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 M - 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
•Net sales for the third quarter were a record, driven by the inclusion of the Planters® snack nuts business, growth from the Company's foodservice businesses, and strong demand across the nut butters, Mexican and simple meals portfolios in Grocery Products. Net sales also benefited from pricing actions across the portfolio. •Segment profit for the quarter increased 18 percent. Strong results fromJennie-O Turkey Store ,Refrigerated Foods , and the contribution from the Planters® snack nuts business were the key contributors to growth. •Compared to the prior year, earnings before income taxes for the quarter increased 42 percent. Last year's results were impacted by one-time acquisition costs and accounting adjustments related to the acquisition of the Planters® snack nuts business of$40 million . •Jennie-O Turkey Store segment profit increased significantly due to higher commodity prices and foodservice sales. •Refrigerated Foods segment profit growth was driven by strong results from the value-added businesses, more than offsetting higher operational and logistics costs, and lower commodity profitability. 24 -------------------------------------------------------------------------------- Table of Contents •International & Other segment profit declined for the quarter. Profit growth inChina , due primarily to lower pork input costs, did not offset the impact of lower export sales. •Grocery Products segment profit declined due to the impact from continued inflationary pressures and lower results from MegaMex. •Year-to-date cash flow from operations was$763 million , up 74 percent compared to the prior year. •Fourth quarter and full year comparisons will be to fiscal 2021 results which included an extra week in the fourth quarter. •OnAugust 9, 2022 , the Company announced a new strategic operating model and will be transitioning to three operating segments - Retail, Foodservice and International. The Company will begin operating under the new model at the beginning of fiscal 2023 onOctober 31, 2022 . Earnings will first be reported under this structure for the first quarter of fiscal 2023.
Consolidated Results
Volume,
Quarter Ended Nine Months Ended in thousands, except per share July 31, July 25, % July 31, July 25, % amounts 2022 2021 Change 2022 2021 Change Volume (lbs.) 1,074,609 1,180,634 (9.0) 3,443,679 3,553,288 (3.1) Organic Volume (1) 1,049,277 1,180,634 (11.1) 3,279,862 3,553,288 (7.7) Net Sales$ 3,034,414 $ 2,863,670 6.0$ 9,175,331 $ 7,931,438 15.7 Organic Net Sales (1) 2,939,687 2,863,670 2.7 8,569,765 7,931,438 8.0 Earnings Before Income Taxes 289,836 204,238 41.9 920,608 773,940 19.0 Net Earnings Attributable to Hormel 218,915 176,917 23.7 720,103 627,101 14.8Foods Corporation Diluted Earnings per Share 0.40 0.32 25.0 1.31 1.15 13.9 Adjusted Diluted Earnings Per Share 0.40 0.39 2.6 1.31 8.3 (1) 1.21
(1) See the "Non-GAAP Financial Measures" section below for a description of the Company's use of measures not defined by GAAP.
Record net sales for the third quarter and first nine months of the year were driven primarily by the inclusion of the Planters® snack nuts business and by growth from the Company's foodservice businesses. All segments have benefited from pricing actions taken during the first nine months of the year to offset inflationary pressures. The third quarter marked the seventh consecutive quarter of record sales. Cost of Products Sold Quarter Ended Nine Months Ended % % in thousands July 31, 2022 July 25, 2021 Change July 31, 2022 July 25, 2021 Change Cost of Products Sold$ 2,528,364 $ 2,440,322 3.6$ 7,577,062 $ 6,581,613 15.1 Cost of products sold for the third quarter and first nine months of fiscal 2022 increased due to inflationary pressures stemming from raw materials, packaging, freight, labor and many other inputs. The inclusion of the Planters® snack nuts business was also a driver of higher costs.
Costs are expected to remain elevated due to the continued impacts of broad-based inflation. In general, raw material input costs for pork, beef, turkey, chicken, and feed are anticipated to remain above historical levels.
