There have been no material changes in the Company's Critical Accounting Policies, as disclosed in its Annual Report on Form 10-K for the year ended October 26, 2008.

The Company is a processor of branded and unbranded food products for retail, foodservice, and fresh product customers. It operates in five segments as described in Note L in the Notes to Consolidated Financial Statements in this Form 10-Q.

The Company earned $0.57 per diluted share in the third quarter of fiscal 2009, an increase of 50.0 percent compared to $0.38 per diluted share in the third quarter of fiscal 2008. Significant factors impacting the quarter were:

† Refrigerated Foods profit increased, reflecting significantly reduced input costs for its value-added businesses.

† Jennie-O Turkey Store continued to report increased profits, driven primarily by lower feed costs due to the planned reduction of turkey production and a reduced cost per ton during the quarter.

† Grocery Products profit results were positively impacted by continued strength in sales of core canned items.

† Specialty Foods results declined due to continued weak sales by its Century Foods International operating segment.

† Net interest and investment income showed notable improvement due to gains on the Company's rabbi trust investments.

Net earnings for the third quarter of fiscal 2009 increased 48.6 percent to $77,169 from $51,947 in the same quarter of 2008. Diluted earnings per share for the quarter increased 50.0 percent to $0.57 from $0.38 last year. Net earnings for the first nine months of 2009 increased 9.8 percent to $238,937 from $217,689 in 2008. Diluted earnings per share increased to $1.76 from $1.58 for the same period of the prior year.

Net sales for the third quarter of fiscal 2009 decreased 6.2 percent to $1,574,440 versus $1,678,142 in 2008. Tonnage decreased 3.7 percent to 1,094 million lbs. for the third quarter compared to 1,137 million lbs. in the same quarter of last year. Net sales for the first nine months of fiscal 2009 decreased 0.7 percent to $4,858,569 from $4,893,391 in the first nine months of fiscal 2008. Tonnage for the nine months decreased 2.4 percent to 3,384 million lbs. compared to 3,467 million lbs. in 2008. Declines reflect the continued impact of a weak economy, planned reductions in production for the Company's turkey operations in response to market conditions, and the discontinuance of sales of Carapelli olive oil and certain other product lines. Net sales for the nine months remain comparable to the prior year as strong demand for core product lines and the impact of earlier pricing initiatives have helped to mitigate the impact of the tonnage declines.

Gross profit for the third quarter and first nine months of fiscal 2009 was $260,324 and $794,677, respectively, compared to $229,046 and $785,689 for the same periods last year. Gross profit as a percentage of net sales for the third quarter and nine months increased to 16.5 and 16.4 percent in 2009, from 13.6 and 16.1 percent for the comparable quarter and nine months of fiscal 2008. The Refrigerated Foods segment benefited from significantly reduced input costs during the quarter compared to the prior year, as a rapid increase in primal

values due to export demand during the third quarter of fiscal 2008 pressured margins in the segment's value-added businesses. The lower costs were able to offset the impact of continued weak cut-out margins in pork operations. Margin improvement also continued at Jennie-O Turkey Store during the third quarter driven by lower feed costs compared to the prior year, due to a planned reduction in turkey production and a decreased cost per ton. Significantly lower freight expense across most segments of the Company also improved the third quarter and nine month margin results.

Selling, general and administrative expenses for the third quarter and first nine months of fiscal 2009 were $142,010 and $424,381, respectively, compared to $135,256 and $419,567 last year. As a percentage of net sales, selling, general and administrative expenses for the third quarter and first nine months increased to 9.0 percent and 8.7 percent, respectively, compared to the prior year at 8.1 percent and 8.6 percent. Increased medical costs and higher pension expenses contributed to the increase for both the quarter and nine months, offsetting declines in travel and advertising expenses. Additional employee incentive plan costs also contributed to the increase for the third quarter. The Company expects overall selling, general and administrative expenses to be approximately 9.0 percent of net sales for the remainder of fiscal 2009.

