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What changed in Hormel Foods's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Hormel Foods's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+274 added−222 removedSource: 10-K (2023-12-06) vs 10-K (2022-12-06)

Top changes in Hormel Foods's 2023 10-K

274 paragraphs added · 222 removed · 166 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeDistribution 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 3 Table of Contents being Danish Crown UK Ltd., and CJ CheilJedang Corporation.
Biggest changeThe Company has licensed companies to manufacture various products internationally on a royalty basis, with the primary licensees being Danish Crown UK 3 Table of Contents Ltd., and CJ CheilJedang Corporation. The Company also has minority positions in food companies in the Philippines (The Purefoods-Hormel Company, Inc., 40 percent holding) and Indonesia (Garudafood, 30 percent holding).
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.
Item 1. BUSINESS General Development of Business Hormel Foods Corporation, a Delaware corporation (collectively, the "Company", "we," "us," and "our"), was founded by George A. Hormel in 1891 in Austin, Minnesota, as Geo. A. Hormel & Company.
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.
As the Company has shifted 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 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.
The Company supports twelve 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.
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.
The Company’s salaried employees are made up of approximately 35 percent female and over 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.
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.
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 4 Table of Contents changes.
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.
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 approximately 60 percent underrepresented minorities.
The Company conducts safety training for all team members and completes approximately 1,000 safety assessments each month. 4 Table of Contents 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.
The Company conducts safety training for all team members and completes approximately 1,000 safety assessments each month. 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.
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.
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.
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.
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; risks associated with acquisitions, joint ventures, equity investments, and divestitures; potential disruption of operations, including at co-manufacturers, suppliers, logistics providers, customers, or other third-party service providers; failure to realize anticipated cost savings or operating efficiencies associated with strategic initiatives; 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.
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.
Walmart is a customer for the Company's Retail and International 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.
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.
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 29, 2023, the Company had approximately 20,000 active employees, with over 90 percent located within the U.S.
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.
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 SQUARE TABLE, HORMEL VITAL CUISINE, HOUSE OF TSANG, JENNIE-O, JUSTIN’S, LA VICTORIA, LAYOUT, LLOYD’S, MARY KITCHEN, MR.
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 offers a competitive compensation package and a multitude of benefits, including medical, life and disability insurance, contributory and non-contributory retirement savings plans, free post-secondary tuition and tuition reimbursement programs, and two years of tuition-free community and technical college for U.S. employees’ dependent children.
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.
Prior period results for fiscal 2022 and 2021 have been recast to reflect the new reportable segments. Net sales to unaffiliated customers, segment profit, and certain other financial information by segment are reported in Note P - Segment Reporting of the Notes to the Consolidated Financial Statements and in Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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.
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.
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.
The Company currently operates with the following three operating and reportable segments: Retail, Foodservice, and International. Retail The Retail segment consists primarily of the processing, marketing, and sale of food products sold predominantly in the retail market. This segment also includes the results from the Company’s MegaMex Foods, LLC joint venture.
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.
In addition, the Company's greenhouse gas reduction targets were validated by the Science Based Targets initiative in 2023. 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 15 percent of consolidated gross sales less returns and allowances during fiscal 2023.
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.
Most of the trademarks the Company uses are registered in the U.S. and other countries.
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.
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.
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.
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 of the Notes to the Consolidated Financial Statements for additional information.
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.
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.
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.
Refer to Note D - Investments in Affiliates of the Notes to the Consolidated Financial Statements for additional information. Description of Business Segments Effective in fiscal 2023, the Company transitioned to a new strategic operating model, which aligns its businesses to be more agile, consumer and customer focused, and market driven.
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.
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 29, 2023, approximately 50 percent of the Company's team members had five or more years of service, and the 34-person officer team had an average of 25 years of service.
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.
Foodservice The Foodservice segment consists primarily of the processing, marketing, and sale of food and nutritional products for foodservice, convenience store, and commercial customers. International The International segment processes, markets, and sells Company products internationally. This segment also includes the results from the Company’s international joint ventures, equity method investments, and royalty arrangements.
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.
PEANUT, 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.
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.
The Company has a global presence within several major international markets, including Australia, Brazil, Canada, China, England, Indonesia, Japan, Mexico, 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.
Removed
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.
Added
During fiscal 2023, the Company purchased a 30% common stock interest in PT Garudafood Putra Putri Jaya Tbk (Garudafood), a food and beverage company in Indonesia, expanding the Company's presence in Southeast Asia and supporting global execution in the snacking and entertaining category.
Removed
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.
Added
To grow and maintain market position, the Company focuses on meeting consumer preferences, delivering product innovation, and maintaining long-term and lasting relationships with industry partners. Patents and Trademarks There are numerous patents and trademarks important to the Company’s business. The Company holds 23 U.S. and eight foreign patents.
Removed
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.
Added
As long as the Company continues to use its trademarks, they are renewed indefinitely.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeVolatility 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. 6 Table of Contents ▪ 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.
Biggest changeVolatility 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 challenges in collecting accounts receivable or non-performance by suppliers. ▪ Unfavorable economic conditions may lead customers and consumers to delay or reduce purchases of the Company's products. 6 Table of Contents ▪ Customer demand for products may not materialize to levels required to achieve the Company's anticipated financial results or may decline as distributors and retailers seek to reduce inventory positions if there is an economic downturn or economic uncertainty in key markets. ▪ 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. ▪ 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.
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.
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 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.
Harvest facilities the Company uses are negotiating to resolve the situation and expect to reach a solution, but harvest capacity and labor costs may 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.
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.
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, loss of key employees and customers of current or acquired companies, inability to integrate or divest operations successfully, assumption of unknown liabilities, disputes with buyers, sellers, or partners, inability to obtain favorable financing terms, 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.
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.
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. 7 Table of Contents ▪ 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.
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 10 Table of Contents to a government furlough could also cause disruption to the Company’s manufacturing facilities.
The Company’s manufacturing facilities and products are subject to ongoing inspection by federal, state and local authorities. Claims or enforcement proceedings could be brought against the Company in the future. The availability of government inspectors due to a government furlough could also cause disruption to the Company’s manufacturing facilities.
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 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.
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.
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 across U.S. industries and are being made by groups and individuals with a wide range of motives and expertise.
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'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, joint ventures, or equity investments. 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.
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 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.
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.
Acquisitions, joint ventures, or equity investments outside the U.S. may also present unique challenges and increase the Company's exposure to the risks associated with foreign operations. Any or all of these risks could impact the Company’s financial results and business reputation.
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.
Disruptions of third-party providers have had and may continue to 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.
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.
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. 10 Table of Contents Government regulation, present and future, exposes the Company to potential sanctions and compliance costs that could adversely affect the Company’s business.
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.
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.
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.
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.
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.
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.
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.
If this conflict, or others such as the Israel-Hamas war, escalates further, it 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.
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.
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.
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.
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.
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.
Continued high-profile data security incidents at other companies evidence an external environment that is becoming increasingly hostile. 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.
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.
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.
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.
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.
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.
Additionally, if a highly pathogenic human disease outbreak developed, such as COVID-19, it may negatively impact the global economy, demand for Company products, the supply chain, the Company's co-manufacturers, and/or the Company’s workforce availability including leadership, and the Company’s financial results could suffer.
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.
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 may not realize the anticipated cost savings or operating efficiencies associated with strategic initiatives. The Company operates in the highly competitive food industry and is subject to volatile cost inputs.
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.
HPAI was detected within the Company's turkey supply chain during the fourth quarter of fiscal 2023 and first quarter of fiscal 2024. The impact of HPAI has reduced and will continue to reduce production volume in the Company's turkey facilities into fiscal 2024.
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.
As of October 29, 2023, the Company employed approximately 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 two of the Company's manufacturing facilities, covering approximately 250 employees, will expire during fiscal 2024.
The Company has made several acquisitions and divestitures in recent years, including the acquisition of the Planters ® snack nuts business in 7 Table of Contents 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.
The Company’s operations are subject to the general risks associated with acquisitions, joint ventures, equity investments, and divestitures. The Company regularly reviews opportunities to support the Company’s strategic initiative of delivering long-term value to shareholders through acquisitions, joint ventures, and equity investments and to divest non-strategic assets.
