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
• Due to the impact of the COVID-19 pandemic and subsequent shelter-in-place
restrictions, the Company experienced significant demand shifts from its
foodservice business to its retail business. The Company also experienced
operational interruptions as its manufacturing facilities and suppliers
were impacted by COVID-19.
• Segment profit increased due to strong growth from Grocery Products,
decline in
• Net earnings decreased due primarily to one-time gains resulting from the
CytoSport divestiture last year and losses on investments during the
quarter.
• Grocery Products profit increased significantly due to higher sales and an
improved mix across the portfolio. •Jennie-O Turkey Store segment profit increased due to higher sales and improved plant and live production performance.
• International & Other profit increased as higher branded export margins
and income from affiliates more than offset weaker results inChina and lower fresh pork export margins.
•
branded retail products were more than offset by the adverse profit impact
from significantly lower foodservice sales and higher operational costs. • Year-to-date cash flow from operations was$548.3 million , up 50 percent
compared to last year due to lower levels of inventory and accounts receivable. • The Company acquired Sadler's Smokehouse for$268.9 million during the quarter. The transaction closed onMarch 2, 2020 .
Response to COVID-19
The Company is committed to making the necessary investments to keep its team members safe. Enhanced safety procedures have been implemented across the Company's facilities, including providing personal protective equipment for all production team members, frequent disinfecting of high-touch areas, reconfiguration of common areas and workstations, temperature and wellness screenings, revised shift scheduling, reducing production line speeds, new guidelines on carpooling, more extensive social distancing measures throughout each facility and where possible, providing remote work opportunities and facilitating access to rapid testing for employees. The Company has also announced over$11 million in bonuses to all full- and part-time plant production team members. 26
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Consolidated Results
Volume,
Thirteen Weeks Ended Twenty-Six Weeks Ended (in thousands, except % % per share amounts) April 26, 2020 April 28, 2019 Change April 26, 2020 April 28, 2019 Change Volume (lbs.) 1,233,072 1,180,007 4.5 2,420,059 2,376,900 1.8 Organic Volume (1) 1,229,343 1,143,879 7.5 2,416,329 2,304,939 4.8 Net Sales$ 2,422,465 $ 2,344,744 3.3$ 4,806,899 $ 4,705,099 2.2 Organic Net Sales (1) 2,400,855 2,275,422 5.5 4,785,289 4,570,623 4.7 Earnings Before Income Taxes 286,489 318,046 (9.9 ) 576,651 625,021 (7.7 ) Net Earnings Attributable toHormel Foods Corporation 227,734 282,429 (19.4 ) 470,606 523,854 (10.2 ) Diluted Earnings per Share 0.42 0.52 (19.2 ) 0.86 0.96 (10.4 ) Adjusted Earnings Before Income Taxes (1) 286,489 301,577 (5.0 ) 576,651 608,552 (5.2 ) Adjusted Diluted Earnings Per Share (1) 0.42 0.46 (8.7 ) 0.86 0.90 (4.4 ) (1)The non-GAAP adjusted financial measurements of adjusted earnings before income taxes (adjusted pretax earnings) and adjusted diluted earnings per share are presented to provide investors with additional information to facilitate the comparison of past and present operations. Adjusted earnings per share excludes the one-time gain associated with the divestiture of the CytoSport business in the second quarter of fiscal 2019, which was recognized in net unallocated expense and provision for income taxes. The tax benefit was driven by the sale of shares of the CytoSport legal entity. The non-GAAP adjusted financial measurements of organic net sales and organic volume are presented to provide investors with additional information to facilitate the comparison of past and present operations. 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 Sadler's Smokehouse acquisition (March 2020 ) in theRefrigerated Foods segment and the CytoSport divestiture (April 2019 ) in the Grocery Products and International & Other segments. The Company believes these non-GAAP financial measurements provide useful information to investors because they are the measurements used to evaluate performance on a comparable year-over-year basis. Non-GAAP measurements are not intended to be a substitute forU.S. GAAP measurements in analyzing financial performance. These non-GAAP measurements are not in accordance with generally accepted accounting principles and may be different from non-GAAP measures used by other companies.