Equity in earnings of affiliates was $290 and $964 for the third quarter and first nine months, respectively, compared to $241 and $3,431 last year. Equity for both the third quarter and nine months was negatively impacted by the dissolution of the Company's Carapelli USA, LLC joint venture in the second quarter of fiscal 2009. For the first nine months, results for the Company's other joint ventures have been mixed. Decreases compared to the prior year were primarily due to lower results from the Company's 40 percent owned Philippine joint venture, Purefoods-Hormel Company, and the Company's 49 percent owned joint venture, San Miguel Purefoods (Vietnam) Co. Ltd. These declines were partially offset by improved performance from the Company's 50 percent owned joint venture, Herdez Corporation. Minority interests in the Company's consolidated investments are also reflected in these figures, and remained comparable to the prior year.

The effective tax rate for the third quarter and first nine months of fiscal 2009 was 34.6 and 34.9 percent, respectively, compared to 35.2 and 36.1 percent for the comparable quarter and nine months of fiscal 2008. The lower rate for both the third quarter and first nine months of fiscal 2009 reflects more positive returns on the Company's rabbi trust in the current year, which are not taxable. The lower rate for the nine months is also due to an increase in interest reserves as a result of the adoption of FIN 48 and net unfavorable discrete items in the first quarter of fiscal 2008. The Company expects an effective tax rate of approximately 36.0 percent for the remainder of fiscal 2009.

Net sales and operating profits for each of the Company's 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 L of the Notes to Consolidated Financial Statements in this Form 10-Q.

                                   Three Months Ended                     Nine Months Ended
                            July 26,      July 27,        %       July 26,      July 27,        %
                              2009          2008       Change       2009          2008       Change
Net Sales
Grocery Products           $   209,012   $   222,922      (6.2 ) $   692,639   $   683,801       1.3
Refrigerated Foods             847,578       890,978      (4.9 )   2,579,064     2,580,259      (0.0 )
Jennie-O Turkey Store          295,381       310,532      (4.9 )     890,165       893,870      (0.4 )
Specialty Foods                167,203       192,001     (12.9 )     519,679       563,322      (7.7 )
All Other                       55,266        61,709     (10.4 )     177,022       172,139       2.8
Total                      $ 1,574,440   $ 1,678,142      (6.2 ) $ 4,858,569   $ 4,893,391      (0.7 )

Segment Operating Profit
Grocery Products           $    33,215   $    29,849      11.3   $   116,527   $   107,829       8.1
Refrigerated Foods              58,291        36,331      60.4       155,731       154,762       0.6
Jennie-O Turkey Store           15,920         8,078      97.1        61,847        54,590      13.3
Specialty Foods                 16,488        16,895      (2.4 )      47,237        50,701      (6.8 )
All Other                        4,664         5,785     (19.4 )      17,936        20,653     (13.2 )

Total segment operating
profit                     $   128,578   $    96,938      32.6   $   399,278   $   388,535       2.8
Net interest and
investment income                 (553 )     (13,904 )    96.0        (3,951 )     (28,738 )    86.3
General corporate
expense                         (9,974 )      (2,907 )  (243.1 )     (28,018 )     (18,982 )   (47.6 )

Earnings before income
taxes                      $   118,051   $    80,127      47.3   $   367,309   $   340,815       7.8

Grocery Products

The Grocery Products segment consists primarily of the processing, marketing, and sale of shelf-stable food products sold predominantly in the retail market.

Grocery Products net sales decreased 6.2 percent for the third quarter and increased 1.3 percent for the first nine months compared to the same fiscal 2008 periods. Tonnage decreased 7.6 percent for the third quarter and 1.0 percent for the first nine months compared to the prior year. Top-line results for both the quarter and nine months were negatively impacted by the discontinuance of sales of Carapelli olive oil in the third quarter, as well as the rationalization of certain other products lines. Excluding those items last year, sales for Grocery Products were essentially flat compared to fiscal 2008. Sales of the SPAM family of products and Hormelchili continued to be strong, with double-digit increases noted for both the third quarter and nine months. These product lines continue to offer a good value proposition to consumers. Sales of Herdez ethnic products were also strong during the third quarter. Sales of Hormel Compleatsmicrowave meals declined during the quarter, reflecting competitive activity and the ongoing economic trend away from convenience items.

Segment profit for Grocery Products increased 11.3 percent for the third quarter and 8.1 percent for the nine months compared to the fiscal 2008. Lower pork input costs and the impact of pricing advances taken in prior periods benefited results for the quarter. This segment has also experienced significant reductions in freight expenses throughout fiscal 2009. Grocery Products continues to be challenged with increased input costs on certain product lines due to higher prices for beef and steel.

