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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 30, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________ to _________________________

Commission File Number: 1-2402

HORMEL FOODS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 41-0319970
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
1 Hormel Place, Austin Minnesota
55912-3680
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code (507) 437-5611 Securities registered pursuant to Section 12(b) of the Act:
 
Title of each classTrading SymbolName of each exchange on which registered
Common Stock $0.01465 par value
HRLNew York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:  None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes   No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes  
No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulations S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer     
Non-accelerated filer           Smaller reporting company     
Emerging growth company     
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes   No
The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant as of May 1, 2022, was $15,095,914,678 based on the closing price of $52.39 on the last business day of the registrant’s most recently completed second fiscal quarter.
As of December 4, 2022, the number of shares outstanding of each of the registrant’s classes of common stock was as follows:
Common Stock, $0.01465 Par Value – 546,424,194 shares
Common Stock Non-Voting, $0.01 Par Value – 0 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the Annual Meeting of Stockholders to be held January 31, 2023, are incorporated by reference into Part III, Items 10-14. The Proxy Statement will be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.
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HORMEL FOODS CORPORATION
TABLE OF CONTENTS
 

2

PART I

Item 1.  BUSINESS

General Development of Business
 
Hormel Foods Corporation, a Delaware corporation (collectively, the "Company", "we," "us,", "our"), was founded by George A. Hormel in 1891 in Austin, Minnesota, as Geo. A. Hormel & Company. The Company started as a processor of meat and food products and continues in this line of business with emphasis on the manufacturing and distribution of branded, value-added consumer items rather than commodity fresh meat products. The Company builds on its founder's legacy of innovation, quality, and integrity with focus on its purpose statement - Inspired People. Inspired Food.™ Today, the Company is a global branded food company bringing some of the most trusted and iconic brands to tables across the globe with over $12 billion in annual revenue in more than 80 countries.

The Company has continually expanded its product portfolio through organic growth and acquisitions. In fiscal 2021, the Company acquired the Planters® snack nuts business, expanding the Company's presence in the growing snacking space. Refer to Note B - Acquisitions and Divestitures for additional information.

Description of Business

Segments
The Company manages and reports its operating results in the following four segments: Grocery Products, Refrigerated Foods, Jennie-O Turkey Store, and International & Other. Net sales to unaffiliated customers, segment profit, and the presentation of certain other financial information by segment are reported in Note P - Segment Reporting of the Notes to Consolidated Financial Statements and in the Management's Discussion and Analysis of Financial Condition and Results of Operations.

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.

During the fourth quarter of fiscal 2022, the Company announced a new strategic operating model, which aligns its businesses to be more agile, consumer and customer focused, and market driven. Effective in fiscal 2023, the Company will transition to this new model with the following three operating and reportable segments: Retail, Foodservice, and International. Prior period results will be reclassified to reflect these new reportable segments.
 
Products and Distribution 
The Company develops, processes, and distributes a wide array of food products in a variety of markets and manufactures its products through various processing facilities and trusted co-manufacturers. The Company’s products primarily consist of meat, nuts, and other food products sold across multiple distribution channels, such as U.S. Retail, U.S. Foodservice, and International.
 
Domestically, the Company sells its products in all 50 states. The Company’s products are sold through its sales personnel, who operate in assigned territories or in dedicated teams serving major customers and who are coordinated from sales offices predominately located in major U.S. cities. The Company also utilizes independent brokers and distributors. Products are primarily distributed by common carrier.

Internationally, the Company markets its products through Hormel Foods International Corporation (HFIC), a wholly-owned subsidiary. HFIC has a global presence within several major international markets, including Australia, Brazil, Canada, China, England, Japan, Mexico, Micronesia, the Philippines, Singapore, and South Korea. Distribution of export sales to customers is by common carrier, while the China and Brazil operations own and operate their own delivery systems. The Company, through HFIC, has licensed companies to manufacture various products internationally on a royalty basis, with the primary licensees
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being Danish Crown UK Ltd., and CJ CheilJedang Corporation. HFIC also has a minority position in a food company in the Philippines (The Purefoods-Hormel Company, Inc., 40 percent holding).

Raw Materials 
The Company concentrates on the marketing and sale of branded, value-added food products. The principal raw materials used by the Company include pork, turkey, beef, chicken, and nuts. The Company takes a balanced approach to sourcing pork raw materials, including hogs purchased for the Austin, Minnesota processing facility, long-term supply agreements for pork, and spot market purchases of pork. The majority of the turkeys needed to meet raw material requirements are raised by the Company. Production costs from raising turkeys are subject to fluctuations in grain prices and fuel costs. To manage these risks, the Company uses futures, swaps, and options contracts to hedge a portion of its anticipated purchases.

The Company also purchases raw materials from various suppliers. As the Company shifts its focus toward a more value-added portfolio, it has become increasingly dependent on these suppliers to meet its raw material needs. Certain raw materials, such as cashews, are sourced internationally, which may cause additional risks to pricing and availability. The Company utilizes supply contracts and forward buying strategies to ensure an adequate supply and mitigate price fluctuations.

Human Capital
The Company’s employees are the driving force behind innovation, improvement, and success. As of October 30, 2022, the Company had more than 20,000 active employees, with over 90 percent located within the U.S. Approximately 20 percent of employees are covered by collective bargaining agreements.

Talent Acquisition, Development, and Retention
Hormel’s team members are the cornerstone of the Company and of the fulfillment of its purpose — Inspired People. Inspired Food.™ The Company places great importance on the growth, development, and engagement of its team members. The Company offers a competitive compensation package and a multitude of benefits, including medical, life and disability insurance, contributory and non-contributory retirement savings plans, tuition reimbursement, and two years of tuition-free community and technical college for U.S. employees’ dependent children.

The Company believes investing in the education, training, and development of employees contributes to the overall success of the business. The Company provides learning opportunities for employees through various training courses, including instructor-led internal and external programs and on-the-job training.

The Company considers the tenure of its team members to be an important indicator of overall performance and is proud of its tenure figures. As of October 30, 2022, approximately 50 percent of the Company's team members had five or more years of service, and the 37-person officer team had an average of 25 years of service.

During fiscal 2022, the Company faced productivity challenges related to high turnover and the need to train new team members at its manufacturing facilities. Overall, the turnover rate was 11 percent for salaried team members and 44 percent for hourly team members. The Company is focused on onboarding and training new team members and creating a best-in-class experience throughout the organization.

Diversity, Equity, and Inclusion
The Company welcomes the diversity of all team members, customers, and consumers, and encourages the integration of their unique skills, thoughts, experiences, and identities. The Company’s workforce is made up of approximately 40 percent female and over 55 percent underrepresented minorities. The Company’s salaried employees are made up of over 30 percent female and approximately 20 percent underrepresented minorities. By fostering an inclusive culture, the Company enables every member of the workforce to leverage unique talents and high performance standards to drive innovation and success.

Executives of the Company are held accountable for creating an inclusive, diverse workplace through their annual incentive plan, which includes a component focused on overall belonging scores and the representation of female and underrepresented minorities in salaried positions.

The Company supports eleven employee resource groups (ERGs) that support the Company’s mission to create a workplace where all people feel welcomed, respected, and valued. These employee-driven groups play a critical role in diversity, equity, and inclusion efforts and provide professional development and mentorship opportunities.

Safety, Health, and Wellness
The Company’s dedicated corporate safety department develops and administers company-wide policies to ensure the safety of each employee and compliance with Occupational Safety and Health Administration standards. The corporate safety department also conducts regular audits of production facilities to ensure compliance with Company safety policies. The Company conducts safety training for all team members and completes approximately 1,000 safety assessments each month.

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The Company recognizes that team members perform best when they are healthy and that optimal performance is necessary for the Company to achieve its key results. In addition to the health care benefits package, the Company’s Inspired Health program aims to cultivate and maintain a culture of health and wellness that is focused on encouraging and empowering team members to make healthy lifestyle choices through awareness, prevention, and positive health behavior changes. This program includes biometric screenings, on-site fitness centers and fitness center discounts, an online health university with robust information and resources, a tobacco cessation program, wellness challenges, and confidential health and wellness support.

