Hormel Foods (HRL) 10-K risk factor changes: FY2019 vs FY2018

[removed: The] [added: The] Company’s operations are subject to the general risks of the food [removed: industry.][added: industry. The food products manufacturing industry is subject to the risks posed by:]

| ▪ | food contamination caused by disease-producing organisms or pathogens, such as [removed: Listeria monocytogenes, Salmonella,] [added: *Listeria monocytogenes*, *Salmonella*,] and pathogenic [removed: E coli.;] [added: *E coli*.;] |

The pathogens [removed: which] [added: that] may cause food contamination are found generally in livestock and in the environment and thus may be present in our products.

These pathogens [removed: also] can [added: also] be introduced to our products as a result of improper handling [added: or cooking] by customers or consumers.

[added: Deterioration of economic conditions could harm the Company’s business.] The Company's business may be adversely affected by changes in national or global economic conditions, including inflation, interest rates, availability of capital, energy availability and costs (including fuel surcharges), and the effects of governmental initiatives to manage economic conditions.

Additionally, if a highly pathogenic [added: 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.

There can be no assurance given, however, [added: that] these plans will be effective in eliminating the negative effects of any such diseases on the Company’s operating results.

[removed: Fluctuations] [added: Fluctuations] in commodity prices and availability of pork, poultry, beef, feed grains, avocados, peanuts, energy, and whey could harm the Company’s [removed: earnings.][added: earnings. The Company’s results of operations and financial condition are largely dependent upon the cost and supply of pork, poultry, beef, feed grains, avocados, peanuts, and whey as well as energy costs and the selling prices for many of our products, which are determined by constantly changing market forces of supply and demand.]

[removed: JOTS] [added: 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 fluctuate due to climate conditions, production forecasts, and supply and demand conditions at local, regional, national, and worldwide [removed: levels.][added: markets.]

The [removed: supply] [added: supplies] of natural and organic proteins may impact the Company’s ability to ensure a continuing supply of these products.

International trade barriers and other restrictions could result in [removed: less] [added: decreased] foreign demand and increased domestic supply of [removed: proteins which could lower] [added: proteins, thereby potentially lowering] prices.

[removed: Outbreaks] [added: Outbreaks] of disease among livestock and poultry flocks could harm the Company’s revenues and operating [removed: margins.][added: margins.]

The outbreak of [removed: disease] [added: 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.

[added: 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, [added: whey,] and [removed: whey.][added: plant-based proteins.]

The [removed: bases] [added: factors] on which the Company competes include:

The Company may be unable to compete successfully on any or all of these [removed: bases] [added: factors] in the future.

Potential risks associated with [removed: acquisitions] [added: these transactions] include the [added: the] inability to [removed: integrate new operations successfully,] [added: 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 [removed: the] [added: current or] acquired companies, the [added: inability to integrate or divest operations successfully, the] possible assumption of unknown liabilities, potential disputes with [removed: the] [added: buyers or] sellers, potential impairment charges if purchase assumptions are not [removed: achieved or market conditions decline,] [added: achieved,] and the inherent risks in entering markets or lines of business in which the Company has limited or no prior experience.

[added: The Company is subject to disruption of operations at co-packers or other suppliers.] Disruption of operations at co‑packers or other suppliers may impact the Company’s product or raw material supply, which could have an adverse effect on the Company’s financial results.

[removed: The] [added: The] Company’s operations are subject to the general risks of [removed: litigation.][added: litigation. The Company is involved on an ongoing basis in litigation arising in the ordinary course of business.]

Litigation trends and the outcome of litigation cannot be predicted with certainty and adverse litigation trends and outcomes could [removed: adversely] [added: negatively] affect the Company’s financial results.

[removed: The] [added: The] Company is subject to the loss of a material [removed: contract.][added: contract. The Company is a party to several supply, distribution, contract packaging, and other material contracts.]

[added: Government regulation, present and future, exposes the Company to potential sanctions and compliance costs that could adversely affect the Company’s business.] The Company’s operations are subject to extensive regulation by the U.S. Department of Homeland Security, the U.S. Department of Agriculture, the U.S. Food and Drug Administration, federal and state taxing authorities, and other federal, state, and local authorities who oversee workforce immigration laws, tax regulations, animal welfare, food safety standards, and the processing, packaging, storage, distribution, advertising, and labeling of the Company’s products.

[added: 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, [removed: and the ability to comply with] [added: as well as] any [removed: modifications to these laws and regulations,] [added: modifications,] is material to the Company’s business.

[removed: In addition, some] [added: 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 [removed: expenses.][added: expenses related to additional investigation, assessment or other requirements.]

[removed: The] [added: The] Company’s foreign operations pose additional risks to the Company’s [removed: business.][added: business. The Company operates its business and markets its products internationally.]

[removed: The] [added: 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 [removed: breaches.][added: breaches. Information technology systems are an important part of the Company’s business operations.]

Attempted [removed: cyber-attacks] [added: 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 an attempt to mitigate [removed: this risk,] [added: these risks,] the Company has implemented and continues to evaluate security initiatives and business continuity plans.

[added: Deterioration of labor relations or increases in labor costs could harm the Company’s Business.] As of October [removed: 28, 2018,] [added: 27, 2019,] the Company had approximately [removed: 20,100] [added: 18,800] employees worldwide, of which approximately [removed: 4,450] [added: 3,310] were represented by labor unions, principally the United Food and Commercial Workers Union.

Most recently, the outbreak of ASF in China has eliminated over 30 percent of that country's hog herd compared to last year, according to the Ministry of Agriculture and Rural Affairs of the People's Republic of China.

The disease has also spread to additional countries in 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’s operations are subject to the general risks associated with acquisitions and divestitures. The Company has made several acquisitions and divestitures in recent years that align with the Company’s strategic initiative of delivering long-term value to shareholders.

The Company regularly reviews strategic opportunities to grow through acquisitions and to divest non-strategic assets.

In addition, the Company is in the middle of a 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.

Implementation is expected to occur in phases over the next several years, beginning in fiscal 2020.

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.

The union contract at one of the Company's facilities will expire during fiscal 2020, covering less than 200 employees.

Negotiations are expected to begin in December 2019.

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

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

The Company’s results of operations and financial condition are largely dependent upon the cost and supply of pork, poultry, beef, feed grains, avocados, peanuts, and whey as well as energy costs and the selling prices for many of our products, which are determined by constantly changing market forces of supply and demand.

Market demand for the Company’s products may fluctuate.

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

The Company has made several acquisitions in recent years, most recently the acquisitions of Columbus, Fontanini, and Ceratti, and regularly reviews opportunities for strategic growth through acquisitions.

The Company is subject to disruption of operations at co-packers or other suppliers.

The Company is involved on an ongoing basis in litigation arising in the ordinary course of business.

The Company is a party to several supply, distribution, contract packaging, and other material contracts.

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

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

New matters or sites may be identified in the future requiring additional investigation, assessment, or expenditures.

The Company operates its business and markets its products internationally.

Information technology systems are an important part of the Company’s business operations.

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

Union contracts at the Company's facilities in Algona, Iowa; Atlanta, Georgia; Austin, Minnesota; and Beloit, Wisconsin will expire during fiscal 2019, covering approximately 2,300 employees.

Negotiations have not yet been initiated.

[removed: AND] [added: AND] RESULTS [removed: OF OPERATIONS][added: OF OPERATIONS]

[removed: Executive Overview][added: Executive Overview]

[added: Fiscal 2019:] Sales for the year were $9.5 billion, a [removed: 4] [added: 1] percent [removed: increase] [added: decline] from last year.

Organic net sales1 were [removed: down 1%.][added: up 1 percent.]

Diluted earnings per share for fiscal [removed: 2018] [added: 2019] were [removed: $1.86, an 18] [added: $1.80, a 3] percent [removed: increase] [added: decrease] compared to [removed: $1.57] [added: $1.86] per share last year.

[removed: Fiscal 2018] [added: A higher effective tax rate drove] net earnings attributable to the Company [removed: increased 20] [added: lower by 3] percent to [removed: $1,012.1] [added: $978.8] million, compared to net earnings of [removed: $846.7] [added: $1,012.1] million last year.

Our Company continued to [removed: generate record operating cash flows, which were reinvested] [added: reinvest] into the business through [removed: acquisitions and] capital expenditures while returning cash back to shareholders in the form of dividends and share repurchases.

The annual dividend for [removed: 2019] [added: 2020] will be [removed: $0.84] [added: $0.93] per share and marks the [removed: 53rd] [added: 54th] consecutive year of dividend increases, representing an increase of [removed: 12] [added: 11] percent after a [removed: 10] [added: 12] percent increase in fiscal [removed: 2018.][added: 2019.]

We repurchased [removed: 1.4] [added: 4.3] million shares of common stock in fiscal [removed: 2018,] [added: 2019,] spending [removed: $46.9] [added: $174.2] million.

[removed: Fiscal 2019 Outlook:] [added: Fiscal 2020 Outlook:] We expect to grow sales and [removed: operating] [added: pretax] profits in fiscal [removed: 2019, with each segment contributing to growth.][added: 2020.]

[removed: The] [added: We expect] contributions from branded items such as the [removed: SPAM®] [added: *SPAM*®] family of products, [removed: Wholly Guacamole®] [added: *Wholly*® guacamole] dips, [removed: Herdez® salsas,] [added: *Herdez*® salsas] and [removed: Muscle Milk are expected] [added: sauces, and *Skippy*® peanut butter] to [removed: drive improved] [added: help offset the impact of the CytoSport sale to the] Grocery Products [removed: results.][added: segment in fiscal 2019.]

[removed: On December 3, 2018,] [added: In December,] the Company completed the sale of [removed: the Fremont] [added: its Fremont, Nebraska,] processing facility [removed: with WholeStone Farms.][added: to Wholestone Farms, LLC, for $30.6 million.]

We plan to support our numerous iconic brands with continued advertising in fiscal [removed: 2019.][added: 2020.]

[removed: Critical] [added: Critical] Accounting [removed: Policies][added: Policies]

Critical accounting policies are defined as those reflective of significant judgments, estimates, and uncertainties, [removed: and potentially] [added: which may] result in materially different results under different assumptions and conditions.

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

[removed: Inventory Valuation:] [added: Inventory Valuation:] The Company values inventories at the lower of cost or net realizable value.

[removed: Goodwill] [added: Goodwill] and Other Indefinite-Lived [removed: Intangibles:] [added: Intangibles:] Estimating the fair value of the Company’s goodwill reporting units and intangible assets requires significant [removed: judgement.][added: judgment upon initial valuation.]

Determining the useful life of an intangible asset also requires [removed: judgement.][added: judgment.]

If [removed: the Company elects to perform] a qualitative assessment [removed: and] determines an impairment is more likely than not, the Company is required to perform a quantitative impairment test.

The fair value of each reporting unit is estimated using discounted cash flow valuations (Level 3), which incorporate assumptions regarding future growth rates, [added: terminal values, and discount rates.]

During the fourth quarter of fiscal [removed: 2018,] [added: 2019,] the Company completed its annual goodwill impairment tests and elected to perform a qualitative assessment.

