Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Report of Management

Management’s Responsibility for Financial Statements

The accompanying financial statements were prepared by the management of Hormel Foods Corporation which is responsible for their integrity and objectivity. These statements have been prepared in accordance with U.S. generally accepted accounting principles appropriate in the circumstances and, as such, include amounts that are based on our best estimates and judgments.

Hormel Foods Corporation has developed a system of internal controls designed to assure that the records reflect the transactions of the Company and that the established policies and procedures are adhered to. This system is augmented by well-communicated written policies and procedures, a strong program of internal audit and well-qualified personnel.

These financial statements have been audited by Ernst & Young LLP, an independent registered public accounting firm, and their report is included herein. The audit was conducted in accordance with the standards of the U.S. Public Company Accounting Oversight Board and includes a review of the Company’s accounting and financial controls and tests of transactions.

The Audit Committee of the Board of Directors, composed solely of outside directors, meets periodically with the independent auditors, management, and the internal auditors to assure that each is carrying out its responsibilities. Both Ernst & Young LLP and our internal auditors have full and free access to the Audit Committee, with or without the presence of management, to discuss the results of their audit work and their opinions on the adequacy of internal controls and the quality of financial reporting.

Management’s Report on Internal Control Over Financial Reporting

Management of Hormel Foods Corporation is responsible for establishing and maintaining adequate internal control over financial reporting for the Company, as such term is defined in Exchange Act Rule 13a–15(f). The Company’s internal control system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting standards. 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 Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework).

Based on our evaluation under the framework in Internal Control - Integrated Framework, we concluded that our internal control over financial reporting was effective as of October 30, 2022. Our internal control over financial reporting as of October 30, 2022, has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included herein.

/s/ James P. Snee						/s/ Jacinth C. Smiley
Chairman of the Board,						Executive Vice President
President and Chief Executive Officer						and Chief Financial Officer

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Hormel Foods Corporation

Opinion on Internal Control Over Financial Reporting

We have audited Hormel Foods Corporation’s internal control over financial reporting as of October 30, 2022, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 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 30, 2022, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the accompanying consolidated statements of financial position of the Company as of October 30, 2022 and October 31, 2021, the related consolidated statements of operations, comprehensive income, changes in shareholders’ investment, and cash flows for each of the three years in the period ended October 30, 2022 and the related notes and financial statement schedule listed in the index at Item 15 and our report dated December 6, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Minneapolis, Minnesota

December 6, 2022

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Hormel Foods Corporation

Opinion on the Financial Statements

We have audited the accompanying consolidated statements of financial position of Hormel Foods Corporation (the Company) as of October 30, 2022 and October 31, 2021, the related consolidated statements of operations, comprehensive income, changes in shareholders’ investment, and cash flows for each of the three years in the period ended October 30, 2022 and the related notes and the financial statement schedule listed in the 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 30, 2022 and October 31, 2021, and the results of its operations and its cash flows for each of the three years in the period ended October 30, 2022, 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 Company's internal control over financial reporting as of October 30, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated December 6, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion**.**

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter 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 matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

			Valuation of Alternative Investments - Pension Assets
Description of the Matter			At October 30, 2022, the Company had $1.2 billion in plan assets related to the defined benefit pension plans. Approximately 61% of the total pension assets are in private equity funds, real estate – domestic funds, global stocks – collective investment funds, hedge funds, fixed income – hedge funds, and fixed income – collective investment 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.

			Valuation of Alternative Investments - Pension Assets
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 a quarterly 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.

/s/ Ernst & Young LLP

We have served as the Company's auditor since 1931.

Minneapolis, Minnesota

December 6, 2022

Consolidated Statements of Operations

						Fiscal Year Ended
						October 30,						October 31,						October 25,
In thousands, except per share amounts						2022						2021						2020
Net Sales						$	12,458,806					$	11,386,189					$	9,608,462
Cost of Products Sold						10,294,120						9,458,283						7,782,498
Gross Profit						2,164,686						1,927,906						1,825,963
Selling, General, and Administrative						879,265						853,071						761,315
Equity in Earnings of Affiliates						27,185						47,763						35,572
Operating Income						1,312,607						1,122,599						1,100,220
Interest and Investment Income						28,012						46,878						35,596
Interest Expense						62,515						43,307						21,069
Earnings Before Income Taxes						1,278,103						1,126,170						1,114,747
Provision for Income Taxes						277,877						217,029						206,393
Net Earnings						1,000,226						909,140						908,354
Less: Net Earnings Attributable to Noncontrolling Interest						239						301						272
Net Earnings Attributable to Hormel Foods Corporation						$	999,987					$	908,839					$	908,082
Net Earnings Per Share:
Basic						$	1.84					$	1.68					$	1.69
Diluted						$	1.82					$	1.66					$	1.66
Weighted-average Shares Outstanding:
Basic						544,918						541,114						538,007
Diluted						549,566						547,580						546,592

See Notes to Consolidated Financial Statements

Consolidated Statements of Comprehensive Income

						Fiscal Year Ended
						October 30,						October 31,						October 25,
In thousands						2022						2021						2020
Net Earnings						$	1,000,226					$	909,140					$	908,354
Other Comprehensive Income (Loss), Net of Tax:
Foreign Currency Translation						(39,393)						13,379						(10,812)
Pension and Other Benefits						65,587						71,967						15,698
Deferred Hedging						(5,267)						33,034						(284)
Total Other Comprehensive Income (Loss)						20,927						118,380						4,602
Comprehensive Income						1,021,153						1,027,520						912,956
Less: Comprehensive Income (Loss) Attributable to Noncontrolling Interest						(542)						700						624
Comprehensive Income Attributable to Hormel Foods Corporation						$	1,021,695					$	1,026,820					$	912,332

See Notes to Consolidated Financial Statements

Consolidated Statements of Financial Position

						October 30,						October 31,
In thousands, except share and per share amounts						2022						2021
Assets
Cash and Cash Equivalents						$	982,107					$	613,530
Short-term Marketable Securities						16,149						21,162
Accounts Receivable (Net of Allowance for Doubtful Accounts of $3,507 at October 30, 2022, and $4,033 at October 31, 2021)						867,593						895,719
Inventories						1,716,059						1,369,198
Taxes Receivable						7,177						8,293
Prepaid Expenses and Other Current Assets						48,041						39,914
Total Current Assets						3,637,125						2,947,816
Goodwill						4,925,829						4,929,102
Other Intangibles						1,803,027						1,822,273
Pension Assets						245,566						289,096
Investments In and Receivables from Affiliates						271,058						299,019
Other Assets						283,169						299,907
Property, Plant, and Equipment
Land						74,303						72,133
Buildings						1,398,255						1,332,881
Equipment						2,636,660						2,415,063
Construction in Progress						216,246						316,455
Less: Allowance for Depreciation						(2,184,319)						(2,027,414)
Net Property, Plant, and Equipment						2,141,146						2,109,117
Total Assets						$	13,306,919					$	12,696,329
Liabilities and Shareholders’ Investment
Accounts Payable						$	816,604					$	793,310
Accrued Expenses						58,801						51,192
Accrued Marketing Expenses						113,105						114,746
Employee Related Expenses						279,072						269,327
Interest and Dividends Payable						163,963						154,803
Taxes Payable						32,925						23,520
Current Maturities of Long-term Debt						8,796						8,756
Total Current Liabilities						1,473,266						1,415,654
Long-term Debt Less Current Maturities						3,290,549						3,315,147
Pension and Post-retirement Benefits						385,832						546,362
Deferred Income Taxes						475,212						278,183
Other Long-term Liabilities						141,840						162,623
Shareholders’ Investment
Preferred Stock, Par Value $0.01 a Share — Authorized 160,000,000 Shares; Issued — None						—						—
Common Stock, Nonvoting, Par Value $0.01 a Share — Authorized 400,000,000 Shares; Issued — None						—						—
Common Stock, Par Value $0.01465 a Share — Authorized 1,600,000,000 Shares; Issued 546,237,051 Shares October 30, 2022 Issued 542,412,403 Shares October 31, 2021						8,002						7,946
Additional Paid-in Capital						469,468						360,336
Accumulated Other Comprehensive Loss						(255,561)						(277,269)
Retained Earnings						7,313,374						6,881,870
Hormel Foods Corporation Shareholders’ Investment						7,535,284						6,972,883
Noncontrolling Interest						4,936						5,478
Total Shareholders’ Investment						7,540,219						6,978,360
Total Liabilities and Shareholders’ Investment						$	13,306,919					$	12,696,329

See Notes to Consolidated Financial Statements

Consolidated Statements of Changes in Shareholders’ Investment

						Hormel Foods Corporation Shareholders
In thousands, except per						Common Stock												Treasury Stock												Additional Paid-In Capital						Retained Earnings						Accumulated Other Comprehensive Income (Loss)						Non-controlling Interest						Total Shareholders’ Investment
share amounts						Shares						Amount						Shares						Amount
Balance at October 27, 2019						534,489						$	7,830					—						$	—					$	184,921					$	6,128,207					$	(399,500)					$	4,077					$	5,925,535
Net Earnings																																				908,082												272						908,354
Other Comprehensive Income (Loss)																																										4,250						352						4,602
Contribution from Non-controlling Interest																																																77						77
Purchases of Common Stock																		(302)						(12,360)																														(12,360)
Stock-based Compensation Expense																														22,458																								22,458
Exercise of Stock Options/ Restricted Shares						5,700						83																		82,324																								82,407
Shares Retired						(302)						(4)						302						12,360						(149)						(12,207)																		—
Declared Dividends — $0.93 per Share																																				(500,747)																		(500,747)
Balance at October 25, 2020						539,887						$	7,909					—						$	—					$	289,554					$	6,523,335					$	(395,250)					$	4,778					$	6,430,326
Net Earnings																																				908,839												301						909,140
Other Comprehensive Income (Loss)																																										117,981						399						118,380
Purchases of Common Stock																		(469)						(19,958)																														(19,958)
Stock-based Compensation Expense						38						1																		24,743																								24,744
Exercise of Stock Options/ Restricted Shares						2,956						43																		46,326																								46,369
Shares Retired						(469)						(7)						469						19,958						(287)						(19,664)																		—
Declared Dividends — $0.98 per Share																																				(530,640)																		(530,640)
Balance at October 31, 2021						542,412						$	7,946					—						$	—					$	360,336					$	6,881,870					$	(277,269)					$	5,478					$	6,978,360
Net Earnings																																				999,987												239						1,000,226
Other Comprehensive Income (Loss)																																										21,708						(782)						20,927
Stock-based Compensation Expense						37						1																		27,786																								27,786
Exercise of Stock Options/ Restricted Shares						3,787						55																		79,871																								79,927
Declared Dividends — $1.04 per Share																														1,475						(568,482)																		(567,007)
Balance at October 30, 2022						546,237						$	8,002					—						$	—					$	469,468					$	7,313,374					$	(255,561)					$	4,936					$	7,540,219