Governmental Regulation and Environmental Matters
The Company’s operations are subject to regulation by various governmental agencies which oversee areas such as food safety, workforce immigration, environmental laws, animal welfare, tax regulations, and the processing, packaging, storage, distribution, advertising, and labeling of the Company’s products. The Company believes it is in compliance with current laws and regulations and does not expect continued compliance to have a material impact on capital expenditures, earnings, or competitive position. The Company continues to monitor existing and pending laws and regulations and, while the impact of regulatory changes cannot be predicted with certainty, the Company does not expect compliance to have a material adverse effect on the Company's business. In addition to compliance with environmental laws and regulations, the Company sets goals to further improve its sustainability efforts and reduce its environmental impact. These goals are outlined in the Company’s 20 by 30 Challenge and include matching energy with renewable sourcing, reducing organic waste and greenhouse gas emissions, supporting regenerative agriculture, focusing on packaging sustainability, and reducing food waste.
 
Significant Customers
The Company serves many customers throughout the world across various sales channels. Sales to the Company's largest customer, Walmart Inc. (Walmart), accounted for approximately 16 percent of consolidated gross sales less returns and allowances during fiscal 2022. Walmart is a customer in all four reportable segments. The Company's top five customers collectively represent approximately 36 percent of consolidated gross sales less returns and allowances. The loss of one or more of the top customers in any of the reportable segments could have a material adverse effect upon such segment's financial results.

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

Patents and Trademarks
There are numerous patents and trademarks important to the Company’s business. The Company holds 41 U.S. and seven foreign patents. Most of the trademarks the Company uses are registered in the U.S. and other countries. Some of the more significant owned or licensed trademarks used by the Company or its affiliates are:
 
HORMEL, ALWAYS TENDER, APPLEGATE, AUSTIN BLUES, BACON 1, BLACK LABEL, BREAD READY, BURKE, CAFÉ H, CERATTI, CHI-CHI’S, COLUMBUS, COMPLEATS, CORN NUTS, CURE 81, DAN’S PRIZE, DI LUSSO, DINTY MOORE, DON MIGUEL, DOÑA MARIA, EMBASA, FAST ‘N EASY, FIRE BRAISED, FONTANINI, HAPPY LITTLE PLANTS, HERDEZ, HORMEL GATHERINGS, HORMEL VITAL CUISINE, HOUSE OF TSANG, JENNIE-O, JUSTIN’S, LA VICTORIA, LAYOUT, LLOYD’S, MARY KITCHEN, NATURAL CHOICE, NUT-RITION, OLD SMOKEHOUSE, OVEN READY, PILLOW PACK, PLANTERS, ROSA GRANDE, SADLER'S SMOKEHOUSE, SKIPPY, SPAM, SPECIAL RECIPE, THICK & EASY, VALLEY FRESH, and WHOLLY.
 
The Company’s patents expire after a term that is typically 20 years from the date of filing, with earlier expiration possible based on the Company’s decision whether to pay required maintenance fees. As long as the Company continues to use its trademarks, they are renewed indefinitely.
 
Available Information
The Company makes available its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 on its website at www.hormelfoods.com. These reports are accessible under the caption, “Investors – Filings & Reports – SEC Filings” on the Company’s website and are available as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission (SEC). These filings are also available on the SEC's website at www.sec.gov. The documents are available in print, free of charge, to any stockholder who requests them.
 

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FORWARD-LOOKING STATEMENTS

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

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

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

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

The Company cautions readers not to place undue reliance on forward-looking statements, which represent current views as of the date made. Forward-looking statements are inherently at risk to changes in the national and worldwide economic environment, which could include, among other things, risks related to the deterioration of economic conditions; the COVID-19 pandemic; risks associated with acquisitions and divestitures; potential disruption of operations including at co-manufacturers, suppliers, logistics providers, customers, or other third-party service providers; risk of loss of a material contract; the Company’s inability to protect information technology systems against, or effectively respond to, cyber attacks or security breaches; deterioration of labor relations, labor availability or increases to labor costs; general risks of the food industry, including food contamination; outbreaks of disease among livestock and poultry flocks; fluctuations in commodity prices and availability of raw materials and other inputs; fluctuations in market demand for the Company’s products; damage to the Company's reputation or brand image; climate change, or legal, regulatory, or market measures to address climate change; risks of litigation; potential sanctions and compliance costs arising from government regulation; compliance with stringent environmental regulations and potential environmental litigation; and risks arising from the Company’s foreign operations.


Item 1A.  RISK FACTORS
 
Business and Operational Risks

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

Volatility in financial markets and the deterioration of national and global economic conditions could impact the Company’s operations as follows:
The financial stability of the Company's customers and suppliers may be compromised, which could result in additional bad debts or non-performance by suppliers.
The value of the Company's investments in debt and equity securities may decline, including most significantly the trading securities held as part of a rabbi trust to fund supplemental executive retirement plans and deferred income plans, and the Company’s assets held in pension plans.
Future volatility or disruption in the capital and credit markets could impair the Company's liquidity or increase costs of borrowing.
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The Company may be required to redirect cash flow from operations or explore alternative strategies, such as disposing of assets, to fulfill the payment of principal and interest on its indebtedness.

The Company has no operations in Russia or Ukraine, yet it has experienced inflated fuel costs and supply chain shortages and delays due to the impact of the military conflict on the global economy. Further escalation related to the conflict, including increased trade barriers or restrictions on global trade, could result in, among other things, additional supply chain disruptions, rising prices for oil and other commodities, volatility in capital markets and foreign exchange rates, rising interest rates or heightened cybersecurity risks, any of which may adversely affect the Company's business. In addition, the effects of the ongoing conflict could heighten many of the other risk factors included in Item 1A.

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

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

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

The COVID-19 pandemic could adversely affect the Company’s business, financial condition and results of operations. The COVID-19 global pandemic has had, and may continue to have, negative impacts across many of the Company's business units and facilities. The near- and long-term impacts of COVID-19 are unknown and impossible to predict with any level of certainty. The following potential risk factors arising from the COVID-19 pandemic have had and/or may continue to have one or more of the following impacts on the Company's operations:
One or more of the Company's manufacturing facilities may be shut down or have their operations significantly impacted due to employee illnesses, increased absenteeism, and/or actions by government agencies. Capital projects may be delayed as additional capacity is no longer currently needed or materials are unavailable. The Company's co-manufacturers and material suppliers may face similar impacts.
Operating costs may increase as measures are put in place to prevent or slow down the spread of COVID-19, such as compliance with regulatory restrictions, vaccine mandates, facility improvements, employee testing, short-term disability policies, and manufacturing employee bonus payments.
Operations may be negatively impacted if members of the Company's leadership team, or other key employees, become ill with COVID-19 or otherwise terminate their employment as a result of COVID-19. Further, the Company may face challenges with labor availability, relations, labor costs, hiring, onboarding, and training new employees, including leadership, which may impact results. The Company also may face operational challenges if government quarantine orders restrict movement of employees.
Supply chain disruptions of various types arising from COVID-19 may impact the Company's ability to make products, the cost for such products, and the ability to deliver products to customers. Closure or reduced operations of material suppliers could result in shortages of key raw materials, as well as impact prices for those materials. The volatility in the market for raw material and supplies could impact the Company's profitability.
National, state, and local government orders closing or limiting operation of borders and ports, or imposing quarantine, could impact the Company's ability to obtain raw materials and to deliver finished goods to customers.
Closures or reduced operations at foodservice establishments may impact results for the Company's foodservice business. Bankruptcy filings and/or delinquent payments from the foodservice industry or other customers may negatively impact cash flow.
A national and/or global economic downturn may impact consumer purchase behavior, such as reduced volume for foodservice products and premium brands.
If the Company's public relations efforts related to the pandemic are not effective or if consumers perceive them to be irresponsible, the Company's competitive position, reputation, and market share may suffer.

The extent of the impact on the Company’s business, financial condition, and results of operations is dependent on the length and severity of the pandemic. The COVID-19 pandemic may adversely impact the Company's operations in one or more ways not identified to date.

