Hormel Foods - 10-Q quarterly report FY2019 Q3

Hormel Foods - 10-Q quarterly report FY2019 Q3

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 28, 2019



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________________________________ to ________________________________________

Commission File Number: 1-2402

HORMEL FOODS CORPORATION

(Exact name of registrant as specified in its charter)



Delaware		41-0319970
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1 Hormel Place

Austin, MN 55912

(Address of Principal Executive Office, including zip code)

(507) 437-5611

(Registrant’s telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Table of Contents

TABLE OF CONTENTS



PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements
	CONSOLIDATED STATEMENTS OF FINANCIAL POSITION - July 28, 2019 and October 28, 2018
	CONSOLIDATED STATEMENTS OF OPERATIONS - Three and Nine Months Ended July 28, 2019 and July 29, 2018
	CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - Three and Nine Months Ended July 28, 2019 and July 29, 2018
	CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ INVESTMENT - Three and Nine Months Ended July 29, 2018 and Three and Nine Months Ended July 28, 2019
	CONSOLIDATED STATEMENTS OF CASH FLOWS - Nine Months Ended July 28, 2019 and July 29, 2018
	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
	CRITICAL ACCOUNTING POLICIES
	RESULTS OF OPERATIONS
	Overview
	Consolidated Results
	Segment Results
	Related Party Transactions
	LIQUIDITY AND CAPITAL RESOURCES
	FORWARD-LOOKING STATEMENTS

Item 3.	Quantitative and Qualitative Disclosures About Market Risk

Item 4.	Controls and Procedures

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings

Item 1A.	Risk Factors

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

Item 6.	Exhibits

SIGNATURES

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(in thousands, except share and per share amounts)




	July 28, 2019			October 28, 2018
	(Unaudited)
Assets
Current Assets
Cash and Cash Equivalents	$	560,199		$	459,136
Short-term Marketable Securities	14,064			—
Accounts Receivable	528,583			600,438
Inventories	1,108,514			963,527
Income Taxes Receivable	667			3,995
Prepaid Expenses	22,606			16,342
Other Current Assets	11,335			6,662
Total Current Assets	2,245,968			2,050,100

Goodwill	2,487,289			2,714,116

Other Intangibles	1,038,127			1,207,219

Pension Assets	210,012			195,153

Investments in and Receivables from Affiliates	279,265			273,153

Other Assets	177,529			189,951

Property, Plant and Equipment
Land	49,801			50,332
Buildings	1,035,755			956,260
Equipment	1,887,368			1,863,020
Construction in Progress	242,369			332,205
Less: Allowance for Depreciation	(1,698,907		)	(1,689,217		)
Net Property, Plant and Equipment	1,516,386			1,512,600

Total Assets	$	7,954,576		$	8,142,292

See Notes to Consolidated Financial Statements

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HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(in thousands, except share and per share amounts)




	July 28, 2019			October 28, 2018
	(Unaudited)
Liabilities and Shareholders' Investment
Current Liabilities
Accounts Payable	$	513,372		$	618,830
Accrued Expenses	56,378			48,298
Accrued Workers Compensation	25,515			24,594
Accrued Marketing Expenses	134,652			118,887
Employee Related Expenses	193,049			224,736
Taxes Payable	34,377			2,490
Interest and Dividends Payable	115,744			101,079
Total Current Liabilities	1,073,087			1,138,914

Long-term Debt–Less Current Maturities	250,000			624,840

Pension and Post-retirement Benefits	492,860			477,557

Other Long-term Liabilities	102,140			99,070

Deferred Income Taxes	145,154			197,093

Shareholders' Investment
Preferred Stock, Par Value $.01 a Share–
Authorized 160,000,000 Shares; Issued–None
Common Stock, Non-voting, Par Value $.01 a Share–
Authorized 400,000,000 Shares; Issued–None
Common Stock, Par Value $.01465 a Share–	7,818			7,825
Authorized 1,600,000,000 Shares;
Issued 533,679,626 Shares July 28, 2019
Issued 534,135,484 Shares October 28, 2018
Additional Paid-in Capital	170,143			106,528
Accumulated Other Comprehensive Loss	(275,195		)	(243,498		)
Retained Earnings	5,984,305			5,729,956
Hormel Foods Corporation Shareholders' Investment	5,887,071			5,600,811
Noncontrolling Interest	4,264			4,007
Total Shareholders' Investment	5,891,335			5,604,818

Total Liabilities and Shareholders' Investment	$	7,954,576		$	8,142,292

See Notes to Consolidated Financial Statements

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HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(Unaudited)



	Three Months Ended						Nine Months Ended
	July 28, 2019			July 29, 2018 *			July 28, 2019			July 29, 2018*
Net Sales	$	2,290,705		$	2,359,142		$	6,995,804		$	7,021,003
Cost of Products Sold	1,857,263			1,904,096			5,604,879			5,574,858
Gross Profit	433,442			455,046			1,390,925			1,446,145

Selling, General and Administrative	180,169			211,497			543,789			635,918
Equity in Earnings of Affiliates	3,384			13,141			28,133			50,158

Operating Income	256,657			256,690			875,269			860,385

Other Income and Expense:
Interest and Investment Income	7,556			9,477			25,727			19,560
Interest Expense	(3,213		)	(8,435		)	(14,975		)	(20,165		)

Earnings Before Income Taxes	261,000			257,732			886,021			859,780

Provision for Income Taxes	61,573			47,379			162,439			108,694

Net Earnings	199,427			210,353			723,582			751,086
Less: Net Earnings (Loss) Attributable to Noncontrolling Interest	(22		)	110			279			352
Net Earnings Attributable to Hormel Foods Corporation	$	199,449		$	210,243		$	723,303		$	750,734

Net Earnings Per Share
Basic	$	0.37		$	0.40		$	1.35		$	1.42
Diluted	$	0.37		$	0.39		$	1.33		$	1.38

Weighted-average Shares Outstanding
Basic	534,188			530,606			534,721			529,953
Diluted	543,678			543,762			545,709			543,352

*Adjusted due to the adoption of Accounting Standards Update (ASU) 2017-07, Compensation - Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (Topic 715). See Note A - General.

See Notes to Consolidated Financial Statements

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HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(Unaudited)




	Three Months Ended						Nine Months Ended
	July 28, 2019			July 29, 2018			July 28, 2019		July 29, 2018
Net Earnings	$	199,427		$	210,353		$	723,582	$	751,086
Other Comprehensive Income (Loss), Net of Tax:
Foreign Currency Translation	(1,051		)	(17,209		)	6,696		(8,201		)
Pension and Other Benefits	1,768			2,393			6,977		7,366
Deferred Hedging	2,061			(9,010		)	8,407		(10,273		)
Total Other Comprehensive Income (Loss)	2,778			(23,826		)	22,080		(11,108		)
Comprehensive Income	202,205			186,527			745,662		739,978
Less: Comprehensive Income (Loss) Attributable to Noncontrolling Interest	(184		)	(261		)	257		377
Comprehensive Income Attributable to Hormel Foods Corporation	$	202,389		$	186,788		$	745,405	$	739,601

See Notes to Consolidated Financial Statements

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HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ INVESTMENT

(in thousands, except per share amounts)

(Unaudited)



	Three Months Ended July 29, 2018

			Hormel Foods Corporation Shareholders
	Common Stock					Treasury Stock					Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Non- controlling Interest			Total Shareholders’ Investment
	Shares		Amount			Shares		Amount			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Non- controlling Interest			Total Shareholders’ Investment
Balance at April 29, 2018	530,133		$	7,766		—		$	—		$	10,971		$	5,504,221		$	(235,753	)	$	4,428		$	5,291,633
Net Earnings														210,243						110			210,353
Other Comprehensive (Loss) Income																	(23,455		)	(371		)	(23,826		)
Purchases of Common Stock																							—
Stock-based Compensation Expense											6,265												6,265
Exercise of Stock Options/Restricted Shares	971		15								10,739												10,754
Shares Retired																							—
Declared Cash Dividends – $0.1875 Per Share														(99,411		)							(99,411		)
Balance at July 29, 2018	531,104		$	7,781		—		$	—		$	27,975		$	5,615,053		$	(259,208	)	$	4,167		$	5,395,768

	Three Months Ended July 28, 2019

			Hormel Foods Corporation Shareholders
	Common Stock					Treasury Stock					Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Non- controlling Interest			Total Shareholders’ Investment
	Shares		Amount			Shares		Amount			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Non- controlling Interest			Total Shareholders’ Investment
Balance at April 28, 2019	536,093		$	7,854		—		$	—		$	163,980		$	6,003,637		$	(278,135	)	$	4,448		$	5,901,784
Net Earnings														199,449						(22		)	199,427
Other Comprehensive (Loss) Income																	2,940			(162		)	2,778
Purchases of Common Stock						(2,682	)	(106,624		)													(106,624		)
Stock-based Compensation Expense											3,193												3,193
Exercise of Stock Options/Restricted Shares	269		3								3,825												3,828
Shares Retired	(2,682	)	(39		)	2,682		106,624			(855		)	(105,730		)							—
Declared Cash Dividends – $0.21 per share														(113,051		)							(113,051		)
Balance at July 28, 2019	533,680		$	7,818		—		$	—		$	170,143		$	5,984,305		$	(275,195	)	$	4,264		$	5,891,335

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HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ INVESTMENT

(in thousands, except per share amounts)

(Unaudited)



	Nine Months Ended July 29, 2018

			Hormel Foods Corporation Shareholders
	Common Stock					Treasury Stock					Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Non- controlling Interest			Total Shareholders’ Investment
	Shares		Amount			Shares		Amount
Balance at October 29, 2017	528,424		$	7,741		—		$	—		$	13,670		$	5,162,571		$	(248,075	)	$	3,790		$	4,939,697
Net Earnings														750,734						352			751,086
Other Comprehensive (Loss) Income																	(11,133		)	25			(11,108		)
Purchases of Common Stock						(1,331	)	(44,741		)													(44,741		)
Stock-based Compensation Expense			1								17,655												17,656
Exercise of Stock Options/Restricted Shares	4,011		58								41,372												41,430
Shares Retired	(1,331	)	(19		)	1,331		44,741			(44,722		)										—
Declared Cash Dividends – $0.5625 Per Share														(298,252		)							(298,252		)
Balance at July 29, 2018	531,104		$	7,781		—		$	—		$	27,975		$	5,615,053		$	(259,208	)	$	4,167		$	5,395,768

	Nine Months Ended July 28, 2019

			Hormel Foods Corporation Shareholders
	Common Stock					Treasury Stock					Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive (Loss) Income			Non- controlling Interest			Total Shareholders’ Investment
	Shares		Amount			Shares		Amount
Balance at October 28, 2018	534,135		$	7,825		—		$	—		$	106,528		$	5,729,956		$	(243,498	)	$	4,007		$	5,604,818
Net Earnings														723,303						279			723,582
Other Comprehensive (Loss) Income																	22,102			(22		)	22,080
Purchases of Common Stock						(4,309	)	(174,246		)													(174,246		)
Stock-based Compensation Expense			1								16,706												16,707
Exercise of Stock Options/Restricted Shares	3,854		55								48,196												48,251
Shares Retired	(4,309	)	(63		)	4,309		174,246			(1,287		)	(172,896		)							—
Cumulative Effect Adjustment from Adoption of:
ASU 2016-16														(10,475		)							(10,475		)
ASU 2017-12														21			(21		)				—
ASU 2018-02														52,342			(53,778		)				(1,436		)
Declared Cash Dividends – $0.63 Per Share														(337,946		)							(337,946		)
Balance at July 28, 2019	533,680		$	7,818		—		$	—		$	170,143		$	5,984,305		$	(275,195	)	$	4,264		$	5,891,335

See Notes to Consolidated Financial Statements

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HORMEL FOODS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)



	Nine Months Ended
	July 28, 2019			July 29, 2018
Operating Activities
Net Earnings	$	723,582		$	751,086
Adjustments to Reconcile to Net Cash Provided by Operating Activities:
Depreciation	113,278			111,586
Amortization of Intangibles	8,937			9,522
Equity in Earnings of Affiliates	(28,133		)	(50,158		)
Distribution from Equity Method Investees	20,000			20,023
(Benefit) Provision for Deferred Income Taxes	(37,921		)	(56,110		)
(Gain) Loss on Property/Equipment Sales and Plant Facilities	(1,046		)	(1,330		)
Gain on Sale of Business	(16,469		)	—
Non-cash Investment Activities	(19,778		)	(9,696		)
Stock-based Compensation Expense	16,707			17,656
Changes in Operating Assets and Liabilities, Net of Acquisitions:
Decrease (Increase) in Accounts Receivable	41,309			78,730
(Increase) Decrease in Inventories	(190,064		)	(48,927		)
(Increase) Decrease in Prepaid Expenses and Other Current Assets	(589		)	(12,863		)
Increase (Decrease) in Pension and Post-retirement Benefits	8,473			163
(Decrease) Increase in Accounts Payable and Accrued Expenses	(94,348		)	(84,182		)
Increase (Decrease) in Net Income Taxes Payable	28,974			17,705
Net Cash Provided by Operating Activities	572,912			743,205