The tables below show the calculations to reconcile from the GAAP measures to the non-GAAP adjusted measures.
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RECONCILIATION OF NON-GAAP MEASURES (in thousands) ADJUSTED EARNINGS (NON-GAAP) Thirteen Weeks Ended April 26, 2020 April 28, 2019 Non-GAAP Gain on Adjusted GAAP Earnings GAAP Earnings CytoSport Sale Earnings % Change Total Segment Profit$ 309,706 $ 294,661 $ -$ 294,661 5.1 Net Unallocated Expense 23,098 (23,178 ) 16,469 (6,709 ) (444.3 ) Noncontrolling Interest (119 ) 207 - 207 (157.5 ) Earnings Before Income Taxes$ 286,489 $ 318,046 $ (16,469 ) $ 301,577 (5.0 ) Provision for Income Taxes 58,873 35,410 16,972 52,382 12.4 Net Earnings$ 227,615 $ 282,636 $ (33,441 ) $ 249,195 (8.7 ) Less: Net Earnings Attributable to Noncontrolling Interest (119 ) 207 - 207 (157.5 ) Net Earnings Attributable to Hormel Foods Corporation$ 227,734 $ 282,429 $ (33,441 ) $ 248,988 (8.5 ) Diluted Earnings Per Share $ 0.42 $ 0.52$ (0.06 ) $ 0.46 (8.7 ) Twenty-Six Weeks Ended April 26, 2020 April 28, 2019 Non-GAAP Gain on Adjusted GAAP Earnings GAAP Earnings CytoSport Sale Earnings % Change Total Segment Profit$ 603,986 $ 615,433 $ -$ 615,433 (1.9 ) Net Unallocated Expense 27,297 (9,287 ) 16,469 7,182 280.1 Noncontrolling Interest (39 ) 301 - 301 (113.0 ) Earnings Before Income Taxes$ 576,651 $ 625,021 $ (16,469 ) $ 608,552 (5.2 ) Provision for Income Taxes 106,083 100,866 16,972 117,838 (10.0 ) Net Earnings$ 470,568 $ 524,155 $ (33,441 ) $ 490,714 (4.1 ) Less: Net Earnings Attributable to Noncontrolling Interest (39 ) 301 - 301 (113.0 ) Net Earnings Attributable to Hormel Foods Corporation$ 470,606 $ 523,854 $ (33,441
)
Diluted Earnings Per Share $ 0.86 $ 0.96
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ORGANIC VOLUME AND
Thirteen Weeks Ended April 26, 2020 April 28, 2019 Organic Organic Organic (in thousands) Reported GAAP Acquisitions (Non-GAAP) Reported GAAP Divestitures (Non-GAAP) % Change Volume (lbs.) Grocery Products 363,703 - 363,703 340,602 (35,103 ) 305,499 19.1 Refrigerated Foods 576,543 (3,730 ) 572,813 578,795 - 578,795 (1.0 ) Jennie-O Turkey Store 209,477 - 209,477 175,611 - 175,611 19.3 International & Other 83,350 - 83,350
84,999 (1,025 ) 83,974 (0.7 )
Total Volume 1,233,072 (3,730 ) 1,229,343 1,180,007 (36,128 ) 1,143,879 7.5 Net Sales Grocery Products$ 683,250 $ -$ 683,250 $ 635,319 $ (67,415 ) $ 567,904 20.3 Refrigerated Foods 1,247,336 (21,610 ) 1,225,726 1,257,884 - 1,257,884 (2.6 ) Jennie-O Turkey Store 343,056 - 343,056 305,256 - 305,256 12.4 International & Other 148,823 - 148,823
146,285 (1,907 ) 144,378 3.1
Total Net Sales$ 2,422,465 $ (21,610 ) $ 2,400,855 $ 2,344,744 $ (69,322 ) $ 2,275,422 5.5 Twenty-Six Weeks Ended April 26, 2020 April 28, 2019 Organic Organic Organic (in thousands) Reported GAAP Acquisitions (Non-GAAP) Reported GAAP Divestitures (Non-GAAP) % Change Volume (lbs.) Grocery Products 656,621 - 656,621 679,345 (69,910 ) 609,435 7.7 Refrigerated Foods 1,182,152 (3,730 ) 1,178,422 1,168,151 - 1,168,151 0.9 Jennie-O Turkey Store 406,676 - 406,676 357,770 - 357,770 13.7 International & Other 174,610 - 174,610