The Company’s operations are subject to the general risks associated with acquisitions and divestitures. The Company has made several acquisitions and divestitures in recent years, including the acquisition of the Planters® snack nuts business in
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June 2021, that align with the Company’s strategic initiative of delivering long-term value to shareholders. The Company regularly reviews strategic opportunities to grow through acquisitions and to divest non-strategic assets. Potential risks associated with these transactions include the inability to consummate a transaction timely or on favorable terms, diversion of management's attention from other business concerns, potential loss of key employees and customers of current or acquired companies, inability to integrate or divest operations successfully, possible assumption of unknown liabilities, potential disputes with buyers or sellers, inability to obtain favorable financing terms, potential impairment charges if purchase assumptions are not achieved, and the inherent risks in entering markets or lines of business in which the Company has limited or no prior experience. Any or all of these risks could impact the Company’s financial results and business reputation. In addition, acquisitions outside the U. S. may present unique challenges and increase the Company's exposure to the risks associated with foreign operations. The Company's level of indebtedness increased significantly to fund the purchase of the Planters® snack nuts business and may continue to increase to fund future acquisitions. Higher levels of debt may, among other things, impact the Company's liquidity and increase the Company's exposure to negative fluctuations in interest rates.

The Company is subject to disruption of operations at co-manufacturers, suppliers, logistics providers, customers, or other third-party service providers.
Disruption of operations at co‑manufacturers, suppliers, or logistics providers have and may continue to impact the Company’s product and input supplies as well as the ability to distribute products.
Disruptions related to significant customers or sales channels has and could continue to result in a reduction in sales or change in the mix of products sold.
Disruption in services from partners such as third-party service providers used to support various business functions such as benefit plan administration, payroll processing, information technology and cloud computing services could have an adverse effect on the Company's business.

Any of these disruptions could have an adverse effect on the Company’s financial results. Actions taken to mitigate the impact of any potential disruption, including increasing inventory in anticipation of a potential production or supply interruption, may adversely affect the Company’s financial results. Additionally, labor-related challenges have caused disruptions for many of these providers and may continue to impact the Company's ability to receive inputs or distribute products.

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

The Company may be adversely impacted if the Company is unable to protect information technology systems against, or effectively respond to, cyber attacks or security breaches. Information technology systems are an important part of the Company’s business operations. In addition, the Company increasingly relies upon third-party service providers for a variety of business functions, including cloud-based services. Cyber incidents are occurring more frequently and are being made by groups and individuals with a wide range of motives and expertise. From time to time, the Company has experienced, and may experience in the future, breaches of its security measures due to human error, malfeasance, insider threats, system errors or vulnerabilities or other irregularities, none of which have been material to date. Remote work arrangements may bring additional information technology and data security risks.

In addition, the Company is in the midst of a multi-year transformation project (Project Orion) to achieve better analytics, customer service, and process efficiencies through the use of Oracle Cloud Solutions. This project is expected to improve the efficiency and effectiveness of certain financial and business transaction processes and the underlying systems environment. During fiscal 2020, the Company implemented the human resource, payroll, and finance phases of the project. Additional integrations are expected to take place over the next few years. Such an implementation is a major undertaking from a financial, management, and personnel perspective. The implementation of the enterprise resource planning system may prove to be more difficult, costly, or time consuming than expected, and there can be no assurance that this system will be beneficial to the extent anticipated.

In an attempt to mitigate these risks, the Company has implemented and continues to evaluate security initiatives and business continuity plans.

Deterioration of labor relations, labor availability or increases in labor costs could harm the Company’s business. As of October 30, 2022, the Company employed more than 20,000 people worldwide, of which approximately 20 percent were represented by labor unions, principally the United Food and Commercial Workers Union. Union contracts at four of the Company's manufacturing facilities, covering approximately 2,400 employees, will expire during fiscal 2023. Negotiations have not yet been initiated. A significant increase in labor costs or a deterioration of labor relations at any of the Company’s facilities or co-manufacturing facilities resulting in work slowdowns or stoppages could harm the Company’s financial results. Labor and skilled labor availability challenges could continue to have an adverse effect on the Company's business.

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Industry Risks

The Company’s operations are subject to the general risks of the food industry. The food products manufacturing industry is subject to the risks posed by:
food spoilage;
food contamination caused by disease-producing organisms or pathogens, such as Listeria monocytogenes, Salmonella, and pathogenic E coli.;
food allergens;
nutritional and health-related concerns;
federal, state, and local food processing controls;
consumer product liability claims;
product tampering; and
the possible unavailability and/or expense of liability insurance.

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

Outbreaks of disease among livestock and poultry flocks could harm the Company’s revenues and operating margins. The Company is subject to risks associated with the outbreak of disease in pork and beef livestock, and poultry flocks, including African swine fever (ASF), Bovine Spongiform Encephalopathy (BSE), pneumo-virus, Porcine Circovirus 2 (PCV2), Porcine Reproduction & Respiratory Syndrome (PRRS), Foot-and-Mouth Disease (FMD), Porcine Epidemic Diarrhea Virus (PEDv), and Highly Pathogenic Avian Influenza (HPAI). The outbreak of such diseases could adversely affect the Company’s supply of raw materials, increase the cost of production, reduce utilization of the Company’s harvest facilities, and reduce operating margins. Additionally, the outbreak of disease may hinder the Company’s ability to market and sell products both domestically and internationally.

In recent years, the outbreak of ASF has impacted hog herds in China, Asia, Europe, and the Caribbean. If an outbreak of ASF were to occur in the U.S., the Company's supply of hogs and pork could be materially impacted.

HPAI was detected within the U.S. in 2022 and was confirmed within the Company's Jennie-O Turkey Store supply chain. The impact of HPAI has reduced and will continue to reduce production volume in the Company's turkey facilities at least through the first half of fiscal 2023. The Company is continuing to monitor the situation and will take the appropriate actions to protect the health of the turkeys across the supply chain.

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

Fluctuations in commodity prices and availability of raw materials and other inputs could harm the Company’s earnings. The Company’s results of operations and financial condition are largely dependent upon the cost and supply of pork, poultry, beef, feed grains, and nuts as well as supplies, energy and other inputs and the selling prices for many of the Company's products, which are determined by constantly changing market forces of supply and demand.

The Company takes a balanced approach to sourcing pork raw materials, including hogs purchased for the Austin, Minnesota processing facility, long-term supply agreements for pork, and spot market purchases of pork. This approach ensures a more stable supply of raw materials while minimizing extreme fluctuations in costs over the long-term. This may result, in the short-term, in higher or lower live hog costs compared to the cash spot market. Market-based pricing on certain product lines, and lead time required to implement pricing adjustments, may prevent all or part of these cost increases from being recovered, and these higher costs could adversely affect the Company's short-term financial results.

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

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The Company may be subject to decreased availability or less favorable pricing for nuts, tomatoes, avocados, or other produce if poor growing conditions have a negative effect on agricultural productivity. Reductions in crop size or quality due to unfavorable growing conditions may have an adverse effect on the Company’s results.

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

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

Market demand for the Company’s products may fluctuate. The Company faces competition from producers of alternative meats and protein sources, including pork, beef, turkey, chicken, fish, nuts, nut butters, whey, and plant-based proteins. The factors on which the Company competes include:
price;
product quality and attributes;
brand identification;
breadth of product line; and
customer service.

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

Damage to the Company’s reputation or brand image can adversely affect its business. Maintaining and continually enhancing the perception of the Company’s reputation and brands is critical to business success. The Company’s reputation and brands have been in the past and could in the future be adversely impacted by a number of factors, including unfavorable consumer perception related to events or rumors, adverse publicity, and negative information disseminated through social and digital media. Failure to maintain, extend, and expand the Company’s reputation or brand image could adversely impact operating results.

Climate change, or legal, regulatory or market measures to address climate change, could have an adverse impact on the Company’s business and results of operations. There is growing concern that carbon dioxide and other greenhouse gases in the atmosphere may have an adverse impact on global temperatures, weather patterns, and the frequency and severity of extreme weather and natural disasters. If such climate change has a negative impact on agricultural productivity, the Company may have decreased availability or less favorable pricing for the raw materials necessary for its operations. Climate change may also cause decreased availability or less favorable pricing for water, which could have an adverse effect on the Company’s operations and supply chain. In addition, natural disasters and extreme weather, including those caused by climate change, could cause disruptions in the Company’s operations and supply chain.