As a result of the qualitative testing [removed: during fiscal 2018 and 2016 and quantitative testing during fiscal 2017,] no [removed: material] goodwill impairment charges were recorded.

This method incorporates assumptions regarding future sales [removed: projections and] [added: projections,] discount [added: rates, and royalty] rates.

[removed: As a result of the review, no material] [added: No] impairment charges were [removed: recorded;] [added: recorded for 2019,] however, [removed: four trademarks] [added: these assets] were determined to have fair values exceeding their carrying [removed: values] [added: value] by less than a 10 percent margin.

During the qualitative review, it was [removed: determined] [added: revealed] that further assessment in the form of a quantitative test was necessary for [removed: two additional] [added: certain] indefinite-lived intangible [removed: assets.][added: assets with a combined carrying value less than $100 million.]

During [removed: the fourth quarter of] fiscal 2018, a $17.3 million intangible asset impairment charge was recorded for the CytoSport trademark.

See additional discussion regarding the Company’s goodwill and intangible assets in Note [removed: D.][added: E - Goodwill and Intangible Assets.]

During fiscal years [removed: 2018, 2017,] [added: 2018] and [removed: 2016,] [added: 2017,] there were no other material [removed: remeasurements of assets or liabilities at fair value on a nonrecurring basis subsequent to their initial recognition.][added: impairment charges recorded.]

[removed: Employee Benefit Plans:] [added: 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 [removed: costs,] [added: costs and the associated liabilities,] management must make a variety of assumptions and estimates including mortality rates, discount rates, [removed: overall] compensation increases, expected return on plan assets, and health care cost trend rates.

[removed: Income Taxes:] [added: Income Taxes:] The Company records income taxes in accordance with the liability method of accounting.

[removed: Significant judgment] [added: Judgment] is required in evaluating the Company’s tax positions and determining its annual tax provision.

[removed: Contingent Liabilities:] [added: Contingent Liabilities:] At any time, the Company may be subject to investigations, legal proceedings, or claims related to the [removed: on-going] [added: ongoing] operation of its business, including claims both by and against the Company.

[added: Such proceedings typically involve claims] related to product liability, contract disputes, wage and hour laws, employment practices, or other actions brought by employees, consumers, competitors, or suppliers.

[removed: Results] [added: Results] of [removed: Operations][added: Operations]

[removed: OVERVIEW][added: OVERVIEW]

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

The Company’s fiscal year consisted of 52 weeks in fiscal years [removed: 2018] [added: 2019, 2018,] and 2017.

[removed: FISCAL] [added: FISCAL] YEARS 2018 AND [removed: 2017:][added: 2017]

Sales decreased primarily due to the divestiture of CytoSport.

Pretax earnings increased 2 percent to $1,209.7 million.

Profit growth from the value-added businesses in Refrigerated Foods and lower selling, general and administrative expenses more than offset a significant decline in commodity profits and lower equity in earnings of affiliates.

The effective tax rate in fiscal 2019 increased primarily due to the impact of the Tax Cuts and Jobs Act (Tax Act) recognized in fiscal 2018.

Refrigerated Foods segment results exceeded last year due to growth from the value-added businesses, including strong results from foodservice products such as *Hormel®* *FirebraisedTM* meats and pizza toppings.

Retail sales of *Hormel®* *Black Label®* convenience bacon and *Columbus®* deli items also contributed to overall growth, helping to offset a significant decline in commodity profits.

The Jennie-O Turkey Store segment was negatively impacted by lost retail distribution due to two voluntary product recalls in the first quarter of fiscal 2019 and low commodity prices resulting from continued industry oversupply.

Grocery Products segment financial performance was down due to lower *Skippy*® peanut butter pricing and a reduction in MegaMex Foods, LLC (MegaMex) equity in earnings compared to fiscal 2018.

International & Other segment results declined primarily by the impact of tariffs and global trade uncertainty affecting fresh pork exports.

Capital expenditures were $293.8 million in fiscal 2019.

Notable projects included the preliminary phases of the Burke pizza toppings plant expansion, a new dry sausage facility in Nebraska, Project Orion, and many other items to support growth of branded products.

Additionally, in April, the Company completed the sale of its CytoSport business to PepsiCo, Inc., for $479.8 million.

Our branded, value-added businesses within Refrigerated Foods continue to be well-positioned for growth in the foodservice, retail, and deli channels.

Positive momentum in brands such as *Hormel®* *Bacon 1TM*, *Hormel®* *Natural Choice®*, *Applegate®, Columbus®* *and Hormel®* *Fire BraisedTM* should help mitigate the risk of higher input prices and volatility due to African swine fever.

Operational improvements, continued industry recovery, and regained lean ground turkey distribution at Jennie-O Turkey Store are expected to return the segment to growth.

The International & Other segment plans to grow sales and earnings while managing through challenges due to African swine fever and global trade uncertainty.

Additionally, we expect continued cost reductions from our supply chain organization and will begin implementation of Project Orion during fiscal 2020.

We will open a new $150 million expansion at our Burke facility in the third quarter of fiscal 2020, which will provide much needed capacity to grow our pizza toppings business in foodservice.

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.

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.

| Net Earnings | | $ | 255,503 | | | $ | 261,406 | | | (2.3 | ) | | $ | 978,806 | | | $ | 1,012,140 | | | (3.3 | ) |

| Diluted Earnings Per Share | | 0.47 | | | | 0.48 | | | | (2.1 | ) | | 1.80 | | | | 1.86 | | | | (3.2 | ) |

| Volume (lbs.) | | 1,236,877 | | | | 1,265,292 | | | | (2.2 | ) | | 4,737,281 | | | | 4,798,178 | | | | (1.3 | ) |

| Organic Volume(1) | | 1,236,877 | | | | 1,226,641 | | | | 0.8 | | | 4,737,281 | | | | 4,721,637 | | | | 0.3 | |

| Net Sales | | $ | 2,501,513 | | | $ | 2,524,697 | | | (0.9 | ) | | $ | 9,497,317 | | | $ | 9,545,700 | | | (0.5 | ) |

| Organic Net Sales(1) | | 2,501,513 | | | | 2,451,049 | | | | 2.1 | | | 9,497,317 | | | | 9,399,603 | | | | 1.0 | |

Organic net sales and organic volume exclude the impacts of the CytoSport divestiture (April 2019) in the Grocery Products and International & Other segments.

Reconciliation of Non-GAAP Measures

| | | FY19 | | | FY 2018 | | | | | | | | | | |

| Grocery Products | | 313,489 | | | 346,214 | | | (37,394 | ) | | 308,820 | | | 1.5 | |

| Refrigerated Foods | | 598,474 | | | 592,298 | | | — | | | 592,298 | | | 1.0 | |

| Jennie-O Turkey Store | | 242,421 | | | 231,180 | | | — | | | 231,180 | | | 4.9 | |

| International & Other | | 82,493 | | | 95,600 | | | (1,257 | ) | | 94,343 | | | (12.6 | ) |

| Total Volume | | 1,236,877 | | | 1,265,292 | | | (38,651 | ) | | 1,226,641 | | | 0.8 | |

| | | FY 2019 | | | | FY 2018 | | | | | | | | | | | | | |

| Grocery Products | | $ | 584,085 | | | $ | 648,244 | | | $ | (71,415 | ) | | $ | 576,829 | | | 1.3 | |

| Refrigerated Foods | | 1,373,009 | | | | 1,321,784 | | | | — | | | | 1,321,784 | | | | 3.9 | |

| Jennie-O Turkey Store | | 398,512 | | | | 388,278 | | | | — | | | | 388,278 | | | | 2.6 | |

Fiscal 2018: The Company delivered record sales and earnings.

The impact of the Tax Cuts and Jobs Act (Tax Act) along with strong performances by Refrigerated Foods and International & Other contributed to these results.

These factors were able to offset continued weakness at JOTS, higher freight costs, and reduced sales and profitability from the CytoSport and contract manufacturing business in Grocery Products.

Adjusted diluted earnings per share1 were $1.89, a 20 percent increase.

Refrigerated Foods segment results exceeded last year with contributions from the Columbus and Fontanini acquisitions.

Strength in value-added products such as Hormel® Natural Choice® and Hormel® FirebraisedTM Meats overcame lower commodity profits and higher freight expense.

International & Other segment results surpassed last year due to strong growth from the China business, which benefited from lower input costs and the addition of the Ceratti acquisition.

The JOTS segment continued to be negatively impacted by industry oversupply leading to low commodity prices in addition to increased freight.

At the beginning of fiscal 2018, the Specialty Foods segment was merged into the Grocery Products segment.

Despite sales growth of Wholly Guacamole® dips and Herdez® salsas, Grocery Products segment financial performance was down from fiscal 2017 as profits were impacted by weakness in the Company's contract manufacturing business, an impairment of the CytoSport trademark, and increased freight.

We completed the acquisition of Columbus, an authentic, premium deli meat and salami company, for $857.4 million.

This strategic acquisition positions us as a total deli solutions provider and enhances our other strong deli brands such as Hormel®, Jennie-O®, Applegate®, and DiLusso®.

In connection with the acquisition, the Company borrowed $375.0 million under a term loan facility and $375.0 million under a revolving credit facility.

As of the close of the year, we repaid the short-term debt.

Momentum in branded, value-added businesses within Refrigerated Foods, especially foodservice and our newly created deli division, should more than offset the expected decline in commodity profits, increased freight, and expenses associated with the divestiture of the Fremont facility.

Innovation from brands including Hormel® Bacon 1TM, Hormel® Natural Choice®, and Hormel® Fire BraisedTM meats is expected to provide incremental growth.

We expect the JOTS segment to return to growth as industry conditions improve.

We anticipate value-added sales and volume growth led by Jennie-O® lean ground turkey and Jennie-O® Oven Ready® items.

The International & Other segment plans to grow sales and earnings in both the China and Brazil businesses and expects to increase sales of the SPAM® and Skippy® families of products.

Additionally, our supply chain organization is expected to provide cost reductions in numerous areas across the supply chain.

The transaction included a processing facility and a multiyear agreement to supply the Company pork raw materials.

Up until the date of sale, this facility manufactured and harvested hogs for processing.

The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.

The Company evaluates, on an ongoing basis, its estimates for reasonableness as changes occur in its business environment.

The Company bases its estimates on experience, the use of independent third-party specialists, and various other assumptions believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities not readily apparent from other sources.

Actual results may differ materially from these estimates under different assumptions or conditions.

Revenue Recognition: The Company recognizes sales when title passes upon delivery of its products to customers, net of applicable provisions for discounts, returns, and allowances.

Products are delivered upon receipt of customer purchase orders with acceptable terms, including price and reasonably assured collectability.

Accordingly, the Company obtains the assistance of third-party valuation specialists who utilize available historical information along with future expectations to value the assets.

Prior to the fourth quarter of fiscal 2017, if the carrying value of a reporting unit exceeded its fair value, the Company completed the second step of the test to determine the amount of goodwill impairment loss, if any, to be recognized.

In the second step, the Company estimated an implied fair value of the reporting unit’s goodwill by allocating the fair value of the reporting unit to all of the assets and liabilities other than goodwill (including any unrecognized intangible assets).