171,634 (2,052 ) 169,583 3.0
Total Volume 2,420,059 (3,730 ) 2,416,329 2,376,900 (71,962 ) 2,304,939 4.8 Net Sales Grocery Products$ 1,223,876 $ -$ 1,223,876 $ 1,242,144 $ (130,588 ) $ 1,111,556 10.1 Refrigerated Foods 2,599,127 (21,610 ) 2,577,516 2,536,631 - 2,536,631 1.6 Jennie-O Turkey Store 673,183 - 673,183 626,490 - 626,490 7.5 International & Other 310,714 - 310,714
299,834 (3,889 ) 295,946 5.0
Total Net Sales$ 4,806,899 $ (21,610 ) $ 4,785,289 $ 4,705,099 $ (134,477 ) $ 4,570,623 4.7 Net Sales The increase in net sales for the second quarter of fiscal 2020 was primarily related to higher branded retail sales across the enterprise and higher sales of commodity items inJennie-O Turkey Store andRefrigerated Foods . These increases more than offset significantly lower foodservice sales and the impact from the CytoSport divestiture last year. Due to shelter-in-place orders and restaurant closures across the country during the quarter, consumer shopping patterns dramatically shifted away from foodservice toward the retail channel. For the first six months of fiscal 2020, the increase in net sales was attributed to higher branded retail sales inGrocery Products and Refrigerated Foods and higher commodity sales inJennie-O Turkey Store andRefrigerated Foods . These increases more than offset lower foodservice sales inRefrigerated Foods andJennie-O Turkey Store and the impact from the CytoSport divestiture last year. 29
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Cost of Products Sold
Thirteen Weeks Ended
Twenty-Six Weeks Ended
April 28, % April 28, %
(in thousands)
3.7$ 3,861,127 $ 3,747,616 3.0
Cost of products sold for the second quarter increased driven by higher sales
and approximately
Cost of products sold for the first six months of fiscal 2020 increased primarily due to higher sales.
The Company expects to absorb another
Gross Profit Thirteen Weeks Ended
Twenty-Six Weeks Ended
April 26, April 28, % April 26, April 28, % (in thousands) 2020 2019 Change 2020 2019 Change Gross Profit$ 477,352 $ 469,149 1.7$ 945,773 $ 957,483 (1.2 ) Percentage of Net Sales 19.7 % 20.0 % 19.7 % 20.3 % Gross profit as a percentage of net sales declined for the second quarter. The primary driver of the decline was sales mix due to lower enterprise-wide foodservice sales and higher operational costs related to the impact of the COVID-19 pandemic. Offsetting some of this impact was improved mix within the Grocery Products segment due to strong demand for branded retail items. For the first six months of fiscal 2020, gross profit as a percentage of net sales declined due to the mix impact from lower foodservice sales across the Company, higher pork and beef raw material costs during the first quarter and higher operational costs due to the impact of the COVID-19 pandemic. Looking ahead to the third quarter of fiscal 2020, the Company expects to be negatively impacted by operational interruptions, record high input costs, lower foodservice demand and higher operating costs related to the COVID-19 pandemic. The Company expects continued strength from branded, value-added retail products to offset a portion of these impacts.
