Executive Overview

Fiscal 2014: Hormel Foods achieved record sales and earnings for fiscal 2014. Sales grew 6.5 percent to $9.3 billion with four of the five reporting segments recording top-line increases. Net earnings for the year were $602.7 million, an increase of 14.5 percent over 2013, with three of five segments contributing to the growth. Earnings per diluted share were $2.23, a 14.4 percent improvement compared to last year.

Significant contributions by the Refrigerated Foods, Jennie-O Turkey Store, and International & Other segments drove top and bottom-line results, with each delivering double-digit percentage segment operating profit growth. Financial performance for the Refrigerated Foods segment improved over last year as strong pork operating margins, higher meat commodity markets, and increased sales of value-added products in the retail and foodservice businesses drove segment results. Our Jennie-O Turkey Store segment was also able to capitalize on the growth of value-added sales and higher meat commodity markets. Segment profit performance was negatively impacted by higher grain and energy costs and lower live production performance associated with colder than normal weather conditions in the first half of the year. The International & Other segment benefitted from growth in the China businesses and increased royalty income, along with momentum from export sales of SKIPPY® peanut butter and pork products, to drive year-over-year gains. Grocery Products results were pressured by higher protein input costs and volume softness associated with price increases on certain products. Specialty Foods segment net sales and segment profit were negatively impacted due to the fourth quarter 2013 expiration of the agreement allowing Diamond Crystal Brands to sell certain sugar substitutes in foodservice trade channels as well as 2014 acquisition-related expenses. General corporate expense was higher due to an increase in bad debt expense, while net interest and investment expense increased due to lower returns on the Company’s rabbi trust.

Our financial performance continued to generate substantial operating cash flows. In fiscal 2014, we completed the acquisitions of the China based SKIPPY® peanut butter business and the CytoSport Holdings, Inc. (CytoSport) business, makers of the Muscle Milk® brand of products, for a total of $466.2 million. We also repurchased 1.3 million shares of common stock for $58.9 million and announced a 25.0 percent increase to our dividend rate after a 17.6 percent increase last year. The annual dividend for 2015 will be $1.00 per share and marks the 49th consecutive year of dividend increases.

Fiscal 2015 Outlook: We expect to deliver sales and earnings in fiscal 2015 that exceed our five percent sales and ten percent earnings growth goals. While we expect continued price volatility in commodity meats, we expect prices to normalize as the year progresses. These lower meat protein prices will provide

input cost relief for the Grocery Products segment. Strong growth in the foodservice and retail businesses and improved live production results within the Refrigerated Foods segment will offset challenging comparisons for our pork operations. More favorable grain markets are expected to benefit the Jennie-O Turkey Store segment, partially offset by lower commodity turkey meat prices. We plan modest increases to turkey and pork production in fiscal 2015 to support our value-added businesses. A full year of contributions from the CytoSport business will aid in the delivery of year-over-year earnings growth for Specialty Foods. We look for continued growth of pork exports and our China businesses, complemented by the SPAM® family of products and SKIPPY® peanut butter, to deliver growth in our International & Other segment.

Product innovation and building our branded, value-added products will remain priorities in fiscal 2015. Introducing new flavors, convenience, and creative menu options for our customers and consumers are vital to our strategy to keep our products relevant in today’s changing marketplace. We will continue to support our numerous iconic brands with increased advertising in fiscal 2015 and expect these efforts to support our business growth goals. Strong cash flow, along with a solid balance sheet, will enable us to continue to return cash to shareholders, while providing the foundation to expand our business through internal investment and strategic acquisitions.

Critical Accounting Policies

This discussion and analysis of financial condition and results of operations is based upon the consolidated financial statements of Hormel Foods Corporation (the Company), which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The Company evaluates, on an ongoing basis, its estimates for reasonableness as changes occur in its business environment. The Company bases its estimates on experience, the use of independent third-party specialists, and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions.

Critical accounting policies are defined as those that are reflective of significant judgments, estimates, and uncertainties, and potentially result in materially different results under different assumptions and conditions. The Company believes the following are its critical accounting policies:

Revenue Recognition: The Company recognizes sales when title passes upon delivery of its products to customers, net of applicable provisions for discounts, returns, and allowances. Products are delivered upon receipt of customer purchase orders with acceptable terms, including price and collectability that is reasonably assured.

The Company offers various sales incentives to customers and consumers. Incentives that are offered off-invoice include prompt pay allowances, will call allowances, spoilage allowances, and temporary price reductions. These incentives are recognized as reductions of revenue at the time title passes. Coupons are used as an incentive for consumers to purchase various products. The coupons reduce revenues at the time they are offered, based on estimated redemption rates. Promotional contracts are performed by customers to promote the Company’s products to consumers. These incentives reduce revenues at the time of performance through direct payments and accrued promotional funds. Accrued promotional funds are unpaid liabilities for promotional contracts in process or completed at the end of a quarter or fiscal year. Promotional contractual accruals are based on agreements with customers for defined performance. The liability relating to these agreements is based on a review of the outstanding contracts on which performance has taken place but for which the promotional payments relating to such contracts remain unpaid as of the end of the fiscal year. The level of customer performance and the historical spend rate versus contracted rates are significant estimates used to determine these liabilities.

Inventory Valuation: The Company values its pork inventories at the lower of cost or USDA market prices (primal values). When the carcasses are disassembled and transferred from primal processing to various manufacturing departments, the primal values, as adjusted by the Company for product specifications and further processing, become the basis for calculating inventory values. Turkey raw materials are represented by the deboned meat quantities. The Company values these raw materials using a concept referred to as the “meat cost pool.” The meat cost pool is determined by combining the cost to grow turkeys with processing costs, less any net sales revenue from by-products created from the processing and not used in producing Company products. The Company has developed a series of ratios using historical data and current market conditions (which themselves involve estimates and judgment determinations by the Company) to allocate the meat cost pool to each meat component. Substantially all inventoriable expenses, meat, packaging, and supplies are valued by the average cost method.

Goodwill and Other Intangibles: The Company’s identifiable intangible assets are amortized over their useful lives, unless the useful life is determined to be indefinite. The useful life of an identifiable intangible asset is based on an analysis of several factors including: contractual, regulatory, or legal obligations, demand, competition, and industry trends. Goodwill and indefinite-lived intangible assets are not amortized, but are tested at least annually for impairment.

The Company’s goodwill impairment test is performed at the reporting unit level. The Company’s reporting units represent operating segments (aggregations of business units that have similar economic characteristics and share the same production facilities, raw materials, and labor force). In conducting the goodwill impairment test, the Company first performs a qualitative assessment to determine whether it is more likely than not (> 50% likelihood) that the fair value of any reporting unit is less than its carrying amount. If the Company concludes that this is the case, then a two-step quantitative test for goodwill impairment is performed for the appropriate reporting units. Otherwise, the Company concludes that no impairment is indicated and does not perform the two-step test.

In conducting the initial qualitative assessment, the Company analyzes actual and projected growth trends for net sales, gross margin, and segment profit for each reporting unit, as well as historical performance versus plan and the results of prior quantitative tests performed. Additionally, each reporting unit assesses critical areas that may impact its business, including macroeconomic conditions and the related impact, market related exposures, any plans to market all or a portion of their business, competitive changes, new or discontinued product lines, changes in key personnel, and any other potential risks to their projected financial results. All of the assumptions used in the qualitative assessment require significant judgment.

