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Item 7. Management’s Discussion and Analysis

2025-03-25 compared with 2016-03-29 · 721 added, 933 removed, 75 unchanged (96% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following information in conjunction with the audited consolidated financial statements and the related notes in “Item 8.

Financial Statements and Supplementary Data.”

EXECUTIVE OVERVIEW

We are the largest hog producer and pork processor in the world.

In the United States, we are also the leader in numerous packaged meats categories with popular brands including Smithfield®, Eckrich®, Farmland®, Armour® and John Morrell®.

We are committed to providing good food in a responsible way and maintaining robust animal care, community involvement, employee safety, environmental, and food safety and quality programs.

We produce and market a wide variety of fresh meat and packaged meats products both domestically and internationally.

We operate in a cyclical industry and our results are significantly affected by fluctuations in commodity prices for livestock (primarily hogs) and grains.

Some of the factors that we believe are critical to the success of our business are our ability to:

maintain and expand market share, particularly in packaged meats,

develop and maintain strong customer relationships,

continually innovate and differentiate our products,

manage risk in volatile commodities markets, and

maintain our position as a low cost producer of live hogs, fresh pork and packaged meats.

We conduct our operations through five reportable segments:

Fresh Pork, Packaged Meats, Hog Production, International and Corporate.

The Fresh Pork segment consists of our U.S.

fresh pork operations.

The Packaged Meats segment consists of our U.S.

packaged meats operations.

The Hog Production segment consists of our hog production operations located in the U.S.

The International segment is comprised mainly of our meat processing and distribution operations in Poland, Romania and the United Kingdom, our interests in meat processing operations in Mexico, our hog production operations located in Poland and Romania, our interests in hog production operations in Mexico, and our former investment in Campofrío Food Group (CFG).

The Corporate segment provides management and administrative services to support our other segments.

In February 2015, we announced an organizational realignment and key senior management appointments that unify all of our independent operating companies, brands, marketing and employees under one corporate umbrella.

Moving to a more centralized structure allows for a more efficient and effective approach to customers, best utilizes management talent, maximizes the manufacturing platform and plant efficiency and optimizes marketing, innovation and brand management.

WH Group Merger

On September 26, 2013 (the Merger Date), pursuant to the Agreement and Plan of Merger dated May 28, 2013 (the Merger Agreement) with WH Group Limited, formerly Shuanghui International Holdings Limited, a corporation formed under the laws of the Cayman Islands and hereinafter referred to as WH Group, the Company merged with Sun Merger Sub, Inc., a Virginia corporation and wholly owned subsidiary of WH Group (Merger Sub), in a transaction hereinafter referred to as the Merger.

As a result of the Merger, the Company survived as a wholly owned subsidiary of WH Group.

WH Group is the majority shareholder of Henan Shuanghui Investment & Development Co., which is China's largest meat processing enterprise and China's largest publicly traded meat products company as measured by market capitalization.

WH Group is a pioneer in the Chinese meat processing industry with over 30 years of history.

WH Group's businesses include hog production, meat processing, fresh meat and packaged meats production and distribution.

The merging of WH Group's distribution network with our strong management team, leading brands and vertically integrated model is allowing us to provide high-quality, competitively-priced and safe U.S.

meat products to consumers in markets around the world.

As part of WH Group's international platform, we expect our best practices in large-scale farming, food safety standards, environmental stewardship and animal welfare to set the global industry standard.

This transaction enabled Smithfield to continue to execute on its strategic priorities while maintaining brand excellence and commitment to environmental stewardship and animal welfare.

We believe we have established Smithfield as the world's leading vertically integrated pork processor and hog producer with best-in-class operations and outstanding food safety practices.

Operationally, we have become part of an enterprise that shares our belief in global opportunities and our commitment to the highest standards of product safety and quality.

With our shared expertise and leadership, we continue to work on accelerating a global expansion strategy as part of WH Group.

The Merger was accounted for as a business combination using the acquisition method of accounting.

WH Groups's cost of acquiring the Company has been pushed-down to establish a new accounting basis for the Company.

The difference in the cost basis of the Company before and after the Merger impacts the comparability of results.

Change in Fiscal Year

On January 16, 2014, the Company elected to change its fiscal year from the 52 or 53 week period which previously ended on the Sunday nearest to April 30 to the 52 or 53 week period which ends on the Sunday nearest to December 31.

The change became effective at the end of the period ended December 29, 2013.

Unless otherwise noted, all references to "2015" and "2014" in this report are to the 53 week period ended January 3, 2016 and the 52 week period ended December 28, 2014 , respectively.

Net income was $452.3 million in 2015 , compared to net income of $556.1 million in 2014 .

The following summarizes the operating results of each of our reportable segments for 2015 compared to 2014 :

Fresh Pork operating profit increased $80.6 million primarily as the impact of lower meat values was more than offset by lower hog prices.

Packaged Meats operating profit increased $213.5 million to a record $673.3 million primarily as a result of lower raw material costs and higher sales volume, partially offset by lower average selling prices.

Hog Production operating profit decreased $324.5 million primarily as a result of lower live hog market prices driven by higher hog supplies, partially offset by favorable hedging results and lower feed costs.

International operating profit decreased $89.7 million due to lower pork market prices in Europe and Mexico and the impact of foreign currency translation due to a stronger U.S.

Corporate expenses increased by $17.7 million primarily due to higher stock-based compensation expense and charitable contributions.

The following table provides a reconciliation of net income to EBITDA and adjusted EBITDA for all periods presented.

EBITDA and adjusted EBITDA are non-GAAP measures.

We believe EBITDA is a useful measure to our investors because it excludes the effects of financing and investing activities by eliminating interest and depreciation costs.

We also believe adjusted EBITDA is a useful measure as it excludes the effect of non-operating activities.

EBITDA and adjusted EBITDA are not intended to be substitutes for our comparable GAAP measures and should not be used by investors or other users of our financial statements as the sole basis for formulating decisions as they exclude a number of important cash and non-cash charges.

Twelve Months Ended

January 3, 2016

December 28, 2014

(in millions)

Interest expense

Income tax expense

Depreciation and amortization expense

Non-operating (gain) loss

Adjusted EBITDA

Animal Health

Department of Agriculture (USDA) identified Porcine Epidemic Diarrhea Virus (PEDv) in the United States for the first time in 2013.

During 2014, the U.S.

pork market was significantly impacted by the spreading of PEDv, a disease that only infects pigs, not humans or other livestock, which has been an industry-wide issue and continues to have a presence in U.S.

Our herds in several regions in which we operate were affected in 2014 as PEDv spread throughout the U.S.

There were confirmed cases of PEDv in the U.S.

however, there were very few cases compared to the outbreak that occurred in 2014.

The USDA and the industry continue to monitor the situation.

During 2015, herds in several of our geographic regions were also impacted by outbreaks of Porcine Reproductive and Respiratory Syndrome Virus (PRRSv).

While PRRSv is not new to the swine industry, the impact of these outbreaks was more severe than observed in recent years.

We are subject to risks related to our ability to maintain animal health and control PEDv and PRRSv.

We are unable to predict the extent these diseases will impact our operations or market prices in the future.

In 2014, the spread of PEDv in the U.S.

reduced hog supplies and lead to higher hog and meat prices.

In 2015, the hog herds recovered and the supply increase yielded lower market prices.

Renewable Fuel Standard

The federal Renewable Fuel Standard (RFS) program requires that bio-fuels be blended into transportation fuels at ever-increasing volumes up to 36 billion gallons in 2030.

In October 2010, the Environmental Protection Agency (EPA) granted a “partial waiver” to a statutory bar under the Clean Air Act prohibiting fuel manufacturers from introducing fuel additives that are not “substantially similar” to those already approved and in use for vehicles of model year (MY) 1975 or later.

Prior to the EPA's decision, the ethanol content of gasoline in the United States was limited to 10 percent (E10), which created a barrier, commonly referred to as the “blendwall,” to the expansion of blended bio-fuels as prescribed by the RFS.

The EPA's decision allows fuel manufacturers to increase the ethanol content of gasoline to 15 percent (E15) for use in MY 2007 and newer light-duty motor vehicles, including passenger cars, light-duty trucks and medium-duty passenger vehicles.

In January 2011, the EPA granted another partial waiver authorizing E15 use in MY 2001-2006 light-duty motor vehicles.

Judicial challenges to these rulemakings by a coalition of industry groups were dismissed.

In 2013, the EPA issued a proposed rule that would have reduced the volume of renewable fuels mandated by statute and reflected the EPA’s estimate of what would actually be produced in 2014.

In April 2015, the EPA entered into a proposed consent decree which would have them propose the 2015 RFS by June 1, 2015 and to finalize the 2014 and 2015 RFS targets by November 30, 2015.

On May 29, 2015, the EPA proposed to establish the annual percentage standards for cellulosic biofuel, biomass-based diesel, advanced biofuel and total renewable fuels that apply to all gasoline and diesel produced or imported in years 2014, 2015 and 2016 as well as the volume of biomass-based diesel for 2017.

The proposed volumes are below statutory levels, but above historical output of renewable fuels.

On November 30, 2015, the EPA finalized RFS standards for 2014, 2015 and 2016 at higher levels than the proposed volumes, but below statutory targets.

The 2016 standard is set at 18.11 billion gallons of renewable fuels, or 10.10% of the motor fuel pool.

Representative Bob Goodlatte (R-VA) has re-introduced legislation in the 114th Congress that would eliminate the conventional (corn starch) ethanol mandate, cap the blendwall at E10, and require the EPA to set cellulosic standards at production levels.

Additionally, Sens.

Dianne Feinstein (D-CA) and Pat Toomey (R-PA) have introduced similar legislation which would eliminate the conventional ethanol mandate.

Although the long-term impact of the RFS is currently unknown, studies have shown that expanded corn-based ethanol production has driven up the price of livestock feed and led to commodity-price volatility.

We cannot presently assess the full economic impact of the RFS program on the meat processing industry or on our operations.

Country of Origin Labeling

Following a World Trade Organization (WTO) panel ruling on a complaint by Canada and Mexico that existing U.S.

country- of-origin labeling (COOL) requirements violated the United States’ WTO obligations, the USDA published a new rule effective May 23, 2013, Mandatory Country of Origin Labeling of Beef, Pork, Lamb, Chicken, Goat Meat, Wild and Farm-Raised Fish and Shellfish, Perishable Agricultural Commodities, Peanuts, Pecans, Ginseng, and Macadamia Nuts .

31367 (May 24, 2013) (the 2013 Rule).

The 2013 Rule requires, in part, that labels on covered meat products must list separately, in sequence, the specific country where the animal was "born," the country where it was "raised," and the country where it was "slaughtered." The rule also prohibits combining or commingling of meats with different "Born, Raised, and Slaughtered" combinations in the same package at retail.

On March 28, 2014 and on July 29, 2014, the U.S.

Court of Appeals for the District of Columbia Circuit rejected a judicial challenge to these rulemakings by a coalition of industry groups.

As of February 9, 2015, industry opponents dropped their lawsuit against the USDA.

The Canadian and Mexican governments challenged the 2013 Rule before the Dispute Settlement Body (DSB) of the WTO.

On October 20, 2014, the DSB issued panel reports finding in favor of Canada and Mexico and against the United States' 2013 Rule.

An appeal of the DSB's ruling brought by the U.S.

was rejected.

Canada and Mexico are seeking a combined $3.2 billion in retaliatory tariffs against a range of U.S.

agricultural and manufactured product exports, including frozen and chilled pork products.

In December 2015, a WTO Arbitration Panel report set retaliatory tariffs against the United States at just over $1 billion.

In December 2015, Congress passed and the President signed into law the Fiscal Year 2016 omnibus spending legislation which included legislative language to repeal the WTO-noncompliant components of the COOL statute.

Although Canada and Mexico still have the right to initiate retaliatory tariffs against the U.S.

under WTO rules, there is no indication that they intend to do so and the revocation of mandatory COOL for meat has essentially settled the dispute.

The commodity markets affecting our business fluctuate on a daily basis.

In this operating environment, it is difficult to forecast industry trends and conditions.

The outlook statements that follow must be viewed in this context.

Our most exciting growth prospect is the ongoing development of our packaged meats business.

Although we have experienced meaningful and consistent improvement in packaged meats margins, we believe significant growth potential remains.

We will continue to strengthen our consumer-focused marketing programs and promote innovation to improve our product mix toward branded, value-added products.

We expect these actions to result in continued broad-based gains in packaged meats sales, volume, market share, distribution and margins.

With our organizational realignment, we are taking steps to build on our record results in 2014 as we continue to solidify Smithfield's position as a global leader in branded packaged meats.

There is a plethora of benefits to moving to a centralized structure and unifying all our resources and brands together as “One Smithfield,” which should position us to take advantage of growth opportunities in the following ways:

Leveraging Smithfield's size and scope in pork industry;

Maximizing our manufacturing platform and distribution system;

Approaching the market more efficiently and effectively;

Best utilizing management talent across company;

Aligning our operations to provide better customer service;

Optimizing operations in areas like brand management, manufacturing, sales, and marketing;

Strengthening marketing, brand building and innovation across all brands.

We will continue to sharpen our strategic focus and drive operational improvements across our entire platform, including our fresh pork, hog production and international divisions.

We are focused on growth and believe that Smithfield is in an ideal position to continue to achieve strong results into 2016.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and accompanying notes included in Part II, Item 8 of this Annual Report on Form 10-K.

This discussion and analysis includes the results of operations and financial conditions, including year-over-year comparisons, for fiscal years 2024 and 2023.

For discussion and analysis of fiscal year 2022, including a year-over-year comparison of fiscal years 2023 and 2022, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our final prospectus, dated January 27, 2025, for our IPO, filed with the SEC under Rule 424(b) of the Securities Act on January 29, 2025.

The information reflects all normal recurring adjustments which we believe are necessary to present fairly the financial position and results of operations for all periods included.

Totals and percentages may be affected by rounding.

Certain prior period amounts have been reclassified to conform to the current period presentation.

We are an American food company that employs approximately 34,000 people in the U.S.

and 2,500 people in Mexico.

We boast a portfolio of high-quality, iconic brands, such as Smithfield®, Eckrich® and Nathan’s Famous®, among many others.

We are a majority owned subsidiary of Hong Kong-based WH Group.

We conduct our operations through three reportable segments:

Packaged Meats, Fresh Pork, and Hog Production.

We also conduct operations that do not constitute reportable segments, which include our Mexico and Bioscience operations.

Our fiscal year is the 52-week or 53-week period which ends on the Sunday nearest to December 31.

Fiscal years 2024 and 2023 each consisted of 52-weeks.

For a more comprehensive overview of our company and operations, refer to “Item 1.

Business” in this Annual Report on Form 10-K.

Growth Strategies

The strategic initiatives we are executing across our segments are complemented and enabled by our strong balance sheet and ongoing operational investments, positioning us for future growth.

We have several strategic initiatives to grow our business, reduce costs and enhance our profitability and margins.

These include:

• driving growth in our Packaged Meats segment;

• further enhancing the profitability of our Fresh Pork segment;

• continuing to invest in innovation;

• optimizing operational and supply chain efficiencies;

• executing synergistic and complementary mergers and acquisitions.

For a more comprehensive discussion of our growth strategies, refer to “Item 1.

Business—Our Growth Strategies” in this Annual Report on Form 10-K.

Key Factors Affecting Our Results of Operations and Financial Condition

The following are key factors that have influenced our results of operations in the past and may influence our results in the future.

Sales Drivers

We are focused on driving profitable growth through our Packaged Meats segment.

Within the Packaged Meats segment, the primary factors impacting sales of our brands are household penetration, consumption levels, price

point and product offerings.

As a result, we have pursued strategies that we believe best align our products with consumer trends and behavior.

We have shifted our portfolio towards a higher mix of value-added and margin accretive products while leveraging the breadth of our offerings to further penetrate across dayparts.

We look to increase brand awareness and encourage consumer adoption of our products through product and packaging innovation and effective and appealing marketing strategies while maintaining our promise to consumers to offer high-quality products for every budget.

We have also expanded to new categories and grown distribution of under-indexed brands in under-penetrated locations.

In addition to the prior initiatives, we also seek to increase sales in packaged meats products by driving volumes of our private label and foodservice products, by expanding our customer relationships and by offering quality selections across the value chain.

packaged meats market is supported by long-term secular tailwinds, including consumer demand for high-protein diets, high-quality nutrition, product versatility and convenience.

We expect these tailwinds to continue to drive increases in overall meat consumption.

Nevertheless, changes in market trends and consumer preferences could adversely affect our results of operations.

In our Fresh Pork segment, the primary drivers of external sales are the consistent level of global pork consumption, our ability to maximize the value of each hog and our ability to leverage our different end markets including retail, foodservice, industrial and export channels.

Through ongoing product innovation, we seek to appeal to ever-changing consumer preferences, including demand for convenience and smaller portion sizes as well as expanded interests in new and varied flavors.

We also seek to capitalize on export markets as an outlet for increasing the value of raw materials through whole-hog utilization and by appealing to differentiated, global tastes and preferences.

Our cost as a percentage of sales varies based on fluctuations of raw materials prices, as well as manufacturing, distribution and marketing costs.

Raw materials are the largest component of our total cost of goods sold, with feed ingredients and hogs accounting for the majority share.