Investing Activities
Net (Purchase) Sale of Securities	(13,884		)	—
Proceeds from Sale of Business	473,885			—
Acquisitions of Businesses/Intangibles	—			(857,668		)
Purchases of Property/Equipment	(154,231		)	(243,975		)
Proceeds from Sales of Property/Equipment	36,258			7,242
(Increase) Decrease in Investments, Equity in Affiliates, and Other Assets	(3,542		)	(6,863		)
Proceeds from Company-owned Life Insurance	16,455			5,294
Net Cash Provided by (Used in) Investing Activities	354,941			(1,095,970		)

Financing Activities
Net Proceeds from Short-term Debt	—			95,000
Proceeds from Long-term Debt	—			375,000
Repayments of Long-term Debt	(374,840		)	(199		)
Dividends Paid on Common Stock	(324,971		)	(288,515		)
Share Repurchase	(174,246		)	(44,741		)
Proceeds from Exercise of Stock Options	48,107			40,732
Net Cash (Used in) Provided by Financing Activities	(825,950		)	177,277

Effect of Exchange Rate Changes on Cash	(840		)	348
Increase (Decrease) in Cash and Cash Equivalents	101,063			(175,140		)
Cash and Cash Equivalents at Beginning of Year	459,136			444,122
Cash and Cash Equivalents at End of Quarter	$	560,199		$	268,982

See Notes to Consolidated Financial Statements

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HORMEL FOODS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE A - GENERAL

Basis of Presentation: The accompanying unaudited consolidated financial statements of Hormel Foods Corporation (the Company) have been prepared in accordance with generally accepted accounting principles for interim financial information, and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the interim period are not necessarily indicative of the results that may be expected for the full year. The Consolidated Statement of Financial Position at October 28, 2018, has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the fiscal year ended October 28, 2018.

Investments: The Company maintains a rabbi trust to fund certain supplemental executive retirement plans and deferred income plans. Under the plans, the participants can defer certain types of compensation and elect to receive a return on the deferred amounts based on the changes in fair value of various investment options, primarily a variety of mutual funds. The Company has corporate-owned life insurance policies on certain participants in the deferred compensation plans. The cash surrender value of the policies is included in Other Assets on the Consolidated Statements of Financial Position. The securities held by the trust are classified as trading securities. Therefore, unrealized gains and losses associated with these investments are included in the Company’s earnings. Securities held by the trust generated gains of $1.7 million and $7.9 million for the third quarter and nine months ended July 28, 2019, compared to losses of $1.4 million and gains of $2.6 million for the third quarter and nine months ended July 29, 2018.

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

Guarantees: The Company enters into various agreements guaranteeing specified obligations of affiliated parties. The Company’s guarantees either terminate in one year or remain in place until such time as the Company revokes the agreement. The Company currently provides revocable standby letters of credit totaling $2.4 million to guarantee obligations that may arise under workers compensation claims of an affiliated party. This potential obligation is not reflected in the Company’s Consolidated Statements of Financial Position.

Reclassifications: Certain reclassifications of previously reported amounts have been made to conform to the current year presentation. The reclassifications had no impact on Net Earnings or Operating Income, other than those related to the adoption of ASU 2017-07 as described within the new accounting pronouncements adopted in the current fiscal year.

Accounting Changes and Recent Accounting Pronouncements:

New Accounting Pronouncements Adopted in Current Fiscal Year

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This topic converges the guidance within U.S. GAAP and international financial reporting standards and supersedes ASC 605, Revenue Recognition. The new standard requires companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. The new standard will also result in enhanced disclosures about revenue, provide guidance for transactions which were not previously addressed comprehensively, and improve guidance for multiple-element arrangements. The new guidance is effective for annual reporting periods beginning after December 15, 2017. The updated guidance is to be applied either retrospectively or by using a cumulative effect adjustment. The Company adopted the provisions of the new standard using the full retrospective method at the beginning of fiscal 2019. The Company made the following policy elections upon adoption: to account for shipping and handling costs as contract fulfillment costs and to exclude taxes imposed on and collected from customers in revenue producing transactions (e.g., sales, use, and value added taxes) from the transaction price. The Company will account for variable consideration using the expected value method. The Company also applied the practical expedient to not capitalize contract costs to obtain contracts with a duration of one year or less, which are expensed and included in the Consolidated

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Statements of Operations. The Company did not have a cumulative effect adjustment as a result of adoption. Adoption of the new standard did not have a material impact on the Company’s results of operations. Additional qualitative disclosures have been provided in Note B - Revenue Recognition and further disaggregation of revenues provided in Note N - Segment Reporting.

In October 2016, the FASB issued ASU 2016-16, Income Taxes - Intra-Entity Transfers of Assets Other Than Inventory (Topic 740). The updated guidance requires the recognition of the income tax consequences of an intra-entity asset transfer, other than transfers of inventory, when the transfer occurs. For intra-entity transfers of inventory, the income tax effects will continue to be deferred until the inventory has been sold to a third party. The updated guidance is effective for reporting periods beginning after December 15, 2017, with early adoption permitted only within the first interim period of a fiscal year. The guidance is required to be applied on a modified retrospective basis through a cumulative effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company adopted the updated provisions at the beginning of fiscal 2019, resulting in a reclassification from prepaid tax assets to deferred tax assets. In addition, due to the impact of the lower tax rate on deferred tax balances resulting from the Tax Cuts and Jobs Act (Tax Act), the Company recognized a cumulative effect adjustment to Retained Earnings of $10.5 million.

In March 2017, the FASB issued ASU 2017-07, Compensation - Retirement Benefits: Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (Topic 715). The updated guidance requires an employer to report the service cost component of net periodic pension cost and net periodic post-retirement benefit cost in the same line item as other compensation costs. Other components of net periodic pension cost and net periodic post-retirement benefit cost must be presented in the income statement separately from the service cost component and outside income from operations. Additionally, only the service cost component is eligible for capitalization. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The updated guidance should be applied retrospectively for the presentation of components of net benefit cost and prospectively, for the capitalization of the service cost component of net benefit cost. The Company adopted the updated provisions at the beginning of fiscal 2019. The Company elected to utilize a practical expedient which allows the Company to use historical amounts disclosed in the Pension and Other Post-retirement Benefits footnote as an estimation basis for retrospectively applying the requirements to separately report the other components in the income statement. Due to the retrospective adoption, the Company reclassified $4.9 million and $14.1 million of non-service cost components of net periodic benefit costs out of Operating Income to Interest and Investment Income on the Consolidated Statements of Operations for the three months and nine months ended July 29, 2018.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging - Targeted Improvements to Accounting for Hedging Activities (Topic 815). The updated guidance expands an entity’s ability to hedge nonfinancial and financial risk components and reduce complexity in fair value hedges of interest rate risk. The guidance eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. The guidance also eases certain documentation and assessment requirements and modifies the accounting for components excluded from the assessment of hedge effectiveness. Entities will apply the amendments to cash flow and net investment hedge relationships that exist on the date of adoption using a modified retrospective approach. The presentation and disclosure requirements apply prospectively. The updated guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those years. Early adoption is permitted in any interim or annual period. The Company early adopted the updated guidance at the beginning of fiscal 2019, therefore eliminating the requirement to separately measure and report hedge ineffectiveness. The Company applied the amendment to cash flow hedge relationships existing on the date of adoption using a modified retrospective approach.

Presentation and disclosure requirements were applied on a prospective basis. The adoption resulted in an immaterial adjustment from Retained Earnings to Accumulated Other Comprehensive Loss.

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220). The updated guidance allows entities to reclassify stranded income tax effects resulting from the Tax Act from accumulated other comprehensive income to retained earnings in their consolidated financial statements. Under the Tax Act, deferred taxes were adjusted to reflect the reduction of the historical corporate income tax rate to the newly enacted corporate income tax rate, which left the tax effects on items within accumulated other comprehensive income stranded at an inappropriate tax rate. The updated guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those years. Early adoption is permitted in any interim period and should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Act is recognized. The Company early adopted the updated provisions at the beginning of fiscal 2019, resulting in a reclassification of $53.8 million to Accumulated Other Comprehensive Loss.

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In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (Topic 350). The amendments in the update align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The amendments are effective for fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years and is to be applied either retrospectively or prospectively to all implementation costs incurred after the adoption date. Early adoption is permitted, including adoption in any interim period. The Company early adopted the updated provisions on a prospective basis at the beginning of fiscal 2019. Subsequent to adoption, the Company has capitalized $13.1 million in cloud implementation costs, primarily associated with the transition to Oracle Cloud Solutions.

New Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The updated guidance requires lessees to recognize a right-of-use asset and lease liability for all leases with terms of more than 12 months. Recognition, measurement, and presentation of expenses will depend on the classification as a finance or operating lease. The update also requires certain quantitative and qualitative disclosures. Accounting guidance for lessors is largely unchanged. The requirements of the new standard are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company will adopt the provisions of this new accounting standard at the beginning of fiscal 2020. The Company has elected the package of practical expedients to not reassess prior conclusions related to contracts containing leases, lease classification, and initial direct costs. In July 2018, the FASB issued ASU 2018-11, which provides an optional transition method allowing entities the option to use the effective date as the date of initial application on transition. The Company is electing this transition method, and as a result, the Company will not adjust its comparative period financial information or make the new required lease disclosures for periods before the effective date. The Company has elected to not separate lease and non-lease components. The Company will not elect the hindsight practical expedient. In connection with the adoption of the new lease accounting standard, the Company has completed scoping reviews and has made progress in developing business process, accounting policies, and internal controls. The Company has implemented new lease accounting software to provide a centralized repository and assist in the preparation of the standard's additional reporting requirements. Based on the assessment to-date, the Company expects an increase to assets and an offsetting increase to liabilities on the Consolidated Statements of Financial Position. The Company expects the lease standard to have an immaterial impact on the Consolidated Statements of Operations and the Consolidated Statements of Cash Flows.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 958). The update provides guidance on the measurement of credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The amendment replaces the current incurred loss impairment approach with a methodology to reflect expected credit losses and requires consideration of a broader range of reasonable and supportable information to explain credit loss estimates. The updated guidance is to be applied on a modified retrospective approach and is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for all entities for fiscal years beginning after December 15, 2018, and interim periods therein. The Company will adopt the provisions of this new accounting standard at the beginning of fiscal 2021 and is in the process of evaluating the impact.

In July 2018, the FASB issued ASU 2018-09, Codification Improvements. This amendment makes changes to a variety of topics to clarify, correct errors in, or make minor improvements to the Accounting Standards Codification (ASC). The transition and effective date guidance is based on the facts and circumstances of each amendment. Some of the amendments do not require transition guidance and will be effective upon issuance of ASU 2018-09. The amendments effective upon issuance did not have a material impact on the Company's consolidated financial statements. A majority of the amendments do have transition guidance with effective dates for annual periods beginning after December 15, 2018. The Company is in the process of evaluating the timing and impact of adopting the remaining amendments.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement - Disclosure Framework (Topic 820). The updated guidance improves the disclosure requirements on fair value measurements. The updated guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted for any removed or modified disclosures. The Company is currently assessing the timing and impact of adopting the updated provisions.

In August 2018, the FASB issued ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans (Topic 715). The updated guidance improves disclosure requirements for employers who sponsor defined benefit pension or other postretirement plans. The amendments are effective for fiscal years ending after December 15, 2020, with early adoption permitted. The Company is currently assessing the timing and impact of adopting the updated provisions.

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Any other recently issued accounting standards or pronouncements not disclosed above have been excluded as they either are not relevant to the Company, or they are not expected to have a material effect on its business practices, financial condition, results of operations, or disclosures.

NOTE B - REVENUE RECOGNITION

Revenue from Contracts with Customers: Effective October 29, 2018, the Company adopted ASC 606, Revenue from Contracts with Customers using the full retrospective adoption method. The impact of adopting this guidance was immaterial to the Company’s financial statements and related disclosures. Under ASC 606, a contract with a customer is an agreement which both parties have approved, that creates enforceable rights and obligations, has commercial substance, where payment terms are identified, and collectability is probable. The Company’s customer contracts predominantly contain a single performance obligation to fulfill customer orders for the purchase of specified products. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. Revenue from product sales is primarily identified by purchase orders (“contracts”) which in some cases are governed by a master sales agreement. The purchase orders in combination with the invoice typically specify quantity and product(s) ordered, shipping terms, and certain aspects of the transaction price including discounts. Contracts are at standalone pricing or governed by pricing lists or brackets. The Company’s revenue is recognized when obligations under the terms of the agreement are satisfied. This is typically once the shipped product is received or picked up by the customer. Revenues are recognized at the net consideration the Company expects to receive in exchange for the goods. The amount of net consideration recognized includes estimates of variable consideration, including costs for trade promotion programs, consumer incentives, and allowances and discounts associated with distressed or potentially unsaleable products.