The impairment loss was equal to the excess of the carrying value of the goodwill over the implied fair value of that goodwill.

In the fourth quarter of fiscal 2017, the Company adopted Accounting Standards Update (ASU) 2017-04, Simplifying the Test for Goodwill Impairment.

As a result, the Company recognizes an impairment loss equal to the difference between the carrying value and estimated fair value of the reporting unit if the carrying value of a reporting unit exceeds its fair value.

terminal values, and discount rates.

An immaterial impairment charge was recorded in the second quarter of fiscal 2016 for the Company's Diamond Crystal Brands (DCB) business based on the agreed-upon sales price for the business.

During the 2017 annual impairment review, the Company completed a quantitative assessment of indefinite-lived intangible assets.

Due to the lack of excess value of these assets, the Company elected to test these assets using a quantitative analysis during fiscal 2018.

For all other indefinite-lived intangible assets, the Company tested the assets using a qualitative analysis.

In total, the Company performed a quantitative test for six trademarks in fiscal 2018, one of which was determined to be impaired.

[removed: Hog Markets:] [added: Hog Markets:] The Company’s earnings are affected by fluctuations in the live hog market.

To minimize the impact on [removed: earnings,] [added: earnings] and [removed: to] ensure a steady supply of quality hogs, the Company has entered into contracts with producers for the purchase of hogs at formula-based prices over periods of up to 10 years.

[removed: Purchased hogs] [added: Hogs purchased] under contract accounted for [added: 93 percent and] 96 percent of the total hogs purchased by the Company during fiscal [removed: 2018] [added: 2019] and [removed: 2017.][added: 2018, respectively.]

[removed: In the second quarter of 2017, the] [added: The] Company [removed: initiated] [added: utilizes] a hedge program to [added: reduce exposure and] offset the [removed: fluctuation] [added: fluctuations] in the Company’s future direct hog purchases.

This program utilizes lean hog [removed: futures, and these contracts] [added: 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 [removed: 28, 2018,] [added: 27, 2019,] was [removed: $0.7] [added: $5.8] million, before tax, compared to [removed: $1.7] [added: $0.7] million, before tax, as of October [removed: 29, 2017.][added: 28, 2018.]

A 10 percent decrease in the market price for lean hogs would have negatively impacted the fair value of the Company’s October [removed: 28, 2018,] [added: 27, 2019,] open lean hog contracts by [removed: $2.5] [added: $19.5] million, which in turn would lower the Company’s future cost on purchased hogs by a similar amount.

[removed: Turkey] [added: Turkey] Production [removed: Costs:] [added: Costs:] The Company raises or contracts for live turkeys to meet the majority of its raw material supply requirements.

[removed: To reduce the Company’s exposure to changes in grain prices, the] [added: The] Company utilizes a hedge program to [added: reduce exposure and] offset the fluctuation in the Company’s future direct grain purchases.

This program utilizes corn futures for [removed: JOTS,] [added: 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 [removed: 28, 2018,] [added: 27, 2019,] was [removed: $(1.3) million] [added: $(2.2) million, before tax,] compared to [removed: $(2.2)] [added: $(1.3)] million, before tax, as of October [removed: 29, 2017.][added: 28, 2018.]

A 10 percent decrease in the market price for grain would have negatively impacted the fair value of the Company’s October [removed: 28, 2018,] [added: 27, 2019,] open grain contracts by [removed: $6.7] [added: $9.5] million, which in turn would lower the Company’s future cost on purchased grain by a similar amount.

[removed: Other] [added: Other] Input [removed: Costs:] [added: Costs:] The costs of raw materials, packaging materials, freight, fuel, and energy may cause the Company's results to fluctuate significantly.

[removed: Investments:] [added: 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 [removed: 28, 2018,] [added: 27, 2019,] the balance of these securities totaled [removed: $137.3] [added: $157.5] million compared to [removed: $128.5] [added: $137.3] million as of October [removed: 29, 2017.][added: 28, 2018.]

The Company is subject to market risk due to fluctuations in the value of the remaining [removed: investments,] [added: 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 [removed: direct] negative impact to the Company’s pretax earnings of approximately [removed: $4.3] [added: $7.0] million, while a 10 percent increase in value would have a positive impact of the same amount.

[removed: International Assets:] [added: 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 [removed: 28, 2018,] [added: 27, 2019,] was [removed: $687.7] [added: $543.8] million, compared to [removed: $781.3] [added: $687.7] million as of October [removed: 29, 2017,] [added: 28, 2018,] with most of the exposure existing in Chinese yuan and Brazilian real.

Changes in currency exchange rates impact the fair values of [added: the] Company assets either currently through the Consolidated Statements of Operations [removed: as currency gains/ losses,] [added: within Interest and Investment Income] or [removed: by affecting other comprehensive loss.][added: 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 [removed: 28, 2018.][added: 27, 2019.]

A 10 percent strengthening in the value of the yuan relative to the U.S. dollar would result in other comprehensive income of approximately [removed: $51.0] [added: $33.7] million pretax.

A 10 percent weakening in the value of the yuan relative to the U.S. dollar would result in other comprehensive loss of approximately [removed: $41.7] [added: $27.6] million pretax.

A 10 percent strengthening in the value of the real relative to the U.S. dollar would result in other comprehensive income of approximately [removed: $13.1] [added: $13.0] million pretax.

Long-Term Debt: A principal market risk affecting the Company is the exposure to changes in interest rates on the Company’s fixed-rate, long-term debt.

Market risk for fixed-rate, long-term debt is estimated as the potential increase in fair value, resulting from a hypothetical 10 percent decrease in interest rates, and amounts to approximately $1.9 million.

The fair value of the Company’s long-term debt was estimated using discounted future cash flows based on the Company’s incremental borrowing rates for similar types of borrowing arrangements.

During fiscal 2018, the value of the Brazilian real declined 21.9 percent.

(See Note J for additional details).

[removed: (a) General] [added: General] Development of [removed: Business][added: Business]

The Company has continually expanded its product portfolio through organic [removed: growth, new product development,] [added: growth] and acquisitions.

On November 27, 2017, the Company acquired Columbus Manufacturing, Inc. (Columbus), an authentic premium deli meat and salami company, from Chicago-based Arbor Investments, for [added: a final purchase price of] $857.4 million.

On August 22, 2017, the Company acquired Cidade do Sol (Ceratti) for a [added: final] purchase price of $103.3 million.

The acquisition of the [removed: Ceratti®] [added: *Ceratti*®] brand allows the Company to establish a full in-country presence in the fast-growing Brazilian market with a premium brand.

On August 16, 2017, the Company acquired Fontanini Italian Meats and Sausages (Fontanini), a branded foodservice business, from Capitol Wholesale Meats, Inc. for a [added: final] purchase price of $425.7 million.

The Company had no other significant change in the type of products produced or services rendered, or in the markets or methods of distribution, since the beginning of the [removed: 2018] [added: 2019] fiscal year.

[removed: (b) Segments][added: Segments]

The [removed: Company’s business is reported] [added: Company reports results] in [added: the following] four segments: Grocery Products, Refrigerated Foods, Jennie-O Turkey [removed: Store (JOTS),] [added: Store,] and International & Other.

Net sales to unaffiliated customers, operating profit, total assets, and the presentation of certain other financial information by segment, are reported in Note P [added: - Segment Reporting] of the Notes to Consolidated Financial Statements and in the [removed: Management’s] [added: Management's] Discussion and Analysis of Financial Condition and Results of Operations.

[removed: (c) Description] [added: Description] of [removed: Business][added: Business]

[removed: Products] [added: Products] and [removed: Distribution][added: Distribution]

The Company’s products primarily consist of meat and other food [removed: products.][added: products sold across multiple distribution channels such as U.S. Retail, U.S. Foodservice, U.S. Deli, and International.]

[removed: The percentages of total] [added: Total] revenues contributed by classes of similar products [added: and sales channels] for the last three fiscal years are [removed: as follows:][added: reported in Note P - Segment Reporting of the Notes to Consolidated Financial Statements.]

As of October [removed: 28, 2018,] [added: 27, 2019,] the Company had approximately [removed: 1,030] [added: 970 direct] sales [removed: personnel] [added: representatives] engaged in selling its [removed: products.][added: products globally.]

The distribution of export sales to customers is by common carrier, while the China and Brazil operations own and operate their own delivery [removed: system.][added: systems.]

The Company, through HFIC, has licensed companies to manufacture various [removed: Company] products internationally on a royalty basis, with the primary licensees being [removed: Tulip International of Denmark] [added: Danish Crown UK Ltd.] and CJ CheilJedang [removed: Corporation of South Korea.][added: Corporation.]

[removed: Raw Materials][added: Raw Materials]

The majority of the hogs harvested [removed: by] [added: for] the Company are purchased under supply contracts from producers located principally in [removed: Minnesota, Iowa, Nebraska,] [added: Minnesota] and [removed: Kansas.][added: Iowa.]

In fiscal [removed: 2018,] [added: 2019,] the Company purchased [removed: 96] [added: 93] percent of its hogs under supply contracts.

In fiscal [removed: 2018, JOTS] [added: 2019, Jennie-O Turkey Store] raised turkeys representing approximately [removed: 76] [added: 79] percent of the volume needed to meet its raw material requirements for branded turkey products and whole birds.

[removed: JOTS’] [added: 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 [removed: feed] grain prices and fuel costs.

Additionally, the cost and supply of avocados, peanuts, [removed: whey,] and [removed: natural and organic protein] [added: whey] are impacted by the changing market forces of supply and demand, which can impact the cost of the Company’s products.

[removed: Manufacturing][added: Manufacturing]

[removed: Patents] [added: Patents] and [removed: Trademarks][added: Trademarks]

The Company holds [removed: 45] [added: 34] U.S. issued and 9 foreign patents.

HORMEL, ALWAYS TENDER, APPLEGATE, AUSTIN BLUES, BACON 1, BLACK LABEL, BREAD READY, BURKE, CAFÉ H, CERATTI, CHI-CHI’S, COLUMBUS, COMPLEATS, CURE 81, [removed: CYTOSPORT,] DAN’S PRIZE, DI LUSSO, DINTY MOORE, DON MIGUEL, DOÑA MARIA, EMBASA, [removed: EVOLVE,] FAST ‘N EASY, FIRE BRAISED, FONTANINI, HERDEZ, HORMEL GATHERINGS, HORMEL VITAL CUISINE, HOUSE OF TSANG, JENNIE-O, JUSTIN’S, LA VICTORIA, LAYOUT, LLOYD’S, MARY KITCHEN, [removed: MUSCLE MILK,] NATURAL CHOICE, OLD SMOKEHOUSE, OVEN READY, PILLOW PACK, [removed: RANGE BRAND,] ROSA GRANDE, SKIPPY, SPAM, SPECIAL RECIPE, THICK & EASY, VALLEY FRESH, and [removed: WHOLLY GUACAMOLE.][added: WHOLLY.]

As long as the Company [removed: intends] [added: continues] to [removed: continue using] [added: use] its trademarks, they are renewed indefinitely.