See Notes to Consolidated Financial Statements

Consolidated Statements of Cash Flows

						Fiscal Year Ended
						October 30,						October 31,						October 25,
In thousands						2022						2021						2020
Operating Activities
Net Earnings						$	1,000,226					$	909,140					$	908,354
Adjustments to Reconcile to Net Cash Provided by (Used in) Operating Activities:
Depreciation						213,026						183,772						165,716
Amortization						49,727						44,634						40,065
Equity in Earnings of Affiliates						(27,185)						(47,763)						(35,572)
Distributions Received from Equity Method Investees						43,039						44,999						37,499
Provision for Deferred Income Taxes						177,000						28,677						32,039
Loss (Gain) on Property/Equipment Sales and Plant Facilities						6,695						3,731						1,793
Non-cash Investment Activities						19,298						(24,215)						(15,315)
Stock-based Compensation Expense						24,943						24,744						22,458
Changes in Operating Assets and Liabilities, Net of Acquisitions:
Decrease (Increase) in Accounts Receivable						28,365						(191,627)						(119,516)
Decrease (Increase) in Inventories						(351,663)						(145,176)						(1,839)
Decrease (Increase) in Prepaid Expenses and Other Current Assets						(15,460)						34,555						5,860
Increase (Decrease) in Pension and Post-retirement Benefits						(29,392)						(15,448)						(10,509)
Increase (Decrease) in Accounts Payable and Accrued Expenses						(14,511)						115,099						111,277
Increase (Decrease) in Net Income Taxes Payable						10,869						36,811						(14,286)
Net Cash Provided by (Used in) Operating Activities						$	1,134,977					$	1,001,934					$	1,128,024
Investing Activities
Net (Purchase) Sale of Securities						$	2,493					$	(4,364)					$	(2,589)
Acquisitions of Businesses and Intangibles						—						(3,396,246)						(270,789)
Purchases of Property and Equipment						(278,918)						(232,416)						(367,501)
Proceeds from Sales of Property and Equipment						1,224						2,216						1,916
Decrease (Increase) in Investments, Equity in Affiliates, and Other Assets						2,404						(343)						(21,124)
Proceeds from Company-owned Life Insurance						14,761						5,315						3,772
Net Cash Provided by (Used in) Investing Activities						$	(258,037)					$	(3,625,839)					$	(656,316)
Financing Activities
Proceeds from Long-term Debt						$	—					$	2,276,292					$	992,381
Repayments of Long-term Debt and Finance Leases						(8,673)						(258,617)						(8,368)
Dividends Paid on Common Stock						(557,839)						(523,114)						(487,376)
Share Repurchase						—						(19,958)						(12,360)
Proceeds from Exercise of Stock Options						79,827						45,919						81,818
Proceeds from Noncontrolling Interest						—						—						77
Net Cash Provided by (Used in) Financing Activities						$	(486,684)					$	1,520,520					$	566,172
Effect of Exchange Rate Changes on Cash						(21,679)						2,606						3,526
Increase (Decrease) in Cash and Cash Equivalents						368,577						(1,100,778)						1,041,407
Cash and Cash Equivalents at Beginning of Year						613,530						1,714,309						672,901
Cash and Cash Equivalents at End of Year						$	982,107					$	613,530					$	1,714,309

See Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

Note A

Summary of Significant Accounting Policies

Principles of Consolidation: The consolidated financial statements include the accounts of Hormel Foods Corporation (the Company) and all of its majority-owned subsidiaries after elimination of intercompany accounts, transactions, and profits.

Use of Estimates: The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Rounding: Certain amounts in the Consolidated Financial Statements and associated notes may not foot due to rounding. All percentages have been calculated using unrounded amounts.

Fiscal Year: The Company’s fiscal year ends on the last Sunday in October. Fiscal years 2022 and 2020 consisted of 52 weeks. Fiscal year 2021 consisted of 53 weeks. Fiscal year 2023 will consist of 52 weeks.

Cash and Cash Equivalents: The Company considers all investments with an original maturity of three months or less on their acquisition date to be cash equivalents. The Company’s cash equivalents as of October 30, 2022, and October 31, 2021, consisted primarily of bank deposits, money market funds rated AAA, or other highly liquid investment accounts. The Net Asset Value (NAV) of the Company’s money market funds is based on the market value of the securities in the portfolio.

Fair Value Measurements: Pursuant to the provisions of Accounting Standards Codification (ASC) 820, Fair Value Measurements and Disclosures (ASC 820), the Company measures certain assets and liabilities at fair value or discloses the fair value of certain assets and liabilities recorded at cost in the consolidated financial statements. Fair value is calculated as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). ASC 820 establishes a fair value hierarchy which requires assets and liabilities measured at fair value to be categorized into one of three levels based on the inputs used in the valuation. The Company classifies assets and liabilities in their entirety based on the lowest level of input significant to the fair value measurement. The three levels are defined as follows:

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

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

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

See additional discussion regarding the Company’s fair value measurements in Note F - Derivatives and Hedging, Note G - Pension and Other Post-retirement Benefits, and Note I - Fair Value Measurements.

Compensation: The Company maintains a rabbi trust to fund certain supplemental executive retirement plans and deferred compensation plans. Under the plans, participants can defer certain types of compensation and elect to receive a return on the deferred amounts based on the changes in fair value of various investment options, primarily a variety of mutual funds. The Company has corporate-owned life insurance policies on certain participants in the deferred compensation plans. The cash surrender value of the policies is included in Other Assets on the Consolidated Statements of Financial Position. The securities held by the trust are classified as trading securities. Therefore, unrealized gains and losses associated with these investments are included in the Company’s earnings. Securities held by the trust generated gains (losses) of $(16.8) million, $21.2 million, and $7.0 million for fiscal years 2022, 2021, and 2020, respectively.

Inventories: Inventories are stated at the lower of cost or net realizable value. Cost is determined principally under the average cost method. Adjustments to the Company’s lower of cost or net realizable value inventory reserve are reflected in Cost of Products Sold in the Consolidated Statements of Operations.

Property, Plant, and Equipment: Property, Plant, and Equipment are stated at cost. The Company uses the straight-line method in computing depreciation. The annual provisions for depreciation have been computed principally using the following ranges of asset lives: buildings 20 to 40 years, and equipment 3 to 14 years.

Leases: The Company determines if an arrangement contains a lease at inception. Right-of-use assets and lease liabilities are recognized based on the present value of future minimum lease payments over the lease term at the commencement date. Leases with an initial term of twelve months or less are not recorded on the Consolidated Statements of Financial Position. The Company combines lease and non-lease components together in determining the minimum lease payments for all leases.

The length of the lease term used in recording right-of-use assets and lease liabilities is based on the contractually required lease term adjusted for any options to renew, early terminate, or purchase the lease that are reasonably certain of being exercised. Most leases include one or more options to renew or terminate. The exercise of lease renewal and termination options is at the Company’s discretion and generally is not reasonably certain at lease commencement. The Company’s lease agreements typically do not contain material residual value guarantees. The Company has one lease with an immaterial residual value guarantee that is included in the minimum lease payments.

Certain lease agreements include rental payment increases over the lease term that can be fixed or variable. Fixed payment increases and variable payment increases based on an index or rate are included in the initial lease liability using the index or rate at commencement date. Variable payment increases not based on an index or rate are recognized as incurred.

If the rate implicit in the lease is not readily determinable, the Company used its periodic incremental borrowing rate, based on the information available at commencement date, to determine the present value of future lease payments. Leases and right-of-use assets that existed prior to the adoption of ASU 2016-02, Leases (Topic 842) were valued using the incremental borrowing rate on October 28, 2019.

Impairment of Long-Lived Assets and Definite-Lived Intangible Assets: Definite-lived intangible assets are amortized over their estimated useful lives. The Company reviews long-lived assets and definite-lived intangible assets for impairment annually, or more frequently when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If impairment indicators are present and the estimated future undiscounted cash flows are less than the carrying 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 years 2022, 2021, or 2020.

Goodwill and Other Indefinite-Lived Intangibles: Indefinite-lived intangible assets are originally recorded at their estimated fair values at date of acquisition. Goodwill is the residual after allocating the purchase price to net assets acquired. Acquired goodwill and other indefinite-lived intangible assets are allocated to reporting units that will receive the related benefits. Goodwill and indefinite-lived intangible assets are tested annually for impairment during the fourth quarter following the annual planning process or more frequently if impairment indicators arise. See additional discussion regarding the Company’s goodwill and intangible assets in Note C - Goodwill and Intangible Assets.

Goodwill

In conducting the annual impairment test for goodwill, the Company has the option to first assess qualitative factors to determine whether it is more likely than not (> 50 percent likelihood) the fair value of any reporting unit is less than its carrying amount. If the Company elects to perform a qualitative assessment and determines an impairment is more likely than not, the Company is required to perform a quantitative impairment test. Otherwise, no further analysis is required. Alternatively, the Company may elect to proceed directly to the quantitative impairment test.

In conducting a qualitative assessment, the Company analyzes actual and projected growth trends for net sales, gross margin and segment profit for each reporting unit, as well as historical performance versus plan and the results of prior quantitative tests. Additionally, the Company assesses factors that may impact the business's financial results such as macroeconomic conditions and the related impact, market-related exposures, plans to market for sale all or a portion of the business, competitive changes, new or discontinued product lines, and changes in key personnel.

If performed, the quantitative goodwill impairment test is performed at the reporting unit level. First, the fair value of each reporting unit is compared to its corresponding carrying value, including goodwill. The fair value of each reporting unit is estimated using discounted cash flow valuations (Level 3), which incorporate assumptions regarding future growth rates, terminal values and discount rates. The estimates and assumptions used consider historical performance and are consistent with the assumptions used in determining future profit plans for each reporting unit, which are approved by the Company’s Board of Directors. If the quantitative assessment results in the carrying value exceeding the fair value of any reporting unit, the results from the quantitative analysis will be relied upon to determine both the existence and amount of goodwill impairment. An impairment loss will be recognized for the amount by which the reporting unit’s carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill in that reporting unit.

During the fourth quarter of fiscal 2022, the Company completed its annual goodwill impairment tests and performed qualitative assessments. No impairment charges were recorded as a result of the qualitative assessments in fiscal years 2022 and 2020 and quantitative assessments in fiscal year 2021.

Indefinite-Lived Intangibles

In conducting the annual impairment test for its indefinite-lived intangible assets, the Company first performs a qualitative assessment to determine whether it is more likely than not (> 50 percent likelihood) an indefinite-lived intangible asset is impaired. If the Company concludes this is the case, a quantitative test for impairment must be performed. Otherwise, the Company does not need to perform a quantitative test.

In conducting the qualitative assessment, the Company analyzes growth rates for historical and projected net sales and the results of prior quantitative tests. Additionally, each operating segment assesses items that may impact the value of their intangible assets or the applicable royalty rates to determine if impairment may be indicated.

If performed, the quantitative impairment test compares the fair value and carrying amount of the indefinite-lived intangible asset. The fair value of indefinite-lived intangible assets is primarily determined on the basis of estimated discounted value using the relief from royalty method (Level 3), which incorporates assumptions regarding future sales projections, discount rates and royalty rates. If the carrying amount exceeds fair value, the indefinite-lived intangible asset is considered impaired, and an impairment charge is recorded for the difference. Even if not required, the Company may elect to perform the quantitative test in order to gain further assurance in the qualitative assessment.

During the fourth quarter of fiscal 2022, the Company completed its annual indefinite-lived asset impairment tests by performing qualitative assessments. No impairment charges were recorded as a result of the qualitative assessments in fiscal years 2022 and 2020 and quantitative assessments in fiscal year 2021.

Pension and Other Post-retirement Benefits: The Company has elected to use the corridor approach to recognize expenses related to its defined benefit pension and other post-retirement benefit plans. Under the corridor approach, actuarial gains or losses resulting from experience and changes in assumptions are deferred and amortized over future periods. For the defined benefit pension plans, the unrecognized gains and losses are amortized when the net gain or loss exceeds 10 percent of the greater of the projected benefit obligation or the fair value of plan assets at the beginning of the year. For the other post-retirement plans, the unrecognized gains and losses are amortized when the net gain or loss exceeds 10 percent of the accumulated pension benefit obligation at the beginning of the year. For plans with primarily active participants, net gains or losses in excess of the corridor are amortized over the average remaining service period of participating employees expected to receive benefits under those plans. For plans with primarily inactive participants, net gains or losses in excess of the corridor are amortized over the average remaining life of the participants receiving benefits under those plans.

Contingent Liabilities: The Company may be subject to investigations, legal proceedings, or claims related to the ongoing operation of its business, including claims both by and against the Company. Such proceedings typically involve claims related to product liability, contract disputes, antitrust regulations, wage and hour laws, employment practices, or other actions brought by employees, consumers, competitors or suppliers. The Company establishes accruals for its potential exposure for claims when losses become probable and reasonably estimable. Where the Company is able to reasonably estimate a range of potential losses, the Company records the amount within that range which constitutes the Company’s best estimate. The Company also discloses the nature of and range of loss for claims against the Company when losses are reasonably possible and material.