If performed, the quantitative goodwill impairment test is a two-step process. First, the fair value of each reporting unit is compared to its corresponding carrying value, including goodwill. The fair value of each reporting unit is estimated using discounted cash flow valuations. The assumptions used in the estimate of fair value, including future growth rates, terminal values, and discount rates, require significant judgment. The estimates and assumptions used consider historical performance and are consistent with the assumptions used in determining future profit plans for each reporting unit, which are approved by the Company’s Board of Directors. The Company reviews product growth patterns, market share information, industry trends, peer group statistics, changes in distribution channels, and economic indicators in determining the estimates and assumptions used to develop cash flow and profit plan assumptions. Additionally, the Company performs sensitivity testing of the profit plan assumptions and discount rate to assess the impact on the fair value for each reporting unit under various circumstances.

If the first step results in the carrying value exceeding the fair value of any reporting unit, then a second step must be completed in order to determine the amount of goodwill impairment that should be recorded. In the second step, the implied fair value of the reporting unit’s goodwill is determined by allocating the reporting unit’s fair value to all of its assets and liabilities other than goodwill in a manner similar to a purchase price allocation. The implied fair value of the goodwill that results from the application of this second step is then compared to the carrying amount of the goodwill and an

impairment charge is recorded for the difference. Even if not required, the Company periodically elects to perform the quantitative test in order to confirm the qualitative assessment.

Based on the qualitative assessment conducted in fiscal 2014, performance of the quantitative two-step test was not required for any of the Company’s reporting units. No goodwill impairment charges were recorded.

In conducting the annual impairment test for its indefinite-lived intangible assets, the Company first performs a qualitative assessment to determine whether it is more likely than not (> 50% likelihood) that an indefinite-lived intangible asset is impaired. If the Company concludes that this is the case, then a quantitative test for impairment must still be performed. Otherwise, the Company does not need to perform a quantitative test.

In conducting the initial qualitative assessment, the Company analyzes growth rates for historical and projected net sales and the results of prior quantitative tests performed. Additionally, each reporting unit assesses critical areas that may impact their intangible assets or the applicable royalty rates to determine if there are factors that could impair the asset.

If performed, the quantitative impairment test compares the fair value and carrying value of the indefinite-lived intangible asset. The fair value of indefinite-lived intangible assets is primarily determined on the basis of estimated discounted value, using the relief from royalty method. The assumptions used in the estimate of fair value, including future sales projections and discount rates, require significant judgment. The estimates and assumptions used consider historical performance and are consistent with the assumptions used in determining future sales projections for each reporting unit as included in their profit plans. The Company reviews various Company and industry factors when determining the assumptions to use in estimating the fair value. Additionally, the Company performs sensitivity testing of the sales assumptions and discount rate to assess the impact on the fair value for each intangible asset under various circumstances. If the carrying value exceeds fair value, the indefinite-lived intangible asset is considered impaired and an impairment charge is recorded for the difference. Even if not required, the Company periodically elects to perform the quantitative test in order to confirm the qualitative assessment.

Based on the qualitative assessment conducted in fiscal 2014, performance of the quantitative test was not required for any of the Company’s indefinite-lived intangible assets. No impairment charges were recorded for indefinite-lived intangible assets for fiscal 2014.

Employee Benefit Plans: The Company incurs expenses relating to employee benefits, such as noncontributory defined benefit pension plans and post-retirement health care benefits. In accounting for these employment costs, management must make a variety of assumptions and estimates including mortality rates, discount rates, overall Company

compensation increases, expected return on plan assets, and health care cost trend rates. The Company considers historical data as well as current facts and circumstances when determining these estimates. The Company uses third-party specialists to assist management in the determination of these estimates and the calculation of certain employee benefit expenses.

Income Taxes: The Company records income taxes in accordance with the liability method of accounting. Deferred taxes are recognized for the estimated taxes ultimately payable or recoverable based on enacted tax law. Changes in enacted tax rates are reflected in the tax provision as they occur.

The Company computes its provision for income taxes based on the statutory tax rates and tax planning opportunities available to it in the various jurisdictions in which it operates. Significant judgment is required in evaluating the Company’s tax positions and determining its annual tax provision. While the Company considers all of its tax positions fully supportable, the Company is occasionally challenged by various tax authorities regarding the amount of taxes due. The Company recognizes a tax position in its financial statements when it is more likely than not that the position will be sustained upon examination, based on the technical merits of the position. That position is then measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. A change in judgment related to the expected ultimate resolution of uncertain tax positions will be recognized in earnings in the quarter of such change.

Contingent Liabilities: At any time, the Company may be subject to investigations, legal proceedings, or claims related to the on-going operation of its business, including claims both by and against the Company. Such proceedings typically involve claims related to product liability, contract disputes, wage and hour laws, employment practices, or other actions brought by employees, consumers, competitors, or suppliers. The Company routinely assesses the likelihood of any adverse outcomes related to these matters on a case by case basis, as well as the potential ranges of losses and fees. The Company establishes accruals for its potential exposure, as appropriate, for claims against the Company when losses become probable and reasonably estimable. Where the Company is able to reasonably estimate a range of potential losses, the Company records the amount within that range that constitutes the Company’s best estimate. The Company also discloses the nature of and range of loss for claims against the Company when losses are reasonably possible and material. These accruals and disclosures are determined based on the facts and circumstances related to the individual cases and require estimates and judgments regarding the interpretation of facts and laws, as well as the effectiveness of strategies or other factors beyond our control.

Results of Operations

The Company is a processor of branded and unbranded food products for retail, foodservice, and fresh product customers. The Company operates in the following five reportable segments:

The Company’s fiscal year consisted of 52 weeks in 2014, 2013, and 2012.

Consolidated Results

Net Earnings: Net earnings attributable to the Company for the fourth quarter of fiscal 2014 were $171.3 million, an increase of 8.8 percent compared to earnings of $157.3 million for the same quarter last year. Diluted earnings per share were $0.63 compared to $0.58 for the same quarter last year. Net earnings attributable to the Company for fiscal 2014 increased 14.5 percent to $602.7 million, from $526.2 million in fiscal 2013. Diluted earnings per share for fiscal 2014 increased 14.4 percent to $2.23 compared to $1.95 per share last year.

Net Sales: Net sales for the fourth quarter of fiscal 2014 increased to $2.54 billion from $2.32 billion in the same quarter of fiscal 2013, an increase of 9.5 percent. Net sales for fiscal 2014 increased 6.5 percent to $9.32 billion compared to $8.75 billion in the prior year. The Company’s Specialty Foods, International & Other, Jennie-O Turkey Store, and Refrigerated Foods reporting segments delivered sales growth in the fourth quarter compared to fiscal 2013. For the full year in fiscal 2014, growth was enjoyed by the International & Other, Refrigerated Foods, Jennie-O Turkey Store, and Grocery Products segments compared to the prior year. Tonnage for the fourth quarter increased 2.8 percent to 1.34 billion lbs. compared to 1.30 billion lbs. for the same period last year. Tonnage for the fiscal year increased 0.7 percent to 5.00 billion lbs. from 4.97 billion lbs. in the prior year.