Many of these same factors are expected to continue throughout the remainder of the fiscal year. Continued investments in promotional programs should provide some additional top-line improvement during the fourth quarter. Construction of the new production facility in Dubuque, Iowa also continues, which will provide additional capacity for canned and microwave tray items beginning in fiscal 2010.

Refrigerated Foods

The Refrigerated Foods segment includes the Hormel Refrigerated, Farmer John, Burke Corporation (Burke), and Dan's Prize operating segments. This segment consists primarily of the processing, marketing, and sale of branded and unbranded pork and beef products for retail, foodservice, and fresh product customers. Results for the Hormel Refrigerated operating segment include the Precept Foods business, which offers a variety of case-ready beef and pork products to retail customers. Precept Foods, LLC, is a 51 percent owned joint venture between Hormel Foods Corporation and Cargill Meat Solutions Corporation, a wholly-owned subsidiary of Cargill, Incorporated.

Net sales for the Refrigerated Foods segment decreased 4.9 percent for the third quarter and were flat for the first nine months of fiscal 2009, compared to the same periods of fiscal 2008. Tonnage decreased 0.9 percent and 1.7 percent for the third quarter and first nine months, respectively, compared to last year. The continued weak economy impacted sales results for this segment. Foodservice sales were particularly soft, and lower pricing on retail fresh pork items also contributed to the sales decline.

Segment profit for Refrigerated Foods increased 60.4 and 0.6 percent for the third quarter and first nine months of fiscal 2009, respectively, compared to the prior year. The Company processed 2,266,000 hogs during the third quarter, which decreased slightly from the prior year. Lower input costs and a more favorable product mix drove the increased profits compared to fiscal 2008. However, continued weak cut-out margins persisted into the third quarter, which generated additional pork operating losses and offset a portion of the gains realized in the value-added businesses. This segment has also benefited from significantly reduced freight expenses throughout fiscal 2009, as compared to the prior year.

The Meat Products business unit reported another strong quarter, with double-digit sales growth achieved for Hormel Natural Choice lunchmeats, Hormel party trays, Hormelretail pepperoni, and DiLusso Deli Companyproducts. However, sales of Hormel refrigerated entrees and Lloyd'sbarbeque ribs showed some declines during the third quarter. The Foodservice business unit also continued to experience sales and tonnage declines, reflecting the ongoing decrease in travel and restaurant business due to economic conditions. The Company has been successful in pursuing other foodservice channels to offset a portion of those lost sales.

Farmer John continued to struggle with lower hog markets for the Company's live hog production facilities, which have generated sizable losses for both the third quarter and first nine months of 2009. However, this business continued to reduce expenses and expand its sales of value-added products, resulting in an overall improvement in profits compared to the prior year third quarter.

The outlook for this segment is mixed entering the fourth quarter. Continued lower input costs are expected to provide some additional benefit, and some improvement in cut-out values has occurred recently. However, weak export markets and softness in the foodservice sector are also expected to persist throughout the remainder of the fiscal year, which could negatively impact results.

Jennie-O Turkey Store

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

JOTS net sales decreased 4.9 percent for the third quarter and were flat for the first nine months versus the comparable periods of fiscal 2008. Tonnage decreased 2.2 percent for the third quarter and 1.8 percent for the first nine months, compared to fiscal 2008 results. Lower sales of retail commodity items, primarily whole birds, were a key driver of the decreased sales due to the timing of shipments and overall lower pricing compared to fiscal 2008. Planned volume reductions have also impacted sales and have driven inventory levels

significantly lower than the prior year. Value-added net sales also declined in the third quarter, reflecting competitive pressures and changes in consumer behavior driven by economic conditions.

Segment profit for JOTS increased 97.1 percent for the third quarter and 13.3 percent for the first nine months of fiscal 2009 compared to the prior year. Lower feed expense, due to a planned reduction in turkey production and a decreased cost per ton compared to the prior year, was again the key driver of the improved profitability this quarter. Despite production cutbacks, the industry remains in an oversupply situation for breast meat and whole birds, causing commodity markets to remain at unusually low levels. The volume reductions at JOTS noted above have allowed the Company to avoid generating surplus breast meat, which would have been sold at a loss under these market conditions.