Foreign Currency Translation: Assets and liabilities denominated in foreign currency are translated at the current exchange rate as of the date of the Consolidated Statements of Financial Position. Amounts in the Consolidated Statements of Operations are translated at the average monthly exchange rate. Translation adjustments resulting from fluctuations in exchange rates are recorded as a component of Accumulated Other Comprehensive Loss within Shareholders’ Investment.

When calculating foreign currency translation, the Company deemed its foreign investments to be permanent in nature and has not provided for taxes on currency translation adjustments arising from converting the investment in a foreign currency to U.S. dollars.

Derivatives and Hedging Activity: The Company uses derivative instruments to manage its exposure to commodity prices and interest rates. The derivative instruments are recorded at fair value on the Consolidated Statements of Financial Position. The cash flow impacts from the derivative instruments are primarily included in Operating Activities on the Consolidated Statements of Cash Flows. Additional information on hedging activities is presented in Note F - Derivatives and Hedging.

Equity Method Investments: The Company has a number of investments in joint ventures where its voting interests are in excess of 20 percent but not greater than 50 percent and for which there are no other indicators of control. The Company accounts for such investments under the equity method of accounting and its underlying share of each investee’s equity, along with any related receivables from affiliates, is reported in the Consolidated Statements of Financial Position as part of Investments In and Receivables from Affiliates.

The Company regularly monitors and evaluates the fair value of its equity investments. If events and circumstances indicate that a decline in the fair value of these assets has occurred and is other than temporary, the Company will record a charge in Equity in Earnings of Affiliates in the Consolidated Statements of Operations. The Company did not record an impairment charge on any

of its equity investments in fiscal years 2022, 2021, or 2020. See additional information pertaining to the Company’s equity method investments in Note D - Investments In and Receivables From Affiliates.

Revenue Recognition: The Company’s customer contracts predominantly contain a single performance obligation to fulfill customer orders for the purchase of specified products. Revenue from product sales is primarily identified by purchase orders (“contracts”), which in some cases are governed by a master sales agreement. The purchase orders in combination with the invoice typically specify quantity and product(s) ordered, shipping terms, and certain aspects of the transaction price including discounts. Contracts are at standalone pricing or governed by pricing lists or brackets. The Company's revenue is recognized at the point in time when performance obligations have been satisfied and control of the product has transferred to the customer. This is typically once the shipped product is received or picked up by the customer. Revenue is recognized at the net consideration the Company expects to receive in exchange for the goods. The amount of net consideration recognized includes estimates of variable consideration, including costs for trade promotion programs, consumer incentives, and allowances and discounts associated with distressed or potentially unsaleable products.

A majority of the Company’s revenue is short-term in nature with shipments within one year from order date. The Company's payment terms generally range between 7 to 45 days and vary by sales channel and other factors. The Company accounts for shipping and handling costs as contract fulfillment costs and excludes taxes imposed on and collected from customers in revenue producing transactions from the transaction price. The Company does not have significant deferred revenue or unbilled receivable balances as a result of transactions with customers. Costs to obtain contracts with a duration of one year or less are expensed and included in the Consolidated Statements of Operations.

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

The Company discloses revenue by reportable segment, sales channel, and class of similar product in Note P - Segment Reporting.

Allowance for Doubtful Accounts: The Company estimates the Allowance for Doubtful Accounts based on a combination of factors, evaluations, and historical data while considering current and future economic conditions.

Advertising Expenses: Advertising costs are included in Selling, General, and Administrative and expensed when incurred. Advertising expenses include all media advertising but exclude the costs associated with samples, demonstrations, and market research. Advertising costs for fiscal years 2022, 2021, and 2020 were $157.3 million, $138.5 million, and $123.6 million, respectively.

Shipping and Handling Costs: The Company’s shipping and handling expenses are included in Cost of Products Sold on the Consolidated Statements of Operations.

Research and Development Expenses: Research and development costs are expensed as incurred and are included in Selling, General, and Administrative expenses on the Consolidated Statements of Operations. Research and development expenses incurred for fiscal years 2022, 2021, and 2020 were $34.7 million, $33.6 million, and $31.9 million, respectively.

Income Taxes: The Company records income taxes in accordance with the liability method of accounting. Deferred taxes are recognized for the estimated taxes ultimately payable or recoverable based on enacted tax law. Changes in enacted tax rates are reflected in the tax provision as they occur.

In accordance with ASC 740, Income Taxes, the Company recognizes a tax position in its financial statements when it is more likely than not that the position will be sustained upon examination based on the technical merits of the position. That position is then measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement.

Stock-Based Compensation: The Company records stock-based compensation expense in accordance with ASC 718, Compensation – Stock Compensation. For options subject to graded vesting, the Company recognizes stock-based compensation expense ratably over the shorter of the vesting period or the individual's retirement eligibility date. The Company estimates forfeitures at the time of grant based on historical experience and revises in subsequent periods if actual forfeitures differ.

Share Repurchases: The Company may purchase shares of its common stock through open market and privately negotiated transactions at prices deemed appropriate by management. The timing and amount of repurchase transactions under the repurchase authorization depend on market conditions as well as corporate and regulatory considerations. For additional share repurchases information, see Part II, Item 5 - Market for Registrants' Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Supplemental Cash Flow Information: Non-cash investment activities presented on the Consolidated Statements of Cash Flows primarily consist of unrealized gains or losses on the Company’s rabbi trust. The noted investments are included in Other Assets on the Consolidated Statements of Financial Position. Changes in the value of these investments are presented in the Consolidated Statements of Operations as Interest and Investment Income.

Reclassifications: Certain reclassifications of previously reported amounts have been made to conform to the current year presentation.

Accounting Changes and Recent Accounting Pronouncements

New Accounting Pronouncements Recently Adopted

Fiscal 2022

In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2019-12, Income Taxes - Simplifying the Accounting for Income Taxes (Topic 740). The updated guidance simplifies the accounting for income taxes by removing certain exceptions in Topic 740 and clarifying and amending existing guidance. The amendments are effective for fiscal years beginning after December 15, 2020, with early adoption permitted. The Company adopted the provisions of this new accounting standard at the beginning of fiscal 2022 and adoption did not have a material impact on its consolidated financial statements.

Fiscal 2021

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326). The update provides guidance on the measurement of credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The amendment replaces the current incurred loss impairment approach with a methodology to reflect expected credit losses and requires consideration of a broader range of reasonable and supportable information to explain credit loss estimates. The updated guidance is to be applied on a modified retrospective approach and is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company adopted the provisions of this new accounting standard at the beginning of fiscal 2021. The adoption did not have a material impact on the Company's consolidated financial statements, thus no cumulative-effect adjustment to retained earnings was necessary.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement - Disclosure Framework (Topic 820). The updated guidance requires entities to disclose the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. Amendments in this guidance also require disclosure of transfers into and out of Level 3 of the fair value hierarchy, purchases and issues of Level 3 assets and liabilities, and clarify that the measurement uncertainty disclosure is as of the reporting date. The guidance removes requirements to disclose the amounts and reasons for transfers between Level 1 and Level 2, policy for timing between of transfers between levels, and the valuation processes for Level 3 fair value measurements. The updated guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company adopted the provisions of this new accounting standard at the beginning of fiscal 2021. Presentation and disclosure requirements were applied prospectively and retrospectively as required by the amendments. The adoption did not have a material impact on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans (Topic 715). The updated guidance requires additional disclosures of weighted-average interest crediting rates for cash balance plans and an explanation of the reasons for significant gains and losses related to changes in the benefit obligation. Amendments in the guidance also clarify the requirement to disclose the projected benefit obligation (PBO) and fair value of plan assets for plans with PBOs in excess of plan assets. The same disclosure is needed for the accumulated benefit obligation (ABO) and fair value of plan assets for plans with ABOs in excess of plan assets. The guidance removes certain previous disclosure requirements no longer considered cost beneficial. The amendments are effective for fiscal years ending after December 15, 2020, with early adoption permitted. The Company adopted the provisions of this new accounting standard at the beginning of fiscal 2021. Presentation and disclosure requirements were applied retrospectively to all periods presented. The adoption did not have a material impact on the Company’s consolidated financial statements.

Fiscal 2020

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The updated guidance requires lessees to recognize a right-of-use asset and lease liability for all leases with terms of more than twelve months. Recognition, measurement, and presentation of expenses will depend on the classification as a finance or operating lease. The update also requires expanded quantitative and qualitative disclosures. Accounting guidance for lessors is largely unchanged. The requirements of the new standard are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company adopted the provisions of this new accounting standard at the beginning of fiscal 2020. For transition purposes, the Company elected the package of practical expedients to not reassess prior conclusions related to contracts containing leases, lease classification, and initial direct costs. The Company elected the comparative periods practical expedient, and as a result, the Company did not adjust its comparative period financial information or make the new required lease disclosures for periods before the effective date. Upon adoption, the Company recognized right-of-use assets of $112.7 million and lease liabilities of $114.1 million in the Consolidated Statements of Financial Position as of October 28, 2019. The new standard did not have a material impact on the Consolidated Statements of Operations or the Consolidated Statements of Cash Flows.

Recently issued accounting standards or pronouncements not disclosed have been excluded as they are currently not relevant to the Company.

Note B

Acquisitions and Divestitures

Acquisitions: On June 7, 2021, the Company acquired the Planters*®* snack nuts business from The Kraft Heinz Company. The acquisition includes the Planters*®, NUT-rition®, and Corn Nuts®* brands. The final purchase price, including working capital adjustments, was $3.4 billion. The transaction was funded with the Company’s cash on hand and from the issuance of long-term debt.

Planters*®* is an iconic snack brand and this acquisition significantly expands the Company's presence, and should broaden the scope for future acquisitions, in the growing snacking space. Operating results for this acquisition have been included in the Company's Consolidated Statements of Operations from the date of acquisition and are reflected in the Grocery Products, Refrigerated Foods, and International & Other segments. The acquisition contributed $1.0 billion and $410.8 million of net sales during fiscal 2022 and fiscal 2021, respectively. As the acquisition has been integrated within the Company's existing operations, post-acquisition net earnings are not discernible.

Acquisition-related costs were $30.3 million for the fiscal year ended October 31, 2021, which are reflected in the Consolidated Statements of Operations as Selling, General, and Administrative. Additional one-time adjustments related to the revaluation of acquired inventory of $12.9 million were recognized in the Consolidated Statements of Operations as Cost of Products Sold for the fiscal year ended October 31, 2021. The combined impact of these one-time acquisition costs and accounting adjustments was $43.2 million for the fiscal year ended October 31, 2021.

The acquisition was accounted for as a business combination using the acquisition method. The Company determined the acquisition date fair values of the assets acquired using independent appraisals. The Company completed purchase accounting allocations in the fourth quarter of fiscal 2021. Allocations of the purchase price to acquired assets, including goodwill and intangibles assets, are presented in the table below.

In thousands			Purchase Price Allocation
Inventory						$	149,224
Property, Plant, and Equipment						170,958
Goodwill						2,313,064
Other Intangibles:
Tradenames						712,000
Customer Relationships						51,000
Purchase Price						$	3,396,246

Goodwill is calculated as the excess of the purchase price over the fair values of the identifiable net assets acquired and is deductible for tax purposes. The goodwill recorded as part of the acquisition primarily reflects the value of the potential to expand the Company's presence in the growing snacking space and serve as a platform for innovation.

The following unaudited pro forma financial information presents the combined results of operations as if the acquisition of the Planters*®* snack nuts business had occurred on October 27, 2019. These unaudited pro forma results do not necessarily reflect the actual results of operations that would have been achieved had the acquisition occurred on that date, nor are they necessarily indicative of future results of operations.

									Fiscal Year Ended
In thousands															October 31, 2021						October 25, 2020
Pro Forma Net Sales															$	12,061,686					$	10,657,992
Pro Forma Net Earnings Attributable to Hormel Foods Corporation															985,881						934,783

The pro forma results include charges for depreciation and amortization of acquired assets and interest expense on debt issued to finance the acquisition, as well as the related income taxes. The pro forma results for the fiscal year ended October 25, 2020, also include nonrecurring adjustments relating to the recognition of transaction costs incurred and revaluation of inventory acquired, along with the related income tax effects, which in the aggregate reduce pro forma net earnings by $41.1 million. The pro forma results for the fiscal year ended October 31, 2021, include an adjustment to add back the transaction costs incurred and revaluation of inventory acquired in those periods, along with the related income tax effects, since those costs are reflected in the preceding fiscal year on a pro forma basis.