Net sales for fiscal 2014 were enhanced by the addition of the CytoSport business acquired on August 11, 2014, and the China based SKIPPY® peanut butter business acquired on November 26, 2013. On a combined basis, these acquisitions contributed an incremental $84.3 million of net sales and 39.6 million lbs. for the fourth quarter, and $102.5 million of net sales and 50.3 million lbs. for the fiscal year. Additionally, top-line comparative results for the year were impacted by the addition of the U.S. based SKIPPY® peanut butter business acquired on January 31, 2013. These sales contributed an incremental $86.5 million of net sales and 57.1 million lbs. to the top-line results for the fiscal year. Increased value-added sales within the Refrigerated Foods and Jennie-O Turkey Store segments also contributed to the top-line results for both the fourth quarter and fiscal year. Robust sales from the Company’s China business and pork export sales by the Company’s international business also provided notable growth throughout fiscal 2014. Tonnage increased for the year, as the Company successfully managed reduced volume through its harvest facilities in the third quarter, reflecting tight raw material supplies due to Porcine Epidemic Diarrhea Virus (PEDv) in the industry.

The Company expects continued strong sales momentum entering 2015. The addition of the CytoSport business further diversifies the Company’s portfolio and represents a significant opportunity for the Company to expand its offerings of

portable, immediate, protein-rich foods. To further support growth, the Company will continue to build brand awareness with increased advertising support focusing on the Jennie-O® Make The Switch® advertising campaign, Hormel® Natural Choice® deli meats, Hormel® REV® wraps, the SPAM® family of products, SKIPPY® peanut butter, and Muscle Milk® protein-rich products.

Gross Profit: Gross profit was $423.6 million and $1.56 billion for the 2014 fourth quarter and fiscal year, respectively, compared to $385.5 million and $1.41 billion last year. As a percentage of net sales, gross profit increased to 16.7 percent for the fourth quarter compared to 16.6 percent in fiscal 2013, and increased to 16.8 percent for the year compared to 16.1 percent in fiscal 2013. Strong performances from the Refrigerated Foods, Jennie-O Turkey Store, and International & Other segments offset lower margins in the Grocery Products and Specialty Foods segments for both the fourth quarter and fiscal year. Beneficial turkey commodity prices for the Jennie-O Turkey Store segment and strong pork operating margins for the Refrigerated Foods segment drove overall profit gains. In addition, continued growth of retail and foodservice value-added products benefited margins. Strong margins from the Company’s China operations and higher pork export sales and royalty income boosted margins for the International & Other segment. High meat input costs and related pricing actions negatively impacted margins and drove lower results in the Grocery Products segment. The Specialty Foods segment delivered lower margins in the fourth quarter due to a fair value inventory adjustment of $4.5 million relating to the CytoSport acquisition. The fourth quarter 2013 expiration of the agreement allowing DCB to sell certain sugar substitutes into foodservice trade channels also impacted fiscal year comparisons. Additionally, shipping and handling expenses rose in all five of the Company’s segments for the fiscal year.

Moving into fiscal 2015, the Company anticipates pork commodity prices and pork operating margins to normalize as the year progresses, providing input cost relief for the Grocery Products segment. Challenging comparisons for the Company’s pork operations will be offset by strong growth in the foodservice and retail businesses and improved live production results for the Refrigerated Foods segment. Jennie-O Turkey Store is entering the new fiscal year backed by strong sales momentum and beneficial grain markets, but will likely experience less favorable commodity meat markets. The International & Other segment will continue to deliver growth through expansion of its China business and the Specialty Foods segment will benefit from a full year of CytoSport sales. Turkey production will be modestly increased in fiscal 2015 to support the Jennie-O Turkey Store value-added product needs, following a year of slight increases to production levels in fiscal 2014. Advertising support for the Company’s core brands should also enhance margin results in fiscal 2015.

Selling, General and Administrative: Selling, general and administrative expenses for the fourth quarter and year were $165.9 million and $650.9 million, respectively, compared to $147.4 million and $627.3 million last year. Selling, general

and administrative expenses as a percentage of net sales for the fourth quarter increased to 6.5 percent compared to the prior year at 6.3 percent. For the fiscal year, these expenses decreased to 7.0 percent of net sales from 7.2 percent in fiscal 2013. The higher expense for the fourth quarter includes $4.8 million of transaction costs incurred related to the acquisition of CytoSport, reflected in the Specialty Foods segment. For the fiscal year, the Company incurred increased advertising and employee-related expenses, offset by transaction and transition costs related to the U.S. based SKIPPY® acquisition in the prior year. In 2015, the Company plans a renewed focus on advertising for many of the Company’s products including the Make The Switch® advertising campaign for Jennie-O® products, SKIPPY® peanut butter, Hormel® Natural Choice® deli meats, the SPAM® family of products, Hormel® REV® wraps, and Muscle Milk® protein-rich products. As a percentage of net sales, the Company expects selling, general and administrative expenses to be between 7.5 percent and 7.8 percent in fiscal 2015.

Research and development expenses were $7.5 million and $29.9 million for the fiscal 2014 fourth quarter and year, respectively, compared to $7.2 million and $29.9 million in fiscal 2013. Building upon the Company’s value-added portfolio through product innovation will continue to be a priority for the Company in fiscal 2015.

Equity in Earnings of Affiliates: Equity in earnings of affiliates was $5.7 million and $17.6 million for the fiscal 2014 fourth quarter and year, respectively, compared to $2.1 million and $20.5 million last year. The increase for the fourth quarter is a result of improved results from the Company’s 50 percent owned MegaMex joint venture, reflecting the impact of a larger incentive expense on the Fresherized Foods acquisition recognized in the prior year. In addition, overall improved results for the Company’s international joint ventures were noted for the fourth quarter of fiscal 2014, while the full year generated an overall decline for those operations as well as the MegaMex joint venture compared to the prior year.

The Company accounts for its majority-owned operations under the consolidation method. Investments in which the Company owns a minority interest, and for which there are no other indicators of control, are accounted for under the equity or cost method. These investments, along with receivables from other affiliates, are included in the Consolidated Statements of Financial Position as investments in and receivables from affiliates. The composition of this line item at October 26, 2014, was as follows:

Grocery Products: Grocery Products net sales decreased 3.4 percent for the fiscal 2014 fourth quarter and increased 2.7 percent for the year compared to fiscal 2013. Tonnage decreased 4.8 percent for the quarter and increased 3.3 percent for the year compared to prior year results. The comparative results for the fiscal year reflect the addition of the SKIPPY® peanut butter business beginning in the second quarter of fiscal 2013. This business contributed an incremental $73.3 million of net sales and 49.1 million lbs. to the results for the fiscal year.

Net sales for Grocery Products in the fourth quarter were negatively impacted by lower tonnage in the canned meat portfolio due to pricing actions taken earlier in the year to partially offset higher commodity cost inputs. Softer sales of Hormel® chili and the Hormel® Compleats® line of microwave meals led to the fourth quarter decline. For the fiscal year, sales gains for Hormel® bacon toppings and the Herdez® line of salsas and sauces within the MegaMex joint venture offset lower sales of the Hormel® Compleats® line of microwave meals and the SPAM® family of products.