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Table of Contents Gross Profit Quarter Ended Nine Months Ended % % in thousands July 31, 2022 July 25, 2021 Change July 31, 2022 July 25, 2021 Change Gross Profit$ 506,049 $ 423,348 19.5$ 1,598,269 $ 1,349,825 18.4
Percentage of Net Sales 16.7 % 14.8 % 17.4 % 17.0 % Gross profit as a percentage of net sales for the third quarter and first nine months of fiscal 2022 increased due primarily to improved profitability from theJennie-O Turkey Store segment, the inclusion of the Planters® snack nuts business, and pricing actions to help mitigate inflationary pressures across all segments. Gross profit as a percentage of net sales also benefited from the reduction of lower margin commodity sales resulting from the Company's new pork supply agreement. Compared to the prior year, gross profit as a percentage of net sales for the third quarter increased for theJennie-O Turkey Store ,Refrigerated Foods , and International & Other segments while declining for Grocery Products. For the first nine months of fiscal 2022, gross profit as a percentage of net sales increased for theJennie-O Turkey Store and International & Other segments, was flat forRefrigerated Foods and lower for Grocery Products. Looking ahead to the fourth quarter of fiscal 2022, the Company expects gross profit as a percentage of net sales to improve sequentially compared to the third quarter of fiscal 2022. The net impact of input cost inflation poses the largest risk to this assumption.
Selling, General and Administrative (SG&A)
Quarter Ended Nine Months Ended % % in thousands July 31, 2022 July 25, 2021 Change July 31, 2022 July 25, 2021 Change SG&A$ 222,147 $ 226,284 (1.8)$ 672,777 $ 622,630 8.1
Percentage of Net Sales 7.3 % 7.9 % 7.3 % 7.9 % For the third quarter, SG&A expenses declined as the comparable period last year included one-time acquisition-related costs associated with the Planters® snack nuts business. SG&A expenses for the first nine months increased due to the addition of the Planters® snack nuts business and higher marketing and advertising investments. As a percent of net sales, SG&A expenses declined for the first nine months, driven by record sales and disciplined cost management. Advertising investments in the third quarter were$37 million compared to$31 million last year. For the first nine months of fiscal 2022, advertising investments increased$28 million , or 29 percent, compared to the prior year. The Company plans to continue to invest in its leading brands.
Equity in Earnings of Affiliates
Quarter Ended Nine Months Ended % % in thousands July 31, 2022 July 25, 2021 Change July 31, 2022 July 25, 2021 Change Equity in Earnings of$ 7,138 $ 10,420 (31.5)$ 19,951 $ 37,722 (47.1) Affiliates Equity in earnings of affiliates for the third quarter and first nine months of fiscal 2022 decreased significantly due to lower results for MegaMex. MegaMex results have been negatively impacted by inflationary pressures, including significantly higher costs for avocados.
Effective Tax Rate
Quarter Ended Nine
Months Ended
July 31, 2022 July 25, 2021 July 31, 2022 July 25, 2021 Effective Tax Rate 24.5 % 13.3 % 21.8 % 18.9 % 26
-------------------------------------------------------------------------------- Table of Contents The effective tax rate for the third quarter increased as last year's tax rate reflected stock option exercise benefits and a one-time foreign tax benefit. The effective tax rate for fiscal 2022 is expected to be between 20.5% and 22.5%. For further information, refer to Note K - Income Taxes.