The increasing concern over climate change may also result in greater local, state, federal, and foreign legal requirements, including requirements to limit greenhouse gas emissions or conserve water usage. If such requirements are enacted, the Company could experience significant cost increases in its operations and supply chain. Further, failure to accomplish goals set by the Company related to climate change or meet expectations of various Company stakeholders may cause decreased demand for the Company’s products and have an adverse effect on results of operations.

Legal and Regulatory Risks

The Company’s operations are subject to the general risks of litigation. The Company is involved on an ongoing basis in litigation arising in the ordinary course of business. Trends in litigation may include class actions involving employees, consumers, competitors, suppliers, shareholders, or others, and claims relating to product liability, contract disputes, antitrust regulations, intellectual property, advertising, labeling, wage and hour laws, employment practices or environmental matters. Neither litigation trends nor the outcomes of litigation can be predicted with certainty and adverse litigation trends and outcomes could negatively affect the Company’s financial results.

Government regulation, present and future, exposes the Company to potential sanctions and compliance costs that could adversely affect the Company’s business. The Company’s operations are subject to extensive regulation by the U.S. Department of Homeland Security, the U.S. Department of Agriculture, the U.S. Food and Drug Administration, federal and state taxing authorities and other federal, state, and local authorities which oversee workforce immigration, taxation, animal welfare, food safety, and the processing, packaging, storage, distribution, advertising, and labeling of the Company’s products. The Company’s manufacturing facilities and products are subject to ongoing inspection by federal, state and local authorities. Claims or enforcement proceedings could be brought against the Company in the future. The availability of government inspectors due
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to a government furlough could also cause disruption to the Company’s manufacturing facilities. Additionally, the Company is subject to new or modified laws, regulations, and accounting standards. The Company’s failure or inability to comply with such requirements could subject the Company to civil remedies, including fines, injunctions, recalls or seizures, as well as potential criminal sanctions. A recent federal district court ruling has had a negative impact on harvest capacity and labor costs. Harvest facilities the Company uses are negotiating to resolve the situation and expect to reach a solution, but harvest capacity and labor costs will continue to be negatively impacted until a solution is reached. There can be no assurance a solution will be reached, in which case the negative impacts of the ruling would continue.

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

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


Item 1B.  UNRESOLVED STAFF COMMENTS
 
None.


Item 2.  PROPERTIES

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

Area*
Square feet, in thousands
Refrigerated FoodsGrocery ProductsJennie-O Turkey StoreInternational & OtherCorporateTotal
Production Facilities5,339 2,768 2,007 1,270 — 11,384 
Warehouse/Distribution Centers724 1,555 149 33 — 2,461 
Live Production829 — 281 — — 1,110 
Administrative/Sales/Research73 12 65 31 574 755 
Total6,965 4,335 2,502 1,334 574 15,710 
*Many of the Company's properties are utilized by more than one segment. These facilities are reflected in the principal segment for presentation purposes. Additionally, turkey growout facilities are excluded.

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

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

The Company is a defendant in four sets of antitrust lawsuits broadly targeting the pork and turkey industries. None of these cases involve allegations of bid rigging or other criminal conduct. The Company has not established reserves as it does not believe it will have liability in any of these cases.


Item 4.  MINE SAFETY DISCLOSURES
 
Not applicable.
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Information About Executive Officers  
CURRENT OFFICE AND PREVIOUS
NAMEAGEFIVE YEARS EXPERIENCEDATES
James P. Snee55Chairman of the Board, President and Chief Executive Officer11/20/17 to Present
Jacinth C. Smiley54Executive Vice President and Chief Financial Officer01/01/22 to Present
Group Vice President (Corporate Strategy)04/05/21 to 12/31/21
Vice President and Chief Accounting Officer, LyondellBasell04/01/18 to 04/04/21
Chief Financial Officer, GE Oil and Gas North America02/01/16 to 03/31/18
Deanna T. Brady57Executive Vice President (Retail)10/31/22 to Present
Executive Vice President (Refrigerated Foods)10/28/19 to 10/30/22
Group Vice President/President Consumer Product Sales10/26/15 to 10/27/19
Mark A. Coffey60Group Vice President (Supply Chain)04/26/21 to Present
Senior Vice President (Supply Chain and Manufacturing)03/28/17 to 04/25/21
Patrick J. Connor53Group Vice President (Retail Sales)10/31/22 to Present
Group Vice President/President Consumer Product Sales10/28/19 to 10/30/22
Vice President (Senior Vice President Consumer Product Sales)10/31/11 to 10/27/19
Jeffery R. Frank46Group Vice President (Retail Marketing)10/31/22 to Present
Group Vice President (Grocery Products)11/01/21 to 10/30/22
Vice President (Grocery Products Marketing)03/01/21 to 10/31/21
Vice President (Foodservice Marketing)04/30/18 to 02/28/21
President and Chief Executive Officer (MegaMex)10/28/13 to 04/29/18
Steven J. Lykken52Group Vice President (Jennie-O Turkey Store, Inc.)03/22/21 to Present
Senior Vice President/President Jennie-O Turkey Store, Inc.12/04/17 to 03/21/21
President Applegate Farms, LLC04/11/16 to 12/03/17
Swen Neufeldt49Group Vice President (Hormel Foods International Corporation)06/29/20 to Present
Vice President (Meat Products)10/31/16 to 06/28/20
Mark J. Ourada57Group Vice President (Foodservice)03/05/18 to Present
Vice President (Foodservice Sales)10/28/13 to 03/04/18
Katherine M. Losness-Larson57Senior Vice President (Human Resources)10/31/22 to Present
Director of Human Resources10/29/18 to 10/30/22
Director of Organizational Development03/17/14 to 10/28/18
Pierre M. Lilly51Senior Vice President and Chief Compliance Officer10/26/20 to Present
Director of Internal Audit05/30/16 to 10/25/20
Lori J. Marco55Senior Vice President (External Affairs) and General Counsel03/30/15 to Present
Kevin L. Myers, Ph.D.57Senior Vice President (Research and Development, Quality Control)03/30/15 to Present
Wendy A. Watkins56Senior Vice President and Chief Communications Officer11/01/21 to Present
Vice President (Corporate Communications)04/13/15 to 10/31/21
Paul R. Kuehneman51Vice President and Controller02/18/22 to Present
Assistant Controller01/04/21 to 02/17/22
Vice President and CFO (Jennie-O Turkey Store)05/30/16 to 01/03/21
Florence Makope47Vice President and Treasurer07/25/22 to Present
Director of Strategy Deployment, Oshkosh Corporation06/27/21 to 07/01/22
Director of International Finance, Oshkosh Corporation03/25/20 to 06/26/21
Treasurer, Plexus Corp.11/19/17 to 03/27/20

No family relationship exists among the executive officers. 

Executive officers are designated annually by the Board of Directors at the first meeting following the Annual Meeting of Stockholders. Vacancies may be filled and additional officers elected at any time. The Company's Chief Executive Officer has the authority to appoint and remove Vice Presidents (other than Executive Vice Presidents, Group Vice Presidents, and Senior Vice Presidents).
13

PART II

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

Holders
There are approximately 10,000 record stockholders and 230,000 stockholders whose shares are held in street name by brokerage firms and financial institutions.
Issuer Purchases of Equity Securities
Fourth Quarter Ended October 30, 2022
Period
Total Number of Shares Purchased(1)
Average Price Paid Per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)
Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs(1)
August 1, 2022 -
September 4, 2022
— $— — 3,987,494 
September 5, 2022 -
October 2, 2022
— — — 3,987,494 
October 3, 2022 -
October 30, 2022
— — — 3,987,494 
Total— — 
(1) On January 29, 2013, the Company's Board of Directors authorized the repurchase of 10,000,000 shares of its common stock with no expiration date. On January 26, 2016, the Board of Directors approved a two-for-one split of the Company’s common stock to be effective January 27, 2016. As part of the stock split resolution, the number of shares remaining to be repurchased was adjusted proportionately.

