0000048465false10/252020FY00P2Y1281.28.372.910.54.06.525.513.212.3us-gaap:OtherAssetsNoncurrentus-gaap:PropertyPlantAndEquipmentAndFinanceLeaseRightOfUseAssetAfterAccumulatedDepreciationAndAmortizationus-gaap:AccruedLiabilitiesCurrentus-gaap:LongTermDebtCurrentus-gaap:OtherLiabilitiesNoncurrentus-gaap:LongTermDebtNoncurrent00000484652019-10-282020-10-25iso4217:USD00000484652020-04-26xbrli:shares0000048465us-gaap:CommonStockMember2020-11-290000048465us-gaap:NonvotingCommonStockMember2020-11-29xbrli:pure0000048465hrl:WalMartStoresMemberus-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMember2019-10-282020-10-2500000484652020-10-2500000484652019-10-27iso4217:USDxbrli:shares0000048465us-gaap:NonvotingCommonStockMember2019-10-270000048465us-gaap:NonvotingCommonStockMember2020-10-250000048465us-gaap:CommonStockMember2019-10-270000048465us-gaap:CommonStockMember2020-10-2500000484652018-10-292019-10-2700000484652017-10-302018-10-280000048465us-gaap:CommonStockMember2017-10-290000048465us-gaap:TreasuryStockCommonMember2017-10-290000048465us-gaap:AdditionalPaidInCapitalMember2017-10-290000048465us-gaap:RetainedEarningsMember2017-10-290000048465us-gaap:AccumulatedOtherComprehensiveIncomeMember2017-10-290000048465us-gaap:NoncontrollingInterestMember2017-10-2900000484652017-10-290000048465us-gaap:RetainedEarningsMember2017-10-302018-10-280000048465us-gaap:NoncontrollingInterestMember2017-10-302018-10-280000048465us-gaap:AccumulatedOtherComprehensiveIncomeMember2017-10-302018-10-280000048465us-gaap:TreasuryStockCommonMember2017-10-302018-10-280000048465us-gaap:CommonStockMember2017-10-302018-10-280000048465us-gaap:AdditionalPaidInCapitalMember2017-10-302018-10-280000048465us-gaap:CommonStockMember2018-10-280000048465us-gaap:TreasuryStockCommonMember2018-10-280000048465us-gaap:AdditionalPaidInCapitalMember2018-10-280000048465us-gaap:RetainedEarningsMember2018-10-280000048465us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-10-280000048465us-gaap:NoncontrollingInterestMember2018-10-2800000484652018-10-280000048465us-gaap:RetainedEarningsMember2018-10-292019-10-270000048465us-gaap:NoncontrollingInterestMember2018-10-292019-10-270000048465us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-10-292019-10-270000048465us-gaap:TreasuryStockCommonMember2018-10-292019-10-270000048465us-gaap:CommonStockMember2018-10-292019-10-270000048465us-gaap:AdditionalPaidInCapitalMember2018-10-292019-10-270000048465us-gaap:RetainedEarningsMembersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberhrl:AccountingStandardsUpdate2016161Member2018-10-280000048465srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberhrl:AccountingStandardsUpdate2016161Member2018-10-280000048465us-gaap:RetainedEarningsMembersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:AccountingStandardsUpdate201712Member2018-10-280000048465us-gaap:AccumulatedOtherComprehensiveIncomeMembersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:AccountingStandardsUpdate201712Member2018-10-280000048465us-gaap:CommonStockMember2019-10-270000048465us-gaap:TreasuryStockCommonMember2019-10-270000048465us-gaap:AdditionalPaidInCapitalMember2019-10-270000048465us-gaap:RetainedEarningsMember2019-10-270000048465us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-10-270000048465us-gaap:NoncontrollingInterestMember2019-10-270000048465us-gaap:RetainedEarningsMember2019-10-282020-10-250000048465us-gaap:NoncontrollingInterestMember2019-10-282020-10-250000048465us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-10-282020-10-250000048465us-gaap:TreasuryStockCommonMember2019-10-282020-10-250000048465us-gaap:AdditionalPaidInCapitalMember2019-10-282020-10-250000048465us-gaap:CommonStockMember2019-10-282020-10-250000048465us-gaap:CommonStockMember2020-10-250000048465us-gaap:TreasuryStockCommonMember2020-10-250000048465us-gaap:AdditionalPaidInCapitalMember2020-10-250000048465us-gaap:RetainedEarningsMember2020-10-250000048465us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-10-250000048465us-gaap:NoncontrollingInterestMember2020-10-250000048465us-gaap:TrustForBenefitOfEmployeesMember2019-10-282020-10-250000048465us-gaap:TrustForBenefitOfEmployeesMember2018-10-292019-10-270000048465us-gaap:TrustForBenefitOfEmployeesMember2017-10-302018-10-280000048465srt:MinimumMemberus-gaap:BuildingMember2019-10-282020-10-250000048465srt:MaximumMemberus-gaap:BuildingMember2019-10-282020-10-250000048465srt:MinimumMemberus-gaap:MachineryAndEquipmentMember2019-10-282020-10-250000048465srt:MaximumMemberus-gaap:MachineryAndEquipmentMember2019-10-282020-10-25hrl:intangible_asset0000048465us-gaap:TrademarksMember2017-10-302018-10-280000048465us-gaap:AccountingStandardsUpdate201602Member2019-10-280000048465srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberhrl:AccountingStandardsUpdate2016161Member2019-10-270000048465us-gaap:AccountingStandardsUpdate201707Member2017-10-302018-10-280000048465us-gaap:AccountingStandardsUpdate201802Member2018-10-290000048465us-gaap:AccountingStandardsUpdate201712Member2018-10-290000048465hrl:SadlersSmokehouseMember2020-03-022020-03-020000048465hrl:ColumbusManufacturingInc.Member2017-11-272017-11-270000048465us-gaap:LineOfCreditMemberhrl:ColumbusManufacturingInc.Memberhrl:TermLoanFacilityMember2017-11-270000048465us-gaap:LineOfCreditMemberhrl:ColumbusManufacturingInc.Memberus-gaap:RevolvingCreditFacilityMember2017-11-270000048465hrl:ColumbusManufacturingInc.Member2017-11-270000048465us-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMemberhrl:CytoSportMember2019-04-152019-04-150000048465hrl:GroceryProductsMember2018-10-280000048465hrl:RefrigeratedFoodsMember2018-10-280000048465hrl:JennieOTurkeyStoreMember2018-10-280000048465us-gaap:AllOtherSegmentsMember2018-10-280000048465hrl:GroceryProductsMember2018-10-292019-10-270000048465hrl:RefrigeratedFoodsMember2018-10-292019-10-270000048465hrl:JennieOTurkeyStoreMember2018-10-292019-10-270000048465us-gaap:AllOtherSegmentsMember2018-10-292019-10-270000048465hrl:GroceryProductsMember2019-10-270000048465hrl:RefrigeratedFoodsMember2019-10-270000048465hrl:JennieOTurkeyStoreMember2019-10-270000048465us-gaap:AllOtherSegmentsMember2019-10-270000048465hrl:GroceryProductsMember2019-10-282020-10-250000048465hrl:RefrigeratedFoodsMember2019-10-282020-10-250000048465hrl:JennieOTurkeyStoreMember2019-10-282020-10-250000048465us-gaap:AllOtherSegmentsMember2019-10-282020-10-250000048465hrl:GroceryProductsMember2020-10-250000048465hrl:RefrigeratedFoodsMember2020-10-250000048465hrl:JennieOTurkeyStoreMember2020-10-250000048465us-gaap:AllOtherSegmentsMember2020-10-250000048465hrl:BrandsTrademarksAndTradeNamesMember2020-10-250000048465hrl:BrandsTrademarksAndTradeNamesMember2019-10-270000048465us-gaap:OtherIntangibleAssetsMember2020-10-250000048465us-gaap:OtherIntangibleAssetsMember2019-10-270000048465hrl:CurrencyTranslationMember2020-10-250000048465hrl:CurrencyTranslationMember2019-10-270000048465hrl:CustomerListsOrRelationshipsMember2020-10-250000048465hrl:CustomerListsOrRelationshipsMember2019-10-282020-10-250000048465hrl:CustomerListsOrRelationshipsMember2019-10-270000048465hrl:CustomerListsOrRelationshipsMember2018-10-292019-10-270000048465us-gaap:OtherIntangibleAssetsMember2020-10-250000048465us-gaap:OtherIntangibleAssetsMember2019-10-282020-10-250000048465us-gaap:OtherIntangibleAssetsMember2019-10-270000048465us-gaap:OtherIntangibleAssetsMember2018-10-292019-10-270000048465us-gaap:TrademarksAndTradeNamesMember2020-10-250000048465us-gaap:TrademarksAndTradeNamesMember2019-10-282020-10-250000048465us-gaap:TrademarksAndTradeNamesMember2019-10-270000048465hrl:CurrencyTranslationMember2020-10-250000048465hrl:CurrencyTranslationMember2019-10-270000048465us-gaap:SeniorNotesMemberhrl:UnsecuredSeniorNotesDueJune2030Member2019-10-270000048465us-gaap:SeniorNotesMemberhrl:UnsecuredSeniorNotesDueJune2030Member2020-10-250000048465hrl:UnsecuredSeniorNotesDueApril2021Memberus-gaap:SeniorNotesMember2019-10-270000048465hrl:UnsecuredSeniorNotesDueApril2021Memberus-gaap:SeniorNotesMember2020-10-250000048465us-gaap:SeniorNotesMember2020-10-250000048465us-gaap:SeniorNotesMember2019-10-270000048465us-gaap:SeniorNotesMemberhrl:UnsecuredSeniorNotesDueJune2030Member2020-06-110000048465us-gaap:SeniorNotesMemberhrl:UnsecuredSeniorNotesDueJune2030Member2020-06-112020-06-110000048465us-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMember2020-10-250000048465us-gaap:LineOfCreditMember2019-10-270000048465us-gaap:LineOfCreditMember2020-10-250000048465us-gaap:PensionPlansDefinedBenefitMember2019-10-282020-10-250000048465us-gaap:PensionPlansDefinedBenefitMember2018-10-292019-10-270000048465us-gaap:PensionPlansDefinedBenefitMember2017-10-302018-10-280000048465us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2019-10-282020-10-250000048465us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2018-10-292019-10-270000048465us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2017-10-302018-10-280000048465srt:MinimumMemberus-gaap:PensionPlansDefinedBenefitMember2019-10-282020-10-250000048465srt:MaximumMemberus-gaap:PensionPlansDefinedBenefitMember2019-10-282020-10-250000048465srt:MinimumMemberus-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2019-10-282020-10-250000048465srt:MaximumMemberus-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2019-10-282020-10-250000048465us-gaap:PensionPlansDefinedBenefitMember2020-10-250000048465us-gaap:PensionPlansDefinedBenefitMember2019-10-270000048465us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2020-10-250000048465us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2019-10-270000048465us-gaap:PensionPlansDefinedBenefitMember2018-10-280000048465us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember2018-10-280000048465us-gaap:DefinedBenefitPlanDebtSecurityMemberus-gaap:PensionPlansDefinedBenefitMember2020-10-250000048465srt:MinimumMemberus-gaap:DefinedBenefitPlanDebtSecurityMemberus-gaap:PensionPlansDefinedBenefitMember2020-10-250000048465srt:MaximumMemberus-gaap:DefinedBenefitPlanDebtSecurityMemberus-gaap:PensionPlansDefinedBenefitMember2020-10-250000048465us-gaap:DefinedBenefitPlanDebtSecurityMemberus-gaap:PensionPlansDefinedBenefitMember2019-10-270000048465srt:MinimumMemberus-gaap:DefinedBenefitPlanDebtSecurityMemberus-gaap:PensionPlansDefinedBenefitMember2019-10-270000048465srt:MaximumMemberus-gaap:DefinedBenefitPlanDebtSecurityMemberus-gaap:PensionPlansDefinedBenefitMember2019-10-270000048465hrl:DefinedBenefitPlanGlobalStocksMemberus-gaap:PensionPlansDefinedBenefitMember2020-10-250000048465hrl:DefinedBenefitPlanGlobalStocksMembersrt:MinimumMemberus-gaap:PensionPlansDefinedBenefitMember2020-10-250000048465srt:MaximumMemberhrl:DefinedBenefitPlanGlobalStocksMemberus-gaap:PensionPlansDefinedBenefitMember2020-10-250000048465hrl:DefinedBenefitPlanGlobalStocksMemberus-gaap:PensionPlansDefinedBenefitMember2019-10-270000048465hrl:DefinedBenefitPlanGlobalStocksMembersrt:MinimumMemberus-gaap:PensionPlansDefinedBenefitMember2019-10-270000048465srt:MaximumMemberhrl:DefinedBenefitPlanGlobalStocksMemberus-gaap:PensionPlansDefinedBenefitMember2019-10-270000048465us-gaap:PensionPlansDefinedBenefitMemberus-gaap:PrivateEquityFundsMember2020-10-250000048465srt:MinimumMemberus-gaap:PensionPlansDefinedBenefitMemberus-gaap:PrivateEquityFundsMember2020-10-250000048465srt:MaximumMemberus-gaap:PensionPlansDefinedBenefitMemberus-gaap:PrivateEquityFundsMember2020-10-250000048465us-gaap:PensionPlansDefinedBenefitMemberus-gaap:PrivateEquityFundsMember2019-10-270000048465srt:MinimumMemberus-gaap:PensionPlansDefinedBenefitMemberus-gaap:PrivateEquityFundsMember2019-10-270000048465srt:MaximumMemberus-gaap:PensionPlansDefinedBenefitMemberus-gaap:PrivateEquityFundsMember2019-10-270000048465us-gaap:DefinedBenefitPlanRealEstateMemberus-gaap:PensionPlansDefinedBenefitMember2020-10-250000048465srt:MinimumMemberus-gaap:DefinedBenefitPlanRealEstateMemberus-gaap:PensionPlansDefinedBenefitMember2020-10-250000048465srt:MaximumMemberus-gaap:DefinedBenefitPlanRealEstateMemberus-gaap:PensionPlansDefinedBenefitMember2020-10-250000048465us-gaap:DefinedBenefitPlanRealEstateMemberus-gaap:PensionPlansDefinedBenefitMember2019-10-270000048465srt:MinimumMemberus-gaap:DefinedBenefitPlanRealEstateMemberus-gaap:PensionPlansDefinedBenefitMember2019-10-270000048465srt:MaximumMemberus-gaap:DefinedBenefitPlanRealEstateMemberus-gaap:PensionPlansDefinedBenefitMember2019-10-270000048465us-gaap:PensionPlansDefinedBenefitMemberus-gaap:HedgeFundsMember2020-10-250000048465srt:MinimumMemberus-gaap:PensionPlansDefinedBenefitMemberus-gaap:HedgeFundsMember2020-10-250000048465srt:MaximumMemberus-gaap:PensionPlansDefinedBenefitMemberus-gaap:HedgeFundsMember2020-10-250000048465us-gaap:PensionPlansDefinedBenefitMemberus-gaap:HedgeFundsMember2019-10-270000048465srt:MinimumMemberus-gaap:PensionPlansDefinedBenefitMemberus-gaap:HedgeFundsMember2019-10-270000048465srt:MaximumMemberus-gaap:PensionPlansDefinedBenefitMemberus-gaap:HedgeFundsMember2019-10-270000048465us-gaap:DefinedBenefitPlanCashAndCashEquivalentsMemberus-gaap:PensionPlansDefinedBenefitMember2020-10-250000048465us-gaap:DefinedBenefitPlanCashAndCashEquivalentsMemberus-gaap:PensionPlansDefinedBenefitMember2019-10-270000048465us-gaap:DefinedBenefitPlanCashAndCashEquivalentsMemberus-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:PensionPlansDefinedBenefitMember2020-10-250000048465us-gaap:DefinedBenefitPlanCashAndCashEquivalentsMemberus-gaap:FairValueInputsLevel1Memberus-gaap:PensionPlansDefinedBenefitMember2020-10-250000048465us-gaap:DefinedBenefitPlanCashAndCashEquivalentsMemberus-gaap:FairValueInputsLevel2Memberus-gaap:PensionPlansDefinedBenefitMember2020-10-250000048465us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:PensionPlansDefinedBenefitMemberus-gaap:PrivateEquityFundsDomesticMember2020-10-250000048465us-gaap:PensionPlansDefinedBenefitMemberus-gaap:FairValueInputsLevel3Memberus-gaap:PrivateEquityFundsDomesticMember2020-10-250000048465us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:PrivateEquityFundsForeignMemberus-gaap:PensionPlansDefinedBenefitMember2020-10-250000048465us-gaap:PrivateEquityFundsForeignMemberus-gaap:PensionPlansDefinedBenefitMemberus-gaap:FairValueInputsLevel3Member2020-10-250000048465us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:USGovernmentDebtSecuritiesMemberus-gaap:PensionPlansDefinedBenefitMember2020-10-250000048465us-gaap:FairValueInputsLevel1Memberus-gaap:USGovernmentDebtSecuritiesMemberus-gaap:PensionPlansDefinedBenefitMember2020-10-250000048465us-gaap:USGovernmentDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Memberus-gaap:PensionPlansDefinedBenefitMember2020-10-250000048465us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:MunicipalBondsMemberus-gaap:PensionPlansDefinedBenefitMember2020-10-250000048465us-gaap:FairValueInputsLevel2Memberus-gaap:MunicipalBondsMemberus-gaap:PensionPlansDefinedBenefitMember2020-10-250000048465us-gaap:DomesticCorporateDebtSecuritiesMemberus-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:PensionPlansDefinedBenefitMember2020-10-250000048465us-gaap:DomesticCorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Memberus-gaap:PensionPlansDefinedBenefitMember2020-10-250000048465us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:ForeignCorporateDebtSecuritiesMemberus-gaap:PensionPlansDefinedBenefitMember2020-10-250000048465us-gaap:ForeignCorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Memberus-gaap:PensionPlansDefinedBenefitMember2020-10-250000048465us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:MutualFundMemberus-gaap:PensionPlansDefinedBenefitMember2020-10-250000048465us-gaap:FairValueInputsLevel1Memberus-gaap:MutualFundMemberus-gaap:PensionPlansDefinedBenefitMember2020-10-250000048465us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:PensionPlansDefinedBenefitMember2020-10-250000048465us-gaap:FairValueInputsLevel1Memberus-gaap:PensionPlansDefinedBenefitMember2020-10-250000048465us-gaap:FairValueInputsLevel2Memberus-gaap:PensionPlansDefinedBenefitMember2020-10-250000048465us-gaap:PensionPlansDefinedBenefitMemberus-gaap:FairValueInputsLevel3Member2020-10-250000048465us-gaap:DefinedBenefitPlanRealEstateMemberus-gaap:PortionAtOtherThanFairValueFairValueDisclosureMemberus-gaap:PensionPlansDefinedBenefitMember2020-10-250000048465us-gaap:EquityFundsMemberus-gaap:PortionAtOtherThanFairValueFairValueDisclosureMemberus-gaap:PensionPlansDefinedBenefitMember2020-10-250000048465us-gaap:PortionAtOtherThanFairValueFairValueDisclosureMemberus-gaap:HedgeFundsMultistrategyMemberus-gaap:PensionPlansDefinedBenefitMember2020-10-250000048465hrl:FixedIncomeFundsHedgeMemberus-gaap:PortionAtOtherThanFairValueFairValueDisclosureMemberus-gaap:PensionPlansDefinedBenefitMember2020-10-250000048465us-gaap:PortionAtOtherThanFairValueFairValueDisclosureMemberus-gaap:PensionPlansDefinedBenefitMemberhrl:FixedIncomeFundsUSTreasuryAndGovernmentAndCorporateDebtSecuritiesMember2020-10-250000048465us-gaap:PortionAtOtherThanFairValueFairValueDisclosureMemberus-gaap:PensionPlansDefinedBenefitMember2020-10-250000048465us-gaap:DefinedBenefitPlanCashAndCashEquivalentsMemberus-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:PensionPlansDefinedBenefitMember2019-10-270000048465us-gaap:DefinedBenefitPlanCashAndCashEquivalentsMemberus-gaap:FairValueInputsLevel1Memberus-gaap:PensionPlansDefinedBenefitMember2019-10-270000048465us-gaap:DefinedBenefitPlanCashAndCashEquivalentsMemberus-gaap:FairValueInputsLevel2Memberus-gaap:PensionPlansDefinedBenefitMember2019-10-270000048465us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:PensionPlansDefinedBenefitMemberus-gaap:PrivateEquityFundsDomesticMember2019-10-270000048465us-gaap:PensionPlansDefinedBenefitMemberus-gaap:FairValueInputsLevel3