A majority of the Company’s revenue is short-term in nature with shipments within one year from order date. The Company's payment terms generally range between 7 to 45 days and vary by sales channel and other factors.

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

The Company elected to account for shipping and handling costs as contract fulfillment costs, and exclude taxes imposed on and collected from customers in revenue producing transactions (e.g., sales, use, and value added taxes) from the transaction price.

Disaggregation of Revenue: The Company discloses revenue by reportable segment. A reconciliation of these disaggregated revenues is provided in Note N - Segment Reporting.

Contract Balances: The Company does not have significant deferred revenue or unbilled receivable balances as a result of transactions with customers.

Contract Costs: The Company elected to apply the practical expedient to not capitalize contract costs to obtain contracts with duration of one year or less, which are expensed and included in the Consolidated Statements of Operations.

NOTE C - ACQUISITIONS AND DIVESTITURES

Divestiture: On April 15, 2019, the Company completed the sale of CytoSport, Inc. (CytoSport), which includes the Muscle Milk^® and Evolve^® brands, to PepsiCo, Inc., and received proceeds of $473.9 million, subject to working capital adjustments. The divestiture resulted in a pretax gain of approximately $16.5 million recognized in Selling, General and Administrative expense and a tax benefit of $17.0 million recognized within the Provision for Income Taxes on the Consolidated Statements of Operations.

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CytoSport's results of operations through the date of divestiture are included within Earnings Before Income Taxes in the Consolidated Statements of Operations and are reported within the Grocery Products and International & Other segments (See Note N - Segment Reporting).

Acquisition: On November 27, 2017, the Company acquired Columbus Manufacturing, Inc. (Columbus), an authentic premium deli meat and salami company, from Chicago-based Arbor Investments for a final purchase price of $857.4 million. The transaction was funded with cash on hand and by borrowing $375.0 million under a term loan facility and $375.0 million under a revolving credit facility.

Columbus specializes in authentic premium deli meat and salami. This acquisition allows the Company to enhance its scale in the deli by broadening its portfolio of products, customers, and consumers.

The acquisition was accounted for as a business combination using the acquisition method. The Company obtained an independent appraisal and completed purchase accounting for the acquisition in the fourth quarter of fiscal 2018. A final allocation of the purchase price to the acquired assets, liabilities, and goodwill is presented in the table below.



(in thousands)
Accounts receivable	$	21,199
Inventory	32,817
Prepaid and other assets	881
Other assets	936
Property, plant and equipment	83,662
Intangible assets	223,704
Goodwill	610,602
Current liabilities	(21,366		)
Deferred taxes	(95,077		)
Purchase price	$	857,358

Goodwill is calculated as the excess of the purchase price over the fair value of the net assets recognized. The $610.6 million of goodwill recorded as part of the acquisition primarily reflects the value of the potential to expand presence in the deli channel and serves as the catalyst for uniting all of the Company's deli businesses into one customer-facing organization. The goodwill and intangible assets have been allocated to the Refrigerated Foods segment.

Operating results for this acquisition have been included in the Company’s Consolidated Statements of Operations from the date of acquisition and are reflected in the Refrigerated Foods segment.

NOTE D - INVENTORIES

Principal components of inventories are:



(in thousands)	July 28, 2019		October 28, 2018
Finished products	$	665,028	$	525,628
Raw materials and work-in-process	254,629		247,495
Operating supplies	122,712		126,644
Maintenance materials and parts	66,145		63,760
Total	$	1,108,514	$	963,527

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NOTE E - GOODWILL AND INTANGIBLE ASSETS

Goodwill: The changes in the carrying amounts of goodwill for the three and nine months ended July 28, 2019, are presented in the table below. The reduction in goodwill during fiscal 2019 is due to the divestiture of CytoSport on April 15, 2019. Beginning balances have been reclassified to conform to the current year presentation between segments. See Note N - Segment Reporting and Note C - Acquisitions and Divestitures for additional information.



(in thousands)	Grocery Products		Refrigerated Foods		Jennie-O Turkey Store		International & Other		Total
Balance at April 28, 2019	$	632,301	$	1,458,692	$	176,628	$	219,014	$	2,486,635
Foreign currency translation	—		—		—		654		654
Balance at July 28, 2019	$	632,301	$	1,458,692	$	176,628	$	219,668	$	2,487,289



(in thousands)	Grocery Products			Refrigerated Foods		Jennie-O Turkey Store			International & Other			Total
Reported balance at October 28, 2018	$	882,582		$	1,406,897	$	203,214		$	221,423		$	2,714,116
Segment reclassification	(25,209		)	51,795		(26,586		)	—			—
Adjusted balance at October 28, 2018	857,373			1,458,692		176,628			221,423			2,714,116
Goodwill sold	(225,072		)	—		—			(4,945		)	(230,017		)
Foreign currency translation	—			—		—			3,190			3,190
Balance at July 28, 2019	$	632,301		$	1,458,692	$	176,628		$	219,668		$	2,487,289

Intangible Assets: The reduction in indefinite and definite-lived intangible assets for fiscal year 2019 is due to the divestiture of CytoSport.

The carrying amounts for indefinite-lived intangible assets are presented in the table below.



(in thousands)	July 28, 2019			October 28, 2018
Brands/tradenames/trademarks	$	959,400		$	1,108,122
Other intangibles	184			184
Foreign currency translation	(2,830		)	(3,484		)
Total	$	956,754		$	1,104,822

The gross carrying amount and accumulated amortization for definite-lived intangible assets are presented in the table below.



	July 28, 2019					October 28, 2018
(in thousands)	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
Customer lists/relationships	$	113,739	$	(34,418	)	$	137,039	$	(36,367	)
Other intangibles	6,957		(2,494		)	6,155		(1,547		)
Foreign currency translation	—		(2,411		)	—		(2,883		)
Total	$	120,696	$	(39,323	)	$	143,194	$	(40,797	)

Amortization expense was $2.6 million and $8.9 million for the third quarter and nine months ended July 28, 2019, respectively, compared to $3.3 million and $9.5 million for the third quarter and nine months ended July 29, 2018.

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Estimated annual amortization expense for the five fiscal years after October 28, 2018, is as follows:



(in millions)
2019	$11.7
2020	10.7
2021	10.7
2022	10.4
2023	9.5

NOTE F - PENSION AND OTHER POST-RETIREMENT BENEFITS

Net periodic benefit cost for pension and other post-retirement benefit plans consists of the following:



	Pension Benefits
	Three Months Ended						Nine Months Ended
(in thousands)	July 28, 2019			July 29, 2018			July 28, 2019			July 29, 2018
Service cost	$	6,510		$	7,903		$	19,531		$	23,709
Interest cost	15,097			14,045			45,289			42,144
Expected return on plan assets	(23,123		)	(24,776		)	(69,369		)	(74,317		)
Amortization of prior service cost	(699		)	(617		)	(2,096		)	(1,851		)
Recognized actuarial loss	3,702			4,548			11,104			13,626
Curtailment loss (gain)	—			—			2,825			—
Net periodic cost	$	1,487		$	1,103		$	7,284		$	3,311



	Post-retirement Benefits
	Three Months Ended						Nine Months Ended
(in thousands)	July 28, 2019			July 29, 2018			July 28, 2019			July 29, 2018
Service cost	$	173		$	98		$	520		$	739
Interest cost	3,007			2,692			9,181			8,356
Amortization of prior service cost	(669		)	(812		)	(2,007		)	(2,233		)
Recognized actuarial loss	—			44			—			133
Curtailment loss (gain)	—			—			(620		)	—
Net periodic cost	$	2,511		$	2,022		$	7,074		$	6,995

Non-service cost components of net pension and postretirement benefit cost are presented within interest and investment income on the Consolidated Statements of Operations.

Curtailments were recognized in the first quarter of fiscal 2019 due to the sale of the Fremont facility.

NOTE G - DERIVATIVES AND HEDGING

The Company uses hedging programs to manage price risk associated with commodity purchases. These programs utilize futures and options contracts to manage the Company’s exposure to price fluctuations in the commodities markets. The Company has determined its designated hedging programs to be highly effective in offsetting the changes in fair value or cash flows generated by the items hedged. Effectiveness testing is performed on a quarterly basis to ascertain a high level of effectiveness for cash flow and fair value hedging programs.

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Cash Flow Hedges: The Company designates corn and lean hog futures and options used to offset price fluctuations in the Company’s future direct grain and hog purchases as cash flow hedges. Effective gains or losses related to these cash flow hedges are reported in accumulated other comprehensive loss (AOCL) and reclassified into earnings, through cost of products sold, in the period or periods in which the hedged transactions affect earnings. The Company typically does not hedge its grain exposure beyond the next two upcoming fiscal years and its hog exposure beyond the next fiscal year.

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

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

Volume: As of July 28, 2019, and October 28, 2018, the Company had the following outstanding commodity futures and options contracts related to its hedging programs:



	Volume
Commodity Contracts	July 28, 2019	October 28, 2018
Corn	30.8 million bushels	23.0 million bushels
Lean hogs	207.5 million pounds	56.9 million pounds

Fair Value of Derivatives: The fair values of the Company’s derivative instruments (in thousands) as of July 28, 2019,

and October 28, 2018, were as follows:



		Fair Value (1)
Derivatives Designated as Hedges:	Location on Consolidated Statements of Financial Position	July 28, 2019		October 28, 2018
Commodity contracts	Other Current Assets	$	7,478	$	(30	)

(1) Amounts represent the gross fair value of derivative assets and liabilities. The Company nets the derivative assets and liabilities for each of its hedging programs, including cash collateral, when a master netting arrangement exists between the Company and the counterparty to the derivative contract. The amount or timing of cash collateral balances may impact the classification of the derivative in the Consolidated Statements of Financial Position. See Note L - Fair Value Measurements for a discussion of these net amounts as reported in the Consolidated Statements of Financial Position.

Fair Value Hedge - Assets (Liabilities): The carrying amount (in thousands) of the Company's fair value hedge assets (liabilities) as of July 28, 2019, and October 28, 2018, were as follows:



Location on Consolidated Statements of Financial Position	Carrying Amount of the Hedged Assets/(Liabilities)
	July 28, 2019		October 28, 2018
Accounts Payable	$	1,234	$	(594	)

AOCL Impact: In fiscal 2019, the Company adopted the amended guidance of ASC 815, Derivatives and Hedging. As a result, hedge ineffectiveness related to effective relationships is now deferred in AOCL until the hedged item impacts earnings. Prior to fiscal 2019, gains or losses on the derivative instrument in excess of the cumulative change in the cash flows of the hedged item, if any (i.e, the ineffective portion) were recognized in the Consolidated Statements of Operations during the current period. As of July 28, 2019, the Company has included in AOCL, before tax hedging gains of $9.0 million relating to its positions. The Company expects to recognize the majority of these gains over the next 12 months.

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The effect of AOCL for gains or losses (before tax, in thousands) related to the Company's derivative instruments for the three months ended July 28, 2019, and July 29, 2018, were as follows:



	Gain/(Loss) Recognized in AOCL (1)						Location on Consolidated Statements of Operations	Gain/(Loss) Reclassified from AOCL into Earnings (1)					Gain/(Loss) Recognized in Earnings (Ineffective Portion)
	Three Months Ended							Three Months Ended					Three Months Ended
Cash Flow Hedges:	July 28, 2019			July 29, 2018				July 28, 2019		July 29, 2018			July 28, 2019		July 29, 2018
Commodity Contracts	$	9,883		$	(12,620	)	Cost of Products Sold	$	940	$	(763	)	$	—	$	(241	)
Excluded Component (2)	$	(4,742	)

The effect of AOCL for gains or losses (before tax, in thousands) related to the Company's derivative instruments for the nine months ended July 28, 2019, and July 29, 2018, were as follows:



	Gain/(Loss) Recognized in AOCL (1)					Location on Consolidated Statements of Operations	Gain/(Loss) Reclassified from AOCL into Earnings (1)						Gain/(Loss) Recognized in Earnings (Ineffective Portion)
	Nine Months Ended						Nine Months Ended						Nine Months Ended
Cash Flow Hedges:	July 28, 2019		July 29, 2018				July 28, 2019			July 29, 2018			July 28, 2019		July 29, 2018
Commodity Contracts	$	9,546	$	(13,869	)	Cost of Products Sold	$	(835	)	$	(195	)	$	—	$	(602	)
Excluded Component (2)	$	501

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

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

Consolidated Statements of Operations Impact: The effect on the Consolidated Statements of Operations for gains or losses (before tax, in thousands) related to the Company's derivative instruments for the three months and nine months ended July 28, 2019, and July 29, 2018, were as follows:



	Cost of Products Sold
	Three Months Ended						Nine Months Ended
	July 28, 2019			July 29, 2018			July 28, 2019			July 29, 2018
Consolidated Statements of Operations	$	1,857,263		$	1,904,096		$	5,604,879		$	5,574,858

Cash Flow Hedges - Commodity Contracts
Gain (loss) reclassified from AOCL	940			(763		)	(835		)	(195		)
Amortization of excluded component from options	(313		)	—			(2,781		)	—
Gain (loss) due to ineffectiveness	—			(241		)	—			(602		)

Fair Value Hedges - Commodity Contracts
Gain (loss) on commodity futures (1)	656			1,363			2,293			3,144
Gain (loss) due to ineffectiveness	—			29			—			(243		)

Total gain (loss) recognized in earnings	$	1,283		$	388		$	(1,323	)	$	2,104

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

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NOTE H - INVESTMENTS IN AND RECEIVABLES FROM AFFILIATES

The Company accounts for its majority-owned operations under the consolidation method. Investments in which the Company owns a minority interest, and for which there are no other indicators of control, are accounted for under the equity or cost method. These investments, along with any related receivables from affiliates, are included in the Consolidated Statements of Financial Position as investments in and receivables from affiliates.