Approximately 80% of the raw materials used in the Packaged Meats segment is sourced internally from our Fresh Pork segment, and about half of the hogs used in the Fresh Pork segment are supplied by our Hog Production segment.

In the Hog Production segment, in fiscal year 2024, approximately 60% of cost of goods sold was from animal feed, which is derived primarily from corn and soybean meal.

The price of feed ingredients, hogs and pork fluctuates based on market dynamics which can affect our margins.

We enter into hedging transactions for these commodities when we determine conditions are appropriate to mitigate the inherent price risks.

While this hedging may limit our ability to participate in gains from favorable commodity fluctuations, it also reduces the risk of loss from adverse changes in raw material prices.

We continue to optimize the size of our hog production operations and procure a greater mix of hogs from independent suppliers with market-based supply agreements in order to supply our Fresh Pork segment.

We have reduced the size of our internal hog production from a peak of 17.6 million head in 2019 to 14.6 million head in 2024, and we continue to explore opportunities for reduced internal production.

We expect to produce approximately 11.5 million head in 2025, which would represent approximately 40% of the hogs processed by our Fresh Pork segment.

We are pursuing best-in-class manufacturing principles in our plants by employing automation to redeploy labor to higher value tasks, increasing yields and driving efficiency by reducing complexity.

In our logistics and distribution network, we have reduced transportation and warehousing costs by improving transportation carrier mix, maximizing utilization of our cold storage and trucking assets, improving supply and demand planning and optimizing inventory levels.

Our results of operations will continue to depend on our ability to (1) manage raw material cost movements through optimizing our hog production operations, hedging, forward purchasing, strategic sourcing negotiations and passing inflationary cost increases to customers, (2) operate our manufacturing and logistics footprint efficiently and competitively and (3) continue to attract and retain customers and consumers through effective sales and marketing spend.

We export our products to over 30 countries, including China, Mexico and Canada, and we are engaged in a joint venture in Mexico.

For the year ended December 29, 2024, U.S.

export sales accounted for 13% of our total sales.

Because of the growing market share of U.S.

pork products in the international markets, U.S.

exporters are increasingly being affected by measures taken by importing countries to protect local producers.

Our international sales and operations are subject to various risks related to economic or political uncertainties, including, but not limited to, the risks posed by the imposition of tariffs, quotas, trade barriers and other trade protection measures that may be taken by various countries.

In February 2025, the current U.S.

administration issued executive orders announcing a 10% tariff on most imported goods from China and 25% tariffs on most imported goods from Mexico and Canada.

The China tariff went into effect on February 4, 2025 and the tariffs on Mexico and Canada went into effect on March 4, 2025.

The China tariff was increased by an additional 10% effective March 4, 2025.

However, on March 6, 2025, President Trump announced that the proposed tariffs on imported goods from Canada and Mexico that are covered by the United States-Mexico-Canada Agreement will be suspended until April 2, 2025.

China responded by imposing an additional 15% tariff on U.S.

chicken, wheat, corn and cotton products and an additional 10% tariff on pork, among other products, increasing the tariff rate on pork from 37% to 47%.

Officials from Mexico and Canada have announced that they anticipate imposing retaliatory tariffs.

Our primary raw materials, including hogs, feed grains and meat, are sourced primarily in the U.S.

Tariffs imposed on U.S.

exports of these items could increase U.S.

supplies of these items and therefore, reduce our raw material costs.

On the other hand, the U.S.

pork industry depends on free and open export markets to support growth.

China, Mexico and Canada are three of our largest export markets.

Tariffs imposed on U.S.

pork exports could increase U.S.

pork supplies, which would also affect the price of pork in the U.S.

We could also experience a decrease in demand or lose customers due to anti-American sentiment.

Any of the above could materially affect our business, financial condition and results of operations.

Recent Developments

The following events and transactions have had, and/or will have, an impact on our results of operations and/or financial condition:

Initial Public Offering.

On January 29, 2025, we completed our IPO of 26,086,958 shares of common stock, which represents 7% of the total outstanding shares, at a price of $20.00 per share.

We issued 13,043,479 shares of common stock bringing the total number of outstanding shares to 393,112,711.

The remaining 13,043,479 shares of common stock were sold by our existing shareholder.

Our existing shareholder granted the underwriters a 30-day option to purchase up to 3,913,042 additional shares of our common stock.

On February 20, 2025, the underwriters partially exercised such option and purchased 2,506,936 additional shares of common stock from our existing shareholder.

We received net proceeds from the IPO of approximately $236 million after deducting underwriting discounts, commissions and fees.

As a result of the IPO, our common stock is listed on the Nasdaq Global Select Market under the ticker “SFD.”

In connection with the IPO, we granted to our directors and certain of our employees and certain directors and employees of WH Group:

• options to purchase 9,822,467 shares with an exercise price equal to the IPO price and an aggregate grant date fair value of $30 million;

• 1,527,000 restricted stock units (“RSUs”) with an aggregate grant date fair value of $31 million.

Both the options and RSUs vest over a five year period, with 20% vesting each year.

We expect to recognize an aggregate of $49 million in compensation expense over the five-year vesting period of these awards, of which we estimate that the amount recognized in 2025 will be $9 million.

Altoona, Iowa Facility Closure.

On August 30, 2024, we closed our Altoona, Iowa ham boning facility and consolidated production volume into other locations to improve manufacturing efficiencies.

Costs associated with closing the plant primarily include operating lease assets and equipment that we disposed of prior to the expiration of the lease term or end of the asset’s useful life.

The charges associated with the closing were not material.

Altoona was accounted for in the Fresh Pork segment.

European Carve-Out.

On August 26, 2024, we completed a carve-out and transfer of our European operations to WH Group.

As a result, we derecognized the assets and liabilities of our former European operations through equity.

No gain or loss was recognized on the transaction.

The historical results of operations, assets and liabilities, and cash flows of the European operations have been condensed and reported as discontinued operations in the consolidated financial statements for all periods presented.

Dry Sausage Facility Acquisition.

On July 30, 2024, we acquired a dry sausage production facility located in Nashville, Tennessee from Cargill Meat Solutions Corporation for $38 million.

The acquisition is part of our strategy to grow our value-added packaged meats business and serve the growing demand for high-quality pepperoni, salami, charcuterie and other dry sausage products.

Employee Retention Tax Credit.

In the second quarter of 2024, we recognized $86 million and $1 million of employee retention credits in cost of sales and selling, general and administrative expenses (“SG&A”), respectively, in the consolidated statement of income.

For more information, see “Note 7:

Employee Retention Tax Credits” to the consolidated financial statements included in Part II, Item 8 of this Annual Report.

American Skin.

On December 28, 2023, we acquired the remaining 15% interest in American Skin Food Group, LLC for $15 million.

West Coast Exit and Hog Production Reform.

We have undertaken a number of steps to exit our operations in California where high taxes, high utility costs and a challenging regulatory environment negatively impact our ability to operate efficiently and profitably.

We also undertook a number of other actions in furtherance of our efforts to optimize the size of our Hog Production segment’s operations and improve its cost structure:

• West Coast Exit.

In May 2022, we announced a decision to close our Vernon, California processing facility, exit farm operations in Arizona and California and reduce our sow herd in Utah.

Additionally, in December 2023, we made a decision to terminate a number of agreements with contract farmers and closed several company-owned nursery farms in Utah as a result of the Vernon, California facility closure in early fiscal year 2023.

• Hog Production Reform.

We have taken the following actions to further restructure and optimize the size of our hog production operations, including:

• In May 2023, we made a decision to cease operations on a number of sow farms in Missouri.

The decision was driven by persistent livestock disease issues, underperforming operations and shifting industry supply and demand dynamics.

• In fiscal years 2023 and 2024, we terminated certain agreements with underperforming contract farmers and closed certain farms in the eastern U.S.

• On December 27, 2024, we became a member of a North Carolina-based company, Murphy Family Farms, by contributing $3 million in cash in exchange for a 25% minority interest.

We additionally sold approximately 150,000 sows and related inventories located on company-owned and contract farms in North Carolina to Murphy Family Farms and recorded a gain of $6 million on the sale.

Subsequent to the end of fiscal year 2024, on December 30, 2024, we sold the commercial hog inventories associated with such sows to Murphy Family Farms.

Murphy Family Farms is now a hog supplier to us and will supply approximately 3.2 million hogs annually.

We will supply animal feed and other supplies and provide certain support services to Murphy Family Farms.

• On February 24, 2025, we became a member of a North Carolina-based company, VisionAg, by contributing $450,000 in cash in exchange for a 9% minority interest.

We additionally sold approximately 28,000 sows and the associated commercial hog inventories located on certain company-owned and contract farms in North Carolina to VisionAg.

VisionAg is now a hog supplier to us and will supply approximately 600,000 hogs annually.

In addition, we will supply animal feed and provide certain support services to VisionAg.

As a result of these decisions, we incurred various exit costs and disposal charges.

We recognized charges totaling $31 million and $195 million in cost of sales in fiscal years 2024 and 2023, respectively.

Included in the $31 million of charges recognized in fiscal year 2024 was a $4 million loss on the sale of certain hog farms in Missouri from which we received $32 million in proceeds.

Additionally, in the fourth quarter of 2023, certain biogas assets owned by our joint venture, Align, were impaired as a result of our decision in December 2023 to terminate hog grower contracts and close farms in Utah.

As a result, we recognized our share of the impairment totaling $35 million in (income) loss from equity method investments in the consolidated income statement.

Also in the fourth quarter of 2023, we incurred $14 million in costs associated with biogas assets owned by our joint venture, Monarch, in connection with the farms in Missouri that were closed in fiscal year 2023.

These costs were recognized in (income) loss from equity method investments in the consolidated statement of income.

In the second quarter of 2023, we sold our Vernon, California facility for $205 million and recognized a gain of $86 million in operating gains in the consolidated statement of income.

On December 17, 2024, we sold our hog production assets in Utah, excluding the live animals, for $58 million.

The transaction resulted in a gain of $32 million, which was recognized in operating gains in the consolidated statement of income in the fourth quarter of 2024.

As part of the agreement, we leased back certain farm and feed properties that we continue to operate.

Results of Operations

Significant Events Affecting Results of Operations

Sale of Label Printing Plant

In 2015, we sold our product label printing business in Kansas City for $1.65 million cash plus contingent consideration, which we valued at $11.9 million , and recognized a gain of $12.0 million in SG&A, reflected in the Packaged Meats segment.

In June 2015, we completed the sale of our entire equity interest in CFG to Alfa for $354.0 million in cash.

As of the date of the sale, the book value of our investment in CFG was $298.7 million.

Additionally, we had $54.6 million of unrealized currency translation losses on our balance sheet related to our investment in CFG.

In January 2015, we commenced a cash tender offer for our 7.75% senior unsecured notes due July 2017, 5.25% senior unsecured notes due August 2018, 5.875% senior unsecured notes due August 2021 and 6.625% senior unsecured notes due August 2022, subject to a maximum aggregate purchase price up to $275.0 million (2015 Tender Offer).

As a result of the 2015 Tender Offer, we paid $275.0 million to repurchase $258.1 million of principal and recognized losses on debt extinguishment of $12.8 million in non-operating (gain) loss in the consolidated condensed income statement, including the write-off of related unamortized premiums and debt issuance costs.

WH Group Merger

In connection with the Merger, we incurred $23.9 million and $18.0 million of professional fees during the three months ended December 29, 2013 and five months ended September 26, 2013 , respectively.

These fees are recognized in merger related costs on the consolidated statements of income and reflected in the results of our Corporate segment.

In addition, Merger Sub deferred $17.3 million of debt issuance costs for a financing arrangement.

We recognized these deferred costs in interest expense during the three months ended December 29, 2013 upon termination of the financing arrangement following the Merger.

WH Group's cost of acquiring the Company has been pushed-down to establish a new accounting basis for the Company.

The allocation of consideration to the net tangible and intangible assets acquired and liabilities assumed by WH Group in the Merger reflects fair value estimates based on management analysis, including work performed by third-party valuation specialists.

This work was finalized during the third quarter of 2014 with no material adjustments.

Our pre-tax earnings for the twelve months ended December 29, 2013 were negatively impacted by $37.7 million as a result of the fair value adjustments to our assets and liabilities, including a $45.4 million increase in cost of sales as a result of the fair value step-up of our inventories.

Acquisition of Kansas City Sausage, LLC

In May 2013, we acquired a 50% interest in Kansas City Sausage Company, LLC (KCS), for $36.0 million in cash.

KCS operates in Des Moines, Iowa and Kansas City, Missouri.

In Des Moines, KCS produces premium raw materials for sausage, as well as value-added products, including boneless hams and hides.

The Kansas City plant is a modern sausage processing facility and is designed for optimum efficiency to provide retail and foodservice customers with high quality products.

With our strong ongoing focus on building our packaged meats business, and with 15% of the U.S.

sow population, this joint venture is a logical fit for the Company.

It is expected to provide a growth platform in two key packaged meats categories — breakfast sausage and dinner sausage — and to allow us to expand our product offerings to our customers.

These categories represent over $4.0 billion in industry retail and foodservice sales annually.

KCS is managed by its Board of Directors, which makes decisions that most significantly impact the economic performance of KCS.

We have the right to nominate and elect the majority of the members of the Board of Directors of KCS, and based on the associated voting rights, we have determined that we have a controlling financial interest in KCS.

As a result, the acquisition of our interest in KCS was accounted for in the Fresh Pork and Packaged Meats segments using the acquisition method of accounting.

In 2015, KCS generated over $275 million in sales.

Missouri Litigation

During the twelve months ended April 29, 2012 , we engaged in global settlement negotiations and recognized $22.2 million in net charges associated with the expected settlement of the Missouri Litigation.

The charges were recognized in selling, general and administrative expenses in the Hog Production segment.

During the twelve months ended April 28, 2013 , the parties to the litigation reached an agreement and consummated the global settlement.

CFG Consolidation Plan

In December 2011, the board of Campofrío Food Group (CFG) approved a multi-year plan to consolidate and streamline its manufacturing operations to improve operating efficiencies and increase utilization (the CFG Consolidation Plan).

The CFG Consolidation Plan included the disposal of certain assets, employee redundancy costs and the contribution of CFG's French cooked ham business into a newly formed joint venture.

As a result, we recorded our share of CFG's charges totaling $38.7 million in equity in (income) loss of affiliates within the International segment in the twelve months ended April 29, 2012 .

Consolidated Results of Operations

The tables presented below compare our results of operations for the periods indicated.

The Transition Period reflects the combined results of predecessor and successor periods.

This combined information does not purport to represent what our consolidated results of operations would have been if the Merger had taken place on April 29, 2013, nor have we made any attempt to either include or exclude expenses or income that would have resulted had the Merger actually occurred on April 29, 2013.

As used in the tables below, "NM" means "not meaningful."

Twelve Months Ended January 3, 2016 and December 28, 2014

Twelve Months Ended

January 3, 2016

December 28, 2014

(in millions)

Cost of sales

Selling, general and administrative expenses

Income from equity method investments

Operating profit

Interest expense

Non-operating (gain) loss

Income before income taxes

Income tax expense

Sales and Gross Profit

Sales decreased primarily as a result of lower market prices across all of our segments and the impact of foreign currency translation as a result of a stronger U.S.

Gross profit decreased primarily as a result of lower sales, partially offset by lower pork processing raw material costs and lower feed costs.

Selling, General and Administrative Expenses (SG&A)

The increase in SG&A is primarily attributable to higher marketing and advertising costs as we focus on growing our brands through consumer-focused marketing programs as well as higher stock-based compensation expense.

Income from Equity Method Investments

Equity income decreased primarily as a result of lower hog prices in Mexico.

Additionally, equity income decreased due to a significant tax benefit recognized through our former investment in CFG in 2014.

Interest Expense

The decrease in interest expense is primarily due to lower debt balances in the current year as a result of various debt repayment activities.

Non-operating (gain) loss

During 2015, we recognized a loss on debt extinguishment of $12.8 million .

Income Tax Expense

For 2015, the effective tax rate was impacted by income relative to permanent items, the lower mix of earnings from foreign operations, which are taxed at lower rates, and foreign restructuring.

For 2014, taxable income relative to permanent items, the mix of income between jurisdictions and foreign restructuring impacted the effective rate.

Twelve Months Ended December 28, 2014 and December 29, 2013

Twelve Months Ended

December 28, 2014

December 29, 2013

(in millions)

Cost of sales

Selling, general and administrative expenses

Merger related costs

Income from equity method investments

Operating profit

Interest expense

Non-operating (gain) loss

Income before income taxes

Income tax expense

Sales and Gross Profit

Sales increased primarily as a result of higher domestic pork market prices.

Gross profit increased primarily as a result of higher average selling prices and lower hog raising costs, which more than offset the increase in pork processing raw material costs.

As noted in "Significant Events Affecting Results of Operations--WH Group Merger," the twelve months ended December 29, 2013 included an additional $45.4 million in cost of sales as a result of the fair value step-up of our inventory.

Selling, General and Administrative Expenses (SG&A)

The increase in SG&A is primarily attributable to higher variable compensation expenses stemming from higher year-over-year operating results, partially offset by lower pension expense.

Merger Related Costs

We incurred an aggregate of $41.9 million of professional fees in the twelve months ended December 29, 2013 as a result of the Merger.