Memberus-gaap:PrivateEquityFundsDomesticMember2019-10-270000048465us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:PrivateEquityFundsForeignMemberus-gaap:PensionPlansDefinedBenefitMember2019-10-270000048465us-gaap:PrivateEquityFundsForeignMemberus-gaap:PensionPlansDefinedBenefitMemberus-gaap:FairValueInputsLevel3Member2019-10-270000048465us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:USGovernmentDebtSecuritiesMemberus-gaap:PensionPlansDefinedBenefitMember2019-10-270000048465us-gaap:FairValueInputsLevel1Memberus-gaap:USGovernmentDebtSecuritiesMemberus-gaap:PensionPlansDefinedBenefitMember2019-10-270000048465us-gaap:USGovernmentDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Memberus-gaap:PensionPlansDefinedBenefitMember2019-10-270000048465us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:MunicipalBondsMemberus-gaap:PensionPlansDefinedBenefitMember2019-10-270000048465us-gaap:FairValueInputsLevel2Memberus-gaap:MunicipalBondsMemberus-gaap:PensionPlansDefinedBenefitMember2019-10-270000048465us-gaap:DomesticCorporateDebtSecuritiesMemberus-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:PensionPlansDefinedBenefitMember2019-10-270000048465us-gaap:DomesticCorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Memberus-gaap:PensionPlansDefinedBenefitMember2019-10-270000048465us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:ForeignCorporateDebtSecuritiesMemberus-gaap:PensionPlansDefinedBenefitMember2019-10-270000048465us-gaap:ForeignCorporateDebtSecuritiesMemberus-gaap:FairValueInputsLevel2Memberus-gaap:PensionPlansDefinedBenefitMember2019-10-270000048465us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:MutualFundMemberus-gaap:PensionPlansDefinedBenefitMember2019-10-270000048465us-gaap:FairValueInputsLevel1Memberus-gaap:MutualFundMemberus-gaap:PensionPlansDefinedBenefitMember2019-10-270000048465us-gaap:EstimateOfFairValueFairValueDisclosureMemberus-gaap:PensionPlansDefinedBenefitMember2019-10-270000048465us-gaap:FairValueInputsLevel1Memberus-gaap:PensionPlansDefinedBenefitMember2019-10-270000048465us-gaap:FairValueInputsLevel2Memberus-gaap:PensionPlansDefinedBenefitMember2019-10-270000048465us-gaap:PensionPlansDefinedBenefitMemberus-gaap:FairValueInputsLevel3Member2019-10-270000048465us-gaap:DefinedBenefitPlanRealEstateMemberus-gaap:PortionAtOtherThanFairValueFairValueDisclosureMemberus-gaap:PensionPlansDefinedBenefitMember2019-10-270000048465us-gaap:EquityFundsMemberus-gaap:PortionAtOtherThanFairValueFairValueDisclosureMemberus-gaap:PensionPlansDefinedBenefitMember2019-10-270000048465us-gaap:PortionAtOtherThanFairValueFairValueDisclosureMemberus-gaap:HedgeFundsMultistrategyMemberus-gaap:PensionPlansDefinedBenefitMember2019-10-270000048465us-gaap:PortionAtOtherThanFairValueFairValueDisclosureMemberus-gaap:PensionPlansDefinedBenefitMember2019-10-270000048465us-gaap:DefinedBenefitPlanRealEstateMemberus-gaap:PensionPlansDefinedBenefitMember2019-10-282020-10-250000048465us-gaap:PensionPlansDefinedBenefitMemberus-gaap:FairValueInputsLevel3Member2018-10-280000048465us-gaap:PensionPlansDefinedBenefitMemberus-gaap:FairValueInputsLevel3Member2019-10-282020-10-250000048465us-gaap:PensionPlansDefinedBenefitMemberus-gaap:FairValueInputsLevel3Member2018-10-292019-10-270000048465us-gaap:PensionPlansDefinedBenefitMemberus-gaap:PrivateEquityFundsMember2019-10-282020-10-250000048465us-gaap:PensionPlansDefinedBenefitMemberus-gaap:PrivateEquityFundsDomesticMember2019-10-282020-10-250000048465us-gaap:PensionPlansDefinedBenefitMemberus-gaap:PrivateEquityFundsDomesticMember2018-10-292019-10-270000048465us-gaap:PrivateEquityFundsForeignMemberus-gaap:PensionPlansDefinedBenefitMember2019-10-282020-10-250000048465us-gaap:PrivateEquityFundsForeignMemberus-gaap:PensionPlansDefinedBenefitMember2018-10-292019-10-270000048465hrl:CommodityContractCornMember2019-10-282020-10-250000048465us-gaap:CashFlowHedgingMember2019-10-282020-10-25utr:bu0000048465us-gaap:CashFlowHedgingMemberhrl:CommodityContractCornMember2019-10-282020-10-250000048465us-gaap:CashFlowHedgingMemberhrl:CommodityContractCornMember2018-10-292019-10-27utr:lb0000048465hrl:CommodityContractHogsMemberus-gaap:CashFlowHedgingMember2019-10-282020-10-250000048465hrl:CommodityContractHogsMemberus-gaap:CashFlowHedgingMember2018-10-292019-10-270000048465us-gaap:CommodityContractMemberus-gaap:OtherCurrentAssetsMemberus-gaap:DesignatedAsHedgingInstrumentMember2020-10-250000048465us-gaap:CommodityContractMemberus-gaap:OtherCurrentAssetsMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-10-270000048465us-gaap:AccountsPayableMember2020-10-250000048465us-gaap:AccountsPayableMember2019-10-270000048465us-gaap:CashFlowHedgingMemberus-gaap:CommodityContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-10-282020-10-250000048465us-gaap:CashFlowHedgingMemberus-gaap:CommodityContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2018-10-292019-10-270000048465us-gaap:CostOfSalesMemberus-gaap:CashFlowHedgingMemberus-gaap:CommodityContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-10-282020-10-250000048465us-gaap:CostOfSalesMemberus-gaap:CashFlowHedgingMemberus-gaap:CommodityContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2018-10-292019-10-270000048465us-gaap:CashFlowHedgingMemberus-gaap:CommodityContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2017-10-302018-10-280000048465us-gaap:FairValueHedgingMemberus-gaap:CommodityContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2019-10-282020-10-250000048465us-gaap:FairValueHedgingMemberus-gaap:CommodityContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2018-10-292019-10-270000048465us-gaap:FairValueHedgingMemberus-gaap:CommodityContractMemberus-gaap:DesignatedAsHedgingInstrumentMember2017-10-302018-10-280000048465hrl:CommodityContractHogsMember2019-10-282020-10-250000048465hrl:MegaMexFoodsLLCMember2020-10-250000048465hrl:MegaMexFoodsLLCMember2019-10-270000048465srt:MinimumMemberhrl:OtherJointVenturesMember2019-10-270000048465srt:MinimumMemberhrl:OtherJointVenturesMember2020-10-250000048465srt:MaximumMemberhrl:OtherJointVenturesMember2020-10-250000048465srt:MaximumMemberhrl:OtherJointVenturesMember2019-10-270000048465hrl:OtherJointVenturesMember2020-10-250000048465hrl:OtherJointVenturesMember2019-10-270000048465hrl:MegaMexFoodsLLCMember2019-10-282020-10-250000048465hrl:MegaMexFoodsLLCMember2018-10-292019-10-270000048465hrl:MegaMexFoodsLLCMember2017-10-302018-10-280000048465hrl:OtherJointVenturesMember2019-10-282020-10-250000048465hrl:OtherJointVenturesMember2018-10-292019-10-270000048465hrl:OtherJointVenturesMember2017-10-302018-10-280000048465hrl:MegaMexFoodsLLCMember2009-10-260000048465us-gaap:AccumulatedTranslationAdjustmentMember2017-10-290000048465us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2017-10-290000048465us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2017-10-290000048465us-gaap:AccumulatedTranslationAdjustmentMember2017-10-302018-10-280000048465us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2017-10-302018-10-280000048465us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2017-10-302018-10-280000048465us-gaap:AccumulatedTranslationAdjustmentMember2018-10-280000048465us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2018-10-280000048465us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2018-10-280000048465srt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMemberus-gaap:AccountingStandardsUpdate201712Member2018-10-280000048465us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMembersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:AccountingStandardsUpdate201802Member2018-10-280000048465us-gaap:AccumulatedOtherComprehensiveIncomeMembersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMemberus-gaap:AccountingStandardsUpdate201802Member2018-10-280000048465us-gaap:AccumulatedTranslationAdjustmentMembersrt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMember2018-10-280000048465us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMembersrt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMember2018-10-280000048465srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMemberus-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2018-10-280000048465us-gaap:AccumulatedOtherComprehensiveIncomeMembersrt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMember2018-10-280000048465us-gaap:AccumulatedTranslationAdjustmentMember2018-10-292019-10-270000048465us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2018-10-292019-10-270000048465us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2018-10-292019-10-270000048465us-gaap:AccumulatedTranslationAdjustmentMember2019-10-270000048465us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2019-10-270000048465us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2019-10-270000048465us-gaap:AccumulatedTranslationAdjustmentMember2019-10-282020-10-250000048465us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2019-10-282020-10-250000048465us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2019-10-282020-10-250000048465us-gaap:AccumulatedTranslationAdjustmentMember2020-10-250000048465us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2020-10-250000048465us-gaap:AccumulatedGainLossNetCashFlowHedgeParentMember2020-10-250000048465us-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMemberhrl:CytoSportMember2018-10-292019-10-270000048465us-gaap:EmployeeStockOptionMember2019-10-282020-10-250000048465us-gaap:EmployeeStockOptionMemberhrl:Fiscal2020AndThereafterMember2019-10-282020-10-250000048465us-gaap:RestrictedStockUnitsRSUMemberhrl:Fiscal2020AndThereafterMember2019-10-282020-10-250000048465hrl:FullTimeEmployeesMember2018-04-302018-07-290000048465hrl:PartTimeEmployeesMember2018-04-302018-07-290000048465us-gaap:EmployeeStockOptionMember2018-04-302018-07-290000048465us-gaap:EmployeeStockOptionMember2019-10-270000048465us-gaap:EmployeeStockOptionMember2020-10-250000048465us-gaap:EmployeeStockOptionMember2018-10-292019-10-270000048465us-gaap:EmployeeStockOptionMember2017-10-302018-10-280000048465us-gaap:RestrictedStockUnitsRSUMember2019-10-282020-10-250000048465us-gaap:RestrictedStockUnitsRSUMember2019-10-270000048465us-gaap:RestrictedStockUnitsRSUMember2020-10-250000048465us-gaap:RestrictedStockUnitsRSUMember2018-10-292019-10-270000048465us-gaap:RestrictedStockUnitsRSUMember2017-10-302018-10-280000048465us-gaap:RestrictedStockMember2019-10-270000048465us-gaap:RestrictedStockMember2019-10-282020-10-250000048465us-gaap:RestrictedStockMember2020-10-250000048465us-gaap:RestrictedStockMember2018-10-292019-10-270000048465us-gaap:RestrictedStockMember2017-10-302018-10-280000048465us-gaap:FairValueMeasurementsRecurringMember2020-10-250000048465us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2020-10-250000048465us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2020-10-250000048465us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2020-10-250000048465us-gaap:CommodityContractMemberus-gaap:FairValueMeasurementsRecurringMember2020-10-250000048465us-gaap:FairValueInputsLevel1Memberus-gaap:CommodityContractMemberus-gaap:FairValueMeasurementsRecurringMember2020-10-250000048465us-gaap:CommodityContractMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2020-10-250000048465us-gaap:CommodityContractMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2020-10-250000048465us-gaap:FairValueMeasurementsRecurringMember2019-10-270000048465us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2019-10-270000048465us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2019-10-270000048465us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2019-10-270000048465us-gaap:CommodityContractMemberus-gaap:FairValueMeasurementsRecurringMember2019-10-270000048465us-gaap:FairValueInputsLevel1Memberus-gaap:CommodityContractMemberus-gaap:FairValueMeasurementsRecurringMember2019-10-270000048465us-gaap:CommodityContractMemberus-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2019-10-270000048465us-gaap:CommodityContractMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel3Member2019-10-270000048465srt:MaximumMemberhrl:HogsAndTurkeysMember2019-10-282020-10-250000048465srt:MaximumMemberhrl:GrowOutContractsMember2019-10-282020-10-250000048465srt:MaximumMemberus-gaap:InventoriesMember2019-10-282020-10-25hrl:renewal_optionhrl:segment0000048465hrl:GroceryProductsMember2017-10-302018-10-280000048465hrl:RefrigeratedFoodsMember2017-10-302018-10-280000048465hrl:JennieOTurkeyStoreMember2017-10-302018-10-280000048465us-gaap:AllOtherSegmentsMember2017-10-302018-10-280000048465hrl:GroceryProductsMemberus-gaap:IntersegmentEliminationMember2019-10-282020-10-250000048465hrl:GroceryProductsMemberus-gaap:IntersegmentEliminationMember2018-10-292019-10-270000048465hrl:GroceryProductsMemberus-gaap:IntersegmentEliminationMember2017-10-302018-10-280000048465hrl:RefrigeratedFoodsMemberus-gaap:IntersegmentEliminationMember2019-10-282020-10-250000048465hrl:RefrigeratedFoodsMemberus-gaap:IntersegmentEliminationMember2018-10-292019-10-270000048465hrl:RefrigeratedFoodsMemberus-gaap:IntersegmentEliminationMember2017-10-302018-10-280000048465us-gaap:IntersegmentEliminationMemberhrl:JennieOTurkeyStoreMember2019-10-282020-10-250000048465us-gaap:IntersegmentEliminationMemberhrl:JennieOTurkeyStoreMember2018-10-292019-10-270000048465us-gaap:IntersegmentEliminationMemberhrl:JennieOTurkeyStoreMember2017-10-302018-10-280000048465us-gaap:IntersegmentEliminationMemberus-gaap:AllOtherSegmentsMember2019-10-282020-10-250000048465us-gaap:IntersegmentEliminationMemberus-gaap:AllOtherSegmentsMember2018-10-292019-10-270000048465us-gaap:IntersegmentEliminationMemberus-gaap:AllOtherSegmentsMember2017-10-302018-10-280000048465us-gaap:IntersegmentEliminationMember2019-10-282020-10-250000048465us-gaap:IntersegmentEliminationMember2018-10-292019-10-270000048465us-gaap:IntersegmentEliminationMember2017-10-302018-10-280000048465hrl:GroceryProductsMemberus-gaap:OperatingSegmentsMember2019-10-282020-10-250000048465hrl:GroceryProductsMemberus-gaap:OperatingSegmentsMember2018-10-292019-10-270000048465hrl:GroceryProductsMemberus-gaap:OperatingSegmentsMember2017-10-302018-10-280000048465hrl:RefrigeratedFoodsMemberus-gaap:OperatingSegmentsMember2019-10-282020-10-250000048465hrl:RefrigeratedFoodsMemberus-gaap:OperatingSegmentsMember2018-10-292019-10-270000048465hrl:RefrigeratedFoodsMemberus-gaap:OperatingSegmentsMember2017-10-302018-10-280000048465hrl:JennieOTurkeyStoreMemberus-gaap:OperatingSegmentsMember2019-10-282020-10-250000048465hrl:JennieOTurkeyStoreMemberus-gaap:OperatingSegmentsMember2018-10-292019-10-270000048465hrl:JennieOTurkeyStoreMemberus-gaap:OperatingSegmentsMember2017-10-302018-10-280000048465us-gaap:AllOtherSegmentsMemberus-gaap:OperatingSegmentsMember2019-10-282020-10-250000048465us-gaap:AllOtherSegmentsMemberus-gaap:OperatingSegmentsMember2018-10-292019-10-270000048465us-gaap:AllOtherSegmentsMemberus-gaap:OperatingSegmentsMember2017-10-302018-10-280000048465us-gaap:OperatingSegmentsMember2019-10-282020-10-250000048465us-gaap:OperatingSegmentsMember2018-10-292019-10-270000048465us-gaap:OperatingSegmentsMember2017-10-302018-10-280000048465us-gaap:CorporateNonSegmentMember2020-10-250000048465us-gaap:CorporateNonSegmentMember2019-10-270000048465us-gaap:CorporateNonSegmentMember2018-10-280000048465us-gaap:CorporateNonSegmentMember2019-10-282020-10-250000048465us-gaap:CorporateNonSegmentMember2018-10-292019-10-270000048465us-gaap:CorporateNonSegmentMember2017-10-302018-10-280000048465hrl:U.S.RetailMember2019-10-282020-10-250000048465hrl:U.S.RetailMember2018-10-292019-10-270000048465hrl:U.S.RetailMember2017-10-302018-10-280000048465hrl:U.S.FoodserviceMember2019-10-282020-10-250000048465hrl:U.S.FoodserviceMember2018-10-292019-10-270000048465hrl:U.S.FoodserviceMember2017-10-302018-10-280000048465hrl:U.S.DeliMember2019-10-282020-10-250000048465hrl:U.S.DeliMember2018-10-292019-10-270000048465hrl:U.S.DeliMember2017-10-302018-10-280000048465hrl:InternationalMember2019-10-282020-10-250000048465hrl:InternationalMember2018-10-292019-10-270000048465hrl:InternationalMember2017-10-302018-10-280000048465hrl:PerishableMeatMember2019-10-282020-10-250000048465hrl:PerishableMeatMember2018-10-292019-10-270000048465hrl:PerishableMeatMember2017-10-302018-10-280000048465hrl:ShelfStableMember2019-10-282020-10-250000048465hrl:ShelfStableMember2018-10-292019-10-270000048465hrl:ShelfStableMember2017-10-302018-10-280000048465hrl:PoultryMember2019-10-282020-10-250000048465hrl:PoultryMember2018-10-292019-10-270000048465hrl:PoultryMember2017-10-302018-10-280000048465hrl:OtherProductsMember2019-10-282020-10-250000048465hrl:OtherProductsMember2018-10-292019-10-270000048465hrl:OtherProductsMember2017-10-302018-10-280000048465country:US2019-10-282020-10-250000048465country:US2018-10-292019-10-270000048465country:US2017-10-302018-10-280000048465us-gaap:NonUsMember2019-10-282020-10-250000048465us-gaap:NonUsMember2018-10-292019-10-270000048465us-gaap:NonUsMember2017-10-302018-10-280000048465hrl:WalMartStoresMemberus-gaap:RevenueFromContractWithCustomerMemberus-gaap:CustomerConcentrationRiskMember2018-10-292019-10-2700000484652019-10-282020-01-2600000484652020-01-272020-04-2600000484652020-04-272020-07-2600000484652020-07-272020-10-2500000484652018-10-292019-01-2700000484652019-01-282019-04-2800000484652019-04-292019-07-2800000484652019-07-292019-10-270000048465hrl:ApplegateFarmsLLCMember2019-10-282020-10-250000048465hrl:SadlersSmokehouseMember2019-10-282020-10-250000048465hrl:FontaniniAndColumbusMember2017-10-302018-10-280000048465hrl:ColumbusManufacturingInc.Member2017-10-302018-10-28
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 25, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________ to _________________________