Segment Results
Net sales and segment profit for each of the Company's reportable segments are set forth below. The Company is an integrated enterprise, characterized by substantial intersegment cooperation, cost allocations and sharing of assets. Therefore, the Company does not represent that these segments, if operated independently, would report the profit and other financial information shown below. Quarter Ended Nine Months Ended in thousands July 31, 2022 July 25, 2021 % Change July 31, 2022 July 25, 2021 % ChangeNet Sales Grocery Products$ 869,802 $ 698,584 24.5$ 2,598,964 $ 1,904,415 36.5 Refrigerated Foods 1,660,257 1,624,641 2.2 4,932,070 4,445,099 11.0 Jennie-O Turkey Store 323,796 350,897 (7.7) 1,115,554 1,035,397 7.7 International & Other 180,559 189,548 (4.7) 528,743 546,528 (3.3) Total$ 3,034,414 $ 2,863,670 6.0$ 9,175,331 $ 7,931,438 15.7 Segment Profit Grocery Products$ 76,478 $ 80,791 (5.3)$ 265,263 $ 270,963 (2.1) Refrigerated Foods 177,109 153,216 15.6 517,993 467,740 10.7 Jennie-O Turkey Store 37,433 5,874 537.3 142,969 45,514 214.1 International & Other 25,334 27,915 (9.2) 75,071 84,600 (11.3) Total Segment Profit 316,354 267,796 18.1 1,001,295 868,817 15.2 Net Unallocated Expense 26,429 63,715 (58.5) 80,799 95,166 (15.1) Noncontrolling Interest (89) 157 (156.7) 112 290 (61.4) Earnings Before Income Taxes$ 289,836 $ 204,238 41.9$ 920,608 $ 773,940 19.0 Grocery Products Quarter Ended Nine Months Ended % % in thousands July 31, 2022 July 25, 2021 Change July 31, 2022 July 25, 2021 Change Volume (lbs.) 366,609 319,216 14.8 1,111,288 937,345 18.6 Net Sales$ 869,802 $ 698,584 24.5$ 2,598,964 $ 1,904,415 36.5 Segment Profit 76,478 80,791 (5.3) 265,263 270,963 (2.1) Volume and sales for the third quarter increased significantly, led by strong demand across the nut butters, Mexican and simple meals portfolios, and from the inclusion of the Planters® snack nuts business. Organic net sales gains in the third quarter were led by products such as SKIPPY® spreads, WHOLLY® Guacamole, Hormel® chili, Dinty Moore® beef stew and Mary Kitchen® hash, in addition to strategic pricing actions. For the first nine months of fiscal 2022, sales increased primarily due to the inclusion of the Planters® snack nuts business.
Segment profit for the third quarter and first nine months of the year decreased, as the contribution from the Planters® snack nuts business and organic net sales growth was more than offset by inflationary pressures and lower results from MegaMex.
Looking to the fourth quarter, Grocery Products expects improved results compared to the third quarter of fiscal 2022 due to strong demand across the business and from pricing actions effective at the beginning of the fourth quarter. Risks to profitability include higher than anticipated elasticities impacting sales volumes and production challenges on key product lines. 27 --------------------------------------------------------------------------------
Table of ContentsRefrigerated Foods Quarter Ended Nine Months Ended % % in thousands July 31, 2022 July 25, 2021 Change July 31, 2022 July 25, 2021 Change Volume (lbs.) 484,271 591,143 (18.1) 1,574,499 1,779,729 (11.5) Net Sales$ 1,660,257 $ 1,624,641 2.2$ 4,932,070 $ 4,445,099 11.0 Segment Profit 177,109 153,216 15.6 517,993 467,740 10.7 For the third quarter, net sales increased due to continued strong results from the foodservice businesses, growth from many retail products, strategic pricing actions across the portfolio and the inclusion of the Planters® snack nuts business in the convenience channel. For the first nine months of fiscal 2022, net sales increased due to strong results from the foodservice businesses, strategic pricing actions across the portfolio, and from the inclusion of the Planters® snack nuts business. Consistent with the Company's long-term strategy to better align resources to value-added growth, the overall decline in volume for the third quarter and first nine months of fiscal 2022 was due primarily to lower commodity sales resulting from the Company's new pork supply agreement. Segment profit growth during the third quarter was driven by strong results from the value-added businesses, more than offsetting higher operational and logistics costs, and lower commodity profitability. For the first nine months of fiscal 2022, segment profit growth was primarily driven by strong results from the foodservice businesses, more than offsetting higher operational and logistics costs. For the fourth quarter,Refrigerated Foods expects profit to decline compared to the prior year as continued strength in the foodservice businesses and strong demand for its retail products are more than offset by higher raw material, operational and logistics costs.Jennie-O Turkey Store Quarter Ended Nine Months Ended % % in thousands July 31, 2022 July 25, 2021 Change July 31, 2022 July 25, 2021 Change Volume (lbs.) 149,931 187,220 (19.9) 540,039 583,413 (7.4) Net Sales$ 323,796 $ 350,897 (7.7)$ 1,115,554 $ 1,035,397 7.7 Segment Profit 37,433 5,874 537.3 142,969 45,514 214.1 As anticipated, volume and net sales declined for the third quarter of fiscal 2022 as a result of the supply impacts on the Company's vertically integrated supply chain from highly pathogenic avian influenza (HPAI). For the quarter, foodservice and whole-bird sales increased due to favorable pricing, partially offsetting lower commodity and retail sales. For the first nine months of fiscal 2022, higher foodservice and whole-bird sales due to favorable pricing drove the overall sales increases.