[removed: Customers] [added: Customers] and Backlog [removed: Orders][added: Orders]

During fiscal [removed: 2018,] [added: 2019,] sales to Walmart Inc. (Walmart) represented approximately [removed: 13.6] [added: 13.5] percent of the Company’s revenues (measured as gross sales less returns and allowances), compared to [removed: 14.4] [added: 13.6] percent in fiscal [removed: 2017.][added: 2018.]

The five largest customers in each segment make up approximately the following percentage of segment sales: [removed: 42] [added: 45] percent of Grocery Products, [removed: 38] [added: 35] percent of Refrigerated Foods, [removed: 42] [added: 52] percent of [removed: JOTS,] [added: Jennie-O Turkey Store,] and [removed: 18] [added: 16] percent of International & Other.

[removed: Competition][added: Competition]

The production and sale of meat and food products in the United States and internationally [removed: are] [added: is] highly competitive.

The Company believes its largest domestic competitors for its Refrigerated Foods segment in [removed: 2018] [added: 2019] were Tyson Foods, Inc. and Smithfield Foods, Inc.; for its Grocery Products segment, Conagra Brands, Inc., General Mills, Inc., Campbell Soup Co., J. M. Smucker Co., and Treehouse Foods Inc.; and for [removed: JOTS,] [added: Jennie-O Turkey Store,] Cargill, Inc. and Butterball, LLC.

Through aggressive marketing and strong quality assurance programs, the Company’s strategy is to provide higher quality products that possess strong brand recognition, which [removed: would] then [removed: support] [added: supports] higher value perceptions from customers.

[removed: Employees][added: Employees]

As of October [removed: 28, 2018,] [added: 27, 2019,] the Company had approximately [removed: 20,100] [added: 18,800] active domestic and foreign employees.

[removed: (e) Available Information][added: Available Information]

The Company makes [removed: available, free of charge on its Web site at www.hormelfoods.com,] [added: 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 [removed: 1934.][added: 1934 on its website at www.hormelfoods.com.]

On April 15, 2019, the Company completed the sale of CytoSport, Inc. (CytoSport), which includes the *Muscle Milk®* and *Evolve®* brands, to PepsiCo, Inc., and received final proceeds of $479.8 million.

The divestiture resulted in a pretax gain of $16.5 million recognized in Selling, General and Administrative expense and a tax benefit of $17.0 million recognized within the Provision for Income Taxes on the Consolidated Statements of Operations.

On December 3, 2018, the Company completed the sale of its Fremont, Nebraska, processing facility to Wholestone Farms, LLC, for a final purchase price of $30.6 million.

The Company develops, processes, and distributes a wide array of food products in a variety of markets.

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.

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 long standing relationships with its sources of raw materials and expects to have an adequate supply for its present needs.

The Company manufactures its products through various harvest and processing facilities along with custom manufacturers.

Environmental Matters

In addition to creating economic value, the Company is committed to building social value.

The Company recently launched its corporate responsibility platform, *Our Food JourneyTM*.

This journey consists of producing food responsibly for customers and consumers around the world by focusing on investing in people and partners, improving communities around the world, and creating products to improve the lives of others.

The capital expenditures associated with these commitments are not material with respect to the Company’s capital expenditures, earnings, or competitive position.

Most of the trademarks the Company uses are registered in the U.S. and other countries.

These filings are also available on the SEC's website at www.sec.gov.

Information About Executive Officers

| | | | | Senior Vice President and Chief Financial Officer | | 10/31/16 to 01/28/19 |

| Deanna T. Brady | | 54 | | Executive Vice President (Refrigerated Foods) | | 10/28/19 to Present |

| | | | | Group Vice President/President Consumer Product Sales | | 10/26/15 to 10/27/19 |

| | | | | | | (retires 01/26/20) |

| | | | | Vice President (Senior Vice President Consumer Product Sales) | | 10/31/11 to 10/27/19 |

| | | | | | | |

On August 16, 2018, the Company entered into a definitive agreement to sell its Fremont, Nebraska, processing facility to WholeStone Farms, LLC.

The transaction is subject to customary closing conditions and is expected to be completed in December 2018.

Substantially all the assets of the Company have been acquired in the ordinary course of business.

The meat products are sold fresh, frozen, cooked, and canned.

| | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | |

| | | Fiscal Year Ended | | | | | | | |

| | | October 28, 2018 | | | October 29, 2017 | | | October 30, 2016 | |

| Perishable | | 55.9 | % | | 53.7 | % | | 53.1 | % |

| Poultry | | 19.3 | % | | 19.1 | % | | 20.5 | % |

| Shelf-stable | | 18.5 | % | | 20.2 | % | | 18.2 | % |

| Miscellaneous | | 6.3 | % | | 7.0 | % | | 8.2 | % |

| Total | | 100.0 | % | | 100.0 | % | | 100.0 | % |

Reporting of revenues from external customers is based on similarity of products, as the same or similar products are sold across multiple distribution channels such as retail, foodservice, or international.

Revenues reported are based on financial information used to produce the Company’s general-purpose financial statements.

The Perishable category includes fresh meats, frozen items, refrigerated meal solutions, sausages, hams, guacamole, and bacon (excluding Jennie-O Turkey Store) products.

Shelf-stable includes canned luncheon meats, peanut butter, chilies, shelf-stable microwaveable meals, hash, stews, flour and corn tortillas, salsas, tortilla chips, and other items that do not require refrigeration.

The Poultry category is composed primarily of JOTS products.

The Miscellaneous category primarily consists of nutritional food products and supplements, dessert and drink mixes, and industrial gelatin products.

The Company also procures a portion of its hogs through farms it either owns or operates in Colorado.

The Company has one plant that harvests hogs for processing.

Quality Pork Processors, Inc. of Dallas, Texas, operates the harvesting facility in Austin, Minnesota, under a custom harvesting arrangement.

The Company currently has seven turkey harvest and processing operations, and 30 facilities that produce and distribute other manufactured items.

Albert Lea Select Foods, Inc. operates the processing facility in Albert Lea, Minnesota, under a custom manufacturing agreement.

Company products are also custom manufactured by several other companies.

The following are the Company’s larger custom manufacturers: Abbyland Foods, Inc., Abbotsford, Wisconsin; Agropur Division Natrel USA, Maplewood, Minnesota; Algood Food Company, Louisville, Kentucky; Cargill Meat Solutions, Minneapolis, MN; Cooper Farms, Van Wert, Ohio: Deitz & Watson, Inc., Philadelphia, Pennsylvania; Harris Ranch Beef Company, Gilroy, California; HP Hood LLC, Lynnfield, Massachusetts; OSI Industries LLC, Chicago, Illinois; Reichel Foods, Inc., Rochester, Minnesota; Reser’s Fine Foods, Topeka, Kansas; and Steuben Foods, Jamaica, New York.

Exel, Inc., based in Westerville, Ohio, operates distribution centers for the Company in Dayton, Ohio, and Osceola, Iowa.

Most of the trademarks are registered.

(f) Executive Officers of the Registrant

| | | | | Vice President (Human Resources), Harsco Corporation | | 06/01/11 to 05/01/14 |

The Company is a party to various legal proceedings related to the [removed: on-going] [added: 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, [added: intellectual property,] contract disputes, wage and hour laws, employment practices, or other actions brought by employees, consumers, competitors, or suppliers.

[removed: UNITED STATES][added: UNITED STATES]

[removed: SECURITIES] [added: SECURITIES] AND EXCHANGE [removed: COMMISSION][added: COMMISSION]

[removed: FORM 10-K][added: FORM 10-K]

[removed: \[ X \] ANNUAL] [added: | ☒ | ANNUAL] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934][added: 1934 |]

For the fiscal year ended October [removed: 28, 2018][added: 27, 2019]

[removed: \[ \] TRANSITION] [added: | ☐ | TRANSITION] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934][added: 1934 |]

For the transition period from [removed: ___________________________________] [added: ____________________] to [removed: ________________________________________][added: _________________________]

[removed: HORMEL] [added: HORMEL] FOODS [removed: CORPORATION][added: CORPORATION]

| [removed: Delaware] [added: Delaware] | | [removed: 41-0319970] [added: 41-0319970] |

| [removed: 1] [added: 1] Hormel [removed: Place Austin, Minnesota] [added: Place] | [added: Austin] | [removed: 55912-3680] [added: Minnesota] | [added: 55912-3680 |]

| (Address of principal executive offices) | | [added: |] (Zip Code) |

| Title of each class | | [added: | | Trading Symbol | |] Name of each exchange on which registered |

| [removed: Common Stock, $0.01465 par value] [added: Common Stock] | [added: $0.01465] | [removed: New] [added: par value | | HRL | | New] York Stock [removed: Exchange] [added: Exchange] |

Yes [removed: X] [added: ☒] No [added: ☐]

Yes [removed: No X][added: ☐]

Yes [removed: X] [added: ☒] No [added: ☐]

Yes [removed: X] [added: ☒] No [added: ☐]

| Large accelerated filer [removed: X] | [added: ☒ |] Accelerated filer | [added: ☐ |]

| Non-accelerated filer | [added: ☐ |] Smaller reporting company | [added: ☐ |]

| | [added: |] Emerging growth company | [added: ☐ |]

Yes [added: ☐] No [removed: X][added: ☒]

The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant as of April [removed: 29, 2018,] [added: 28, 2019,] was [removed: $9,908,981,177] [added: $11,072,534,818] based on the closing price of [removed: $36.47] [added: $39.94] on the last business day of the registrant’s most recently completed second fiscal quarter.

As of November [removed: 30, 2018,] [added: 29, 2019,] the number of shares outstanding of each of the registrant’s classes of common stock was as follows:

Common Stock, $0.01465 – Par Value [removed: 534,595,685] [added: 534,736,743] shares

[removed: DOCUMENTS] [added: DOCUMENTS] INCORPORATED BY [removed: REFERENCE][added: REFERENCE]

Portions of the Proxy Statement for the Annual Meeting of Stockholders to be held January [removed: 29, 2019,] [added: 28, 2020,] are incorporated by reference into Part III, Items 10-14.