Selling, General and Administrative (SG&A)
Thirteen Weeks Ended
Twenty-Six Weeks Ended
April 28, % April 28, % (in thousands) April 26, 2020 2019 Change April 26, 2020 2019 Change SG&A$ 193,912 $ 170,076 14.0$ 389,433 $ 363,620 7.1 Percentage of Net Sales 8.0 % 7.3 % 8.1 % 7.7 % For the second quarter, SG&A expenses increased primarily due to the inclusion of a one-time gain resulting from the CytoSport divestiture in fiscal 2019. For the first six months of fiscal 2020, SG&A expenses increased as fiscal 2019 benefited from both the one-time gain from the divestiture of CytoSport and a legal settlement.
Advertising investments in the second quarter were even with the prior year but declined for the first half of fiscal 2020 due to the divestiture of CytoSport.
Equity in Earnings of Affiliates
Thirteen Weeks Ended
Twenty-Six Weeks Ended
% % (in thousands) April 26, 2020 April 28, 2019 Change April 26, 2020 April 28, 2019 Change Equity in Earnings of Affiliates$ 10,021 $ 13,291 (24.6 )$ 17,608 $ 24,749 (28.9 )
The decline in equity in earnings of affiliates for the second quarter was attributed to weak foodservice demand and higher operational costs from a temporary plant closure at MegaMex due to the effects of the COVID-19 pandemic.
For the first six months of fiscal 2020, equity in earnings of affiliates declined due to lower earnings for MegaMex.
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Table of Contents Effective Tax Rate Thirteen Weeks Ended Twenty-Six Weeks Ended April 26, April 28, April 26, 2020 April 28, 2019 2020 2019 Effective Tax Rate 20.6 % 11.1 % 18.4 % 16.1 % The lower effective tax rate in fiscal 2019 was due to the benefit of the tax gain from the CytoSport divestiture. For further information, refer to Note I - Income Taxes. 31
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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. Thirteen Weeks Ended Twenty-Six Weeks Ended April 28, 2019 April 28, (in thousands) April 26, 2020 %
Change
$ 683,250 $ 635,319
7.5
1,247,336 1,257,884
(0.8 ) 2,599,127 2,536,631 2.5
343,056 305,256 12.4 673,183 626,490 7.5 International & Other 148,823 146,285 1.7 310,714 299,834 3.6 Total$ 2,422,465 $ 2,344,744
3.3
Segment Profit Grocery Products$ 127,763 $ 104,499
22.3
131,431 158,088 (16.9 ) 298,775 320,681 (6.8 ) Jennie-O Turkey Store 27,348 17,749 54.1 65,899 55,653 18.4 International & Other 23,164 14,325 61.7 43,115 39,303 9.7 Total Segment Profit 309,706 294,661 5.1 603,986 615,433 (1.9 ) Net Unallocated Expense 23,098 (23,178 ) (199.7 ) 27,297 (9,287 ) (393.9 ) Noncontrolling Interest (119 ) 207 (157.5 ) (39 ) 301 (113.0 )
Earnings Before Income Taxes
Grocery Products Thirteen Weeks Ended Twenty-Six Weeks Ended April 26, April 28, % April 26, April 28, % (in thousands) 2020 2019 Change 2020 2019 Change Volume (lbs.) 363,703 340,602 6.8 656,621 679,345 (3.3 ) Net Sales$ 683,250 $ 635,319 7.5$ 1,223,876 $ 1,242,144 (1.5 ) Segment Profit 127,763 104,499 22.3 196,198 199,796 (1.8 ) Net sales for the second quarter increased as a result of higher consumer demand for branded retail products, driven by growth from products such as the SPAM® family of products, Skippy® peanut butter, Hormel® chili and Hormel® Compleats® microwave meals. These gains more than offset the impact from the CytoSport divestiture in fiscal 2019. For the first six months of fiscal 2020, net sales declined as growth from many center store brands did not fully offset the impact from the CytoSport divestiture last year. For the second quarter, segment profit increased due to higher sales and an improved mix across the portfolio. Segment profit decreased for the first six months of fiscal 2020 due primarily to the divestiture of CytoSport last year. Grocery Products also benefited from a legal settlement in fiscal 2019. The Company anticipates continued strong demand for its branded retail items in the third quarter. Profits may be impacted by higher beef and pork trim prices due to lower supplies from operational disruptions in the industry. 32