For the third quarter and first nine months of the year, higher commodity prices and foodservice sales drove the substantial improvement in segment profit.
Jennie-O Turkey Store remains on pace to exceed profit expectations for the year, with significant profit growth in the fourth quarter. Sales volumes are projected to decline approximately 30 percent in the fourth quarter due to continued supply gaps in its vertically integrated supply chain and whole bird sales pulled forward into the third quarter. Risks to the outlook include a material impact to production and sales volumes from HPAI in the vertically integrated supply chain. International & Other Quarter Ended Nine Months Ended % % in thousands July 31, 2022 July 25, 2021 Change July 31, 2022 July 25, 2021 Change Volume (lbs.) 73,797 83,055 (11.1) 217,853 252,801 (13.8) Net Sales$ 180,559 $ 189,548 (4.7)$ 528,743 $ 546,528 (3.3) Segment Profit 25,334 27,915 (9.2) 75,071 84,600 (11.3) Volume and sales declined during the third quarter as higher global sales of SPAM® luncheon meat and improved results inBrazil did not overcome an overall decline in export sales and lower sales inChina . Export volumes declined as a result of current export logistics challenges and lower commodity sales due to the Company's new pork supply agreement. Sales inChina 28 -------------------------------------------------------------------------------- Table of Contents were negatively affected by COVID-related restrictions and temporary plant shutdowns. Volume and sales declined during the first nine months of the year as a result of lower commodity sales due to the Company's new pork supply agreement and ongoing export logistics challenges. Segment profit for the third quarter and first nine months of fiscal 2022 declined due in large part to lower results from the export business, which has been negatively impacted by logistics challenges and meaningfully higher freight expenses.
The International & Other segment anticipates growth in the fourth quarter
driven by branded exports and improved profitability in
Unallocated Income and Expenses
The Company does not allocate deferred compensation, investment income, interest expense or interest income to its segments when measuring performance. The Company also retains various other income and unallocated expenses at the corporate level. Equity in earnings of affiliates is included in segment profit; however, earnings attributable to the Company's noncontrolling interests are excluded. These items are included in the segment table for the purpose of reconciling segment results to earnings before income taxes. Quarter Ended Nine Months Ended in thousands July 31, 2022 July 25, 2021 July 31, 2022 July 25, 2021 Net Unallocated Expense$ 26,429 $ 63,715 $ 80,799 $ 95,166 Noncontrolling Interest (89) 157 112 290 For the third quarter and first nine months of fiscal 2022, net unallocated expense decreased due to one-time acquisition costs and accounting adjustments of$40 million and$43 million , respectively, related to the acquisition of the Planters® snack nuts business in the prior year. Higher interest expense and lower investment income net of deferred compensation this year have been the primary drivers of higher expenses to-date. Non-GAAP Financial Measures The non-GAAP adjusted financial measure of adjusted diluted earnings per share is presented to provide investors with additional information to facilitate the comparison of past and present operations. Adjusted diluted earnings per share excludes the impact of the acquisition-related expenses and accounting adjustments related to the acquisition of the Planters® snack nuts business. The tax impact was calculated using the effective tax rate for the quarter in which the expenses and accounting adjustments were incurred. The non-GAAP adjusted financial measures 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 impact of the acquisition of the Planters® snack nuts business (June 2021 ) in the Grocery Products,Refrigerated Foods and International & Other segments.