Following several consecutive quarters of growth in its value-added businesses, JOTS did report a decline in the third quarter. Gains on retail products, such as Jennie-O Turkey Storeturkey burgers, were unable to offset decreased revenues for the foodservice and deli business units. The Company continues to focus on its value-added product lines and is pursuing options to restore growth in this area in upcoming quarters, including new media campaigns planned for the fourth quarter.

JOTS continues to focus on balancing inventories with value-added production demand. Export restrictions are a concern entering the fourth quarter. It is also likely that the industry oversupply of breast meat will keep commodity prices low during at least the remainder of fiscal 2009. Although feed costs are expected to be volatile in the fourth quarter, they should still be less than a year ago. The trend of weaker consumer demand is also a challenge, and may impact results for JOTS in the fourth quarter.

Specialty Foods

The Specialty Foods segment includes the Diamond Crystal Brands (DCB), Century Foods International (CFI), and Hormel Specialty Products (HSP) operating segments. This segment consists of the packaging and sale of various sugar and sugar substitute products, salt and pepper products, liquid portion products, dessert mixes, ready-to-drink products, gelatin products, and private label canned meats to retail and foodservice customers. This segment also includes the processing, marketing, and sale of nutritional food products and supplements to hospitals, nursing homes, and other marketers of nutritional products.

Specialty Foods has been challenged throughout fiscal 2009, as net sales decreased 12.9 percent for the third quarter and 7.7 percent for the first nine months, compared to the same periods of fiscal 2008. Tonnage decreased 13.2 percent for the quarter and 9.3 percent for the first nine months, compared to the prior year. The Boca Grande acquisition contributed an incremental $3,277 of net sales and 4.0 million lbs. of tonnage to the third quarter results for this segment, and $13,842 of net sales and 15.8 million lbs. of tonnage to the nine month results. Specialty Foods segment profit decreased 2.4 percent in the third quarter and 6.8 percent for the first nine months, compared to 2008 results.

Declines in both net sales and profits continued to be driven by reduced sales of nutritional powders and ready-to-drink products at CFI. The loss of business due to competitive issues and an overall slowdown with existing key customers have continued to negatively impact results compared to the prior year. Increased sales of nutritional products at DCB offset a portion of these declines. Sales and margins for private label luncheon meat, hash, and chili were also up at HSP during the quarter, offsetting a decline in contract packaging sales. Reduced freight and distribution expenses have also benefited this segment during fiscal 2009.

Entering the fourth quarter, sales of private label canned products are expected to remain strong. CFI continues to pursue new contract packaging opportunities, but results are still expected to trail the prior year. DCB will continue to face competitive pricing pressures on certain product lines, but a favorable product mix and lower freight expenses should provide some upside during the fourth quarter.

All Other

The All Other segment includes the Hormel Foods International (HFI) operating segment, which manufactures, markets, and sells Company products internationally. This segment also includes various miscellaneous corporate sales.

All Other net sales decreased 10.4 percent for the quarter and increased 2.8 percent for the first nine months, as compared to fiscal 2008. HFI export sales of fresh pork declined compared to the fiscal 2008 third quarter, as the weak global economy and publicity regarding the H1N1 flu virus have impacted pork export markets. Segment profit decreased 19.4 and 13.2 percent for the third quarter and first nine months of fiscal 2009, respectively, compared to prior year results. Lower raw material costs provided some benefit for the quarter, but were unable to offset the impact of the weaker export markets and unfavorable currency exchange rates in key international markets. Although the Company's international joint ventures improved modestly in the third quarter, they continue to represent a significant decrease in profits for the first nine months, compared to fiscal 2008.

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. These items are included in the segment table for the purpose of reconciling segment results to earnings before income taxes.

Net interest and investment income represented a net expense of $553 and $3,951 for the third quarter and first nine months of fiscal 2009, respectively, compared to a net expense of $13,904 and $28,738 for the comparable quarter and nine months of fiscal 2008. The decreased expense was primarily driven by improved investment returns on the Company's rabbi trust for supplemental executive retirement plans and deferred income plans, which increased $10,469 and $20,126 for the third quarter and first nine months, respectively, compared to fiscal 2008. Fiscal 2009 results also include a $3,591 pretax gain recognized on the dissolution of the Company's Carapelli USA, LLC joint venture. Additionally, the Company recorded a $2,400 investment write-off in the third quarter of fiscal 2008. Interest expense of $6,963 and $21,336 for the third quarter and first nine months of 2009, respectively, was comparable to prior year levels. The Company anticipates that interest expense will approximate $29,000 for fiscal 2009.