On March 2, 2020, the Company acquired the assets comprising the Sadler's Smokehouse business (Sadler's) for a final purchase price of $270.8 million. Sadler's is an authentic, pit-smoked meats business based in Henderson, Texas. This acquisition has strengthened the Company's foodservice position and provided an opportunity to further extend the Sadler's product line into the retail channel.

The transaction was funded with cash on hand and accounted for as a business combination using the acquisition method. The Company completed an allocation of the fair value of the assets acquired utilizing third-party valuation appraisals during fiscal 2020.

Operating results for this acquisition have been included in the Company's Consolidated Statements of Operations from the date of acquisition and are reflected in the Refrigerated Foods segment. Pro forma results are not material for inclusion.

See Note C - Goodwill and Intangible Assets for amounts assigned to goodwill and intangible assets.

Note C

Goodwill and Intangible Assets

Goodwill: The changes in the carrying amount of goodwill for the fiscal years ended October 30, 2022, and October 31, 2021, are:

In thousands						Grocery Products						Refrigerated Foods						Jennie-O Turkey Store						International & Other						Total
Balance at October 25, 2020						$	632,301					$	1,607,005					$	176,628					$	196,793					$	2,612,727
Goodwill Acquired						1,766,053						487,416						—						59,595						2,313,064
Foreign Currency Translation						—						—						—						3,311						3,311
Balance at October 31, 2021						$	2,398,354					$	2,094,421					$	176,628					$	259,699					$	4,929,102
Foreign Currency Translation						—						—						—						(3,273)						(3,273)
Balance at October 30, 2022						$	2,398,354					$	2,094,421					$	176,628					$	256,427					$	4,925,829

The increase in goodwill during fiscal 2021 reflects the acquisition of the Planters*®* snack nuts business. See Note B - Acquisitions and Divestitures for additional information.

Intangible Assets: The carrying amounts for indefinite-lived intangible assets are:

						October 30,						October 31,
In thousands						2022						2021
Brands/Tradenames/Trademarks						$	1,665,190					$	1,665,190
Other Intangibles						184						184
Foreign Currency Translation						(6,599)						(6,646)
Total						$	1,658,775					$	1,658,728

The gross carrying amount and accumulated amortization for definite-lived intangible assets are:

			October 30, 2022						October 31, 2021
			Gross						Gross
			Carrying			Accumulated			Carrying			Accumulated
In thousands			Amount			Amortization			Amount			Amortization
Customer Lists/Relationships			$	168,239		$	(69,779)		$	168,239		$	(56,882)
Other Intangibles			59,241			(11,606)			60,241			(8,356)
Tradenames/Trademarks			10,536			(7,828)			10,536			(5,700)
Foreign Currency Translation			—			(4,551)			—			(4,534)
Total			$	238,016		$	(93,764)		$	239,016		$	(75,471)

Amortization expense for the last three fiscal years was:

In thousands
2022						$	19,274
2021						17,518
2020						14,251

Estimated annual amortization expense for the five fiscal years after October 30, 2022, is as follows:

In thousands
2023						$	18,320
2024						16,331
2025						14,628
2026						14,172
2027						13,940

During the fourth quarter of fiscal years 2022, 2021, and 2020, the Company completed the required annual impairment tests of indefinite-lived intangible assets and goodwill. No impairment was indicated. Useful lives of intangible assets were also reviewed during this process with no material changes identified.

Note D

Investments In and Receivables From Affiliates

Investments In and Receivables from Affiliates consists of:

In thousands			Segment			Percent Owned						October 30, 2022						October 31, 2021
MegaMex Foods, LLC			Grocery Products			50%						$	182,939					$	205,413
Other Joint Ventures			International & Other			Various (20 – 50%)						88,119						93,606
Total												$	271,058					$	299,019

Equity in Earnings of Affiliates consists of:

In thousands			Segment						Fiscal Year Ended
			October 30, 2022						October 31, 2021						October 25, 2020
MegaMex Foods, LLC			Grocery Products						$	19,861					$	38,178					$	31,919
Other Joint Ventures			International & Other						7,324						9,585						3,653
Total									$	27,185					$	47,763					$	35,572

Dividends received from affiliates for the fiscal years ended October 30, 2022, October 31, 2021, and October 25, 2020, were $43.0 million, $45.0 million, and $37.5 million, respectively.

The Company recognized a basis difference of $21.3 million associated with the formation of MegaMex Foods, LLC, of which $10.2 million is remaining as of October 30, 2022. This difference is being amortized through Equity in Earnings of Affiliates.

Note E

Inventories

Principal components of inventories are:

In thousands						October 30, 2022						October 31, 2021
Finished Products						$	974,160					$	725,115
Raw Materials and Work-in-Process						440,193						395,403
Operating Supplies						206,289						163,416
Maintenance Materials and Parts						95,417						85,264
Total						$	1,716,059					$	1,369,198

Note F

Derivatives and Hedging

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

Cash Flow Commodity Hedges: The Company designates grain and lean hog futures, swaps, and options used to offset price fluctuations in the Company’s future grain and hog purchases as cash flow hedges. Effective gains or losses related to these cash flow hedges are reported in Accumulated Other Comprehensive Loss (AOCL) and reclassified into earnings, through Cost

of Products Sold, in the periods in which the hedged transactions affect earnings. The Company typically does not hedge its grain exposure beyond the next two upcoming fiscal years and its hog exposure beyond the next fiscal year.

Fair Value Commodity Hedges: The Company designates the futures it uses to minimize the price risk assumed when fixed forward priced contracts are offered to the Company’s commodity suppliers as fair value hedges. The intent of the program is to make the forward priced commodities cost nearly the same as cash market purchases at the date of delivery. Changes in the fair value of the futures contracts, along with the gain or loss on the hedged purchase commitment, are marked-to-market through earnings and recorded on the Consolidated Statements of Financial Position as a Current Asset and Current Liability, respectively. Gains or losses related to these fair value hedges are recognized through Cost of Products Sold in the periods in which the hedged transactions affect earnings.

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

Fair Value Interest Rate Hedge: In the first quarter of fiscal 2022, the Company entered into an interest rate swap to protect against changes in the fair value of a portion of previously issued senior unsecured notes attributable to the change in the benchmark interest rate. The hedge specifically designated the last $450 million of the notes due June 2024 (the “2024 Notes”). The Company terminated the swap in the fourth quarter of fiscal 2022. The loss related to the swap was recorded as a fair value hedging adjustment to the hedged debt and will be amortized into earnings over the remaining life of the debt.

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

Volume: The Company's outstanding contracts related to its commodity hedging programs include:

			Volume
Commodity Contracts			October 30, 2022			October 31, 2021
Corn			34.3 million bushels			33.1 million bushels
Lean Hogs			177.5 million pounds			120.0 million pounds

Fair Value of Derivatives: The fair values of the Company’s derivative instruments designated as hedges are:

			Location on Consolidated						Gross Fair Value(1)
In thousands			Statements of Financial Position						October 30, 2022						October 31, 2021
Commodity Contracts			Other Current Assets						$	13,504					$	21,798

(1) Amounts represent the gross fair value of commodity derivative assets and liabilities. The Company nets the derivative assets and liabilities for each of its commodity hedging programs, including cash collateral, when a master netting arrangement exists between the Company and the counterparty to the derivative contract. The amount or timing of cash collateral balances may impact the classification of the commodity derivative in the Consolidated Statements of Financial Position. The gross asset position as of October 30, 2022, is offset by the obligation to return cash collateral of $1.3 million contained within the master netting arrangement. The gross asset position as of October 31, 2021, is offset by the obligation to return cash collateral of $10.8 million. See Note I - Fair Value Measurements for a discussion of these net amounts as reported in the Consolidated Statements of Financial Position.

Fair Value Hedge - Assets (Liabilities): The carrying amount of the Company’s fair value hedge assets (liabilities) are:

			Location on Consolidated						Carrying Amount of the Hedged Assets/(Liabilities)
In thousands			Statements of Financial Position						October 30, 2022						October 31, 2021
Commodity Contracts			Accounts Payable(1)						$	5,725					$	3,432
Interest Rate Contracts			Long-term Debt - Less Current Maturities(2)						(430,050)						—

(1) Represents the carrying amount of fair value hedged assets and liabilities which are offset by other assets included in master netting arrangements described above.

(2) Represents the carrying amount of the hedged portion of the "2024 Notes". As of October 30, 2022, the carrying amount of the "2024 Notes" included a cumulative fair value hedging adjustment of $20.0 million from discontinued hedges.

Accumulated Other Comprehensive Loss Impact: As of October 30, 2022, the Company included in AOCL hedging gains (before tax) of $26.0 million on commodity contracts and $13.5 million related to interest rate settled positions. The Company expects to recognize the majority of the gains on commodity contracts over the next twelve months. Gains on interest rate contracts offset the hedged interest payments over the tenor of the associated debt instruments.

The effect of AOCL for gains or losses (before tax) related to the Company's derivative instruments are:

						Gain/(Loss) Recognized in AOCL(1)												Location on Consolidated Statements of Operations						Gain/(Loss) Reclassified from AOCL into Earnings(1)
In thousands						Fiscal Year Ended															Fiscal Year Ended
Cash Flow Hedges:						October 30, 2022						October 31, 2021									October 30, 2022						October 31, 2021
Commodity Contracts						$	56,371					$	59,143					Cost of Products Sold						$	57,592					$	31,044
Excluded Component(2)						(4,748)						1,078												—						—
Interest Rate Contracts						—						14,864						Interest Expense						988						399

(1) See Note H - Accumulated Other Comprehensive Loss for the after-tax impact of these gains or losses on Net Earnings.

(2) Represents the time value of corn options excluded from the assessment of effectiveness for which the difference between changes in fair value and periodic amortization is recorded in AOCL.

Consolidated Statements of Operations Impact: The effect on the Consolidated Statements of Operations for gains or losses (before tax) related to the Company's derivative instruments are:

			Consolidated Statement of Operations Impact
			Fiscal Year Ended
In thousands			October 30, 2022						October 31, 2021						October 25, 2020
Net Earnings Attributable to Hormel Foods Corporation			$	999,987					$	908,839					$	908,082
Cash Flow Hedges - Commodity Contracts
Gain (Loss) Reclassified from AOCL			55,350						31,787						(37,834)
Amortization of Excluded Component from Options			(4,369)						(3,033)						—
Gain (Loss) Due to Discontinuance of Cash Flow Hedges(1)			2,242						(743)						—
Fair Value Hedges - Commodity Contracts
Gain (Loss) on Commodity Futures(2)			(18,122)						(28,078)						13,192
Total Gain (Loss) on Commodity Contracts(3)			$	35,101					$	(67)					$	(24,642)
Cash Flow Hedges - Interest Rate Locks
Amortization of Gain on Interest Rate Locks			988						399						—
Fair Value Hedge - Interest Rate Swap
Gain (Loss) on Interest Rate Swap			928						—						—
Amortization of Loss Due to Discontinuance of Fair Value Hedge(4)			(1,923)						—						—
Total Gain (Loss) on Interest Rate Contracts(5)			$	(7)					$	399					$	—
Total Gain (Loss) Recognized in Earnings			$	35,094					$	332					$	(24,642)

(1) In fiscal years ended 2022 and 2021, the Company discontinued hedge accounting related to corn usage deemed to no longer probable to occur resulting in the immediate recognition of gains of $2.2 million (1.0 million bushels) and losses of $0.7 million (2.8 million bushels), respectively.

(2) Represents gains or losses on commodity contracts designated as fair value hedges that were closed during the year, which were offset by a corresponding gain or loss on the underlying hedged purchase commitment. Additional gains or losses related to changes in the fair value of open commodity contracts, along with the offsetting gain or loss on the hedged purchase commitment, are also marked-to-market through earnings with no impact on a net basis.