Income from Equity Method Investments

The increase in profitability in the current year is primarily driven by higher hog prices in Mexico.

Additionally, favorable changes to income tax rates positively impacted equity income from CFG.

Interest Expense

Interest expense for the twelve months ended December 29, 2013 included $17.3 million of debt issuance costs originally deferred by Merger Sub.

Income Tax Expense

For the twelve months ended December 28, 2014, taxable income relative to permanent items, the mix of income between jurisdictions and foreign restructurings impacted the effective tax rate.

The effective tax rate for the twelve months ended December 29, 2013 was also impacted by income relative to permanent items for the period, the mix of income between jurisdictions and state income tax credits.

Eight Months Ended December 29, 2013 and December 30, 2012

The Transition Period

Eight Months Ended

September 27 - December 29, 2013

April 29 - September 26, 2013

December 29, 2013

December 30, 2012

(in millions)

Cost of sales

Selling, general and administrative expenses

Merger related costs

Loss (income) from equity method investments

Operating profit

Interest expense

Loss on debt extinguishment

Income before income taxes

Income tax expense

Sales and Gross Profit

Sales increased primarily as a result of higher average selling prices in the Fresh Pork, Packaged Meats and Hog Production segments and an 18% increase in volume in the International segment.

Gross profit decreased primarily as the result of an 8% increase in domestic live hog prices.

As noted in "Significant Events Affecting Results of Operations--WH Group Merger," the eight months ended December 29, 2013 included an additional $45.4 million in cost of sales as a result of the fair value step-up of our inventory.

Selling, General and Administrative Expenses

Advertising costs during the eight months ended December 29, 2013 were approximately $20.0 million higher than during the eight months ended December 30, 2012 as we continued our investment in marketing and advertising programs focused on building brand equity and growing sales.

Merger Related Costs

As noted in "Significant Events Affecting Results of Operations," we incurred an aggregate of $41.9 million of professional fees during the eight months ended December 29, 2013 as a result of the Merger.

Loss (Income) from Equity Method Investments

The decline in profitability was primarily driven by lower selling prices in the meat processing operations of our Mexican joint ventures.

Also, tax law changes in Mexico negatively impacted our joint ventures.

during the eight months ended December 29, 2013 .

Interest Expense and Loss on Debt Extinguishment

As noted in "Significant Events Affecting Results of Operations," interest expense for the eight months ended December 29, 2013 includes $17.3 million of debt issuance costs originally deferred by Merger Sub.

In the eight months ended December 30, 2012, we recognized losses of $120.7 million on the repurchase of $694.4 million of our outstanding senior notes due in May 2013 and July 2014.

Income Tax Expense

The effective tax rate was impacted in all periods presented by income relative to permanent items, the mix of income between jurisdictions and state income tax credits.

Twelve Months Ended April 28, 2013 and April 29, 2012

Twelve Months Ended

April 28, 2013

April 29, 2012

Consolidated Results of Continuing Operations

2024 2023 $ Change

(in millions)

Sales $ 14,142 $ 14,640 $ (498)

Cost of sales 12,244 13,751 (1,507)

Selling, general and administrative expenses

(Income) loss from equity method investments

Operating profit

Interest expense

Loss on debt extinguishment

Income before income taxes

Income tax expense

Sales and Gross Profit

Sales increased slightly as higher volumes across all segments were largely offset by lower domestic fresh meat and hog market prices and the effects of foreign currency translation.

The decline in gross profit margin was primarily caused by higher hog feed costs and lower pork prices in the U.S.

Gross profit 1,897 889 1,008

Selling, general and administrative expenses 840 1,050 (211)

The twelve months ended April 29, 2012 included $22.2 million in net charges associated with the Missouri litigation.

The twelve months ended April 29, 2012 included $6.4 million in professional fees related to the potential acquisition of a controlling interest in CFG.

In June 2011, we terminated negotiations to purchase the additional interest.

Pension and other post-retirement benefit expenses increased $26.4 million.

Operating gains

(60) (105) 45

Operating profit (loss) 1,118 (56) 1,174

Interest expense, net 66 76 (10)

Non-operating gains (9) (3) (6)

Income (loss) from continuing operations before income taxes 1,061 (129) 1,189

Income tax expense (benefit) 271 (41) 312

(Income) loss from equity method investments (8) 46 (53)

CFG's results for twelve months ended April 29, 2012 included $38.7 million of charges related to the CFG Consolidation Plan.

Results from our Mexican joint ventures declined due to higher feed costs, lower hog prices and lower meat sales volumes.

Interest Expense

Interest expense decreased due to lower average interest rates resulting from the refinancing of our 10% senior secured notes due July 2014 (2014 Notes) and our 7.75% senior unsecured notes due May 2013 (2013 Notes) as described under "Liquidity and Capital Resources" below.

Loss on Debt Extinguishment

Twelve Months Ended April 28, 2013

We recognized losses of $120.7 million on the repurchase of $694.4 million of our outstanding senior notes due in May 2013 and July 2014.

Twelve Months Ended April 29, 2012

We recognized losses of $11.0 million on the repurchase of $59.7 million of our 2014 Notes.

We recognized a loss on debt extinguishment of $1.2 million in the first quarter associated with the refinancing of our working capital facilities in June 2011.

Income Tax Expense

The following items explain the significant changes in the effective tax rate from the twelve months ended April 29, 2012 to twelve months ended April 28, 2013 :

Tax credits increased due in part to the passage of the American Taxpayer Relief Act of 2012 that retroactively reinstated the Research and Development, Work Opportunity and Welfare to Work tax credits.

We released $11.1 million in deferred tax asset valuation allowances in the twelve months ended April 28, 2013 , primarily related to the utilization of tax losses in foreign jurisdictions.

The mix of earnings from foreign operations, which are taxed at lower rates, was higher in the twelve months ended April 28, 2013 .

Segment Results

The following information reflects the comparative results from each respective segment:

Twelve Months Ended January 3, 2016 and December 28, 2014

Twelve Months Ended

January 3, 2016

December 28, 2014

Net income (loss) from continuing operations 798 (133) 930

Net income from continuing operations attributable to noncontrolling interests 14 5 9

Net income (loss) from continuing operations attributable to Smithfield

$ 783 $ (138) $ 921

Operating Profit (Loss) by Segment

2024 2023 $ Change

(in millions)

Packaged Meats

$ 1,168 $ 1,066 $ 102

Hog Production

International

Total segment sales

Intersegment sales

Consolidated sales

(144) (756) 612

Corporate expenses

(153) (107) (46)

(55) (371) 316

Operating profit (loss)

Packaged Meats

Hog Production

International

Consolidated operating profit

Sales decreased 12% due to a 21% decrease in average selling prices, partially offset by a 12% increase in volume.

Operating profit per head increased to $6 from $4 due to lower raw material costs, which more than offset the impact of lower fresh pork market prices.

We processed 30.5 million hogs during 2015 , an increase of 13% from the prior year.

Packaged Meats

Current year sales decreased 1% due to an 8% decrease in average selling prices, partially offset by a 7% increase in volume.

Current year sales volume totaled 3.0 billion pounds.

Current year operating profit increased to $0.22 per pound from $0.16 per pound due primarily to lower raw material costs.

Current year results included a gain of $12.0 million on the sale of our product label printing business in Kansas City.

Hog Production

Sales decreased 9% due to lower domestic live hog market prices which were partially offset by favorable hedging results.

Head sold during the year amounted to 15.9 million hogs, an increase of 8% from the prior year.

These changes in sales volumes and market prices are driven largely by the effects of PEDv in the prior year.

See "Executive Overview--Animal Health" for additional discussion about PEDv.

Operating profit decreased to $1 per head from $23 per head due to lower selling prices, partially offset by favorable hedging results and lower feed costs.

International

Sales decreased due primarily to changes in foreign exchange rates, which negatively impacted sales by $260.5 million , or 16% .

On a constant currency basis, sales increased 2% due to a 9% increase in volume to 1.5 billion pounds driven largely by a 9% increase in hogs processed and an 11% increase in poultry processed in Europe, partially offset by a 7% decrease in average selling prices.

We processed 4.6 million hogs during 2015.

Operating profit was negatively impacted by lower pork market prices in Europe along with lower equity income from our Mexican joint ventures.

Foreign currency translation also negatively impacted operating profit by approximately $12.6 million due to a stronger U.S.

The decrease in operating results is primarily attributable to higher stock-based compensation expense and charitable contributions.

Twelve Months Ended December 28, 2014 and December 29, 2013

Twelve Months Ended

December 28, 2014

December 29, 2013

$ 1,118 $ (56) $ 1,174

We recently removed income from equity method investments from the measure of segment profit reviewed by our Chief Operating Decision Maker.

Accordingly, the historical segment results presented herein have been retrospectively adjusted to remove income from equity method investments.

Results of Operations Analysis

The following discussion provides an analysis of our results of operations for fiscal year 2024 compared to fiscal year 2023.

2024 2023 $ Change % Change

(in millions)

Sales by segment:

Packaged Meats $ 8,319 $ 8,280 $ 39 0.5 %

Fresh Pork 7,873 7,832 42 0.5 %

Hog Production 3,002 3,317 (315) (9.5) %

International

Other 471 559 (88) (15.7) %

Total segment sales 19,665 19,988 (323) (1.6) %

Intersegment sales

Inter-segment sales eliminations:

(2,990) (2,694) (296) 11.0 %

Hog Production

(2,533) (2,646) 114 (4.3) %

(1) (7) 6 (90.0) %

Total inter-segment sales eliminations (5,524) (5,348) (176) 3.3 %

Consolidated Sales $ 14,142 $ 14,640 $ (498) (3.4) %

Operating profit (loss):

Packaged Meats.

Segment sales increased by $39 million, or 0.5%, as a 3.1% increase in average sales price more than offset a 2.5% decrease in sales volume.

The increase in average sales price was primarily due to higher raw material costs, which translated into higher sales prices of our packaged meats products, as well as an improvement in product mix.

The decrease in volume was mainly due to lower bacon sales associated with the group housing legislation in California and Massachusetts, which requires pork producers nationwide to comply with certain production standards in order to sell pork products into these states, and lower holiday ham sales.

Segment sales increased by $42 million, or 0.5%, as a 5.4% increase in our average sales price more than offset a 4.7% decrease in volume.

The increase in our average sales price reflects strong demand for U.S.

pork, which was supported by higher relative prices for competing proteins and strength in export markets.

In fiscal year

2024, fresh pork cut-out values reported by the USDA averaged $0.96 per pound, up 6.5% from fiscal 2023.

The decrease in Fresh Pork volume was largely due to a strategic plan to optimize production levels.

Hog Production.

International

Consolidated operating profit

Current year sales increased 12% due to a 15% increase in average selling prices partially offset by a 3% decrease in volume.

Current year operating profit increased 27%.

Operating profit per head increased from $2.61 to $3.47 due to higher fresh pork market prices, which more than offset higher raw material costs.

We processed 27.9 million hogs during 2014, a decrease of 4%, largely attributable to PEDv.

However, average hog weights were up 2%, which helped to offset the overall decline in volume.

Packaged Meats

Current year sales increased 10% due to a 10% increase in average selling prices.

Current year sales volume totaled 2.8 billion pounds, which remained relatively unchanged from the twelve months ended December 29, 2013.

Current year operating profit increased to $0.16 per pound from $0.13 per pound due to higher average selling prices.

Additionally, the prior year included $38.7 million, or $0.01 per pound, of non-cash costs related to the fair value step-up of inventories due to the Merger.

See "Significant Events Affecting Results of Operations" for further discussion.

Segment sales decreased by $315 million, or 9.5%, largely due to an 7.8% decrease in the number of hogs sold and a $171 million decrease in grain sales, partially offset by a 6.2% increase in our average hog sales price, including the effects of hedging.

The decrease in the number of hogs sold by the segment was largely attributable to Hog Production Reform activities aimed at reducing the number of hogs we produce.

Segment sales decreased by $88 million, or 15.7%, predominantly attributable to our Mexico operations due in part to an 8.3% decline in volume.

Inter-segment Eliminations

• Fresh Pork.

The increase in inter-segment sales by our Fresh Pork segment was attributable to higher market values for fresh pork components sold to our Packaged Meats segment.

• Hog Production.

Current year sales decreased due to lower sales volume, partially offset by higher domestic live hog market prices.

Head sold during the year amounted to 14.7 million hogs, a decrease of 10% from the twelve months ended December 29, 2013.

PEDv was a significant factor in the volume decline and favorably impacted market prices.

Current year operating profit benefited from a 20% increase in domestic live hog market prices and lower feed costs.

International

Current year sales were positively impacted by an 18% increase in volume of 1.5 billion pounds, driven largely by a 13% increase in hogs processed in Europe, and partially offset by an 11% decrease in average selling prices.

We processed 4.3 million hogs during 2014.

The effects of foreign currency translation also positively impacted sales by approximately $18 million.

Current year operating profit was positively impacted by higher sales and lower feed costs in Europe along with higher equity income from our Mexican joint ventures.

Additionally, favorable changes to income tax rates positively impacted equity income from CFG.

Operating results in the Corporate segment were improved from last year due to the impact of $41.9 million of merger related costs in the prior year, partially offset by higher variable compensation expense in the current year driven by improved operating results.

Eight Months Ended December 29, 2013 and December 30, 2012

The Transition Period

Eight Months Ended

September 27 - December 29, 2013

April 29 - September 26, 2013

December 29, 2013

December 30, 2012

The decrease in inter-segment sales by our Hog Production segment was attributable to our Hog Production Reform activities, which reduced the number of hogs sold to our Fresh Pork segment, partially offset by an increase in the average sales price.

Cost of Sales

2024 2023 $ Change % Change

(in millions)

Packaged Meats

Hog Production

International

Total segment sales

Intersegment sales

Consolidated sales

Operating profit (loss):

Packaged Meats

$ 6,759 $ 6,792 $ (33) (0.5) %

7,419 7,525 (105) (1.4) %

Hog Production

International

Consolidated operating profit

Sales increased during the Transition Period as a result of a 6% increase in average selling prices and a 1% increase in volume.

Operating profit decreased despite the increase in average selling prices primarily as a result of an 8% increase in domestic live hog prices.

3,104 4,024 (920) (22.9) %

412 536 (125) (23.3) %

74 222 (148) (66.6) %

Inter-segment eliminations (5,524) (5,348) (176) 3.3 %

Cost of sales

$ 12,244 $ 13,751 $ (1,507) (11.0) %

Packaged Meats.

Sales increased during the Transition Period as a result of a 9% increase in average selling prices.

Operating profit in the current year decreased as the increase in selling prices was more than offset by higher raw material costs.

Additionally, operating profit in the Transition Period included $38.7 million of additional non-cash costs related to the fair value step-up of our inventories.

See "Significant Events Affecting Results of Operations" for further discussion.

Cost of sales in our Packaged Meats segment decreased by $33 million, or 0.5%, driven by the following factors, which more than offset a $75 million increase in raw material costs attributable to the net effect of higher meat prices and lower sales volume:

• A $71 million decrease in manufacturing and distribution costs primarily due to cost improvement initiatives and lower sales volume.

• The recognition of $38 million in employee retention tax credits in the second quarter of 2024.

Cost of sales in our Fresh Pork segment decreased by $105 million, or 1.4%, due to the following factors, which more than offset a $111 million increase in raw material costs driven by the net effect of higher market hog prices and lower sales volume:

• A $175 million decrease in manufacturing and distribution costs largely due to cost improvement initiatives and lower sales volume.

• The recognition of $41 million in employee retention tax credits in the second quarter of 2024.

Hog Production.

Transition Period sales benefited from an 8% increase in domestic live hog prices and a 3% increase in head sold.

Hog Production operating profit improved by $97.2 million mainly due to higher live hog market prices.

International

As a result of fluctuations in foreign exchange rates, International segment sales and operating profit in the Transition Period were both positively impacted by approximately 3%.

Sales and operating profit in the transition period were positively impacted by an 18% increase in volume which was partially offset by a 10% decrease in average selling prices.

Transition Period operating profit was also negatively impacted by 8% and 6% increases in raising costs in both Poland and Romania, respectively, along with significantly lower equity income from our Mexican joint ventures.

The Transition Period includes fees related to the Merger.

See "Significant Events Affecting Results of Operations" for further discussion.

Twelve Months Ended April 28, 2013 and April 29, 2012

Twelve Months Ended

April 28, 2013

April 29, 2012

Cost of sales in our Hog Production segment decreased by $920 million, or 22.9%, primarily due to the following factors:

• A $717 million decrease in raw material costs largely due to lower prices for feed ingredients, a reduction in the number of hogs produced and lower external grain sales.

• A $195 million decrease in operating costs largely attributable to the effects of our Hog Production Reform activities on both volume and cost improvements, as well as lower external grain sales.

• The recognition of $8 million in employee retention tax credits in the second quarter of 2024.

Cost of sales in our Other segments decreased by $125 million, or 23.3%, which was primarily attributable to lower raw material costs in our Mexico operations driven by lower market prices for feed ingredients and lower sales volume.

The unallocated costs primarily represent costs associated with our West Coast Exit and Hog Production Reform activities.

