Contractual Obligations and Commercial Commitments Off-Balance Sheet Arrangements Forward-Looking Statements The following table outlines the company’s future contractual financial obligations as of October 30, 2004. (For additional information regarding these obligations, see Note E “Long-term Debt and Other Borrowing Arrangements” and Note H “Commitments and Contingencies.”) (1) In the normal course of business, the company commits to purchase fixed quantities of livestock and grain from producers to ensure a steady supply of production inputs. Certain of these contracts are based on market prices at the time of delivery, for which the company has estimated the purchase commitment using current market prices as of October 30, 2004. The company also utilizes  various hedging programs to manage the price risk associated with these commitments. As of October 30, 2004, these hedging programs result in a net reduction of $2,462 in future cash payments associated with the purchase commitments in fiscal 2005, which is not reflected in the table above. (2) The company also utilizes grow-out contracts with independent farmers to raise turkeys for the company. Under these contracts, livestock, feed, and other supplies are owned by the company. The farmers provide the required labor in facilities that they either own or sublease from the company and receive a fee per pound when the turkeys are delivered. As of October 30, 2004, the company had approximately 100 active contracts ranging from two to twenty-five years in duration. The grow-out activity is assumed to continue through the term of these active contracts and amounts in the table represent the company’s obligation based on turkeys expected to be delivered from these farmers. (3) Amounts presented for other purchase obligations represent all known open purchase orders and all known contracts exceeding $1,000, related to the procurement of materials, supplies, and  various services. The company primarily purchases goods and services on an as-needed basis, with no unconditional commitment. Therefore, the amounts in the table represent only a portion of expected future cash expenditures. (4) Amounts presented for capital expenditures represent only the company’s short-term commitments to complete construction in progress at various Hormel Foods and Jennie-O Turkey Store locations. The company estimates total capital expenditures for fiscal 2005 to be $100,000. (5) Other long-term liabilities primarily represents payments under the company’s deferred compensation plans and minimum payments required under supply agreements related to the sale of Vista International Packaging, Inc. Minority interest related to the Precept Foods operation is not included in the table above. Payments under the company’s defined benefit pension and other postretire- ment benefit plans are also excluded from the table. (See estimated benefit payments for the next ten fiscal years in Note F “Pension and Other Postretirement Health Care Benefits.”) In addition to the commitments set forth in the above table, at October 30, 2004, the company had $62,263 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 and collateral required for an Internal Revenue Service refund, pending audit completion. The company believes its financial resources, including a three- year revolving credit facility for $150,000 and anticipated funds from operations, will be adequate to meet all current commitments.  The company enters into various agreements guaranteeing speci- fied obligations of affiliated parties. In some cases, the company guarantees payment for raw materials that were purchased by a supplier of Hormel Foods. In other cases, the company provides a standby letter of credit for obligations of an affiliated party that may arise under worker compensation claims. The company’s guaran- tees either terminate in one year or remain in place until such time as Hormel Foods revokes the agreement. Total guarantees provided by the company, as of October 30, 2004, amounted to $3,604. These potential obligations are not reflected in the com- pany’s consolidated balance sheet.  This report may contain “forward-looking” information within the meaning of the federal securities laws. The “forward-looking” infor- mation 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. “Forward-looking” statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, the statements. Among the factors that may affect the operating results of the company are the following: (i) fluctuations in the cost and availability of raw materials, such as commodity pork, poultry, and feed grain costs; (ii) changes in the availability and relative 28 Hormel Foods Corporation Payments Due by Periods Contractual Obligations Total Less than 1 year 1-3 years 3-5 years After 5 years Purchase obligations: Hog and turkey commitments (1) $2,441,667 $634,736 $726,789 $319,517 $ 760,625 Grain commitments (1) 30,511 29,201 1,310 – – Turkey grow-out contracts (2) 75,041 10,736 13,745 11,006 39,554 Other (3) 108,574 72,057 23,929 12,588 – Long-term debt 377,270 15,760 11,450 59 350,001 Interest payments on long-term debt 164,036 24,577 46,709 46,375 46,375 Capital expenditures (4) 57,681 57,681 – – – Leases 27,857 9,354 13,838 3,982 683 Other long-term liabilities (5) 69,667 8,071 17,949 14,649 28,998 Total Contractual Cash Obligations $3,352,304 $862,173 $855,719 $408,176 $1,226,236