The Company believes these non-GAAP financial measures provide useful information to investors because they are the measures used to evaluate performance on a comparable year-over-year basis. Non-GAAP measures are not intended to be a substitute for GAAP measures in analyzing financial performance. These non-GAAP measures are not in accordance with generally accepted accounting principles and may be different from non-GAAP measures used by other companies.
The tables below show the calculations to reconcile from the GAAP measures to the non-GAAP adjusted measures.
29 -------------------------------------------------------------------------------- Table of Contents RECONCILIATION OF NON-GAAP MEASURES In thousands, except per share amounts
ADJUSTED DILUTED EARNINGS PER SHARE (NON-GAAP)
Quarter Ended July 31, 2022 July 25, 2021 Reported Reported Acquisition Costs Non-GAAP GAAP GAAP and Adjustments Non-GAAP % Change Net Sales$ 3,034,414 $ 2,863,670 $ -$ 2,863,670 6.0 Cost of Products Sold 2,528,364 2,440,322 (12,900) 2,427,422 4.2 Gross Profit 506,049 423,348 12,900 436,248 16.0 Selling, General and Administrative 222,147 226,284 (27,462) 198,822 11.7 Equity in Earnings of Affiliates 7,138 10,420 - 10,420 (31.5) Operating Income 291,040 207,484 40,362 247,846 17.4 Interest and Investment Income (Expense) 14,411 8,457 - 8,457 70.4 Interest Expense 15,615 11,703 - 11,703 33.4 Earnings Before Income Taxes 289,836 204,238 40,362 244,600 18.5 Provision for Income Taxes 71,010 27,164 5,368 32,532 118.3 Net Earnings 218,826 177,074 34,994 212,068 3.2 Less: Net Earnings Attributable to Noncontrolling Interest (89) 157 - 157 (156.6) Net Earnings Attributable toHormel Foods Corporation$ 218,915 $ 176,917 $ 34,994 $ 211,911 3.3 Diluted Net Earnings Per Share $ 0.40$ 0.32 $ 0.06$ 0.39 2.6 Nine Months Ended July 31, 2022 July 25, 2021 Reported Reported Acquisition Costs Non-GAAP GAAP GAAP and Adjustments Non-GAAP % Change Net Sales$ 9,175,331 $ 7,931,438 $ -$ 7,931,438 15.7 Cost of Products Sold 7,577,062 6,581,613 (12,900) 6,568,713 15.4 Gross Profit 1,598,269 1,349,825 12,900 1,362,725 17.3 Selling, General and Administrative 672,777 622,630 (30,303) 592,327 13.6 Equity in Earnings of Affiliates 19,951 37,722 - 37,722 (47.1) Operating Income 945,443 764,917 43,203 808,120 17.0 Interest and Investment Income (Expense) 20,078 36,740 - 36,740 (45.3) Interest Expense 44,913 27,718 - 27,718 62.0 Earnings Before Income Taxes 920,608 773,940 43,203 817,143 12.7 Provision for Income Taxes 200,393 146,549 5,975 152,524 31.4 Net Earnings 720,215 627,390 37,228 664,618 8.4 Less: Net Earnings Attributable to Noncontrolling Interest 112 290 - 290 (61.4) Net Earnings Attributable toHormel Foods Corporation$ 720,103 $ 627,101 $ 37,228 $ 664,329 8.4 Diluted Net Earnings Per Share $ 1.31$ 1.15 $ 0.06$ 1.21 8.3 30
-------------------------------------------------------------------------------- Table of Contents ORGANIC VOLUME ANDNET SALES (NON-GAAP) Quarter Ended July 31, 2022 July 25, 2021 Reported Organic Reported Organic GAAP Acquisitions (Non-GAAP) GAAP % Change Volume (lbs.) Grocery Products 366,609 (20,825) 345,785 319,216 8.3 Refrigerated Foods 484,271 (3,946) 480,325 591,143 (18.7) Jennie-O Turkey Store 149,931 - 149,931 187,220 (19.9) International & Other 73,797 (561) 73,236 83,055 (11.8) Total Volume 1,074,609 (25,332) 1,049,277 1,180,634 (11.1) Net Sales Grocery Products$ 869,802 $ (78,202) $ 791,600 $ 698,584 13.3 Refrigerated Foods 1,660,257 (14,968) 1,645,289 1,624,641 1.3 Jennie-O Turkey Store 323,796 - 323,796 350,897 (7.7)
International & Other 180,559 (1,557) 179,002
189,548 (5.6) Total Net Sales$ 3,034,414 $ (94,727) $ 2,939,687 $ 2,863,670 2.7 Nine Months Ended July 31, 2022 July 25, 2021 Reported Organic Reported Organic GAAP Acquisitions (Non-GAAP) GAAP % Change Volume (lbs.) Grocery Products 1,111,288 (138,187) 973,101 937,345 3.8 Refrigerated Foods 1,574,499 (22,128) 1,552,372 1,779,729 (12.8) Jennie-O Turkey Store 540,039 - 540,039 583,413 (7.4)
International & Other 217,853 (3,503) 214,350
252,801 (15.2) Total Volume 3,443,679 (163,817) 3,279,862 3,553,288 (7.7) Net Sales Grocery Products$ 2,598,964 $ (514,709) $ 2,084,256 $ 1,904,415 9.4 Refrigerated Foods 4,932,070 (80,980) 4,851,090 4,445,099 9.1 Jennie-O Turkey Store 1,115,554 - 1,115,554 1,035,397 7.7
International & Other 528,743 (9,877) 518,865