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Table of ContentsRefrigerated Foods Thirteen Weeks Ended Twenty-Six Weeks Ended (in thousands) April 26, April 28, % April 26, April 28, % 2020 2019 Change 2020 2019 Change Volume (lbs.) 576,543 578,795 (0.4 ) 1,182,152 1,168,151 1.2 Net Sales$ 1,247,336 $ 1,257,884 (0.8 )$ 2,599,127 $ 2,536,631 2.5 Segment Profit 131,431 158,088 (16.9 ) 298,775 320,681 (6.8 ) Second quarter net sales declined as strong branded retail and deli products sales, commodity sales and the Sadler's Smokehouse acquisition did not fully offset a dramatic decline in foodservice sales due to the effect of the COVID-19 pandemic. For the first six months of fiscal 2020, net sales increases from branded retail products and commodity sales more than offset declines in foodservice sales.Refrigerated Foods segment profit declined for the second quarter, as improved results from products such as Hormel® Black Label® bacon, Applegate® natural and organic meats, Columbus® charcuterie, Hormel® pepperoni and Lloyd's® barbecue meats were more than offset by the adverse profit impact from significantly lower foodservice sales and higher operational costs. Segment profit declined for the first six months of fiscal 2020 primarily due to lower foodservice sales and earnings. Looking ahead to the third quarter,Refrigerated Foods is expected to be negatively impacted by higher input costs, lower foodservice demand and higher operating costs. These costs are primarily related to lower production volumes, the cost of enhanced safety measures in the Company's production facilities, and special employee bonuses.
Thirteen Weeks Ended Twenty-Six Weeks Ended April 26, April 28, % April 26, April 28, % (in thousands) 2020 2019 Change 2020 2019 Change Volume (lbs.) 209,477 175,611 19.3 406,676 357,770 13.7 Net Sales$ 343,056 $ 305,256 12.4$ 673,183 $ 626,490 7.5 Segment Profit 27,348 17,749 54.1 65,899 55,653 18.4 For the second quarter and first six months of fiscal 2020, improved commodity, retail and whole-bird sales more than offset a decline in foodservice sales due to the COVID-19 pandemic.
Segment profit for the second quarter and first six months of fiscal 2020 increased due to higher sales and improved plant and live production performance.
International & Other
Thirteen Weeks Ended Twenty-Six Weeks Ended April 26, April 28, % April 26, April 28, % (in thousands) 2020 2019 Change 2020 2019 Change Volume (lbs.) 83,350 84,999 (1.9 ) 174,610 171,634 1.7 Net Sales$ 148,823 $ 146,285 1.7$ 310,714 $ 299,834 3.6 Segment Profit 23,164 14,325 61.7 43,115 39,303 9.7
Sales for the second quarter increased as strong global demand for SPAM®
luncheon meat and other branded exports overcame softer foodservice sales,
especially in
Segment profit for the second quarter increased as higher branded export margins and income from affiliates more than offset weaker results inChina and lower fresh pork export margins. Segment profit for the first six months of fiscal 2020 increased due to improved results from branded exports and higher income from affiliates. International & Other expects continued strong demand for branded exports and retail items inChina . Higher input costs inChina andBrazil are expected to negatively impact results. 33
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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. Thirteen Weeks Ended Twenty-Six Weeks Ended April 26, April 28, April 26, April 28, (in thousands) 2020 2019 2020 2019 Net Unallocated Expense$ 23,098 $ (23,178 ) $ 27,297 $ (9,287 ) Net Earnings (Loss) Attributable to Noncontrolling Interest (119 ) 207 (39 ) 301 Net unallocated expense increased significantly for the second quarter and first six months of fiscal 2020 due primarily to the one-time gain from the CytoSport divestiture last year and losses on investments.
Related Party Transactions
There has been no material change in the information regardingRelated Party Transactions as disclosed in the Company's Annual Report on Form 10-K for the fiscal year endedOctober 27, 2019 .