(3) Total Gain (Loss) on Commodity Contracts is recognized in earnings through Cost of Products Sold.

(4) Represents the fair value hedging adjustment amortized into earnings.

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

Note G

Pension and Other Post-retirement Benefits

The Company has several defined benefit plans and defined contribution plans covering most employees. Benefits for defined benefit pension plans covering hourly employees are provided based on stated amounts for each year of service, while plan benefits covering salaried employees are based on final average compensation, age and years of service. In the fourth quarter of fiscal 2022, an amendment was enacted for the salaried pension plan which changed the design from a stable value benefit to a cash balance benefit effective January 1, 2023. The cash balance design establishes hypothetical accounts for employees that are credited with an amount equal to a specified percentage of their pay plus interest. Total costs associated with the Company’s defined contribution benefit plans in fiscal years 2022, 2021, and 2020 were $47.9 million, $46.7 million, and $44.5 million, respectively.

Certain groups of employees are eligible for post-retirement health or welfare benefits. Benefits for retired employees vary for each group depending on respective retirement dates and applicable plan coverage in effect. Contribution requirements for retired employees are governed by the Retiree Health Care Payment Program and may change each year as the cost to provide coverage is determined.

Net periodic cost of defined benefit plans included the following for fiscal years ending:

						Pension Benefits																		Post-retirement Benefits
In thousands						October 30, 2022						October 31, 2021						October 25, 2020						October 30, 2022						October 31, 2021						October 25, 2020
Service Cost						$	40,076					$	37,127					$	35,584					$	469					$	533					$	770
Interest Cost						50,558						50,399						53,642						7,684						7,945						9,306
Expected Return on Plan Assets						(108,248)						(102,693)						(101,283)						—						—						—
Amortization of Prior Service Cost						(1,496)						(1,496)						(2,168)						8						(669)						(2,651)
Recognized Actuarial Loss						12,530						22,742						22,383						2,439						2,020						1,045
Net Periodic Cost						$	(6,581)					$	6,080					$	8,158					$	10,600					$	9,830					$	8,470

Non-service cost components of net pension and post-retirement benefit cost are presented within Interest and Investment Income on the Consolidated Statements of Operations.

Actuarial gains and losses and any adjustments resulting from plan amendments are deferred and amortized over periods ranging from 8 to 21 years for pension benefits and 13 to 14 years for post-retirement benefits. The following amounts have not been recognized in net periodic pension cost and are included in Accumulated Other Comprehensive Loss:

						Pension Benefits												Post-retirement Benefits
In thousands						October 30, 2022						October 31, 2021						October 30, 2022						October 31, 2021
Unrecognized Prior Service Credit						$	(2,399)					$	(3,624)					$	(146)					$	(154)
Unrecognized Actuarial (Losses) Gains						(272,401)						(305,433)						18,044						(35,616)

The following is a reconciliation of the beginning and ending balances of the benefit obligation, fair value of plan assets, and funded status of the plans as of the measurement dates:

						Pension Benefits												Post-retirement Benefits
In thousands						October 30, 2022						October 31, 2021						October 30, 2022						October 31, 2021
Change in Benefit Obligation:
Benefit Obligation at Beginning of Year						$	1,711,958					$	1,666,886					$	274,666					$	285,293
Service Cost						40,076						37,127						469						533
Interest Cost						50,558						50,399						7,684						7,945
Actuarial (Gain) Loss(1)						(515,995)						34,247						(51,219)						1,539
Plan Amendments						(2,722)						—						—						—
Participant Contributions						—						—						1,808						2,113
Medicare Part D Subsidy						—						—						448						461
Benefits Paid						(83,862)						(76,702)						(21,868)						(23,218)
Benefit Obligation at End of Year						$	1,200,013					$	1,711,958					$	211,986					$	274,666

(1) Actuarial gains in fiscal 2022 were primarily due to the change in the discount rate assumptions utilized in measuring plan obligations.

						Pension Benefits												Post-retirement Benefits
In thousands						October 30, 2022						October 31, 2021						October 30, 2022						October 31, 2021
Change in Plan Assets:
Fair Value of Plan Assets at Beginning of Year						$	1,698,596					$	1,553,532					$	—					$	—
Actual Return on Plan Assets						(387,244)						211,054						—						—
Participant Contributions						—						—						1,808						2,113
Employer Contributions						12,711						10,712						20,060						21,105
Benefits Paid						(83,862)						(76,702)						(21,868)						(23,218)
Fair Value of Plan Assets at End of Year						$	1,240,200					$	1,698,596					$	—					$	—
Funded Status at End of Year						$	40,187					$	(13,362)					$	(211,986)					$	(274,666)

Amounts recognized in the Consolidated Statements of Financial Position are as follows:

						Pension Benefits												Post-retirement Benefits
In thousands						October 30, 2022						October 31, 2021						October 30, 2022						October 31, 2021
Pension Assets						$	245,566					$	289,096					$	—					$	—
Employee-related Expenses						(11,571)						(11,173)						(19,962)						(19,589)
Pension and Post-retirement Benefits						(193,808)						(291,285)						(192,024)						(255,077)
Net Amount Recognized						$	40,187					$	(13,362)					$	(211,986)					$	(274,666)

The accumulated benefit obligation for all pension plans was $1.2 billion and $1.7 billion as of October 30, 2022, and October 31, 2021, respectively. The following table provides information for pension plans with projected and accumulated benefit obligations in excess of plan assets:

In thousands						October 30, 2022						October 31, 2021
Projected Benefit Obligation						$	205,379					$	302,458
Accumulated Benefit Obligation						204,302						292,877
Fair Value of Plan Assets						—						—

Weighted-average assumptions used to determine benefit obligations are as follows:

						October 30, 2022						October 31, 2021
Discount Rate						5.92		%				3.00		%
Rate of Future Compensation Increase (For Plans that Base Benefits on Final Compensation Level)						3.95		%				4.14		%
Interest Crediting Rate (For Cash Balance Plan)(1)						4.42		%				—

(1) Cash balance plan enacted in the fourth quarter of fiscal 2022.

Weighted-average assumptions used to determine net periodic benefit costs are as follows:

						October 30, 2022						October 31, 2021						October 25, 2020
Discount Rate						3.00		%				3.06		%				3.37		%
Rate of Future Compensation Increase (For Plans that Base Benefits on Final Compensation Level)						4.14		%				4.09		%				4.06		%
Expected Long-term Return on Plan Assets						6.50		%				6.75		%				7.00		%

The expected long-term rate of return on plan assets is based on fair value and developed in consultation with outside advisors. A range is determined based on the composition of the asset portfolio, historical long-term rates of return, and estimates of future performance. The interest crediting rate is determined annually based on the U.S. 30-year Treasury rate with a floor of 2.65 percent.

For measurement purposes, an 8 percent annual rate of increase in the per capita cost of covered health care benefits for pre-Medicare and post-Medicare retirees’ coverage is assumed for 2023. The pre-Medicare and post-Medicare rate is assumed to decrease to 5 percent for 2028 and remain steady thereafter.

The Company’s funding policy is to make annual contributions of not less than the minimum required by applicable regulations. The Company expects to make contributions of $32.5 million during fiscal 2023 which represent benefit payments for unfunded plans.

Benefits expected to be paid over the next ten fiscal years are as follows:

In thousands						Pension Benefits						Post-retirement Benefits
2023						$	81,447					$	20,548
2024						84,199						20,176
2025						87,441						19,640
2026						90,959						19,031
2027						95,094						18,370
2028-2032						501,359						80,186

Plan assets for certain defined benefit pension plans are held in the Hormel Foods Corporation Master Trust (Master Trust). The investment strategy for the Master Trust attempts to minimize the long-term cost of pension benefits, reduce the volatility of pension expense, and achieve a healthy funded status for the plans. The Company establishes target allocations in consultation with outside advisors through the use of asset-liability modeling in an effort to match the duration of the plan assets with the duration of the Company’s projected benefit liability.

The actual and target weighted-average asset allocations for the Company’s pension plan assets as of the plan measurement date are as follows:

						October 30, 2022									October 31, 2021
Asset Category						Actual %						Target Range %			Actual %						Target Range %
Fixed Income						43.3						40-60			43.8						35-60
Global Stocks						36.9						20-55			40.7						20-55
Real Estate						8.6						0-10			5.3						0-10
Private Equity						7.1						0-10			6.4						0-10
Hedge Funds						2.1						0-10			2.6						0-10
Cash and Cash Equivalents						1.9						0-5			1.1						—

The following tables show the categories of defined benefit pension plan assets and the level under which fair values were determined pursuant to the provisions of ASC 820. Assets measured at fair value using the net asset value (NAV) per share practical expedient are not required to be classified in the fair value hierarchy. These amounts are provided to permit reconciliation to the total fair value of plan assets.

						Fair Value Measurements as of October 30, 2022
In thousands						Total Fair Value						Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
Plan Assets in Fair Value Hierarchy
Cash Equivalents(1)						$	23,162					$	—					$	23,162					$	—
Private Equity(2)
Domestic						37,032						—						—						37,032
International						51,122						—						—						51,122
Fixed Income(3)
U.S. Government Issues						166,461						109,643						56,818						—
Municipal Issues						10,541						—						10,541						—
Corporate Issues – Domestic						244,044						—						244,044						—
Corporate Issues – Foreign						41,759						—						41,759						—
Global Stocks - Mutual Funds(4)						—						—						—						—
Plan Assets in Fair Value Hierarchy						$	574,121					$	109,643					$	376,324					$	88,154
Plan Assets at Net Asset Value
Real Estate – Domestic(5)						$	106,951
Global Stocks - Collective Investment Funds(6)						458,045
Hedge Funds(7)						26,273
Fixed Income - Hedge Funds(8)						62,025
Fixed Income - Collective Investment Funds(9)						12,785
Plan Assets at Net Asset Value						$	666,080
Total Plan Assets at Fair Value						$	1,240,200

						Fair Value Measurements as of October 31, 2021
In thousands						Total Fair Value						Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
Plan Assets in Fair Value Hierarchy
Cash Equivalents(1)						$	19,328					$	—					$	19,328					$	—
Private Equity(2)
Domestic						53,229						—						—						53,229
International						56,190						—						—						56,190
Fixed Income(3)
U.S. Government Issues						262,181						164,357						97,824						—
Municipal Issues						14,024						—						14,024						—
Corporate Issues – Domestic						321,639						—						321,639						—
Corporate Issues – Foreign						56,102						—						56,102						—
Global Stocks - Mutual Funds(4)						94,115						94,115						—						—
Plan Assets in Fair Value Hierarchy						$	876,808					$	258,472					$	508,917					$	109,419
Plan Assets at Net Asset Value
Real Estate – Domestic(5)						$	90,106
Global Stocks - Collective Investment Funds(6)						596,985
Hedge Funds(7)						44,848
Fixed Income - Hedge Funds(8)						62,609
Fixed Income - Collective Investment Funds(9)						27,239
Plan Assets at Net Asset Value						$	821,787
Total Plan Assets at Fair Value						$	1,698,596

The following is a description of the valuation methodologies used for instruments measured at fair value, including the general classification of such instruments:

(1) Cash Equivalents: These Level 2 investments consist primarily of highly liquid money market mutual funds traded in active markets in addition to highly liquid futures and T-bills with an observable daily settlement price.

(2) Private Equity: These Level 3 investments consist of various collective investment funds, which are managed by a third party, invested in a well-diversified portfolio of equity investments from top performing, high quality firms focused on U.S. and foreign small to mid-markets, venture capitalists, and entrepreneurs with a concentration in areas of innovation. Investment strategies include buyouts, growth capital, buildups, and distressed, as well as early stages of company development mainly in the U.S. The fair value of these funds is based on the fair value of the underlying investments.