Investments in and receivables from affiliates consist of the following:



(in thousands)	Segment	% Owned	July 28, 2019		October 28, 2018
MegaMex Foods, LLC	Grocery Products	50%	$	207,832	$	205,148
Foreign Joint Ventures	International & Other	Various (26-40%)	71,433		68,005
Total			$	279,265	$	273,153

Equity in earnings of affiliates consists of the following:



		Three Months Ended					Nine Months Ended
(in thousands)	Segment	July 28, 2019			July 29, 2018		July 28, 2019		July 29, 2018
MegaMex Foods, LLC	Grocery Products	$	3,418		$	11,859	$	27,399	$	44,381
Foreign Joint Ventures	International & Other	(34		)	1,282		734		5,777
Total		$	3,384		$	13,141	$	28,133	$	50,158

For the three months ended July 28, 2019, and July 29, 2018, respectively, $10.0 million of dividends were received from affiliates. For the nine months ended July 28, 2019, and July 29, 2018, $20.0 million of dividends were received from affiliates.

The Company recognized a basis difference of $21.3 million associated with the formation of MegaMex Foods, LLC, of which $12.9 million is remaining as of July 28, 2019. This difference is being amortized through Equity in Earnings of Affiliates.

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NOTE I - ACCUMULATED OTHER COMPREHENSIVE LOSS

Components of accumulated other comprehensive loss are as follows:



(in thousands)	Foreign Currency Translation			Pension & Other Benefits				Deferred Gain (Loss) - Hedging				Accumulated Other Comprehensive Loss
Balance at April 28, 2019	$	(37,247	)	$	(246,182	)		$	5,294			$	(278,135	)
Unrecognized gains (losses)
Gross	(889		)	(1		)		5,141				4,251
Tax effect	—			—				(2,370		)		(2,370		)
Reclassification into Net Earnings
Gross	—			2,334			(1)	(940		)	(2)	1,394
Tax effect	—			(565		)		230				(335		)
Net of tax amount	(889		)	1,768				2,061				2,940
Balance at July 28, 2019	$	(38,136	)	$	(244,414	)		$	7,355			$	(275,195	)



(in thousands)	Foreign Currency Translation			Pension & Other Benefits				Deferred Gain (Loss) - Hedging				Accumulated Other Comprehensive Loss
Reported balance at October 28, 2018	$	(44,854	)	$	(197,613	)		$	(1,031	)		$	(243,498	)
Impact of adoption of ASU
ASU 2017-12	—			—				(21		)	(3)	(21		)
ASU 2018-02	—			(53,778		)	(3)	—				(53,778		)
Adjusted balance at October 28, 2018	(44,854		)	(251,391		)		(1,052		)		(297,297		)
Unrecognized gains (losses)
Gross	6,718			2,203				10,067				18,988
Tax effect	—			(533		)		(2,299		)		(2,832		)
Reclassification into Net Earnings
Gross	—			7,001			(1)	835			(2)	7,836
Tax effect	—			(1,694		)		(196		)		(1,890		)
Net of tax amount	6,718			6,977				8,407				22,102
Balance at July 28, 2019	$	(38,136	)	$	(244,414	)		$	7,355			$	(275,195	)

(1) Included in the computation of net periodic cost. See Note F - Pension and Other Post-Retirement Benefits for additional details.

(2) Included in Cost of Products Sold in the Consolidated Statements of Operations.

(3) Cumulative effect from the adoption of Accounting Standards Update. See Note A - General for additional details.

NOTE J - INCOME TAXES

The Company's tax provision is determined using an estimated annual effective tax rate and adjusted for discrete taxable events that may occur during the quarter. The effects of tax legislation are recognized in the period in which the law is enacted. The deferred tax assets and liabilities are remeasured using enacted tax rates expected to apply to taxable income in the years the related temporary differences are anticipated to reverse.

On December 22, 2017, the United States (U.S.) enacted comprehensive tax legislation into law, H.R. 1, commonly referred to as the Tax Act. Except for certain provisions, the Tax Act is effective for tax years beginning on or after January 1, 2018. As a fiscal year U.S. taxpayer, the majority of the provisions, such as eliminating the domestic manufacturing deduction, creating new taxes on certain foreign sourced income, and introducing new limitations on certain business deductions, apply to the Company in fiscal 2019. In addition, for fiscal 2019 and effective in the first quarter, the U.S. federal corporate income tax rate was reduced from a blended rate of 23.4 percent for fiscal 2018, to 21.0 percent in fiscal 2019 and beyond.

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The Company's effective tax rate for the third quarter and first nine months of fiscal 2019 was 23.6 percent and 18.3 percent, respectively, compared to 18.4 percent and 12.6 percent for the respective periods last year. The Company expects a full-year effective tax rate between 18.3 percent and 20.3 percent for fiscal 2019.

In March 2018, the FASB issued ASU 2018-05, Income Taxes: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 (Topic 740), which provides guidance for companies related to the Tax Act. This ASU allows for a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related tax impacts. Based on current interpretation of the Tax Act, the Company made reasonable estimates to record provisional adjustments during fiscal 2018, as described above. The Company continued to evaluate such amounts within the first quarter of fiscal 2019 and determined no adjustments were required within the remaining portion of the measurement period. As of January 27, 2019, the Company has completed the accounting for the tax effects of the Tax Act.

During fiscal 2018, the Company provisionally recorded the transition tax on its foreign earnings. Those foreign earnings have been deemed repatriated for U.S. federal tax purposes. The Company maintains all earnings are permanently reinvested. Accordingly, no additional income taxes have been provided for withholding tax, state tax, or other taxes.

The amount of unrecognized tax benefits, including interest and penalties, is recorded in other long-term liabilities. If recognized as of July 28, 2019, and July 29, 2018, $28.5 million and $26.0 million, respectively, would impact the Company’s effective tax rate. The Company includes accrued interest and penalties related to uncertain tax positions in income tax expense. Interest and penalties included in income tax expense was immaterial for the third quarter and first nine months of fiscal 2019, compared to $0.2 million and $0.6 million for the respective periods in fiscal 2018. The amount of accrued interest and penalties at July 28, 2019, and July 29, 2018, associated with unrecognized tax benefits was $6.8 million and $6.3 million, respectively.

The Company is regularly audited by federal and state taxing authorities. The United States Internal Revenue Service (I.R.S.) concluded its examination of fiscal 2017 in the second quarter of fiscal 2019. The Company has elected to participate in the Compliance Assurance Process (CAP) for fiscal years 2018 through 2020. The objective of CAP is to contemporaneously work with the I.R.S. to achieve federal tax compliance and resolve all or most of the issues prior to filing of the tax return. The Company may elect to continue participating in CAP for future tax years. The Company may withdraw from the program at any time.

The Company is in various stages of audit by several state taxing authorities on a variety of fiscal years, as far back as 2011. While it is reasonably possible that one or more of these audits may be completed within the next 12 months and the related unrecognized tax benefits may change, based on the status of the examinations it is not possible to reasonably estimate the effect of any amount of such change to previously recorded uncertain tax positions.

NOTE K - STOCK-BASED COMPENSATION

The Company issues stock options and restricted shares as part of its stock incentive plans for employees and non-employee directors. During the third quarter and nine months ended July 28, 2019, stock-based compensation expense was $3.2 million and $16.7 million, respectively, compared to $6.3 million and $17.7 million for the third quarter and nine months ended July 29, 2018, respectively.

At July 28, 2019, there was $31.3 million of total unrecognized compensation expense from stock-based compensation arrangements granted under the plans. This compensation is expected to be recognized over a weighted-average period of approximately 2.8 years. During the third quarter and nine months ended July 28, 2019, cash received from stock option exercises was $3.8 million and $48.1 million, respectively, compared to $10.7 million and $40.7 million, for the third quarter and nine months ended July 29, 2018, respectively.

Shares issued for option exercises and restricted shares may be either authorized but unissued shares or shares of treasury stock.

Stock Options: The Company’s policy is to grant options with the exercise price equal to the market price of the common stock on the date of grant. Options typically vest over four years and expire ten years after the date of the grant. The Company recognizes stock-based compensation expense ratably over the shorter of the requisite service period or vesting period. The fair value of stock-based compensation granted to retirement-eligible individuals is expensed at the time of grant.

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During the third quarter of fiscal 2018, the Company made a one-time grant of 200 stock options to each active, full-time employee and 100 stock options to each active, part-time employee of the Company on April 30, 2018. The options vest in five years and expire ten years after the grant date.

A reconciliation of the number of options outstanding and exercisable (in thousands) as of July 28, 2019, and changes during the nine months then ended, is as follows:



	Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding at October 28, 2018	29,536	$	23.55
Granted	1,809	44.37
Exercised	3,790	12.70
Forfeited	660	36.37
Expired	5	35.87
Outstanding at July 28, 2019	26,890	26.16		5.3	$	414,544
Exercisable at July 28, 2019	18,763	$	21.09	4.0	$	380,708

The weighted-average grant date fair value of stock options granted and the total intrinsic value of options exercised (in thousands) during the third quarter and first nine months of fiscal years 2019 and 2018, are as follows. There were no stock options granted during the third quarter of fiscal year 2019.



	Three Months Ended				Nine Months Ended
	July 28, 2019		July 29, 2018		July 28, 2019		July 29, 2018
Weighted-average grant date fair value	$	—	$	7.33	$	9.24	$	7.16
Intrinsic value of exercised options	$	7,308	$	25,136	$	115,094	$	96,950

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



0.029	Three Months Ended			Nine Months Ended
	July 28, 2019	July 29, 2018		July 28, 2019		July 29, 2018
Risk-free interest rate	—	2.9	%	2.8	%	2.7	%
Dividend yield	—	2.1	%	1.9	%	2.1	%
Stock price volatility	—	19.0	%	19.0	%	19.0	%
Expected option life	—	8 years		8 years		8 years

As part of the annual valuation process, the Company reassesses the appropriateness of the inputs used in the valuation models. The Company establishes the risk-free interest rate using stripped U.S. Treasury yields as of the grant date where the remaining term is approximately the expected life of the option. The dividend yield is based on the dividend rate approved by the Company’s Board of Directors and the stock price on the grant date. The expected volatility assumption is based primarily on historical volatility. As a reasonableness test, implied volatility from exchange traded options is also examined to validate the volatility range obtained from the historical analysis. The expected life assumption is based on an analysis of past exercise behavior by option holders. In performing the valuations for option grants, the Company has not stratified option holders as exercise behavior has historically been consistent across all employee and non-employee director groups.

Restricted Shares: Restricted shares awarded to non-employee directors annually on February 1 are subject to a restricted period which expires the date of the Company’s next annual stockholders meeting. Newly elected directors receive a prorated award of restricted shares of the Company's common stock, which expires on the date of the Company's second succeeding annual stockholders meeting. A reconciliation of the restricted shares (in thousands) as of July 28, 2019, and changes during the nine months then ended, is as follows:

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	Shares	Weighted- Average Grant Date Fair Value
Restricted at October 28, 2018	52	$	34.08
Granted	51	42.23
Vested	52	34.08
Restricted at July 28, 2019	51	$	42.23

The weighted-average grant date fair value of restricted shares granted, the total fair value (in thousands) of restricted shares granted, and the fair value (in thousands) of shares that have vested during the first nine months of fiscal years 2019 and 2018, are as follows:



	Nine Months Ended
	July 28, 2019		July 29, 2018
Weighted-average grant date fair value	$	42.23	$	34.08
Fair value of restricted shares granted	2,134		1,760
Fair value of shares vested	1,760		2,053

NOTE L - FAIR VALUE MEASUREMENTS

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

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

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

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

The Company’s financial assets and liabilities carried at fair value on a recurring basis as of July 28, 2019, and October 28, 2018, and their level within the fair value hierarchy, are presented in the tables below.