[removed: HORMEL] [added: HORMEL] FOODS [removed: CORPORATION][added: CORPORATION]

[removed: TABLE] [added: TABLE] OF [removed: CONTENTS][added: CONTENTS]

[removed: | [PART I](#s08CC19B79A3F4C63A45CF5DC08F130C1) | | |][added: PART I]

| [Item [removed: 1.](#s08CC19B79A3F4C63A45CF5DC08F130C1)] [added: 1.](#s487395E306715A3FB4A541E8E46245CF)] | [removed: [BUSINESS](#s08CC19B79A3F4C63A45CF5DC08F130C1)] [added: [BUSINESS](#s487395E306715A3FB4A541E8E46245CF)] | [removed: [3](#s08CC19B79A3F4C63A45CF5DC08F130C1)] [added: [3](#s487395E306715A3FB4A541E8E46245CF)] |

| [Item [removed: 1A.](#s53fccbe610a24897aeb7ff887ca50ed1)] [added: 1A.](#s0CDE8898150B5CF6BEC11EAD89DECA27)] | [RISK [removed: FACTORS](#s53fccbe610a24897aeb7ff887ca50ed1)] [added: FACTORS](#s0CDE8898150B5CF6BEC11EAD89DECA27)] | [removed: [7](#s53fccbe610a24897aeb7ff887ca50ed1)] [added: [7](#s0CDE8898150B5CF6BEC11EAD89DECA27)] |

| [Item [removed: 1B.](#s777b90642bdf4b01946f700ccc56ae81)] [added: 1B.](#sDD8DC46DE25A585081BEFA1E73162EBC)] | [UNRESOLVED STAFF [removed: COMMENTS](#s777b90642bdf4b01946f700ccc56ae81)] [added: COMMENTS](#sDD8DC46DE25A585081BEFA1E73162EBC)] | [removed: [9](#s777b90642bdf4b01946f700ccc56ae81)] [added: [9](#sDD8DC46DE25A585081BEFA1E73162EBC)] |

| [Item [removed: 2.](#s2B06DC3AEC9FECC813A0F5DC096A19B7)] [added: 2.](#s196F659006105E41A2B37732A32DFAE1)] | [removed: [PROPERTIES](#s2B06DC3AEC9FECC813A0F5DC096A19B7)] [added: [PROPERTIES](#s196F659006105E41A2B37732A32DFAE1)] | [removed: [9](#s2B06DC3AEC9FECC813A0F5DC096A19B7)] [added: [10](#s196F659006105E41A2B37732A32DFAE1)] |

| [Item [removed: 3.](#s5576BBF14DB69EA4C742F5DC09DF2C97)] [added: 3.](#sE1BFF74EF79055669E21C115E7816DF8)] | [LEGAL [removed: PROCEEDINGS](#s5576BBF14DB69EA4C742F5DC09DF2C97)] [added: PROCEEDINGS](#sE1BFF74EF79055669E21C115E7816DF8)] | [removed: [11](#s5576BBF14DB69EA4C742F5DC09DF2C97)] [added: [10](#sE1BFF74EF79055669E21C115E7816DF8)] |

| [Item [removed: 4.](#sFF56E6335E5248CD2CD8F5DC0A04945C)] [added: 4.](#s344B551F77795946AFAB8BE8CEBDA199)] | [MINE SAFETY [removed: DISCLOSURES](#sFF56E6335E5248CD2CD8F5DC0A04945C)] [added: DISCLOSURES](#s344B551F77795946AFAB8BE8CEBDA199)] | [removed: [11](#sFF56E6335E5248CD2CD8F5DC0A04945C)] [added: [10](#s344B551F77795946AFAB8BE8CEBDA199)] |

| [Item [removed: 5.](#sBD00C33129609F9CE497F5DC0A1D0AA3)] [added: 5.](#sA85F6DC2D069579DADF6DAFBEA603ECE)] | [MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY [removed: SECURITIES](#sBD00C33129609F9CE497F5DC0A1D0AA3)] [added: SECURITIES](#sA85F6DC2D069579DADF6DAFBEA603ECE)] | [removed: [12](#sBD00C33129609F9CE497F5DC0A1D0AA3)] [added: [11](#sA85F6DC2D069579DADF6DAFBEA603ECE)] |

| [Item [removed: 6.](#s96DB00796B942010CB8AF5DC0A5B34E9)] [added: 6.](#s89303979D0F15BE8B69418571350BECC)] | [SELECTED FINANCIAL [removed: DATA](#s96DB00796B942010CB8AF5DC0A5B34E9)] [added: DATA](#s89303979D0F15BE8B69418571350BECC)] | [removed: [13](#s96DB00796B942010CB8AF5DC0A5B34E9)] [added: [12](#s89303979D0F15BE8B69418571350BECC)] |

| [Item [removed: 7.](#s5476FB6585F887B09745F5DC0A71165A)] [added: 7.](#sD64B644FC9EE562FB2D84831C551D30A)] | [MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF [removed: OPERATIONS](#s5476FB6585F887B09745F5DC0A71165A)] [added: OPERATIONS](#sD64B644FC9EE562FB2D84831C551D30A)] | [removed: [27](#s5476FB6585F887B09745F5DC0A71165A)] [added: [13](#sD64B644FC9EE562FB2D84831C551D30A)] |

| [Item [removed: 7A.](#se2f9099787b14ef4a0b0dad30c26794b)] [added: 7A.](#sBF1149BCC7A05B82A042D9761C6D7402)] | [QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET [removed: RISK](#se2f9099787b14ef4a0b0dad30c26794b)] [added: RISK](#sBF1149BCC7A05B82A042D9761C6D7402)] | [removed: [29](#se2f9099787b14ef4a0b0dad30c26794b)] [added: [29](#sBF1149BCC7A05B82A042D9761C6D7402)] |

| [Item [removed: 8.](#s3e0780d28cf94ab2b739fee5f7345cc0)] [added: 8.](#s648E1A0BF2E75E17B96D68C71F04A8DF)] | [FINANCIAL STATEMENTS AND SUPPLEMENTARY [removed: DATA](#s3e0780d28cf94ab2b739fee5f7345cc0)] [added: DATA](#s648E1A0BF2E75E17B96D68C71F04A8DF)] | [removed: [30](#s234d9914deee4c52bfb4739f3cf16623)] [added: [29](#s648E1A0BF2E75E17B96D68C71F04A8DF)] |

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No ☒

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| [PART II](#s988331F1266D5E4F9D822694CCA976D0) | | |

| [PART IV](#s67B40D6D3BC956A689E14C7E058AB3D6) | | |

| [SIGNATURES](#s46288E0A48DE58F3AE5EA4E82B9309A1) | | [72](#s46288E0A48DE58F3AE5EA4E82B9309A1) |

10-K 1 hormel_2018x10k.htm 10-K

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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

(X)

| [PART II](#s02437da89c5342a8a0097c4dd57795a7) | | |

| [PART IV](#s0D0F19723AE653682289F5DC0B7A5F5C) | | |

| [SIGNATURES](#s3f280b02954d46e086056277e11c44d6) | | [74](#s3f280b02954d46e086056277e11c44d6) |

The Company believes its operating facilities are well maintained and suitable for current production [removed: volumes, and expansion plans are either completed or in process to accommodate all volumes anticipated in the foreseeable future.][added: volumes.]

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.

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| Area* (Square feet) | | Refrigerated Foods | | | Grocery Products | | | Jennie-O Turkey Store | | | International & Other | | | Corporate | | | Total | |

| Processing Plants | | 4,528,000 | | | 1,648,000 | | | 1,987,000 | | | 1,243,000 | | | | | | 9,406,000 | |

| Warehouse/Distribution Centers | | 497,000 | | | 832,000 | | | 140,000 | | | 79,000 | | | | | | 1,548,000 | |

| Live Production | | 815,000 | | | | | | 313,000 | | | | | | | | | 1,128,000 | |

| Administrative/Sales/Research | | 65,000 | | | 6,000 | | | 66,000 | | | 34,000 | | | 559,000 | | | 730,000 | |

| Total | | 5,905,000 | | | 2,486,000 | | | 2,506,000 | | | 1,356,000 | | | 559,000 | | | 12,812,000 | |

*Many of the Company’s properties are utilized by more than one segment.

These facilities are reflected in the principal segment for presentation purposes.

Additionally, turkey growout facilities are excluded.

The Company regularly engages in construction and other capital improvement projects with a focus on value-added capacity projects and automation.

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| Location | | Principal Segment (1) | | Approximate Area (Square Feet, Unless Noted) | | | Owned or Leased | | Lease Expiration Date |

| Harvest and Processing Plants | | | | | | | | | |

| Austin, Minnesota | | Refrigerated Foods | | 1,464,000 | | | Owned | | |

| | | Grocery Products | | | | | | | |

| | | International & Other | | | | | | | |

| Barron, Wisconsin | | JOTS | | 425,000 | | | Owned | | |

| Faribault, Minnesota | | JOTS | | 191,000 | | | Owned | | |

| Melrose, Minnesota | | JOTS | | 550,000 | | | Owned | | |

| Willmar, Minnesota | | JOTS | | 339,000 | | | Owned | | |

| | | | | | | | | | |

| Processing Plants | | | | | | | | | |

| Albert Lea, Minnesota | | Refrigerated Foods | | 82,000 | | | Owned | | |

| Algona, Iowa | | Refrigerated Foods | | 154,000 | | | Owned | | |

| Alma, Kansas | | Refrigerated Foods | | 62,000 | | | Owned | | |

| Aurora, Illinois | | Grocery Products | | 141,000 | | | Owned | | |

| Beijing, China | | International & Other | | 95,000 | | | 80% Owned | | |

| Beloit, Wisconsin | | Grocery Products | | 341,000 | | | Owned | | |

| Browerville, Minnesota | | Refrigerated Foods | | 109,000 | | | Owned | | |

| Dubuque, Iowa | | Grocery Products | | 344,000 | | | Owned | | |

| Hayward, California | | Refrigerated Foods | | 128,000 | | | Leased | | August 2032 |

| Hayward, California | | Refrigerated Foods | | 67,000 | | | Leased | | May 2021 |

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| Location | | Principal Segment (1) | | Approximate Area (Square Feet, Unless Noted) | | | Owned or Leased | | Lease Expiration Date |

| Jiaxing, China | | International & Other | | 1,256,000 | | | Owned | | |

| Knoxville, Iowa | | Refrigerated Foods | | 135,000 | | | Owned | | |

| Lathrop, California | | Refrigerated Foods | | 88,000 | | | Owned | | |

| Little Rock, Arkansas | | Grocery Products | | 153,000 | | | Owned | | |

| Long Prairie, Minnesota | | Refrigerated Foods | | 92,000 | | | Owned | | |

| McCook, Illinois | | Refrigerated Foods | | 177,000 | | | Owned | | |

| Mendota Heights, Minnesota | | Refrigerated Foods | | 85,000 | | | Owned | | |

| Montevideo, Minnesota | | JOTS | | 89,000 | | | Owned | | |

| Nevada, Iowa | | Refrigerated Foods | | 239,000 | | | Owned | | |

| Osceola, Iowa | | Refrigerated Foods | | 382,000 | | | Owned | | |

| Pelican Rapids, Minnesota | | JOTS | | 375,000 | | | Owned | | |

| Quakertown, Pennsylvania | | Grocery Products | | 13,000 | | | Owned | | |

[removed: PART II][added: PART II]

[removed: Market information][added: Market information]

[removed: Holders][added: Holders]

There are approximately 12,600 record stockholders and [removed: 126,900] [added: 136,000] stockholders whose shares are held in street name by brokerage firms and financial institutions.

[removed: Issuer] [added: There were no issuer] purchases of equity securities in the fourth quarter of fiscal [removed: 2018 are shown below:][added: 2019.]

[removed: | Period | | Total Number of Shares Purchased | | Average Price Paid Per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1) | | Maximum Number] [added: The maximum number] of [removed: Shares] [added: shares] that [removed: May Yet Be Purchased Under] [added: may yet be purchased under] the [removed: Plans] [added: plans] or [removed: Programs (1) |][added: programs as of October 27, 2019 is 4,758,235.]