546,528 (5.1) Total Net Sales$ 9,175,331 $ (605,565) $ 8,569,765 $ 7,931,438 8.0 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 31, 2021 . 31 -------------------------------------------------------------------------------- Table of Contents LIQUIDITY AND CAPITAL RESOURCES When assessing liquidity and capital resources, the Company evaluates cash and cash equivalents, short-term and long-term investments, income from operations, and borrowing capacity. Cash Flow Highlights Nine Months Ended in millions July 31, 2022 July 25, 2021 Cash and Cash Equivalents$ 850 $ 291 Cash Provided by (Used in) Operating Activities 763
438
Cash Provided by (Used in) Investing Activities (172)
(3,530)
Cash Provided by (Used in) Financing Activities (344)
1,664
Cash and cash equivalents increased$237 million in the nine months endedJuly 31, 2022 as cash from operating activities was sufficient to cover dividend payments and capital expenditures. The use of cash to fund the acquisition of the Planters® snack nuts business was the primary driver of the decline in cash and cash equivalents in the prior year. Additional details related to significant drivers of cash flows are provided below. Cash Provided by (Used in) Operating Activities •Cash flows from operating activities benefited from earnings, while changes in operating assets and liabilities during the nine months endedJuly 31, 2022 were overall unfavorable. -Inventory increased$311 million compared to$202 million in the prior year. The higher inventory value in fiscal 2022 was primarily due to a recovery in inventory volumes and sustained higher raw material costs. The increase in inventory levels during fiscal 2021 was the result of inflation in raw materials and supplies along with the additional inventory activity for the Planters® snack nuts business since its acquisition. -Accounts receivable declined$97 million in the nine months endedJuly 31, 2022 as a result of the timing of sales and collections. In comparison, accounts receivable rose$192 million in the nine months endedJuly 25, 2021 with the additional accounts receivable activity for the Planters® snack nuts business since its acquisition. -Accounts payable and accrued expenses decreased$84 million and$30 million in the nine months endedJuly 31, 2022 andJuly 25, 2021 , respectively, primarily due to the timing of invoice payments. Cash Provided by (Used in) Investing Activities •Capital expenditures were$189 million and$139 million in the nine months endedJuly 31, 2022 andJuly 25, 2021 , respectively. The Company's target for capital expenditures for fiscal 2022 is$310 million . The largest spend in both years was related to capacity expansion inOmaha, Nebraska . Additional projects include a new production line for the SPAM® family of products inDubuque, Iowa in fiscal 2022 and Project Orion in fiscal 2021. For the remainder of the fiscal year, the Company will prioritize projects which increase value added production capacity, improve infrastructure, drive cost savings and leverage automation. •In the nine months endedJuly 25, 2021 , the Company acquired the Planters® snack nuts business for$3.4 billion . See Note B - Acquisitions and Divestitures for more information. Cash Provided by (Used in) Financing Activities •Cash dividends paid to the Company's shareholders continue to be an ongoing financing activity for the Company with payments totaling$416 million in the nine months endedJuly 31, 2022 compared to$390 million in the comparable period of fiscal 2021. For fiscal 2022, the annual dividend rate was increased 6 percent to$1.04 per share, representing the 56th consecutive annual dividend increase. The Company has paid dividends for 376 consecutive quarters. •Proceeds from exercise of stock options was$78 million in the nine months endedJuly 31, 2022 compared to$44 million in the comparable period of fiscal 2021. The increase in proceeds was caused by the number of options exercised with 3.7 million shares issued during fiscal 2022 compared to 2.8 million shares during fiscal 2021. •The Company issued unsecured senior notes in an aggregate principal amount of$2.3 billion to fund the acquisition of the Planters® snack nuts business in the nine months endedJuly 25, 2021 . See Note J - Long-term Debt and Other Borrowing Arrangements for more information. •The Company repaid$250.0 million of its senior