Dividends
The Company has paid dividends for 377 consecutive quarters. The annual dividend rate for fiscal 2023 will increase to $1.10 per share, representing the 57th consecutive annual dividend increase. The Company is dedicated to returning excess cash flow to shareholders through dividend payments.

14

Shareholder Return Performance Graph
The following graph shows a comparison of cumulative total shareholder return, calculated on a dividend-reinvested basis, for the Company, the S&P 500 Index, and the S&P 500 Packaged Foods & Meats Index for the five years ended October 30, 2022. The graph assumes $100 was invested in each, as of the market close on October 30, 2017. Note that historic stock price performance is not necessarily indicative of future stock price performance.

hrl-20221030_g1.jpg


Item 6.  RESERVED




15

Item 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
 
Executive Overview
 
Fiscal 2022: The Company achieved its third consecutive year of record net sales in fiscal 2022. Net sales increased 9 percent to $12.5 billion, primarily driven by the full year inclusion of the Planters® snack nuts business and by growth from the Company's foodservice businesses. Organic net sales1 growth of 6 percent can be attributed to improvement from the foodservice businesses and pricing actions to mitigate inflationary pressures in each business segment (1See explanation of non-GAAP financial measures in the Consolidated Results section). Volume and organic volume1 declined 7 percent and 8 percent, respectively. Consistent with the Company's long-term strategy to better align resources to value-added growth, the overall decline in volume was primarily due to lower commodity sales resulting from the Company's new pork supply agreement, which was effective January 1, 2022. Net earnings increased 10 percent compared to fiscal 2021, benefiting from the inclusion of the Planters® snack nuts business, significant profit growth for the Jennie-O Turkey Store segment, and higher sales across the foodservice businesses. Net earnings were negatively impacted by broad-based inflationary pressures stemming from raw materials, packaging, freight, labor, and other inputs. Pricing actions to mitigate these pressures were announced and implemented throughout fiscal 2022. Diluted earnings per share for fiscal 2022 was $1.82, compared to $1.66 last year. Fiscal 2022 contained one less week than the prior year.

Earnings for Jennie-O Turkey Store increased significantly due to higher commodity prices and foodservice sales. Highly pathogenic avian influenza (HPAI) was confirmed in the Jennie-O Turkey Store supply chain in March 2022. In the second half of the year, the team effectively managed a limited turkey supply and maximized operational performance. Refrigerated Foods segment profit for the full year increased, primarily driven by strong results from the foodservice businesses, more than offsetting higher operational and logistics costs. Grocery Products segment profit declined, as the contribution from the Planters® snack nuts business and organic net sales growth was more than offset by inflationary pressures and lower results from MegaMex. International & Other segment profit declined due in large part to lower results from the export business, which was negatively impacted by logistics challenges and meaningfully higher freight and warehouse expenses.

The Company again reinvested into the business through capital expenditures and returned a record amount of cash to shareholders in the form of dividends. Capital expenditures in fiscal 2022 were $279 million, including investments in new production capabilities for retail and foodservice pepperoni, an expansion of bacon capacity, work on a new line for the SPAM® family of products to be opened in the first half of fiscal 2023, and other projects to support growth of branded products and increase automation. The annual dividend for 2023 will be $1.10 per share and marks the 57th consecutive year of dividend increases.

In August 2022, the Company announced a new strategic operating model and has transitioned, effective October 31, 2022, to three operating segments – Retail, Foodservice, and International. The three new segments will continue to be supported by the Company's One Supply Chain team and corporate functions. Additionally, the Company will be standing up a Brand Fuel Center of Excellence, which will house enterprise-wide brand management expertise, e-commerce capabilities, insights-led innovation and analytical support to further enable data-driven decisions. Changes to the Company's operating segments have no impact on historical consolidated results of operations, financial position, or cash flows. Earnings will be reported under this structure beginning with the release of fiscal 2023 first quarter results in early March 2023. The Company will provide recast financial information for fiscal years 2021 and 2022 in February 2023.

Fiscal 2023 Outlook: The Company expects sales and earnings growth in fiscal 2023. From a top-line perspective, the Company anticipates to benefit from higher levels of brand investment, increased production capacity, pricing actions effective in the second half of fiscal 2022, and actions related to its new strategic operating model. Earnings growth is expected from the Foodservice and International segments and improvement across the supply chain. The Company expects to again operate in a volatile, complex and high-cost environment in fiscal 2023. Risks to the outlook include incremental inflationary pressures, further supply chain disruption, and the impact of deteriorating macroeconomic conditions on the Company's customers, consumers, and operators.

The Company remains in a strong financial position due to its consistent cash flow, liquidity, and strong balance sheet. The Company plans to continue to support the business through increased marketing and advertising investments for its leading brands as well as investments into its production capabilities, including a new line for the SPAM® family of products, a large investment to expand its operations and capabilities in China, and projects to increase automation and efficiency. The Company remains committed to returning cash to shareholders in the form of dividends.

A detailed review of the Company's fiscal 2022 performance compared to fiscal 2021 appears in the following section. A detailed review of the fiscal 2021 performance compared to fiscal 2020 is set forth in Part II, Item 7 of the Company's Form 10-K for the fiscal year ended October 31, 2021, under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which is incorporated herein by reference.
16


Results of Operations
 
OVERVIEW
 
The Company is a processor of branded and unbranded food products for retail, foodservice, deli, and commercial customers.

The Company operates in the following four reportable segments:
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.
 
The Company’s fiscal year consisted of 52 weeks in fiscal years 2022 and 2020 and 53 weeks in fiscal year 2021. Fiscal year 2023 will consist of 52 weeks.

CONSOLIDATED RESULTS
 
Net Earnings and Diluted Earnings Per Share
 Fourth Quarter EndedFiscal Year Ended
In thousands, except per share amountsOctober 30, 2022October 31, 2021% ChangeOctober 30, 2022October 31, 2021% Change
Net Earnings$279,883 $281,738 (0.7)$999,987 $908,839 10.0 
Diluted Earnings Per Share0.51 0.51 — 1.82 1.66 9.6 
Adjusted Diluted Earnings Per Share (1)
0.51 0.51 — 1.82 1.73 5.2 
 
Volume and Net Sales 
 Fourth Quarter EndedFiscal Year Ended
In thousandsOctober 30, 2022October 31, 2021% ChangeOctober 30, 2022October 31, 2021% Change
Volume (lbs.)1,160,490 1,379,848 (15.9)4,604,169 4,933,136 (6.7)
Organic Volume(1)
1,160,490 1,281,287 (9.4)4,440,352 4,834,575 (8.2)
Net Sales$3,283,475 $3,454,751 (5.0)$12,458,806 $11,386,189 9.4 
Organic Net Sales(1)
3,283,475 3,207,983 2.4 11,853,241 11,139,421 6.4 
 
(1)  See the "Non-GAAP Financial Measures" section below for a description of the Company's use of measures not defined by U.S. generally accepted accounting principles (GAAP)
 
Consistent with the Company's long-term strategy to better align resources to value-added growth, the overall decline in volume for the fourth quarter and full year of fiscal 2022 was primarily due to lower commodity sales resulting from the Company's new pork supply agreement, which was effective January 1, 2022.

Net sales decreased for the fourth quarter of fiscal 2022 due to reduced commodity sales and the impact from an additional week of sales last year. Organic net sales for the fourth quarter increased, led by growth from the Grocery Products and International & Other segments. The Grocery Products segment benefited from pricing actions effective at the beginning of the fourth quarter.

Fiscal 2022 marked the third consecutive year of record sales for the Company. Record net sales were primarily driven by the inclusion of the Planters® snack nuts business and growth from the Company's foodservice businesses. All segments implemented pricing actions during the fiscal year to combat inflationary pressures.

In fiscal 2023, the Company expects sales growth and to benefit from higher levels of brand investment, increased production capacity, pricing actions effective in the second half of fiscal 2022, and actions related to its new strategic operating model.