[removed: (1)] On January [removed: 31,] [added: 29,] 2013, the [removed: Company announced its] [added: Company's] Board of Directors [removed: had] authorized the repurchase of 10,000,000 shares of its common stock with no expiration date.

On [removed: November 23, 2015,] [added: January 26, 2016,] the Board of Directors [removed: authorized] [added: approved] a two-for-one split of the Company’s common [removed: stock.][added: stock to be effective January 27, 2016.]

As part of the [removed: resolution to approve that] stock [removed: split,] [added: split resolution,] the number of shares remaining to be repurchased was adjusted proportionately.

[removed: Shareholder] [added: Shareholder] return performance [removed: graph][added: 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 [removed: 26, 2018.][added: 27, 2019.]

The graph assumes $100 was invested in each, as of the market close on October [removed: 28, 2013.][added: 27, 2014.]

[removed: ][added: ]

Dividends

The Company has paid dividends for 365 consecutive quarters.

The annual dividend rate for fiscal 2020 was increased 11 percent percent to $0.93 per share, representing the 54th consecutive annual dividend increase.

The Company is dedicated to returning excess cash flow to shareholders through dividend payments.

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| --- | --- | --- | --- | --- | --- | --- | --- | --- |

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| July 30, 2018 – September 2, 2018 | | \- | | \- | | \- | | 9,121,823 |

| September 3, 2018 – September 30, 2018 | | \- | | \- | | \- | | 9,121,823 |

| October 1, 2018 – October 28, 2018 | | 54,667 | | $39.45 | | 54,667 | | 9,067,156 |

| Total | | 54,667 | | $39.45 | | 54,667 | | |

The repurchase program was authorized at a meeting of the Company’s Board of Directors on January 29, 2013.

The stock split was subsequently approved by stockholders at the Company’s Annual Meeting on January 26, 2016, and effected January 27, 2016.

All numbers in the table above reflect the impact of this stock split.

[removed: The information set forth below for] [added: To fully understand factors that may affect] the [removed: five years ended October 28, 2018, is not necessarily indicative of results] [added: comparability] of [removed: future operations, and] [added: the information presented below, this information] should be read in conjunction with Part [removed: II, Item 7, “Management’s] [added: I-Item 1 Business, Part II-Item 7 Management’s] Discussion and Analysis of Financial Condition and Results of [removed: Operations”] [added: Operations,] and the consolidated financial statements and related notes thereto included in Part [removed: II, Item] [added: II-Item] 8 [added: Financial Statements and Supplementary Data] of this Form [removed: 10-K to fully understand factors that may affect the comparability of the information presented below.][added: 10-K.]

| (in thousands, except per share amounts) | | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016*] [added: 2017] | | | | [removed: 2015] [added: 2016*] | | | | [removed: 2014] [added: 2015] | | |

| [removed: Operations] [added: Operations] | | | | | | | | | | | | | | | | | | | | |

| Net Sales | | [removed: $] [added: $] | [removed: 9,545,700] [added: 9,497,317] | | | $ | [removed: 9,167,519] [added: 9,545,700] | | | $ | [removed: 9,523,224] [added: 9,167,519] | | | $ | [removed: 9,263,863] [added: 9,523,224] | | | $ | [removed: 9,316,256] [added: 9,263,863] | |

| Net Earnings Attributable to Hormel Foods Corporation | | [removed: 1,012,140] [added: 978,806] | | | | [removed: 846,735] [added: 1,012,140] | | | | [removed: 890,052] [added: 846,735] | | | | [removed: 686,088] [added: 890,052] | | | | [removed: 602,677] [added: 686,088] | | |

| % of net sales | | [removed: 10.60] [added: 10.31] | | [removed: %] [added: %] | | [removed: 9.24] [added: 10.60] | | % | | [removed: 9.35] [added: 9.24] | | % | | [removed: 7.41] [added: 9.35] | | % | | [removed: 6.47] [added: 7.41] | | % |

| [removed: Financial Position] [added: Financial Position] | | | | | | | | | | | | | | | | | | | | |

| Total Assets | | [removed: $] [added: $] | [removed: 8,142,292] [added: 8,109,004] | | | $ | [removed: 6,975,908] [added: 8,142,292] | | | $ | [removed: 6,370,067] [added: 6,975,908] | | | $ | [removed: 6,139,831] [added: 6,370,067] | | | $ | [removed: 5,455,619] [added: 6,139,831] | |

| Hormel Foods Corporation Shareholders’ Investment | | [removed: 5,600,811] [added: 5,921,458] | | | | [removed: 4,935,907] [added: 5,600,811] | | | | [removed: 4,448,006] [added: 4,935,907] | | | | [removed: 3,998,198] [added: 4,448,006] | | | | [removed: 3,605,678] [added: 3,998,198] | | |

| [added: Plus:] Depreciation and Amortization | | [removed: $] [added: 165,209] | [added: | | |] 161,858 | | | [removed: $] | 130,977 | | | [removed: $] | 131,968 | | | [removed: $] | 133,434 | | | [removed: $ | 130,044 | |]

| Capital Expenditures | | [removed: 389,607] [added: 293,838] | | | | [removed: 221,286] [added: 389,607] | | | | [removed: 255,524] [added: 221,286] | | | | [removed: 144,063] [added: 255,524] | | | | [removed: 159,138] [added: 144,063] | | |

| Acquisitions of Businesses | | [removed: 857,668] [added: —] | | | | [removed: 520,463] [added: 857,668] | | | | [removed: 280,889] [added: 520,463] | | | | [removed: 770,587] [added: 280,889] | | | | [removed: 466,204] [added: 770,587] | | |

| Share Repurchase | | [removed: 46,898] [added: 174,246] | | | | [removed: 94,487] [added: 46,898] | | | | [removed: 87,885] [added: 94,487] | | | | [removed: 24,928] [added: 87,885] | | | | [removed: 58,937] [added: 24,928] | | |

| Dividends Paid | | [removed: 388,107] [added: 437,053] | | | | [removed: 346,010] [added: 388,107] | | | | [removed: 296,493] [added: 346,010] | | | | [removed: 250,834] [added: 296,493] | | | | [removed: 203,156] [added: 250,834] | | |

| [removed: Common Stock] [added: Common Stock] | | | | | | | | | | | | | | | | | | | | |

| Weighted-Average Shares Outstanding – Basic | | [removed: 530,742] [added: 534,578] | | | | [removed: 528,363] [added: 530,742] | | | | [removed: 529,290] [added: 528,363] | | | | [removed: 528,143] [added: 529,290] | | | | [removed: 527,624] [added: 528,143] | | |

| Weighted-Average Shares Outstanding – Diluted | | [removed: 543,869] [added: 545,232] | | | | [removed: 539,116] [added: 543,869] | | | | [removed: 542,473] [added: 539,116] | | | | [removed: 541,002] [added: 542,473] | | | | [removed: 540,431] [added: 541,002] | | |

| Earnings [removed: per] [added: Per] Share – Basic | | [removed: $] [added: $] | [removed: 1.91] [added: 1.83] | | | $ | [removed: 1.60] [added: 1.91] | | | $ | [removed: 1.68] [added: 1.60] | | | $ | [removed: 1.30] [added: 1.68] | | | $ | [removed: 1.14] [added: 1.30] | |

| Earnings [removed: per] [added: Per] Share – Diluted | | [removed: 1.86] [added: 1.80] | | | | [removed: 1.57] [added: 1.86] | | | | [removed: 1.64] [added: 1.57] | | | | [removed: 1.27] [added: 1.64] | | | | [removed: 1.12] [added: 1.27] | | |

| Dividends [added: Declared] per Share | | [removed: 0.75] [added: 0.84] | | | | [removed: 0.68] [added: 0.75] | | | | [removed: 0.58] [added: 0.68] | | | | [removed: 0.50] [added: 0.58] | | | | [removed: 0.40] [added: 0.50] | | |

| Hormel Foods Corporation Shareholders’ Investment [removed: Per] [added: per] Share | | [removed: 10.49] [added: 11.08] | | | | [removed: 9.34] [added: 10.49] | | | | [removed: 8.42] [added: 9.34] | | | | [removed: 7.57] [added: 8.42] | | | | [removed: 6.84] [added: 7.57] | | |

The Company provides EBIT, EBITDA, and Return on Invested Capital because these measures are useful to [added: management and] investors as indicators of operating strength [removed: and performance] relative to prior years and are [removed: typically] [added: commonly] used to benchmark [removed: our] [added: the] Company’s [removed: performance against other companies in our industry.][added: performance.]

| (in thousands) | | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016*] [added: 2017] | | | | [removed: 2015] [added: 2016*] | | | | [removed: 2014] [added: 2015] | | |

| [removed: (1) EBIT:] [added: (1) EBIT:] | | | | | | | | | | | | | | | | | | | | |

| Net Earnings Attributable to Hormel Foods Corporation | | [removed: $] [added: $] | [removed: 1,012,140] [added: 978,806] | | | $ | [removed: 846,735] [added: 1,012,140] | | | $ | [removed: 890,052] [added: 846,735] | | | $ | [removed: 686,088] [added: 890,052] | | | $ | [removed: 602,677] [added: 686,088] | |

| Plus: Income Tax Expense | | [removed: 168,702] [added: 230,567] | | | | [removed: 431,542] [added: 168,702] | | | | [removed: 426,698] [added: 431,542] | | | | [removed: 369,879] [added: 426,698] | | | | [removed: 316,126] [added: 369,879] | | |

| Plus: Interest Expense | | [removed: 26,494] [added: 18,070] | | | | [removed: 12,683] [added: 26,494] | | | | [removed: 12,871] [added: 12,683] | | | | [removed: 13,111] [added: 12,871] | | | | [removed: 12,704] [added: 13,111] | | |

| [removed: (2) EBITDA:] [added: (2) EBITDA:] | | | | | | | | | | | | | | | | | | | | |

| [removed: (3) Return] [added: (3) Return] on Invested [removed: Capital:] [added: Capital:] | | | | | | | | | | | | | | | | | | | | |

| X (1 – Effective Tax [removed: Rate*)] [added: Rate)] | | [removed: 85.71] [added: 80.93] | | [removed: %] [added: %] | | [removed: 66.24] [added: 85.71] | | % | | [removed: 67.59] [added: 66.24] | | % | | [removed: 64.97] [added: 67.59] | | % | | [removed: 65.59] [added: 64.97] | | % |

| Total [removed: Debt] [added: Debt, including capital leases] | | [removed: 624,840] [added: 269,713] | | | | [removed: 250,000] [added: 624,840] | | | | 250,000 | | | | [removed: 435,000] [added: 250,000] | | | | [removed: 250,000] [added: 435,000] | | |

| Hormel Foods Corporation Shareholders’ Investment | | [removed: 5,600,811] [added: 5,921,458] | | | | [removed: 4,935,907] [added: 5,600,811] | | | | [removed: 4,448,006] [added: 4,935,907] | | | | [removed: 3,998,198] [added: 4,448,006] | | | | [removed: 3,605,678] [added: 3,998,198] | | |

| Total Debt and Shareholders’ Investment | | [removed: $] [added: $] | [removed: 6,225,651] [added: 6,191,171] | | | $ | [removed: 5,185,907] [added: 6,225,651] | | | $ | [removed: 4,698,006] [added: 5,185,907] | | | $ | [removed: 4,433,198] [added: 4,698,006] | | | $ | [removed: 3,855,678] [added: 4,433,198] | |

[removed: *] Excluding earnings attributable to noncontrolling interests.