Segment profit for Grocery Products decreased 21.1 percent for the fourth quarter and 8.7 percent for the year compared to fiscal 2013. Profit results for the fourth quarter were hampered by high meat input costs and reduced volumes following related pricing actions. Partially offsetting the decrease were higher equity in earnings results from the MegaMex joint venture in the fourth quarter, as the prior year included higher incentive expense on the Fresherized Foods acquisition. For the fiscal year, improved margins of Hormel® bacon toppings and the Herdez® line of salsas and sauces within our MegaMex joint venture were unable to offset the margin declines in products such as the SPAM® family of products, Hormel® chili, Hormel® Compleats® microwave meals, and Dinty Moore® stew.

Looking ahead, the Company expects pork commodity prices to normalize as the year progresses, providing input cost relief in fiscal 2015 for Grocery Products. Growth for SKIPPY® peanut butter products is anticipated following the September kick-off of a national advertising campaign after many years off air. Effective at the beginning of fiscal 2015, Fresherized Foods, the makers of Wholly Guacamole®, will be integrated into the Grocery Products sales and distribution systems giving this brand the full benefit of the Company’s sales force

capabilities. Going forward, 100 percent of these sales will be reported within the top-line results for the Grocery Products segment. The Company recently announced the closure of its Grocery Products plant in Stockton, California, and production from that facility will be moved to more modern facilities within the Company in the second quarter of fiscal 2015.

Refrigerated Foods: Net sales for the Refrigerated Foods segment increased 9.4 percent for the fiscal 2014 fourth quarter and increased 9.2 percent for the year compared to fiscal 2013. Tonnage increased 0.6 percent for the fourth quarter and decreased 0.1 percent for the fiscal year compared to prior year results. Tonnage remained relatively even with last year, as the Company successfully managed the reduced volumes processed through its harvest facilities in the third quarter due to PEDv in the industry and its effect on raw material supplies.

Several value-added product lines within Refrigerated Foods grew during fiscal 2014. Top-line results were driven by double-digit sales growth within the foodservice business in both the fourth quarter and fiscal year. Several value-added products within the foodservice business delivered growth, led by sales of innovative Hormel® Fire BraisedTM meats and Hormel® Bacon 1TM fully cooked bacon, along with continued robust sales of Hormel® fully cooked sausages. On the retail side of the business, improved sales performance of Hormel® Black Label® bacon and Hormel® REV® wraps, along with the reformulation and packaging updates of Hormel® side dishes introduced just under a year ago, led to restored sales growth for the fiscal year. Additionally, Hormel® Black Label® bacon and Hormel® party trays delivered sales gains in the fourth quarter.

Segment profit for Refrigerated Foods increased 9.9 percent in the fourth quarter and 45.3 percent for the year, compared to fiscal 2013. Unusually high pork operating margins were a significant driver of the higher results for both the fourth quarter and year. Strong growth for retail and foodservice value-added products also boosted margins in fiscal 2014.

Entering fiscal 2015, the Company expects pork operating margins to normalize as the year progresses. Commodity pork prices are anticipated to exhibit some volatility with PEDv still lingering in domestic herds, but not to the degree experienced in fiscal 2014. Strong growth in the foodservice and retail businesses is expected to offset these lower margins. The Company intends to increase pork production levels slightly over fiscal 2014. In continued support of the value-added product portfolio, the Company plans to focus advertising dollars on Hormel® Natural Choice® deli meats and Hormel® REV® wraps to enhance sales in the upcoming year.

Jennie-O Turkey Store: Jennie-O Turkey Store (JOTS) net sales for the fiscal 2014 fourth quarter and year increased 10.9 percent and 4.4 percent, respectively, compared to fiscal 2013. Tonnage increased 6.6 percent for the fourth quarter and 0.1 percent for the year, compared to prior year results. JOTS value-added products continued to deliver sales gains throughout the fourth quarter and fiscal year. Retail sales

of Jennie-O® lean ground turkey chubs and tray pack items experienced the greatest benefit from the Make The Switch® advertising campaign that started early in the year featuring ground turkey tacos. High commodity turkey prices also aided top-line growth. Total harvest volume increased during the fourth quarter and fiscal year compared to the prior year.

Segment profit for JOTS increased 45.3 percent for the fourth quarter and 22.6 percent for the year, compared to fiscal 2013. Increased value-added volume, improved product mix, strategic price management, and record commodity pricing drove the improved segment profit performance compared to a year ago. The positive comparison to fiscal 2013 reflects lower overall grain costs and higher commodity turkey meat prices. Value-added growth benefited from increased advertising expenses in fiscal 2014 with a renewed focus on the Make The Switch® advertising campaign. These profit gains offset lower live production performance and higher fuel expenses from the extended harsh winter experienced earlier in the year.

Entering fiscal 2015, the Company plans to increase turkey production modestly to support the value-added businesses for JOTS, following a year with a slight increase in production levels. Overall lower feed costs, although volatile, will benefit JOTS in 2015. The Company anticipates turkey prices to normalize during fiscal 2015, down from extremely high prices experienced in fiscal 2014. Advertising spend for JOTS more than doubled in fiscal 2014, with the Make The Switch® advertising campaign noted above. The Company plans to expand this advertising campaign into new markets in fiscal 2015.

Specialty Foods: Specialty Foods net sales increased 30.6 percent for the fiscal 2014 fourth quarter and decreased 2.7 percent for the year compared to fiscal 2013. Tonnage increased 14.5 percent for the quarter and decreased 4.9 percent for the year, compared to prior year results. The comparative results reflect the addition of the newly acquired CytoSport business beginning in the fourth quarter of fiscal 2014, contributing $73.5 million of net sales and 32.5 million lbs. to top-line results. Along with the addition of CytoSport sales, stronger canned meat sales for HSP led to the improved top-line performance for the fourth quarter. Sales declines for the full year were largely driven by the fourth quarter 2013 expiration of the agreement allowing DCB to sell certain sugar substitutes into foodservice trade channels, in addition to lower nutritional sales at Century Foods International (CFI). These declines were partially offset by improved sales of nutritional products for DCB and stronger canned meat sales for HSP.

Specialty Foods segment profit decreased 13.9 percent for the fourth quarter and 19.5 percent for the year compared to fiscal 2013. Declines in the fourth quarter were largely driven by $9.3 million of nonrecurring transaction costs and fair value adjustments related to the CytoSport acquisition. For the fiscal year, the shortfall was primarily driven by the expiration of the sugar substitute agreement noted above. High protein raw material costs also negatively impacted results in the fourth quarter for HSP.

In fiscal 2015, the Company will benefit from a full year of CytoSport sales while leveraging operational efficiencies and purchasing synergies to maximize the potential of this business.

International & Other: International & Other net sales increased 12.9 percent for the fiscal 2014 fourth quarter and 19.2 percent for the year compared to fiscal 2013. Continued strong sales for the Company’s China operations and pork exports, along with the addition of the China based SKIPPY® peanut butter sales were the primary drivers of the top-line results for the fourth quarter. The combined SKIPPY® business, including the U.S. based business acquired at the beginning of the second quarter of fiscal 2013, contributed an incremental $40.8 million of net sales and 25.0 million lbs. for the fiscal year comparison.