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.
These implementations are a major undertaking from a financial, management, and personnel perspective and may prove to be more difficult, costly, or time consuming than expected, and there can be no assurance that these projects will be beneficial to the extent anticipated. Deterioration of labor relations, labor availability or increases in labor costs could harm the Company’s business.
Removed
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.
Added
During fiscal 2023, an impairment was indicated for the Justin's ® trade name, resulting in an impairment charge of $28.4 million.
Removed
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.
Added
The Company has made several acquisitions, joint ventures, equity investments, and divestitures in recent years, including the acquisition of the Planters ® snack nuts business in fiscal 2021 and purchase of a minority interest in Garudafood in fiscal 2023.
Removed
Capital projects may be delayed as additional capacity is no longer currently needed or materials are unavailable.
Added
Due to the nature of these arrangements, joint ventures and equity investments involve further risks, including the possibility that the Company is unable to execute business strategies and manage operations given limitations of the Company's control. Additionally, partners may become bankrupt, make business decisions that are inconsistent with the Company's goals, or block or delay necessary decisions.
Removed
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.
Added
During fiscal 2023, an impairment was indicated for the Justin's ® trade name, resulting in an impairment charge of $28.4 million and the Company recorded a $7.0 million impairment charge related to a corporate venturing investment to recognize a decline in fair value not believed to be temporary.
Removed
Further, the Company may face challenges with labor availability, relations, labor costs, hiring, onboarding, and training new employees, including leadership, which may impact results.
Added
Strategic initiatives are implemented to achieve a profitable cost structure, operate efficiently, better serve customers, and optimize cash flow. These initiatives may focus on opportunities to improve the procurement, manufacturing, and logistics within the Company’s supply chain as well as general and administrative processes.
Removed
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.
Added
A failure or delay in implementing the improvements associated with these strategic initiatives could adversely impact the Company’s results, ability to meet its long-term growth expectations, and ability to fund future initiatives. The Company began an enterprise transformation and modernization initiative in the second half of fiscal 2023 to provide cost savings and operating efficiencies by fiscal 2026.
Removed
Closure or reduced operations of material suppliers could result in shortages of key raw materials, as well as impact prices for those materials.
Added
If this initiative does not achieve the expected financial impact or is not completed in a timely manner, the Company’s financial results and ability to meet its long-term growth expectations could be adversely impacted. 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.
Removed
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.
Added
Remote work arrangements may bring additional information technology and data security risks.
Removed
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.
Added
Although the Company has programs in place related to business continuity, disaster recovery, and information security initiatives to maintain the confidentiality, integrity, and availability of systems, business applications, and customer information, the Company may not be able to anticipate or implement effective preventive measures against all potential cybersecurity threats, especially because the techniques used change frequently and because attacks can originate from a wide variety of sources, both domestic and foreign.
Removed
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.
Added
Cybersecurity risk is increasingly difficult to identify and quantify and cannot be fully mitigated because of the rapidly evolving nature of the threats, targets, and consequences. In addition, the Company is in the midst of multi-year data and technology transformation projects to achieve better analytics, customer service, and process efficiencies.
Removed
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.
Added
The projects, including modernizing the order-to-cash process, are expected to improve the efficiency and effectiveness of certain financial and business transaction processes and the underlying systems environment. Multiple phases of these projects have already been implemented and additional phases are expected to be implemented in the upcoming years.
Removed
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.
Added
The impact of global climate change may increase these risks due to changes in weather or migratory patterns which may result in certain types of diseases occurring more frequently or with more intense effects. Additionally, the outbreak of disease may hinder the Company’s ability to market and sell products both domestically and internationally.
Removed
Fluctuations in commodity prices and availability of raw materials and other inputs could harm the Company’s earnings.
Added
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.
Removed
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.
Added
If such requirements are enacted, the Company could experience significant cost increases in its operations and supply chain. The Company has developed and publicly announced goals to reduce its impact on the environment such as the 20 by 30 Challenge and the recently announced validation of its greenhouse gas reduction targets by the Science Based Targets initiative.
Added
The Company's ability to achieve these goals is subject to numerous factors and conditions, many of which are outside of its control. Examples include, among others, evolving regulatory requirements, disclosure frameworks, and methodologies for reporting data.
Added
UNRESOLVED STAFF COMMENTS None. 11 Table of Contents

Item 2. Properties

Properties — owned and leased real estate

1 edited+2 added−2 removed1 unchanged
Biggest changeThese 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. 11 Table of Contents
Biggest changeA majority of the Company's property is owned. Leased property is used as needed for production, distribution, and sales. 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.
Removed
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.
Added
Many of the Company's domestic properties are utilized by more than one segment and utilization of these facilities can change over time. Therefore, it is impracticable to disclose them by segment. The facilities outside the U.S. serve the International segment.
Removed
Area* Square feet, in thousands Refrigerated Foods Grocery Products Jennie-O Turkey Store International & Other Corporate Total Production Facilities 5,339 2,768 2,007 1,270 — 11,384 Warehouse/Distribution Centers 724 1,555 149 33 — 2,461 Live Production 829 — 281 — — 1,110 Administrative/Sales/Research 73 12 65 31 574 755 Total 6,965 4,335 2,502 1,334 574 15,710 *Many of the Company's properties are utilized by more than one segment.
Added
Area (1) Square feet, in thousands Production Facilities Warehouse/Distribution Centers Administration/Sales/Research Offices Total Leased Owned Arizona — — 2 2 2 — Arkansas 589 — 9 598 9 589 California 323 428 54 805 656 149 Colorado 829 — 10 839 10 829 Florida — — 5 5 5 — Georgia 259 — — 259 — 259 Illinois 738 — 22 760 22 738 Iowa 1,482 658 3 2,143 283 1,860 Kansas 312 — 3 315 3 312 Massachusetts — — 4 4 4 — Michigan — — 3 3 3 — Minnesota 3,761 219 554 4,534 89 4,445 Nebraska 845 — — 845 — 845 New Jersey — — 29 29 29 — North Carolina — — 3 3 3 — Ohio — 453 8 461 322 139 Pennsylvania 13 348 9 370 357 13 Texas 285 — 2 287 2 285 Utah — 209 — 209 209 — Virginia 625 — — 625 — 625 Washington — — 2 2 2 — Wisconsin 1,227 102 3 1,332 107 1,225 Total Domestic 11,288 2,417 725 14,430 2,117 12,313 Australia — — 2 2 2 — Brazil 440 — 3 443 440 3 China 842 33 26 901 2 899 Total International 1,282 33 31 1,346 444 902 Total Square Feet 12,570 2,450 756 15,776 2,561 13,215 (1) Turkey growout facilities are excluded. 12 Table of Contents

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

0 edited+3 added−4 removed0 unchanged
Removed
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.
Added
Item 3. LEGAL PROCEEDINGS On August 15, 2023, the Company received an unexpected, unfavorable arbitration ruling involving an isolated commercial dispute with a third party. Pursuant to the ruling, the arbitrator awarded $59.6 million in damages, plus prejudgment interest of $5.3 million and attorneys’ fees, to the counterparty payable by the Company.
Removed
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.
Added
The pre-tax impact of the adverse arbitration ruling of $68.3 million is reflected in Selling, General, and Administrative expenses in the Consolidated Statements of Operations for fiscal 2023. The arbitration award amount was paid in full by the Company in the fourth quarter of fiscal 2023. The adverse arbitration ruling is not subject to further appeal or judicial review.
Removed
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.
Added
Standard confidentiality provisions in the arbitration rules prohibit the Company from commenting on the substance of the ruling. Information regarding other legal proceedings is available in Note J - Commitments and Contingencies of the Notes to the Consolidated Financial Statements.
Removed
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

Mine Safety Disclosures — required of mining issuers

6 edited+0 added−6 removed0 unchanged
Biggest changeBrady 57 Executive 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 Sales 10/26/15 to 10/27/19 Mark A. Coffey 60 Group 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.