General corporate expense for the third quarter and first nine months was $9,974 and $28,018, respectively, compared to $2,907 and $18,982 for the comparable periods of fiscal 2008. Increased expense for the third quarter and nine months reflects higher medical and pension related expenses, which are expected to continue in upcoming quarters. Additional employee incentive plan costs also contributed to the increase for the quarter.

There has been no material change in the information regarding Related Party Transactions that was disclosed in the Company's Annual Report on Form 10-K for the year ended October 26, 2008.

Cash and cash equivalents were $295,100 at the end of the third quarter of fiscal year 2009 compared to $109,987 at the end of the comparable fiscal 2008 period.

Cash provided by operating activities was $327,124 in the first nine months of fiscal 2009 compared to $183,431 in the same period of fiscal 2008. Increased earnings and favorable changes in working capital generated most of the increase, as significant decreases in inventory and accounts receivable balances during fiscal 2009 have more than offset decreases in accounts payable and accrued expense balances. These increases were partially offset by a contribution of $55,000 to fund the Company's pension plans in the third quarter of fiscal 2009.

Cash used in investing activities decreased to $60,240 in the first nine months of fiscal 2009 from $124,229 in the comparable period of fiscal 2008. Decreased cash outflow related to acquisition activity was the primary driver of the decrease, due to the acquisition of Boca Grande in the third quarter of fiscal 2008 for $23,255. Lower fixed asset expenditures during fiscal 2009 also contributed to the decrease, declining to $71,029 for the first nine months of fiscal 2009 from $96,293 in the comparable period of fiscal 2008. The Company currently estimates its fiscal 2009 fixed asset expenditures to be approximately $100,000. The Company's investments in available-for-sale securities also resulted in a lower net cash outflow of approximately $12,800 for the first nine months of fiscal 2009 compared to the prior year.

Cash used in financing activities was $126,562 in the first nine months of fiscal 2009 compared to $98,964 in the same period of fiscal 2008. The Company used $13,876 for common stock repurchases in first nine months of fiscal 2009, compared to $56,472 in the same period of the prior year. For additional information pertaining to the Company's share repurchase plans or programs, see

Cash dividends paid to the Company's shareholders also continue to be a significant financing activity for the Company. Dividends paid in the first nine months of 2009 were $75,880 compared to $70,585 in the comparable period of fiscal 2008. For fiscal 2009, the annual dividend rate has been increased to $0.76 per share, representing the 43rd consecutive annual dividend increase. The Company has paid dividends for 324 consecutive quarters and expects to continue doing so.

The Company is required, by certain covenants in its debt agreements, to maintain specified levels of financial ratios and balance sheet position. At the end of the third quarter of fiscal 2009, the Company was in compliance with all of these debt covenants.

Cash flow from operating activities provides the Company with its principal source of liquidity. The Company does not anticipate a significant risk to cash flow from this source in the foreseeable future because the Company operates in a relatively stable industry and has strong products across many product lines. However, due to the credit market conditions that began in the latter half of fiscal 2008, the Company has continued to manage its capital conservatively during fiscal 2009. Certain capital projects that were not time critical were delayed, and notable efforts have been made to improve working capital balances. The Company repaid its $60,000 outstanding short-term line of credit balance subsequent to the end of the third quarter, and intends to renew its credit facility in fiscal 2010. The Company is also evaluating an additional discretionary contribution to its pension plans during the fourth quarter. Additional share repurchases also remain a strategic option that will be considered as a use of free cash flows.

Contractual Obligations and Commercial Commitments

As discussed in Note K of the Notes to Consolidated Financial Statements, the Company adopted the provisions of FIN 48 at the beginning of fiscal 2008. The Company is unable to determine its exact contractual obligations by year related to this pronouncement, as the ultimate amount or timing of settlement of its reserves for income taxes cannot be reasonably estimated. The total liability for unrecognized tax benefits, including interest and penalties, at July 26, . . .