	Fair Value Measurements at July 28, 2019
(in thousands)	Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets at Fair Value
Cash and cash equivalents (1)	$	560,199	$	559,009	$	1,190	$	—
Short-term marketable securities (2)	14,064		4,683		9,381		—
Other trading securities (3)	157,114		—		157,114		—
Commodity derivatives (4)	9,555		9,347		208		—
Total Assets at Fair Value	$	740,932	$	573,039	$	167,893	$	—
Liabilities at Fair Value
Deferred compensation (3)	$	61,309	$	—	$	61,309	$	—
Total Liabilities at Fair Value	$	61,309	$	—	$	61,309	$	—

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	Fair Value Measurements at October 28, 2018
(in thousands)	Total Fair Value		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets at Fair Value
Cash and cash equivalents (1)	$	459,136	$	459,136	$	—	$	—
Other trading securities (3)	137,311		—		137,311		—
Commodity derivatives (4)	4,611		4,611		—		—
Total Assets at Fair Value	$	601,058	$	463,747	$	137,311	$	—
Liabilities at Fair Value
Deferred compensation (3)	$	60,181	$	—	$	60,181	$	—
Total Liabilities at Fair Value	$	60,181	$	—	$	60,181	$	—

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


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

(2)

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

(3)

A majority of the funds held in the rabbi trust relate to the supplemental executive retirement plans and have been invested in fixed income funds managed by a third party. The declared rate on these funds is set based on a formula using the yield of the general account investment portfolio supporting the fund, adjusted for expenses and other charges. The rate is guaranteed for one year at issue, and may be reset annually on the policy anniversary, subject to a guaranteed minimum rate. As the value is based on adjusted market rates, and the fixed rate is only reset on an annual basis, these funds are classified as Level 2. The funds held in the rabbi trust are included in Other Assets on the Consolidated Statements of Financial Position. The remaining funds held are also managed by a third-party insurance policy, the values of which represent their cash surrender value based on the fair value of the underlying investments in the account and include equity securities, money market accounts, bond funds, or other portfolios for which there is an active quoted market. Therefore, these policies are also classified as Level 2. The related deferred compensation liabilities are included in other long-term liabilities on the Consolidated Statements of Financial Position with investment options generally mirroring those funds held by the rabbi trust. Therefore, these investment balances are classified as Level 2. The Company also offers a fixed rate investment option to participants. The rate earned on these investments is adjusted annually based on a specified percentage of the I.R.S. applicable federal rates. These balances are classified as Level 2.

(4)

The Company’s commodity derivatives represent futures contracts and options used in its hedging or other programs to offset price fluctuations associated with purchases of corn, soybean meal, and hogs, and to minimize the price risk assumed when forward priced contracts are offered to the Company’s commodity suppliers. The Company’s futures contracts for corn and soybean meal are traded on the Chicago Board of Trade, while futures contracts for lean hogs are traded on the Chicago Mercantile Exchange. These are active markets with quoted prices available, and these contracts are classified as Level 1. Over-the-counter (OTC) derivative instruments are valued using discounted cashflow models, observable market inputs, and other mathematical pricing models. The Company’s lean hog option contracts are OTC instruments whose value is calculated using the Black-Scholes pricing model, lean hog future prices quoted from the Chicago Mercantile Exchange, and other adjustments to inputs that are observable in active markets. As the value of these instruments is driven by observable prices in active markets they are classified as Level 2. All derivatives are reviewed for potential credit risk and risk of nonperformance. The Company nets the derivative assets and liabilities for each of its hedging programs, including cash collateral, when a master netting arrangement exists between the Company and the counterparty to the derivative contract. The net balance for each program is included in other current assets or accounts payable, as appropriate, in the Consolidated Statements of Financial Position. As of July 28, 2019, the Company has recognized the right to reclaim net cash collateral of $2.2 million from various counterparties (including $9.7 million of realized gains on closed positions offset by cash owed of $7.5 million). As of October 28, 2018, the Company had recognized the right to reclaim net cash collateral of $4.6 million from various counterparties (including cash of $4.7 million less $0.1 million of realized losses).

The Company’s financial assets and liabilities include accounts receivable, accounts payable, and other liabilities, for which carrying value approximates fair value. The Company does not carry its long-term debt at fair value in its Consolidated Statements of Financial Position. Based on borrowing rates available to the Company for long-term financing with similar terms and average maturities, the fair value of long-term debt, utilizing discounted cash flows (Level 2), was $260.0 million as of July 28, 2019, and $631.3 million as of October 28, 2018.

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In accordance with the provisions of ASC 820, the Company measures certain nonfinancial assets and liabilities at fair value, which are recognized or disclosed on a nonrecurring basis (e.g. goodwill, intangible assets, and property, plant and equipment). During the nine months ended July 28, 2019, and July 29, 2018, there were no material remeasurements of assets or liabilities at fair value on a nonrecurring basis subsequent to their initial recognition.

NOTE M - EARNINGS PER SHARE DATA

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



	Three Months Ended		Nine Months Ended
(in thousands)	July 28, 2019	July 29, 2018	July 28, 2019	July 29, 2018
Basic weighted-average shares outstanding	534,188	530,606	534,721	529,953
Dilutive potential common shares	9,490	13,156	10,988	13,399
Diluted weighted-average shares outstanding	543,678	543,762	545,709	543,352

For the third quarter and nine months ended July 28, 2019, a total of 5.9 million and 3.0 million weighted-average stock options, respectively, were not included in the computation of dilutive potential common shares since their inclusion would have an antidilutive effect on earnings per share, compared to 10.6 million and 7.6 million, respectively, for the third quarter and nine months ended July 29, 2018.

NOTE N - SEGMENT REPORTING

The Company develops, processes, and distributes a wide array of food products in a variety of markets. The Company reports its results in the following four segments: Grocery Products, Refrigerated Foods, Jennie-O Turkey Store, and International & Other. At the beginning of fiscal 2019, the Hormel Deli Solutions division combined all deli businesses, including the Jennie-O Turkey Store deli division, into one division within the Refrigerated Foods segment. In addition, the ingredients business was realigned from the Grocery Products segment to the Refrigerated Foods segment. Fiscal 2018 segment results have been adjusted to reflect these changes.

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

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

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

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 joint ventures and royalty arrangements.

Intersegment sales are recorded at prices that approximate cost and are eliminated in the Consolidated Statements of Operations. The Company does not allocate investment income, interest expense, or interest income to its segments when measuring performance. The Company also retains various other income and expenses at the corporate level. Equity in earnings of affiliates is included in segment profit; however, earnings attributable to the Company’s noncontrolling interests are excluded. These items are included below as Net Unallocated Expense and Noncontrolling Interest when reconciling to Earnings Before Income Taxes.

Sales and profits for each of the Company’s reportable segments and reconciliation to earnings before income taxes are set forth below. The Company is an integrated enterprise, characterized by substantial intersegment cooperation, cost allocations, and sharing of assets. Therefore, the Company does not represent these segments, if operated independently, would report the profit and other financial information shown below.

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	Three Months Ended						Nine Months Ended
(in thousands)	July 28, 2019			July 29, 2018			July 28, 2019			July 29, 2018
Sales to Unaffiliated Customers
Grocery Products	$	543,088		$	607,054		$	1,785,232		$	1,832,123
Refrigerated Foods	1,301,101			1,288,394			3,837,732			3,788,097
Jennie-O Turkey Store	298,781			316,100			925,271			942,735
International & Other	147,735			147,594			447,569			458,048
Total	$	2,290,705		$	2,359,142		$	6,995,804		$	7,021,003

Intersegment Sales
Grocery Products	$	10		$	14		$	32		$	28
Refrigerated Foods	5,282			1,660			10,733			5,210
Jennie-O Turkey Store	31,804			28,069			90,665			78,297
International & Other	—			—			—			—
Total	37,096			29,743			101,430			83,535
Intersegment elimination	(37,096		)	(29,743		)	(101,430		)	(83,535		)
Total	$	—		$	—		$	—		$	—

Net Sales
Grocery Products	$	543,098		$	607,068		$	1,785,264		$	1,832,151
Refrigerated Foods	1,306,383			1,290,054			3,848,465			3,793,307
Jennie-O Turkey Store	330,585			344,169			1,015,936			1,021,032
International & Other	147,735			147,594			447,569			458,048
Intersegment elimination	(37,096		)	(29,743		)	(101,430		)	(83,535		)
Total	$	2,290,705		$	2,359,142		$	6,995,804		$	7,021,003

Segment Profit
Grocery Products	$	58,778		$	83,433		$	258,574		$	274,184
Refrigerated Foods	171,795			151,924			492,476			476,375
Jennie-O Turkey Store	21,278			23,305			76,931			93,102
International & Other	18,755			18,646			58,058			64,151
Total segment profit	270,606			277,308			886,039			907,812
Net unallocated expense	9,584			19,686			297			48,384
Noncontrolling interest	(22		)	110			279			352
Earnings Before Income Taxes	$	261,000		$	257,732		$	886,021		$	859,780

Revenue has been disaggregated into the categories below to show how sales channels affect the nature, amount, timing, and uncertainty of revenue and cash flows for the third quarter and first nine months of fiscal 2019 and 2018.



	Three Months Ended				Nine Months Ended
(in thousands)	July 28, 2019		July 29, 2018		July 28, 2019		July 29, 2018
U.S. Retail	$	1,163,367	$	1,221,398	$	3,672,189	$	3,778,544
U.S. Foodservice	729,321		729,247		2,135,633		2,060,594
U.S. Deli	229,386		240,777		693,377		672,252
International	168,631		167,720		494,605		509,613
Total	$	2,290,705	$	2,359,142	$	6,995,804	$	7,021,003

The Company’s products primarily consist of meat and other food products. Perishable includes fresh meats, frozen items, refrigerated meal solutions, sausages, hams, guacamole, and bacon (excluding Jennie-O Turkey Store products). Shelf-stable

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includes canned luncheon meats, peanut butter, chilies, shelf-stable microwaveable meals, hash, stews, meat spreads, flour and corn tortillas, salsas, tortilla chips, and other items that do not require refrigeration. The Poultry category is composed primarily of Jennie-O Turkey Store products. The Miscellaneous category primarily consists of nutritional food products and supplements, dessert and drink mixes, and industrial gelatin products. The Miscellaneous category includes CytoSport. The reduction in this category during fiscal 2019 is due to the divestiture of CytoSport on April 15, 2019. The amount of total revenues contributed by classes of similar products for the third quarter and first nine months of fiscal 2019 and 2018 are as follows:



	Three Months Ended				Nine Months Ended
(in thousands)	July 28, 2019		July 29, 2018		July 28, 2019		July 29, 2018
Perishable	$	1,355,765	$	1,325,886	$	4,014,372	$	3,948,767
Shelf-stable	417,535		428,133		1,299,263		1,297,474
Poultry	427,622		453,926		1,296,677		1,325,037
Miscellaneous	89,783		151,197		385,492		449,725
Total	$	2,290,705	$	2,359,142	$	6,995,804	$	7,021,003

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

CRITICAL ACCOUNTING POLICIES

There have been no material changes in the Company’s Critical Accounting Policies, as disclosed in its Annual Report on Form 10-K for the fiscal year ended October 28, 2018.

RESULTS OF OPERATIONS

Overview

The Company is a global manufacturer and marketer of branded food products. It operates in four reportable segments as described in Note N - Segment Reporting in the Notes to Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

The Company reported net earnings per diluted share of $0.37 for the third quarter of fiscal 2019, compared to $0.39 per diluted share in the third quarter of fiscal 2018. Significant factors impacting the quarter were:


•	The Company delivered pretax earnings growth. Net earnings declined as strong results from Refrigerated Foods were unable to offset the impact of a higher effective tax rate and weakness in the Grocery Products segment.


•	Refrigerated Foods segment profit increased primarily due to improved profitability for value-added products. Lower operational costs and higher commodity profits played a smaller role in the profit improvement.


•	Grocery Products profit was negatively impacted by the divestiture of CytoSport, the impact of significantly higher avocado costs, and lower Skippy^® peanut butter pricing.


•	Jennie-O Turkey Store segment profit declined as a result of lower sales from retail and foodservice value-added items.


•	International & Other profit was slightly higher, driven by growth in China.