Biggest changeSmiley 55 Executive Vice President and Chief Financial Officer 01/01/22 to Present Group Vice President (Corporate Strategy) 04/05/21 to 12/31/21 Vice President and Chief Accounting Officer, LyondellBasell 04/01/18 to 04/04/21 Deanna T. Brady 58 Executive 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 Sales 10/26/15 to 10/27/19 Mark A.
Item 4. MINE SAFETY DISCLOSURES Not applicable. 12 Table of Contents Information About Executive Officers CURRENT OFFICE AND PREVIOUS NAME AGE FIVE YEARS EXPERIENCE DATES James P. Snee 55 Chairman of the Board, President and Chief Executive Officer 11/20/17 to Present Jacinth C.
Item 4. MINE SAFETY DISCLOSURES Not applicable. Information About Executive Officers CURRENT OFFICE AND PREVIOUS NAME AGE FIVE YEARS EXPERIENCE DATES James P. Snee 56 Chairman of the Board, President and Chief Executive Officer 11/20/17 to Present Jacinth C.
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 Table of Contents PART II
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 Table of Contents PART II
Lilly 51 Senior Vice President and Chief Compliance Officer 10/26/20 to Present Director of Internal Audit 05/30/16 to 10/25/20 Lori J. Marco 55 Senior Vice President (External Affairs) and General Counsel 03/30/15 to Present Kevin L. Myers, Ph.D. 57 Senior Vice President (Research and Development, Quality Control) 03/30/15 to Present Wendy A.
Losness-Larson 58 Senior Vice President (Human Resources) 10/31/22 to Present Director of Human Resources 10/29/18 to 10/30/22 Pierre M. Lilly 52 Senior Vice President and Chief Compliance Officer 10/26/20 to Present Director of Internal Audit 05/30/16 to 10/25/20 Kevin L. Myers, Ph.D. 58 Senior Vice President (Research and Development, Quality Control) 03/30/15 to Present Paul R.
Kuehneman 51 Vice President and Controller 02/18/22 to Present Assistant Controller 01/04/21 to 02/17/22 Vice President and CFO (Jennie-O Turkey Store) 05/30/16 to 01/03/21 Florence Makope 47 Vice President and Treasurer 07/25/22 to Present Director of Strategy Deployment, Oshkosh Corporation 06/27/21 to 07/01/22 Director of International Finance, Oshkosh Corporation 03/25/20 to 06/26/21 Treasurer, Plexus Corp. 11/19/17 to 03/27/20 No family relationship exists among the executive officers.
Kuehneman 52 Vice President and Controller 02/18/22 to Present Assistant Controller 01/04/21 to 02/17/22 Vice President and CFO (Jennie-O Turkey Store) 05/30/16 to 01/03/21 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.
Lykken 52 Group 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, LLC 04/11/16 to 12/03/17 Swen Neufeldt 49 Group Vice President (Hormel Foods International Corporation) 06/29/20 to Present Vice President (Meat Products) 10/31/16 to 06/28/20 Mark J.
Coffey 61 Group Vice President (Supply Chain) 04/26/21 to Present Senior Vice President (Supply Chain and Manufacturing) 03/28/17 to 04/25/21 Swen Neufeldt 50 Group Vice President (Hormel Foods International Corporation) 06/29/20 to Present Vice President (Meat Products) 10/31/16 to 06/28/20 Mark J. Ourada 58 Group Vice President (Foodservice) 03/05/18 to Present Katherine M.
Removed
Smiley 54 Executive Vice President and Chief Financial Officer 01/01/22 to Present Group Vice President (Corporate Strategy) 04/05/21 to 12/31/21 Vice President and Chief Accounting Officer, LyondellBasell 04/01/18 to 04/04/21 Chief Financial Officer, GE Oil and Gas North America 02/01/16 to 03/31/18 Deanna T.
Removed
Connor 53 Group Vice President (Retail Sales) 10/31/22 to Present Group Vice President/President Consumer Product Sales 10/28/19 to 10/30/22 Vice President (Senior Vice President Consumer Product Sales) 10/31/11 to 10/27/19 Jeffery R.
Removed
Frank 46 Group 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.
Removed
Ourada 57 Group Vice President (Foodservice) 03/05/18 to Present Vice President (Foodservice Sales) 10/28/13 to 03/04/18 Katherine M. Losness-Larson 57 Senior Vice President (Human Resources) 10/31/22 to Present Director of Human Resources 10/29/18 to 10/30/22 Director of Organizational Development 03/17/14 to 10/28/18 Pierre M.
Removed
Watkins 56 Senior Vice President and Chief Communications Officer 11/01/21 to Present Vice President (Corporate Communications) 04/13/15 to 10/31/21 Paul R.
Removed
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.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+1 added−1 removed1 unchanged
Biggest changeOn 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.
Biggest changeOn 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.
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.
The graph assumes $100 was invested in each as of the market close on October 29, 2018. Note that historic stock price performance is not necessarily indicative of future stock price performance. 14 Table of Contents Item 6. RESERVED
The Company is dedicated to returning excess cash flow to shareholders through dividend payments. 14 Table of Contents 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.
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 29, 2023.
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.
Holders There are approximately 10,000 record stockholders and 270,000 stockholders whose shares are held in street name by brokerage firms and financial institutions. There were no issuer purchases of equity securities in the quarter ended October 29, 2023.
The annual dividend rate for fiscal 2023 will increase to $1.10 per share, representing the 57th consecutive annual dividend increase.
The annual dividend rate for fiscal 2024 will increase to $1.13 per share, representing the 58th consecutive annual dividend increase. The Company is dedicated to returning excess cash flow to shareholders through dividend payments.
Removed
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.
Added
As part of the stock split resolution, the number of shares remaining to be repurchased was adjusted proportionately. The maximum number of shares that may yet be purchased under the repurchase plans or programs as of October 29, 2023 is 3,677,494. Dividends The Company has paid dividends for 381 consecutive quarters.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeADJUSTED DILUTED EARNINGS PER SHARE (NON-GAAP) Fiscal Year Ended October 30, 2022 October 31, 2021 In thousands, except per share amounts Reported GAAP Reported GAAP Acquisition Costs and Adjustments Non-GAAP Non-GAAP % Change Net Sales $ 12,458,806 $ 11,386,189 $ — $ 11,386,189 9.4 Cost of Products Sold 10,294,120 9,458,283 (12,900) 9,445,383 9.0 Gross Profit 2,164,686 1,927,906 12,900 1,940,806 11.5 Selling, General, and Administrative 879,265 853,071 (30,303) 822,768 6.9 Equity in Earnings of Affiliates 27,185 47,763 — 47,763 (43.1) Operating Income 1,312,607 1,122,599 43,203 1,165,802 12.6 Interest and Investment Income (Expense) 28,012 46,878 — 46,878 (40.2) Interest Expense 62,515 43,307 — 43,307 44.4 Earnings Before Income Taxes 1,278,103 1,126,170 43,203 1,169,373 9.3 Provision for Income Taxes 277,877 217,029 5,975 223,004 24.6 Net Earnings 1,000,226 909,140 37,228 946,368 5.7 Less: Net Earnings Attributable to Noncontrolling Interest 239 301 — 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 23 Table of Contents ORGANIC VOLUME (NON-GAAP) Fourth Quarter Ended October 30, 2022 October 31, 2021 Lbs., in thousands Reported (GAAP) Reported (GAAP) 53rd Week Organic (Non-GAAP) Organic % Change Grocery Products 388,270 403,550 (28,825) 374,725 3.6 Refrigerated Foods 530,166 657,488 (46,963) 610,525 (13.2) Jennie-O Turkey Store 163,785 240,771 (17,198) 223,573 (26.7) International & Other 78,269 78,039 (5,574) 72,465 8.0 Total Volume 1,160,490 1,379,848 (98,561) 1,281,287 (9.4) Fiscal Year Ended October 30, 2022 October 31, 2021 Lbs., in thousands Reported (GAAP) Acquisitions Organic (Non-GAAP) Reported (GAAP) 53rd Week Organic (Non-GAAP) Organic % Change Grocery Products 1,499,558 (138,186) 1,361,372 1,340,895 (28,825) 1,312,070 3.8 Refrigerated Foods 2,104,665 (22,127) 2,082,538 2,437,217 (46,963) 2,390,254 (12.9) Jennie-O Turkey Store 703,824 — 703,824 824,184 (17,198) 806,986 (12.8) International & Other 296,122 (3,503) 292,619 330,841 (5,574) 325,267 (10.0) Total Volume 4,604,169 (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, 2022 October 31, 2021 In thousands Reported (GAAP) Reported (GAAP) 53rd Week Organic (Non-GAAP) Organic % Change Grocery Products $ 934,174 $ 905,030 $ (64,645) $ 840,385 11.2 Refrigerated Foods 1,759,161 1,888,311 (134,879) 1,753,432 0.3 Jennie-O Turkey Store 391,866 459,754 (32,840) 426,914 (8.2) International & Other 198,274 201,655 (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, 2022 October 31, 2021 In thousands Reported (GAAP) Acquisitions Organic (Non-GAAP) Reported (GAAP) 53rd Week Organic (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 Foods 6,691,230 (80,979) 6,610,251 6,333,410 (134,879) 6,198,531 6.6 Jennie-O Turkey Store 1,507,421 — 1,507,421 1,495,151 (32,840) 1,462,311 3.1 International & Other 727,017 (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 thousands October 30, 2022 October 31, 2021 EBIT: Net Earnings Attributable to Hormel Foods Corporation $ 999,987 $ 908,839 Plus: Income Tax Expense 277,877 217,029 Plus: Interest Expense 62,515 43,307 Less: Interest and Investment Income 28,012 46,878 EBIT $ 1,312,367 $ 1,122,297 EBITDA: EBIT per above 1,312,367 1,122,297 Plus: Depreciation and Amortization 262,753 228,406 EBITDA $ 1,575,121 $ 1,350,704 24 Table of Contents 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.