International & Other segment profit increased 2.5 percent and 18.5 percent for the fiscal 2014 fourth quarter and year, respectively, compared to fiscal 2013. Additional margins from China based SKIPPY® peanut butter sales and higher royalty income offset lower sales and margins on exports of the SPAM® family of products, as higher meat input costs pressured margins during the fourth quarter. Segment profit gains for the fiscal year were largely driven by robust margins for the Company’s China operations along with export sales of fresh pork items and improved royalty income.

After achieving another record segment profit year in fiscal 2014, the Company’s international business is entering 2015 with strong momentum. The Company expects solid export sales of the SPAM® family of products and SKIPPY® peanut butter sales, coupled with continued positive results from the Company’s China operations. To further expand our presence in China, the Company recently announced the construction of a new refrigerated foods plant slated to open in the back half of fiscal 2016. This facility will produce pepperoni, bacon, ham, and other refrigerated meat items sold in both foodservice and retail channels within China. The Company is also considering a potential exit from its business in Vietnam early in fiscal 2015, which has been part of a larger joint venture in the region and has not delivered the results expected from our international investments.

Unallocated Income and Expenses: The Company does not allocate investment income, interest expense, and interest income to its segments when measuring performance. The Company also retains various other income and unallocated expenses at corporate. Equity in earnings of affiliates is included in segment operating 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.

Net interest and investment expense (income) for the fourth quarter and fiscal year was a net expense of $2.6 million and $9.5 million, respectively, compared to a net expense of $0.6 million and $7.5 million for the comparable periods of

fiscal 2013. The increased expense for the fourth quarter and fiscal year is primarily due to lower returns on the Company’s rabbi trust. Interest expense was $1 2.7 million for fiscal 2014, increasing slightly from $12.5 million in fiscal 2013, as the Company utilized its revolving line of credit to fund the CytoSport acquisition in the fourth quarter. The Company expects interest expense to be approximately $12.0 million to $14.0 million for fiscal 2015.

General corporate expense for the fourth quarter and year was $6.2 million and $33.4 million, respectively, compared to $7.5 million and $26.7 million for the comparable periods of the prior year. The lower expense for the fourth quarter reflects lower salary and pension related expenses compared to the prior year. General corporate expense for the fiscal year was higher compared to last year, primarily the result of a bad debt incurred in the third quarter.

Net earnings attributable to the Company’s noncontrolling interests were $0.6 million and $3.3 million for the 2014 fourth quarter and fiscal year, respectively, compared to $1.1 million and $3.9 million for the comparable periods of fiscal 2013. The Company’s Precept Foods business generated lower results for both the fourth quarter and full year compared to fiscal 2013. This joint venture was dissolved at the end of the fiscal year. For the fiscal year, these declines were partially offset by improved results from the Company’s China operations.

Consolidated Results

Net Earnings: Net earnings attributable to the Company for the fourth quarter of fiscal 2013 were $157.3 million, an increase of 18.7 percent compared to earnings of $132.6 million for the same quarter in fiscal 2012. Diluted earnings per share were $0.58 compared to $0.49 for the same quarter in fiscal 2012. Net earnings attributable to the Company for fiscal 2013 increased 5.2 percent to $526.2 million, from $500.1 million in fiscal 2012. Diluted earnings per share for fiscal 2013 increased 4.8 percent to $1.95 compared to $1.86 per share in fiscal 2012.

Net Sales: Net sales for the fourth quarter of fiscal 2013 increased to $2.32 billion from $2.17 billion in fiscal 2012, an increase of 7.1 percent. Net sales for fiscal 2013 increased 6.3 percent to $8.75 billion compared to $8.23 billion in fiscal 2012. Tonnage for the fourth quarter increased 3.0 percent to 1.30 billion lbs. compared to 1.26 billion lbs. for the same period in fiscal 2012. Tonnage for the fiscal year increased 2.8 percent to 4.97 billion lbs. from 4.83 billion lbs. in fiscal 2012. Four of the Company’s five reporting segments delivered sales growth in the fourth quarter of fiscal 2013, and all five segments improved on a full year basis compared to fiscal 2012.

Net sales for fiscal 2013 were enhanced by the addition of the SKIPPY® peanut butter business acquired at the beginning of the second quarter. These sales contributed an incremental $94.8 million of net sales and 58.1 million lbs. for the fourth quarter, and $272.8 million of net sales and 163.4 million lbs.

for the fiscal year. Additionally, top-line comparative results for the year were impacted by the addition of Don Miguel Foods Corp. sales (additional product lines within the MegaMex joint venture) when the Company’s retail sales force assumed responsibility for these sales beginning in the third quarter of fiscal 2012. These sales contributed an incremental $103.2 million of net sales and 47.4 million lbs. to the top-line results for the fiscal year. Higher export sales of the SPAM® family of products by the Company’s international business provided notable growth throughout fiscal 2013. Increased value-added sales within the Refrigerated Foods and Jennie-O Turkey Store segments also contributed to the top-line results for both the fourth quarter and fiscal year. The more modest tonnage increase reflects continued lower sales of commodity meat items as harvest levels were reduced to limit the Company’s exposure to unfavorable operating margins. In addition, planned reductions in the Refrigerated Foods feed sales business impacted volume comparisons.

Gross Profit: Gross profit was $385.5 million and $1.41 billion for the 2013 fourth quarter and fiscal year, respectively, compared to $351.8 million and $1.33 billion in fiscal 2012. As a percentage of net sales, gross profit increased to 16.6 percent for the fourth quarter compared to 16.2 percent in fiscal 2012, but decreased to 16.1 percent for the year compared to 16.2 percent in fiscal 2012. Strong fourth quarter performances from the Refrigerated Foods, Grocery Products, and International & Other segments offset lower margins in the Jennie-O Turkey Store and Specialty Foods segments. The additional margins from SKIPPY® peanut butter sales boosted margins for both the Grocery Products and International & Other segments. Additionally, continued strong margins were experienced on export sales of the SPAM® family of products in the International & Other segment and improved results in the value-added businesses were seen in the Refrigerated Foods segment during the fourth quarter. These increases were able to overcome a sharp decline in the Specialty Foods segment due to the expiration of the agreement allowing DCB to sell certain sugar substitutes in foodservice trade channels and higher input costs for HSP. For the full year, gross margins were hindered by high grain costs and weak commodity turkey prices for Jennie-O Turkey Store and poor pork processing margins for Refrigerated Foods. In addition, shipping and handling expenses for the fiscal year increased compared to fiscal 2012 in four of the Company’s five reporting segments.

Selling, General and Administrative: Selling, general and administrative expenses for the fourth quarter and year were $147.4 million and $627.3 million, respectively, compared to $159.7 million and $605.9 million in fiscal 2012. Selling, general and administrative expenses as a percentage of net sales for the fourth quarter decreased to 6.3 percent compared to fiscal 2012 at 7.4 percent. For the fiscal year, these expenses decreased to 7.2 percent of net sales from 7.4 percent in fiscal 2012. The expense incurred in fiscal 2013 includes transition and transaction costs incurred related to the acquisition of

the SKIPPY® peanut butter business compared to fiscal 2012. A reduction in advertising expenses led to a lower expense for both the fourth quarter and year as the prior year included a significant investment in the Make The Switch® media campaign. Lower employee benefit-related costs were also seen in the fourth quarter compared to fiscal 2012.

Research and development expenses were $7.2 million and $29.9 million for the fiscal 2013 fourth quarter and year, respectively, compared to $8.1 million and $29.8 million in fiscal 2012.