(3) Fixed Income: The Level 1 investments include U.S. Treasury bonds and notes, which are valued at the closing price reported on the active market in which the individual securities are traded. The Level 2 investments consist principally of U.S. government securities, which are valued daily using institutional bond quote sources and mortgage-backed securities pricing sources, and municipal, domestic, and foreign securities, which are valued daily using institutional bond quote sources.

(4) Global Stocks - Mutual Funds: These Level 1 investments include open-ended mutual funds consisting of a mix of U.S. common stocks and foreign common stocks, which are valued at closing price reported on the active market in which the fund is traded. The investment strategy is to obtain long term capital appreciation by focusing on companies generating above average earnings growth and are leading growth businesses in the marketplace. There are no restrictions on redemptions.

(5) Real Estate - Domestic: These investments include ownership in open-ended real estate funds, which manage diversified portfolios of commercial properties within the office, residential, retail, and industrial property sectors. Investment strategies aim to acquire, own, hold, or dispose of investments with the goal of achieving current income and/or capital appreciation. The real estate investments are valued at the NAV of shares held by the Master Trust. Requests to redeem shares are granted on a quarterly basis with either 45 or 90 days advance notice, subject to availability of cash.

(6) Global Stocks - Collective Investment Funds: These investments include commingled funds consisting of a mix of U.S. common stocks and foreign common stocks. The collective investment funds are valued at the NAV of shares held by the Master Trust. The investment strategy is to obtain long term capital appreciation by focusing on companies generating above average earnings growth and are leading growth businesses in the marketplace. All funds are daily liquid with the exception of one that is available on the first business day of the month for subscriptions and withdrawals.

(7) Hedge Funds: These investments are designed to provide diversification to an overall institutional portfolio and, in particular, provide protection against equity market downturns. They are comprised of Commodity Trading Advisor Managed Futures, Global Macro (Discretionary and/or Quant) and Long Volatility/Tail Risk Hedging strategies. The hedge funds are valued at the NAV of shares held by the Master Trust. Requests to redeem shares are granted daily, monthly or quarterly.

(8) Fixed Income - Hedge Funds: These investments target absolute, risk-adjusted returns by taking advantage of price dislocations and inconsistencies within credit markets. Funds are comprised primarily of U.S. and European corporate credit and structured credit. The investments are valued at the NAV of shares held by the Master Trust. Requests to redeem shares are granted on a quarterly basis on the three year fund anniversary with a ninety day notice period.

(9) Fixed Income - Collective Investment Funds: These investments include commingled funds consisting of a mix of U.S. government and investment grade corporate bonds. The collective investment funds are valued at NAV of the shares held by the Master Trust. The investment strategy is to achieve an investment return that approximates as closely to the Bloomberg Barclays U.S. Aggregate Bond Index over the long term by investing in the securities that comprise the benchmark. There are no restrictions on redemptions.

A reconciliation of the beginning and ending balance of the investments measured at fair value using significant unobservable inputs (Level 3) is as follows:

In thousands						October 30, 2022						October 31, 2021
Fair Value at Beginning of Year						$	109,419					$	83,838
Purchases, Issuances, and Settlements (Net)						(29,188)						(23,151)
Unrealized Gains (Losses)(1)						(18,027)						26,879
Realized Gains						(604)						604
Interest and Dividend Income						26,554						21,248
Fair Value at End of Year						$	88,154					$	109,419

(1) Included in Accumulated Other Comprehensive Loss in the Consolidated Statements of Financial Position.

During fiscal 2022, the value of the Level 3 investments ranged from $75.2 million to $109.4 million, with an average value of $91.8 million.

The Company has commitments totaling $131.5 million for the private equity investments within the pension plans. The unfunded private equity commitment balance for each investment category is as follows:

In thousands						October 30, 2022						October 31, 2021
Domestic Equity						$	2,146					$	81
International Equity						10,466						9,794
Unfunded Commitment Balance						$	12,612					$	9,875

Funding for future private equity capital calls will come from existing pension plan assets and not from additional cash contributions by the Company.

Note H

Accumulated Other Comprehensive Loss

Components of Accumulated Other Comprehensive Loss are as follows:

In thousands						Foreign Currency Translation						Pension & Other Benefits									Derivatives & Hedging									Accumulated Other Comprehensive Loss
Balance at October 27, 2019						$	(52,996)					$	(348,877)								$	2,373								$	(399,500)
Unrecognized Gains (Losses)
Gross						(11,164)						2,003									(38,213)									(47,374)
Tax Effect						—						(404)									9,324									8,920
Reclassification into Net Earnings
Gross						—						18,609			(1)						37,834			(2)						56,443
Tax Effect						—						(4,510)									(9,229)									(13,739)
Net of Tax Amount						(11,164)						15,698									(284)									4,250
Balance at October 25, 2020						$	(64,161)					$	(333,178)								$	2,089								$	(395,250)
Unrecognized Gains (Losses)
Gross						12,980						72,623									75,084									160,687
Tax Effect						—						(17,715)									(18,259)									(35,974)
Reclassification into Net Earnings
Gross						—						22,597			(1)						(31,443)			(2)						(8,846)
Tax Effect						—						(5,538)									7,652									2,114
Net of Tax Amount						12,980						71,967									33,034									117,981
Balance at October 31, 2021						$	(51,181)					$	(261,211)								$	35,123								$	(277,269)
Unrecognized Gains (Losses)
Gross						(38,612)						73,361									51,623									86,372
Tax Effect						—						(17,942)									(12,384)									(30,326)
Reclassification into Net Earnings
Gross						—						13,481			(1)						(58,580)			(2)						(45,099)
Tax Effect						—						(3,312)									14,073									10,761
Net of Tax Amount						(38,612)						65,587									(5,267)									21,708
Balance at October 30, 2022						$	(89,793)					$	(195,624)								$	29,856								$	(255,561)

(1) Included in computation of net periodic cost. See Note G - Pension and Other Post-retirement Benefits for additional information.

(2) Included in Cost of Products Sold and Interest Expense in the Consolidated Statements of Operations. See Note F - Derivatives and Hedging for additional information.

Note I

Fair Value Measurements

The Company’s financial assets and liabilities carried at fair value on a recurring basis as of October 30, 2022, and October 31, 2021, and their level within the fair value hierarchy are presented in the table below.

						Fair Value Measurements at October 30, 2022
						Total Fair Value						Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
In thousands
Assets at Fair Value
Cash and Cash Equivalents(1)						$	982,107					$	980,730					$	1,377					$	—
Short-term Marketable Securities(2)						16,149						8,763						7,386						—
Other Trading Securities(3)						186,243						—						186,243						—
Commodity Derivatives(4)						12,448						12,228						220						—
Total Assets at Fair Value						$	1,196,947					$	1,001,721					$	195,226					$	—
Liabilities at Fair Value
Deferred Compensation(3)						$	57,790					$	—					$	57,790					$	—
Total Liabilities at Fair Value						$	57,790					$	—					$	57,790					$	—

						Fair Value Measurements at October 31, 2021
						Total Fair Value						Quoted Prices in Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
In thousands
Assets at Fair Value
Cash and Cash Equivalents(1)						$	613,530					$	611,111					$	2,419					$	—
Short-term Marketable Securities(2)						21,162						8,790						12,372						—
Other Trading Securities(3)						203,020						—						203,020						—
Commodity Derivatives(4)						13,522						8,104						5,418						—
Total Assets at Fair Value						$	851,234					$	628,005					$	223,229					$	—
Liabilities at Fair Value
Deferred Compensation(3)						$	70,466					$	—					$	70,466					$	—
Total Liabilities at Fair Value						$	70,466					$	—					$	70,466					$	—

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

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

(2) The Company holds securities as part of a portfolio maintained to generate investment income and to provide cash for operations of the Company, if necessary. The portfolio is managed by a third party who is responsible for daily trading activities, and all assets within the portfolio are highly liquid. The cash, U.S. government securities, and money market funds rated AAA held by the portfolio are classified as Level 1. The current investment portfolio also includes corporate bonds and other asset backed securities for which there is an active, quoted market. Market prices are obtained from a variety of industry providers, large financial institutions, and other third-party sources to calculate a representative daily market value, and therefore, these securities are classified as Level 2.

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

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

The rabbi trust is included in Other Assets and deferred compensation liabilities in Other Long-term Liabilities on the Consolidated Statements of Financial Position. Securities held by the rabbi trust are classified as trading securities. Unrealized gains and losses associated with these investments are included in the Company's earnings. Securities held by the trust generated gains (losses) of $(16.8) million, $21.2 million, and $7.0 million for fiscal years 2022, 2021, and 2020, respectively.

(4) The Company’s commodity derivatives represent futures, swaps, and options contracts used in its hedging or other programs to offset price fluctuations associated with purchases of corn and hogs, and to minimize the price risk assumed when forward priced contracts are offered to the Company’s commodity

suppliers. The Company’s futures contracts for corn are traded on the Chicago Board of Trade, while futures contracts for lean hogs are traded on the Chicago Mercantile Exchange. These are active markets with quoted prices available, and these contracts are classified as Level 1. The Company’s corn futures option contracts are over-the-counter instruments classified as Level 2 whose value is calculated using the Black-Scholes pricing model, corn future prices quoted from the Chicago Board of Trade, and other adjustments to inputs that are observable in active markets. All derivatives are reviewed for potential credit risk and risk of nonperformance. The net balance for each program is included in Other Current Assets or Accounts Payable, as appropriate, in the Consolidated Statements of Financial Position. As of October 30, 2022, the Company has recognized the obligation to return net cash collateral of $1.3 million from various counterparties (including cash of $27.5 million less $26.2 million of realized gain). As of October 31, 2021, the Company had recognized obligation to return net cash collateral of $10.8 million from various counterparties (including cash of $45.6 million less $34.8 million of realized gain).

The Company’s financial assets and liabilities include accounts receivable, accounts payable, and other liabilities, for which carrying value approximates fair value. The Company does not carry its long-term debt at fair value in its Consolidated Statements of Financial Position. The fair value of long-term debt, utilizing discounted cash flows (Level 2), was $2.7 billion as of October 30, 2022, and $3.3 billion as of October 31, 2021. See Note L - Long Term Debt and Other Borrowing Arrangements for additional information.

The Company measures certain nonfinancial assets and liabilities at fair value, which are recognized or disclosed on a nonrecurring basis (e.g., goodwill, intangible assets, and property, plant, and equipment). During fiscal years 2022, 2021, and 2020, there were no material remeasurements of assets or liabilities at fair value on a nonrecurring basis subsequent to their initial recognition.

Note J

Commitments and Contingencies

To ensure a steady supply of hogs and turkeys and keep the cost of products stable, the Company has entered into contracts with producers for the purchase of hogs and turkeys at formula-based prices over periods up to 10 years. The Company has also entered into grow-out contracts with independent farmers to raise turkeys for the Company for periods up to 25 years. Under these arrangements, the Company owns the livestock, feed, and other supplies while the independent farmers provide facilities and labor. In addition, the Company has contracted for the purchase of corn, soybean meal, feed ingredients, and other raw materials from independent suppliers for periods up to 4 years. Under these contracts, the Company is committed to make purchases, assuming current price levels, as follows:

In thousands			October 30, 2022
2023			$	1,321,098
2024			894,139
2025			534,137
2026			372,558
2027			167,727
Later Years			144,769
Total			$	3,434,428

Purchases under these contracts for fiscal years 2022, 2021, and 2020 were $1.2 billion, $1.1 billion, and $0.9 billion, respectively.

The Company has commitments of approximately $75 million related to infrastructure improvements supporting various manufacturing facilities as of October 30, 2022.

As of October 30, 2022, the Company has $49.4 million of standby letters of credit issued on its behalf. The standby letters of credit are primarily related to the Company’s self-insured workers compensation programs. This amount includes revocable standby letters of credit totaling $3.1 million for obligations of an affiliated party that may arise under workers compensation claims. Letters of credit are not reflected in the Company’s Consolidated Statements of Financial Position.

The Company is involved in litigation on an ongoing basis arising in the ordinary course of business. In the opinion of management, the outcome of litigation currently pending will not materially affect the Company’s results of operations, financial condition, or liquidity.