Biggest changeADJUSTED DILUTED EARNINGS PER SHARE (NON-GAAP) Fiscal Year Ended October 30, 2022 October 31, 2021 In thousands, except per share amounts Reported GAAP Reported GAAP Acquisition Costs and Adjustments Non-GAAP Non-GAAP % Change Net Sales $ 12,458,806 $ 11,386,189 $ — $ 11,386,189 9.4 Cost of Products Sold 10,294,120 9,458,283 (12,900) 9,445,383 9.0 Gross Profit 2,164,686 1,927,906 12,900 1,940,806 11.5 Selling, General, and Administrative 879,265 853,071 (30,303) 822,768 6.9 Equity in Earnings of Affiliates 27,185 47,763 — 47,763 (43.1) Operating Income 1,312,607 1,122,599 43,203 1,165,802 12.6 Interest and Investment Income (Expense) 28,012 46,878 — 46,878 (40.2) Interest Expense 62,515 43,307 — 43,307 44.4 Earnings Before Income Taxes 1,278,103 1,126,170 43,203 1,169,373 9.3 Provision for Income Taxes 277,877 217,029 5,975 223,004 24.6 Net Earnings 1,000,226 909,140 37,228 946,368 5.7 Less: Net Earnings Attributable to Noncontrolling Interest 239 301 — 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 ORGANIC VOLUME (NON-GAAP) Fourth Quarter Ended October 30, 2022 October 31, 2021 Lbs., in thousands Reported (GAAP) Reported (GAAP) 53rd Week Organic (Non-GAAP) Organic % Change Retail 810,044 980,339 (70,024) 910,315 (11.0) Foodservice 266,447 301,111 (21,508) 279,603 (4.7) International 83,999 98,399 (7,029) 91,371 (8.1) Total Volume 1,160,490 1,379,848 (98,561) 1,281,287 (9.4) 28 Table of Contents Fiscal Year Ended October 30, 2022 October 31, 2021 Lbs., in thousands Reported (GAAP) Acquisitions Organic (Non-GAAP) Reported (GAAP) 53rd Week Organic (Non-GAAP) Organic % Change Retail 3,245,625 (138,186) 3,107,439 3,546,324 (70,024) 3,476,300 (10.6) Foodservice 1,027,124 (22,127) 1,004,997 1,007,667 (21,508) 986,159 1.9 International 331,421 (3,503) 327,918 379,145 (7,029) 372,117 (11.9) Total Volume 4,604,169 (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, 2022 October 31, 2021 In thousands Reported (GAAP) Reported (GAAP) 53rd Week Organic (Non-GAAP) Organic % Change Retail $ 2,066,454 $ 2,181,048 $ (155,789) $ 2,025,259 2.0 Foodservice 1,009,672 1,043,634 (74,545) 969,089 4.2 International 207,350 230,068 (16,433) 213,635 (2.9) Total Net Sales $ 3,283,475 $ 3,454,751 $ (246,768) $ 3,207,983 2.4 Fiscal Year Ended October 30, 2022 October 31, 2021 In thousands Reported (GAAP) Acquisitions Organic (Non-GAAP) Reported (GAAP) 53rd Week Organic (Non-GAAP) Organic % Change Retail $ 7,987,598 $ (514,708) $ 7,472,890 $ 7,418,079 $ (155,789) $ 7,262,290 2.9 Foodservice 3,691,408 (80,979) 3,610,429 3,130,174 (74,545) 3,055,629 18.2 International 779,799 (9,877) 769,922 837,936 (16,433) 821,503 (6.3) Total Net Sales $ 12,458,806 $ (605,565) $ 11,853,241 $ 11,386,189 $ (246,768) $ 11,139,421 6.4 EBIT AND EBITDA (NON-GAAP) Fiscal Year Ended In thousands October 30, 2022 October 31, 2021 EBIT: Net Earnings Attributable to Hormel Foods Corporation $ 999,987 $ 908,839 Plus: Income Tax Expense 277,877 217,029 Plus: Interest Expense 62,515 43,307 Less: Interest and Investment Income 28,012 46,878 EBIT $ 1,312,367 $ 1,122,297 EBITDA: EBIT per above 1,312,367 1,122,297 Plus: Depreciation and Amortization 235,885 209,309 EBITDA $ 1,548,252 $ 1,331,606 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.
The composition of this line item as of October 30, 2022, was as follows: In thousands Investments/Receivables U.S. $ 192,577 Foreign 78,481 Total $ 271,058 Interest and Investment Income and Interest Expense Fourth Quarter Ended Fiscal Year Ended October 30, October 31, October 30, October 31, In thousands 2022 2021 % Change 2022 2021 % Change Interest and Investment Income $ 7,933 $ 10,138 (21.7) $ 28,012 $ 46,878 (40.2) Interest Expense 17,602 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.
The composition of this line item as of October 30, 2022, was as follows: In thousands Investments in Affiliates U.S. $ 192,577 Foreign 78,481 Total $ 271,058 Interest and Investment Income and Interest Expense Fourth Quarter Ended Fiscal Year Ended October 30, October 31, October 30, October 31, In thousands 2022 2021 % Change 2022 2021 % Change Interest and Investment Income $ 7,933 $ 10,138 (21.7) $ 28,012 $ 46,878 (40.2) Interest Expense 17,602 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.
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.
These non-GAAP measures 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.
Selling, General, and Administrative (SG&A) Fourth Quarter Ended Fiscal Year Ended October 30, October 31, October 30, October 31, In thousands 2022 2021 % Change 2022 2021 % Change SG&A $ 206,487 $ 230,441 (10.4) $ 879,265 $ 853,071 3.1 Percentage of Net Sales 6.3 % 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.
Selling, General, and Administrative (SG&A) Fourth Quarter Ended Fiscal Year Ended October 30, October 31, October 30, October 31, In thousands 2022 2021 % Change 2022 2021 % Change SG&A $ 206,487 $ 230,441 (10.4) $ 879,265 $ 853,071 3.1 Percent of Net Sales 6.3 % 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.
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 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 381 consecutive quarterly dividends since becoming a public company in 1928.
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.
The Company believes these non-GAAP financial measures provide useful information to investors because they are the measures used to evaluate performance on a comparable year-over-year basis. Non-GAAP measures are not intended to be a substitute for U.S. GAAP measures in analyzing financial performance.
The Company uses third-party specialists 28 Table of Contents to assist in the determination of these estimates and the calculation of certain employee benefit expenses and the outstanding obligation. Benefit plan assets are stated at fair value.