Equity in Earnings of Affiliates: Equity in earnings of affiliates was $2.1 million and $20.5 million for the fiscal 2013 fourth quarter and year, respectively, compared to $10.1 million and $38.7 million in fiscal 2012. The decrease is a result of lower earnings from the Company’s 50 percent owned MegaMex joint venture, which experienced higher incentive expense on the Fresherized Foods acquisition, unfavorable exchange rates, and higher input costs. Overall improved results were seen in the Company’s international joint ventures for the fourth quarter, while fiscal 2013 resulted in an overall decline for those operations compared to fiscal 2012.

The Company accounts for its majority-owned operations under the consolidation method. Investments in which the Company owns a minority interest, and for which there are no other indicators of control, are accounted for under the equity or cost method. These investments, along with receivables from other affiliates, are included in the Consolidated Statements of Financial Position as investments in and receivables from affiliates. The composition of this line item at October 27, 2013, was as follows:

Income Taxes: The Company’s effective tax rate for the fiscal 2013 fourth quarter and year was 33.9 percent and 33.6 percent, respectively, compared to 33.1 percent and 33.4 percent, respectively, for the quarter and year in fiscal 2012.

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 that these segments, if operated independently, would report the operating profit and other financial information shown below. (Additional segment financial information can be found in Note O “Segment Reporting.”)

Grocery Products: Grocery Products net sales increased 23.3 percent for the fiscal 2013 fourth quarter and 29.6 percent for the year compared to fiscal 2012. Tonnage increased 24.4 percent for the quarter and 29.1 percent for the year compared to fiscal 2012. The comparative results reflect the addition of the newly acquired SKIPPY® peanut butter business beginning in the second quarter of fiscal 2013 and Don Miguel Foods Corp. sales (additional product lines within the MegaMex joint venture) beginning in the third quarter of fiscal 2012 when the Company’s retail sales force assumed responsibility for these sales. The addition of the SKIPPY® peanut butter business contributed an incremental $75.6 million of net sales and 48.1 million lbs. to the top-line results for the fourth quarter. On a combined basis, these businesses contributed an incremental $322.0 million of net sales and 182.8 million lbs. to the top- line results for fiscal 2013.

Improved sales in both the fourth quarter and fiscal year were recorded for Hormel® bacon toppings and the Herdez® and Don Miguel® products within the Company’s MegaMex joint venture which offset declines in categories such as Hormel® chili and Hormel® chunk meats. Sales of the Hormel® Compleats® line of microwave meals were also strong, enhanced by the introduction of new breakfast meal items towards the end of the third quarter.

Segment profit for Grocery Products increased 17.0 percent for the fourth quarter and 17.9 percent for the year compared to fiscal 2012. Along with the positive performance from the SKIPPY® peanut butter products, profit results for the fourth quarter and year benefited from improved margin performance in Hormel® Compleats® microwave meals and Hormel® bacon toppings. Higher pork and beef input costs squeezed

margins of Hormel® chili and the SPAM® family of products. Lower equity in earnings results from the MegaMex joint venture also impacted profits due to higher incentive expense on the Fresherized Foods acquisition, unfavorable exchange rates, and higher input costs.

Refrigerated Foods: Net sales for the Refrigerated Foods segment increased 4.2 percent for the fiscal 2013 fourth quarter and increased 0.7 percent for the year compared to fiscal 2012. Tonnage decreased 4.8 percent for the fourth quarter and decreased 3.7 percent for the fiscal year compared to fiscal 2012 results, as planned reductions in this segment’s feed sales business beginning late in the first quarter of fiscal 2013 impacted volume comparisons. Lower sales of commodity fresh pork items contributed to top-line declines in the first half of fiscal 2013, as a reduction in harvest levels was taken to limit the Company’s exposure to unfavorable pork operating margins. However, top-line results strengthened during the second half of the year and solid net sales gains across several key value-added product lines were able to offset the decline in fresh pork sales for the fourth quarter.

Several value-added product lines within Refrigerated Foods experienced notable growth during fiscal 2013. The retail business unit had a solid performance throughout fiscal 2013 for Hormel® pepperoni, Hormel® Natural Choice® deli meats, and Lloyd’s® barbeque ribs in the retail channel. The new Hormel® REV® wraps enjoyed broad consumer acceptance, driven in part by a national advertising campaign which began in late July. Within the foodservice business, sales gains for fiscal 2013 were generated by several value-added products, led by sales of Hormel® Natural Choice® deli meats and Hormel® Fire BraisedTM meats.

Segment profit for Refrigerated Foods increased 29.9 percent in the fourth quarter and 1.8 percent for the year, compared to fiscal 2012. Pork operating margins in the fourth quarter improved compared to the challenging operating environment in fiscal 2012, offsetting unseasonably high hog costs. Additionally, retail bacon pricing actions taken during the third quarter drove improved margins toward the end of fiscal 2013.

Jennie-O Turkey Store: Jennie-O Turkey Store (JOTS) net sales for the fiscal 2013 fourth quarter and year increased 7.1 percent and 3.4 percent, respectively, compared to fiscal 2012. Tonnage increased 7.8 percent for the fourth quarter and 1.3 percent for the year, compared to fiscal 2012 results. JOTS value-added products continued to deliver sales gains throughout the fourth quarter and fiscal year. Retail sales of Jennie-O® fresh turkey chubs, turkey breakfast sausage, and turkey bacon were robust, while Jennie-O® fresh turkey tray pack sales were down during the fourth quarter. Total harvest volume increased during the fourth quarter compared to fiscal 2012, after intentional reductions were taken earlier in the year to reduce the segment’s exposure to weak commodity meat pricing.

Segment profit for JOTS increased 25.5 percent for the fourth quarter and decreased 6.8 percent for the year, compared to fiscal 2012. Significantly higher grain costs and lower commodity turkey meat prices during the first half of the year resulted in lower earnings for fiscal 2013, partially offset by operational efficiencies and continued momentum from value-added business. Fourth quarter results were also driven by continued growth in value-added sales, along with performance gains and expense reductions in operations, live production and supply chain, which were able to offset the impact of market conditions as the fiscal year ended. Reductions in advertising expense also provided lower expenses for this segment for both the 2013 fourth quarter and fiscal year.

Specialty Foods: Specialty Foods net sales decreased 14.1 percent for the fiscal 2013 fourth quarter and increased 0.9 percent for the year compared to fiscal 2012. Tonnage decreased 8.3 percent for the quarter and 2.0 percent for the year, compared to fiscal 2012 results. Sales declines at DCB drove the top-line decreases for both the 2013 quarter and fiscal year, due to the expiration of the agreement allowing DCB to sell certain sugar substitutes in foodservice trade channels. Softer sugar and liquid portion sales also contributed to the year-over-year decline. CFI experienced sales declines in the fourth quarter in the nutritional category, which was partially offset by higher ready-to-drink sales. For the fiscal year, ready-to-drink and nutritional sales drove the year-over-year sales increase. HSP posted sales gains in canned meats in the fourth quarter and fiscal year.