Note K

Leases

The Company has operating leases for manufacturing facilities, office space, warehouses, transportation equipment, and miscellaneous real estate and equipment contracts. Finance leases primarily include turkey growing facilities and an aircraft. The Company's lessor portfolio consists primarily of immaterial operating leases of farmland to third parties.

Lease information included in the Consolidated Statements of Financial Position are:

In thousands			Location on Consolidated Statements of Financial Position						October 30, 2022			October 31, 2021
Right-of-Use Assets
Operating			Other Assets						$	73,613		$	72,291
Finance			Net Property, Plant, and Equipment						45,563			53,433
Total Right-of-Use Assets									$	119,176		$	125,724
Liabilities
Current
Operating			Accrued Expenses						$	21,183		$	18,331
Finance			Current Maturities of Long-term Debt						8,391			8,362
Noncurrent
Operating			Other Long-term Liabilities						55,571			56,779
Finance			Long-term Debt Less Current Maturities						36,082			44,637
Total Lease Liabilities									$	121,227		$	128,109

Lease expenses are:

						Fiscal Year Ended
In thousands						October 30, 2022			October 31, 2021			October 25, 2020
Operating Lease Cost (1)						$	25,702		$	21,993		$	19,602
Finance Lease Cost
Amortization of Right-of-Use Assets						7,965			8,104			7,985
Interest on Lease Liabilities						1,707			2,019			2,304
Variable Lease Cost (2)						463,439			544,635			424,955
Net Lease Cost						$	498,813		$	576,751		$	454,846

(1) Includes short-term lease costs, which are immaterial.

(2) ASC 842 - Leases requires disclosure of payments related to agreements with an embedded lease that are not otherwise reflected on the balance sheet. The Company's variable lease costs primarily include inventory related expenses, such as materials, labor, and overhead from manufacturing and service agreements that contain embedded leases. Variability of these costs is determined based on usage or output and may vary for other reasons such as changes in material prices.

The weighted-average remaining lease term and discount rate for lease liabilities included in the Consolidated Statements of Financial Position are:

			October 30, 2022			October 31, 2021
Weighted Average Remaining Lease Term
Operating Leases			5.32 years			5.92 years
Finance Leases			6.26 years			7.18 years
Weighted Average Discount Rate
Operating Leases			2.08		%	1.76		%
Finance Leases			3.44		%	3.48		%

Supplemental cash flow and other information related to leases for the fiscal year-end are:

In thousands						October 30, 2022			October 31, 2021			October 25, 2020
Cash Paid for Amounts Included in the Measurement of Lease Liabilities
Operating Cash Flows from Operating Leases						$	24,098		$	20,305		$	15,412
Operating Cash Flows from Finance Leases						1,707			2,019			2,304
Financing Cash Flows from Finance Leases						8,491			8,598			8,189
Right-of-Use Assets obtained in exchange for new operating lease liabilities						19,646			31,962			5,210

The maturity of the Company's lease liabilities as of October 30, 2022, are:

In thousands						Operating Leases						Finance Leases (1)						Total
2023						$	23,405					$	9,745					$	33,150
2024						19,062						9,623						28,685
2025						14,892						8,120						23,012
2026						10,110						5,652						15,762
2027						4,429						4,314						8,743
2028 and beyond						13,962						11,226						25,188
Total Lease Payments						$	85,859					$	48,680					$	134,539
Less: Imputed Interest						9,105						4,207						13,312
Present Value of Lease Liabilities						$	76,754					$	44,473					$	121,227

(1) Over the life of the lease contracts, finance lease payments include $8.5 million related to purchase options which are reasonably certain of being exercised.

Note L

Long-term Debt and Other Borrowing Arrangements

Long-term Debt consists of:

In thousands			October 30, 2022			October 31, 2021
Senior Unsecured Notes, with Interest at 3.050% Interest Due Semi-annually through June 2051 Maturity Date			$	600,000		$	600,000
Senior Unsecured Notes, with Interest at 1.800% Interest Due Semi-annually through June 2030 Maturity Date			1,000,000			1,000,000
Senior Unsecured Notes, with Interest at 1.700% Interest Due Semi-annually through June 2028 Maturity Date			750,000			750,000
Senior Unsecured Notes, with Interest at 0.650% Interest Due Semi-annually through June 2024 Maturity Date			950,000			950,000
Unamortized Discount on Senior Notes			(7,750)			(8,484)
Unamortized Debt Issuance Costs			(19,856)			(23,435)
Interest Rate Swap Liabilities(1)			(19,950)			—
Finance Lease Liabilities(2)			44,473			52,999
Other Financing Arrangements			2,429			2,823
Total			$	3,299,345		$	3,323,903
Less: Current Maturities of Long-term Debt			8,796			8,756
Long-term Debt Less Current Maturities			$	3,290,549		$	3,315,147

(1) See Note F - Derivatives and Hedging for additional information

(2) See Note K - Leases for additional information

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

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

Unsecured Revolving Credit Facility: On May 6, 2021, the Company entered into an unsecured revolving credit agreement with Wells Fargo Bank, National Association as administrative agent, swingline lender and issuing lender, U.S. Bank National

Association, JPMorgan Chase Bank, N.A. and BofA Securities, Inc. as syndication agents and the lenders party thereto. The revolving credit agreement provides for an unsecured revolving credit facility with an aggregate principal commitment amount at any time outstanding of up to $750.0 million with an uncommitted increase option of an additional $375.0 million upon the satisfaction of certain conditions. The unsecured revolving line of credit bears interest, at the Company’s election, at either a Base Rate plus margin of 0.0% to 0.150% or the Eurocurrency Rate plus margin of 0.575% to 1.150% and a variable fee of 0.050% to 0.100% is paid for the availability of this credit line. Extensions of credit under the facility may be made in the form of revolving loans, swingline loans and letters of credit. The lending commitments under the agreement are scheduled to expire on May 6, 2026, at which time the Company will be required to pay in full all obligations then outstanding. As of October 30, 2022, and October 31, 2021, the Company had no outstanding draws from this facility.

Debt Covenants: The Company is required by certain covenants in its debt agreements to maintain specified levels of financial ratios and financial position. As of October 30, 2022, the Company was in compliance with all of these covenants.

Interest Payments: Total interest paid in the last three fiscal years is as follows:

In millions
2022						$	57.0
2021						25.1
2020						14.5

Note M

Stock-Based Compensation

The Company issues stock options, restricted stock units, restricted shares, and deferred stock units as part of its stock incentive plans for employees and nonemployee directors. Stock-based compensation expense for fiscal years 2022, 2021, and 2020, was $24.9 million, $24.7 million, and $22.5 million, respectively. The Company recognizes stock-based compensation expense ratably over the vesting period or the individual's retirement eligibility date.

As of October 30, 2022, there was $19.6 million of total unrecognized compensation expense from stock-based compensation arrangements granted under the plans. This compensation is expected to be recognized over a weighted-average period of approximately 1.5 years. During fiscal years 2022, 2021, and 2020, cash received from stock option exercises was $79.8 million, $45.9 million, and $81.8 million, respectively.

Shares issued for option exercises, restricted stock units, restricted shares, and deferred stock units may be either authorized but unissued shares or shares of treasury stock. The number of shares available for future grants was 11.1 million at October 30, 2022, 12.5 million at October 31, 2021, and 13.7 million at October 25, 2020.

Stock Options: The Company’s policy is to grant options with the exercise price equal to the market price of the common stock on the date of grant. Options typically vest over four years and expire ten years after the date of the grant.

A reconciliation of the number of options outstanding and exercisable as of October 30, 2022, is:

						Shares (in thousands)						Weighted-Average Exercise Price						Weighted-Average Remaining Contractual Term (Years)						Aggregate Intrinsic Value (in thousands)
Stock Options Outstanding at October 31, 2021						19,022						$	33.49
Granted						1,358						43.19
Exercised						(3,845)						22.17
Forfeited						(403)						40.06
Expired						(1)						40.59
Stock Options Outstanding at October 30, 2022						16,130						$	36.85					4.9						$	163,808
Stock Options Exercisable at October 30, 2022						10,816						$	34.56					3.9						$	134,370

The weighted-average grant date fair value of stock options granted and the total intrinsic value of options exercised during each of the past three fiscal years, are:

						Fiscal Year Ended
						October 30,						October 31,						October 25,
In thousands, except per share amounts						2022						2021						2020
Weighted-average Grant Date Fair Value						$	7.09					$	7.52					$	7.72
Intrinsic Value of Exercised Options						109,745						94,108						182,821

The fair value of each option award is calculated on the date of grant using the Black-Scholes valuation model utilizing the following weighted-average assumptions:

						Fiscal Year Ended
						October 30,						October 31,						October 25,
						2022						2021						2020
Risk-free Interest Rate						1.6		%				1.0		%				1.7		%
Dividend Yield						2.4		%				2.1		%				2.0		%
Stock Price Volatility						20.4		%				20.0		%				19.0		%
Expected Option Life						7.5 years						7.4 years						7.5 years

As part of the annual valuation process, the Company reassesses the appropriateness of the inputs used in the valuation models. The Company establishes the risk-free interest rate using U.S. Treasury yields as of the grant date. The dividend yield is based on the dividend rate approved by the Company’s Board of Directors and the stock price on the grant date. The expected volatility assumption is based on historical volatility. The expected life assumption is based on an analysis of past exercise behavior by option holders. In performing the valuations for option grants, the Company has not stratified option holders as exercise behavior has historically been consistent across all employees.

Restricted Stock Units: Restricted stock units are valued equal to the market price of the common stock on the date of the grant and generally vest after three years. These awards accumulate dividend equivalents, which are provided as additional units and are subject to the same vesting requirements as the underlying grant. A reconciliation of the restricted stock units as of October 30, 2022, is:

						Shares (in thousands)						Weighted- Average Grant Date Fair Value			Weighted-Average Remaining Contractual Term (Years)			Aggregate Intrinsic Value (in thousands)
Restricted Stock Units Outstanding at October 31, 2021						385						$	46.81
Granted						362						44.14
Dividend Equivalents						9						50.32
Vested						(41)						45.68
Forfeited						(34)						44.76
Restricted Stock Units Outstanding at October 30, 2022						681						$	45.53		1.5			$	31,972

The weighted-average grant date fair value of restricted stock units granted and the total fair value of restricted stock units granted during each of the past three fiscal years, are:

						Fiscal Year Ended
						October 30,						October 31,						October 25,
In thousands, except per share amounts						2022						2021						2020
Weighted-average Grant Date Fair Value						$	44.14					$	47.52					$	45.88
Fair Value of Restricted Stock Units Granted						15,980						10,699						9,383
Fair Value of Restricted Stock Units Vested						$	1,893					$	1,460					$	839

Restricted Shares: Restricted shares awarded to nonemployee directors annually on February 1 are subject to a restricted period which expires the date of the Company’s next annual stockholders meeting. Newly elected directors receive a prorated award of restricted shares of the Company's common stock, which expires on the date of the Company's second succeeding annual stockholders meeting. A reconciliation of the restricted shares as of October 30, 2022, is:

In thousands, except per share amounts						Shares						Weighted- Average Grant Date Fair Value
Restricted Shares Outstanding at October 31, 2021						38						$	46.92
Granted						37						47.11
Vested						(38)						46.92
Restricted Shares Outstanding at October 30, 2022						37						$	47.11

The weighted-average grant date fair value of restricted shares granted, the total fair value of restricted shares granted, and the fair value of shares that have vested during each of the past three fiscal years are:

						Fiscal Year Ended
						October 30,						October 31,						October 25,
In thousands, except per share amounts						2022						2021						2020
Weighted-average Grant Date Fair Value						$	47.11					$	46.92					$	47.29
Fair Value of Restricted Shares Granted						1,760						1,760						1,973
Fair Value of Restricted Shares Vested						$	1,760					$	2,133					$	1,974

Deferred Stock Units: Nonemployee directors can elect to receive all or a portion of their annual retainer in the form of non-forfeitable deferred stock units which vest immediately. The deferred stock units accumulate dividend equivalents, which are provided as additional units. Each deferred stock unit represents the right to receive one share of the Company’s common stock following the completion of the director’s service.