The Company uses third-party specialists to assist in the determination of these estimates and the calculation of certain employee benefit expenses and the outstanding obligation. 33 Table of Contents Benefit plan assets are stated at fair value.
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 believes its anticipated income from operations, cash on hand, borrowing capacity under the current credit facility, and access to capital markets 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 expects the effective tax rate in fiscal 2023 to be between 21.0 and 23.0 percent. 19 Table of Contents 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.
The Company expects the effective tax rate in fiscal 2024 to be between 21.0 and 23.0 percent. 18 Table of Contents 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.
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.
MegaMex Foods results were 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.
The overall decline was partially offset by higher interest expense and lower investment income net of deferred compensation. 22 Table of Contents 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.
The overall decline was partially offset by higher interest expense and lower investment income net of deferred compensation. 27 Table of Contents Non-GAAP Financial Measures The non-GAAP financial measure of adjusted diluted earnings per share is presented to provide investors with additional information to facilitate the comparison of past and present operations.
These investments, along with receivables from other affiliates, are included in the Consolidated Statements of Financial Position as investments in and receivables from affiliates.
These investments, along with receivables from other affiliates, are included on the Consolidated Statements of Financial Position as Investments in Affiliates.
The preparation of these financial statements requires the Company to make estimates, judgments, and assumptions that can have a meaningful effect on the reporting of consolidated financial statements. See Note A - Summary of Significant Accounting Policies for additional information.
The preparation of these financial statements requires the Company to make estimates, judgments, and assumptions that can 31 Table of Contents have a meaningful effect on the reporting of consolidated financial statements. See Note A - Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements for additional information.
A change in judgment related to the expected ultimate resolution of uncertain tax positions will be recognized in earnings in the quarter of such change. As of October 30, 2022, the Company had $21.8 million of unrecognized tax benefits, including estimated interest and penalties, recorded in Other Long-term Liabilities.
A change in judgment related to the expected ultimate resolution of uncertain tax positions will be recognized in earnings in the quarter of such change. As of October 29, 2023, the Company had $21.5 million of unrecognized tax benefits, including estimated interest and penalties, recorded in Other Long-term Liabilities.
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.
Therefore, the Company does not represent that these segments, if operated independently, would report the profit and other financial information shown below. Additional segment financial information can be found in Note P - Segment Reporting of the Notes to the Consolidated Financial Statements.
The Company also performed qualitative impairment testing for indefinite-lived intangible assets in the fourth quarter of fiscal 2022. No impairment charges were recorded as a result of the testing. The Company last completed quantitative testing in fiscal 2021 and the estimated fair value of each indefinite-lived intangible asset exceeded the carrying value by more than 10 percent.
No other impairment charges were recorded as a result of the qualitative assessment. The Company last completed quantitative testing for the other indefinite-lived intangible assets in fiscal 2021 and the estimated fair value of each indefinite-lived intangible asset exceeded the carrying value by more than 10 percent.
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.
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.
A one-percentage-point change in these rates would have the following effects: 1-Percentage-Point Benefit Cost Benefit Obligation In millions Increase Decrease Increase Decrease Pension Benefits Discount Rate $ (11.1) $ 13.2 $ (118.0) $ 142.6 Expected Long-term Rate of Return on Plan Assets (12.0) 12.0 — — Rate of Future Compensation Increase 1.3 (1.2) 0.2 (0.2) Interest Crediting Rate 3.3 (2.8) 8.7 (7.5) Post-retirement Benefits Discount Rate $ — $ (1.1) $ (14.9) $ 17.3 Health Care Cost Trend Rate 0.8 (0.7) 17.0 (14.9) As of October 30, 2022, the Company had $88.2 million and $666.1 million of private equity and NAV investments, respectively.
A one-percentage-point change in these rates would have the following effects: One-Percentage-Point Benefit Cost Benefit Obligation In millions Increase Decrease Increase Decrease Pension Benefits Discount Rate $ (11.0) $ 13.0 $ (108.5) $ 129.7 Expected Long-term Rate of Return on Plan Assets (11.5) 11.5 — — Rate of Future Compensation Increase 1.7 (1.5) 1.0 (1.3) Interest Crediting Rate 4.3 (3.6) 11.6 (10.2) Post-retirement Benefits Discount Rate $ (0.2) $ 0.3 $ (12.4) $ 14.3 Health Care Cost Trend Rate 1.0 (0.9) 14.3 (12.6) As of October 29, 2023, the Company had $79.4 million and $638.4 million of private equity and NAV investments, respectively.
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.
Cash Provided by (Used in) Financing Activities ▪ Cash dividends paid to the Company’s shareholders are an ongoing financing activity for the Company with payments totaling $593 million in fiscal 2023 and $558 million in fiscal 2022.
The Company uses hedging programs to manage price risk associated with a portion of the future grain and hog commitments. The purchase commitments listed above do not reflect the impact of the hedging instruments that manage the risk of fluctuating commodity markets. See Note F - Derivatives and Hedging and Note J - Commitments and Contingencies for additional information.
The Company uses hedging programs to manage price risk associated with a portion of the future grain and hog commitments. The purchase commitments listed above do not reflect the impact of the hedging instruments that manage the risk of fluctuating commodity markets.
Other acquired assets, such as customer relationships, are expected to have determinable useful lives. Sensitivity of Estimate to Change: The Company did not have any business combinations in fiscal 2022. On June 7, 2021, the Company acquired the Planters ® snack nuts business for $3.4 billion and used a third-party valuation specialist to perform the valuation of the assets acquired.
Sensitivity of Estimate to Change: The Company did not have any business combinations in fiscal 2023 and 2022. On June 7, 2021, the Company acquired the Planters ® snack nuts business for $3.4 billion and used a third-party valuation specialist to perform the valuation of the assets acquired.
The Company also holds quarterly meetings with the investment adviser to review fund performance, which include comparisons to the relevant indices. On an annual basis, the Company performs pricing tests on certain underlying investments to gain additional assurance of the reliability of values received from the fund manager. See Note G - Pension and Other Post-retirement Benefits for additional information.
The Company also holds quarterly meetings with the investment adviser to review fund performance, which include comparisons to the relevant indices. On an annual basis, the Company performs pricing tests on certain underlying investments to gain additional assurance of the reliability of values received from the fund manager.
The annual dividend rate for fiscal 2023 will increase to $1.10 per share, representing the 57th consecutive annual dividend increase. 25 Table of Contents Capital Expenditures Capital expenditures are first allocated to required maintenance and then growth opportunities based on the needs of the business.
The annual dividend rate for fiscal 2024 will increase to $1.13 per share, representing the 58th consecutive annual dividend increase. Capital Expenditures Capital expenditures are first allocated to required maintenance and then growth opportunities based on the needs of the business.
CONSOLIDATED RESULTS Net Earnings and Diluted Earnings Per Share Fourth Quarter Ended Fiscal Year Ended In thousands, except per share amounts October 30, 2022 October 31, 2021 % Change October 30, 2022 October 31, 2021 % Change Net Earnings $ 279,883 $ 281,738 (0.7) $ 999,987 $ 908,839 10.0 Diluted Earnings Per Share 0.51 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 Ended Fiscal Year Ended In thousands October 30, 2022 October 31, 2021 % Change October 30, 2022 October 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 Earnings and Diluted Earnings Per Share Fourth Quarter Ended Fiscal Year Ended In thousands, except per share amounts October 30, 2022 October 31, 2021 % Change October 30, 2022 October 31, 2021 % Change Net Earnings $ 279,883 $ 281,738 (0.7) $ 999,987 $ 908,839 10.0 Diluted Earnings Per Share 0.51 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 Ended Fiscal Year Ended In thousands October 30, 2022 October 31, 2021 % Change October 30, 2022 October 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).
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.
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.
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.
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Executive Overview Fiscal 2023: The Company achieved its second consecutive year of net sales in excess of $12 billion in fiscal 2023.
(3) Represents pension and other post-retirement benefit payments related to the Company's unfunded defined benefit plans. Benefit payments reflect expectations for the next ten years as estimates are not readily available beyond that point. See Note G - Pension and Other Post-retirement Benefits for additional information. (4) See Note K - Leases for additional detail.