Specialty Foods segment profit decreased 33.7 percent for the fourth quarter and increased 7.0 percent for the year compared to fiscal 2012. Declines in the fourth quarter were driven by the expiration of the sugar substitute agreement noted above. High protein raw material costs negatively impacted results in the fourth quarter and fiscal year. The favorable results for fiscal year 2013 were driven by efforts to diversify the customer base and a favorable product mix for CFI, improved margins in Hormel Health Labs, and stronger ingredient sales for HSP.

International & Other: International & Other net sales increased 37.9 percent for the fiscal 2013 fourth quarter and 23.3 percent for the year compared to fiscal 2012. Strong export sales of the SPAM® family of products and improved performance by the Company’s China operations were the principal drivers of the top-line results for both the fourth quarter and fiscal year. The addition of worldwide SKIPPY® product sales (excluding Mainland China) also enhanced top-line results, contributing $17.5 million of net sales and 9.3 million lbs. in the fourth quarter and $51.0 million of net sales and 26.4 million lbs. for fiscal 2013.

International & Other segment profit increased 82.0 percent and 43.3 percent for the fiscal 2013 fourth quarter and year, respectively, compared to fiscal 2012. Segment profit gains for the fourth quarter and fiscal year were largely driven by robust margins on exports of the SPAM® family of products and fresh pork items. Improved overall results for the Company’s international joint ventures also provided a benefit for fiscal 2013.

Unallocated Income and Expenses: The Company does not allocate investment income, interest expense, and interest income to its segments when measuring performance. The Company also retains various other income and unallocated expenses at corporate. Equity in earnings of affiliates is included in segment operating 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.

Net interest and investment expense (income) for the fourth quarter and fiscal year was a net expense of $0.6 million and $7.5 million, respectively, compared to a net expense of $1.4 million and $6.3 million for the comparable periods of fiscal 2012. The decreased expense for the fourth quarter is primarily due to better returns on the Company’s rabbi trust. For the year, increased net expense primarily reflects lower interest income, as the acquisition of the U.S. based SKIPPY® peanut butter business decreased invested funds in fiscal 2013. Interest expense was $12.5 million for fiscal 2013, decreasing slightly from $12.9 million in fiscal 2012.

General corporate expense for the fourth quarter and year was $7.5 million and $26.7 million, respectively, compared to $3.4 million and $21.4 million for the comparable periods of fiscal 2012. An increase in the Company’s lower of cost or market inventory reserve caused a notable expense increase for the fourth quarter and fiscal year compared to fiscal 2012. The higher expense for both the fourth quarter and fiscal year also reflects an increase in employee-related expenses compared to fiscal 2012.

Net earnings attributable to the Company’s noncontrolling interests were $1.1 million and $3.9 million for the 2013 fourth quarter and fiscal year, respectively, compared to $1.7 million and $4.9 million for the comparable periods of fiscal 2012. The Company’s Precept Foods business generated lower results for both the fourth quarter and full year compared to fiscal 2012. However, these declines were partially offset by continued improvement from the Company’s China operations, which were up for both the fourth quarter and fiscal year compared to fiscal 2012 results.

The Company was not party to any material related party transactions during fiscal years 2014, 2013, or 2012.

Liquidity and Capital Resources

Cash and cash equivalents were $334.2 million at the end of fiscal year 2014 compared to $434.0 million at the end of fiscal year 2013 and $682.4 million at the end of fiscal year 2012.

During fiscal 2014, cash provided by operating activities was $746.9 million compared to $637.8 million in 2013 and $517.8 million in 2012. Continued higher earnings and net positive working capital changes largely generated the increase in 2014.

Cash used in investing activities decreased to $616.8 million in fiscal year 2014 from $691.1 million in fiscal year 2013 and increased from $106.8 million in fiscal year 2012. The fourth quarter of fiscal 2014 included $424.3 million used to purchase CytoSport Holdings, Inc. and the fiscal year also included $41.9 million used to purchase the China based SKIPPY® peanut butter business in Weifang, China from Unilever United States Inc. The larger use of cash in fiscal 2013 included $665.4 million used to acquire the U.S. based SKIPPY® peanut butter business. In anticipation of that purchase in the prior year, the Company liquidated its marketable securities portfolio at the end of the first quarter of fiscal 2013, which generated $77.6 million in cash. Capital expenditures in fiscal 2014 increased to $159.1 million, from

$106.8 million in 2013 and $132.3 million in 2012. Capital expenditures for fiscal 2015 are estimated to be approximately $180.0 million to $200.0 million.

Cash used in financing activities was $229.4 million in fiscal 2014 compared to $195.5 million in fiscal 2013 and $192.7 million in fiscal 2012.

The Company used $58.9 million for common stock repurchases during fiscal 2014, compared to $70.8 million in fiscal 2013 and $61.4 million in fiscal 2012. During fiscal 2014, the Company repurchased 1.3 million shares of its common stock at an average price per share of $46.87. On January 31, 2013, the Company announced that its Board of Directors had authorized the repurchase of 10.0 million shares of its common stock with no expiration date. At of the end of fiscal 2014, there were 8.2 million shares remaining for repurchase under that authorization.

Cash dividends paid to the Company’s shareholders also continue to be an ongoing financing activity for the Company, with $203.2 million in dividends paid in fiscal 2014, compared to $174.3 million in the fiscal 2013 and $152.2 million in fiscal 2012. The dividend rate was $0.80 per share in 2014, which reflected a 17.6 percent increase over the fiscal 2013 rate. The Company has paid dividends for 345 consecutive quarters and expects to continue doing so in the future. The annual dividend rate for fiscal 2015 was increased 25.0 percent to $1.00 per share, representing the 49th consecutive annual dividend increase.

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.

Maximizing the value returned to shareholders through dividend payments remains a priority for use of the Company’s strong cash position going forward. The Company remains focused on growing the business, utilizing innovation to drive organic growth, and is also well positioned to take advantage of strategic acquisition opportunities. Capital spending to enhance and expand current operations will also be a significant cash outflow in fiscal 2015.

In addition to the commitments set forth in the above table, at October 26, 2014, the Company had $41.7 million in standby letters of credit issued on behalf of the Company. The standby letters of credit are primarily related to the Company’s self-insured workers compensation programs.

The Company believes its financial resources, including a revolving credit facility for $300.0 million and anticipated funds from operations, will be adequate to meet all current commitments.

Off-Balance Sheet Arrangements

As of October 26, 2014, the Company had $41.7 million 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 also includes revocable standby letters of credit totaling $3.5 million for obligations of an affiliated party that may arise under workers compensation claims. Letters of credit are not reflected in the Company’s Consolidated Statements of Financial Position.

Forward-Looking Statements

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

The Private Securities Litigation Reform Act of 1995 (the Reform Act) provides a “safe harbor” for forward-looking statements to encourage companies to provide prospective information. The Company is filing this cautionary statement in connection with the Reform Act. When used in the Company’s Annual Report to Stockholders, other filings by the Company with the U.S. Securities 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 following discussion of risk factors contains certain cautionary statements regarding the Company’s business, which should be considered by investors and others. Such risk factors should be considered in conjunction with any discussions of operations or results by the Company or its representatives, including any forward-looking discussion, as well as comments contained in press releases, presentations to securities analysts or investors, or other communications by the Company.

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

The Company cautions readers not to place undue reliance on forward-looking statements, which represent current views as of the date made. Forward-looking statements are inherently at risk to 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.