During fiscal 2022, the Company granted 12.3 thousand units, credited dividend equivalents of 2.1 thousand units and distributed 5.5 thousand units, which had a weighted-average fair value on the grant date of $48.30, $48.44, and $17.95 per share respectively. As of October 30, 2022, 104.9 thousand units were outstanding, which had a weighted-average fair value on the grant date of $36.18 per share and an aggregate intrinsic fair value of $4.9 million.

Note N

Income Taxes

The components of the Provision for Income Taxes are as follows:

			Fiscal Year Ended
In thousands						October 30, 2022						October 31, 2021						October 25, 2020
Current
U.S. Federal						$	67,638					$	171,732					$	142,708
State						20,054						7,541						13,353
Foreign						13,185						9,079						18,293
Total Current						100,877						188,352						174,354
Deferred
U.S. Federal						164,091						23,507						34,408
State						13,638						2,220						4,937
Foreign						(729)						2,950						(7,306)
Total Deferred						177,000						28,677						32,039
Total Provision for Income Taxes						$	277,877					$	217,029					$	206,393

The Company has elected to treat global intangible low taxed income (GILTI) as a period cost.

Deferred Income Taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the deferred income tax liabilities and assets are as follows:

In thousands						October 30, 2022						October 31, 2021
Deferred Tax Liabilities
Goodwill and Intangible Assets						$	(404,295)					$	(322,822)
Tax over Book Depreciation and Basis Differences						(246,411)						(143,891)
Other, net						(21,467)						(21,967)
Deferred Tax Assets
Pension and Other Post-retirement Benefits						42,794						71,190
Employee Compensation Related Liabilities						65,461						68,133
Marketing and Promotional Accruals						29,045						22,916
Other, net						62,334						50,767
Net Deferred Tax (Liabilities) Assets						$	(472,539)					$	(275,674)

Reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows:

			Fiscal Year Ended
						October 30, 2022						October 31, 2021						October 25, 2020
U.S. Statutory Rate						21.0		%				21.0		%				21.0		%
State Taxes on Income, Net of Federal Tax Benefit						2.4						0.8						1.6
Stock-based Compensation						(1.5)						(1.6)						(3.1)
All Other, net						(0.2)						(0.9)						(1.0)
Effective Tax Rate						21.7		%				19.3		%				18.5		%

As of October 30, 2022, the Company had $271.1 million of undistributed earnings from non-U.S. subsidiaries. The Company maintains all earnings as permanently reinvested. Accordingly, no additional income taxes have been provided for withholding tax, state tax, or other taxes.

Total income taxes paid during fiscal years 2022, 2021, and 2020 were $93.1 million, $167.0 million, and $169.7 million, respectively.

The following table sets forth changes in the unrecognized tax benefits, excluding interest and penalties, for fiscal years 2022 and 2021.

In thousands
Balance as of October 25, 2020						$	33,242
Tax Positions Related to the Current Period
Increases						4,003
Tax Positions Related to Prior Periods
Increases						2,117
Decreases						(4,170)
Settlements						(8,934)
Decreases Related to a Lapse of Applicable Statute of Limitations						(4,166)
Balance as of October 31, 2021						$	22,092
Tax Positions Related to the Current Period
Increases						3,618
Tax Positions Related to Prior Periods
Increases						1,890
Decreases						(1,789)
Settlements						(2,509)
Decreases Related to a Lapse of Applicable Statute of Limitations						(3,782)
Balance as of October 30, 2022						$	19,520

The amount of unrecognized tax benefits, including interest and penalties, is recorded in Other Long-term Liabilities. If recognized as of October 30, 2022, and October 31, 2021, $17.2 million, and $19.6 million, respectively, would impact the Company’s effective tax rate. The Company includes accrued interest and penalties related to uncertain tax positions in income tax expense, with immaterial losses included in expense for fiscal 2022, 2021 and 2020. The amount of accrued interest and penalties at October 30, 2022, and October 31, 2021, associated with unrecognized tax benefits was $2.3 million and $5.0 million, respectively.

The Company is regularly audited by federal and state taxing authorities. The U.S. Internal Revenue Service (I.R.S.) concluded their examinations of fiscal 2019 in the second quarter of fiscal 2021. The I.R.S. has placed the Company in the Bridge phase of the Compliance Assurance Process (CAP) for fiscal 2020. In this phase, the I.R.S. will not accept any disclosures, conduct any reviews, or provide any assurances. The Company has elected to participate in CAP for fiscal years through 2023. The objective of CAP is to contemporaneously work with the I.R.S. to achieve federal tax compliance and resolve all or most of the issues prior to filing of the tax return. The Company may elect to continue participating in CAP for future tax years; the Company may withdraw from the program at any time.

The Company is in various stages of audit by several state taxing authorities on a variety of fiscal years, as far back as 2015. While it is reasonably possible that one or more of these audits may be completed within the next 12 months and the related unrecognized tax benefits may change based on the status of the examinations, it is not possible to reasonably estimate the effect of any amount of such change to previously recorded uncertain tax positions.

The Inflation Reduction Act of 2022 was signed into law on August 16, 2022. The 15% corporate alternative minimum tax will not apply to the Company until fiscal year 2024.

Note O

Earnings Per Share Data

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

						Fiscal Year Ended
In thousands						October 30, 2022						October 31, 2021						October 25, 2020
Basic Weighted-Average Shares Outstanding						544,918						541,114						538,007
Dilutive Potential Common Shares						4,648						6,466						8,585
Diluted Weighted-Average Shares Outstanding						549,566						547,580						546,592
Antidilutive Potential Common Shares						1,915						2,839						1,822

Note P

Segment Reporting

The Company develops, processes, and distributes a wide array of food products in a variety of markets. The Company reports its results in the following four segments: Grocery Products, Refrigerated Foods, Jennie-O Turkey Store, and International & Other, which are consistent with how the Company's Chief Operating Decision Maker (CODM) assesses performance and allocates resources.

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

Refrigerated Foods: The Refrigerated Foods segment includes the processing, marketing, and sale of branded and unbranded pork, beef, and poultry products for retail, foodservice, deli, convenience store, and commercial customers.

Jennie-O Turkey Store: The Jennie-O Turkey Store segment primarily consists of the processing, marketing, and sale of branded and unbranded turkey products for retail, foodservice, and commercial customers.

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

Intersegment sales are eliminated in the Consolidated Statements of Operations. The Company does not allocate deferred compensation, investment income, interest expense, or interest income to its segments when measuring performance. The Company also retains various other income and expenses at the corporate level. In fiscal 2021, one-time acquisition-related costs and accounting adjustments associated with the purchase of the Planters*®* snack nuts business were also retained at the corporate level. Equity in Earnings of Affiliates is included in segment profit; however, earnings attributable to the Company’s noncontrolling interests are excluded. These items are included below as Net Unallocated Expense and Noncontrolling Interest when reconciling to Earnings Before Income Taxes.

Financial measures for each of the Company’s reportable segments and reconciliation to consolidated Earnings Before Income Taxes are set forth below. The Company's CODM reviews assets at a consolidated level and does not use assets by segment to evaluate performance or allocate resources. Therefore, the Company does not disclose assets by segment. The Company is an integrated enterprise, characterized by substantial intersegment cooperation, cost allocations, and sharing of assets. Therefore, the Company does not represent that these segments, if operated independently, would report the profit and other financial information shown below.

In thousands			Fiscal Year Ended
			October 30, 2022						October 31, 2021						October 25, 2020
Sales to Unaffiliated Customers
Grocery Products						$	3,533,138					$	2,809,445					$	2,385,291
Refrigerated Foods						6,691,230						6,333,410						5,271,061
Jennie-O Turkey Store						1,507,421						1,495,151						1,333,459
International & Other						727,017						748,183						618,650
Total						$	12,458,806					$	11,386,189					$	9,608,462
Intersegment Sales
Grocery Products						$	—					$	—					$	13
Refrigerated Foods						25,751						28,019						21,067
Jennie-O Turkey Store						253,573						134,563						108,276
International & Other						—						—						—
Total						279,325						162,582						129,356
Intersegment Elimination						(279,325)						(162,582)						(129,356)
Total						$	—					$	—					$	—
Net Sales
Grocery Products						$	3,533,138					$	2,809,445					$	2,385,304
Refrigerated Foods						6,716,981						6,361,429						5,292,128
Jennie-O Turkey Store						1,760,994						1,629,714						1,441,735
International & Other						727,017						748,183						618,650
Intersegment Elimination						(279,325)						(162,582)						(129,356)
Total						$	12,458,806					$	11,386,189					$	9,608,462
Segment Profit
Grocery Products						$	367,642					$	382,197					$	358,008
Refrigerated Foods						685,394						664,558						609,406
Jennie-O Turkey Store						218,860						76,006						105,585
International & Other						105,264						115,943						93,782
Total Segment Profit						$	1,377,161					$	1,238,704					$	1,166,782
Net Unallocated Expense						99,297						112,836						52,307
Noncontrolling Interest						239						301						272
Earnings Before Income Taxes						$	1,278,103					$	1,126,170					$	1,114,747
Depreciation and Amortization
Grocery Products						$	50,948					$	34,645					$	32,148
Refrigerated Foods						131,041						116,206						97,317
Jennie-O Turkey Store						47,190						47,669						46,322
International & Other						12,972						15,244						16,226
Corporate						20,602						14,643						13,767
Total						$	262,753					$	228,406					$	205,781

Revenue has been disaggregated into the categories below to show how sales channels affect the nature, amount, timing, and uncertainty of revenue and cash flows. Total revenue contributed by sales channel for the last three fiscal years are:

						Fiscal Year Ended
In thousands						October 30, 2022						October 31, 2021						October 25, 2020
U.S. Retail						$	7,780,284					$	7,283,842					$	6,411,739
U.S. Foodservice						3,879,568						3,239,424						2,489,644
International						798,955						862,923						707,078
Total						$	12,458,806					$	11,386,189					$	9,608,462

In fiscal 2022, the Company updated its presentation of revenue disaggregation by sales channel, combining U.S. Deli and U.S. Retail as market conditions have evolved providing many similarities between the channels. The prior year presentation has been updated to conform to the current period presentation.

The Company’s products primarily consist of meat and other food products. Total revenue contributed by classes of similar products for the last three fiscal years are:

						Fiscal Year Ended
In thousands						October 30, 2022						October 31, 2021						October 25, 2020
Perishable						$	6,554,512					$	6,271,164					$	5,328,738
Shelf-stable						3,402,075						2,661,194						2,092,551
Poultry						2,121,819						2,100,356						1,886,367
Miscellaneous						380,400						353,475						300,806
Total						$	12,458,806					$	11,386,189					$	9,608,462

Perishable includes fresh meats, frozen items, refrigerated meal solutions, bacon, sausages, hams, and guacamole (excluding Jennie-O Turkey Store products). Shelf-stable includes canned luncheon meats, nut butters, snack nuts, chili, shelf-stable microwaveable meals, hash, stews, tortillas, salsas, tortilla chips, and other items that do not require refrigeration. The Poultry category is composed primarily of Jennie-O Turkey Store products. The Miscellaneous category primarily consists of nutritional food products and supplements, dessert and drink mixes, and industrial gelatin products.

Revenues from external customers are classified as domestic or foreign based on the location where title passes. No individual foreign country is material to the consolidated results. Additionally, the Company’s long-lived assets located in foreign countries are not significant. Total net sales attributed to the U.S. and all foreign countries in total for the last three fiscal years are:

						Fiscal Year Ended
In thousands						October 30, 2022						October 31, 2021						October 25, 2020
U.S.						$	11,776,883					$	10,653,088					$	9,006,007
Foreign						681,923						733,101						602,454
Total						$	12,458,806					$	11,386,189					$	9,608,462

In fiscal 2022, sales to Walmart Inc. (Walmart) represented $2.1 billion or 15.6% of the Company’s consolidated gross sales less returns and allowances compared to $1.9 billion or 15.2% in fiscal 2021. Walmart is a customer for all four segments of the Company.