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were$606.1 million at the end of the second quarter of fiscal 2020 compared to$639.3 million at the end of the comparable fiscal 2019 period. Cash provided by operating activities was$548.3 million in the first twenty-six weeks of fiscal 2020 compared to$365.6 million in the same period of fiscal 2019. Lower levels of inventory and accounts receivable drove the majority of the increase. Cash flows from operating activities continue to provide the Company with its principal source of liquidity. The COVID-19 pandemic has caused supply chain disruptions, market volatility and a shift in consumer behavior. The Company believes its balanced business model and strong balance sheet make it well-positioned to weather the pandemic. Cash used in investing activities was$423.1 million in the first twenty-six weeks of fiscal 2020 compared to cash provided by investing activities of$424.8 million in the same period of fiscal 2019. In the second quarter of 2020, the Company acquired Sadler's Smokehouse for$268.9 million . In fiscal 2019, the Company received proceeds of$473.9 million for the sale of CytoSport. Capital expenditures in the first twenty-six weeks of fiscal 2020 increased to$138.6 million from$87.6 million in the comparable period of fiscal 2019. The Company estimates its fiscal 2020 capital expenditures to be approximately$340.0 million . Key projects for the year include an expansion of the Company's Burke Corporation pizza-toppings facility inNevada, Iowa ; a new dry sausage production facility inNebraska ; Project Orion; and other projects to support growth of branded products. Cash used in financing activities was$188.7 million in the first twenty-six weeks of fiscal 2020 compared to$610.5 million in the same period of fiscal 2019. The Company repurchased$12.4 shares of common stock in the first twenty-six weeks of fiscal 2020 compared to$67.6 million repurchased during the same period of the prior year. In the first twenty-six weeks of fiscal 2019, the Company repaid$374.8 million of debt related to the purchase ofColumbus . For additional information pertaining to the Company's share repurchase plans or programs, see Part II, Item 2 - Unregistered Sales ofEquity 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 twenty-six weeks of fiscal 2020 were$236.8 million compared to$212.3 million in the comparable period of fiscal 2019. For fiscal 2020, the annual dividend rate was increased to$0.93 per share, representing the 54th consecutive annual dividend increase. The Company has paid dividends for 367 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 second quarter of fiscal 2020, the Company was in compliance with all of these debt covenants. The Company recently renewed its shelf registration statement and will be looking at near-term opportunities to access the debt capital markets to refinance existing debt maturing inApril 2021 and to maintain ample liquidity at favorable interest rates. In light of the COVID-19 pandemic, the Company remains confident in its ability to meet its cash flow needs and remains dedicated to returning excess cash flow to shareholders through dividend payments. Top priorities for the Company include reinvestments to ensure employee and food safety. Growing the business through innovation and evaluating opportunities for strategic acquisitions remain a focus for the Company. Capital spending to enhance and expand current operations will also be a significant cash outflow for fiscal 2020. 34
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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, atApril 26, 2020 , was$24.0 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
Off-Balance Sheet Arrangements
As ofApril 26, 2020 , andOctober 27, 2019 , the Company had$46.5 million and$44.8 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. This amount includes$2.7 million as ofApril 26, 2020 , andOctober 27, 2019 , 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 byHormel Foods, LLC or other subsidiaries ofHormel Foods Corporation .
CRITICAL ACCOUNTING POLICIES
The discussion and analysis of financial condition and results of operations is based upon the Company's consolidated financial statements, which have been prepared in accordance withU.S. generally accepted accounting principles. The preparation of these financial statements requires the Company to make estimates, judgments, and assumptions that can have a meaningful impact on the reporting of consolidated financial statements. Critical accounting policies are defined as those reflective of significant judgments, estimates, and uncertainties, which may result in materially different results under different assumptions and conditions. The Company has considered the impact of COVID-19 and determined 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 endedOctober 27, 2019 . As conditions resulting from the COVID-19 pandemic evolve, the Company expects these judgments and estimates may be subject to change, which could materially impact future periods.
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 theSecurities 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, 35
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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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