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Consolidated Results

Volume, Net Sales, Earnings, and Diluted Earnings per Share



	Three Months Ended						Nine Months Ended
(in thousands, except per share amounts)	July 28, 2019		July 29, 2018		% Change		July 28, 2019		July 29, 2018		% Change
Volume (lbs.)	1,123,504		1,170,893		(4.0	)	3,500,404		3,532,886		(0.9	)
Organic volume ⁽¹⁾	1,123,504		1,133,003		(0.8	)	3,500,404		3,494,996		0.2
Net sales	$	2,290,705	$	2,359,142	(2.9	)	$	6,995,804	$	7,021,003	(0.4	)
Organic net sales ⁽¹⁾	2,290,705		2,286,693		0.2		6,995,804		6,948,554		0.7
Net earnings	199,449		210,243		(5.1	)	$	723,303	$	750,734	(3.7	)
Diluted earnings per share	0.37		0.39		(5.1	)	1.33		1.38		(3.6	)
Adjusted net earnings ⁽¹⁾	199,449		210,243		(5.1	)	689,862		750,734		(8.1	)
Adjusted diluted earnings per share ⁽¹⁾	0.37		0.39		(5.1	)	1.26		1.38		(8.7	)

⁽¹⁾The non-GAAP adjusted financial measurements are presented to provide investors additional information to facilitate the comparison of past and present operations. The company believes these non-GAAP financial measurements provide useful information to investors because they are measurements used to evaluate performance on a comparable year-over-year basis. These non-GAAP measurements are not intended to be a substitute for U.S. GAAP measurements in analyzing financial performance. These non-GAAP measurements are not in accordance with generally accepted accounting principles and may be different from non-GAAP measures used by other companies.

Organic net sales and organic volume are defined as net sales and volume, excluding the impact of acquisitions and divestitures. Organic net sales and organic volume exclude the impacts of the CytoSport divestiture (April 2019) in the Grocery Products and International & Other segments. The tables below show the calculations to reconcile from the non-GAAP adjusted measures to the GAAP measures in the third quarter and year-to-date of fiscal 2019 and fiscal 2018.



Non-GAAP Measures

	Three Months Ended
	July 28, 2019		July 29, 2018
(in thousands)	Reported GAAP		Reported GAAP		CytoSport Divestiture			Organic (Non-GAAP)		Non-GAAP % Change
Volume (lbs.)
Grocery Products	290,658		323,748		(36,521		)	287,227		1.2
Refrigerated Foods	558,531		564,672		—			564,672		(1.1	)
Jennie-O Turkey Store	189,146		197,710		—			197,710		(4.3	)
International & Other	85,169		84,763		(1,369		)	83,394		2.1
Total Volume	1,123,504		1,170,893		(37,890		)	1,133,003		(0.8	)

Net Sales
Grocery Products	$	543,088	$	607,054	$	(69,986	)	$	537,068	1.1
Refrigerated Foods	1,301,101		1,288,394		—			1,288,394		1.0
Jennie-O Turkey Store	298,781		316,100		—			316,100		(5.5	)
International & Other	147,735		147,594		(2,463		)	145,131		1.8
Total Net Sales	$	2,290,705	$	2,359,142	$	(72,449	)	$	2,286,693	0.2

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	Nine Months Ended
	July 28, 2019		July 29, 2018
(in thousands)	Reported GAAP		Reported GAAP		CytoSport Divestiture			Organic (Non-GAAP)		Non-GAAP % Change
Volume (lbs.)
Grocery Products	970,003		982,479		(36,521		)	945,958		2.5
Refrigerated Foods	1,726,682		1,734,842		—			1,734,842		(0.5	)
Jennie-O Turkey Store	546,916		553,475		—			553,475		(1.2	)
International & Other	256,803		262,090		(1,369		)	260,721		(1.5	)
Total Volume	3,500,404		3,532,886		(37,890		)	3,494,996		0.2

Net Sales
Grocery Products	$	1,785,232	$	1,832,123	$	(69,986	)	$	1,762,137	1.3
Refrigerated Foods	3,837,732		3,788,097		—			3,788,097		1.3
Jennie-O Turkey Store	925,271		942,735		—			942,735		(1.9	)
International & Other	447,569		458,048		(2,463		)	455,585		(1.8	)
Total Net Sales	$	6,995,804	$	7,021,003	$	(72,449	)	$	6,948,554	0.7

Adjusted net earnings and adjusted diluted earnings per share exclude the one-time gain associated with the divestiture of the CytoSport business, which was recognized in net unallocated expense and Provision for Income Taxes in the second quarter of fiscal 2019. The tax benefit was driven by the sale of shares of the CytoSport legal entity. The table below shows the calculations to reconcile from the non-GAAP adjusted measures to the GAAP measure in the first nine months of fiscal 2019.



	Nine Months Ended July 28, 2019
(in thousands)	GAAP Earnings		Gain on CytoSport Sale			Non-GAAP Adjusted Earnings
Grocery Products	$	258,574	$	—		$	258,574
Refrigerated Foods	492,476		—			492,476
Jennie-O Turkey Store	76,931		—			76,931
International & Other	58,058		—			58,058
Total segment profit	886,039		—			886,039
Net unallocated expense	297		16,469			16,766
Noncontrolling interest	279		—			279
Earnings Before Income Taxes	886,021		(16,469		)	869,552
Provision for Income Taxes	162,439		16,972			179,411
Net Earnings	723,582		(33,441		)	690,141
Less: Net Earnings (Loss) Attributable to Noncontrolling Interest	279		—			279
Net Earnings Attributable to Hormel Foods Corporation	$	723,303	$	(33,441	)	$	689,862

Diluted Earnings Per Share*	$	1.33	$	(0.06	)	$	1.26

*Diluted Earnings Per Share does not sum across due to rounding

The decrease in net sales for the third quarter of fiscal 2019 was primarily related to the divestiture of CytoSport. Organic net sales were flat as increased sales of the SPAM^® family of products, Hormel^® Bacon 1^TM cooked bacon, Don Miguel^® branded items, Old Smokehouse^® premium raw bacon, and Hormel^® Fire Braised^TM products helped offset lower retail and foodservice sales at Jennie-O Turkey Store and lower sales of Skippy^® peanut butter.

For the first nine months of 2019, net sales were flat to last year as strong value-added sales in Refrigerated Foods mostly offset the impact of the divestiture of CytoSport and weak retail sales of Jennie-O Turkey Store products.

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Cost of Products Sold



	Three Months Ended						Nine Months Ended
(in thousands)	July 28, 2019		July 29, 2018		% Change		July 28, 2019		July 29, 2018		% Change
Cost of products sold	$	1,857,263	$	1,904,096	(2.5	)	$	5,604,879	$	5,574,858	0.5

Cost of products sold for the third quarter declined due to the divestiture of CytoSport and lower volumes of value-added products in Refrigerated Foods. For the first nine months of fiscal 2019, cost of products sold was higher, as increases in operational costs and freight expenses more than offset the impact from the divestiture of CytoSport.

Gross Profit



	Three Months Ended								Nine Months Ended
(in thousands)	July 28, 2019			July 29, 2018			% Change		July 28, 2019			July 29, 2018			% Change
Gross profit	$	433,442		$	455,046		(4.7	)	$	1,390,925		$	1,446,145		(3.8	)
Percentage of net sales	18.9		%	19.3		%			19.9		%	20.6		%

Gross profit as a percentage of net sales declined for the third quarter. Margins in Refrigerated Foods increased in the third quarter of fiscal 2019, while Grocery Products, Jennie-O Turkey Store, and International & Other declined compared to the prior year. Refrigerated Foods margins were positively impacted by price increases on value-added items, higher commodity profits, and lower operational expenses. Grocery Products decreased due to impact from the divestiture of CytoSport and lower Skippy^® peanut butter pricing. Jennie-O Turkey Store declined on lower retail and foodservice sales. International & Other was negatively impacted by lower margins from branded exports.

For the first nine months of 2019, gross profit as a percentage of net sales declined due to lower pork commodity profits, higher freight expenses, and lower margins on fresh pork exports.

Looking to the fourth quarter of fiscal 2019, the Company expects the Refrigerated Foods, Grocery Products and International & Other segments to experience periods of margin compression due to rising and volatile pork markets related to African swine fever. Additionally, pork export margins could remain challenged due to tariffs and global trade uncertainty. Lost lean ground turkey distribution and lower Skippy^® peanut butter pricing are expected to negatively impact the Jennie-O Turkey Store and Grocery Products segments, respectively.

Selling, General and Administrative (SG&A)



	Three Months Ended								Nine Months Ended
(in thousands)	July 28, 2019			July 29, 2018			% Change		July 28, 2019			July 29, 2018			% Change
SG&A	$	180,169		$	211,497		(14.8	)	$	543,789		$	635,918		(14.5	)
Percentage of net sales	7.9		%	9.0		%			7.8		%	9.1		%

For the third quarter of fiscal 2019, SG&A expenses decreased primarily due to the CytoSport divestiture and lower employee-related expenses. For the first nine months of fiscal 2019, SG&A expenses declined due to the impacts from the CytoSport divestiture and a legal settlement. Selling expenses have also been favorable compared to the prior year.

Due to the CytoSport divestiture, advertising investments in the third quarter and first nine months of fiscal 2019 declined. Advertising investments for the full year are expected to be lower compared to the prior year driven primarily by the divestiture of CytoSport.

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Equity in Earnings of Affiliates



	Three Months Ended						Nine Months Ended
(in thousands)	July 28, 2019		July 29, 2018		% Change		July 28, 2019		July 29, 2018		% Change
Equity in earnings of affiliates	$	3,384	$	13,141	(74.2	)	$	28,133	$	50,158	(43.9	)

Equity in earnings of affiliates for the third quarter of fiscal 2019 was lower due to significantly higher avocado costs impacting MegaMex earnings. Results for the first nine months of fiscal 2019 were negatively impacted by lower MegaMex earnings driven by significantly higher avocado costs and the effect of a non-operating tax benefit in fiscal 2018.

Effective Tax Rate



	Three Months Ended				Nine Months Ended
	July 28, 2019		July 29, 2018		July 28, 2019		July 29, 2018
Effective tax rate	23.6	%	18.4	%	18.3	%	12.6	%

The Company's effective tax rates for the third quarter and first nine months of fiscal 2019 were 23.6 percent and 18.3 percent respectively. This compares to 18.4 percent and 12.6 percent for the respective periods last year. The higher effective tax rate in the current quarter was the result of deferred tax remeasurements last year related to tax reform. The Company expects a full-year effective tax rate between 18.3 and 20.3 percent for fiscal 2019. For further information, refer to Note J - Income Taxes.

Segment Results

Net sales and operating profits for each of the Company’s reportable segments are set forth below. The Company is an integrated enterprise, characterized by substantial intersegment cooperation, cost allocations, and sharing of assets. Therefore, the Company does not represent these segments, if operated independently, would report the operating profit and other financial information shown below. At the beginning of fiscal 2019, the Hormel Deli Solutions division combined all deli businesses, including the Jennie-O Turkey Store deli division, into one division within the Refrigerated Foods segment. In addition, the ingredients business was realigned from the Grocery Products segment to the Refrigerated Foods segment. Fiscal 2018 segment results have been adjusted to reflect these changes. Additional segment financial information can be found in Note N - Segment Reporting of the Notes to Consolidated Financial Statements in this Quarterly Report on Form 10-Q.



	Three Months Ended							Nine Months Ended
(in thousands)	July 28, 2019			July 29, 2018		% Change		July 28, 2019		July 29, 2018		% Change
Net Sales
Grocery Products	$	543,088		$	607,054	(10.5	)	$	1,785,232	$	1,832,123	(2.6	)
Refrigerated Foods	1,301,101			1,288,394		1.0		3,837,732		3,788,097		1.3
Jennie-O Turkey Store	298,781			316,100		(5.5	)	925,271		942,735		(1.9	)
International & Other	147,735			147,594		0.1		447,569		458,048		(2.3	)
Total	$	2,290,705		$	2,359,142	(2.9	)	$	6,995,804	$	7,021,003	(0.4	)

Segment Profit
Grocery Products	$	58,778		$	83,433	(29.6	)	$	258,574	$	274,184	(5.7	)
Refrigerated Foods	171,795			151,924		13.1		492,476		476,375		3.4
Jennie-O Turkey Store	21,278			23,305		(8.7	)	76,931		93,102		(17.4	)
International & Other	18,755			18,646		0.6		58,058		64,151		(9.5	)
Total segment profit	270,606			277,308		(2.4	)	886,039		907,812		(2.4	)
Net unallocated expense	9,584			19,686		(51.3	)	297		48,384		(99.4	)
Noncontrolling interest	(22		)	110		(120.0	)	279		352		(20.7	)
Earnings before income taxes	$	261,000		$	257,732	1.3		$	886,021	$	859,780	3.1

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Grocery Products

Results for the Grocery Products segment compared to the prior year are as follows:



	Three Months Ended						Nine Months Ended
(in thousands)	July 28, 2019		July 29, 2018		% Change		July 28, 2019		July 29, 2018		% Change
Volume (lbs.)	290,658		323,748		(10.2	)	970,003		982,479		(1.3	)
Net sales	$	543,088	$	607,054	(10.5	)	$	1,785,232	$	1,832,123	(2.6	)
Segment profit	58,778		83,433		(29.6	)	258,574		274,184		(5.7	)

Net sales for the third quarter of fiscal 2019 decreased due to the CytoSport divestiture and lower Skippy^® peanut butter sales. These declines more than offset growth from the SPAM^® family of products, Don Miguel^® branded items, Dinty Moore^® stew, and Herdez^® salsas and sauces. For the first nine months of fiscal 2019, net sales declined due to the CytoSport divestiture.