Benefit payments reflect expectations for the next ten years as estimates are not readily available beyond that point. See Note G - Pension and Other Post-Retirement Benefits of the Notes to the Consolidated Financial Statements for additional information. (4) See Note K - Leases of the Notes to the Consolidated Financial Statements for additional detail.
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.
Gross profit as a percent of net sales for fiscal 2022 also benefited from the reduction of lower margin commodity sales resulting from the Company's pork supply agreement that was new in fiscal 2022. 24 Table of Contents Compared to the prior year, gross profit as a percent of net sales for the fourth quarter of fiscal 2022 increased for the Retail segment and declined for the other segments.
This amount includes revocable standby letters of credit totaling $3.1 million for obligations of an affiliated party that may arise under workers compensation claims. Letters of credit are not reflected in the Company’s Consolidated Statements of Financial Position.
The standby letters of credit are primarily related to the Company’s self-insured workers compensation programs. This amount includes revocable standby letters of credit totaling $2.7 million for obligations of an affiliated party that may arise under workers compensation claims. Letters of credit are not reflected on the Consolidated Statements of Financial Position.
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. 18 Table of Contents Equity in Earnings of Affiliates Fourth Quarter Ended Fiscal Year Ended October 30, October 31, October 30, October 31, In thousands 2022 2021 % Change 2022 2021 % 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.
Equity in Earnings of Affiliates Fourth Quarter Ended Fiscal Year Ended October 30, October 31, October 30, October 31, In thousands 2022 2021 % Change 2022 2021 % 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 Foods.
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.
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 Retail and Foodservice segments. The Retail segment benefited from pricing actions effective at the beginning of the fourth quarter.
Gross Profit Fourth Quarter Ended Fiscal Year Ended October 30, October 31, October 30, October 31, In thousands 2022 2021 % Change 2022 2021 % Change Gross Profit $ 566,417 $ 578,081 (2.0) $ 2,164,686 $ 1,927,906 12.3 Percentage of Net Sales 17.3 % 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 Fourth Quarter Ended Fiscal Year Ended October 30, October 31, October 30, October 31, In thousands 2022 2021 % Change 2022 2021 % Change Gross Profit $ 566,417 $ 578,081 (2.0) $ 2,164,686 $ 1,927,906 12.3 Percent of Net Sales 17.3 % 16.7 % 17.4 % 16.9 % Consolidated gross profit as a percent of net sales for the fourth quarter of fiscal 2022 increased primarily due to improved profitability from the Retail segment.
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 declined in the fourth quarter of fiscal 2022, as growth in China did not overcome the impact of lower commodity turkey sales, lower branded export margins, and higher logistics expenses for the export business.
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.
For fiscal 2022, gross profit as a percent of net sales increased for Foodservice and International segments and decreased modestly for the Retail segment. All business segments were negatively impacted by broad-based inflationary pressures.
Cash Flow Highlights Fiscal Year Ended In millions October 30, 2022 October 31, 2021 Cash and Cash Equivalents $ 982 $ 614 Cash Provided By (Used in) Operating Activities 1,135 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.
Cash Flow Highlights Fiscal Year Ended In millions October 29, 2023 October 30, 2022 Cash and Cash Equivalents $ 737 $ 982 Cash Provided By (Used in) Operating Activities 1,048 1,135 Cash Provided by (Used in) Investing Activities (690) (258) Cash Provided by (Used in) Financing Activities (600) (487) Cash and cash equivalents decreased in fiscal 2023.
Products such as Hormel ® Natural Choice ® meats, Hormel ® Bacon 1 TM fully cooked bacon, Hormel ® Fire Braised TM flame-seared meats, Hormel Gatherings ® party trays and Applegate ® breaded chicken grew volume and sales for the quarter.
Partially offsetting these declines, products such as Hormel ® Natural Choice ® meats, Hormel ® Bacon 1 TM fully cooked bacon and Hormel ® Fire Braised TM flame-seared meats grew volume and sales for the fourth quarter of fiscal 2022.
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.
Fiscal 2022 volume and net sales increased due to strong results across the portfolio as the industry continued to recover from pandemic-related declines and from the inclusion of the Planters ® snack nuts business in the convenience channel.
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.
In fiscal 2024, the Company expects gross profit as a percent of net sales to be comparable to fiscal 2023. Incremental cost inflation and unfavorable sales mix pose the largest risks to this outlook.
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.
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 Foodservice segment. All segments implemented pricing actions during the fiscal year to combat inflationary pressures.
The Company also identified customer relationships which were assigned a fair value of $51.0 million using the distributor method under the income approach. Assumptions in valuing this asset included future earnings projections, customer attrition rate, and discount rate, among others. The Company believes the estimates applied are based on reasonable assumptions, but which are inherently uncertain.
Assumptions in valuing this asset included future earnings projections, customer attrition rate, and discount rate, among others. The Company believes the estimates applied are based on reasonable assumptions, but which are inherently uncertain.
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.
Additional details related to significant drivers of cash flows are provided below. 29 Table of Contents 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 $49 million in fiscal 2023 primarily due to timing of sales and more efficient collections.
Effective Tax Rate Fourth Quarter Ended Fiscal Year Ended October 30, October 31, October 30, October 31, 2022 2021 2022 2021 Effective Tax Rate 21.7 % 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.
Interest expense in fiscal 2022 reflects the full year impact of debt issued in 2021. 25 Table of Contents Effective Tax Rate Fourth Quarter Ended Fiscal Year Ended October 30, October 31, October 30, October 31, 2022 2021 2022 2021 Effective Tax Rate 21.7 % 20.0 % 21.7 % 19.3 % The effective tax rate for fiscal 2021 included the benefit of one-time state tax discrete items.
The Company may utilize third-party 27 Table of Contents valuation experts to assist in the fair value determination. The fair value measurements of identifiable intangibles are based on available historical information and expectations and assumptions about the future.
The Company may utilize third-party valuation experts to assist in the fair value determination. The fair value measurements of identifiable intangibles are based on available historical information and expectations and assumptions about the future. Significant assumptions used to value identifiable intangible assets may include projected revenue growth, estimated cash flows, discount rates, royalty rates, and other factors.
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 Table of Contents Cost of Products Sold Fourth Quarter Ended Fiscal Year Ended October 30, October 31, October 30, October 31, In thousands 2022 2021 % Change 2022 2021 % 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.
Cost of Products Sold Fourth Quarter Ended Fiscal Year Ended October 30, October 31, October 30, October 31, In thousands 2022 2021 % Change 2022 2021 % 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.
Debt Covenants The Company’s debt and credit agreements contain customary terms and conditions including representations, warranties, and covenants. These debt covenants limit the ability of the Company to, among other things, incur debt for borrowed money secured by certain liens, engage in certain sale and leaseback transactions, and require maintenance of certain consolidated leverage ratios.
These debt covenants limit the ability of the Company to, among other things, incur debt for borrowed money secured by certain liens, engage in certain sale and leaseback transactions, and require maintenance of certain consolidated leverage ratios. As of October 29, 2023, the Company was in compliance with all covenants and expects to maintain compliance in the future.
Significant assumptions used to value identifiable intangible assets may include projected revenue growth, estimated cash flows, discount rates, royalty rates, and other factors. Determining the useful life of an intangible asset also requires judgment. Certain acquired brands are expected to have indefinite lives based on their history and the Company’s intent to continue to support and build the brands.
Determining the useful life of an intangible asset also requires judgment. Certain acquired brands are expected to have indefinite lives based on their history and the Company’s intent to continue to support and build the brands. Other acquired assets, such as customer relationships, are expected to have determinable useful lives.
For the year ended October 30, 2022, the Company had $1,200.0 million and $212.0 million in pension benefit obligation and post-retirement benefit obligation, respectively. For fiscal 2023, the Company expects pension benefit costs of $37.4 million and post-retirement benefit costs of $12.2 million.
For the year ended October 29, 2023, the Company had $1.2 billion and $186.2 million in pension benefit obligation and post-retirement benefit obligation, respectively. For fiscal 2024, the Company expects pension benefit costs of $44.3 million and post-retirement benefit costs of $10.5 million.