unsecured notes upon maturity inApril 2021 . Sources and Uses of Cash The Company believes its balanced business model, with diversification across raw material inputs, channels, and categories, provides stability in ever changing economic environments. The Company applies a waterfall approach to capital resource allocation, which focuses first on required uses of cash such as capital expenditures to maintain facilities, dividend returns to 32 -------------------------------------------------------------------------------- Table of Contents investors, and mandatory debt repayments. Next, the Company looks to strategic items in support of growth initiatives such as acquisitions and innovation investments, which is followed by opportunistic uses including incremental debt repayment and share repurchases. The Company believes its anticipated income from operations, cash on hand, and borrowing capacity under the current credit facility will be adequate to meet all short-term and long-term commitments. The Company's ability to leverage its balance sheet through the issuance of debt provides the flexibility to take advantage of strategic opportunities which may require additional funding. There have been no 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 endedOctober 31, 2021 . The Company is required by certain covenants in its debt agreements to maintain specified levels of financial ratios and financial position. As ofJuly 31, 2022 , the Company was in compliance with all of these debt covenants and expects to maintain this compliance. 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 ESTIMATES
This 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 with GAAP. The preparation of these financial statements requires the Company to make estimates, judgments, and assumptions that can have a meaningful effect on the reporting of consolidated financial statements. The significant accounting policies used in preparing these Consolidated Financial Statements are consistent with those described in Note A - Summary of Significant Accounting Policies to the Consolidated Financial Statements in the Form 10-K with the exception of new requirements adopted in the first quarter of fiscal 2022. Critical accounting estimates are defined as those reflective of significant judgments, estimates, and uncertainties, which may result in materially different results under different assumptions and conditions. There have been no material changes in the Company's Critical Accounting Estimates as disclosed in its Annual Report on Form 10-K for the fiscal year endedOctober 31, 2021 .
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 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 discussions of risk factors in the Company's most recent Annual Report on Form 10-K and in Part II, Item 1A of this Quarterly Report on Form 10-Q contain 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. 33
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The Company cautions readers not to place undue reliance on forward-looking statements, which represent current views as of the date made. Forward-looking statements are inherently at risk to changes in the national and worldwide economic environment, which could include, among other things, risks related to the deterioration of economic conditions; the COVID-19 pandemic; risks associated with acquisitions and divestitures; potential disruption of operations including at co-manufacturers, suppliers, logistics providers, customers, or other third-party service providers; risk of loss of a material contract; the Company's inability to protect information technology systems against, or effectively respond to, cyber attacks or security breaches; deterioration of labor relations, labor availability or increases to labor costs; general risks of the food industry, including food contamination; outbreaks of disease among livestock and poultry flocks; fluctuations in commodity prices and availability of raw materials and other inputs; fluctuations in market demand for the Company's products; risks of litigation; potential sanctions and compliance costs arising from government regulation; compliance with stringent environmental regulation and potential environmental litigation; and risks arising from the Company's foreign operations.
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