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 as a result of food processing. 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 markets, 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 also 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 each period. These instruments may

also limit the Company’s ability to benefit from market gains if commodity prices become more favorable than those that have been secured under the Company’s hedging programs.

Additionally, if a high pathogenic 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.

Fluctuations in commodity prices of pork, poultry, 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, 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 very large, vertically integrated operations operating under long-term supply agreements. This has resulted in fewer hogs being available on the cash spot market. Additionally, overall hog production in the U.S. has declined. The decrease in the supply of hogs could diminish the utilization of harvest and production facilities and increase the cost of the raw materials they produce. 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 costs for live hogs that are higher than 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 also contracts with turkey growers to meet its raw material requirements for whole birds and processed turkey products. Additionally, the Company owns various hog raising facilities that supplement its supply of raw materials. 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.

International trade barriers and other restrictions could result in less foreign demand and increased domestic supply of proteins which could lower prices.

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 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 Avian Influenza. 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, PEDv has impacted the Company’s internal farm operations and several of the Company’s independent hog suppliers. The spread of PEDv in the industry continues to be a concern and reduced the number of hogs through the Company’s harvest facilities in the third quarter of the year. 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.

Market demand for the Company’s products may fluctuate. The Company faces competition from producers of alternative meats and protein sources, including pork, beef, turkey, chicken, fish, peanut butter, and whey. 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. 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. The Company has made several acquisitions in recent years, most recently the acquisition of CytoSport Holdings, Inc., and regularly reviews opportunities for strategic growth through acquisitions. Potential risks associated with acquisitions include the inability to integrate new operations successfully, the diversion of management’s attention from other business concerns, the potential loss of

key employees and customers of the acquired companies, the possible assumption of unknown liabilities, potential disputes with the 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’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 state and local authorities that 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 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 that will require 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.

Deterioration of labor relations or increases in labor costs could harm the Company’s business. As of October 26, 2014, the Company had approximately 20,400 employees worldwide, of which approximately 5,500 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 that results 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; Beloit, Wisconsin; Fremont, Nebraska; and Vernon, California will expire during fiscal 2015, covering a combined total of approximately 3,400 employees. Negotiations at these facilities have not yet been initiated.

Quantitative and Qualitative Disclosure About Market Risks

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. Purchased hogs under contract accounted for 94 percent and 98 percent of the total hogs purchased by the Company in fiscal years 2014 and 2013, 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. Under normal, long-term market conditions, changes in the cash hog market are offset by proportional changes in primal values. Therefore, a hypothetical 10 percent change in the cash hog market would have had an immaterial effect on the Company’s results of operations.

Certain procurement contracts allow for future hog deliveries (firm commitments) to be forward priced. The Company generally hedges these firm commitments by using hog futures contracts. These futures contracts are designated and accounted for as fair value hedges. The change in the market value of such futures contracts is highly effective at offsetting changes in price movements of the hedged item, and the Company evaluates the effectiveness of the contracts on a regular basis. Changes in the fair value of the futures contracts, along with the gain or loss on the firm commitment, are marked-to-market through earnings and are recorded on the Consolidated Statements of Financial Position as a current asset and liability, respectively. The fair value of the Company’s open futures contracts as of October 26, 2014, was $0.6 million compared to $(10.9) million as of October 27, 2013.

The Company measures its market risk exposure on its hog futures contracts using a sensitivity analysis, which considers a hypothetical 10 percent change in market prices. A 10 percent increase in market prices would have negatively impacted the fair value of the Company’s October 26, 2014 open contracts by $6.1 million, which in turn would lower the Company’s future cost of purchased hogs by a similar amount.

Turkey and Hog Production Costs: The Company raises or contracts for live turkeys and hogs to meet some of its raw material supply requirements. Production costs in raising turkeys and hogs 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 and hogs are offset by proportional changes in their respective markets.

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 currently utilizes corn futures for JOTS, and these contracts are accounted for under cash flow hedge accounting. The

open contracts are reported at their fair value with an unrealized loss of ($11.3) million, before tax, on the Consolidated Statements of Financial Position as of October 26, 2014, compared to an unrealized loss of $(6.3) million, before tax, as of October 27, 2013.

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 October 26, 2014, open grain contracts by $7.1 million, which in turn would lower the Company’s future cost on purchased grain by a similar amount.

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 $4.0 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 rates for similar types of borrowing arrangements.

Investments: The Company holds trading securities as part of a rabbi trust to fund certain supplemental executive retirement plans and deferred income plans. As of October 26, 2014, the balance of these securities totaled $117.2 million. 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 direct negative impact to the Company’s pretax earnings of approximately $3.9 million, while a 10 percent increase in value would have a positive impact of the same amount.

International: 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 October 26, 2014, was $214.8 million, compared to $21 6.6 million as of October 27, 2013, with most of the exposure existing in Chinese yuan and Philippine pesos. Changes in currency exchange rates impact the fair values of Company assets either currently through the Consolidated Statements of Operations as currency gains/losses, or by affecting other comprehensive loss.

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, as of October 26, 2014. A 10 percent strengthening in the value of the yuan relative to the U.S. dollar would result in other comprehensive income of approximately $13.3 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 $10.9 million pretax.

Management’s Responsibility

for Financial Statements

The accompanying financial statements were prepared by the management of Hormel Foods Corporation which is responsible for their integrity and objectivity. These statements have been prepared in accordance with U.S. generally accepted accounting principles appropriate in the circumstances and, as such, include amounts that are based on our best estimates and judgments.

Hormel Foods Corporation has developed a system of internal controls designed to assure that the records reflect the transactions of the Company and that the established policies and procedures are adhered to. This system is augmented by well-communicated written policies and procedures, a strong program of internal audit, and well-qualified personnel.

These financial statements have been audited by Ernst & Young LLP, an independent registered public accounting firm, and their report is included herein. The audit was conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States) and includes a review of the Company’s accounting and financial controls and tests of transactions.

The Audit Committee of the Board of Directors, composed solely of outside directors, meets periodically with the independent auditors, management, and the internal auditors to assure that each is carrying out its responsibilities. Both Ernst & Young LLP and our internal auditors have full and free access to the Audit Committee, with or without the presence of management, to discuss the results of their audit work and their opinions on the adequacy of internal controls and the quality of financial reporting.

Management’s Report on Internal Control

Over Financial Reporting

Management of Hormel Foods Corporation is responsible for establishing and maintaining adequate internal control over financial reporting for the Company, as such term is defined in Exchange Act Rule 13a–15(f). The Company’s internal control system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting standards. Under the supervision, and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework).

Based on our evaluation under the framework in Internal Control – Integrated Framework, we concluded that our internal control over financial reporting was effective as of October 26, 2014. Our internal control over financial reporting as of October 26, 2014, has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included herein.

We have audited Hormel Foods Corporation’s internal control over financial reporting as of October 26, 2014, based on criteria established in Internal Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) (the COSO criteria). Hormel Foods Corporation’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Report of Management entitled Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Hormel Foods Corporation maintained, in all material respects, effective internal control over financial reporting as of October 26, 2014, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statements of financial position of Hormel Foods Corporation as of October 26, 2014 and October 27, 2013 and the related statements of operations, comprehensive income, changes in shareholders’ investment and cash flows for each of the three years in the period ended October 26, 2014, and our report dated December 17, 2014 expressed an unqualified opinion thereon.