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Hormel Foods Reports Record Third Quarter Results

COMMENTARY

“We had an excellent quarter, with earnings per share and sales up 14 percent and 5 percent, respectively,” said Jeffrey M. Ettinger, chairman of the board, president and chief executive officer. “All five segments reported increased earnings, led by our Grocery Products segment. Our strong sales growth across multiple segments demonstrates that our products are connecting well with consumers.

“Our Grocery Products segment benefitted from strong sales of our SPAM® family of products and from our MegaMex Foods joint venture. I was also pleased to see sales of our HORMEL® COMPLEATS® microwave meals grow nicely in the quarter. Our Jennie-O Turkey Store segment delivered another good quarter, aided by increased value-added sales and an improved product mix. Our international business continues to achieve impressive results, led by strong export sales of our SPAM® family of products and fresh pork. Increased value-added sales offset lower pork operating margins, boosting our Refrigerated Foods segment results during the quarter. Our Specialty Foods team generated excellent results on higher sales during the quarter,” Ettinger remarked.

SEGMENT OPERATING HIGHLIGHTS – THIRD QUARTER

Grocery Products (15% of Net Sales, 23% of Total Segment Operating Profit) Grocery Products segment profit increased by 32 percent, led by improved sales of our SPAM® family of products and by our MegaMex Foods joint venture. Net sales increased over last year’s results by 21 percent, including sales of DON MIGUEL® products. Without those sales, sales increased 3 percent.

Refrigerated Foods (52% of Net Sales, 35% of Total Segment Operating Profit) Refrigerated Foods segment profit improved by 7 percent, as stronger results by our Meat Products and Foodservice businesses were able to offset lower pork operating margins. While net sales for the quarter were flat, value-added sales increased, including sales of HORMEL® NATURAL CHOICE® deli meats, HORMEL® party trays, HORMEL® bacon, and HORMEL® pepperoni.

Jennie-O Turkey Store (18% of Net Sales, 23% of Total Segment Operating Profit) Jennie-O Turkey Store delivered another solid quarter, with segment operating profit up 12 percent from a year ago. Increased value-added sales and an improved product mix offset higher feed costs and lower commodity meat prices. Net sales for the quarter rose 7 percent, led by sales of JENNIE-O TURKEY STORE ® fresh tray pack products and turkey burgers.

Specialty Foods (11% of Net Sales, 12% of Total Segment Operating Profit) Specialty Foods segment profit increased 18 percent, as all three business units registered gains. Net sales grew 11 percent, led by higher sales of bulk and nutritional items, private label canned meats and ingredients.

All Other (4% of Net Sales, 7% of Total Segment Operating Profit) The All Other segment, which consists primarily of Hormel Foods International, grew segment profit by 55 percent and net sales by 2 percent, driven principally by stronger exports of our SPAM® family of products and fresh pork.

Net Interest and Investment Expense Net interest and investment expense was lower due principally to reduced debt levels and a lower interest rate.

OUTLOOK

“Our excellent results in the third quarter give us momentum heading into the fourth quarter and put us on track to achieve results consistent with our annual guidance range of $1.79 to $1.89 per share,” concluded Ettinger. “Increased grain costs will present a challenge, but the strength of our balanced business model and the vibrancy of our branded, value-added portfolio should support continued sales and earnings growth as we close out fiscal 2012.”

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