Selling, General and Administrative Expenses

2024 2023 $ Change % Change

(in millions)

Packaged Meats

Hog Production

International

Total segment sales

Intersegment sales

Consolidated sales

Operating profit (loss):

Packaged Meats

$ 394 $ 422 $ (28) (6.7) %

188 190 (3) (1.5) %

Hog Production

International

Consolidated operating profit

Sales declined 3% due to a 6% decrease in average selling prices, partially offset by a 3% increase in volume as a result of higher slaughter levels and hog weights.

Operating profit decreased to $6 per head from $8 per head due to lower fresh pork market prices.

We processed 28.5 million hogs, an increase of 3% from the twelve months ended April 29, 2012.

42 50 (8) (15.9) %

24 26 (2) (8.2) %

Unallocated 38 254 (215) (84.9) %

Corporate expenses

154 108 46 42.8 %

Selling, general, and administrative expenses

$ 840 $ 1,050 $ (211) (20.1) %

SG&A decreased by $211 million, or 20.1%, primarily driven by the following factors, which more than offset a $44 million increase in variable compensation expenses attributable to the improvement in our results of operations (reflected primarily in corporate expenses):

• A $211 million decrease in accruals for litigation matters described in “Note 18:

Regulation and Contingencies” to the consolidated financial statements included in Part II, Item 8.

of this Annual Report.

This decrease is reflected in unallocated expenses in the table above.

• A $27 million decrease in marketing and advertising expenses due to an increased focus on the effectiveness of our spending, largely attributable to our Packaged Meats and Fresh Pork segments.

• The impact of foreign exchange transactions, which decreased SG&A by $14 million.

Gains and losses on foreign exchange transactions are included in unallocated expenses in the table above.

Operating Gains

Operating gains consists of the following items:

(in millions)

Packaged Meats $ (2) $ —

Sales increased 2% due to a 4% increase in volume partially offset by a 1% decrease in average selling prices.

Sales volume totaled 2.8 billion pounds and 2.7 billion pounds for the twelve months ended April 28, 2013 and April 29, 2012, respectively.

Operating profit increased to $0.17 per pound from $0.15 per pound due to lower raw material costs.

Hog Production

Sales increased due to higher volumes, which more than offset the impact of lower market hog prices.

Head sold during the twelve months ended April 28, 2013 amounted to 16.0 million hogs, an increase of 1% from the twelve months ended April 29, 2012 .

Operating profit was negatively impacted by higher hog supplies, resulting in a 6% decrease in live hog prices, and increased domestic raising costs, including the effects of grain derivative contracts designated in hedging relationships for accounting purposes, primarily as a result of higher priced feed.

Operating profit for the twelve months ended April 28, 2013 included gains of $91.2 million compared to $58.6 million for the twelve months ended April 29, 2012 on lean hog derivative contracts and grain derivative contracts that are not designated in hedging relationships for accounting purposes.

Operating profit for the twelve months ended April 29, 2012 included $22.2 million in net charges associated with the Missouri litigation as well as accelerated depreciation charges of $8.2 million as a result of our decision to permanently idle certain farm assets in Missouri.

International

Fluctuation in foreign exchange rates and their effect on foreign currency translation decreased sales by 8% and decreased operating profit by $11.5 million.

Sales and operating profit for the twelve months ended April 28, 2013 benefited from significantly higher volumes in our Polish operations due to a 19% increase in the number of hogs processed.

Unit sales prices in our Polish operations increased in several key product categories;

however, higher volumes of lower value by-products that resulted from more processed hogs effectively diminished the overall average unit selling price compared to twelve months ended April 29, 2012 .

Sales and operating profit in our Romanian operations improved on significantly higher average unit selling prices and sales volumes, which benefited from the approval to export pork products to European Union member countries beginning in the fourth quarter of the twelve months ended April 29, 2012 .

Sales and hog slaughter volumes benefited from an expansion in our hog production operations in the second quarter of the twelve months ended April 29, 2012 .

Operating profit for the twelve months ended April 29, 2012 included $38.7 million of charges related to the CFG Consolidation Plan.

Equity income from our Mexican joint ventures decreased by $4.1 million due to higher feed costs and unfavorable changes in foreign exchange rates.

The twelve months ended April 29, 2012 included $6.4 million of professional fees related to the potential acquisition of a controlling interest in CFG.

In June 2011, we terminated negotiations to purchase the additional interest.

Gain on disposal of assets (1)

Insurance recoveries

Other operating gains (5) (12)

Total operating gains

$ (60) $ (105)

________________

(1) Fiscal year 2024 includes a $32 million gain on the sale of hog farms in Utah and a $6 million gain on the sale of assets to Murphy Family Farms.

Fiscal year 2023 includes an $86 million gain on the sale of our Vernon, California plant.

Interest Expense, Net

Interest expense, net decreased by $10 million to $66 million from $76 million, or 13.1%, due to higher levels of cash and cash equivalents earning interest at higher rates in fiscal year 2024 as compared to fiscal year 2023, while interest rates on borrowings were largely fixed.

Non-operating Gains

Non-operating gains consists of the following items:

(in millions)

Gain on nonqualified retirement plan assets

$ (17) $ (15)

Net pension and postretirement benefits cost (1)

Non operating gains $ (9) $ (3)

________________

(1) Includes the components of net pension and postretirement benefits cost other than service cost, which is included in operating profit.

These components consist of interest cost, expected return on plan assets, amortization of actuarial gains/losses and prior service costs/credits, and curtailment gains.

Income Tax Expense (Benefit)

Income tax expense (benefit) increased to an expense of $271 million in fiscal year 2024 from a benefit of $41 million in fiscal year 2023 primarily due to the significant pre-tax income recognized in fiscal year 2024, compared to a loss recognized in fiscal year 2023.

The effective tax rate was 25.5% in fiscal year 2024 compared to 32.2% in fiscal year 2023.

The impact of the reconciling items between the federal statutory rate and our effective tax rate were more pronounced in fiscal year 2023 largely due to the pre-tax loss of $129 million in fiscal year 2023 compared to pre-tax income of $1,061 million in fiscal year 2024.

See “Note 13:

Income Taxes” to the consolidated financial statements included in Part II, Item 8 of this Annual Report, for further information.

(Income) Loss from Equity Method Investments

(Income) loss from equity method investments increased to income of $8 million in fiscal year 2024 from a loss of $46 million in fiscal year 2023.

Fiscal year 2023 included $49 million in impairments and other costs associated with our biogas joint ventures as a result of our West Coast Exit and Hog Production Reform actions.

Liquidity and Capital Resources

Our cash requirements consist primarily of the purchase of raw materials used in our hog production and pork processing operations, long-term debt obligations and related interest, lease payments for real estate, machinery, vehicles and other equipment, and expenditures for capital assets, other investments and other general business purposes.

Our primary sources of liquidity are cash we receive as payment for the products we produce and sell, as well as our credit facilities.

We believe that our current liquidity position is strong and that our cash flows from operations and availability under our credit facilities will be sufficient to meet our working capital needs and financial obligations for at least the next twelve months.

As of January 3, 2016 , our liquidity position was $2.3 billion , comprised of $1.4 billion in availability under our credit facilities, $704.9 million in cash and cash equivalents and $160.0 million in unutilized loans.

Our liquidity position was enhanced by cash held for payments deferred by livestock suppliers to 2016 as well as cash held for the $125.0 million voluntary contribution to fund our qualified pension plans made in the first quarter of 2016.

Sources of Liquidity

We have available a variety of sources of liquidity and capital resources, both internal and external.

These sources provide funds required for current operations, acquisitions, integration costs, debt retirement and other capital requirements.

Accounts Receivable and Inventories

The meat processing industry is characterized by high sales volume and rapid turnover of inventories and accounts receivable.

Because of the rapid turnover rate, we consider our meat inventories and accounts receivable highly liquid and readily convertible into cash.

The Hog Production segment also has rapid turnover of accounts receivable.

Although inventory turnover in the Hog Production segment is slower, mature hogs are readily convertible into cash.

Borrowings under our credit facilities are used, in part, to finance increases in the levels of inventories and accounts receivable resulting from seasonal and other market-related fluctuations in raw material costs.

Our sources of liquidity include cash and cash equivalents on hand together with availability under our committed revolving credit facilities.

As of December 29, 2024, we had $3,245 million of available liquidity consisting of $943 million in cash and cash equivalents and $2,303 million of availability under our committed credit facilities.

Availability under our committed credit facilities is reduced by the principal amount of our outstanding commercial paper.

Credit Facilities

January 3, 2016

Borrowing Base Adjustment

Outstanding Letters of Credit

Outstanding Borrowings

Amount Available

December 29, 2024

Facility Capacity Borrowing

Adjustment Outstanding

Borrowings Outstanding

Credit Amount

(in millions)

Inventory Revolver

Senior Revolving Credit Facility

$ 2,100 $ — $ — $ — $ — $ 2,100

Securitization Facility

International facilities

225 — — — (22) 203

Total credit facilities $ 2,325 $ — $ — $ — $ (22) $ 2,303

In April 2015, we entered into a new $1.025 billion asset-based revolving credit facility agreement (the Inventory Revolver Credit Agreement) which replaced the Inventory Revolver which would have matured in June 2016.

Financial Statements and Supplementary Data-Note 7 —" Debt " for additional information regarding our working capital facilities and Rabobank Term Loan.

Rabobank Term Loan

In May 2015, we refinanced our $200.0 million Rabobank Term Loan and extended its maturity date from May 1, 2018 to May 1, 2020.

Financial Statements and Supplementary Data-Note 7 —" Debt " for additional information regarding our working capital facilities and Rabobank Term Loan.

Operating Activities

Twelve Months Ended

January 3, 2016

December 28, 2014

(in millions)

Net cash flows from operating activities

The following items explain the significant changes in cash flows from operating activities for the periods presented:

Twelve Months Ended January 3, 2016 vs.

Twelve Months Ended December 28, 2014

Cash paid to outside hog suppliers decreased due to lower domestic live hog prices.

In the current year, we received $152.5 million for the settlement of derivative contracts and for margin requirements compared to $179.6 million paid in the prior year.

Net tax payments decreased approximately $25.4 million

Cash interest payments decreased approximately $24.5 million .

In the current year, we received a cash dividend of $14.3 million from one our of Mexican joint ventures.

Cash received from customers decreased due to lower average meat selling prices.

In the current year, we contributed $200.0 million to our qualified pension plans.

Twelve Months Ended

December 28, 2014

December 29, 2013

(in millions)

Net cash flows from operating activities

The following items explain the significant changes in cash flows from operating activities for the periods presented:

Twelve Months Ended December 28, 2014 vs.

Twelve Months Ended December 28, 2013

Cash received from customers increased due to higher average meat selling prices.

Cash paid for grain and other ingredients purchased by the Hog Production segment decreased approximately $656.6 million from the prior year.

Cash paid to outside hog suppliers increased due to a 20% increase in average domestic live hog prices.

Cash paid to outside meat suppliers increased due to higher fresh meat market prices, particularly pork and beef.

The current year included net tax payments of $178.8 million for income taxes as compared to net

refunds of $16.5 million in the prior year.

In the current year, we paid $179.6 million for the settlement of derivative contracts and for margin requirements compared to $37.1 million in the prior year.

Cash interest payments increased approximately $23.2 million.

The Transition Period

Eight Months Ended

September 27 - December 29, 2013

April 29 - September 26, 2013

December 29, 2013

December 30, 2012

(in millions)

Net cash flows from operating activities

The following items explain the significant changes in cash flows from operating activities for the periods presented:

Eight Months Ended December 29, 2013 vs.

Eight Months Ended December 30, 2012

Cash received from customers increased due to a 6% and 9% increase in average selling prices in the Fresh Pork and Packaged Meats segments, respectively, and an 18% increase in sales volume in the International segment.

Cash paid for grain and other feed ingredients purchased by the Hog Production segment decreased approximately $65.4 million despite a significant increase in total pounds purchased.

In the prior year eight month period, we paid cash to settle the Missouri litigation.

In the eight months ended December 29, 2013 , we paid $53.8 million for the settlement of derivative contracts and for margin requirements compared to $91.0 million received in prior year.

Cash paid to outside hog suppliers increased due to an 8% increase in domestic live hog market prices.

Twelve Months Ended

April 28, 2013

April 29, 2012

(in millions)

Net cash flows from operating activities

The following items explain the significant changes in cash flows from operating activities for the periods presented:

Twelve Months Ended April 28, 2013 vs.

Twelve Months Ended April 29, 2012

Cash paid for grain and other feed ingredients purchased by the Hog Production segment increased approximately $372 million.

Cash received for the settlement of commodity derivative contracts and for margin requirements decreased $103.4 million in fiscal 2013.

Cash received from customers decreased primarily as a result of lower domestic selling prices.

We paid cash to settle the Missouri litigation in the twelve months ended April 28, 2013.

Expenditures for advertising increased as part of our strategy to build brand equity and grow sales.

Cash paid to outside hog suppliers was lower due to a 6% decrease in average domestic live hog market prices.

Income tax payments decreased $222.0 million as a result of significant tax refunds during the twelve months ended April 28, 2013 and lower domestic taxable income.

We contributed $17.7 million to our qualified and non-qualified pension plans in the twelve months ended April 28, 2013 compared to $142.8 million in the twelve months ended April 29, 2012.

Investing Activities

Twelve Months Ended

January 3, 2016

December 28, 2014

(in millions)

Capital expenditures

Proceeds from sale of equity interest in CFG

Business acquisition, net of cash acquired

Net (expenditures) proceeds from breeding stock transactions

Construction of distribution center pending sale-leaseback

Proceeds from sale-leaseback of distribution center

Proceeds from sale of property, plant and equipment

Net cash flows from investing activities

The following items explain the significant investing activities for the periods presented:

Capital expenditures primarily related to plant and hog farm improvement projects, including the replacement of gestation stalls with group pens, which is more fully explained under "Additional Matters Affecting Liquidity" below.

In June 2015, we sold our entire equity interest in CFG for $354.0 million .

In April 2014, Kansas City Sausage Company, LLC (KCS) bought a meat processing business for $11.0 million.

Twelve Months Ended

December 28, 2014

December 29, 2013

(in millions)

Acquisition of Smithfield Foods, Inc.

Capital expenditures

Business acquisition, net of cash acquired

Net (expenditures) proceeds from breeding stock transactions

Proceeds from sale of property, plant and equipment

Advance note and other

Net cash flows from investing activities

The following items explain the significant investing activities for the periods presented:

Twelve Months Ended December 28, 2014

In April 2014, Kansas City Sausage Company, LLC (KCS) bought a meat processing business for $11.0 million.

Twelve Months Ended December 28, 2013

WH Group paid $4.9 billion in connection with the Merger to acquire all of our common stock and settle all vested and unvested stock-based compensation awards.

We paid $33.7 million, net of cash acquired, for a 50% interest in KCS.

Also, we advanced $10.0 million to the seller of KCS in exchange for a promissory note, which is secured by the remaining membership interests in KCS held by the seller.

The Transition Period

Eight Months Ended

September 27 - December 29, 2013

April 29 - September 26, 2013

December 29, 2013

December 30, 2012

Senior Unsecured Revolving Credit Facility

In February 2025, we refinanced our $2,100 million senior unsecured revolving credit facility (“Senior Revolving Credit Facility”) extending the maturity date from May 21, 2027 to February 12, 2030.

As part of the new agreement, there are no longer any subsidiary guarantors under the Senior Revolving Credit Facility which also released the subsidiary guarantors from our senior unsecured notes.

The Senior Revolving Credit Facility bears interest at the SOFR plus a margin ranging from 0.875% to 1.50% per annum, or, at our election, at a base rate plus a margin ranging from 0.00% to 0.50% per annum, in each case depending on our senior unsecured debt ratings.

The Senior Revolving Credit Facility also contains financial maintenance covenants requiring us to maintain a maximum total consolidated leverage ratio (ratio of consolidated funded debt to consolidated capitalization, each as defined in the Senior Revolving Credit Facility) of 0.50 to 1.00 (which we may elect to increase to 0.55 to 1.00 with respect to any fiscal quarter in which a material acquisition is consummated and the immediately following three consecutive fiscal quarters, subject to certain restrictions) and a minimum interest coverage ratio (ratio of EBITDA to Consolidated Interest Expense, each as defined in the Senior Revolving Credit Facility) of 3.50 to 1.00.

Our Senior Revolving Credit Facility contains customary covenants, including, but not limited to, restrictions on our ability and that of our subsidiaries to merge and consolidate with other companies, incur indebtedness, grant liens or security interests on assets subject to their security interest, make acquisitions, loans, advances or investments, pay dividends, sell or otherwise transfer assets, optionally prepay or modify terms of any junior indebtedness or enter into transactions with affiliates, each subject to certain exceptions as set forth therein.

We are currently in compliance with the covenants under our Senior Revolving Credit Facility.

We have a commercial paper program, which is supported by the Senior Revolving Credit Facility, that provides access to a low-cost source of borrowing to fund general corporate purposes, including working capital.

The maximum issuance capacity under our commercial paper program is $1,750 million.

The maturity of commercial paper issued under the program varies but does not exceed 397 days from the date of issuance.

Our ability to access the commercial paper market in the future is dependent on maintaining investment grade credit ratings and market conditions.

Accounts Receivable Securitization Facility

In November 2024, we refinanced our accounts receivable securitization facility (the “Securitization Facility”), which extended the maturity date to November 22, 2027, and reduced the borrowing capacity to $225 million.