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.
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, in addition to supply impacts on the Company's vertically integrated supply chain as a result of HPAI.
Commitments The following table shows a schedule of the Company's material cash commitments as of October 30, 2022: In millions Payments Due by Periods Total Less than 1 year 1-3 years 3-5 years More than 5 years Purchase Commitments (1) $ 3,434 $ 1,321 $ 1,428 $ 540 $ 145 Debt Repayments (2) 3,300 — 950 — 2,350 Interest Payments on Long-term Debt (2) 764 55 104 98 506 Pension & Other Post-retirement Benefit Payments (3) 1,118 102 211 223 582 Lease Obligations (4) 135 33 52 25 25 Other Commitments (5) 75 32 34 9 — (1) The Company commits to purchase quantities of livestock, grain, and other raw materials to ensure a steady supply of production inputs.
Commitments The following table shows a schedule of the Company's material cash commitments as of October 29, 2023: In millions Payments Due by Periods Total Less than 1 year 1-3 years 3-5 years More than 5 years Purchase Commitments (1) $ 2,763 $ 1,229 $ 1,178 $ 298 $ 59 Debt Repayments (2) 3,300 950 — 750 1,600 Interest Payments on Long-term Debt (2) 708 55 98 98 457 Pension & Other Post-retirement Benefit Payments (3) 1,138 104 217 227 590 Lease Obligations (4) 194 41 69 47 36 Other Commitments (5) 110 51 59 — — (1) The Company commits to purchase quantities of livestock, grain, and other raw materials to ensure a steady supply of production inputs.
Goodwill and Other Indefinite-Lived Intangibles Description: Other indefinite-lived intangible assets primarily include tradenames obtained through business acquisitions which are originally recorded at their estimated fair values at the date of acquisition.
Goodwill and Other Indefinite-Lived Intangibles Description: Other indefinite-lived intangible assets primarily include trade names obtained through business acquisitions which are originally recorded at their estimated fair values at the date of acquisition. Goodwill is the residual after allocating the purchase price to net assets acquired and is allocated across the Company’s reporting units: Retail, Foodservice, and International.
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.
The non-GAAP financial measures 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 Retail, Foodservice, and International segments.
Judgments and Uncertainties: Determining whether impairment indicators exist and estimating the fair value of the Company’s goodwill reporting units and intangible assets for impairment testing requires significant judgment. Indefinite-lived tradenames are evaluated for impairment using an income approach utilizing the relief from royalty method. Significant assumptions include royalty rate, annual projected revenue, discount rate, and estimated long term growth rate.
Indefinite-lived trade names are evaluated for impairment using an income approach utilizing the relief from royalty method. Significant assumptions include royalty rate, annual projected revenue, discount rate, and estimated long-term growth rate.
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.
Equity in Earnings of Affiliates is included in segment profit; however, earnings attributable to the Company’s corporate venturing investments and noncontrolling interests are excluded.
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.
International segment profit declined due to lower sales in China and lower turkey commodity sales. The Company again reinvested into the business through capital expenditures and returned a record amount of cash to shareholders in the form of dividends.
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.
Risks to this outlook include continued softness in China and commodity headwinds impacting the export business. 20 Table of Contents 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.
(2) As of October 30, 2022, the Company’s outstanding debt included unsecured senior notes due in fiscal 2024, 2028, 2030, and 2051. The Company is required by certain covenants in its debt agreements to maintain specified levels of financial ratios and financial position. See Note L - Long-term Debt and Other Borrowing Arrangements for additional information.
The Company is required by certain covenants in its debt agreements to maintain specified levels of financial ratios and financial position. See Note L - Long-Term Debt and Other Borrowing Arrangements of the Notes to the Consolidated Financial Statements for additional information. (3) Represents pension and other post-retirement benefit payments related to the Company's unfunded defined benefit plans.
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 dividend rate was $1.10 per share in fiscal 2023 compared to $1.04 per share in fiscal 2022. ▪ During fiscal 2023, the Company repurchased 310,000 shares for $12 million. 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 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.
The decline in segment profit for the fourth quarter of fiscal 2022 was driven by the impact from an additional week in the fourth quarter of fiscal 2021 and higher operational, logistics and raw material costs. Segment profit growth for fiscal 2022 was primarily due to significantly higher net sales as described above.
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.
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.
Based on the fiscal 2021 testing, a 10 percent decline in forecasted revenue or 10 percent increase in the discount rate would not result in a material impairment. Pension and Other Post-Retirement Benefits Description: The Company sponsors several defined benefit pension and post-retirement health care benefit plans and recognizes the associated expenses, assets, and liabilities.
Based on the fiscal 2021 testing, a 10 percent decline in forecasted revenue or 10 percent increase in the discount rate would not result in a material impairment.
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.
Capital expenditures in fiscal 2023 were $270 million, including investments in new production capabilities for retail and foodservice pepperoni and an expansion for the SPAM ® family of products. The Company continues to prioritize investments in growth, innovation, cost savings, automation, and maintenance.
Changes in these estimates can have a significant impact on the assessment of fair value which could result in material impairment losses. During the fourth quarter of fiscal 2022, the Company performed a qualitative assessment of goodwill. No goodwill impairment charges were recorded as a result of the testing.
During the fourth quarter of fiscal 2023, the Company performed a qualitative assessment of goodwill. No goodwill impairment charges were recorded as a result of the assessment.
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.
The increase in fiscal 2022 of $15 million is primarily due to the timing of payments. – Accounts payable and accrued expenses decreased $141 million in fiscal 2023 related to the timing of payments and lower promotional and incentive compensation expenses. In fiscal 2022, accounts payable and accrued expenses decreased $15 million related to the timing of payments.
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.
Pricing actions helped mitigate some of the impact from inflationary pressures. Compared to fiscal 2022, gross profit as a percent of net sales for the fourth quarter and full year increased for the Foodservice segment but declined for the Retail and International segments.
Refer to Note B - Acquisitions and Divestitures for additional information. The Company acquired tradenames which were determined to have a fair value of $712.0 million. Key assumptions used to calculate the fair value of the tradenames using a relief from royalty model included revenue projections, royalty rates, and discount rates.
Refer to Note B - Acquisitions and Divestitures of the Notes to the Consolidated 32 Table of Contents Financial Statements for additional information. The Company acquired trade names which were determined to have a fair value of $712.0 million.
As of October 30, 2022, the Company was in compliance with all covenants and expects to maintain compliance in the future. Cash Held by International Subsidiaries As of October 30, 2022, the Company had $170 million of cash and cash equivalents held by international subsidiaries. The Company maintains all undistributed earnings as permanently reinvested.
Cash Held by International Subsidiaries As of October 29, 2023, the Company had $164 million of cash and cash equivalents held by international subsidiaries. The Company maintains all undistributed earnings as permanently reinvested. The Company evaluates the balance and uses of cash held internationally based on the needs of the business.
Raw material input costs for pork, beef, turkey, and feed are anticipated to remain volatile and above historical levels.
Raw material input costs for pork, beef, and feed are anticipated to remain volatile and above historical levels. The Company expects its transformation and modernization initiative to begin delivering modest cost savings in fiscal 2024, targeting packaging, logistics, and production costs.
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 Table of Contents In fiscal 2023, the International & Other segment will be reported within the Company's new International segment.
Segment profit for fiscal 2022 declined due in large part to lower results from the export business, which was negatively impacted by logistics challenges and meaningfully higher freight expenses. Unallocated Income and Expense The Company does not allocate deferred compensation, investment income, interest expense, or interest income to its segments when measuring performance.
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 ® .
Advertising investments in fiscal 2023 were $160 million, representing a 2% increase compared to fiscal 2022. In fiscal 2024, the Company intends to continue investing in its leading brands and for full year advertising expense to increase compared to the prior year.
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.
Prior period segment results have been retrospectively recast to reflect the new reportable segments. The Company’s fiscal year consisted of 52 weeks in fiscal years 2023 and 2022 and 53 weeks in fiscal year 2021. Fiscal year 2024 will consist of 52 weeks.