The information set forth below for the five years ended October 27, 2019, is not necessarily indicative of results of future operations.

| EBIT(1) | | 1,195,923 | | | | 1,179,519 | | | | 1,276,374 | | | | 1,312,918 | | | | 1,055,612 | | |

| % of net sales | | 12.59 | | % | | 12.36 | | % | | 13.92 | | % | | 13.79 | | % | | 11.39 | | % |

| EBITDA(2) | | 1,361,132 | | | | 1,341,377 | | | | 1,407,351 | | | | 1,444,886 | | | | 1,189,046 | | |

| % of net sales | | 14.33 | | % | | 14.05 | | % | | 15.35 | | % | | 15.17 | | % | | 12.84 | | % |

| Return on Invested Capital(3) | | 15.63 | | % | | 16.24 | | % | | 16.30 | | % | | 18.89 | | % | | 15.47 | | % |

| Long-term Obligations, including capital leases | | 269,713 | | | | 624,840 | | | | 250,000 | | | | 250,000 | | | | 250,000 | | |

| Cash Flows | | | | | | | | | | | | | | | | | | | | |

| Proceeds from Sale of Business | | 479,806 | | | | — | | | | 135,944 | | | | 110,149 | | | | — | | |

| Less: Interest and Investment Income* | | 31,520 | | | | 27,817 | | | | 14,586 | | | | 16,703 | | | | 13,466 | | |

| EBIT | | $ | 1,195,923 | | | $ | 1,179,519 | | | $ | 1,276,374 | | | $ | 1,312,918 | | | $ | 1,055,612 | |

| EBIT per (1) above | | 1,195,923 | | | | 1,179,519 | | | | 1,276,374 | | | | 1,312,918 | | | | 1,055,612 | | |

| EBITDA | | $ | 1,361,132 | | | $ | 1,341,377 | | | $ | 1,407,351 | | | $ | 1,444,886 | | | $ | 1,189,046 | |

| EBIT per (1) above | | 1,195,923 | | | | 1,179,519 | | | | 1,276,374 | | | | 1,312,918 | | | | 1,055,612 | | |

| After-tax EBIT | | $ | 967,860 | | | $ | 1,010,966 | | | $ | 845,470 | | | $ | 887,401 | | | $ | 685,831 | |

| Return on Invested Capital | | 15.63 | | % | | 16.24 | | % | | 16.30 | | % | | 18.89 | | % | | 15.47 | | % |

* 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.

| Net Earnings | | 1,012,582 | | | | 847,103 | | | | 890,517 | | | | 687,264 | | | | 606,026 | | |

| EBIT(1) | | 1,198,479 | | | | 1,280,101 | | | | 1,323,430 | | | | 1,066,144 | | | | 928,271 | | |

| % of net sales | | 12.56 | | % | | 13.96 | | % | | 13.90 | | % | | 11.51 | | % | | 9.96 | | % |

| EBITDA(2) | | 1,360,337 | | | | 1,411,078 | | | | 1,455,398 | | | | 1,199,578 | | | | 1,058,315 | | |

| % of net sales | | 14.25 | | % | | 15.39 | | % | | 15.28 | | % | | 12.95 | | % | | 11.36 | | % |

| Return on Invested Capital (3) | | 16.50 | | % | | 16.35 | | % | | 19.04 | | % | | 15.62 | | % | | 15.79 | | % |

| Long-term Debt less Current Maturities | | 624,840 | | | | 250,000 | | | | 250,000 | | | | 250,000 | | | | 250,000 | | |

| Selected Cash Flow Data | | | | | | | | | | | | | | | | | | | | |

Management uses EBIT as a component of certain executive incentive plans but does not utilize EBITDA for any material purpose.

| Less: Interest and Investment Income | | 8,857 | | | | 10,859 | | | | 6,191 | | | | 2,934 | | | | 3,236 | | |

| EBIT | | $ | 1,198,479 | | | $ | 1,280,101 | | | $ | 1,323,430 | | | $ | 1,066,144 | | | $ | 928,271 | |

| EBIT per (1) above | | 1,198,479 | | | | 1,280,101 | | | | 1,323,430 | | | | 1,066,144 | | | | 928,271 | | |

| Plus: Depreciation and Amortization | | 161,858 | | | | 130,977 | | | | 131,968 | | | | 133,434 | | | | 130,044 | | |

| EBITDA | | $ | 1,360,337 | | | $ | 1,411,078 | | | $ | 1,455,398 | | | $ | 1,199,578 | | | $ | 1,058,315 | |

| EBIT per (1) above | | 1,198,479 | | | | 1,280,101 | | | | 1,323,430 | | | | 1,066,144 | | | | 928,271 | | |

| After-tax EBIT | | $ | 1,027,336 | | | $ | 848,067 | | | $ | 894,506 | | | $ | 692,674 | | | $ | 608,887 | |

| Return on Invested Capital | | 16.50 | | % | | 16.35 | | % | | 19.04 | | % | | 15.62 | | % | | 15.79 | | % |

[removed: Report] [added: Report] of [removed: Management][added: Management]

[removed: Management’s] [added: Management’s] Responsibility for Financial [removed: Statements][added: Statements]

[removed: Management’s] [added: Management’s] Report on Internal Control Over Financial [removed: Reporting][added: Reporting]

Under the supervision, and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in [removed: Internal] [added: *Internal] Control - Integrated [removed: Framework] [added: Framework*] issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework).

Based on our evaluation under the framework in [removed: Internal] [added: *Internal] Control - Integrated [removed: Framework,] [added: Framework*,] we concluded that our internal control over financial reporting was effective as of October [removed: 28, 2018.][added: 27, 2019.]

Our internal control over financial reporting as of October [removed: 28, 2018,] [added: 27, 2019,] has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included herein.

| Chairman of the Board, | [removed: Senior] [added: Executive] Vice President |

| [removed: President,] [added: President and] Chief Executive [removed: Officer, and Director] [added: Officer] | and Chief Financial Officer |

[removed: Report] [added: Report] of Independent Registered Public Accounting [removed: Firm][added: Firm]

[removed: To] [added: To] the Shareholders and [removed: The] [added: the] Board of Directors of Hormel Foods [removed: Corporation][added: Corporation]

We have audited Hormel Foods Corporation’s internal control over financial reporting as of October [removed: 28, 2018,] [added: 27, 2019,] based on criteria established in Internal [removed: Control–Integrated] [added: Control-Integrated] Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 [removed: framework),] [added: framework)] (the COSO criteria).

In our opinion, Hormel Foods Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of October [removed: 28, 2018,] [added: 27, 2019,] based on the COSO criteria.

We [removed: have] also [added: have] audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the [added: accompanying] consolidated [removed: balance sheets] [added: statements] of [added: financial position of] Hormel Foods Corporation [added: (the Company)] as of October [removed: 28, 2018] [added: 27, 2019] and October [removed: 29, 2017 and] [added: 28, 2018,] the related consolidated statements of [added: operations,] comprehensive income, [added: changes in] shareholders’ [removed: equity] [added: investment,] and cash flows for each of the three years in the period ended October [removed: 28, 2018] [added: 27, 2019] and the related notes and financial statement schedule listed in the [removed: Index] [added: index] at Item 15 [removed: (collectively referred to as the consolidated financial statements)] and our report dated December [removed: 7, 2018] [added: 6, 2019] expressed an unqualified opinion thereon.

[removed: Basis] [added: Basis] for [removed: Opinion][added: Opinion]

[removed: Definition] [added: Definition] and Limitations of Internal Control [removed: over] [added: Over] Financial [removed: Reporting][added: Reporting]

[removed: Report] [added: Report] of Independent Registered Public Accounting [removed: Firm][added: Firm]

[removed: To] [added: To] the Shareholders and [removed: The] [added: the] Board of Directors of Hormel Foods [removed: Corporation][added: Corporation]

[removed: Opinion] [added: Opinion] on the Financial [removed: Statements][added: Statements]

We have audited the [added: accompanying] consolidated [removed: balance sheets] [added: statements] of [added: financial position of] Hormel Foods Corporation (the Company) as of October [removed: 28, 2018] [added: 27, 2019] and October [removed: 29, 2017,] [added: 28, 2018,] the related consolidated statements of [added: operations,] comprehensive income, [added: changes in] shareholders’ [removed: equity] [added: investment,] and cash flows for each of the three years in the period ended October [removed: 28, 2018,] [added: 27, 2019] and the related notes and financial statement schedule listed in the [removed: Index] [added: index] at Item 15 (collectively referred to as the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at October [removed: 28, 2018] [added: 27, 2019] and October [removed: 29, 2017,] [added: 28, 2018,] and the results of its operations and its cash flows for each of the three years in the period ended October [removed: 28, 2018,] [added: 27, 2019,] in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the [removed: Company’s] [added: Company's] internal control over financial reporting as of October [removed: 28, 2018,] [added: 27, 2019,] based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 [removed: framework)] [added: framework),] and our report dated December [removed: 7, 2018] [added: 6, 2019] expressed an unqualified opinion thereon.

[removed: Basis] [added: Basis] for [removed: Opinion][added: Opinion]

We believe that our audits provide a reasonable basis for our [removed: opinion.][added: opinion.]

We have served as the [removed: Corporation’s] [added: Company's] auditor since 1931.