As part of the Securitization Facility, certain accounts receivable of our major domestic meat processing subsidiaries are

sold to a wholly owned “bankruptcy remote” special purpose vehicle (“SPV”).

The SPV pledges all such accounts receivable not otherwise sold pursuant to the Monetization Facility (as defined below) as security for loans made, and letters of credit issued, by participating lenders under the Securitization Facility.

The SPV is included in our consolidated financial statements and therefore the accounts receivable owned by it are included in our consolidated balance sheets.

However, the accounts receivable owned by the SPV are separate and distinct from our other assets and are not available to our other creditors should we become insolvent.

As of December 29, 2024, the SPV held $374 million of accounts receivable.

We must maintain certain ratios related to the collection of our receivables as a condition of the Securitization Facility agreement.

As of December 29, 2024, we had $22 million in letters of credit issued under the Securitization Facility.

None of the letters of credit were drawn upon.

Under the Securitization Facility, we and the SPV, as applicable, are subject to certain customary covenants, including, but not limited to, restrictions on our ability to sell, assign or otherwise dispose of any collateral or assign any right to receive income with respect thereto, use proceeds for any purpose other than those set forth in the Securitization Facility, make certain payments on junior indebtedness, incur debt or merge or consolidate, subject to certain exceptions set forth therein.

The SPV is also prohibited from issuing any LCR Security (as defined in the Securitization Facility agreement).

We are currently in compliance with the covenants under the Securitization Facility.

Monetization Facility

In addition to the Securitization Facility, we maintain an uncommitted $250 million accounts receivable monetization facility (the “Monetization Facility”).

At Smithfield’s election and subject to the purchasing banks’ approval, certain accounts receivable may be sold by the SPV to purchasing banks, so long as the uncollected outstanding amount of accounts receivable sold pursuant to the Monetization Facility does not exceed $250 million in the aggregate at any time, among other limitations.

In the event of a sale, the purchasing banks assume all credit risk related to the receivables while we maintain risk associated with customer disputes.

We account for the sale of receivables to a purchasing bank by derecognizing the receivables from our consolidated balance sheet upon transfer of control to the purchasing bank, and recognizing a discount on the sale in SG&A in the consolidated statement of income.

The proceeds from the sale of receivables are included in net cash flows from operating activities in the consolidated statement of cash flows.

On behalf of the purchasing banks, we continue to service all receivables sold under the Monetization Facility.

As of December 29, 2024, the uncollected balance of receivables that had been sold to purchasing banks was $230 million.

We had no servicing asset or liability outstanding as of December 29, 2024.

In the first quarter of fiscal year 2023, we sold $227 million of accounts receivable at a discount and received proceeds totaling $225 million.

Subsequently, we reinvested $4,094 million and $3,431 million of cash collections from customers in the revolving sale of accounts receivable to purchasing banks in fiscal years 2024 and 2023, respectively.

We recognized charges totaling $15 million and $12 million in fiscal years 2024 and 2023, respectively, attributable to the discount on the sale of accounts receivable in SG&A in the consolidated statement of income.

Cash Flows From Operating Activities of Continuing Operations

(in millions)

Acquisition of Smithfield Foods, Inc.

Capital expenditures

Business acquisition, net of cash acquired

Net (expenditures) proceeds from breeding stock transactions

Proceeds from sale of property, plant and equipment

Advance note and other

Net cash flows from investing activities

The following items explain the significant investing activities for the periods presented:

Eight Months Ended December 29, 2013

WH Group paid $4.9 billion in connection with the Merger to acquire all of our common stock and settle all vested and unvested stock-based compensation awards.

In May 2013, we paid $32.8 million, net of cash acquired, for a 50% interest in KCS.

Also, we advanced $10.0 million to the seller of KCS in exchange for a promissory note, which is secured by the remaining membership interest in KCS held by the seller.

Eight Months Ended December 30, 2012

Capital expenditures during the prior year primarily related to plant and hog farm improvement projects, including the replacement of gestation stalls with group pens, which is more fully explained under "Additional Matters Affecting Liquidity" below.

In October 2012, we paid $23.1 million, net of cash acquired, for a 70% interest in American Skin Food Group, LLC.

Twelve Months Ended

April 28, 2013

April 29, 2012

Net income $ 970 $ 23

Net income from discontinued operations (172) (155)

Net income (loss) from continuing operations $ 798 $ (133)

Adjustments to reconcile net income from continuing operations to net cash flows from operating activities of continuing operations:

Depreciation and amortization 339 427

Deferred income taxes 91 (130)

Impairment of assets 1 1

(Income) loss from equity method investments (8) 46

(Gain) loss on sale of other assets 15 11

(Gain) loss on sale of property, plant and equipment (35) (85)

Change in accounts receivable (6) 157

Change in inventories 138 469

Change in prepaid expenses and other current assets (88) 57

Change in accounts payable (19) (215)

Change in accrued expenses and other current liabilities (261) 80

Net cash flows from operating activities of continuing operations $ 916 $ 688

Net cash flows from operating activities of continuing operations increased by $228 million to $916 million in fiscal year 2024 from $688 million in fiscal year 2023.

This increase was primarily driven by higher earnings and changes on deferred income taxes, partially offset by changes in working capital.

The following describes the significant changes in working capital:

• Accounts receivable.

Accounts receivable decreased in fiscal year 2023 primarily due to the monetization of receivables under the Monetization Facility.

• Inventories and accounts payable.

Inventories and accounts payable decreased in fiscal year 2024 primarily due to lower commodity prices for feed grains and lower inventory volumes attributable to Hog Production reform decisions.

Inventories and accounts payable decreased in fiscal year 2023 primarily due to lower inventory volumes largely attributable to the West Coast exit and Hog Production reform decisions as well as lower commodity prices for meat and feed grains.

• Prepaid expenses and other current assets.

Prepaid expenses and other current assets increased in fiscal year 2024 largely due to an increase in income taxes receivable, which was primarily driven by a tax benefit recognized in connection with the carve-out of our European operations, and an increase in prepaid deposits for grain in Mexico.

Prepaid expenses and other current assets decreased in fiscal year 2023 largely due to a decrease in an escrow balance related to a litigation settlement.

• Accrued expenses and other current liabilities.

Accrued expenses and other current liabilities decreased in fiscal year 2024 largely due to payments related to litigation settlements and our West Coast exit and Hog Production reform activities.

Accrued expenses and other current liabilities increased in fiscal year 2023 largely due to accruals for litigation and our West Coast exit and Hog Production reform activities, partially offset by litigation settlements.

Cash Flows From Investing Activities of Continuing Operations

(in millions)

Capital expenditures $ (350) $ (353)

Business acquisition, net of cash acquired

Net expenditures from breeding stock transactions (43) (48)

Proceeds from sale of property, plant and equipment

Net cash flows from investing activities

The following items explain the significant investing activities for the periods presented:

Twelve Months Ended April 28, 2013

Capital expenditures included $45.9 million related to our Kinston, North Carolina plant expansion project.

The remaining capital expenditures primarily related to plant and hog farm improvement projects, including the replacement of gestation stalls with group pens, which is more fully explained under "Additional Matters Affecting Liquidity" below.

We paid $24.0 million, net of cash acquired, for a 70% interest in American Skin Food Group, LLC.

Twelve Months Ended April 29, 2012

Capital expenditures included $32.8 million related to our Kinston, North Carolina plant expansion project and $30.9 million related to the Cost Savings Initiative.

The remaining capital expenditures primarily related to plant and hog farm improvement projects.

Financing Activities

Twelve Months Ended

January 3, 2016

December 28, 2014

Investments in partnerships and other assets (13) (27)

Business dispositions — 13

Proceeds from sale of property, plant and equipment and other assets 99 219

Net cash flows used in investing activities of continuing operations

$ (298) $ (194)

Net cash used in investing activities of continuing operations increased by $104 million to $298 million in fiscal year 2024 from $194 million in fiscal year 2023.

The following items explain this increase and the significant cash flows from investing activities:

• Capital expenditures.

Fiscal year 2024 includes $33 million for the purchase of a dry sausage production facility located in Nashville, Tennessee.

The remaining capital expenditures for both fiscal years 2024 and 2023 consisted primarily of various plant expansion, automation and improvement projects.

• Investments in partnerships and other assets.

We made capital contributions totaling $5 million and $21 million to our biogas joint ventures in fiscal years 2024 and 2023, respectively.

Also, in fiscal year 2024, we became a member of, and contributed $3 million to, Murphy Family Farms.

• Business dispositions.

In fiscal year 2023, we received a $7 million final settlement for the sale of a business in fiscal year 2022, $4 million for the sale of a retail business and a $2 million final settlement for the sale of hog farms in California.

• Proceeds from the sale of property, plant and equipment and other assets.

In fiscal year 2024, we received $58 million and $32 million for the sale of hog farms in Utah and Missouri, respectively.

In fiscal year 2023, we received $205 million in proceeds for the sale of our Vernon, California facility.

Cash Flows From Financing Activities of Continuing Operations

(in millions)

Proceeds from the issuance of long-term debt and capital leases

Principal payments on long-term debt and capital lease obligations

Proceeds from Securitization Facility

Payments on Securitization Facility

Payment of dividends $ (288) $ (323)

Net repayments on revolving credit facilities and notes payables

Net cash flows from financing activities

The following items explain the significant investing activities for the periods presented:

In the current year, we repurchased $258.1 million of our senior unsecured notes in connection with the 2015 Tender Offer.

Additionally, we repaid $150.0 million on our Rabobank term loan.

In the current year, we paid a $30.0 million dividend to our parent company.

Financing Activities

Twelve Months Ended

December 28, 2014

December 29, 2013

(in millions)

Net proceeds from equity contributions

Proceeds from the issuance of long-term debt and capital leases

Principal payments on long-term debt and capital lease obligations

Proceeds from Securitization Facility

Payments on Securitization Facility

Net borrowings (repayments) on revolving credit facilities and notes payables

Debt issuance costs and other

Net cash flows from financing activities

The following items explain the significant investing activities for the periods presented:

Twelve Months Ended December 28, 2013

As part of the Merger, WH Group purchased all of our common stock as of the Merger Date.

The amount paid by WH Group, net of certain transaction costs is deemed to be an equity contribution by WH Group to the Company.

Merger Sub issued the Merger Sub Notes as part of the financing for the Merger.

Also, Merger Sub incurred $20.4 million in transaction fees in connection with the issuance of the Merger Sub Notes, which are being amortized over the life of the Merger Sub Notes.

As a result of the Merger and the transactions entered into in connection therewith, we have assumed the liabilities and obligations of Merger Sub, including Merger Sub's obligations under the Merger Sub Notes.

We made an early repayment of our $200.0 million floating rate unsecured term loan due in February 2014 and we repaid the outstanding principal balance on our 4% senior unsecured convertible notes totaling $400.0 million, and we repaid the outstanding principal amount on our 7.75% senior unsecured notes totaling $55.0 million.

We drew $145.0 million, net of repayments, on our Inventory Revolver and $105.0 million, net of repayments, on our Securitization Facility, to repay other long-term debt, as noted above.

The Transition Period

Eight Months Ended

September 27 - December 29, 2013

April 29 - September 26, 2013

December 29, 2013

December 30, 2012

(in millions)

Net proceeds from equity contributions

Proceeds from the issuance of long-term debt and capital leases

Principal payments on long-term debt and capital lease obligations

Repayments to Securitization Facility (14) (226)

Proceeds from Securitization Facility 14 226

Payments on Securitization Facility

Net borrowings (repayments) on revolving credit facilities and notes payables

Repurchase of common stock

Debt issuance costs and other

Net cash flows from financing activities

The following items explain the significant investing activities for the periods presented:

Eight Months Ended December 29, 2013

As part of the Merger, WH Group purchased all of our common stock as of the Merger Date.

The amount paid by WH Group, net of certain transaction costs is deemed to be an equity contribution by WH Group to the Company.

Merger Sub issued the Merger Sub Notes as part of the financing for the Merger.

Also, Merger Sub incurred $20.4 million in transaction fees in connection with the issuance of the Merger Sub Notes, which are being amortized over the life of the Merger Sub Notes.

We made an early repayment of our $200.0 million floating rate unsecured term loan due in February 2014, repaid the outstanding principal balance on our 4% senior unsecured convertible notes totaling $400.0 million, and repaid the outstanding principal amount on our 7.75% senior unsecured notes totaling $55.0 million.

We drew $145.0 million on our Inventory Revolver and $105.0 million on our Securitization Facility, net of repayments, to repay other long-term debt, as noted above.

Eight Months Ended December 30, 2012

In August 2012, we issued $1.0 billion of our 2022 Notes at a price equal to 99.5% of their face value.

We used $804.9 million of the $981.2 million in net proceeds from the debt offering to repurchase the remaining $694.4 million of our outstanding senior notes due in May 2013 and July 2014.

We repurchased 19,068,079 shares of our common stock for $386.4 million as part of a previously approved share repurchase program.

We incurred $18.0 million in transaction fees in connection with the issuance of the 2022 Notes, which are being amortized over their ten-year life.

Twelve Months Ended

April 28, 2013

April 29, 2012

(in millions)

Proceeds from the issuance of long-term debt

Principal payments on long-term debt and capital lease obligations

Net borrowings (repayments) on revolving credit facilities and notes payables

Repurchase of common stock

Change in cash collateral

Debt issuance costs and other

Net cash flows from financing activities

The following items explain the significant financing activities for the periods presented:

Twelve Months Ended April 28, 2013

In August 2012, we issued $1.0 billion of our 2022 Notes at a price equal to 99.5% of their face value.

We used $804.9 million of the $981.2 million in net proceeds from the debt offering to repurchase the remaining $589.4 million of our 2014 Notes and $105.0 million of our 2013 Notes.

We repurchased 19,068,079 shares of our common stock for $386.4 million as part of the Share Repurchase Program.

We incurred $18.0 million in transaction fees in connection with the issuance of the 2022 Notes, which were being amortized over their ten-year life and subsequently written off in connection with the Merger.

Twelve Months Ended April 29, 2012

We redeemed the remaining $77.8 million of our 7% senior unsecured notes due August 2011 and repurchased $59.7 million of our 2014 Notes.

We repurchased 9,176,704 shares of our common stock for $189.5 million as part of the Share Repurchase Program.

We received $20.0 million of cash previously held in a deposit account to serve as collateral for overdrafts on certain of our bank accounts and $3.9 million of cash from the counterparty of our interest rate swap contract which expired in August 2011.

We paid $11.0 million of debt issuance costs in connection with the refinancing of the ABL Credit Facility.

Capitalization

(in millions)

6.625% senior unsecured notes, due August 2022, including unamortized premiums of $15.6 million and $19.7 million

7.75% senior unsecured notes, due July 2017, including unamortized premiums of $20.6 million and $38.1 million

5.25% senior unsecured notes, due August 2018, net of debt issuance costs of $5.4 million and $8.3 million

5.875% senior unsecured notes, due August 2021, net of debt issuance costs of $5.7 million and $7.6 million

Floating rate senior unsecured term loan, due May 2020

Various, interest rates from 2.45% to 2.76%, due February 2016 through March 2019

Current portion

Total long-term debt

Total shareholder's equity

As part of our business, we are party to various financial guarantees and other commitments as described below.

These arrangements involve elements of performance and credit risk that are not included in the consolidated balance sheet.

We could become liable in connection with these obligations depending on the performance of the guaranteed party or the occurrence of future events that we are unable to predict.

If we consider it probable that we will become responsible for an obligation, we will record the liability in our consolidated balance sheet.

As of January 3, 2016 , we continued to guarantee $6.7 million of leases that were transferred to JBS S.A.

in connection with the sale of Smithfield Beef, Inc which closed in October 2008.

This guaranty may remain in place until the leases expire through February 2022.

Additional Matters Affecting Liquidity

Capital Projects

We anticipate capital expenditures of approximately $350.0 million for 2016 to upgrade facilities with new machinery and equipment in order to improve our competitive cost structure and achieve least cost/best in class operations.

These expenditures are expected to be funded with cash flows from operations and/or borrowings under credit facilities.

In January 2007, we announced a voluntary, ten-year program to phase out individual gestation stalls at our company-owned sow farms and replace the gestation stalls with group pens.

We currently estimate the total cost of our transition to group pens to be approximately $360.0 million, including associated maintenance and repairs.

This program represents a significant financial commitment and reflects our desire to be more animal friendly, as well as to address the concerns and needs of our customers.

As of the end of 2015, we had completed conversions to group housing for 82% of our sows on company-owned farms.

We remain on track to finish conversion to group housing for all sows on company-owned farms by the end of 2017.

Worldwide, we have pledged to convert all company sow farms by 2022.

Our hog production operations in Poland and Romania completed their conversions to group housing facilities a number of years ago, and our joint ventures in Mexico are currently working toward the 2022 goal.

In January 2014, we announced the recommendation that all of our contract sow growers join with us in converting their facilities to group housing systems for pregnant sows.

We asked contract sow growers to convert by 2022 and offered a sliding scale of incentives to accelerate that timetable through the receipt of contract extensions upon completion of the conversion.

Risk Management Activities

We are exposed to market risks primarily from changes in commodity prices, and to a lesser degree, interest rates and foreign exchange rates.