The Company last completed quantitative testing in fiscal 2021 and the estimated fair value of each goodwill reporting unit exceeded the calculated carrying value by more than 50 percent. Based on the 2021 testing, a 10 percent decline in projected cash flows or 10 percent increase in the discount rate would not result in an impairment.
Based on the quantitative testing performed in the first quarter of fiscal 2023, a 10 percent decline in projected cash flows or 10 percent increase in the discount rate would not result in an impairment. The Company also performed a qualitative impairment assessment for indefinite-lived intangible assets in the fourth quarter of fiscal 2023.
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.
Returning cash to shareholders in the form of dividends remains a top priority for the Company.
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.
For the fourth quarter of fiscal 2022, segment profit increased due to higher commodity turkey prices, improved value-added mix, and pricing actions to offset the impact from continued inflationary pressures.
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.
Debt As of October 29, 2023, the Company’s outstanding debt included $3.3 billion of fixed rate unsecured senior notes due in fiscal 2024, 2028, 2030, and 2051 with interest payable semi-annually. During fiscal 2023, the Company made $55 million of interest payments and expects to make $55 million of interest payments in fiscal 2024 on these notes.
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 $352 million increase in fiscal 2022 is due to inflation in raw material and other input costs and maintaining higher inventory levels. – Prepaid expenses and other assets increased $69 million in fiscal 2023 primarily due to cash collateral requirements for the Company's hedging programs and timing of payments related to infrastructure improvement commitments.
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.
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 30 Table of Contents the Company, subject to certain customary conditions.
The Company evaluates the balance and uses of cash held internationally based on the needs of the business. Share Repurchases The Company is authorized to repurchase 3,987,494 shares of stock as part of an existing plan approved by the Company’s Board of Directors. During fiscal year 2022, the Company did not repurchase any shares of stock.
Share Repurchases The Company is authorized to repurchase 3,677,494 shares of common stock as part of an existing plan approved by the Company’s Board of Directors. During fiscal 2023, the Company repurchased 310,000 shares for $12 million. The Company continues to evaluate share repurchases as part of its capital allocation strategy.
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.
The Foodservice segment consists primarily of the processing, marketing, and sale of food and nutritional products for foodservice, convenience store, and commercial customers. The International segment processes, markets, and sells Company products internationally. This segment also includes the results from the Company’s international joint ventures, equity method investments, and royalty arrangements.
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.
In fiscal 2023, $950 million of the notes was reclassified as Current Maturities of Long-term Debt on the Consolidated Statements of Financial Position. See Note L - Long-Term Debt and Other Borrowing Arrangements of the Notes to the Consolidated Financial Statements for additional information.
If the carrying value of these assets exceeds the estimated fair value, the asset is considered impaired which requires a reduction to earnings. See Note A - Summary of Significant Accounting Policies for additional details regarding the Company’s procedures.
Goodwill and indefinite-lived intangible assets are not amortized but tested annually for impairment, or more frequently if impairment indicators arise. If the carrying value of these assets exceeds the estimated fair value, the asset is considered impaired which requires a reduction to earnings.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe Company currently does not use market risk sensitive instruments to manage this risk. 29 Table of Contents Investment Risk: The Company has corporate-owned life insurance policies classified as trading securities as part of a rabbi trust to fund certain supplemental executive retirement plans and deferred income plans.
Biggest changeInvestment Risk: The Company has corporate-owned life insurance policies classified as trading securities as part of a rabbi trust to fund certain supplemental executive retirement plans and deferred income plans. As of October 29, 2023, the balance of 34 Table of Contents these securities totaled $188.2 million compared to $186.2 million as of October 30, 2022.
To reduce these exposures and offset the fluctuations caused by changes in market conditions, the Company employs hedging programs. These programs utilize futures, swaps, and options and are accounted for as cash flow hedges.
To reduce these exposures and offset the fluctuations caused by changes in market conditions, the Company employs hedging programs. These programs utilize futures, swaps, and options contracts and are accounted for as cash flow hedges.
A 10 percent decline in the value of the investments not held in fixed income funds would have negatively impacted the Company’s pretax earnings by approximately $7.6 million, while a 10 percent increase in value would have a positive impact of the same amount.
A 10 percent decline in the value of the investments not held in fixed income funds would have negatively impacted the Company’s pretax earnings by approximately $7.8 million, while a 10 percent increase in value would have a positive impact of the same amount.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to various forms of market risk as a part of its ongoing business practices. The Company utilizes derivative instruments to mitigate earnings fluctuations due to market volatility. Commodity Price Risk: The Company is subject to commodity price risk primarily through grain and live hog markets.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to various forms of market risk as a part of its ongoing business practices. The Company utilizes derivative instruments to mitigate earnings fluctuations due to market volatility. Commodity Price Risk: The Company is subject to commodity price risk primarily through grain, lean hog, and natural gas markets.
Interest Rate Risk : The Company is subject to interest rate risk primarily from changes in fair value of long-term fixed rate debt. As of October 30, 2022, the Company’s long-term debt had a fair value of $2.7 billion compared to $3.3 billion as of October 31, 2021.
Interest Rate Risk : The Company is subject to interest rate risk primarily from changes in fair value of long-term fixed rate debt. As of October 29, 2023, the Company’s long-term debt had a fair value of $2.7 billion compared to $2.7 billion as of October 30, 2022.
A 10 percent increase would have negatively impacted the long-term debt by $84.1 million. Foreign Currency Exchange Rate Risk: The fair values of certain Company assets are subject to fluctuations in foreign currency exchange rates.
A 10 percent increase would have negatively impacted the long-term debt by $77.5 million. Foreign Currency Exchange Rate Risk: The fair values of certain assets are subject to fluctuations in foreign currency exchange rates.
The fair value of the Company’s cash flow commodity contracts as of October 30, 2022, was $21.6 million compared to $25.2 million as of October 31, 2021. The Company measures its market risk exposure on its cash flow commodity contracts using a sensitivity analysis, which considers a hypothetical 10 percent change in the market prices.
The fair value of the Company’s cash flow commodity contracts as of October 29, 2023, was $17.1 million compared to $21.6 million as of October 30, 2022. The Company measures its market risk exposure on its cash flow commodity contracts using a sensitivity analysis, which considers a hypothetical 10 percent change in the market prices.
The Company measures its market risk exposure of long-term fixed rate debt using a sensitivity analysis, which considers a 10 percent change in interest rates. A 10 percent decrease in interest rates would have positively impacted the fair value of the Company’s long-term debt as of October 30, 2022, by $90.2 million.
The Company measures its market risk exposure of long-term fixed rate debt using a sensitivity analysis, which considers a 10 percent change in interest rates. A 10 percent decrease in interest rates would have positively impacted the fair value of the Company’s long-term debt as of October 29, 2023, by $83.6 million.
The Company is subject to market risk due to fluctuations in the value of the remaining investments as unrealized gains and losses associated with these securities are included in the Company’s net earnings on a mark-to-market basis.
The rabbi trust is invested primarily in fixed income funds. The Company is subject to market risk due to fluctuations in the value of the remaining investments as unrealized gains and losses associated with these securities are included in the Company’s net earnings on a mark-to-market basis.
A 10 percent decrease in the market price would have negatively impacted the fair value of the Company's cash flow commodity contracts as of October 30, 2022, by $31.7 million, which in turn would lower the Company's future cost on purchased commodities by a similar amount.
A 10 percent decrease in the market price would have negatively impacted the fair value of the Company's cash flow commodity contracts as of October 29, 2023, by $26.3 million, which in turn would lower the Company's future cost on purchased commodities by a similar amount.
The Company's net asset position in foreign currencies as of October 30, 2022, was $652.4 million, compared to $657.2 million as of October 31, 2021, with most of the exposure existing in Chinese yuan and Brazilian real.
The Company's net asset position in foreign currencies as of October 29, 2023, was $1.1 billion, compared to $652.4 million as of October 30, 2022, with most of the exposure existing in Indonesian rupiah, Chinese yuan, and Brazilian real. The Company currently does not use market risk sensitive instruments to manage this risk.
Removed
As of October 30, 2022, the balance of these securities totaled $186.2 million compared to $203.0 million as of October 31, 2021. The rabbi trust is invested primarily in fixed income funds.

Other HRL 10-K year-over-year comparisons