Commission File Number: 1-2402

HORMEL FOODS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 41-0319970
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

1 Hormel Place, Austin Minnesota
55912-3680
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code (507) 437-5611
Securities registered pursuant to Section 12(b) of the Act: 
Title of each classTrading SymbolName of each exchange on which registered
Common Stock $0.01465 par value
HRLNew York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:  None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes   No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes  
No
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, and (2) has been subject to such filing requirements for the past 90 days.  Yes   No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulations S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  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 filerAccelerated filer     
Non-accelerated filer           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 has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes   No
The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant as of April 26, 2020, was $13,086,349,866 based on the closing price of $46.61 on the last business day of the registrant’s most recently completed second fiscal quarter.
As of November 29, 2020, the number of shares outstanding of each of the registrant’s classes of common stock was as follows:
Common Stock, $0.01465 – Par Value 539,918,117 shares
Common Stock Non-Voting, $0.01 Par Value – 0 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Annual Meeting of Stockholders to be held January 26, 2021, are incorporated by reference into Part III, Items 10-14. The Proxy Statement will be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.
1

Table of Contents

HORMEL FOODS CORPORATION
TABLE OF CONTENTS
 

2

Table of Contents

PART I
Item 1.  BUSINESS

General Development of Business
 
Hormel Foods Corporation, a Delaware corporation (the Company), was founded by George A. Hormel in 1891 in Austin, Minnesota, as Geo. A. Hormel & Company. The Company started as a processor of meat and food products and continues in this line of business. The Company’s name was changed to Hormel Foods Corporation in 1995. The Company is primarily engaged in the production of a variety of meat and food products and the marketing of those products throughout the United States and internationally. Although pork and turkey remain the major raw materials for its products, the Company has emphasized for several years the manufacturing and distribution of branded, value-added consumer items rather than commodity fresh meat products. The Company has continually expanded its product portfolio through organic growth and acquisitions. Refer to Note B - Acquisitions and Divestitures for information on the Company's recent acquisitions and divestitures.
 
Internationally, the Company markets its products through Hormel Foods International Corporation (HFIC), a wholly owned subsidiary. HFIC has a global presence in the international marketplace through joint ventures and placement of personnel in strategic foreign locations such as Australia, Brazil, Canada, China, Japan, and the Philippines. HFIC has a minority position in a food company in the Philippines (The Purefoods-Hormel Company, Inc., 40% holding).

The Company had no significant change in the type of products produced or services rendered, or in the markets or methods of distribution, since the beginning of the 2020 fiscal year. The Company has not been involved in any bankruptcy, receivership or similar proceedings during its history.

Segments
The Company reports results in the following four segments:  Grocery Products, Refrigerated Foods, Jennie-O Turkey Store, and International & Other. 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. Segment results for fiscal years prior to 2019 have been adjusted to reflect these changes. Net sales to unaffiliated customers, operating profit, total assets and the presentation of certain other financial information by segment are reported in Note P - Segment Reporting of the Notes to Consolidated Financial Statements and in the Management's Discussion and Analysis of Financial Condition and Results of Operations.