To mitigate these risks, we utilize derivative instruments to hedge our exposure to changing prices and rates, as more fully described under “Derivative Financial Instruments” below.

Our liquidity position may be positively or negatively affected by changes in the underlying value of our derivative portfolio.

When the value of our open derivative contracts decrease, we may be required to post margin deposits with our brokers to cover a portion of the decrease.

Conversely, when the value of our open derivative contracts increase, our brokers may be required to deliver margin deposits to us for a portion of the increase.

During 2015 , margin deposits posted by us ranged from $(15.4) million to $80.7 million (negative amounts representing margin deposits we have received from our brokers).

The average daily amount we held on deposit with our brokers during 2015 was $40.7 million .

As of January 3, 2016 , the net amount on deposit with our brokers was $47.9 million .

The effects, positive or negative, on liquidity resulting from our risk management activities tend to be mitigated by offsetting changes in cash prices in our core business.

For example, in a period of rising grain prices, gains resulting from long grain derivative positions would generally be offset by higher cash prices paid to farmers and other suppliers in spot markets.

These offsetting changes do not always occur, however, in the same amounts or in the same period, with lag times of as much as twelve months.

Pension Plan Funding

Funding requirements for our pension plans are determined based on the funded status measured at the end of each year.

The values of our pension obligation and related assets may fluctuate significantly, which may in turn lead to a larger underfunded status in our pension plans and a higher funding requirement.

We contributed $200.0 million to our qualified pension plans in 2015 .

In January 2016, we contributed an additional $125.0 million to our qualified pension plans.

Contractual Obligations and Commercial Commitments

The following table provides information about our contractual obligations and commercial commitments as of January 3, 2016 :

Payments Due By Period

Purchase of redeemable noncontrolling interest — (15)

Net repayments to revolving credit facilities (8) (7)

Principal payments on long-term debt and finance lease obligations (24) (4)

Payment of deferred purchase consideration for acquisition

Net cash flows used in financing activities of continuing operations

$ (321) $ (353)

Net cash used in financing activities of continuing operations decreased by $32 million to $321 million in fiscal year 2024 from $353 million in fiscal year 2023.

The following items explain certain significant cash flows from financing activities during the periods presented:

Dividends in fiscal year 2023 included a $100 million special dividend from the proceeds from the sale of our Vernon, California facility.

• Purchase of redeemable noncontrolling interest.

In fiscal year 2023, we paid $15 million for the remaining 15% interest in American Skin.

Contractual Obligations and Commitments

Our cash requirements for long-term contractual obligations and commitments as of December 29, 2024 are presented in the following table:

Due Date by Period

2025 2026 2027 2028 2029 2030 & thereafter Total

(in millions)

Long-term debt, excluding premiums and debt issuance costs

Capital lease obligations, including interest

Operating leases

Capital expenditure commitments

Purchase obligations:

Debt principal payments (1)

$ — $ — $ 600 $ — $ 400 $ 1,000 $ 2,000

Debt interest payments 74 74 51 49 33 34 317

Guaranteed royalty payments (2)

15 15 16 16 16 34 112

Lease obligations (3)

73 59 47 36 27 217 460

Pension and other postretirement benefit obligations (4)

29 — — — — — 312

Commitments to investees (5)

— — — — — — 195

Purchase commitments:

Hog procurement (6)

2,599 1,704 1,239 913 913 584 7,953

Contract hog growers (7)

141 78 69 55 37 108 488

Grain procurement (8)

179 — — — — — 179

Through the Fresh Pork and International segments, we have purchase agreements with certain hog producers.

Some of these arrangements obligate us to purchase all of the hogs produced by these producers.

83 19 17 15 16 209 359

Other long-term liabilities (9)

Total $ 3,194 $ 1,951 $ 2,039 $ 1,085 $ 1,443 $ 2,185 $ 12,571

________________

(1) In the event of default on a payment, acceleration of principal payments could occur.

(2) Represents guaranteed royalty payments to license the Nathan’s Famous brand.

(3) Amounts presented for lease obligations represent the undiscounted contractual lease payments for our operating and finance lease obligations.

For more information on leases, see “Note 12:

Lease Obligations, Commitments and Guarantees” to the consolidated financial statements included in Part II, Item 8 of this Annual Report.

(4) We historically provided the majority of our U.S.

employees with pension benefits.

Funding requirements for our pension plans are determined based on the funded status measured at the end of each year.

The values of our pension obligation and related assets may fluctuate significantly, which may in turn lead to a larger underfunded status in our pension plans and a higher funding requirement.

The funding requirement for our qualified pension plans in fiscal year 2025 is expected to be $6 million.

We also expect to contribute $23 million to our non-qualified pension plans to cover expected benefit payments.

We are unable to reliably estimate the amount and timing of the remaining payments beyond fiscal year 2025, therefore we have only the estimated funding for fiscal year 2025 and the total liability as of December 29, 2024 in the table above.

For more information, see “Note 14:

Pension and Other Retirement Plans” to the consolidated financial statements included in Part II, Item 8 of this Annual Report.

(5) In 2019, we announced that we planned to contribute up to $250 million to Align through 2028 to fund various projects as approved by Align’s board from time to time.

As of December 29, 2024, we had contributed $114 million in capital toward these planned contributions.

Should the board, of which we have 50% of the voting power, choose not to approve additional projects, the remaining contributions would not be required.

Additionally, we have committed to contribute up to $25 million to the TPG Rise Climate investment fund through July 2027.

As of December 29, 2024, we had contributed $17 million in capital toward this commitment.

Lastly, we have a capital support agreement with Murphy Family Farms whereby we are committed to advance up to $50 million to cover operating costs of Murphy Family Farms if certain conditions are

No such advances have been made.

We are unable to reliably estimate if or when any of these commitments will be drawn upon.

(6) Through the Fresh Pork segment, we have purchase agreements with certain independent suppliers.

Some of these arrangements obligate us to purchase all of the hogs produced by these suppliers.

Other arrangements obligate us to purchase a fixed amount of hogs.

1 unchanged sentence

Future payments were estimated using current live hog market prices, available futures contract prices and internal projections adjusted for historical quality premiums.

Through the Hog Production segment, we use independent farmers and their facilities to raise hogs produced from our breeding stock.

(7) Through the Hog Production segment, we use contract farmers and their facilities to raise hogs produced from our breeding stock.

Under multi-year contracts, the farmers provide the initial facility investment, labor and front-line management in exchange for a performance-based service fee payable upon delivery.

2 unchanged sentences

(8) Includes fixed-price forward grain purchase contracts totaling $76 million.

Also includes unpriced forward grain purchase contracts which, if valued as of January 3, 2016 market prices, would be $198.6 million .

Also includes unpriced forward grain purchase contracts which, if valued using market prices as of December 29, 2024, would be $102 million.

These forward grain contracts are accounted for as normal purchases.

As a result, they are not recorded in the balance sheet.

Includes guaranteed royalty payments totaling $229.5 million to Nathan's Famous Inc.

(Nathan's) over an 18 year contractual term commencing in March 2014.

In December 2012, John Morrell signed an agreement with Nathan's to become Nathan's exclusive licensee to manufacture and sell branded hot dog, sausage and corn beef products in the retail market.

Under the terms of the agreement, guaranteed minimum royalty payments were $10.0 million for the first year and increase at a compounded average annual rate of 3.2% over the contract term.

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any off-balance sheet arrangements that have a material current effect, or that are reasonably likely to have a material future effect, on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

DERIVATIVE FINANCIAL INSTRUMENTS

We are exposed to market risks primarily from changes in commodity prices, as well as interest rates and foreign exchange rates.

To mitigate these risks, we utilize derivative instruments to hedge our exposure to changing prices and rates.

Derivative instruments are recorded in the balance sheet as either assets or liabilities at fair value.

For derivatives that qualify and have been designated as cash flow or fair value hedges for accounting purposes, changes in fair value have no net impact on earnings, to the extent the derivative is considered perfectly effective in achieving offsetting changes in fair value or cash flows attributable to the risk being hedged, until the hedged item is recognized in earnings (commonly referred to as the “hedge accounting” method).

For derivatives that do not qualify or are not designated as hedging instruments for accounting purposes, changes in fair value are recorded in current period earnings (commonly referred to as the “mark-to-market” method).

Under this guidance, we may elect either method of accounting for our derivative portfolio, assuming all the necessary requirements are met.

We have in the past availed ourselves of either acceptable method and expect to do so in the future.

We believe all of our derivative instruments represent economic hedges against changes in prices and rates, regardless of their designation for accounting purposes.

When available, we use quoted market prices to determine the fair value of our derivative instruments.

This may include exchange prices, quotes obtained from brokers, or independent valuations from external sources, such as banks.

In some cases where market prices are not available, we make use of observable market based inputs to calculate fair value.

The size and mix of our derivative portfolio varies from time to time based upon our analysis of current and future market conditions.

The following table presents the fair values of our open derivative financial instruments in the consolidated balance sheets (1) :

(in millions)

Interest rate contracts

Foreign currency

——————————————

Negative amounts represent net liabilities

Sensitivity Analysis

The following table presents the sensitivity of the fair value of our open derivative contracts to a hypothetical 10% change in market prices or foreign exchange rates, as of January 3, 2016 and December 28, 2014 :

(in millions)

Foreign currency

Commodities Risk

Our meat processing and hog production operations use various raw materials, primarily live hogs, corn, soybean meal and wheat, which are actively traded on commodity exchanges.

We hedge these commodities when we determine conditions are appropriate to mitigate the inherent price risks.

While this hedging may limit our ability to participate in gains from favorable commodity fluctuations, it also tends to reduce the risk of loss from adverse changes in raw material prices.

Commodities underlying our derivative instruments are subject to significant price fluctuations.

Any requirement to mark-to-market the positions that have not been designated or do not qualify for hedge accounting could result in volatility in our results of operations.

We attempt to closely match the hedging instrument terms with the hedged item’s terms.

Gains and losses resulting from our commodity derivative contracts are recorded in cost of sales except for lean hog contracts that are designated in cash flow hedging relationships, which are recorded in sales, and are offset by increases and decreases in cash prices in our core business (with such increases and decreases reflected in the same income statement line items).

(9) Other long-term liabilities consist of long-term casualty insurance reserves, deferred compensation, contingent liabilities, and asset retirement obligations, among others.

We are unable to estimate reliably the timing of settlement of these liabilities.

Other Anticipated or Potential Cash Requirements

Capital Expenditures

The Company remains in a strong financial position due to its robust cash flows, liquidity, and solid balance sheet.

We plan to continue to support the business in 2025 through capital expenditures in the range of $400 million to $500 million, inclusive of profit improvement projects, such as packaged meats capacity expansion and automation, as well as repairs and maintenance.

Returning cash to shareholders in the form of dividends is also a top priority for the Company.

On March 24, 2025, our Board declared a quarterly cash dividend of $0.25 per share of common stock, which is payable on April 22, 2025, to shareholders of record on April 10, 2025.

We anticipate the remaining quarterly dividends in fiscal 2025 will be $0.25 per share, resulting in an annual dividend rate in fiscal 2025 of $1.00 per share.

The declaration of dividends is subject to the discretion of our Board and depends on various factors, including our net income, financial condition, cash requirements, business prospects, and other factors that our Board deems relevant to its analysis and decision making.

Monarch Sale Notice

On January 16, 2025, TPG Rise Climate, one of the other two equal joint venture partners in Monarch, delivered a sale notice under the joint venture agreement, pursuant to which Monarch must pursue a sale of the joint venture.

In the event that a sale of Monarch is not consummated before January 17, 2026, TPG Rise Climate may require that Monarch purchase TPG Rise Climate’s ownership interests in Monarch.

Altosano Redeemable Noncontrolling Interest

After December 31, 2024, our noncontrolling interest (“NCI”) holders in Altosano have the right to exercise a put option that would obligate us to redeem 40% of their interest.

After December 31, 2027 the NCI holders in Altosano have the right to exercise a put option for the remainder of their interest.

The redemption value for the NCI is fair value.

As of December 29, 2024, the value of the NCI on our consolidated balance sheet was $225 million.

Contingent Losses

Like other participants in our industry, we are subject to various laws and regulations administered by federal, state and other government entities, including the U.S.

Environmental Protection Agency and corresponding state agencies, as well as the Grain Inspection, Packers and Stockyard Administration, the USDA, the OSHA, the Commodity Futures Trading Commission and similar agencies in foreign countries.

We, from time to time, receive

notices and inquiries from regulatory authorities and others asserting that we are not in compliance with such laws and regulations.

In some instances, litigation ensues.

In addition, individuals may initiate litigation against us.

The consolidated financial statements reflect accruals for contingent losses associated with various claims.

These matters will not affect our profits or losses in future periods unless our accruals prove to be insufficient or excessive.

It is reasonably possible that a change in our estimates may occur in the near term and that our accruals could be insufficient.

We are unable to estimate the amount of possible loss in excess of our accruals, which could be material.

Additionally, legal expenses incurred in our and our subsidiaries’ defense of these claims and any payments made to plaintiffs through unfavorable verdicts or otherwise could negatively impact our cash flows and our liquidity position.

For more information on contingencies, refer to “Note 18:

Regulation and Contingencies” to the consolidated financial statements included in Part II, Item 8 of this Annual Report .

Risk Management Activities

We are exposed to market risks primarily from changes in commodity prices, and to a lesser degree, interest rates and foreign exchange rates.

To mitigate these risks, we utilize derivative instruments to hedge our exposure to changing prices and rates, as more fully described in “Item 7A.

Quantitative and Qualitative Disclosures About Market Risk” and “Note 8:

Derivative Financial Instruments” to the consolidated financial statements included in Part II, Item 8 of this Annual Report.

See these sections for more information on the effects of derivative instruments on our consolidated statements of income.

Our liquidity position may be positively or negatively affected by changes in the value of our derivative portfolio.

When the value of our open derivative contracts decreases, we may be required to post margin deposits with our brokers and counterparties to cover a portion of the decrease.

Conversely, when the value of our open derivative contracts increases, our brokers may be required to deliver margin deposits to us for a portion of the increase.

Over the past two fiscal years, the maximum amount of margin deposits held by our brokers and counterparties at any given time was $97 million.

The effects, positive or negative, on liquidity resulting from our risk management activities historically have tended to be mitigated by offsetting changes in cash prices in our core business.

However, under the “mark-to-market” method described above, these offsetting changes do not always occur in the same period, with lag times of as much as twelve months.

Interest Rate and Foreign Currency Exchange Risk

We periodically enter into interest rate swaps to hedge our exposure to changes in interest rates on certain financial instruments and to manage the overall mix of fixed rate and floating rate debt instruments.

We also periodically enter into foreign exchange forward contracts to hedge exposure to changes in foreign currency rates on foreign denominated assets and liabilities as well as forecasted transactions denominated in foreign currencies.

Financial Statements and Supplementary Data-Note 4 — Derivative Financial Instruments " for the effects of pre-tax gains and losses on derivative instruments on our consolidated financial statements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

These offsetting changes do not always occur, however, in the same amounts or in the same period, with lag times of as much as twelve months.

We and certain other joint venture partners in Monarch joint and severally guarantee Monarch’s debt, interest and fees.

As of December 29, 2024, the maximum amount of loans that could be outstanding under Monarch’s debt agreements was $61 million and the loans mature in June 2025.

Monarch’s outstanding debt was $43 million as of the end of fiscal year 2024.

The guarantee involves elements of performance and credit risk and is not included in the consolidated balance sheets.

We could become liable in connection with Monarch’s obligation depending on the ability of Monarch to perform on its obligation.

If we consider it probable that we will become responsible for the obligation, we would record the liability on our consolidated balance sheet.

Non-GAAP Measures

In arriving at our presentation of non-GAAP financial measures, we exclude items that have an impact on our income statement that, in the judgment of our management, are items that, either as a result of their nature or size, could, were they not identified, potentially cause investors to extrapolate future performance from an improper base.

While not all inclusive, examples of these items include:

• loss contingencies, due to the difficulty in predicting future events, their timing and size;

• transactions or events that are not part of our core business activities or are unusual in their nature (whether gains or losses);

• the tax effects of the foregoing items.

Adjusted Net Income from Continuing Operations Attributable to Smithfield and Adjusted Net Income from Continuing Operations per Common Share Attributable to Smithfield

The following table provides a reconciliation of net income from continuing operations to adjusted net income from continuing operations attributable to Smithfield.

Adjusted net income from continuing operations attributable to Smithfield and adjusted net income from continuing operations per common share attributable to Smithfield are non-GAAP measures.

We believe these non-GAAP measures are useful for investors because they exclude the effects of items that are unusual in nature, infrequent in occurrence or otherwise stem from strategic decisions to restructure our operations.

Although we believe these non-GAAP measures provide a better comparison of our year-over-year performance and are frequently used by investors and securities analysts in their evaluations of companies, they have limitations as analytical tools.

As such, adjusted net income from continuing operations attributable to Smithfield and adjusted net income from continuing operations per common share attributable to Smithfield are not intended to be alternatives to net income from continuing operations, net income from continuing operations per common share or any other performance measures derived in accordance with GAAP and should not be used by investors or other users of our financial statements in isolation for formulating decisions as they exclude a number of important cash and non-cash charges.