For the third quarter, segment profit decreased primarily due to the divestiture of CytoSport, the impact of significantly higher avocado costs on MegaMex earnings, and lower Skippy^® peanut butter pricing. Segment profit decreased for the first nine months of fiscal 2019 on lower equity in earnings from MegaMex, which was driven by significantly higher avocado costs and a non-operating tax benefit last year.

The Company anticipates lower volume and sales in the fourth quarter due to the divestiture of CytoSport and lower prices on Skippy^® peanut butter products. Segment profit is expected to improve slightly year-over-year as the core business offsets the impact of the CytoSport divestiture and a $17.3 million impairment of the CytoSport trademark last year.

Refrigerated Foods

Results for the Refrigerated Foods segment compared to the prior year are as follows:



	Three Months Ended						Nine Months Ended
(in thousands)	July 28, 2019		July 29, 2018		% Change		July 28, 2019		July 29, 2018		% Change
Volume (lbs.)	558,531		564,672		(1.1	)	1,726,682		1,734,842		(0.5	)
Net sales	$	1,301,101	$	1,288,394	1.0		$	3,837,732	$	3,788,097	1.3
Segment profit	171,795		151,924		13.1		492,476		476,375		3.4

Third quarter net sales increases were led by strong demand for foodservice items such as Hormel^® Bacon 1^™ cooked bacon, Old Smokehouse^® premium raw bacon, and Hormel^® Fire Braised^TM products. Retail sales of Hormel^® Black Label^® convenience bacon and Columbus^® branded deli items also contributed to overall growth. Volume declined slightly for the quarter, attributed to price increases on value-added items. For the first nine months of 2019, growth from value-added products more than offset declines in commodity sales.

Refrigerated Foods segment profit increased significantly for the quarter primarily due to improved profitability for value-added products. Favorable operational expenses and higher commodity profits also contributed to the earnings growth. Segment profit for the first nine months increased as value-added profits more than offset commodity profit declines from prior quarters.

Looking ahead to the fourth quarter, Refrigerated Foods is expected to grow volume and sales due to strong demand for value-added products. Segment profit is expected to decline due to lower commodity profits and higher input costs. The impact of African swine fever presents additional risk to input costs. This could lead to short-term margin compression as branded value-added pricing actions lag input cost increases.

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Jennie-O Turkey Store

Results for the Jennie-O Turkey Store segment compared to the prior year are as follows:



	Three Months Ended						Nine Months Ended
(in thousands)	July 28, 2019		July 29, 2018		% Change		July 28, 2019		July 29, 2018		% Change
Volume (lbs.)	189,146		197,710		(4.3	)	546,916		553,475		(1.2	)
Net sales	$	298,781	$	316,100	(5.5	)	$	925,271	$	942,735	(1.9	)
Segment profit	21,278		23,305		(8.7	)	76,931		93,102		(17.4	)

For the third quarter, sales decreased as lower retail and foodservice sales were not fully offset by improved results in the commodity and whole-bird businesses. The retail business continues to be impacted by lost distribution due to the impact of two voluntary product recalls. Net sales for the first nine months of fiscal 2019 declined, as improved commodity, whole-bird, and foodservice sales did not offset a decline in retail sales.

Segment profit for the third quarter declined as a result of lower sales from retail and foodservice value-added items. For the first nine months of fiscal 2019, lower retail sales, higher-than-expected plant startup expenses, and higher feed costs negatively impacted profitability.

Jennie-O Turkey Store anticipates an earnings decline in the fourth quarter compared to last year driven by lower retail sales of lean ground turkey.

International & Other

Results for the International & Other segment compared to the prior year are as follows:



	Three Months Ended					Nine Months Ended
(in thousands)	July 28, 2019		July 29, 2018		% Change	July 28, 2019		July 29, 2018		% Change
Volume (lbs.)	85,169		84,763		0.5	256,803		262,090		(2.0	)
Net sales	$	147,735	$	147,594	0.1	$	447,569	$	458,048	(2.3	)
Segment profit	18,755		18,646		0.6	58,058		64,151		(9.5	)

Volume and sales for the third quarter were flat as improved results in China offset the divestiture of CytoSport. Results in China were positively impacted by strong demand for foodservice and Skippy^® peanut butter products as well as increased distribution of SPAM^® luncheon meat. Segment profit for the quarter was slightly higher, driven by growth in China.

For the first nine months of 2019, volume, sales, and segment profit continued to be impacted by tariffs on fresh pork exports and lower equity in earnings. These factors more than offset strong results from the China business.

The Company anticipates volume, sales, and earnings declines due to lower exports and the divestiture of CytoSport. Pork exports remain a risk due to global trade uncertainty.

Unallocated Income and Expenses

The Company does not allocate investment income, interest expense, or interest income to its segments when measuring performance. The Company also retains various other income and unallocated expenses at the corporate level. Equity in earnings of affiliates is included in segment profit; however, earnings attributable to the Company’s noncontrolling interests are excluded. These items are included in the segment table for the purpose of reconciling segment results to earnings before income taxes.



	Three Months Ended					Nine Months Ended
(in thousands)	July 28, 2019			July 29, 2018		July 28, 2019		July 29, 2018
Net unallocated expense	$	9,584		$	19,686	$	297	$	48,384
Noncontrolling interest earnings (loss)	(22		)	110		279		352

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For the third quarter of fiscal 2019, net unallocated expense decreased primarily due to lower interest expense and universal stock option expenses in the prior year.

Net unallocated expense for the first nine months of fiscal 2019 decreased due to a one-time gain resulting from the CytoSport divestiture, the benefit from a legal settlement, and lower selling expenses.

Related Party Transactions

There has been no material change in the information regarding Related Party Transactions as disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended October 28, 2018.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents were $560.2 million at the end of the third quarter of fiscal 2019 compared to $269.0 million at the end of the comparable fiscal 2018 period.

Cash provided by operating activities was $572.9 million in the first nine months of fiscal 2019 compared to $743.2 million in the same period of fiscal 2018. The decrease is attributed to higher levels of working capital in the first nine months of fiscal 2019 compared to the prior year, primarily due to an elevated level of inventory.

Cash provided by investing activities was $354.9 million in the first nine months of fiscal 2019 compared to cash used in investing activities of $1,096.0 million in the same period of fiscal 2018. In the second quarter of fiscal 2019, the Company received proceeds of $473.9 million for the sale of CytoSport. In fiscal 2018, the Company spent $857.4 million on the acquisition of Columbus. Capital expenditures in the first nine months of fiscal 2019 decreased to $154.2 million from $244.0 million in the comparable period of fiscal 2018. The Company currently estimates its fiscal 2019 capital expenditures to be approximately $250.0 million. Key projects for the full year include an expansion of the Company's Burke Corporation pizza-toppings facility in Nevada, Iowa, and Fontanini facility in McCook, Ill., along with other projects designed to increase value-added capacity.

Cash used in financing activities was $826.0 million in the first nine months of fiscal 2019 compared to cash provided by financing activities of $177.3 million in the same period of fiscal 2018. In the first nine months of fiscal 2019, the Company repaid $374.8 million of debt related to the purchase of Columbus in the prior year. The higher cash provided in fiscal 2018 is related to the purchase of Columbus as the Company borrowed $375.0 million under a term loan facility and $375.0 million under a revolving credit facility to fund the purchase, with $280.0 million paid down during the first nine months. The Company repurchased $174.2 million of its common stock in the first nine months of fiscal 2019 compared to $44.7 million repurchased during the same period of the prior year. For additional information pertaining to the Company’s share repurchase plans or programs, see Part II, Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds.

Cash dividends paid to the Company’s shareholders continue to be an ongoing financing activity for the Company. Dividends paid in the first nine months of fiscal 2019 were $325.0 million compared to $288.5 million in the comparable period of fiscal 2018. For fiscal 2019, the annual dividend rate was increased to $0.84 per share, representing the 53rd consecutive annual dividend increase. The Company has paid dividends for 364 consecutive quarters and expects to continue doing so.

The Company is required by certain covenants in its debt agreements to maintain specified levels of financial ratios and financial position. At the end of the third quarter of fiscal 2019, the Company was in compliance with all of these debt covenants.

Cash flows from operating activities continue to provide the Company with its principal source of liquidity. The Company does not anticipate a significant risk to cash flows from this source in the foreseeable future because the Company operates in a relatively stable industry and has strong brands across many product lines.

The Company is dedicated to returning excess cash flow to shareholders through dividend payments. Growing the business through innovation and evaluating opportunities for strategic acquisitions remains a focus for the Company. Reinvestments in the business to ensure employee and food safety are a top priority for the Company. Capital spending to enhance and expand current operations will also be a significant cash outflow for fiscal 2019.

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Contractual Obligations and Commercial Commitments

The Company records income taxes in accordance with the provisions of ASC 740, Income Taxes. The Company is unable to determine its contractual obligations by year related to this pronouncement, as the ultimate amount or timing of settlement of its reserves for income taxes cannot be reasonably estimated. The total liability for unrecognized tax benefits, including interest and penalties, at July 28, 2019, was $28.5 million.

There have been no other material changes to the information regarding the Company’s future contractual financial obligations previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended October 28, 2018.

Off-Balance Sheet Arrangements

As of July 28, 2019, and October 28, 2018, the Company had $45.6 million and $45.5 million, respectively, of standby letters of credit issued on its behalf. The standby letters of credit are primarily related to the Company’s self-insured workers compensation programs. However, that amount includes $2.4 million as of July 28, 2019, and $2.4 million as of October 28, 2018, of revocable standby letters of credit for obligations of an affiliated party that may arise under workers compensation claims. Letters of credit are not reflected in the Company’s Consolidated Statements of Financial Position.

Trademarks

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

FORWARD-LOOKING STATEMENTS

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

The Private Securities Litigation Reform Act of 1995 (the Reform Act) provides a “safe harbor” for forward-looking statements to encourage companies to provide prospective information. The Company is filing this cautionary statement in connection with the Reform Act. When used in this Quarterly Report on Form 10-Q, the Company’s Annual Report to Stockholders, other filings by the Company with the Securities and Exchange Commission (the Commission), the Company’s press releases, and oral statements made by the Company’s representatives, the words or phrases “should result,” “believe,” “intend,” “plan,” “are expected to,” “targeted,” “will continue,” “will approximate,” “is anticipated,” “estimate,” “project,” or similar expressions are intended to identify forward-looking statements within the meaning of the Reform Act. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those anticipated or projected.

In connection with the “safe harbor” provisions of the Reform Act, the Company is identifying risk factors that could affect financial performance and cause the Company’s actual results to differ materially from opinions or statements expressed with respect to future periods. The discussion of risk factors in Part II, Item 1A of this Quarterly Report on Form 10-Q contains certain cautionary statements regarding the Company’s business, which should be considered by investors and others. Such risk factors should be considered in conjunction with any discussions of operations or results by the Company or its representatives, including any forward-looking discussion, as well as comments contained in press releases, presentations to securities analysts or investors, or other communications by the Company.

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

The Company cautions readers not to place undue reliance on forward-looking statements, which represent current views as of the date made. Forward-looking statements are inherently at risk to any changes in the national and worldwide economic environment, which could include, among other things, economic conditions, political developments, currency exchange rates, interest and inflation rates, accounting standards, taxes, and laws and regulations affecting the Company and its markets.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Hog Markets: The Company’s earnings are affected by fluctuations in the live hog market. To minimize the impact on earnings, and to ensure a steady supply of quality hogs, the Company has entered into contracts with producers for the purchase of hogs at formula-based prices over periods of up to 10 years. Hogs purchased under contract accounted for 94 percent and 96 percent of the total hogs purchased by the Company during the first nine months of fiscal years 2019 and 2018, respectively. The majority of these contracts use market-based formulas based on hog futures, hog primal values, or industry reported hog markets. Other contracts use a formula based on the cost of production, which can fluctuate independently from hog markets. The Company’s value-added branded portfolio helps mitigate changes in hog and pork market prices. Therefore, a hypothetical 10 percent change in the cash hog market would have had an immaterial effect on the Company’s results of operations.

To reduce the Company's exposure to changes in lean hog markets, the Company utilizes a hedge program to offset the fluctuations in the Company's future direct hog purchases. The program utilizes lean hog futures which are accounted for under cash flow hedge accounting. The fair value of the Company's open futures contracts in this program as of July 28, 2019 was $5.9 million, before tax, compared to $0.7 million, before tax as of October 28, 2018. The Company measures its market risk exposure on its lean hog futures contracts using a sensitivity analysis, which considers a hypothetical 10 percent change in the market prices for lean hogs. A 10 percent decrease in the market price for lean hogs would have negatively impacted the fair value of the Company's July 28, 2019, open lean hog contracts by $8.0 million, which in turn would lower the Company's future cost on purchased hogs by a similar amount.

Turkey Production Costs: The Company raises or contracts for live turkeys to meet the majority of its raw material supply requirements. Production costs in raising turkeys are subject primarily to fluctuations in feed prices, and to a lesser extent, fuel costs. Under normal, long-term market conditions, changes in the cost to produce turkeys are offset by proportional changes in the turkey market.

To reduce the Company’s exposure to changes in grain prices, the Company utilizes a hedge program to offset the fluctuation in the Company’s future direct grain purchases. This program utilizes corn futures for Jennie-O Turkey Store, and these contracts are accounted for under cash flow hedge accounting. The fair value of the Company’s open futures contracts as of July 28, 2019, was $2.6 million, before tax, compared to $(1.3) million, before tax, as of October 28, 2018. The Company measures its market risk exposure on its grain futures contracts using a sensitivity analysis, which considers a hypothetical 10 percent change in the market prices for grain. A 10 percent decrease in the market price for grain would have negatively impacted the fair value of the Company’s July 28, 2019, open grain contracts by $8.7 million, which in turn would lower the Company’s future cost on purchased grain by a similar amount.

Other Input Costs: The costs of raw materials, packaging materials, freight, fuel, and energy may cause the Company's results to fluctuate significantly. To manage input cost volatility, the Company pursues cost saving measures, forward pricing, derivatives, and pricing actions when necessary.

Long-Term Debt: A principal market risk affecting the Company is the exposure to changes in interest rates on the Company’s fixed-rate, long-term debt. Market risk for fixed-rate, long-term debt is estimated as the potential increase in fair value, resulting from a hypothetical 10 percent decrease in interest rates, and amounts to approximately $1.0 million. The fair value of the Company’s long-term debt was estimated using discounted future cash flows based on the Company’s incremental borrowing rate for similar types of borrowing arrangements.

Investments: The Company has corporate-owned life insurance policies classified as trading securities as part of a rabbi trust to fund certain supplemental executive retirement plans and deferred income plans. As of July 28, 2019, the balance of these securities totaled $157.1 million compared to $137.3 million as of October 28, 2018. A majority of these securities represent fixed income funds. The Company is subject to market risk due to fluctuations in the value of the remaining investments, as unrealized gains and losses associated with these securities are included in the Company’s net earnings on a mark-to-market basis. A 10 percent decline in the value of the investments not held in fixed income funds would have a negative impact to the Company’s pretax earnings of approximately $7.0 million, while a 10 percent increase in value would have a positive impact of the same amount.

International Assets: The fair values of certain Company assets are subject to fluctuations in foreign currencies. The Company's net asset position in foreign currencies as of July 28, 2019 was $537.1 million, compared to $687.7 million as of October 28, 2018, with most of the exposure existing in Chinese yuan and Brazilian real. Changes in currency exchange rates impact the fair values of the Company assets either currently through the Consolidated Statements of Operations within Interest and Investment Income or through the Consolidated Statements of Financial Position within Accumulated Other Comprehensive Loss.

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The Company measures its foreign currency exchange risk by using a 10 percent sensitivity analysis on the Company's primary foreign net asset position, the Chinese yuan and Brazilian real, as of July 28, 2019. A 10 percent strengthening in the value of the yuan relative to the U.S. dollar would result in other comprehensive income of approximately $33.1 million pretax. A 10 percent weakening in the value of the yuan relative to the U.S. dollar would result in other comprehensive loss of approximately $27.1 million pretax. A 10 percent strengthening in the value of the real relative to the U.S. dollar would result in other comprehensive income of approximately $13.9 million pretax. A 10 percent weakening in the value of the real relative to the U.S. dollar would result in other comprehensive loss of approximately $11.4 million pretax.

Item 4. Controls and Procedures


(a)	Disclosure Controls and Procedures.

As of the end of the period covered by this report (the Evaluation Date), the Company carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act)). In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures were effective to provide reasonable assurance that information the Company is required to disclose in reports it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Commission rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.


(b)	Internal Controls.

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

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

Risk Factors

The Company’s operations are subject to the general risks of the food industry.

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


▪	food spoilage;


▪	food contamination caused by disease-producing organisms or pathogens, such as Listeria monocytogenes, Salmonella, and pathogenic E coli.;


▪	food allergens;


▪	nutritional and health-related concerns;


▪	federal, state, and local food processing controls;


▪	consumer product liability claims;


▪	product tampering; and


▪	the possible unavailability and/or expense of liability insurance.

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

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

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

Volatility in financial markets and the deterioration of national and global economic conditions could impact the Company’s operations as follows:


▪	The financial stability of our customers and suppliers may be compromised, which could result in additional bad debts for the Company or non-performance by suppliers; and


▪	The value of our investments in debt and equity securities may decline, including most significantly the Company’s trading securities held as part of a rabbi trust to fund supplemental executive retirement plans and deferred income plans, and the Company’s assets held in pension plans.

The Company utilizes hedging programs to manage its exposure to various commodity market risks, which qualify for hedge accounting for financial reporting purposes. Volatile fluctuations in market conditions could cause these instruments to become ineffective, which could require any gains or losses associated with these instruments to be reported in the Company’s earnings

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each period. These instruments may limit the Company’s ability to benefit from market gains if commodity prices become more favorable than those secured under the Company’s hedging programs.

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

Outbreaks of disease among livestock and poultry flocks could harm the Company’s revenues and operating margins.

The Company is subject to risks associated with the outbreak of disease in pork and beef livestock, and poultry flocks, including African swine fever (ASF), Bovine Spongiform Encephalopathy (BSE), pneumo-virus, Porcine Circovirus 2 (PCV2), Porcine Reproduction & Respiratory Syndrome (PRRS), Foot-and-Mouth Disease (FMD), Porcine Epidemic Diarrhea Virus (PEDv), and Highly Pathogenic Avian Influenza (HPAI). The outbreak of disease 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.

Most recently, the outbreak of ASF in China has eliminated over 30 percent of the country's hog herd compared to last year, according to the Ministry of Agriculture and Rural Affairs of the People's Republic of China. The disease has also spread to additional countries in Asia and Europe. If an outbreak of ASF were to occur in the United States, the Company's supply of hogs and pork could be materially impacted.

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

Fluctuations in commodity prices and availability of pork, poultry, beef, feed grains, avocados, peanuts, energy, and whey could harm the Company’s earnings.

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

The live hog industry has evolved to large, vertically-integrated operations using long-term supply agreements. This has resulted in fewer hogs being available on the cash spot market. Consequently, the Company uses long-term supply contracts based on market-based formulas or the cost of production to ensure a stable supply of raw materials while minimizing extreme fluctuations in costs over the long-term. This may result, in the short-term, in higher live hog costs compared to the cash spot market, depending on the relationship of the cash spot market to contract prices. Market-based pricing on certain product lines, and lead time required to implement pricing adjustments, may prevent all or part of these cost increases from being recovered, and these higher costs could adversely affect our short-term financial results.

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

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

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

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Market demand for the Company’s products may fluctuate.

The Company faces competition from producers of alternative protein sources, including pork, beef, turkey, chicken, fish, nut butters, whey, and plant-based proteins. The bases on which the Company competes include:


▪	price;


▪	product quality and attributes;


▪	brand identification;


▪	breadth of product line; and


▪	customer service.

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

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

The Company has made several acquisitions and divestitures in recent years that align with the Company’s strategic initiative of delivering long-term value to shareholders, most recently the acquisition of Columbus and the divestiture of CytoSport. The Company regularly reviews strategic opportunities to grow through acquisitions and to divest non-strategic assets. Potential risks associated with these transactions include the the inability to consummate a transaction on favorable terms, the diversion of management's attention from other business concerns, the potential loss of key employees and customers of current or acquired companies, the inability to integrate or divest operations successfully, the possible assumption of unknown liabilities, potential disputes with buyers or sellers, potential impairment charges if purchase assumptions are not achieved or market conditions decline, and the inherent risks in entering markets or lines of business in which the Company has limited or no prior experience. Any or all of these risks could impact the Company’s financial results and business reputation. In addition, acquisitions outside the United States may present unique challenges and increase the Company's exposure to the risks associated with foreign operations.

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

Disruption of operations at co‑packers or other suppliers may impact the Company’s product or raw material supply, which could have an adverse effect on the Company’s financial results. Additionally, actions taken to mitigate the impact of any potential disruption, including increasing inventory in anticipation of a potential production or supply interruption, may adversely affect the Company’s financial results.

The Company’s operations are subject to the general risks of litigation.

The Company is involved on an ongoing basis in litigation arising in the ordinary course of business. Trends in litigation may include class actions involving employees, consumers, competitors, suppliers, shareholders, or injured persons, and claims relating to product liability, contract disputes, intellectual property, advertising, labeling, wage and hour laws, employment practices, or environmental matters. Litigation trends and the outcome of litigation cannot be predicted with certainty and adverse litigation trends and outcomes could adversely affect the Company’s financial results.

The Company is subject to the loss of a material contract.

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

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

The Company’s operations are subject to extensive regulation by the U.S. Department of Homeland Security, the U.S. Department of Agriculture, the U.S. Food and Drug Administration, federal and state taxing authorities, and other federal, state, and local authorities who oversee workforce immigration laws, tax regulations, animal welfare, food safety standards, and the processing, packaging, storage, distribution, advertising, and labeling of the Company’s products. The Company’s manufacturing facilities and products are subject to continuous 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

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a government furlough could also cause disruption to the Company’s manufacturing facilities. Additionally, the Company is subject to new or modified laws, regulations, and accounting standards. The Company’s failure or inability to comply with such requirements could subject the Company to civil remedies, including fines, injunctions, recalls, or seizures, as well as potential criminal sanctions.

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

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

The Company’s foreign operations pose additional risks to the Company’s business.

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

The Company may be adversely impacted if the Company is unable to protect information technology systems against, or effectively respond to, cyber-attacks, security breaches, interruptions or other failures.

Information technology systems are an important part of the Company’s business operations. Attempted cyber-attack and other cyber incidents are occurring more frequently and are being made by groups and individuals with a wide range of motives and expertise.

In addition, the Company has begun a process transformation project to achieve better analytics, customer service, and process efficiencies through the use of Oracle Cloud Solutions. This project is expected to improve the efficiency and effectiveness of certain financial and business transaction processes and the underlying systems environment. Implementation is expected to occur in phases over the next several years. Such an implementation is a major undertaking from a financial, management, and personnel perspective. The implementation of the enterprise resource planning system may prove to be more difficult, costly, or time consuming than expected, and there can be no assurance that this system will be beneficial to the extent anticipated.

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

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

As of July 28, 2019, the Company had approximately 18,700 employees worldwide, of which approximately 3,220 were represented by labor unions, principally the United Food and Commercial Workers Union. A significant increase in labor costs or a deterioration of labor relations at any of the Company’s facilities or contracted hog processing facilities resulting in work slowdowns or stoppages could harm the Company’s financial results. Union contracts at the Company's facilities in Algona, Iowa; Atlanta, Georgia; Austin, Minnesota; and Beloit, Wisconsin will expire during the fourth quarter of fiscal 2019, covering approximately 2,300 employees and negotiations are underway.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities in the Third Quarter of Fiscal 2019



Period	Total Number of Shares Purchased¹	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs¹	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs¹
April 29, 2019 – June 2, 2019	2,260,000	$	39.61	2,260,000	5,179,721
June 3, 2019 – June 30, 2019	199,086	40.56		199,086	4,980,635
July 1, 2019 – July 28, 2019	222,400	40.56		222,400	4,758,235
Total	2,681,486	$	39.76	2,681,486

¹On January 31, 2013, the Company announced its Board of Directors had authorized the repurchase of 10,000,000 shares

of its common stock with no expiration date. The repurchase program was authorized at a meeting of the Company’s Board of Directors on January 29, 2013. On November 23, 2015, the Board of Directors authorized a two-for-one split of the Company’s common stock. As part of the resolution to approve the stock split, the number of shares remaining to be repurchased was adjusted proportionately. The stock split was subsequently approved by stockholders at the Company’s Annual Meeting on January 26, 2016, and effected January 27, 2016. All numbers in the table above reflect the impact of this stock split.

Item 6. Exhibits



31.1	Certification Required Under Section 302 of the Sarbanes-Oxley Act of 2002

31.2	Certification Required Under Section 302 of the Sarbanes-Oxley Act of 2002

32.1	Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101	The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended July 28, 2019, formatted in Inline XBRL: (i) Consolidated Statements of Financial Position, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Changes in Shareholders' Investment, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.

104	The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended July 28, 2019, formatted in Inline XBRL (included as Exhibit 101).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		HORMEL FOODS CORPORATION
		(Registrant)


Date: September 3, 2019	By	/s/ JAMES N. SHEEHAN
		JAMES N. SHEEHAN
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)

Date: September 3, 2019	By	/s/ JANA L. HAYNES
		JANA L. HAYNES
		Vice President and Controller
		(Principal Accounting Officer)

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock

New York Stock Exchange