[removed: Consolidated] [added: Consolidated] Statements of Financial [removed: Position][added: Position]

| | | [removed: October 28,] [added: October 27,] | | | | October [removed: 29,] [added: 28,] | | |

| (in thousands, except share and per share amounts) | | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | |

| [removed: Assets] [added: Assets] | | | | | | | | |

| Cash and [removed: cash equivalents |] [added: Cash Equivalents at Beginning of Year] | [removed: $] | [removed: 459,136] [added: 459,136] | | | [removed: $] | 444,122 | | [added: | | 415,143 | | |]

| Accounts [removed: receivable (net] [added: Receivable (Net] of [removed: allowance] [added: Allowance] for [removed: doubtful accounts] [added: Doubtful Accounts] of [removed: $4,051] [added: $4,063] at October [removed: 28, 2018,] [added: 27, 2019,] and [removed: $4,246] [added: $4,051] at October [removed: 29, 2017)] [added: 28, 2018)] | | [removed: 600,438] [added: 574,396] | | | | [removed: 618,351] [added: 600,438] | | |

| Inventories | | [removed: 963,527] [added: 1,042,362] | | | | [removed: 921,022] [added: 963,527] | | |

| Income [removed: taxes receivable] [added: Taxes Receivable] | | [removed: 3,995] [added: 19,924] | | | | [removed: 22,346] [added: 3,995] | | |

| Prepaid [removed: expenses] [added: Expenses] | | [removed: 16,342] [added: 22,637] | | | | [removed: 16,144] [added: 16,342] | | |

| Other [removed: current assets] [added: Current Assets] | | [removed: 6,662] [added: 14,457] | | | | [removed: 4,538] [added: 6,662] | | |

| Total Current Assets | | [removed: 2,050,100] [added: 2,361,413] | | | | [removed: 2,026,523] [added: 2,050,100] | | |

| Goodwill | | [removed: 2,714,116] [added: 2,481,645] | | | | [removed: 2,119,813] [added: 2,714,116] | | |

| Other Intangibles | | [removed: 1,207,219] [added: 1,033,862] | | | | [removed: 1,027,014] [added: 1,207,219] | | |

| Pension Assets | | [removed: 195,153] [added: 135,915] | | | | [removed: 171,990] [added: 195,153] | | |

| Investments In and Receivables [removed: From] [added: from] Affiliates | | [removed: 273,153] [added: 289,157] | | | | [removed: 242,369] [added: 273,153] | | |

| Other Assets | | [removed: 189,951] [added: 177,901] | | | | [removed: 184,948] [added: 189,951] | | |

Opinion on Internal Control Over Financial Reporting

December 6, 2019

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

| | Valuation of Alternative Investments - Pension Assets | | | |

| *Description of the Matter* | At October 27, 2019, the Company had $1.5 billion in plan assets related to the defined benefit pension plans. Approximately 43% of the total pension assets are in global stocks - collective investment funds, private equity funds, real estate - domestic funds, and hedge funds. These types of investments are referred to as “alternative investments.” As documented in Note G of the financial statements, these alternative investments are valued at net asset value (NAV) or are valued using significant unobservable inputs. | | | |

| | Auditing the fair value of these alternative investments is challenging because of the higher estimation uncertainty of the inputs to the fair value calculations, including the underlying NAVs, discounted cash flow valuations, comparable market valuations, and adjustments for currency, credit liquidity and other risks. Additionally, certain information regarding the fair value of these alternative investments is based on unaudited information available to management at the time of valuation. | | | |

| *How We Addressed the Matter in Our Audit* | We obtained an understanding, evaluated the design and tested the operating effectiveness of controls addressing the risk of material misstatement relating to valuation of alternative investments. This included testing management's review controls over the valuation of alternative investments, for example, a review of fund performance in comparison to the selected benchmark and meetings with the investment advisor on a quarterly basis to review market performance and fund returns in comparison with relevant indices and the investment policy. We also tested management's independent price testing of underlying investments performed for certain investments on an annual basis. | | | |

| | Our audit procedures included, among others, inquiring of management and the investment advisor regarding changes to the investment portfolio and investment strategies. We confirmed the fair value of the investments and ownership interest directly with the fund managers. We inspected the trust statement for observable transactions near year end to compare to the estimated fair value. We also obtained the latest audited financial statements for certain investments, performed a rollforward of the investment balance to compute an estimated market return on investment, and compared the market return to relevant benchmarks. | | | |

| | Valuation of Indefinite-Lived Intangible Assets - Trade Names | | | |

| *Description of the Matter* | At October 27, 2019, the Company’s indefinite-lived intangible assets relating to brands, tradenames, and trademarks were $956.8 million. As explained in Note D of the financial statements, indefinite-lived intangible assets are tested by management for impairment at least annually. Due to the lack of excess value of certain trade names with combined carrying values representing less than $100 million, the Company elected to test these assets using a quantitative analysis. | | | |

| | Auditing management’s quantitative indefinite-lived intangible asset impairment test was complex and highly judgmental due to the significant measurement uncertainty in determining the fair value of the asset which was subject to a quantitative impairment test. For example, the fair value estimate was sensitive to significant assumptions including future net sales projections, royalty rates, and discount rates, which are affected by expected future market or economic conditions and industry and company-specific qualitative factors. | | | |

| *How We Addressed the Matter in Our Audit* | We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s indefinite lived intangible assets quantitative impairment test. This included evaluating controls over management's review of the forecasting process used to develop future net sales projections, as well as controls over the review of the other significant assumptions. We also tested management's controls to validate that the data used in the valuation was complete and accurate. | | | |

| | Our audit procedures included, among others, assessing methodologies and testing the significant assumptions discussed above and the underlying data used by the Company in its analysis. We compared the significant assumptions used by management to forecasts used in the Company’s annual operating plans, current industry and economic trends, and other relevant factors. We assessed the historical accuracy of management’s estimates and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the trade names that would result from changes in the assumptions. Finally, we compared the fair values for each trade name subject to the quantitative impairment assessment to their carrying values in order to conclude on whether impairment charges were necessary. | | | |

December 6, 2019

| Cash and Cash Equivalents | | $ | 672,901 | | | $ | 459,136 | |

| Short-term Marketable Securities | | 14,736 | | | | — | | |

| Total Assets | | $ | 8,109,004 | | | $ | 8,142,292 | |

| Cost of Products Sold | | 7,612,669 | | | | 7,566,227 | | | | 7,170,883 | | |

| Gross Profit | | 1,884,648 | | | | 1,979,473 | | | | 1,996,636 | | |

| Selling, General and Administrative | | 727,584 | | | | 841,205 | | | | 759,304 | | |

| Operating Income | | 1,196,265 | | | | 1,179,961 | | | | 1,276,742 | | |

*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.

| Net Earnings | | | | | | | | | | | | | | | | | | | | 978,806 | | | | | | | | 342 | | | | 979,148 | | |

| Other Comprehensive Income (Loss) | | | | | | | | | | | | | | | | | | | | | | | | (102,203 | | ) | | (272 | | ) | | (102,475 | | ) |

| Purchases of Common Stock | | | | | | | | | (4,309 | ) | | (174,246 | | ) | | | | | | | | | | | | | | | | | | (174,246 | | ) |

| Shares Retired | | (4,309 | ) | | (63 | | ) | | 4,309 | | | 174,246 | | | | (1,287 | | ) | | (172,896 | | ) | | | | | | | | | | — | | |

| Cumulative Effect Adjustment from the Adoption of: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| ASU 2016-16 | | | | | | | | | | | | | | | | | | | | (10,475 | | ) | | | | | | | | | | (10,475 | | ) |

| ASU 2018-02 | | | | | | | | | | | | | | | | | | | | 52,342 | | | | (53,778 | | ) | | | | | | (1,436 | | ) |

| Balance at October 27, 2019 | | 534,489 | | | $ | 7,830 | | | — | | | $ | — | | | $ | 184,921 | | | $ | 6,128,207 | | | $ | (399,500 | ) | | $ | 4,077 | | | $ | 5,925,535 | |

| Gain on Sale of Business | | (16,469 | | ) | | — | | | | — | | |

| Net (Purchase) Sale of Securities | | $ | (14,496 | ) | | $ | — | | | $ | — | |

value of the assets and any related goodwill, the carrying value is reduced to the estimated fair value.

The Company recorded no material impairment charges for long-lived or definite-lived assets in fiscal 2019, 2018, 2017.

No impairment charges were recorded for fiscal 2019.

Amounts in the Consolidated Statements of Operations are translated at the average monthly exchange rate.

Revenue Recognition: The Company recognizes revenues at the net consideration the Company expects to receive in exchange for goods sold.

December 7, 2018

December 7, 2018

| Cost of products sold | | 7,550,267 | | | | 7,164,356 | | | | 7,365,049 | | |

| Gross Profit | | 1,995,433 | | | | 2,003,163 | | | | 2,158,175 | | |

| Selling, general and administrative | | 838,205 | | | | 762,104 | | | | 871,974 | | |

| Operating Income | | 1,198,921 | | | | 1,280,469 | | | | 1,323,895 | | |

*Fiscal 2016 included 53 weeks.

*Fiscal 2016 included 53 weeks.

| Balance at October 25, 2015* | | 528,412 | | | $ | 7,741 | | | — | | | $ | — | | | $ | — | | | $ | 4,216,125 | | | $ | (225,668 | ) | | $ | 3,195 | | | $ | 4,001,393 | |

| Net earnings | | | | | | | | | | | | | | | | | | | | 890,052 | | | | | | | | 465 | | | | 890,517 | | |

| Purchases of common stock | | | | | | | | | (2,386 | ) | | (87,885 | | ) | | | | | | | | | | | | | | | | | | (87,885 | | ) |

| Shares retired | | (2,386 | ) | | (35 | | ) | | 2,386 | | | 87,885 | | | | (25,304 | | ) | | (62,546 | | ) | | | | | | | | | | — | | |

*Shares have been restated, as appropriate, to reflect the two-for-one stock split distributed on February 9, 2016.

| Principal payments on short-term debt | | $ | — | | | $ | — | | | $ | (185,000 | ) |

| Cash and cash equivalents at beginning of year | | 444,122 | | | | 415,143 | | | | 347,239 | | |

*Fiscal 2016 included 53 weeks.

Stock Split: On November 23, 2015, the Company’s Board of Directors authorized a two\-for-one split of the Company’s voting common stock, which was subsequently approved by shareholders at the Company’s Annual Meeting on January 26, 2016, and effected on January 27, 2016.

The Company’s voting common stock was reclassified by reducing the par value from$.0293 per share to $0.01465 per share and the number of authorized shares was increased from 800 million to 1.6 billion shares, in order to effect the two\-for-one stock split.

The Company distributed the additional shares of $.01465 par value common stock on February 9, 2016, and the shares began trading at the post-split price on February 10, 2016.

Unless otherwise noted, all prior year share amounts and per share calculations throughout this Annual Report have been restated to reflect the impact of this split and to provide data on a comparable basis.

Such restatements include calculations regarding the Company’s weighted-average shares, earnings per share, and dividends per share, as well as disclosures regarding the Company’s stock-based compensation plans and share repurchase activity.

Internal-use software development and implementation costs are expensed until the Company has determined that the software will result in probable future economic benefits, and management has committed to funding the project.

Thereafter, all material development and implementation costs, and purchased software costs are capitalized as part of machinery and equipment and amortized using the straight-line method over the remaining estimated useful lives.

An immaterial impairment charge was recorded in the second quarter of fiscal 2016 for the Company's Diamond Crystal Brands (DCB) business based on the agreed-upon sales price for the business.

As a result of the review, no material impairment charges were recorded; however, four trademarks were determined to have fair values exceeding their carrying values by less than a 10 percent margin.

Due to the lack of excess value of these assets, the Company elected to test these assets using a quantitative analysis during fiscal 2018.

For all other indefinite-lived

intangible assets, the Company tested the assets using a qualitative analysis.

In total, the Company performed a quantitative test for six trade names in fiscal 2018 and only one was determined to be impaired.

Assets Held for Sale: The Company classifies assets as held for sale when management approves and commits to a formal plan of sale with the expectation the sale will be completed within one year.

The net assets of the business held for sale are then recorded at the lower of their current carrying value or the fair market value, less costs to sell.

Revenue Recognition: The Company recognizes sales when title passes upon delivery of its products to customers, 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 title passes.

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.

During the fourth quarter of fiscal year [removed: 2018,] [added: 2019,] there has been no change in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

[removed: PART III][added: PART III]