Description of Business
 
Products and Distribution 
The Company develops, processes, and distributes a wide array of food products in a variety of markets. The Company manufactures its products through various processing facilities and trusted co-manufacturers. The Company’s products primarily consist of meat and other food products sold across multiple distribution channels such as U.S. Retail, U.S. Foodservice, U.S. Deli, and International. Total revenues contributed by classes of similar products and sales channels for the last three fiscal years are reported in Note P - Segment Reporting of the Notes to Consolidated Financial Statements.
 
Domestically, the Company sells its products in all 50 states. The Company’s products are sold through its sales personnel, operating in assigned territories or as dedicated teams serving major customers coordinated from sales offices predominately located in major U.S. cities. The Company also utilizes independent brokers and distributors. Distribution of products to customers is primarily by common carrier.

Through HFIC, the Company markets its products in various locations throughout the world. Some of the larger markets include Australia, Brazil, Canada, China, England, Japan, Mexico, Micronesia, the Philippines, Singapore, and South Korea. The distribution of export sales to customers is by common carrier, while the China and Brazil operations own and operate their own delivery systems. The Company, through HFIC, has licensed companies to manufacture various products internationally on a royalty basis, with the primary licensees being Danish Crown UK Ltd. and CJ CheilJedang Corporation.

Raw Materials 
The Company has, for the past several years, been concentrating on branded products with year-round demand to minimize the seasonal variation experienced with commodity-type products. Pork continues to be the primary raw material for Company products. The Company’s expanding line of branded products has reduced, but not eliminated, the sensitivity of Company results to raw material supply and price fluctuations.
 
The majority of the hogs harvested for the Company are purchased under supply contracts from producers located principally in Minnesota and Iowa. The cost of hogs and the utilization of the Company’s facilities are affected by both the level and the methods of pork production in the United States. The Company uses supply contracts to ensure a stable supply of raw materials. The Company’s contracts utilize market-based formulas and/or markets of certain hog production inputs to better balance input costs with customer pricing. All contract costs are fully reflected in the Company’s reported financial statements. In fiscal 2020, the Company purchased 95 percent of its hogs under supply contracts. 
3

Table of Contents


In fiscal 2020, Jennie-O Turkey Store raised turkeys representing approximately 78 percent of the volume needed to meet its raw material requirements for branded turkey products and whole birds. Turkeys not sourced within the Company are contracted with independent turkey growers. Jennie-O Turkey Store’s turkey-raising farms are located throughout Minnesota and Wisconsin.
 
Production costs in raising hogs and turkeys are subject primarily to fluctuations in grain prices and fuel costs. To manage this risk, the Company uses futures contracts to hedge a portion of its anticipated purchases of grain.

The Company purchases other commodity-based raw materials such as beef, pork, and chicken for use across all segments. Raw materials are obtained from various suppliers and manufacturers. The Company has longstanding relationships with its suppliers of raw materials and expects to have an adequate supply for its present needs.

Additionally, the cost and supply of avocados and peanuts are impacted by the changing market forces of supply and demand, which can impact the cost of the Company’s products. The Company uses long-term supply contracts and forward buying in an attempt to manage these risks.

Human Capital
Employees are the cornerstone of the Company and its purpose: Inspired People. Inspired Food™. As of October 25, 2020, the Company had approximately 19,100 active domestic and foreign employees. The Company is committed to supporting employees' professional development as well as providing competitive benefits and a safe, inclusive workplace.

Employee safety remains the Company's top priority. The Company develops and administers company-wide policies to ensure the safety of each team member and compliance with Occupational Safety and Health Administration (OSHA) standards. This includes monthly safety training and assessments as well as annual safety audits.

The Company believes a diverse workforce fosters innovation and cultivates an environment filled with unique perspectives. As a result, diversity and inclusion help the Company meet the needs of customers and consumers around the world. Respect for human rights is fundamental to the Company's business and its commitment to ethical business conduct.

The Company measures employee engagement on an ongoing basis as it believes an engaged workforce leads to a more innovative, productive and profitable company. The results from engagement surveys are used to implement programs and processes designed to keep employees connected with the Company.
 
Governmental Regulation and Environmental Matters
The Company’s operations are subject to regulation by various governmental agencies which oversee areas such as food safety, workforce immigration, environmental laws, animal welfare, tax regulations, and the processing, packaging, storage, distribution, advertising, and labeling of the Company’s products. The Company believes it is in compliance with such laws and regulations and does not expect continued compliance to have a material impact on capital expenditures, earnings, or competitive position. The Company continues to monitor existing and pending laws and regulations and while the impact of regulatory changes cannot be predicted with certainty, the Company does not expect compliance to have a material adverse effect.
 
Customers
During fiscal 2020, sales to Walmart Inc. (Walmart) represented approximately 14.6 percent of the Company’s revenues (measured as gross sales less returns and allowances), compared to 13.5 percent in fiscal 2019. Walmart is a customer for all four segments of the Company. The five largest customers in each segment make up approximately the following percentage of segment sales: 44 percent of Grocery Products, 35 percent of Refrigerated Foods, 54 percent of Jennie-O Turkey Store, and 15 percent of International & Other. The loss of one or more of the top customers in any of these segments could have a material adverse effect on the results of such segment.

Competition
The production and sale of meat and food products in the United States and internationally is highly competitive. The Company competes with manufacturers of pork and turkey products as well as national and regional producers of other meat and protein sources, such as beef, chicken, fish, peanut butter, whey, and plant-based proteins. 
 
All segments compete on the basis of price, product quality and attributes, brand identification, breadth of product line, and customer service. Through effective marketing and strong quality assurance programs, the Company’s strategy is to provide high quality products that possess strong brand recognition, which support higher value perceptions with customers.

4

Table of Contents

Patents and Trademarks
There are numerous patents and trademarks important to the Company’s business. The Company holds 34 U.S. and six foreign patents. Most of the trademarks the Company uses are registered in the U.S. and other countries. Some of the more significant owned or licensed trademarks used by the Company or its affiliates are:
 
HORMEL, ALWAYS TENDER, APPLEGATE, AUSTIN BLUES, BACON 1, BLACK LABEL, BREAD READY, BURKE, CAFÉ H, CERATTI, CHI-CHI’S, COLUMBUS, COMPLEATS, CURE 81, DAN’S PRIZE, DI LUSSO, DINTY MOORE, DON MIGUEL, DOÑA MARIA, EMBASA, FAST ‘N EASY, FIRE BRAISED, FONTANINI, HAPPY LITTLE PLANTS, HERDEZ, HORMEL GATHERINGS, HORMEL VITAL CUISINE, HOUSE OF TSANG, JENNIE-O, JUSTIN’S, LA VICTORIA, LAYOUT, LLOYD’S, MARY KITCHEN, NATURAL CHOICE, OLD SMOKEHOUSE, OVEN READY, PILLOW PACK, ROSA GRANDE, SADLER'S, SKIPPY, SPAM, SPECIAL RECIPE, THICK & EASY, VALLEY FRESH, and WHOLLY.
 
The Company’s patents expire after a term that is typically 20 years from the date of filing, with earlier expiration possible based on the Company’s decision to pay required maintenance fees. As long as the Company continues to use its trademarks, they are renewed indefinitely.
 
Available Information
The Company makes available its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 on its website at www.hormelfoods.com. These reports are accessible under the caption, “Investors – Filings & Reports – SEC Filings” on the Company’s website and are available as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission (SEC). These filings are also available on the SEC's website at www.sec.gov. The documents are available in print, free of charge, to any stockholder who requests them.
 

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 the Company’s Annual Report to Stockholders, other filings by the Company with the U.S. Securities and Exchange 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 following discussion of risk factors 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, changes resulting from the COVID-19 pandemic, economic conditions, political developments, civil unrest, currency exchange rates, interest and inflation rates, accounting standards, taxes, laws, and regulations affecting the Company and its markets.

5

Table of Contents

Item 1A.  RISK FACTORS
 
BUSINESS AND OPERATIONAL RISKS

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, tax rates, availability of capital, energy availability and costs (including fuel surcharges), political developments, civil unrest, 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.

The Company's goodwill and indefinite lived intangible assets are initially recorded at fair value and are not amortized, but are reviewed for impairment annually or more frequently if impairment indicators arise. Impairment testing requires judgement around estimates and assumptions and is impacted by factors such as revenue growth rates, operating margins, tax rates, royalty rates, and discount rates. An unfavorable change in these factors may lead to the impairment of goodwill and/or intangible assets.

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

The uncertain and rapidly changing COVID-19 pandemic could adversely affect the Company’s business, financial condition and results of operations. The ongoing COVID-19 global pandemic has had, and will likely continue to have, negative impacts across many of the Company's business units and facilities. The Company's operations and business have been impacted directly and indirectly by various government actions taken to stop or slow the spread of COVID-19, including travel restrictions, border shutdowns, stay-at-home and shelter-in-place orders, shutdowns of non-essential businesses, and emergency declarations.

The near- and long-term impacts of COVID-19 are unknown and impossible to predict with any level of certainty. At this time, the following potential risk factors arising from COVID-19 pandemic have had and/or may continue to cause one or more of the following impacts on the Company's operations:

One or more of the Company's manufacturing facilities may be shut down or have their operations significantly impacted due to employee illnesses, increased absenteeism, and/or actions by government agencies. Capital projects may be delayed as additional capacity is no longer currently needed. The Company's co-manufacturers and material suppliers may face similar impacts.
Regulatory restrictions and measures taken at the Company's facilities to prevent or slow down the spread of COVID-19 may impact facilities’ efficiency.
Operating costs may increase as measures are put in place to prevent or slow down the spread of COVID-19, such as facility improvements, employee testing, short-term disability policies, and manufacturing employee bonus payments.
Any new or additional measures required by national, state or local governments to combat COVID-19 may similarly add additional operational costs.
Ongoing closure or reduced operations at foodservice establishments may impact results for the Company's foodservice business. Bankruptcy filings and/or delinquent payments from foodservice industry or other customers may negatively impact cash flow.
A national and/or global economic downturn may impact consumer purchase behavior, such as reduced foodservice volume, lower volume in premium brands, and potential loss of business to private label.
It may become more difficult and/or expensive to obtain debt or equity financing necessary to sustain the Company's operations, make capital expenditures, and/or finance future acquisitions.
The Company may face litigation by stockholders, employees, suppliers, customers, consumers, and others relating to COVID-19 and its effects.
6

Table of Contents

The Company relies on its dedicated employees, many of whom have a long tenure with the Company. Operations may be negatively impacted if members of the Company's leadership team, or other key employees, become ill with COVID-19 or otherwise terminate their employment as a result of COVID-19. Further, the Company may face challenges hiring, onboarding, and training new employees, including leadership, which may impact results. The Company also may face operational challenges if government quarantine orders restrict movement of employees.
It is possible that the COVID-19 pandemic could negatively affect the Company's labor availability, relations, or labor costs.
In accordance with recommendations to reduce large gatherings and increase social distancing, many of the Company's office-based employees are working remotely, which may bring additional information technology and data security risks.
Supply chain disruptions of various types arising from COVID-19 may impact the Company's ability to make products, the cost for such products, and the ability to deliver products to customers. Closure or reduced operations of material suppliers could result in shortages of key raw materials, as well as impact prices for those materials. The volatility in the market for raw material and supplies could impact the Company's profitability.
National, state, and local government orders closing or limiting operation of borders and ports, or imposing quarantine, could impact the Company's ability to obtain raw materials and to deliver finished goods to customers.
COVID-19 has wide-reaching impacts to society and the business making all decisions, interactions, and transactions significantly more complex.
The Company is committed to being transparent through communications to inform shareholders, employees, customers, consumers, and others about the enhanced safety protocols implemented. The Company must keep pace with a rapidly changing media environment. If the Company's public relations efforts are not effective or if consumers perceive them to be irresponsible, the Company's competitive position, reputation, and market share may suffer.

The Company has already seen several of these risks materialize. The extent of the impact on the Company’s business, financial condition and results of operations is dependent on the length and severity of the pandemic. The COVID-19 pandemic is an unprecedented situation and the Company's understanding of its impacts is changing and evolving. The additional risk factors identified here are based upon information known at this time. The COVID-19 pandemic may adversely impact the Company's operations in one or more ways not identified to date.

The Company’s operations are subject to the general risks associated with acquisitions and divestitures. The Company has made several acquisitions and divestitures in recent years, most recently the acquisition of Sadler's Smokehouse, that align with the Company’s strategic initiative of delivering long-term value to shareholders. The Company regularly reviews strategic opportunities to grow through acquisitions and to divest non-strategic assets. Potential risks associated with these transactions include the inability to 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 current or acquired companies, the inability to integrate or divest operations successfully, the possible assumption of unknown liabilities, potential disputes with buyers or sellers, potential impairment charges if purchase assumptions are not achieved, 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-manufacturers, suppliers, or other third-party service providers. Disruption of operations at co‑manufacturers 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 regularly engages third-party service providers to support various business functions such as benefit plan administration, payroll processing, information technology, and cloud computing services. A disruption in services from these partners could have an adverse effect on the Company's business.

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. The Company currently sources approximately 30% of its pork raw materials from Wholestone Farms, LLC (Wholestone) under a supply agreement expiring in December 2021. The Company is in negotiations with Wholestone as well as evaluating alternative procurement options.

The Company may be adversely impacted if the Company is unable to protect information technology systems against, or effectively respond to, cyber-attacks or security breaches. Information technology systems are an important part of the Company’s business operations. In addition, the Company increasingly relies upon third-party service providers for a variety of business functions, including cloud-based services. Attempted 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 midst of a multi-year transformation project (Project Orion) 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. The initial phase to implement the human resource and payroll process was deployed during the first quarter of fiscal 2020.
7

Table of Contents

During the third quarter of fiscal 2020, the Company implemented the finance phase of the project. Additional integrations are expected to take place over the next few 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 difficult, costly, or time consuming than expected, and there can be no assurance that this system will be beneficial to the extent anticipated.

In an attempt to mitigate 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 October 25, 2020, approximately 3,470 of the Company's employees 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 co-manufacturing facilities resulting in work slowdowns or stoppages could harm the Company’s financial results.

INDUSTRY RISKS

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 that may cause food contamination are found generally in livestock and in the environment and thus may be present in our products. These pathogens can also 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.

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 such diseases 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.

In recent years, the outbreak of ASF has impacted hog herds in China, Asia, and Europe. 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, and energy 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, and peanuts 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. Typically, this results in fewer hogs being available on the cash spot market. Consequently, the Company uses long-term supply contracts priced 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 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.

Jennie-O Turkey Store 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 fluctuates due to climate conditions, production forecasts, and supply and demand conditions at local, regional, national, and worldwide
8

Table of Contents

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

International trade barriers and other restrictions could result in decreased foreign demand and increased domestic supply of proteins, thereby potentially lowering prices. The Company occasionally utilizes in-country production to limit this exposure.

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 plant-based proteins. The factors 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 factors in the future.

LEGAL AND REGULATORY RISKS

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, antitrust regulations, intellectual property, advertising, labeling, wage and hour laws, employment practices or environmental matters. Neither litigation trends nor the outcomes of litigation can be predicted with certainty and adverse litigation trends and outcomes could negatively 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 which oversee workforce immigration, taxation, animal welfare, food safety, and the processing, packaging, storage, distribution, advertising, and labeling of the Company’s products. The Company’s manufacturing facilities and products are subject to ongoing 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, as well as any modifications, is material to the Company’s business. 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 related to additional investigation, assessment or other requirements. The occurrence of any of these events, the implementation of new laws and regulations or stricter interpretation of existing laws or regulations could adversely affect the Company’s financial results.

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


9

Table of Contents

Item 1B.  UNRESOLVED STAFF COMMENTS
 
None.

Item 2.  PROPERTIES

The Company's global headquarters are located in Austin, Minnesota. The Company has various processing plants, warehouses and operational facilities, mainly in the states of Iowa, Minnesota, Illinois, and Wisconsin. The Company maintains a national sales force through strategic placement of sales offices throughout the United States. Properties are also maintained internationally to support global processing and sales. The majority of Company property is owned. Leased property is used as needed for Company production and sales. Property leases range in duration from one to twelve years.

Area*
(Square feet)
Refrigerated FoodsGrocery ProductsJennie-O Turkey StoreInternational & OtherCorporateTotal
Processing Plants4,971,000 1,648,000 1,987,000 1,243,000 9,849,000 
Warehouse/Distribution Centers497,000 885,000 140,000 79,000 1,601,000 
Live Production816,000 314,000 1,130,000 
Administrative/Sales/Research65,000 6,000 66,000 34,000 563,000 734,000 
Total6,349,000 2,539,000 2,507,000 1,356,000 563,000 13,314,000 
*Many of the Company's properties are utilized by more than one segment. These facilities are reflected in the principle segment for presentation purposes. Additionally, turkey growout facilities are excluded.

The Company believes its operating facilities are well maintained and suitable for current production volumes. The Company regularly engages in construction and other capital improvement projects with a focus on value-added capacity projects and automation.

Item 3.  LEGAL PROCEEDINGS
 
The Company is a party to various legal proceedings related to the ongoing operation of its business, including claims both by and against the Company. At any time, such proceedings typically involve claims related to product liability, labeling, contracts, antitrust regulations, intellectual property, competition laws, employment practices, or other actions brought by employees, customers, consumers, competitors or suppliers. The Company establishes accruals for its potential exposure, as appropriate, for claims against the Company when losses become probable and reasonably estimable. However, future developments or settlements are uncertain and may require the Company to change such accruals as proceedings progress. Resolution of any currently known matters, either individually or in the aggregate, are not expected to have a material effect on the Company’s financial condition, results of operations, or liquidity.

Item 4.  MINE SAFETY DISCLOSURES
 
Not applicable.



10

Table of Contents

Information About Executive Officers 
CURRENT OFFICE AND PREVIOUS
NAMEAGEFIVE YEARS EXPERIENCEDATES
James P. Snee53Chairman of the Board, President and Chief Executive Officer11/20/17 to Present
President and Chief Executive Officer10/31/16 to 11/19/17
President and Chief Operating Officer10/26/15 to 10/30/16
James N. Sheehan65Executive Vice President and Chief Financial Officer01/29/19 to Present
Senior Vice President and Chief Financial Officer10/31/16 to 01/28/19
Vice President and Chief Accounting Officer05/30/16 to 10/30/16
Vice President and Controller05/01/00 to 05/29/16
Deanna T. Brady55Executive Vice President (Refrigerated Foods)10/28/19 to Present
Group Vice President/President Consumer Product Sales10/26/15 to 10/27/19
Glenn R. Leitch60Executive Vice President (Supply Chain)12/04/17 to Present
Group Vice President/President Jennie-O Turkey Store, Inc.10/31/11 to 12/03/17
PJ Connor51Group Vice President/President Consumer Product Sales10/28/19 to Present
Vice President (Senior Vice President Consumer Product Sales)10/31/11 to 10/27/19
Luis G. Marconi54Group Vice President (Grocery Products)10/31/16 to Present
Vice President (Grocery Products Marketing)03/05/12 to 10/30/16
Swen Neufeldt47Group Vice President (Hormel Foods International Corporation)06/29/20 to Present
Vice President (Meat Products)10/31/16 to 06/28/20
President Asia Pacific (Hormel Foods International Corporation)10/27/14 to 10/30/16
Mark A. Coffey58Senior Vice President (Supply Chain and Manufacturing)03/28/17 to Present
Vice President (Supply Chain)02/06/17 to 03/27/17
Vice President (Affiliated Businesses)10/31/11 to 02/05/17
Janet L. Hogan56Senior Vice President (Human Resources)03/28/17 to Present
Vice President (Human Resources)01/18/17 to 03/27/17
Senior Vice President (Human Resources), ProQuest LLC10/10/16 to 01/17/17
Executive Vice President, Chief Human Resources Officer,
Oshkosh Corporation
05/12/14 to 02/20/16
Pierre M. Lilly49Senior Vice President and Chief Compliance Officer10/26/20 to Present
Director of Internal Audit05/30/16 to 10/25/20
Assistant Director of Internal Audit02/15/16 to 05/29/16
Senior Director of Internal Audit, National Express Corporation09/28/15 to 02/12/16
Steven J. Lykken50Senior Vice President/President Jennie-O Turkey Store, Inc.12/04/17 to Present
President Applegate Farms, LLC04/11/16 to 12/03/17
Chief Operating Officer Applegate Farms, LLC08/17/15 to 04/10/16
Lori J. Marco53Senior Vice President (External Affairs) and General Counsel03/30/15 to Present
Kevin L. Myers, Ph.D.55Senior Vice President (Research and Development and Quality Control)03/30/15 to Present
Jana L. Haynes48Vice President and Controller05/30/16 to Present
  Director of Investor Relations10/28/13 to 05/29/16
Gary L. Jamison55Vice President and Treasurer5/30/16 to Present
  Vice President and Chief Financial Officer Jennie-O Turkey Store, Inc.12/31/12 to 05/29/16

No family relationship exists among the executive officers. 

Executive officers are designated annually by the Board of Directors at the first meeting following the Annual Meeting of Stockholders. Vacancies may be filled and additional officers elected at any time. The Company's Chief Executive Officer has the authority to appoint and remove Vice Presidents (other than Executive Vice Presidents, Group Vice Presidents, and Senior Vice Presidents).
11

Table of Contents

PART II

Item 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
 
Market information
Hormel Foods Corporation’s common stock is traded on the New York Stock Exchange under the symbol HRL. The CUSIP number is 440452100.

Holders
There are approximately 12,600 record stockholders and 136,000 stockholders whose shares are held in street name by brokerage firms and financial institutions.
 
There were no issuer purchases of equity securities in the fourth quarter of fiscal 2020. The maximum number of shares that may yet be purchased under the plans or programs as of October 25, 2020 is 4,456,320. On January 29, 2013, the Company's Board of Directors authorized the repurchase of 10,000,000 shares of its common stock with no expiration date. On January 26, 2016, the Board of Directors approved a two-for-one split of the Company’s common stock to be effective January 27, 2016. As part of the stock split resolution, the number of shares remaining to be repurchased was adjusted proportionately. 

Dividends
The Company has paid dividends for 369 consecutive quarters. The annual dividend rate for fiscal 2021 was increased 5 percent to $0.98 per share, representing the 55th consecutive annual dividend increase. The Company is dedicated to returning excess cash flow to shareholders through dividend payments.

Shareholder return performance graph
The following graph shows a comparison of cumulative total shareholder return, calculated on a dividend-reinvested basis, for the Company, the S&P 500 Index, and the S&P 500 Packaged Foods & Meats Index for the five years ended October 25, 2020. The graph assumes $100 was invested in each, as of the market close on October 26, 2015. Note that historic stock price performance is not necessarily indicative of future stock price performance.

hrl-20201025_g1.jpg

12

Table of Contents


Item 6.  SELECTED FINANCIAL DATA


The information set forth below for the five years ended October 25, 2020, is not necessarily indicative of results of future operations. To fully understand factors that may affect the comparability of the information presented below, this information should be read in conjunction with Part I-Item 1 Business, Part II-Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations, and the consolidated financial statements and related notes thereto included in Part II-Item 8 Financial Statements and Supplementary Data of this Form 10-K.
(in thousands, except per share amounts)20202019201820172016*
Operations     
Net Sales$9,608,462 $9,497,317 $9,545,700 $9,167,519 $9,523,224 
Net Earnings Attributable to
   Hormel Foods Corporation
908,082 978,806 1,012,140 846,735 890,052 
% of Net Sales9.5 %10.3 %10.6 %9.2 %9.3 %
EBIT(1)
1,099,948 1,195,923 1,179,519 1,276,374 1,312,918 
% of Net Sales11.4 %12.6 %12.4 %13.9 %13.8 %
EBITDA(2)
1,305,729 1,361,132 1,341,377 1,407,351 1,444,886 
% of Net Sales13.6 %14.3 %14.1 %15.4 %15.2 %
Return on Invested Capital(3)
11.6 %15.6 %16.2 %16.3 %18.9 %
Financial Position    
Total Assets$9,908,282 $8,109,004 $8,142,292 $6,975,908 $6,370,067 
Total Debt, Including Finance Leases1,303,627 269,713 624,840 250,000 250,000 
Hormel Foods Corporation
   Shareholders’ Investment
6,425,548 5,921,458 5,600,811 4,935,907 4,448,006 
Cash Flows    
Capital Expenditures367,501 293,838 389,607 221,286 255,524 
Acquisitions of Businesses and Intangibles270,789 — 857,668 520,463 280,889 
Proceeds from Sale of Business 479,806 — 135,944 110,149 
Share Repurchase12,360 174,246 46,898 94,487 87,885 
Dividends Paid487,376 437,053 388,107 346,010 296,493 
Common Stock    
Weighted-Average Shares
   Outstanding – Basic
538,007 534,578 530,742 528,363 529,290 
Weighted-Average Shares
   Outstanding – Diluted
546,592 545,232 543,869 539,116 542,473 
Earnings Per Share – Basic$1.69 $1.83 $1.91 $1.60 $1.68 
Earnings Per Share – Diluted1.66 1.80 1.86 1.57 1.64 
Dividends Declared per Share0.93 0.84 0.75 0.68 0.58 
Hormel Foods Corporation
   Shareholders’ Investment per Share
11.90 11.08 10.49 9.34 8.42 
The Company provides EBIT, EBITDA, and Return on Invested Capital because these measures are useful to management and investors as indicators of operating strength relative to prior years and are commonly used to benchmark the Company’s performance. These measures are calculated as follows: 
(in thousands)20202019201820172016*
(1) EBIT:
     
Net Earnings Attributable to
   Hormel Foods Corporation
$908,082 $978,806 $1,012,140 $846,735 $890,052 
Plus: Income Tax Expense206,393 230,567 168,702 431,542 426,698 
Plus: Interest Expense21,069 18,070 26,494 12,683 12,871 
Less: Interest and Investment Income**35,596 31,520 27,817 14,586 16,703 
EBIT$1,099,948 $1,195,923 $1,179,519 $1,276,374 $1,312,918 
(2) EBITDA:
    
EBIT per above1,099,948 1,195,923 1,179,519 1,276,374 1,312,918 
Plus: Depreciation and Amortization205,781 165,209 161,858 130,977 131,968 
EBITDA$1,305,729 $1,361,132 $1,341,377 $1,407,351 $1,444,886 
(3) Return on Invested Capital:
    
EBIT per above1,099,948 1,195,923 1,179,519 1,276,374 1,312,918 
X (1 – Effective Tax Rate***)81.5 %80.9 %85.7 %66.2 %67.6 %
After-tax EBIT$896,238 $967,860 $1,010,966 $845,470 $887,401 
Divided by:    
Total Debt, Including Finance Leases1,303,627 269,713 624,840 250,000 250,000 
Hormel Foods Corporation
   Shareholders’ Investment
6,425,548 5,921,458 5,600,811 4,935,907 4,448,006 
Total Debt and Shareholders’ Investment$7,729,175 $6,191,171 $6,225,651 $5,185,907 $4,698,006 
Return on Invested Capital11.6 %15.6 %16.2 %16.3 %18.9 %
 
* Fiscal 2016 included 53 weeks.
** 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).
*** Excluding earnings attributable to noncontrolling interests.
13

Table of Contents

Item 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
 
Executive Overview
 
Fiscal 2020: Sales for the year were a record $9.6 billion, a 1 percent increase from last year, as all four business segments delivered sales growth. Organic net sales1 increased 2 percent. (1See explanation of non-GAAP financial measures in the Consolidated Results section). Due to the impact of the COVID-19 pandemic on the last three fiscal quarters of 2020, the Company experienced significant demand shifts from its domestic foodservice business to its domestic retail business. Net sales increased for the year due to higher branded retail sales from all business segments, higher commodity sales in Refrigerated Foods and Jennie-O Turkey Store, and the acquisition of the Sadler's Smokehouse business. These gains offset a dramatic decline in foodservice sales and the impact of the CytoSport divestiture last year. Earnings before tax declined 8 percent, as the Company absorbed approximately $80 million in incremental costs related to the COVID-19 pandemic. The 7 percent decrease in net earnings attributable to the Company was driven by COVID-19 related expenses in addition to the impact of the gain on the CytoSport divestiture last year. Diluted earnings per share for fiscal 2020 were $1.66, an 8 percent decrease compared to $1.80 per share last year.

Grocery Products segment profit for the full year increased as improved center store retail sales and favorable product mix more than overcame the divestiture of CytoSport and the benefit from a legal settlement in fiscal 2019. International & Other segment results increased significantly for the full year of fiscal 2020 due to higher income from the Company's partners in the Philippines, South Korea and Europe, branded export growth, and improved results in China. Earnings for the Jennie-O Turkey Store segment deceased primarily due to lower foodservice earnings and increased supply chain costs related to the COVID-19 impacts on manufacturing and live production. Refrigerated Foods segment results declined for the full year as lower foodservice sales and incremental supply chain costs related to COVID-19 more than offset excellent performances from the retail businesses.

In response to the COVID-19 pandemic, the Company committed to making investments necessary to keep its team members safe. These investments included: enhanced safety procedures across the Company's facilities; providing personal protective equipment for all production team members; frequent disinfecting of high-touch areas; reconfiguration of common areas and workstations; temperature and wellness screenings; revised shift scheduling; reduced production line speeds; new guidelines on carpooling; more extensive social distancing measures throughout each facility; and where possible, providing remote work opportunities and facilitating access to rapid testing for employees. The Company also paid over $11 million in bonuses to full- and part-time plant production team members during the year.

Additionally, the Company continued to reinvest into the business through capital expenditures while returning cash back to shareholders in the form of dividends. Capital expenditures were $367.5 million in fiscal 2020. Notable projects included the completion of the Burke pizza toppings plant expansion, significant work on a new dry sausage facility in Nebraska, Project Orion, and many other projects to support growth of branded products. The annual dividend for 2021 will be $0.98 per share and marks the 55th consecutive year of dividend increases, representing an increase of 5 percent.

In March, the Company acquired Sadler's Smokehouse for $270.8 million. In June, the Company issued $1.0 billion, ten-year notes at an annual interest rate of 1.8 percent. The proceeds from the offering is expected to provide liquidity and allow the business to take advantage of strategic opportunities.

Fiscal 2021 Outlook: We are optimistic about our ability to grow sales and earnings in fiscal 2021. Sales for our retail products is expected to remain strong but not to the level of growth seen in fiscal 2020. Sales momentum for products such as SKIPPY® peanut butter, Herdez® salsas and sauces, Hormel® Black Label® bacon, Applegate® brands, and Jennie-O® lean ground turkey is expected to continue. Key product lines are expected to benefit from structurally higher capacity compared to last year. We anticipate a modest recovery in the foodservice industry but likely not back to 2019 levels. Brands like Hormel® Bacon 1TM, Hormel® Fire BraisedTM, Sadler’s®, and Café H® are well-positioned to grow as the industry recovers. Additional restrictions related to on-premise dining and regional lockdowns could impact the recovery of the foodservice industry. We expect the COVID-19 related higher cost structure in our domestic operations to continue through the first half of fiscal 2021 and for the majority of COVID-19 costs to subside as the pandemic comes under control. The availability of labor to staff our domestic production facilities and higher input costs present risk to our sales and profitability. Barring any unforeseen trade issues, the International & Other segment expects continued growth from the China business and the SPAM® and SKIPPY® brands.

Due to consistent cash flow, liquidity, and a strong balance sheet, the Company remains in a position of strength heading into fiscal 2021. We plan to invest our capital to support the growth of the value-added businesses and advertise our numerous iconic brands. We plan to open a new dry sausage facility for the Columbus® brand in the second quarter as well as invest in additional capacity to support our pepperoni business. Additionally, we are committed to returning cash to shareholders in the form of dividends.
 

14

Table of Contents

A detailed review of the Company's fiscal 2020 performance compared to fiscal 2019 appears in following section. A detailed review of the fiscal 2019 performance compared to fiscal 2018 is set forth in Part II, Item 7 of the Company's Form 10-K for the fiscal year ended October 27, 2019 under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which is incorporated herein by reference.

Results of Operations
 
OVERVIEW
 
The Company is a processor of branded and unbranded food products for retail, foodservice, deli, and commercial customers. At the beginning of fiscal 2019, the Company aligned all deli businesses, including the Jennie-O Turkey Store deli division, into Hormel Deli Solutions reporting within the Refrigerated Foods segment. In addition, the ingredients business was realigned from the Grocery Products segment to the Refrigerated Foods segment. Periods presented herein have been recast to reflect these changes. Periods presented have also been 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 - Summary of Significant Accounting Policies for more information.

The Company operates in the following four reportable segments:
SegmentBusiness Conducted
Grocery ProductsThis 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 (MegaMex) joint venture.
Refrigerated FoodsThis segment consists primarily of the processing, marketing, and sale of branded and unbranded pork, beef, chicken and turkey products for retail, foodservice, deli and, commercial customers.
Jennie-O Turkey StoreThis segment consists primarily of the processing, marketing, and sale of branded and unbranded turkey products for retail, foodservice, and commercial customers.
International & OtherThis 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 and royalty arrangements.
 
The Company’s fiscal year consisted of 52 weeks in fiscal years 2020, 2019, and 2018. Fiscal 2021 will consist of 53 weeks.
 
FISCAL YEARS 2020 AND 2019

CONSOLIDATED RESULTS
 
Net Earnings and Diluted Earnings Per Share 
 Fourth Quarter EndedYear Ended
(in thousands, except per share
amounts)
October 25, 2020October 27, 2019% ChangeOctober 25, 2020October 27, 2019% Change
Net Earnings$234,356 $255,503 (8.3)$908,082 $978,806 (7.2)
Diluted Earnings Per Share0.43 0.47 (8.5)1.66 1.80 (7.8)
 
15

Table of Contents

Volume and Net Sales 
 Fourth Quarter EndedYear Ended
(in thousands)October 25, 2020October 27, 2019% ChangeOctober 25, 2020October 27, 2019% Change
Volume (lbs.)1,209,434 1,236,877 (2.2)4,794,706 4,737,281 1.2 
Organic Volume(1)
1,204,662 1,236,877 (2.6)4,779,409 4,665,319 2.4 
Net Sales$2,420,105 $2,501,513 (3.3)$9,608,462 $9,497,317 1.2 
Organic Net Sales(1)
2,392,741 2,501,513 (4.3)9,519,099 9,362,840 1.7 
 
(1) COMPARISON OF U.S. GAAP TO NON-GAAP FINANCIAL MEASUREMENTS
 
The non-GAAP adjusted financial measurements of organic net sales and organic volume are presented to provide investors with additional information to facilitate the comparison of past and present operations. Organic net sales and organic volume are defined as net sales and volume, excluding the impact of acquisitions and divestitures. Organic net sales and organic volume exclude the impacts of the Sadler's Smokehouse acquisition (March 2020) in the Refrigerated Foods segment and the CytoSport divestiture (April 2019) in the Grocery Products, and International & Other segments.

The Company believes these non-GAAP financial measurements provide useful information to investors because they are the measurements used to evaluate performance on a comparable year-over-year basis. Non-GAAP measurements are not intended to be a substitute for U.S. GAAP measurements in analyzing financial performance. These non-GAAP measurements are not in accordance with generally accepted accounting principles and may be different from non-GAAP measures used by other companies.

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

Reconciliation of Non-GAAP Measures

4th Quarter

Volume (lbs.)
 October 25, 2020October 27, 2019
(in thousands)Reported
(GAAP)
AcquisitionsOrganic
(Non-GAAP)
Reported
(GAAP)
DivestituresOrganic
(Non-GAAP)
Organic
% change
Grocery Products317,743  317,743 313,489 — 313,489 1.4 
Refrigerated Foods572,873 (4,772)568,101 598,474 — 598,474 (5.1)
Jennie-O Turkey Store237,435  237,435 242,421 — 242,421 (2.1)
International & Other81,383  81,383 82,493 — 82,493 (1.3)
Total Volume1,209,434 (4,772)1,204,662 1,236,877 — 1,236,877 (2.6)

Net Sales 
 October 25, 2020October 27, 2019
(in thousands)Reported
(GAAP)
AcquisitionsOrganic
(Non-GAAP)
Reported
(GAAP)
DivestituresOrganic
(Non-GAAP)
Organic
% change
Grocery Products$580,617 $ $580,617 $584,085 $— $584,085 (0.6)
Refrigerated Foods1,308,842 (27,364)1,281,478 1,373,009 — 1,373,009 (6.7)
Jennie-O Turkey Store373,471  373,471 398,512 — 398,512 (6.3)
International & Other157,175  157,175 145,907 — 145,907 7.7 
Total Net Sales$2,420,105 $(27,364)$2,392,741 $2,501,513 $— $2,501,513 (4.3)

Net sales for the fourth quarter of fiscal 2020 decreased, as higher sales of whole-birds at Jennie-O Turkey Store, the impact from the Sadler's Smokehouse acquisition, and strong retail sales growth of Applegate® products, Jennie-O® lean ground turkey, Black Label® bacon, and Skippy® peanut butter could not overcome significantly lower enterprise-wide foodservice sales.
16

Table of Contents

Full Year

Volume (lbs.)
 October 25, 2020October 27, 2019
(in thousands)Reported
(GAAP)
AcquisitionsOrganic
(Non-GAAP)
Reported
(GAAP)
DivestituresOrganic
(Non-GAAP)
Organic
% change
Grocery Products1,281,562  1,281,562 1,283,492 (69,910)1,213,582 5.6 
Refrigerated Foods2,360,571 (15,298)2,345,273 2,325,156 — 2,325,156 0.9 
Jennie-O Turkey Store815,425  815,425 789,337 — 789,337 3.3 
International & Other337,149  337,149 339,296 (2,052)337,244 — 
Total Volume4,794,707 (15,298)4,779,409 4,737,281 (71,962)4,665,319 2.4 

Net Sales
 October 25, 2020October 27, 2019
(in thousands)Reported
(GAAP)
AcquisitionsOrganic
(Non-GAAP)
Reported
(GAAP)
DivestituresOrganic
(Non-GAAP)
Organic
% change
Grocery Products$2,385,291 $ $2,385,291 $2,369,317 $(130,588)$2,238,729 6.5 
Refrigerated Foods5,271,061 (89,363)5,181,698 5,210,741 — 5,210,741 (0.6)
Jennie-O Turkey Store1,333,459  1,333,459 1,323,783 — 1,323,783 0.7 
International & Other618,650  618,650 593,476 (3,889)589,587 4.9 
Total Net Sales$9,608,462 $(89,363)$9,519,099 $9,497,317 $(134,477)$9,362,840 1.7 

For fiscal 2020, net sales increased due to higher branded retail sales from all business segments, higher commodity sales in Refrigerated Foods and Jennie-O Turkey Store, and the acquisition of Sadler's Smokehouse. The impact of the COVID-19 pandemic and subsequent shift in consumer behavior toward the retail channel led to a dramatic decline in foodservice sales. Net sales were also negatively impacted by the CytoSport divestiture last year.

In fiscal 2021, the Company expects net sales growth due to continued momentum from the retail and international channels and a recovery in the foodservice industry. Grocery Products expects strong demand for its branded retail items to continue. The business is expected to benefit from structural capacity improvements on key categories such as canned meats and chili. The International & Other segment expects stronger sales in China and continued growth of SPAM® luncheon meat and Skippy ® peanut butter. The retail businesses in Refrigerated Foods should continue to grow, led by the Hormel® Black Label® and Applegate® brands. We expect a recovery in the foodservice industry and growth from the Hormel® Bacon 1TM, Hormel® Fire BraisedTM, Sadler’s®, and Café H® brands. The deli division is expected to continue to grow the Columbus ® brand as new capacity comes online. Jennie-O Turkey Store is expecting sales growth from Jennie-O ® lean ground turkey and a recovery in foodservice.

Cost of Products Sold 
 Fourth Quarter EndedYear Ended
 October 25,October 27, October 25,October 27, 
(in thousands)20202019% Change20202019% Change
Cost of Products Sold$1,962,340 $2,007,790 (2.3)$7,782,498 $7,612,669 2.2 
 
Cost of products sold for the fourth quarter of fiscal 2020 decreased primarily due to lower value-added foodservice sales. Cost of products sold for the full year increased driven by record sales and approximately $80 million of incremental operational costs related to the COVID-19 pandemic. These costs included lower production volumes, employee bonuses, and enhanced safety measures in the Company's facilities.

The Company expects to absorb additional COVID-19 related operational costs during the first half of fiscal 2021. As the pandemic comes under control, the majority of these costs should subside.
 
Gross Profit 
 Fourth Quarter EndedYear Ended
 October 25,October 27, October 25,October 27, 
(in thousands)20202019% Change20202019% Change
Gross Profit$457,765 $493,723 (7.3)$1,825,963 $1,884,648 (3.1)
Percentage of Net Sales18.9 %19.7 % 19.0 %19.8 % 

Consolidated gross profit as a percentage of net sales for the fourth quarter and full year declined. The mix impact from lower foodservice sales in the Refrigerated Foods and Jennie-O Turkey Store segments and the incremental supply chain costs incurred related to the COVID-19 pandemic were the primary drivers of the decline.

17

Table of Contents

In fiscal 2021, higher sales and improved mix are expected to lead to gross profit expansion. The Company expects the higher cost structure related to COVID-19 to continue through the first half. Higher raw material input costs present a risk to the Company's profitability.

Selling, General, and Administrative (SG&A) 
 Fourth Quarter EndedYear Ended
 October 25,October 27, October 25,October 27, 
(in thousands)20202019% Change20202019% Change
SG&A$190,797 $183,795 3.8 $761,315 $727,584 4.6 
Percentage of Net Sales7.9 %7.3 %7.9 %7.7 %

SG&A expenses for the fourth quarter increased driven by higher advertising investments in 2020 and lower pension and other employee-related expenses last year. Full year SG&A increased as a result of various factors impacting comparability to last year. These factors included the one-time gain from the divestiture of CytoSport, a partial year of expenses related to CytoSport, and a legal settlement.

Advertising investments in the fourth quarter were $29 million, an increase of 14 percent. Advertising investments declined for fiscal 2020 due primarily to the divestiture of CytoSport.

In fiscal 2021, the Company intends to continue building brand awareness through advertising investments in key brands such as SPAM®, SKIPPY®, Hormel® chili, Applegate®, Columbus®, Hormel® Black Label®, Hormel® pepperoni and Jennie-O®.

Research and development continues to be a vital part of the Company's strategy to extend existing brands and expand into new branded items. Research and development expenses were $8.3 million and $31.9 million for the fiscal 2020 fourth quarter and year, respectively, compared to $8.4 million and $32.5 million for the corresponding periods in fiscal 2019.
 
Equity in Earnings of Affiliates 
 Fourth Quarter EndedYear Ended
 October 25,October 27, October 25,October 27, 
(in thousands)20202019% Change20202019% Change
Equity in Earnings of Affiliates$9,729 $11,068 (12.1)$35,572 $39,201 (9.3)
 
Equity in earnings of affiliates for the fourth quarter and full year of fiscal 2020 declined due to lower earnings from the MegaMex foodservice business. This decline was partially offset by improved performance from the Company's joint venture in the Philippines.

The Company accounts for its majority-owned operations under the consolidation method. Investments in which the Company owns a minority interest, and for which there are no other indicators of control, are accounted for under the equity or cost method. These investments, along with receivables from other affiliates, are included in the Consolidated Statements of Financial Position as investments in and receivables from affiliates. The composition of this line item at October 25, 2020, was as follows: 
(in thousands)Investments/Receivables
Country 
United States$220,907 
Foreign87,466 
Total$308,372 
 
Effective Tax Rate 
 Fourth Quarter EndedYear Ended
 October 25,October 27,October 25,October 27,
 2020201920202019
Effective Tax Rate15.9 %21.0 %18.5 %19.1 %
 
The effective tax rate for fiscal 2020 was impacted by stock-based compensation and state tax settlements. The tax impacts of the CytoSport divestiture and stock-based compensation were the main drivers of the Company's fiscal 2019 effective tax rates for the fourth quarter and fiscal year. For additional information, refer to Note J - Income Taxes.

The Company expects the effective tax rate in fiscal 2021 to be between 20.0 and 21.5 percent.


18

Table of Contents

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 that these segments, if operated independently, would report the operating profit and other financial information shown below. Additional segment financial information can be found in Note P - Segment Reporting. 
 Fourth Quarter EndedYear Ended
 October 25,October 27, October 25,October 27, 
(in thousands)20202019% Change20202019% Change
Net Sales      
Grocery Products$580,617 $584,085 (0.6)$2,385,291 $2,369,317 0.7 
Refrigerated Foods1,308,842 1,373,009 (4.7)5,271,061 5,210,741 1.2 
Jennie-O Turkey Store373,471 398,512 (6.3)1,333,459 1,323,783 0.7 
International & Other157,175 145,907 7.7 618,650 593,476 4.2 
Total Net Sales$2,420,105 $2,501,513 (3.3)$9,608,462 $9,497,317 1.2 
Segment Profit
Grocery Products$81,642 $80,923 0.9 $358,008 $339,497 5.5 
Refrigerated Foods157,810 189,287 (16.6)609,406 681,763 (10.6)
Jennie-O Turkey Store32,618 41,031 (20.5)105,585 117,962 (10.5)
International & Other27,047 17,455 55.0 93,782 75,513 24.2 
Total Segment Profit299,116 328,696 (9.0)1,166,782 1,214,735 (3.9)
   Net Unallocated Expense20,553 5,065 305.8 52,307 5,362 875.5 
Noncontrolling Interest169 63 172.2 272 342 (20.5)
Earnings Before Income Taxes$278,732 $323,694 (13.9)$1,114,747 $1,209,715 (7.9)

Grocery Products
 Fourth Quarter EndedYear Ended
 October 25,October 27, October 25,October 27, 
(in thousands)20202019% Change20202019% Change
Volume (lbs.)317,743 313,489 1.4 1,281,562 1,283,492 (0.2)
Net Sales$580,617 $584,085 (0.6)$2,385,291 $2,369,317 0.7 
Segment Profit81,642 80,923 0.9 358,008 339,497 5.5 

Demand for center store brands remained strong in the fourth quarter of fiscal 2020, led by growth from brands such as SKIPPY®, Herdez®, and Hormel® Compleats®. Sales for the quarter were impacted by lower inventory levels and production limitations related to the COVID-19 pandemic on certain center store products and lower sales for MegaMex foodservice items. For the full year, net sales increased as growth from many center store brands more than offset the impact from the CytoSport divestiture last year.
Segment profit for the fourth quarter increased as improved results across the nut butters portfolio more than offset increased freight expense and lower earnings from our MegaMex foodservice business. Segment profit for the full year increased as improved sales and favorable product mix more than overcame the divestiture of CytoSport and the benefit from a legal settlement in fiscal 2019.
Looking ahead to fiscal 2021, Grocery Products expects strong demand for its branded retail items to continue. The business will benefit from structural capacity improvements on key categories such as canned meats and chili. Higher input costs could negatively pressure profitability.

Refrigerated Foods 
 Fourth Quarter EndedYear Ended
 October 25,October 27, October 25,October 27, 
(in thousands)20202019% Change20202019% Change
Volume (lbs.)572,873 598,474 (4.3)2,360,571 2,325,156 1.5 
Net Sales$1,308,842 $1,373,009 (4.7)$5,271,061 $5,210,741 1.2 
Segment Profit157,810 189,287 (16.6)609,406 681,763 (10.6)

For the fourth quarter, retail and deli sales growth from brands such as Applegate®, Hormel® Black Label®, and Columbus®, in addition to the impact from the Sadler’s Smokehouse acquisition did not offset a significant decline in foodservice sales. Sales were impacted by production limitations due to the COVID-19 pandemic and lower inventory levels. Full year sales increased due to strong demand for branded retail products, higher commodity sales and the benefit from the Sadler's Smokehouse acquisition.

19

Table of Contents

For the fourth quarter and full year of fiscal 2020, the decline in segment profit was due to lower foodservice sales and incremental supply chain costs related to COVID-19. Fourth quarter segment profit was also negatively impacted by a decrease in commodity profits.
 
In fiscal 2021, Refrigerated Foods is expecting modest growth from the retail businesses and a recovery in foodservice demand. Factors such as limited labor availability and low levels of inventory entering the year may limit the Company's ability to supply product in key categories to meet robust demand. Higher operational costs related to COVID-19 are expected to continue through the first half of the fiscal year. As the pandemic comes under control, the majority of these costs should subside.

Jennie-O Turkey Store
 Fourth Quarter EndedYear Ended
 October 25,October 30, October 25,October 30, 
(in thousands)20202019% Change20202019% Change
Volume (lbs.)237,435 242,421 (2.1)815,425 789,337 3.3 
Net Sales$373,471 $398,512 (6.3)$1,333,459 $1,323,783 0.7 
Segment Profit32,618 41,031 (20.5)105,585 117,962 (10.5)
 
Fourth quarter volume and sales growth of Jennie-O® lean ground products and whole birds were exceptionally strong. Reduced demand for foodservice and commodity products led to the overall decline in sales. Sales increased for fiscal 2020 as improvements in retail, whole bird, and commodity sales more than offset a dramatic decline in foodservice sales.

Lower foodservice earnings and increased supply chain costs related to the COVID-19 pandemic drove the decline in segment profit for the fourth quarter and full year.

Jennie-O Turkey Store expects growth from Jennie-O branded retail products, a recovery in the foodservice business, and an improvement in the vertically integrated supply chain. Incremental COVID-19 related costs are expected to persist through the first half of fiscal 2021. As the pandemic comes under control, the majority of these costs should subside. Limited labor availability and higher feed costs for 2021 pose a risk to sales and profitability.
 
International & Other
 Fourth Quarter EndedYear Ended
 October 25,October 27, October 25,October 27, 
(in thousands)20202019% Change20202019% Change
Volume (lbs.)81,383 82,493 (1.3)337,149 339,296 (0.6)
Net Sales$157,175 $145,907 7.7 $618,650 $593,476 4.2 
Segment Profit27,047 17,455 55.0 93,782 75,513 24.2 
 
Sales for the fourth quarter of fiscal 2020 increased due to strong worldwide demand for SPAM® luncheon meat and growth in China. Results in China were positively impacted by strong demand for branded retail items, such as SKIPPY® peanut butter, and an accelerating recovery in the foodservice channel. Sales for the full year increased on improved results in China and strong international demand for the SPAM® and SKIPPY® brands.

The significant increase in segment profit for the fourth quarter was due to improved results in China, higher income from our partners in the Philippines, South Korea, and Europe, and branded export growth. Segment results increased for the full year of fiscal 2020 due to higher income from the Company's partners in the Philippines, South Korea, and Europe, branded export growth, and improved results in China.

Looking ahead to 2021, the International & Other segment anticipates growth in China and higher worldwide sales of SPAM ® luncheon meat and SKIPPY ® peanut butter. Higher input costs pose a risk to business results in China and Brazil.
 
20

Table of Contents

Unallocated Income and Expense
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 the corporate level. Equity in Earnings of Affiliates is included in segment profit; however, earnings attributable to the Company’s noncontrolling interests are excluded. These items are included in the segment table for the purpose of reconciling segment results to Earnings Before Income Taxes.
 Fourth Quarter EndedYear Ended
 October 25,October 27,October 25,October 27,
(in thousands)2020201920202019
Net Unallocated Expense$20,553 $5,065 $52,307 $5,362 
Noncontrolling Interest169 63 272 342 
 
Net Unallocated Expense increased for the fourth quarter due to higher interest and employee related expenses. Net Unallocated Expense for fiscal 2020 increased primarily due to one-time benefits in fiscal 2019 associated with the sale of CytoSport, higher selling and employee related expenses, and the impact from a legal settlement in 2019.
 
Liquidity and Capital Resources
 
Cash and Cash Equivalents were $1,714.3 million for fiscal 2020 compared to $672.9 million and $459.1 million for 2019 and 2018, respectively.
 
During fiscal 2020, cash provided by operating activities was $1,128.0 million compared to $923.0 million in fiscal 2019, and $1,241.7 million in fiscal 2018. The increase in fiscal 2020 was primarily due effective management of working capital.
 
Cash provided by/(used in) investing activities was $(656.3) million, $220.2 million, and $(1,235.4) million in fiscal 2020, 2019, and 2018, respectively. Fiscal 2020 included the acquisition of Sadler's for $270.8 million. In fiscal 2019, the Company received $479.8 million from the sale of CytoSport and $30.6 million from the sale of the Fremont, Nebraska, processing facility. Fiscal 2018 included $857.4 million to purchase Columbus.

Capital expenditures in fiscal 2020, 2019, and 2018 were $367.5 million, $293.8 million, and $389.6 million, respectively. Significant projects in fiscal 2020 and 2019 included a new dry sausage facility in Nebraska, the Burke pizza toppings plant expansion, Project Orion, and ongoing investments to support food and employee safety as well as the growth of branded products. Key capital projects in fiscal 2018 included the expansion of value-added capacity at Dold Foods in Kansas and a highly automated whole bird facility in Minnesota. Capital expenditures for fiscal 2021 are estimated to be $350.0 million with the largest projects expected to include completion of the new dry sausage production facility in Nebraska, pepperoni capacity expansion, and Project Orion.
 
Cash provided by financing activities was $566.2 million in fiscal 2020 compared to cash used in financing activities of $926.2 million in fiscal 2019 and cash provided by financing activities of $11.6 million in fiscal 2018. In the third quarter of fiscal 2020, the Company issued ten-year senior notes in an aggregate principal amount of $1.0 billion. The proceeds from the offering provide liquidity and allow the Company to take advantage of strategic opportunities. Cash used in financing activities in fiscal 2019 included repayment of the $375.0 term loan used to fund the acquisition of Columbus and $174.2 million in share repurchases.

Cash dividends paid to the Company’s shareholders continues to be an ongoing financing activity for the Company with $487.4 million in dividends paid in fiscal 2020 compared to $437.1 million in fiscal 2019 and $388.1 million in fiscal 2018. The dividend rate was $0.93 per share in fiscal 2020, which reflected an 11.0 percent increase over the fiscal 2019 rate of $0.84 per share. The Company has paid dividends for 369 consecutive quarters. The annual dividend rate for fiscal 2021 was increased 5% percent to $0.98 per share, representing the 55th consecutive annual dividend increase.

The Company is required by certain covenants in its debt agreements to maintain specified levels of financial ratios and financial position. As of October 25, 2020, the Company was in compliance with all debt covenants.

Despite the COVID-19 pandemic, the Company remains confident in its ability to meet cash flow needs. In addition to providing a return to shareholders through dividends, top priorities for the Company include investments to ensure employee and food safety, growing the business through innovation, and evaluating opportunities for strategic acquisitions. Capital spending to enhance and expand current operations isl also expected to be a significant cash outflow in fiscal 2021.

21

Table of Contents

Contractual Obligations and Commercial Commitments
The following table outlines the Company’s future contractual financial obligations as of October 25, 2020, (for additional information regarding these obligations, see Note E - Long-term Debt and Other Borrowing Arrangements and Note M - Commitments and Contingencies):
 Payments Due by Periods
Contractual Obligations (in thousands)TotalLess Than
1 Year
1-3 Years3-5 YearsMore Than
5 Years
Purchase Obligations:     
Hog, Turkey, and Raw Material Commitments(1)
$2,848,544 $894,419 $1,404,416 $537,495 $12,214 
Grain Commitments(1)
55,489 54,740 749 — — 
Turkey Grow-out Contracts(2)
103,014 15,006 22,347 16,002 49,659 
Current and Long-term Debt(3)
1,250,000 250,000 — — 1,000,000 
Interest Payments on Long-term Debt(3)
184,760 22,760 36,000 36,000 90,000 
Finance Leases(4)
68,919 10,327 19,672 17,729 21,192 
Operating Leases(4)
60,399 13,363 19,012 9,380 18,644 
Other Long-term Liabilities(5) (6)
72,254 7,085 13,814 12,221 39,133 
Total Contractual Cash Obligations$4,643,379 $1,267,700 $1,516,010 $628,827 $1,230,842 
 
(1) In the normal course of business, the Company commits to purchase fixed quantities of livestock, grain, and raw materials from producers to ensure a steady supply of production inputs. Some of these contracts are based on market prices at the time of delivery, for which the Company has estimated the purchase commitment using current market prices as of October 25, 2020.
 
(2) The Company utilizes grow-out contracts with independent farmers to raise turkeys for the Company. Under these contracts, the turkeys, feed, and other supplies are owned by the Company. The farmers provide the required labor and facilities and receive a fee per pound when the turkeys are delivered. Some of the facilities are sub-leased by the Company to the independent farmers. As of October 25, 2020, the Company had approximately 100 active contracts ranging from one to twenty-five years in duration. The grow-out activity is assumed to continue through the term of these active contracts. Amounts in the table represent the Company’s obligation based on turkeys expected to be delivered from these farmers.
 