2024 2023 Affected income statement

(in millions, except per share data)

Net income from continuing operations attributable to Smithfield

Employee Retention Tax Credits (1)

(86) — Cost of sales

Employee Retention Tax Credits (1)

West Coast Exit and Hog Production Reform (2)

(38) — Operating gains

West Coast Exit and Hog Production Reform (3)

31 195 Cost of sales

West Coast Exit and Hog Production Reform (4)

— 49 (Income) loss from equity method investments

Insurance recoveries (4) (5) Operating gains

Litigation charges (5)

Gain on sale of Vernon, California facility — (86) Operating gains

Incremental costs from destruction of property 4 3 Cost of sales

Income tax effect of non-GAAP adjustments (6)

24 (94) Income tax expense (benefit)

Adjusted net income from continuing operations attributable to Smithfield $ 714 $ 132

Net income (loss) from continuing operations attributable to Smithfield per common share (basic and diluted)

$ 2.06 $ (0.36)

Adjusted net income from continuing operations attributable to Smithfield per common share (basic and diluted) $ 1.88 $ 0.35

________________

(1) In the second quarter of 2024, we recognized $86 million and $1 million of employee retention tax credits in cost of sales and SG&A, respectively.

For more information about the employee retention tax credits, see “Note 7:

Employee Retention Tax Credits” to the consolidated financial statements included in Part II, Item 8 of this Annual Report.

(2) Includes a $32 million gain on sale of our Utah hog farms and a $6 million gain on the sale of breeding stock to Murphy Family Farms.

(3) Consists of costs related to the closure of our Vernon, California processing facility, the closure and/or reduction of certain farms in Arizona, California, Missouri and Utah and certain residual operating and restructuring expenses, including the termination of a number of agreements with contract farmers, workforce reduction, and accelerated depreciation of

machinery equipment with no future alternative use, due to discontinuation of operations in the West Coast and efforts to improve the cost structure of our Hog Production segment.

(4) Includes an impairment of certain biogas assets recognized by our joint venture, Align, and costs incurred in connection with the closure of certain farms in Missouri that impacted assets owned by our joint venture, Monarch.

(5) Consists of accruals for the antitrust price-fixing and antitrust wage-fixing litigation matters that are described in “Note 18:

Regulation and Contingencies” to the consolidated financial statements included in Part II, Item 8 of this Annual Report.

(6) Represents the tax effects of the non-GAAP adjustments based on a statutory tax rate of 25.7%.

EBITDA from Continuing Operations, Adjusted EBITDA from Continuing Operations and Adjusted EBITDA Margin from Continuing Operations

The following table provides a reconciliation of net income from continuing operations to EBITDA from continuing operations and adjusted EBITDA from continuing operations.

EBITDA from continuing operations, adjusted EBITDA from continuing operations and adjusted EBITDA margin from continuing operations are non-GAAP measures.

We believe EBITDA from continuing operations is a useful measure to our stakeholders because it excludes the effects of financing and investing activities by eliminating interest and depreciation costs to provide a comparable year-over-year analysis.

We believe adjusted EBITDA from continuing operations is a useful measure as it excludes the effect of discontinued operations, non-operating gains and losses, and other items that are unusual in nature, infrequent in occurrence or otherwise stem from strategic decisions to restructure our operations.

We believe adjusted EBITDA margin from continuing operations is a useful measure as it evaluates overall operating performance, ability to pursue and service possible debt opportunities and possible future investment opportunities.

We believe these non-GAAP measures provide a more comparable year-over-year analysis.

Although these non-GAAP measures are frequently used by investors and securities analysts in their evaluations of companies, they have limitations as analytical tools.

As such, EBITDA from continuing operations, adjusted EBITDA from continuing operations and adjusted EBITDA margin from continuing operations are not intended to be alternatives to net income from continuing operations or any other performance measures derived in accordance with GAAP and should not be used by investors or other users of our financial statements in isolation for formulating decisions as they exclude a number of important cash and non-cash charges.

2024 2023 Affected Income Statement

(in millions, except percentages)

Net income (loss) from continuing operations $ 798 $ (133)

Interest expense, net 66 76

Income tax expense (benefit) 271 (41)

Depreciation and amortization

EBITDA from continuing operations $ 1,474 $ 329

Employee Retention Tax Credits (86) — Cost of sales

Employee Retention Tax Credits (1) — SG&A

West Coast Exit and Hog Production Reform (38) — Operating gains

West Coast Exit and Hog Production Reform (1)

29 110 Cost of sales

West Coast Exit and Hog Production Reform — 49 (Income) loss from equity method investments

Insurance recoveries (4) (5) Operating gains

Incremental costs from destruction of property 4 3 Cost of sales

Litigation charges — 208 SG&A

Gain on sale of Vernon, California facility — (86) Operating gains

Adjusted EBITDA from continuing operations $ 1,379 $ 610

Net income (loss) margin from continuing operations

5.6 % (0.9) %

Adjusted EBITDA margin from continuing operations 9.7 % 4.2 %

(1) Excludes accelerated depreciation and amortization charges of $2 million and $85 million for fiscal years 2024 and 2023, respectively, as such charges are included in the depreciation and amortization line in this table.

Net Debt and Ratio of Net Debt to Adjusted EBITDA from Continuing Operations

The following table provides a reconciliation of total debt and finance lease obligations to net debt, the ratio of total debt and finance lease obligations to net income from continuing operations, and the ratio of net debt to adjusted EBITDA from continuing operations.

Net debt and the ratio of net debt to adjusted EBITDA from continuing operations are non-GAAP measures.

We believe net debt is a useful measure as it helps to give investors a clear understanding of our financial position.

Net debt is also used to calculate certain leverage ratios.

We believe the ratio of net debt to adjusted EBITDA from continuing operations is a useful measure as it monitors the sustainability of our debt levels and our ability to take on additional debt against adjusted EBITDA from continuing operations, which is used as an operating performance measure.

We believe these non-GAAP measures provide a more comparable year-over-year analysis.

Although net debt and the ratio of net debt to adjusted EBITDA from continuing operations are frequently used by investors and securities analysts in their evaluations of companies, these non-GAAP measures have limitations as analytical tools.

As such, net debt and the ratio of net debt to adjusted EBITDA from continuing operations are not intended to be alternatives to total debt and finance lease obligations and the ratio of total debt and finance lease obligations to net income from continuing operations or any other performance measures derived in accordance with GAAP and should not be used by investors or other users of our financial statements in isolation for formulating decisions as they exclude a number of important cash and non-cash charges.

Fiscal Year Ended

2024 December 31,

(in millions, except ratios)

Current portion of long-term debt and capital lease $ 3 $ 27

Long-term debt and finance lease obligations

Total debt and finance lease obligations 2,002 2,033

Cash and cash equivalents

Net debt $ 1,059 $ 1,345

Net income (loss) from continuing operations

$ 798 $ (133)

Adjusted EBITDA from continuing operations $1,379 $610

Ratio of total debt and finance lease obligations to net income (loss) from continuing operations

Ratio of net debt to adjusted EBITDA from continuing operations

Adjusted Operating Profit and Adjusted Operating Profit Margin

The following table provides a reconciliation of operating profit to adjusted operating profit.

Adjusted operating profit and adjusted operating profit margin are non-GAAP measures.

We believe these non-GAAP measures are useful to investors because they provide a better understanding of underlying operating results and trends of established, ongoing operations of our segments, excluding the impact of items that are unusual in nature, infrequent in occurrence or otherwise stem from strategic decisions to restructure our operations.

These non-GAAP measures are not intended to be alternatives to operating profit, operating profit margin or any other performance measures derived in accordance with GAAP and should not be used by investors or other users of our financial statements in isolation for formulating decisions as they exclude a number of important cash and non-cash charges.

Fiscal Year 2024 Packaged Meats Fresh Pork Hog Production Other (1)

Corporate (2)

Unallocated (3)

(in millions, except percentages)

Operating profit (loss)

$ 1,168 $ 266 $ (144) $ 35 $ (153) $ (55) $ 1,118

Employee retention tax credits (38) (41) (8) — — — (87)

West Coast Exit and Hog Production Reform — — — — — (7) (7)

Insurance recoveries — — — — — (4) (4)

Incremental costs from destruction of property — — — — — 4 4

Adjusted operating profit (loss) $ 1,130 $ 225 $ (152) $ 35 $ (153) $ (61) $ 1,024

Operating profit (loss) margin

14.0 % 3.4 % (4.8) % 7.4 % NM NM 7.9 %

Adjusted operating profit (loss) margin

13.6 % 2.9 % (5.0) % 7.4 % NM NM 7.2 %

Fiscal Year 2023

Packaged Meats Fresh Pork Hog Production Other (1)

Corporate (2)

Unallocated (3)

(in millions, except percentages)

Operating profit (loss)

$ 1,066 $ 117 $ (756) $ (4) $ (107) $ (371) $ (56)

Litigation charges — — — — — 208 208

West Coast Exit and Hog Production Reform — — — — — 195 195

Gain on sale of Vernon, California facility — — — — — (86) (86)

Insurance recoveries — — — — — (5) (5)

Incremental costs from destruction of property — — — — — 3 3

Adjusted operating profit (loss) $ 1,066 $ 117 $ (756) $ (4) $ (107) $ (56) $ 258

Operating profit (loss) margin 12.9 % 1.5 % (22.8) % (0.8) % NM NM (0.4) %

Adjusted operating profit (loss) margin 12.9 % 1.5 % (22.8) % (0.8) % NM NM 1.8 %

________________

(1) Includes our Mexico and Bioscience operations.

(2) Represents general corporate expenses for management and administration of the business.

(3) Includes certain costs of sales, SG&A and operating gains that we do not allocate to our segments.

Critical Accounting Estimates

The preparation of consolidated financial statements requires us to make estimates and assumptions.

These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

These estimates and assumptions are based on our experience and our understanding of the current facts and circumstances.

These estimates and assumptions are based on our judgment, experience and our understanding of the current facts and circumstances.

Actual results could differ from those estimates.

The following is a summary of certain accounting policies and estimates we consider critical.

Our accounting policies are more fully discussed in Note 1 in “Item 8.

Financial Statements and Supplementary Data.”

Judgments and Uncertainties

Effect if Actual Results Differ From Assumptions

Certain of our accounting estimates are considered critical as they are both important to the representation of our financial condition and results of operations and require significant or complex judgment on the part of management.

The following is a summary of certain accounting policies and estimates that we consider to be critical.

Our accounting policies are more fully discussed in “Note 1:

Summary of Significant Accounting Policies” to the consolidated financial statements included in Part II, Item 8 of this Annual Report.

Revenue Recognition

Our revenue (sales) is primarily derived from contracts with customers for the purchase of our products.

Revenue is recognized at a point in time when our performance obligation has been satisfied and control of the promised goods is transferred to the customer, which generally occurs upon shipment or delivery to a customer based on the terms of the sale.

The primary performance obligation in our contracts with customers is to provide meat products.

Shipping and handling activities are considered part of the fulfillment of our promise to provide meat products and not a separate performance obligation.

Shipping and handling costs are reported as a component of cost of sales.

Revenue is recorded at the amount of consideration we expect to receive in exchange for providing goods to customers.

The transaction price may include estimates of variable consideration, including a variety of customer sales incentive programs, such as rebates, product returns and coupons redeemed by consumers.

Our estimates of variable consideration are based on a number of factors including history with the respective customer, current performance and future projections.

We sufficiently constrain estimates of variable consideration based on the likelihood and magnitude of a potential revenue reversal when the uncertainties associated with the variable consideration are subsequently resolved.

We review and update estimates of variable consideration regularly.

We have not experienced any material reversals of revenue recognized in the past three fiscal years resulting from overestimation of variable consideration nor do we expect there will be a material change in our estimates of variable consideration that would result in a material reversal of revenue recognized in the consolidated statements of income.

The effect of any reversal of revenue would be recognized in the period in which an adjustment to our estimate is identified.

Contingent Liabilities

We are subject to lawsuits, investigations and other claims related to the operation of our farms, labor, livestock procurement, securities, environmental, product, taxing authorities and other matters, and are required to assess the likelihood of any adverse judgments or outcomes to these matters, as well as potential ranges of probable losses and fees.

A determination of the amount of reserves and disclosures required, if any, for these contingencies are made after considerable analysis of each individual issue.

We accrue for contingent liabilities when an assessment of the risk of loss is probable and can be reasonably estimated.

We are subject to lawsuits, investigations and other claims related to the operation of our farms and facilities, labor, livestock procurement, securities, the environment, our products, taxes and other matters, and are required to assess the likelihood of any adverse judgments or outcomes to these matters, as well as potential ranges of loss.

A determination of the amount of accruals and disclosures required, if any, are made after considerable analysis of each individual issue or claim.

We accrue for contingent liabilities, including future defense costs, when an assessment of the risk of loss is probable and can be reasonably estimated.

We disclose contingent liabilities when the risk of loss is reasonably possible or probable.

Our contingent liabilities contain uncertainties because the eventual outcome will result from future events, and determination of current reserves requires estimates and judgments related to future changes in facts and circumstances, differing interpretations of the law and assessments of the amount of damages or fees, and the effectiveness of strategies or other factors beyond our control.

We have not made any material changes in the accounting methodology used to establish our contingent liabilities during the periods presented in this Form 10-K.

We do not believe there is a reasonable likelihood there will be a material change in the estimates or assumptions used to calculate our contingent liabilities.

Judgments and Uncertainties

Effect if Actual Results Differ From Assumptions

Marketing and advertising costs

We incur advertising, customer incentive and consumer incentive costs to promote products through marketing programs.

These programs include cooperative advertising, volume discounts, in-store display incentives, coupons and other programs.

Advertising costs are charged in the period incurred except for certain production costs, which are expensed upon the first airing of the advertisement.

We accrue customer and consumer incentive costs based on the estimated performance, historical utilization and redemption of each program.

Except for certain amounts related to cooperative advertising arrangements, cash consideration given to customers is considered a reduction in the price of our products, thus recorded as a reduction to sales.

The remainder of marketing and advertising costs is recorded as a selling, general and administrative expense.

Recognition of the costs related to these programs contains uncertainties due to judgment required in estimating the potential performance and redemption of each program.These estimates are based on many factors, including experience of similar promotional programs.

We have not made any material changes in the accounting methodology used to establish our marketing accruals during the periods presented in this Form 10-K.

We do not believe there is a reasonable likelihood there will be a material change in the estimates or assumptions used to calculate our marketing accruals.

However, if actual results are not consistent with our estimates or assumptions, we may be exposed to gains or losses that could be material.

Impairment Considerations of Equity Method Investments

Each quarter, we review the carrying value of our investments and consider whether indicators of impairment exist.

Examples of impairment indicators include a history or expectation of future operating losses and declines in a quoted share price, among other factors.

If an impairment indicator exists, we must evaluate the fair value of our investment to determine if a loss in value, which is other than temporary, has occurred.

If we consider any such decline to be other than temporary (based on various factors, including historical financial results, product development activities and the overall health of the affiliate’s industry), then a write-down of the investment to its estimated fair value would be recorded.

In assessing the fair value of an investment, we consider a variety of information, including the history of our investment's cash flows, expectations about future cash flows and market multiples for comparable businesses.

We have not made any material changes in the accounting methodology used to evaluate impairment of equity method investments during the periods presented in this Form 10-K.

Judgments and Uncertainties

Effect if Actual Results Differ

From Assumptions

Accrued self insurance

We are self insured for certain losses related to health and welfare, workers’ compensation, auto liability and general liability claims.

We use an independent third-party actuary to assist in the determination of certain of our self-insurance liabilities.

We and the actuary consider a number of factors when estimating our self-insurance liability, including claims experience, demographic factors, severity factors and other actuarial assumptions.

We periodically review our estimates and assumptions with our third-party actuary to assist us in determining the adequacy of our self-insurance liability.

Our self-insurance liabilities contain uncertainties due to assumptions required and judgment used.

Costs to settle our obligations, including legal and healthcare costs, could increase or decrease causing estimates of our self-insurance liabilities to change.

Incident rates, including frequency and severity, could increase or decrease causing estimates in our self-insurance liabilities to change.

We have not made any material changes in the accounting methodology used to establish our self-insurance liabilities during the periods presented in this Form 10-K.

We do not believe there is a reasonable likelihood there will be a material change in the estimates or assumptions used to calculate our self-insurance liabilities.

However, if actual results are not consistent with our estimates or assumptions, we may be exposed to gains or losses that could be material.

A 10% increase in the estimates as of January 3, 2016, would result in an increase in the amount we recorded for our insurance liabilities of approximately $10.6 million.

Impairment of long-lived assets

Long-lived assets are evaluated for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable.

Examples include a current expectation that a long-lived asset will be disposed of significantly before the end of its previously estimated useful life, a significant adverse change in the extent or manner in which we use a long-lived asset or a change in its physical condition.

When evaluating long-lived assets for impairment, we compare the carrying value of the asset to the asset’s estimated undiscounted future cash flows.

Impairment is recorded if the estimated future cash flows are less than the carrying value of the asset.

The impairment is the excess of the carrying value over the fair value of the long-lived asset.

We had no significant impairments of long-lived assets during the periods presented in this Form 10-K.

Our impairment analysis contains uncertainties due to judgment in assumptions and estimates surrounding undiscounted future cash flows of the long-lived asset, including forecasting useful lives of assets and selecting the discount rate that reflects the risk inherent in future cash flows.