17

Cost of Products Sold 
 Fourth Quarter EndedFiscal Year Ended
 October 30,October 31, October 30,October 31, 
In thousands20222021% Change20222021% Change
Cost of Products Sold$2,717,058 $2,876,669 (5.5)$10,294,120 $9,458,283 8.8 
 
Cost of products sold for the fourth quarter decreased, resulting from lower sales due to the additional week in fiscal 2021. For fiscal 2022, cost of products sold increased due to inflationary pressures stemming from raw materials, packaging, freight, labor, and other inputs. The inclusion of the Planters® snack nuts business was also a driver of higher costs for the full year.

In fiscal 2023, costs are expected to remain elevated due to the continued impacts of broad-based inflation. Raw material input costs for pork, beef, turkey, and feed are anticipated to remain volatile and above historical levels.
 
Gross Profit 
 Fourth Quarter EndedFiscal Year Ended
 October 30,October 31, October 30,October 31, 
In thousands20222021% Change20222021% Change
Gross Profit$566,417 $578,081 (2.0)$2,164,686 $1,927,906 12.3 
Percentage of Net Sales17.3 %16.7 % 17.4 %16.9 % 

Consolidated gross profit as a percentage of net sales for the fourth quarter and full year of fiscal 2022 increased primarily due to improved profitability from the Jennie-O Turkey Store segment, the inclusion of the Planters® snack nuts business, and pricing actions to help mitigate inflationary pressures across all segments. Gross profit as a percentage of net sales also benefited from the reduction of lower margin commodity sales resulting from the Company's new pork supply agreement.

Compared to the prior year, gross profit as a percentage of net sales for the fourth quarter of fiscal 2022 increased for the Jennie-O Turkey Store segment and declined for the other segments. For fiscal 2022, gross profit as a percentage of net sales increased for the Jennie-O Turkey Store and International & Other segments and decreased for the Refrigerated Foods and Grocery Products segments. All business segments were negatively impacted by broad-based inflationary pressures.

In fiscal 2023, the Company expects gross profit as a percentage of net sales to be comparable to fiscal 2022. Incremental cost inflation poses the largest risk to this assumption.

Selling, General, and Administrative (SG&A) 
 Fourth Quarter EndedFiscal Year Ended
 October 30,October 31, October 30,October 31, 
In thousands20222021% Change20222021% Change
SG&A$206,487 $230,441 (10.4)$879,265 $853,071 3.1 
Percentage of Net Sales6.3 %6.7 %7.1 %7.5 %

SG&A expenses for the fourth quarter of fiscal 2022 declined primarily due to the additional week in fiscal 2021. SG&A expenses for fiscal 2022 increased due to the inclusion of the Planters® snack nuts business and higher marketing and advertising investments. As a percent of net sales, SG&A expenses declined for the full year, driven by record sales and disciplined cost management.

Advertising investments in fiscal year 2022 were $157 million, representing a 14 percent increase compared to fiscal 2021.

In fiscal 2023, the Company intends to continue investing in key brands including Planters®, SPAM®, SKIPPY®, Columbus®, Hormel® Black Label®, Hormel® pepperoni, and Jennie-O®.

Research and development continues to be a vital part of the Company's strategy to grow existing brands and expand into new branded items. Research and development expenses were $8.6 million and $34.7 million for the fourth quarter and full year of fiscal 2022, respectively, compared to $8.3 million and $33.6 million for the corresponding periods in fiscal 2021.
 
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Equity in Earnings of Affiliates 
 Fourth Quarter EndedFiscal Year Ended
 October 30,October 31, October 30,October 31, 
In thousands20222021% Change20222021% Change
Equity in Earnings of Affiliates$7,234 $10,041 (28.0)$27,185 $47,763 (43.1)
 
Equity in earnings of affiliates for the fourth quarter and full year of fiscal 2022 decreased significantly due to lower results for MegaMex. MegaMex results have been negatively impacted by inflationary pressures, including significantly higher costs for avocados.

The Company accounts for its majority-owned operations under the consolidation method. Investments in which the Company owns a minority interest, and for which there are no other indicators of control, are accounted for under the equity or cost method. These investments, along with receivables from other affiliates, are included in the Consolidated Statements of Financial Position as investments in and receivables from affiliates. The composition of this line item as of October 30, 2022, was as follows:
 
In thousandsInvestments/Receivables
U.S.$192,577 
Foreign78,481 
Total$271,058 

Interest and Investment Income and Interest Expense
 Fourth Quarter EndedFiscal Year Ended
 October 30,October 31, October 30,October 31, 
In thousands20222021% Change20222021% Change
Interest and Investment Income$7,933 $10,138 (21.7)$28,012 $46,878 (40.2)
Interest Expense17,602 15,589 (12.9)62,515 43,307 (44.4)

Interest and investment income decreased in the fourth quarter and full year of fiscal 2022 primarily due to losses on the rabbi trust. Interest expense in fiscal 2022 reflects the full year impact of debt issued in 2021.

Effective Tax Rate
 Fourth Quarter EndedFiscal Year Ended
 October 30,October 31,October 30,October 31,
 2022202120222021
Effective Tax Rate21.7 %20.0 %21.7 %19.3 %
 
The effective tax rate for fiscal 2021 included the benefit of one-time state tax discrete items. For additional information, refer to Note N - Income Taxes.

The Company expects the effective tax rate in fiscal 2023 to be between 21.0 and 23.0 percent.


19

SEGMENT RESULTS
 
Net sales and segment profit for each of the Company’s reportable segments are set forth below. The Company is an integrated enterprise, characterized by substantial intersegment cooperation, cost allocations, and sharing of assets. Therefore, the Company does not represent that these segments, if operated independently, would report the segment profit and other financial information shown below. Additional segment financial information can be found in Note P - Segment Reporting. 
 Fourth Quarter EndedFiscal Year Ended
 October 30,October 31, October 30,October 31, 
In thousands20222021% Change20222021% Change
Net Sales      
Grocery Products$934,174 $905,030 3.2 $3,533,138 $2,809,445 25.8 
Refrigerated Foods1,759,161 1,888,311 (6.8)6,691,230 6,333,410 5.6 
Jennie-O Turkey Store391,866 459,754 (14.8)1,507,421 1,495,151 0.8 
International & Other198,274 201,655 (1.7)727,017 748,183 (2.8)
Total Net Sales$3,283,475 $3,454,751 (5.0)$12,458,806 $11,386,189 9.4 
Segment Profit
Grocery Products$102,378 $111,235 (8.0)$367,642 $382,197 (3.8)
Refrigerated Foods167,402 196,819 (14.9)685,394 664,558 3.1 
Jennie-O Turkey Store75,891 30,492 148.9 218,860 76,006 188.0 
International & Other30,194 31,343 (3.7)105,264 115,943 (9.2)
Total Segment Profit375,865 369,888 1.6 1,377,161 1,238,704 11.2 
   Net Unallocated Expense18,498 17,669 4.7 99,297 112,836 (12.0)
Noncontrolling Interest128 12 994.1 239 301 (20.6)
Earnings Before Income Taxes$357,495 $352,230 1.5 $1,278,103 $1,126,170 13.5 

Grocery Products
 Fourth Quarter EndedFiscal Year Ended
 October 30,October 31, October 30,October 31, 
In thousands20222021% Change20222021% Change
Volume (lbs.)388,270 403,550 (3.8)1,499,558 1,340,895 11.8 
Net Sales$934,174 $905,030 3.2 $3,533,138 $2,809,445 25.8 
Segment Profit102,378 111,235 (8.0)367,642 382,197 (3.8)

Net sales for the fourth quarter of fiscal 2022 increased due to strong demand for SKIPPY® peanut butter and the impact of pricing actions across the Mexican and simple-meals portfolios. For the full year, net sales increased primarily due to the inclusion of the Planters® snack nuts business and the impact from strategic pricing actions.

For the fourth quarter of fiscal 2022, segment profit declined, as pricing actions did not offset the impact from continued inflationary pressures. Full year segment profit decreased, as the contribution from the Planters® snack nuts business and organic net sales growth was more than offset by inflationary pressures and lower results from MegaMex.

In fiscal 2023, the Grocery Products segment will be reported within the Company's new Retail and Foodservice segments. Refer to the "Fiscal 2023 Outlook" in the "Executive Summary" for additional forward-looking commentary.


20

Refrigerated Foods 
 Fourth Quarter EndedFiscal Year Ended
 October 30,October 31, October 30,October 31, 
In thousands20222021% Change20222021% Change
Volume (lbs.)530,166 657,488 (19.4)2,104,665 2,437,217 (13.6)
Net Sales$1,759,161 $1,888,311 (6.8)$6,691,230 $6,333,410 5.6 
Segment Profit167,402 196,819 (14.9)685,394 664,558 3.1 

Volume and net sales declined in the fourth quarter of fiscal 2022 due to the impact from an additional week in the fourth quarter of last year and lower commodity sales. Products such as Hormel® Natural Choice® meats, Hormel® Bacon 1TM fully cooked bacon, Hormel® Fire BraisedTM flame-seared meats, Hormel Gatherings® party trays and Applegate® breaded chicken grew volume and sales for the quarter. For fiscal 2022, net sales increased due to strong results from the foodservice businesses, strategic pricing actions across the portfolio, and the inclusion of the Planters® snack nuts business in the convenience channel. Consistent with the Company's long-term strategy to better align resources to value-added growth, the overall decline in volume for the fourth quarter and full year was due primarily to lower commodity sales resulting from the Company's new pork supply agreement.

The decline in segment profit for the fourth quarter of fiscal 2022 was driven by lower commodity profitability and higher operational, logistics and raw material costs. Segment profit growth for full year of fiscal 2022 was primarily due to strong results from the foodservice businesses, more than offsetting higher operational and logistics costs.

In fiscal 2023, the Refrigerated Foods segment will be reported within the Company's new Retail and Foodservice segments. Refer to the "Fiscal 2023 Outlook" in the "Executive Summary" for additional forward-looking commentary.

Jennie-O Turkey Store
 Fourth Quarter EndedFiscal Year Ended
 October 30,October 31, October 30,October 31, 
In thousands20222021% Change20222021% Change
Volume (lbs.)163,785 240,771 (32.0)703,824 824,184 (14.6)
Net Sales$391,866 $459,754 (14.8)$1,507,421 $1,495,151 0.8 
Segment Profit75,891 30,492 148.9 218,860 76,006 188.0 
 
As anticipated, volume and sales declined in the fourth quarter of fiscal 2022 as a result of the supply impacts on the Company's vertically integrated supply chain from HPAI. For fiscal 2022, higher foodservice and whole-bird sales due to favorable pricing drove the marginal sales increase.

For the fourth quarter of fiscal 2022, segment profit growth was primarily due to higher commodity prices and improved value-added mix. For the full year fiscal 2022, higher commodity prices and foodservice sales drove the substantial improvement in segment profit.

In fiscal 2023, the Jennie-O Turkey Store segment will be reported within the Company's new Retail, Foodservice, and International segments. The Company expects the impacts from HPAI to reduce production volume in its turkey facilities through at least the first half of fiscal 2023. Refer to the "Fiscal 2023 Outlook" in the "Executive Summary" for additional forward-looking commentary.

International & Other
 Fourth Quarter EndedFiscal Year Ended
 October 30,October 31, October 30,October 31, 
In thousands20222021% Change20222021% Change
Volume (lbs.)78,269 78,039 0.3 296,122 330,841 (10.5)
Net Sales$198,274 $201,655 (1.7)$727,017 $748,183 (2.8)
Segment Profit30,194 31,343 (3.7)105,264 115,943 (9.2)
 
In the fourth quarter of fiscal 2022, volume and net sales growth from the SPAM® and SKIPPY® brands and the multinational businesses were offset by lower fresh pork and refrigerated export sales. For fiscal 2022, volume and sales declined as a result of lower commodity sales due to the Company's new pork supply agreement and ongoing export logistics challenges.

Segment profit declined in the fourth quarter of fiscal 2022, as growth in China did not overcome the impact of lower margins and higher logistics expenses for the export business. Segment profit for the full year declined due in large part to lower results from the export business, which was negatively impacted by logistics challenges and meaningfully higher freight expenses.
21


In fiscal 2023, the International & Other segment will be reported within the Company's new International segment. Refer to the "Fiscal 2023 Outlook" in the "Executive Summary" for additional forward-looking commentary.

Unallocated Income and Expense
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 unallocated expenses at the corporate level. Equity in Earnings of Affiliates is included in segment profit; however, earnings attributable to the Company’s noncontrolling interests are excluded. These items are included in the segment table for the purpose of reconciling segment results to Earnings Before Income Taxes.
 Fourth Quarter EndedFiscal Year Ended
 October 30,October 31,October 30,October 31,
In thousands2022202120222021
Net Unallocated Expense$18,498 $17,669 $99,297 $112,836 
Noncontrolling Interest128 12 239 301 
 
For the fourth quarter of fiscal 2022, Net Unallocated Expense increased slightly as unfavorable investment performance was mostly offset with lower corporate expense.

For fiscal 2022, Net Unallocated Expense decreased due to one-time acquisition costs and accounting adjustments of $43 million related to the acquisition of the Planters® snack nuts business in fiscal 2021. The overall decline was partially offset by higher interest expense and lower investment income net of deferred compensation.


22

Non-GAAP Financial Measures

The non-GAAP adjusted financial measurement of adjusted diluted earnings per share is presented to provide investors with additional information to facilitate the comparison of past and present operations. This measurement excludes the impact of the acquisition-related expenses and accounting adjustments related to the acquisition of the Planters® snack nuts business. The tax impact was calculated using the effective tax rate for the quarter in which the expenses and accounting adjustments were incurred.

The non-GAAP adjusted financial measurements of organic volume and organic net sales are presented to provide investors with additional information to facilitate the comparison of past and present operations. Organic volume and organic net sales exclude the impacts of the acquisition of the Planters® snack nuts business (June 2021) in the Grocery Products, Refrigerated Foods, and International & Other segments. Organic volume and organic net sales also exclude the impact of the 53rd week in fiscal 2021 as approximated based on average weekly sales for the fourth quarter (fourteen weeks) ended October 31, 2021.

The Company provides earnings before interest and taxes (EBIT) and earnings before interest, taxes, depreciation and amortization (EBITDA) because these measures are useful to management and investors as indicators of operating strength relative to prior years and are commonly used to benchmark the Company’s performance.

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

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

ADJUSTED DILUTED EARNINGS PER SHARE (NON-GAAP)
Fiscal Year Ended
October 30, 2022October 31, 2021
In thousands, except per share amountsReported
GAAP
Reported
GAAP
Acquisition Costs and AdjustmentsNon-GAAPNon-GAAP
% Change
Net Sales$12,458,806 $11,386,189 $— $11,386,189 9.4 
Cost of Products Sold10,294,120 9,458,283 (12,900)9,445,383 9.0 
Gross Profit2,164,686 1,927,906 12,900 1,940,806 11.5 
Selling, General, and Administrative879,265 853,071 (30,303)822,768 6.9 
Equity in Earnings of Affiliates27,185 47,763 — 47,763 (43.1)
Operating Income1,312,607 1,122,599 43,203 1,165,802 12.6 
Interest and Investment Income (Expense)28,012 46,878 — 46,878 (40.2)
Interest Expense62,515 43,307 — 43,307 44.4 
Earnings Before Income Taxes1,278,103 1,126,170 43,203 1,169,373 9.3 
Provision for Income Taxes277,877 217,029 5,975 223,004 24.6 
Net Earnings1,000,226 909,140 37,228 946,368 5.7 
Less: Net Earnings Attributable to Noncontrolling Interest239 301 — 301 (20.5)
Net Earnings Attributable to Hormel Foods Corporation$999,987 $908,839 $37,228 $946,067 5.7 
Diluted Net Earnings Per Share$1.82 $1.66 $0.06 $1.73 5.2 

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ORGANIC VOLUME (NON-GAAP)
Fourth Quarter Ended
 October 30, 2022October 31, 2021
Lbs., in thousandsReported
(GAAP)
Reported
(GAAP)
53rd WeekOrganic
(Non-GAAP)
Organic
% Change
Grocery Products388,270 403,550 (28,825)374,725 3.6 
Refrigerated Foods530,166 657,488 (46,963)610,525 (13.2)
Jennie-O Turkey Store163,785 240,771 (17,198)223,573 (26.7)
International & Other78,269 78,039 (5,574)72,465 8.0 
Total Volume1,160,490 1,379,848 (98,561)1,281,287 (9.4)
    

Fiscal Year Ended
 October 30, 2022October 31, 2021
Lbs., in thousandsReported
(GAAP)
AcquisitionsOrganic
(Non-GAAP)
Reported
(GAAP)
53rd WeekOrganic
(Non-GAAP)
Organic
% Change
Grocery Products1,499,558 (138,186)1,361,372 1,340,895 (28,825)1,312,070 3.8 
Refrigerated Foods2,104,665 (22,127)2,082,538 2,437,217 (46,963)2,390,254 (12.9)
Jennie-O Turkey Store703,824  703,824 824,184 (17,198)806,986 (12.8)
International & Other296,122 (3,503)292,619 330,841 (5,574)325,267 (10.0)
Total Volume4,604,169 (163,817)4,440,352 4,933,136 (98,561)4,834,575 (8.2)

ORGANIC NET SALES (NON-GAAP)
Fourth Quarter Ended
 October 30, 2022October 31, 2021
In thousandsReported
(GAAP)
Reported
(GAAP)
53rd WeekOrganic
(Non-GAAP)
Organic
% Change
Grocery Products$934,174 $905,030 $(64,645)$840,385 11.2 
Refrigerated Foods1,759,161 1,888,311 (134,879)1,753,432 0.3 
Jennie-O Turkey Store391,866 459,754 (32,840)426,914 (8.2)
International & Other198,274 201,655 (14,404)187,251 5.9 
Total Net Sales$3,283,475 $3,454,751 $(246,768)$3,207,983 2.4 

Fiscal Year Ended
 October 30, 2022October 31, 2021
In thousandsReported
(GAAP)
AcquisitionsOrganic
(Non-GAAP)
Reported
(GAAP)
53rd WeekOrganic
(Non-GAAP)
Organic
% Change
Grocery Products$3,533,138 $(514,708)$3,018,430 $2,809,445 $(64,645)$2,744,800 10.0 
Refrigerated Foods6,691,230 (80,979)6,610,251 6,333,410 (134,879)6,198,531 6.6 
Jennie-O Turkey Store1,507,421  1,507,421 1,495,151 (32,840)1,462,311 3.1 
International & Other727,017 (9,877)717,140 748,183 (14,404)733,779 (2.3)
Total Net Sales$12,458,806 $(605,565)$11,853,241 $11,386,189 $(246,768)$11,139,421 6.4 

EBIT and EBITDA
 Fiscal Year Ended
In thousandsOctober 30, 2022October 31, 2021
EBIT:
Net Earnings Attributable to Hormel Foods Corporation$999,987 $908,839 
Plus: Income Tax Expense277,877 217,029 
Plus: Interest Expense62,515 43,307 
Less: Interest and Investment Income28,012 46,878 
EBIT$1,312,367 $1,122,297 
EBITDA:
EBIT per above1,312,367 1,122,297 
Plus: Depreciation and Amortization262,753 228,406 
EBITDA$1,575,121 $1,350,704 


24

LIQUIDITY AND CAPITAL RESOURCES

When assessing liquidity and capital resources, the Company evaluates cash and cash equivalents, short-term and long-term investments, income from operations, and borrowing capacity.

Cash Flow Highlights
Fiscal Year Ended
In millionsOctober 30, 2022October 31, 2021
Cash and Cash Equivalents$982 $614 
Cash Provided By (Used in) Operating Activities1,135 1,002 
Cash Provided by (Used in) Investing Activities(258)(3,626)
Cash Provided by (Used in) Financing Activities(487)1,521 

Cash and cash equivalents increased in fiscal 2022. The Company’s income from operations was sufficient to cover dividend payments and capital expenditures. Additional details related to significant drivers of cash flows are provided below.

Cash Provided by (Used in) Operating Activities
Cash flows from operating activities were largely impacted by changes in operating assets and liabilities.
Accounts receivable decreased $28 million in fiscal 2022 primarily due to timing of collections. The $192 million increase in fiscal 2021 is largely due to increased sales and the incremental impact of the Planters® snack nuts business.
In fiscal 2022, inventory increased $352 million due to inflation in raw material and other input costs and maintaining higher inventory levels. The $145 million increase in fiscal 2021 is due to higher raw material and supply costs and the acquisition of the Planters® snack nuts business.
Accounts payable and accrued expenses decreased $15 million in fiscal 2022 related to the timing of payments. In fiscal 2021, accounts payable and accrued expenses increased $115 million related to the incremental impact of the Planters® snack nuts business.

Cash Provided by (Used in) Investing Activities
Capital expenditures were $279 million and $232 million in fiscal 2022 and 2021, respectively. The largest spend in both years was related to capacity expansion in Omaha, Nebraska. Additional projects included an expansion of bacon capacity at the Austin, Minnesota facility and a new production line for the SPAM® family of products in Dubuque, Iowa in fiscal 2022 and Project Orion in fiscal 2021.
In fiscal 2021, the Company acquired the Planters® snack nuts business for $3.4 billion.

Cash Provided by (Used in) Financing Activities
Cash dividends paid to the Company’s shareholders continue to be an ongoing financing activity for the Company with payments totaling $558 million in fiscal 2022 and $523 million in fiscal 2021. The dividend rate was $1.04 per share in fiscal 2022, which reflected a 6 percent increase over the fiscal 2021 rate of $0.98 per share.
The Company issued $2.3 billion of long-term debt in fiscal 2021. Proceeds from the issuance, along with cash on hand, were used to fund the acquisition of the Planters® snack nuts business.
The Company repaid $250 million of its senior unsecured notes upon maturity in fiscal 2021.

Sources and Uses of Cash
The Company's balanced business model, with diversification across raw material inputs, channels, and categories, provides stability in ever changing economic environments. The Company maintains a disciplined capital allocation strategy by applying a waterfall approach, which focuses first on required uses of cash such as capital expenditures to maintain facilities, dividend returns to investors, mandatory debt repayments, and pension obligations. Next, the Company looks to strategic items in support of growth initiatives such as capital projects, acquisitions, additional dividend increases, and working capital investments. Finally, the Company evaluates opportunistic uses including incremental debt repayment and share repurchases.

The Company believes its anticipated income from operations, cash on hand, and borrowing capacity under the current credit facility will be adequate to meet all short-term and long-term commitments. The Company continues to look for opportunities to make investments and acquisitions that align with its strategic priorities. The Company's ability to leverage its balance sheet through the issuance of debt provides the flexibility to pursue strategic opportunities which may require additional funding.

Dividend Payments
The Company remains committed to providing returns to investors through cash dividends. The Company has paid 377 consecutive quarterly dividends since becoming a public company in 1928. The annual dividend rate for fiscal 2023 will increase to $1.10 per share, representing the 57th consecutive annual dividend increase.

25

Capital Expenditures
Capital expenditures are first allocated to required maintenance and then growth opportunities based on the needs of the business. Capital expenditures supporting growth opportunities in fiscal 2023 will focus on projects for capacity, innovation, automation, and new technology. Capital expenditures for fiscal 2023 are estimated to be $350 million.

Debt
As of October 30, 2022, the Company’s outstanding debt included $3.3 billion of fixed rate unsecured senior notes due in fiscal 2024, 2028, 2030, and 2051. During fiscal 2022, the Company made $55 million of interest payments and expects to make $55 million of interest payments in fiscal 2023 on these notes. See Note L - Long-term Debt and Other Borrowing Arrangements for additional information.

Borrowing Capacity
As a source of short-term financing, the Company maintains a $750 million unsecured revolving credit facility. The maximum commitment under this credit facility may be further increased by $375 million, generally by mutual agreement of the lenders and us, subject to certain customary conditions. Funds drawn from this facility may be used by the Company to refinance existing debt, for working capital or other general corporate purposes, and for funding acquisitions. The lending commitments under the facility are scheduled to expire on May 6, 2026, at which time the Company will be required to pay in full all obligations then outstanding. As of October 30, 2022, the Company had no outstanding draws from this facility.

Debt Covenants