(3) See Note E - Long-term Debt and Other Borrowing Arrangements.

(4) See Note N - Leases.
 
(5) Other Long-term Liabilities represent payments under the Company’s deferred compensation plans and immaterial other financing arrangements. Excluded from the table above are payments under the Company’s defined benefit pension and other post-retirement benefit plans. (See estimated benefit payments for the next ten fiscal years in Note F - Pension and Other Post-retirement Benefits).

(6) As discussed in Note J - Income Taxes, the total liability for unrecognized tax benefits, including interest and penalties, at October 25, 2020, was $29.1 million, which is not included in the table above as the ultimate amount or timing of settlement of the Company's reserves for income taxes cannot be reasonably estimated.

The Company believes its financial resources, including a revolving credit facility for $400 million and anticipated funds from operations, will be adequate to meet all current commitments.

Off-Balance Sheet Arrangements
As of October 25, 2020, the Company had $47.5 million 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, this amount includes revocable standby letters of credit totaling $3.1 million for obligations of an affiliated party that may arise under workers compensation claims. Letters of credit are not reflected in the Company’s Consolidated Statements of Financial Position.

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

Critical Accounting Policies

This discussion and analysis of financial condition and results of operations is based upon the Company's consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP). The preparation of these financial statements requires the Company to make estimates, judgments, and assumptions that can have a meaningful effect on the reporting of consolidated financial statements. See Note A - Summary of Significant Accounting Policies additional information.
 
Critical accounting policies are defined as those reflective of significant judgments, estimates and uncertainties, which may result in materially different results under different assumptions and conditions. As conditions resulting from the COVID-19 pandemic evolve, the Company expects these judgments and estimates may be subject to change, which could materially impact future periods. The Company believes the following are its critical accounting policies:
 

22

Table of Contents

Revenue Recognition: The Company recognizes sales at the point in time when the performance obligation has been satisfied and control of the product has transferred to the customer. Obligations for the Company are usually fulfilled once shipped product is received or picked up by the customer. Revenue is recorded net of applicable provisions for discounts, returns, and allowances.
 
The Company offers various sales incentives to customers and consumers. Incentives offered off-invoice include prompt pay allowances, will call allowances, spoilage allowances and temporary price reductions. These incentives are recognized as reductions of revenue at the time control is transferred. Coupons are used as an incentive for consumers to purchase various products. The coupons reduce revenues at the time they are offered, based on estimated redemption rates. Promotional contracts are performed by customers to promote the Company’s products to consumers. These incentives reduce revenues at the time of performance through direct payments and accrued promotional funds. Accrued promotional funds are unpaid liabilities for promotional contracts in process or completed at the end of a quarter or fiscal year. Promotional contractual accruals are based on agreements with customers for defined performance. The liability relating to these agreements is based on a review of the outstanding contracts on which performance has taken place but which the promotional payments relating to such contracts remain unpaid as of the end of the fiscal year. The level of customer performance and the historical spend rate versus contracted rates are estimates used to determine these liabilities.
 
Inventory Valuation: The Company values inventories at the lower of cost or net realizable value. For pork inventories, when the carcasses are disassembled and transferred from primal processing to various manufacturing departments, the primal values, as adjusted by the Company for product specifications and further processing, become the basis for calculating inventory values. Turkey raw materials are represented by the deboned meat quantities. The Company values these raw materials using a concept referred to as the “meat cost pool.” The meat cost pool is determined by combining the cost to grow turkeys with processing costs, less any net sales revenue from by-products created from the processing and not used in producing Company products. The Company has developed a series of ratios using historical data and current market conditions (which themselves involve estimates and judgment determinations by the Company) to allocate the meat cost pool to each meat component. Substantially all inventoriable expenses, meat, packaging, and supplies are valued by the average cost method.
 
Goodwill and Other Indefinite-Lived Intangibles: Estimating the fair value of the Company’s goodwill reporting units and intangible assets requires significant judgment upon initial valuation. Determining the useful life of an intangible asset also requires judgment. Certain acquired brands are expected to have indefinite lives based on their history and the Company’s intent to continue to support and build the brands. Other acquired assets such as customer relationships, are expected to have determinable useful lives.
 
Indefinite-lived intangible assets are originally recorded at their estimated fair values at the date of acquisition and the residual of the purchase price is recorded to goodwill. Goodwill and other indefinite-lived intangible assets are allocated to the reporting units that will receive the related sales and income. Goodwill and indefinite-lived intangible assets are tested annually for impairment, or more frequently if impairment indicators arise.
 
Goodwill
In conducting the annual impairment test for goodwill, the Company has the option to first assess qualitative factors to determine whether it is more likely than not (> 50% likelihood) the fair value of any reporting unit is less than its carrying amount. If a qualitative assessment determines an impairment is more likely than not, the Company is required to perform a quantitative impairment test. Otherwise, no further analysis is required. Alternatively, the Company may elect to proceed directly to the quantitative impairment test.

In conducting a qualitative assessment, the Company analyzes actual and projected growth trends for net sales, gross margin, and segment profit for each reporting unit, as well as historical performance versus plan and the results of prior quantitative tests performed. Additionally, the Company assesses factors that may impact its business, including macroeconomic conditions and the related impact, market-related exposures, plans to market for sale all or a portion of the business, competitive changes, new or discontinued product lines, changes in key personnel, and any potential risks to their projected financial results.
 
If performed, the quantitative goodwill impairment test is performed at the reporting unit level. First, the fair value of each reporting unit is compared to its corresponding carrying value, including goodwill. The fair value of each reporting unit is estimated using discounted cash flow valuations (Level 3), which incorporate assumptions regarding future growth rates, terminal values and discount rates. The estimates and assumptions used consider historical performance and are consistent with the assumptions used in determining future profit plans for each reporting unit, which are approved by the Company’s Board of Directors. If the quantitative assessment results in the carrying value exceeding the fair value of any reporting unit, then the results from the quantitative analysis will be relied upon to determine both the existence and amount of goodwill impairment. An impairment loss will be recognized for the amount by which the reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill in that reporting unit.
 
During the fourth quarter of fiscal 2020, the Company completed its annual goodwill impairment tests and elected to perform a qualitative assessment. As a result of the qualitative testing during 2020, 2019, and 2018, no goodwill impairment charges were recorded.

23

Table of Contents

Indefinite-lived Intangible Assets
In conducting the annual impairment test for its indefinite-lived intangible assets, the Company first performs a qualitative assessment to determine whether it is more likely than not (> 50% likelihood) that an indefinite-lived intangible asset is impaired. If the Company concludes this is the case, a quantitative test for impairment must be performed. Otherwise, the Company does not need to perform a quantitative test.
 
In conducting the qualitative assessment, the Company analyzes growth rates for historical and projected net sales and the results of prior quantitative tests performed. Additionally, the Company assesses critical areas that may impact the value of its intangible assets or the applicable royalty rates to determine if impairment may be indicated.
 
If performed, the quantitative impairment test compares the fair value to the carrying value of the indefinite-lived intangible asset. The fair value of indefinite-lived intangible assets is primarily determined on the basis of estimated discounted value, using the relief from royalty method (Level 3). This method incorporates assumptions regarding future sales projections, discount rates, and royalty rates. If the carrying value exceeds fair value, the indefinite-lived intangible asset is considered impaired and an impairment charge is recorded. Even if not required, the Company may elect to perform the quantitative test in order to gain further assurance in the qualitative assessment.
 
During the fourth quarter of fiscal 2020, the Company completed its annual indefinite-live impairment tests by performing a qualitative assessment. During 2019, the Company elected to quantitatively test two indefinite-lived intangible assets and to perform a qualitative assessment for the remaining assets. No impairment charges were recorded as a result of the qualitative and quantitative testing during fiscal years 2020 and 2019. During fiscal 2018, a $17.3 million intangible asset impairment charge was recorded for the CytoSport trademark. No other material impairment charges were recorded in fiscal 2018.
 
Pension and Other Post-retirement Benefits: The Company incurs expenses relating to employee benefits, such as noncontributory defined benefit pension plans and post-retirement health care benefits. In accounting for these employment costs and the associated liabilities, management must make a variety of assumptions and estimates including mortality rates, discount rates, compensation increases, expected return on plan assets, and health care cost trend rates. The Company considers historical data as well as current facts and circumstances when determining these estimates. The Company uses third-party specialists to assist management in the determination of these estimates and the calculation of certain employee benefit expenses and the outstanding obligation.
 
Benefit plan assets are stated at fair value. Due to the lack of readily available market prices, private equity investments are valued by models using a combination of available market data and unobservable inputs that consider earnings multiples, discounted cash flows, and other qualitative and quantitative factors. Other benefit plan investments are measured at Net Asset Value (NAV) per share of the fund's underlying investments as a practical expedient. These valuations are subject to judgments and assumptions of the funds which may prove to be incorrect, resulting in risks of incorrect valuation of these investments. The Company seeks to mitigate these risks by evaluating the appropriateness of the funds’ judgments and assumptions by reviewing the financial data included in the funds’ financial statements for reasonableness. The Company also holds quarterly meetings with the investment adviser to review fund performance, which include comparisons to the relevant indices. On an annual basis, the Company performs pricing tests on certain underlying investments to gain additional assurance of the reliability of values received from the fund manager. See Note F - Pension and Other Post-retirement Benefits for additional information.

Income Taxes: The Company records income taxes in accordance with the liability method of accounting. Deferred taxes are recognized for the estimated taxes ultimately payable or recoverable based on enacted tax law. Changes in enacted tax rates are reflected in the tax provision as they occur.
 
The Company computes its provision for income taxes based on the statutory tax rates and tax planning opportunities available to it in the various jurisdictions in which it operates. Judgment is required in evaluating the Company’s tax positions and determining its annual tax provision. While the Company considers all of its tax positions fully supportable, the Company is occasionally challenged by various tax authorities regarding the amount of taxes due. The Company recognizes a tax position in its financial statements when it is more likely than not the position will be sustained upon examination, based on the technical merits of the position. This position is then measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. A change in judgment related to the expected ultimate resolution of uncertain tax positions will be recognized in earnings in the quarter of such change.
 
Contingent Liabilities: At any time, the Company may be subject to investigations, legal proceedings or claims related to the ongoing operation of its business, including claims both by and against the Company. Such proceedings typically involve claims related to product liability, contract disputes, wage and hour laws, employment practices, antitrust regulations, or other actions brought by employees, consumers, competitors, or suppliers. The Company routinely assesses the likelihood of any adverse outcomes related to these matters on a case by case basis, as well as the potential ranges of losses and fees. The Company establishes accruals for its potential exposure, as appropriate, for claims against the Company when losses become probable and reasonably estimable. Where the Company is able to reasonably estimate a range of potential losses, the Company records the amount within that range which constitutes the Company’s best estimate. The Company also discloses the nature and range of loss for claims against the Company when losses are reasonably possible and material. These accruals and disclosures are determined based on the facts and circumstances related to the individual cases and require estimates and judgments regarding the interpretation of facts and laws, as well as the effectiveness of strategies or factors beyond our control.
 
24

Table of Contents

Item 7A. 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 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. Hogs purchased under contract accounted for 95 percent and 93 percent of the total hogs purchased by the Company during fiscal 2020 and 2019, respectively. The majority of these contracts use market-based formulas based on hog futures, hog primal values, or industry reported hog markets. Other contracts use a formula based on the cost of production, which can fluctuate independently from hog markets. The Company’s value-added branded portfolio helps mitigate changes in hog and pork market prices. Therefore, a hypothetical 10 percent change in the cash hog market would have had an immaterial effect on the Company’s results of operations.
 
The Company utilizes a hedge program to reduce exposure and offset the fluctuations in the Company’s future direct hog purchases. This program utilizes lean hog futures which are accounted for under cash flow hedge accounting. The fair value of the Company’s open futures contracts in this program as of October 25, 2020, was $3.1 million compared to $5.8 million as of October 27, 2019. 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 October 25, 2020, open lean hog contracts by $9.3 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.
 
The Company utilizes a hedge program to reduce exposure and offset the fluctuation in the Company’s future direct grain purchases. This program utilizes corn futures for Jennie-O Turkey Store, and these contracts are accounted for under cash flow hedge accounting. The fair value of the Company’s open futures contracts as of October 25, 2020, was $(0.1) million compared to $(2.2) million as of October 27, 2019. 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 October 25, 2020, open grain contracts by $7.2 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.
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 October 25, 2020, the balance of these securities totaled $173.1 million compared to $157.5 million as of October 27, 2019. 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 negative impact to the Company’s pretax earnings of approximately $8.4 million, while a 10 percent increase in value would have a positive impact of the same amount.
 
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 October 25, 2020, was $541.2 million, compared to $543.8 million as of October 27, 2019, with most of the exposure existing in Chinese yuan and Brazilian real. Changes in currency exchange rates impact the fair values of the Company assets either currently through the Consolidated Statements of Operations within Interest and Investment Income or through the Consolidated Statements of Financial Position within Accumulated 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 the Brazilian real, as of October 25, 2020. A 10 percent strengthening in the value of the Chinese yuan relative to the U.S. dollar would result in other comprehensive income of approximately $40.7 million pretax. A 10 percent weakening in the value of the Chinese yuan relative to the U.S. dollar would result in other comprehensive loss of approximately $33.3 million pretax. A 10 percent strengthening in the value of the Brazilian real relative to the U.S. dollar would result in other comprehensive income of approximately $10.4 million pretax. A 10 percent weakening in the value of the Brazilian real relative to the U.S. dollar would result in other comprehensive loss of approximately $8.5 million pretax.

Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 

25

Table of Contents

Report of Management

Management’s Responsibility for Financial Statements
 
The accompanying financial statements were prepared by the management of Hormel Foods Corporation which is responsible for their integrity and objectivity. These statements have been prepared in accordance with U.S. generally accepted accounting principles appropriate in the circumstances and, as such, include amounts that are based on our best estimates and judgments.
 
Hormel Foods Corporation has developed a system of internal controls designed to assure that the records reflect the transactions of the Company and that the established policies and procedures are adhered to. This system is augmented by well-communicated written policies and procedures, a strong program of internal audit and well-qualified personnel.
 
These financial statements have been audited by Ernst & Young LLP, an independent registered public accounting firm, and their report is included herein. The audit was conducted in accordance with the standards of the U.S. Public Company Accounting Oversight Board and includes a review of the Company’s accounting and financial controls and tests of transactions.