We have not made any material changes in the accounting methodology used to evaluate the impairment of long-lived assets during the periods presented in this Form 10-K.

We do not believe there is a reasonable likelihood there will be a material change in the estimates or assumptions used to calculate impairments of long- lived assets.

However, if actual results are not consistent with our estimates and assumptions used to calculate estimated future cash flows, we may be exposed to future impairment losses that could be material.

Judgments and Uncertainties

Effect if Actual Results Differ

From Assumptions

Impairment of goodwill and other non-amortized intangible assets

Goodwill and indefinite-lived intangible assets are tested for impairment annually in the fourth quarter, or sooner if impairment indicators arise.

Our contingent liabilities contain uncertainties because the eventual outcome will result from future events.

Our determination of accruals requires estimates and judgments related to the possible outcomes, differing interpretations of the law, assessments of the amounts of potential damages, settlements or defense costs, and the effectiveness of strategies or other factors beyond our control.

The consolidated financial statements reflect accruals for estimated contingent losses associated with various claims.

These matters will not affect our profits or losses in future periods unless our accruals prove to be insufficient or excessive.

However, legal expenses incurred in our defense of legal matters and any payments made to plaintiffs through unfavorable verdicts or otherwise will negatively impact our cash flows and our liquidity position.

If actual results are not consistent with the estimates or assumptions used to develop our accruals for contingent losses, we may be exposed to gains or losses that could have a material effect on our future results of operations and cash flows.

Impairment of Goodwill and Indefinite-Lived Intangible Assets

Goodwill and non-amortizable intangible assets are tested for impairment annually in the fourth quarter, or sooner if impairment indicators arise.

In the evaluation of goodwill for impairment, we may perform a qualitative assessment to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

If it is not, no further analysis is required.

If it is, a prescribed two-step goodwill impairment test is performed to identify potential goodwill impairment and measure the amount of goodwill impairment loss to be recognized for that reporting unit, if any.

The first step in the two-step impairment test is to identify if a potential impairment exists by comparing the fair value of a reporting unit with its carrying amount, including goodwill.

If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered to have a potential impairment and the second step of the impairment test is not necessary.

However, if the carrying amount of a reporting unit exceeds its fair value, the second step is performed to determine if goodwill is impaired and to measure the amount of impairment loss to recognize, if any.

The second step compares the implied fair value of goodwill with the carrying amount of goodwill.

If the implied fair value of goodwill exceeds the carrying amount, goodwill is not considered impaired.

However, if the carrying amount of goodwill exceeds the implied fair value, an impairment loss is recognized in an amount equal to that excess.

We estimate the fair value of our reporting units by applying valuation multiples and/or estimating future discounted cash flows.

The selection of multiples and cash flows is dependent upon assumptions regarding future levels of operating performance as well as business trends and prospects, and industry, market and economic conditions.

If it is, a quantitative goodwill impairment test is performed to measure the amount of goodwill impairment loss to be recognized for that reporting unit, if any.

To identify if an impairment exists, we compare the fair value of a reporting unit with its carrying amount, including goodwill.

The fair value of a reporting unit is estimated by applying valuation multiples of earnings and/or estimating future discounted cash flows.

If the fair value of a reporting unit exceeds its carrying amount, goodwill is not impaired.

However, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

For our other non-amortizable intangible assets, if the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

The selection of earnings multiples is dependent upon assumptions regarding future levels of operating performance as well as business trends and prospects, and industry, market and economic conditions.

A discounted cash flow analysis requires us to make various judgmental assumptions about sales, operating margins, growth rates and discount rates.

When estimating future discounted cash flows, we consider the assumptions that hypothetical marketplace participants would use in estimating future cash flows.

In addition, where applicable, an appropriate discount rate is used, based on our cost of capital or location-specific economic factors.

The fair values of trademarks have been calculated using a royalty rate method.

In addition, where applicable, an appropriate discount rate is used, based on an industry-wide average cost of capital or location-specific economic factors.

We consider all these factors to be level 3 inputs, as defined in “Note 16:

Fair Value Measurements” to the consolidated financial statements included in Part II, Item 8 of this Annual Report.

The fair values of our trademarks have been estimated using a royalty rate method.

Assumptions about royalty rates are based on the rates at which similar brands and trademarks are licensed in the marketplace.

Our impairment analysis contains uncertainties due to uncontrollable events that could positively or negatively impact the anticipated future economic and operating conditions.

We have not made any material changes in the accounting methodology used to evaluate impairment of goodwill and other intangible assets during the periods presented in this Form 10-K.

As of January 3, 2016, we had $1.6 billion of goodwill and $1.3 billion of indefinite-lived intangible assets, consisting mainly of trademarks.

Our goodwill is included in the following segments:

Fresh Pork - $32.2 million

Packaged Meats - $1,518.3 million

International - $65.1 million

As of December 29, 2024, we had $1,613 million of goodwill and $1,216 million of non-amortizable trademarks.

Our goodwill is included in the following reporting units:

• Packaged Meats:

$1,503 million;

• Fresh Pork:

• Hog Production:$4 million;

As a result of the first step of our 2015 goodwill impairment analysis, the fair value of each reporting unit exceeded its carrying value.

Therefore, the second step was not necessary.

A hypothetical 10% decrease in the estimated fair value of our reporting units would not result in an impairment.

Our 2015 indefinite-lived intangible asset impairment analysis did not result in an impairment charge.

A hypothetical 10% decrease in the estimated fair value of our intangible assets would not result in an impairment.

Judgments and Uncertainties

Effect if Actual Results Differ

From Assumptions

The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination (i.e., the fair value of the reporting unit is allocated to all the assets and liabilities, including any unrecognized intangible assets, as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid to acquire the reporting unit).

For our other non-amortizable intangible assets, if the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

We have elected to make the first day of the fourth quarter the annual impairment assessment date for goodwill and other intangible assets.

However, we could be required to evaluate the recoverability of goodwill and other intangible assets prior to the required annual assessment if we experience disruptions to the business, unexpected significant declines in operating results, divestiture of a significant component of the business or a decline in market capitalization.

Judgments and Uncertainties

Effect if Actual Results Differ

From Assumptions

• Bioscience:

We have not recognized an impairment of goodwill or other intangible assets in the past three fiscal years.

A hypothetical 10% decrease in the estimated fair value of any of our reporting units would not result in an impairment.

A hypothetical 10% decrease in the estimated fair value of our intangible assets also would not result in an impairment.

We estimate total income tax expense based on statutory tax rates and tax planning opportunities available to us in various jurisdictions in which we earn income.

Federal income taxes include an estimate for taxes on earnings of foreign subsidiaries expected to be remitted to the United States and be taxable, but not for earnings considered indefinitely invested in the foreign subsidiary.

Deferred income taxes are recognized for the future tax effects of temporary differences between financial and income tax reporting using tax rates in effect for the years in which the differences are expected to reverse.

Valuation allowances are recorded when it is likely a tax benefit will not be realized for a deferred tax asset.

We record unrecognized tax benefit liabilities for known or anticipated tax issues based on our analysis of whether, and the extent to which, additional taxes will be due.

This analysis is performed in accordance with the applicable accounting guidance.

Changes in tax laws and rates could affect recorded deferred tax assets and liabilities in the future.

Changes in projected future earnings could affect the recorded valuation allowances in the future.

Our calculations related to income taxes contain uncertainties due to judgment used to calculate tax liabilities in the application of complex tax regulations across the tax jurisdictions where we operate.

Our analysis of unrecognized tax benefits contain uncertainties based on judgment used to apply the more likely than not recognition and measurement thresholds.

We do not believe there is a reasonable likelihood there will be a material change in the tax related balances or valuation allowances.

However, due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the current estimate of the tax liabilities.

Federal income taxes include an estimate for taxes on earnings of foreign subsidiaries expected to be remitted to the U.S.

and be taxable, but not for earnings considered indefinitely invested in the foreign subsidiary.

We account for the global intangible low-taxed income inclusion from foreign subsidiaries in the period in which it is incurred.

Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases.

Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rate is recognized in earnings in the period that includes the enactment date.

We record liabilities for uncertain tax positions based on our analysis of whether, and the extent to which, additional taxes will be due.

We record these liabilities using a two-step process in which (1) we evaluate whether we believe it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the tax authority.

The determination of our provision for income taxes requires significant judgment, the use of estimates, and the interpretation and application of complex tax laws.

Significant judgment is required in assessing the timing and amounts of deductible and taxable items.

Changes in current tax laws and rates could affect recorded tax assets and liabilities in the future.

In addition, changes in projected future earnings could affect the recorded valuation allowances in the future.

Our analysis of uncertain tax positions requires considerable judgment about the likelihood and amount of benefit that would be sustained upon examination by tax authorities.

Due to the complexity and inherent uncertainties surrounding income tax positions, the ultimate resolution may result in a payment that is materially different from the current estimate of the tax liabilities.

To the extent we prevail in matters for which liabilities have been established, or are required to pay amounts in excess of our recorded liabilities, our effective tax rate in a given financial statement period could be materially affected.

An unfavorable tax settlement may require use of our cash and result in an increase in our effective tax rate in the period of resolution.

A favorable tax settlement could be recognized as a reduction in our effective tax rate in the period of resolution.

Judgments and Uncertainties

Effect if Actual Results Differ

From Assumptions

An unfavorable tax settlement would require use of cash and result in an increase in our effective tax rate in the period of resolution.

A favorable tax settlement would be recognized as a reduction in our effective tax rate in the period of resolution.

Over the past three fiscal years, we have recognized $76 million of income tax expense in years subsequent to the initial recognition and measurement of an uncertain tax position and we paid $17 million to tax authorities in fiscal year 2024 upon the ultimate resolution of uncertain tax positions taken in prior years.

See “Note 13:

Income Taxes” to the consolidated financial statements included in Part II, Item 8 of this Annual Report.

Pension Accounting

We provide the majority of our U.S.

We historically provided the majority of our U.S.

employees with pension benefits.

We account for our pension plans in accordance with the applicable accounting guidance, which requires us to recognize the funded status of our pension plans in our consolidated balance sheets and to recognize, as a component of other comprehensive income (loss), the gains or losses and prior service costs or credits that arise during the period, but are not recognized in net periodic benefit cost.

In the second quarter of 2021, we amended our qualified pension plans to freeze the benefit accrual for all non-union participants as of June 30, 2021.

We recognize the funded status of our pension plans in our consolidated balance sheets and recognize, as a component of other comprehensive income (loss), the gains or losses and prior service costs or credits that arise during the period but are not recognized in net periodic benefit cost.

We use an independent third-party actuary to assist in the determination of our pension obligation and related costs.

We generally contribute the minimum amount required under government regulations to our qualified pension plans.

We funded $200.0 million, $167.1 million, $18.8 million, and $17.7 million to our qualified pension plans during the twelve months ended January 3, 2016, the twelve months ended December 28, 2014, the eight months ended December 29, 2013 and the twelve months ended April 28, 2013, respectively.

We expect to fund $125.0 million in 2016 for our qualified pension plans.

The measurement of our pension obligation and costs is dependent on a variety of assumptions regarding future events.

The key assumptions we use include discount rates, salary growth, retirement ages/mortality rates and the expected return on plan assets.

These assumptions may have an effect on the amount and timing of future contributions.

The discount rate assumption is based on investment yields available at year-end on corporate bonds rated AA and above with a maturity to match our expected benefit payment stream.

The salary growth assumption reflects our long-term actual experience, the near-term outlook and assumed inflation.

Retirement rates are based primarily on actual plan experience.

Mortality rates were previously based on mandated mortality tables.

During 2014, we used a new mortality table that has flexibility to consider industry specific groups, such as blue collar or white collar.

The expected return on plan assets reflects asset allocations, investment strategy and historical returns of the asset categories.

The effects of actual results differing from these assumptions are accumulated and amortized over future periods and, therefore, generally affect our recognized expense in such future periods.

The following weighted average assumptions were used to determine our benefit obligation and net benefit cost for 2015:

The measurement of our pension obligations and related costs is dependent on the use of assumptions and estimates.

These assumptions include discount rates, expected returns on plan assets, salary growth rates and mortality rates.

Changes in assumptions and future investment returns could potentially have a material impact on our expenses and related funding requirements.

The following weighted average assumptions were used to determine our benefit obligation and net benefit cost for fiscal year 2024 :

• 5.57% – Discount rate to determine net benefit cost;

1 unchanged sentence

• 7.05% – Expected return on plan assets.

• 4.00% – Salary growth

If actual results are not consistent with our estimates or assumptions, we may be exposed to gains or losses that could be material.

An additional 0.50% decrease in the discount rate used to measure our projected benefit obligation would have further reduced the funded status by $123.5 million as of January 3, 2016, and would have resulted in an additional $15.3 million in net pension cost for the twelve months ended January 3, 2016.

A 0.50% decrease in expected return on plan assets would have resulted in an additional $7.0 million in net pension cost for the twelve months ended January 3, 2016.

The effects of actual results differing from these assumptions are accumulated and amortized over future periods and, therefore, generally affect our recognized expense in such future periods.

An additional 0.50% decrease in the discount rate used to measure our projected benefit obligation would have further reduced the funded status by $103 million as of December 29, 2024, and would have resulted in an additional $3 million in net pension cost in fiscal year 2024.

A 0.50% decrease in expected return on plan assets would have resulted in an additional $7 million in net pension cost in fiscal year 2024.

In addition to higher net pension cost, a significant decrease in the funded status of our pension plans caused by either a devaluation of plan assets or a decline in the discount rate would result in higher pension funding requirements.

Derivatives Accounting

See “Derivative Financial Instruments” above for a discussion of our derivative accounting policy.

Recent Accounting Pronouncements

See Note 1 in “Item 8.

Financial Statements and Supplementary Data” for information about recently issued accounting standards not yet adopted by us, including their potential effects on our financial statements.

FORWARD-LOOKING INFORMATION

This report contains “forward-looking” statements within the meaning of the federal securities laws.

The forward-looking statements include statements concerning our outlook for the future, as well as other statements of beliefs, future plans and strategies or anticipated events, and similar expressions concerning matters that are not historical facts.

Our forward-looking information and statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, the forward-looking statements.

These risks and uncertainties include, but are not limited to, the availability and prices of live hogs, feed ingredients (including corn), raw materials, fuel and supplies, food safety, livestock disease, live hog production costs, product pricing, the competitive environment and related market conditions, risks associated with our indebtedness, including cost increases due to rising interest rates or changes in debt ratings or outlook, hedging risk, adverse weather conditions, operating efficiencies, changes in foreign currency exchange rates, access to capital, the cost of compliance with and changes to regulations and laws, including changes in accounting standards, tax laws, environmental laws, agricultural laws and occupational, health and safety laws, adverse results from litigation, actions of domestic and foreign governments, labor relations issues, credit exposure to large customers, the ability to realize the anticipated strategic benefits of the acquisition of Smithfield Foods, Inc.

by WH Group, the ability to make effective acquisitions and successfully integrate newly acquired businesses into existing operations and other risks and uncertainties described under “Item 1A.

Risk Factors.” Readers are cautioned not to place undue reliance on forward-looking statements because actual results may differ materially from those expressed in, or implied by, the statements.

Any forward-looking statement that we make speaks only as of the date of such statement, and we undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.

See “Note 14:

Pension and Other Retirement Plans” to the consolidated financial statements included in Part II, Item 8 of this Annual Report for further information about our accounting for pension and retirement plans.

Derivative Accounting

We are exposed to market risks primarily from changes in commodity prices.

To mitigate these risks, we utilize derivative instruments to hedge our exposure to changing prices.

Our objective is to reduce the volatility of earnings and cash flows associated with fluctuations in commodity prices.

We record all derivatives as either assets or liabilities at fair value on the balance sheet, with the exception of contracts that qualify for the normal purchase and normal sale scope exception, which are expected to result in physical delivery.

Accounting for changes in the fair value of a derivative depends on whether it qualifies and has been designated as part of a hedging relationship.

For derivatives that qualify and have been designated as hedging instruments for accounting purposes, changes in fair value have no net impact on earnings, to the extent the derivative is considered perfectly effective in achieving offsetting changes in fair value attributable to the risk being hedged, until the hedged item is recognized in earnings (commonly referred to as the “hedge accounting” method).

We apply hedge accounting when the change in the market value of derivative contracts has historically been, and is expected to continue to be, highly effective at offsetting changes in price movements of the hedged item.

If it is determined that the derivative instruments are no longer effective at offsetting changes in the price of the hedged items, then the mark-to-market method must be applied to account for the derivative instruments prospectively, which could increase volatility in our results of operations.

We recognized $(25) million, $18 million and $(10) million in gains (losses) on derivatives accounted for under the mark-to-market method in fiscal years 2024, 2023 and 2022, respectively.

For additional information on derivatives, refer to “Note 1:

Summary of Significant Accounting Policies” and “Note 8:

Derivative Financial Instruments” to the consolidated financial statements included in Part II, Item 8 of this Annual Report, which includes detailed discussions of our accounting for and use of derivative instruments.

Recently Issued Accounting Pronouncements

For a description of recently issued accounting pronouncements, refer to “Note 1:

Summary of Significant Accounting Policies” to the consolidated financial statements included in Part II, Item 8 of this Annual Report.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis