SMITHFIELD FOODS INC 10-Q

ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA SMITHFIELD FOODS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in millions, except for share and per share data, and unaudited) Three Months Ended March 30, 2025 March 31, 2024 Sales $ 3,771 $ 3,444 Cost of sales 3,262 3,083 Gross profit 510 362 Selling, general and administrative expenses 197 199 Operating gains ( 9 ) ( 1 ) Operating profit 321 163 Interest expense, net 11 16 Non-operating (gains) losses 6 ( 4 ) Income from continuing operations before income taxes 304 152 Income tax expense 72 39 Loss from equity method investments 5 1 Net income from continuing operations 227 112 Net income (loss) from continuing operations attributable to noncontrolling interests 4 ( 2 ) Net income from continuing operations attributable to Smithfield 224 114 Income from discontinued operations before income taxes — 54 Income tax expense from discontinued operations — 12 Net income from discontinued operations — 42 Net income from discontinued operations attributable to noncontrolling interests — — Net income from discontinued operations attributable to Smithfield — 42 Net income 227 154 Net income (loss) attributable to noncontrolling interests 4 ( 1 ) Net income attributable to Smithfield $ 224 $ 156 Net income per common share attributable to Smithfield: Basic and diluted: Continuing operations $ 0.57 $ 0.30 Discontinued operations — 0.11 Total $ 0.57 $ 0.41 Weighted-average shares outstanding: Basic 388,812,663 380,069,232 Diluted 389,064,212 380,069,232 See Notes to Condensed Consolidated Financial Statements 2 SMITHFIELD FOODS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in millions and unaudited) Three Months Ended March 30, 2025 March 31, 2024 Net income $ 227 $ 154 Other comprehensive income (loss), net of tax: Foreign currency translation ( 1 ) ( 5 ) Pension accounting 3 3 Hedge accounting 41 ( 43 ) Total other comprehensive income (loss) 43 ( 45 ) Comprehensive income 270 109 Comprehensive income attributable to noncontrolling interests 3 4 Comprehensive income attributable to Smithfield $ 267 $ 105 See Notes to Condensed Consolidated Financial Statements 3 SMITHFIELD FOODS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in millions, except share data, and unaudited) March 30, 2025 December 29, 2024 ASSETS Current assets: Cash and cash equivalents $ 928 $ 943 Accounts receivable, net 759 558 Inventories, net 2,385 2,412 Prepaid expenses and other current assets 262 290 Total current assets 4,334 4,202 Property, plant and equipment, net 3,153 3,176 Goodwill 1,613 1,613 Intangible assets, net 1,264 1,266 Operating lease assets 327 335 Equity method investments 197 202 Other assets 258 260 Total assets $ 11,146 $ 11,054 LIABILITIES AND EQUITY Current liabilities: Accounts payable 447 777 Current portion of long-term debt and finance lease obligations 3 3 Current portion of operating lease obligations 55 56 Accrued expenses and other current liabilities 889 871 Total current liabilities 1,393 1,706 Long-term debt and finance lease obligations 2,000 1,999 Long-term operating lease obligations 277 286 Deferred income taxes, net 523 518 Net long-term pension obligation 277 279 Other liabilities 207 208 Redeemable noncontrolling interests 243 225 Commitments and contingencies (Note 18) Equity: Shareholders’ equity: Preferred stock, no par value; 100,000,000 shares authorized; no shares issued and outstanding — — Common stock, no par value; 5,000,000,000 shares authorized; 393,112,711 shares issued and outstanding as of March 30, 2025 and 380,069,232 shares issued and outstanding as of December 29, 2024 — — Additional paid-in capital 3,325 3,102 Retained earnings 3,308 3,184 Accumulated other comprehensive loss ( 408 ) ( 452 ) Total shareholders’ equity 6,225 5,834 Total liabilities and equity $ 11,146 $ 11,054 See Notes to Condensed Consolidated Financial Statements 4 SMITHFIELD FOODS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions and unaudited) Three Months Ended March 30, 2025 March 31, 2024 Cash flows from operating activities: Net income $ 227 $ 154 Less: Net income from discontinued operations — ( 42 ) Net income from continuing operations $ 227 $ 112 Adjustments to reconcile net income from continuing operations to net cash flows used in operating activities of continuing operations: Depreciation and amortization 83 82 Changes in operating and other assets and liabilities, net ( 541 ) ( 360 ) Other 64 ( 54 ) Net cash flows used in operating activities of continuing operations ( 166 ) ( 219 ) Cash flows from investing activities: Capital expenditures ( 79 ) ( 92 ) Net expenditures from breeding stock transactions ( 7 ) ( 25 ) Other 1 ( 3 ) Net cash flows used in investing activities of continuing operations ( 85 ) ( 119 ) Cash flows from financing activities: Net proceeds from issuance of common stock 236 — Principal payments on long-term debt and finance lease obligations — ( 19 ) Payment of dividends — ( 88 ) Other — ( 2 ) Net cash flows from (used in) financing activities of continuing operations 236 ( 109 ) Effect of foreign exchange rate changes on cash from continuing operations — 2 Cash flows from discontinued operations Net cash flows from operating activities of discontinued operations — 43 Net cash flows used in investing activities of discontinued operations — ( 111 ) Net cash flows used in financing activities of discontinued operations — ( 4 ) Effect of foreign exchange rate changes on cash from discontinued operations ( 4 ) Net change in cash and cash equivalents of discontinued operations — ( 77 ) Net change in cash, cash equivalents and restricted cash ( 15 ) ( 522 ) Cash, cash equivalents and restricted cash at beginning of period (including discontinued operations) 943 751 Cash, cash equivalents and restricted cash at end of period (including discontinued operations) 928 229 Less: Cash, cash equivalents and restricted cash attributable to discontinued operations at end of period — ( 25 ) Cash, cash equivalents and restricted cash at end of period $ 928 $ 204 See Notes to Condensed Consolidated Financial Statements 5 SMITHFIELD FOODS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDER’S EQUITY (in millions and unaudited) Three Months Ended March 30, 2025 Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders’ Equity Balance, December 29, 2024 $ 3,102 $ 3,184 $ ( 452 ) $ 5,834 Dividend — ( 99 ) — ( 99 ) Net proceeds from issuance of common stock 236 — — 236 Adjustment to redeemable noncontrolling interests ( 15 ) — — ( 15 ) Stock compensation expense 2 — — 2 Comprehensive income: Net income attributable to Smithfield — 224 — 224 Other comprehensive income, net of tax — — 43 43 Balance, March 30, 2025 $ 3,325 $ 3,308 0 $ ( 408 ) $ 6,225 Three Months Ended March 31, 2024 Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Total Shareholders’ Equity Balance, December 31, 2023 $ 4,152 $ 3,588 $ ( 500 ) $ 7,241 Dividend — ( 88 ) — ( 88 ) Adjustment to redeemable noncontrolling interests ( 11 ) — — ( 11 ) Other ( 1 ) — — ( 1 ) Comprehensive income: Net income attributable to Smithfield — 156 — 156 Other comprehensive loss, net of tax — — ( 51 ) ( 51 ) Balance, March 31, 2024 $ 4,140 $ 3,656 0 $ ( 550 ) $ 7,246 See Notes to Condensed Consolidated Financial Statements 6 SMITHFIELD FOODS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization Smithfield Foods, Inc., together with its subsidiaries (“Smithfield,” “the Company,” “we,” “us” or “our”) produces a wide variety of fresh pork and packaged meats products primarily in the United States (“U.S.”) and markets them both domestically and internationally. We operate in a cyclical industry and our results are significantly affected by fluctuations in commodity prices for meat, livestock (primarily hogs) and grains. We are an indirect, majority owned subsidiary of Hong Kong-based WH Group Limited (“WH Group”). Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”), which require us to make estimates and use assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. It is possible that actual results could differ materially from those estimates. 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. These statements and notes should be read in conjunction with the audited consolidated financial statements and related notes for the year ended December 29, 2024, which include a comprehensive description of our significant accounting policies and other information that is not included in our interim condensed consolidated financial statements. Our elected fiscal year is the 52-week or 53-week period which ends on the Sunday nearest to December 31. Unless otherwise noted, all references to the first quarter of 2025 and the three months ended March 30, 2025 are to the 13-week period ended March 30, 2025. All references to the first quarter of 2024 and the three months ended March 31, 2024 are to the 13-week period ended March 31, 2024. Principles of Consolidation The condensed consolidated financial statements include the accounts of all wholly owned subsidiaries, as well as majority-owned subsidiaries and other entities for which we have a controlling financial interest. We evaluate contractual, equity and other variable interests in entities that may be deemed variable interest entities (“VIE”). We consolidate a VIE if we determine that we are the VIE’s primary beneficiary. A VIE’s primary beneficiary has both (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (2) the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. All intercompany transactions and accounts have been eliminated. Stock-Based Compensation In connection with our initial public offering (“IPO”), we adopted an incentive plan, under which eligible individuals may be granted equity-based incentive awards, including stock options and restricted stock units (“RSUs”), among others. We estimate the fair value of stock options on the grant date using the Black-Scholes option pricing model. RSUs are measured at fair value as if they were vested and issued on the grant date. We recognize stock-based compensation expense for stock options and RSUs granted to our employees using the straight-line method over the requisite service period. We recognize forfeitures as they occur. Stock-based compensation expense is included in selling, general and administrative expenses (“SG&A”) in the condensed consolidated statements of income. 7 Seasonality Sales and profitability as well as cash flow generation and use are impacted on a quarterly basis by the seasonal nature of our business. Generally, our sales and profitability are higher in the fourth quarter due to the Thanksgiving and Christmas holidays. In addition, the timing of the Easter holiday can impact the comparability of our first and second quarters both on a quarter-to-quarter and year-over-year basis. Our cash use is highest in the first quarter due to working capital needs related to payments to certain suppliers that are typically deferred in the fourth quarter. Recently Issued Accounting Pronouncements New Accounting Pronouncements Not Yet Adopted In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures . The standard requires enhanced rate reconciliation disclosures, including disclosure of specific categories and additional information for reconciling items that meet a quantitative threshold. The standard also requires companies to disaggregate income taxes paid by federal, state and foreign taxes. The update is effective for our annual report on Form 10-K for fiscal year 2025, with early adoption permitted. The standard will not impact our financial position, results of operations or cash flows. In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses . The new guidance is intended to provide investors more disaggregated information about certain line items presented in the consolidated statement of income. The update is effective for fiscal year 2027, with early adoption permitted. The new disclosures are required to be applied prospectively with the option for retrospective application. The standard will not impact our financial position, results of operations or cash flows but may have an impact on the presentation of certain items. NOTE 2: REPORTABLE SEGMENTS Our reportable segments are determined on the basis of our organizational structure and information that is regularly reviewed by our Chief Operating Decision Maker (“CODM”) for the purpose of making operating and resource allocation decisions and assessing the performance of the operating segments of our business. Our CODM is our Chief Executive Officer. Our CODM reviews assets at a consolidated level; not by reportable segment. Therefore, we do not disclose assets by reportable segment. The measure of segment profit reviewed by our CODM is operating profit, which represents the operating results of our operating segments with the exception of certain gains, losses and other expenses which are not allocated to our segments. Our CODM uses operating profit to assess segment performance, compensate employees and allocate capital, personnel and other resources to each segment. We recently removed income from equity method investments from the measure of segment profit reviewed by our CODM. Accordingly, the historical segment results presented herein have been retrospectively adjusted to remove income from equity method investments. Following the carve-out and distribution of our European operations (see “Note 3: Discontinued Operations”), we conduct our operations through three reportable segments: Packaged Meats, Fresh Pork and Hog Production. Packaged Meats The Packaged Meats segment consists of our U.S. operations that process fresh meat into a wide variety of packaged meats products, including bacon, sausage, hot dogs, deli and lunch meats, dry sausage products (such as pepperoni and genoa salami), ham products, ready-to-eat products and prepared foods (such as pre-cooked entrees, bacon and sausage). Approximately 80 % of the Packaged Meats segment’s raw materials are sourced from our Fresh Pork segment. We market our domestic packaged meats products under a strategic set of core brands, which include: Smithfield, Eckrich, Nathan’s Famous, Farmland, Armour, Farmer John, Kretschmar, Krakus, John Morrell, Cook’s, Gwaltney, Carando, Margherita, Curly’s and Smithfield Culinary. We also sell a sizeable portion of our packaged 8 meats products as private label products. The majority of the Packaged Meats segment’s products are sold to retail and foodservice customers in the U.S. Fresh Pork The Fresh Pork segment consists of our U.S. operations that process live hogs into a wide variety of primal, sub-primal and offal products, such as bellies, butts, hams, loins, picnics and ribs. In the first quarter of 2025, the Fresh Pork segment sourced approximately 40 % of its raw materials from our Hog Production segment, compared to approximately 50 % in the first quarter of 2024, with the remainder from third-party farmers with whom we partner across the U.S. Approximately one-third of our fresh pork products, including the majority of hams, bellies and trimmings, is transferred to our Packaged Meats segment. Externally, we sell our fresh pork products to domestic retail, foodservice and industrial customers, as well as to export markets, including, among others, China, Mexico, Japan, South Korea and Canada. Hog Production The Hog Production segment consists of our hog production operations in the U.S. , which produce and raise our hogs on numerous company-owned farms and farms that are owned and operated by third-party contract farmers. Nearly all of the hogs produced by this segment are processed by our Fresh Pork segment. The Hog Production segment also sells grains and feed to external customers. The following table provides certain financial information by reportable segment with a reconciliation to the consolidated totals. Three Months Ended March 30, 2025 Packaged Meats Fresh Pork Hog Production Other (1) Corporate (2) Unallocated (3) Intersegment Consolidated (in millions) Sales 2,024 2,033 932 104 — — ( 1,322 ) $ 3,771 Cost of sales 1,665 1,906 919 84 — 9 ( 1,322 ) 3,262 Selling, general and administrative expenses 93 46 12 6 29 12 — 197 Operating gains — — — — — ( 9 ) — ( 9 ) Operating profit (loss) 266 82 1 14 ( 29 ) ( 12 ) — 321 Interest expense, net 11 11 Non-operating losses 6 6 Income from continuing operations before income taxes 304 Other segment data: Depreciation and amortization 32 27 15 6 — 2 — 83 Capital expenditures 40 24 11 2 3 — — 79 9 Three Months Ended March 31, 2024 Packaged Meats Fresh Pork Hog Production Other (1) Corporate (2) Unallocated (3) Intersegment Consolidated (in millions) Sales $ 1,999 $ 1,938 $ 706 $ 114 $ — $ — $ ( 1,314 ) $ 3,444 Cost of sales 1,621 1,782 868 116 — 10 ( 1,314 ) 3,083 Selling, general and administrative expenses 92 47 12 7 32 9 — 199 Operating gains — — — — — ( 1 ) — ( 1 ) Operating profit (loss) 286 110 ( 174 ) ( 8 ) ( 32 ) ( 18 ) — 163 Interest expense, net 16 16 Non-operating gains ( 4 ) ( 4 ) Income from continuing operations before income taxes 152 Other segment data: Depreciation and amortization 30 28 16 8 — — — 82 Capital expenditures 41 29 11 3 8 — — 92 ________________ (1) Includes our Mexico and Bioscience operations. Our Mexico operations include the raising of hogs and production of pork products that are sold primarily to customers in Mexico. Our Bioscience operations use raw materials from hogs that we harvest to manufacture heparin products, including an active pharmaceutical ingredient that mitigates the risk of blood clots. (2) Represents general corporate expenses for management and administration of the business. (3) Includes certain items that we do not allocate to our segments. The following table disaggregates our sales to customers by reportable segment and by major distribution channel. Three Months Ended March 30, 2025 Retail (1) Foodservice (2) Exports (3) Industrial (4) Other / Unallocated (5) Total External Sales (6) Intersegment Consolidated (in millions) Packaged Meats $ 1,284 $ 597 $ 31 $ 110 $ 2 $ 2,024 $ — $ 2,024 Fresh Pork 483 59 435 266 3 1,246 787 2,033 Hog Production — — — — 397 397 535 932 Other (7) — — — — 104 104 — 104 Intersegment — — — — — — ( 1,322 ) ( 1,322 ) Total $ 1,767 $ 657 $ 466 $ 376 $ 505 $ 3,771 $ — $ 3,771 Three Months Ended March 31, 2024 Retail (1) Foodservice (2) Exports (3) Industrial (4) Other / Unallocated (5) Total External Sales (6) Intersegment Consolidated (in millions) Packaged Meats $ 1,318 $ 553 $ 31 $ 95 $ 2 $ 1,999 $ — $ 1,999 Fresh Pork 471 53 423 255 2 1,203 735 1,938 Hog Production — — — — 128 128 578 706 Other (7) — — — — 114 114 — 114 Intersegment — — — — — — ( 1,314 ) ( 1,314 ) Total $ 1,789 $ 606 $ 454 $ 350 $ 245 $ 3,444 $ — $ 3,444 ________________ (1) Includes national and regional retailers in the U.S. such as grocery supermarket chains, independent grocers and club stores. 10 (2) Includes foodservice distributors, fast food and other restaurant operators, hotel chains and other institutional customers in the U.S. (3) Includes exports from the U.S. to international retailers and wholesale distributors primarily in North America, Asia, Latin America and other emerging markets. (4) Includes sales to industrial customers who use our raw materials in their finished goods production, including prepared meals, pharmaceutical production and pet food. (5) Includes sales of grain, oilseeds, feed, breeding stock and market hogs, among others, in addition to external sales from our Mexico and Bioscience operations. (6) Includes external sales from our Mexico operations of $ 99 million and $ 106 million in the three months ended March 30, 2025 and March 31, 2024, respectively. All other external sales are sourced from our U.S. operations. (7) Includes our Mexico and Bioscience operations. NOTE 3: DISCONTINUED OPERATIONS On August 26, 2024, we completed a carve-out and distribution of our European operations to WH Group. The European carve-out represents a strategic shift in our geographical footprint. Accordingly, where applicable, the historical results of operations, assets and liabilities, and cash flows of the European operations have been condensed into separate line items and presented in the condensed consolidated statements of income, the condensed consolidated balance sheets and the condensed consolidated statements of cash flows as discontinued operations. The following table presents the major components of net income from discontinued operations included in the condensed consolidated statements of income. Three Months Ended March 30, 2025 March 31, 2024 (in millions) Sales $ — $ 810 Cost of sales — 713 Gross profit — 97 Selling, general and administrative expenses — 50 Operating gains — ( 9 ) Operating profit — 55 Non-operating losses — 1 Income from discontinued operations before income taxes — 54 Income tax on discontinued operations — 12 Net income from discontinued operations $ — $ 42 Acquisition within our Discontinued Operations Prior to the carve-out and distribution of our European operations, we completed the following acquisition, which is included in discontinued operations. Argal On March 28, 2024, our former European operations purchased a 50.1 % stake in Argal Alimentacíon, S.A. (“Argal”), a Spanish producer of packaged meats products with approximately 1,480 employees, for € 91 million ($ 98 million), subject to post-closing adjustments. The amount paid at closing was € 82 million ($ 88 million) with the remaining balance due upon finalization of the purchase price. In August 2024, an additional € 8 million ($ 9 million) was paid, which resulted in a final purchase price of € 90 million ($ 97 million). 11 NOTE 4: ACQUISITION AND DISPOSITION 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, deli, charcuterie and other dry sausage products. The total cost of the asset acquisition was allocated based on the relative fair value of the assets acquired. The allocated fair values of the assets acquired are as follows: equipment valued at $ 17 million, buildings valued at $ 11 million, inventory valued at $ 5 million and land valued at $ 5 million. Disposition 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. NOTE 5: OPERATING GAINS AND NON-OPERATING (GAINS) LOSSES The following table provides details of operating gains and non-operating (gains) losses. Three Months Ended March 30, 2025 March 31, 2024 (in millions) Operating gains: Insurance recoveries (1) $ ( 6 ) $ — Gain on disposal of assets ( 2 ) — Other operating gains ( 1 ) ( 1 ) Total operating gains $ ( 9 ) $ ( 1 ) Non-operating (gains) losses: Net pension and postretirement benefits cost (2) $ 4 $ 2 (Gain) loss on nonqualified retirement plan assets 2 ( 6 ) Total non-operating (gains) losses $ 6 $ ( 4 ) ________________ (1) Represents a gain from an insurance recovery in connection with a fire at our Tar Heel, North Carolina rendering facility that occurred in 2021. (2) 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. NOTE 6: RESTRUCTURING Hog Production Reform Beginning in 2023, we undertook a number of actions to optimize the size of our Hog Production segment’s operations and improve its cost structure, including ceasing certain farm operations, terminating certain agreements with underperforming contract farmers and reducing the size of our hog production business (“Hog Production Reform”). In the fourth quarter of fiscal year 2024, we became a member of a North Carolina-based company, Murphy Family Farms LLC (“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 12 farms in North Carolina to Murphy Family Farms. 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 Hog Production, LLC (“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. In the first quarters of 2025 and 2024, we recognized charges totaling $ 1 million and $ 10 million, respectively, associated with Hog Production Reform in cost of sales in the condensed consolidated statements of income. The following table details the charges by major type of cost. Three Months Ended Cumulative March 30, 2025 March 31, 2024 March 30, 2025 (in millions) Accelerated depreciation $ 1 $ — $ 172 Contract termination costs — 8 57 Employee termination benefits — 2 32 Loss on asset disposals — — 9 Other exit costs — — 110 Total $ 1 $ 10 $ 379 Workforce Reduction In the first quarter of 2025, we implemented a reduction in workforce initiative to streamline our operations and reduce operating expenses. We eliminated certain corporate and plant positions and recognized employee termination benefit costs totaling $ 9 million in the condensed consolidated statement of income in the first quarter of 2025 with $ 6 million classified in SG&A and $ 2 million classified in cost of sales. NOTE 7: ACCOUNTS RECEIVABLE Accounts receivable, net is comprised of both receivables from contracts with customers and other receivables. Our receivables from contracts with customers were $ 680 million and $ 494 million as of March 30, 2025 and December 29, 2024, respectively. We monitor the credit risk associated with our accounts receivable and establish an allowance for credit losses expected to be incurred over the life of the receivable, which is recorded net of this allowance. We calculate this allowance based on our history of write-offs, future economic conditions, level of past due accounts, the financial health of our customers and historical experience. Our allowance for credit losses was not material for the periods presented. 13 NOTE 8: INVENTORIES Inventories, net consist of the following: March 30, 2025 December 29, 2024 (in millions) Fresh and packaged meats $ 1,164 $ 1,006 Livestock 787 949 Grains 182 208 Maintenance parts 117 115 Manufacturing supplies 113 115 Other 21 19 Inventories, net $ 2,385 $ 2,412 NOTE 9: DERIVATIVE FINANCIAL INSTRUMENTS Our pork production operations use various raw materials, primarily live hogs, corn, soybean meal and wheat, which are actively traded on commodity exchanges. We also use fuel and other energy commodities in our operations. We hedge these commodities when we determine conditions are appropriate to mitigate price risk. 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 attempt to closely match the commodity contract terms with the hedged item. We also periodically enter into interest rate swaps to hedge exposure to changes in interest rates on certain financial instruments and foreign exchange forward contracts to hedge certain exposures to fluctuating foreign currency rates. Changes in commodity prices could have a significant impact on cash deposit requirements under our broker and counterparty agreements. Additionally, certain of our derivative contracts contain credit risk-related contingent features, which would require us to post additional cash collateral to cover net losses on open derivative instruments if our credit rating were sufficiently downgraded. As of March 30, 2025, the net liability position of our open derivative instruments that are subject to credit risk-related contingent features was not material. The size and mix of our derivative portfolio vary 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 on a gross basis. Assets Liabilities March 30, 2025 December 29, 2024 March 30, 2025 December 29, 2024 (in millions) Derivatives using the “hedge accounting” method: Commodity contracts $ 34 $ 13 $ 7 $ 37 Derivatives using the “mark-to-market” method: Commodity contracts 13 2 4 7 Total fair value of derivative instruments $ 47 $ 15 $ 11 $ 44 14 The following tables reconcile the gross amounts of derivative assets and liabilities to the net amounts presented in our consolidated balance sheets and the related effects of cash collateral under netting arrangements that provide a legal right of offset of assets and liabilities. March 30, 2025 Gross Amount of Derivative Assets/ Liabilities Netting of Derivative Assets/ Liabilities Net Derivative Assets/Liabilities Netting of Derivative and Cash Collateral Net Amount Presented in the Consolidated Balance Sheet (1) (in millions) Assets: Commodities $ 47 $ ( 9 ) $ 38 $ ( 1 ) $ 37 Liabilities: Commodities 11 ( 9 ) 3 — 3 ________________ (1) Net derivative assets are recorded in prepaid expenses and other current assets. Net derivative liabilities are recorded in accrued expenses and other current liabilities. Cash collateral balances were not material. December 29, 2024 Gross Amount of Derivative Assets/ Liabilities Netting of Derivative Assets/ Liabilities Net Derivative Assets/Liabilities Netting of Derivative and Cash Collateral Net Amount Presented in the Consolidated Balance Sheet (1) (in millions) Assets: Commodities $ 15 $ ( 13 ) $ 2 $ 37 $ 39 Liabilities: Commodities 44 ( 13 ) 31 ( 23 ) 8 ________________ (1) Net derivative assets are recorded in prepaid expenses and other current assets. Net derivative liabilities are recorded in accrued expenses and other current liabilities. These balances include $ 60 million of cash collateral paid to and held by one of our brokers, $ 37 million of which represents the initial margin and exceeded the related open derivative liability position. Hedge Accounting Method Cash Flow Hedges We enter into derivative instruments, such as futures, swaps and options contracts, to manage our exposure to the variability in expected future cash flows attributable to commodity price risk associated with the forecasted sale of fresh pork and the forecasted purchase of grains, hogs, and energy. In addition, we enter into interest rate swaps to manage our exposure to changes in interest rates associated with our variable interest rate debt and the forecasted issuance of fixed rate debt. Lastly, we enter into foreign exchange contracts to manage our exposure to the variability in expected future cash flows attributable to changes in foreign exchange rates associated with the forecasted purchase or sale of assets denominated in foreign currencies. As of March 30, 2025, substantially all of our commodity-related cash flow hedges were for transactions forecasted through December 2025. 15 As of March 30, 2025, the notional volumes associated with open derivative instruments designated in cash flow hedging relationships were as follows: Volume Metric Lean hogs 722,379,000 Pounds Corn 37,180,000 Bushels Soybean meal 615,000 Tons Natural Gas 4,880,000 Million BTU Diesel 6,804,000 Gallons The following table presents the effects on our condensed consolidated financial statements of pre-tax gains and losses on derivative instruments designated in cash flow hedging relationships for the periods indicated: Gains (Losses) Recognized in Other Comprehensive Income (Loss) on Derivative Gains (Losses) Reclassified from Accumulated Other Comprehensive Loss into Earnings Three Months Ended Three Months Ended March 30, 2025 March 31, 2024 March 30, 2025 March 31, 2024 (in millions) Commodity contracts $ 45 $ ( 61 ) $ ( 10 ) $ ( 3 ) The amounts associated with option contracts as of and for the three months ended March 30, 2025 were not material. In the three months ended March 31, 2024, we recognized $ 15 million in expenses for option premiums, which are excluded from the assessment of hedge effectiveness. As of March 31, 2024, accumulated other comprehensive income included $ 12 million of net gains associated with options for which the underlying hedged transactions had not yet impacted earnings. This amount represents the difference between the change in the fair value of the options and the amount of option premiums amortized through earnings. Deferred losses on closed derivative contracts included in accumulated other comprehensive loss as of March 30, 2025 were not material. We are unable to estimate the amount of deferred gains or losses related to open derivative contracts to be reclassified into earnings within the next twelve months as their values are subject to change. Fair Value Hedges We enter into derivative instruments (primarily futures contracts) that are designed to hedge changes in the fair value of firm commitments to buy grains and hogs. As of March 30, 2025, the notional volumes associated with open derivative instruments designated in fair value hedging relationships were as follows: Volume Metric Lean hogs 30,640,000 Pounds Corn 3,635,000 Bushels Soybeans 420,000 Bushels The carrying values of hedged firm commitments designated in fair value hedge relationships as of March 30, 2025 and December 29, 2024 were not material. When the underlying inventories are acquired, the hedge relationship is discontinued and the fair value hedge adjustment is reclassified to inventories. The amount of fair value hedge gains remaining in inventories for which hedge accounting has been discontinued was $ 1 million and $ 3 million as of March 30, 2025 and December 29, 2024, respectively. Mark-to-Market Method 16 As of March 30, 2025, the notional volumes associated with open derivative instruments using the “mark-to-market” method were as follows: Volume Metric Commodities: Lean hogs 8,746,000 Pounds Corn 19,322,000 Bushels Soybean meal 70,000 Tons Soybeans 2,995,000 Bushels Natural gas 106,000 Million BTU Diesel 756,000 Gallons Derivative Impact on the Consolidated Statements of Income The following table presents the effect of derivatives on the condensed consolidated statements of income for the periods indicated. Three Months Ended March 30, 2025 March 31, 2024 (in millions) Sales Cash flow hedging - commodity contracts $ ( 9 ) $ 1 Mark to market - commodity contracts 7 ( 13 ) Total derivative loss recognized sales ( 2 ) ( 12 ) Cost of Sales Cash flow hedging - commodity contracts ( 2 ) ( 4 ) Fair value hedging - commodity contracts Change in fair value of open derivatives 2 ( 1 ) Change in fair value of related hedged items ( 1 ) 1 Gain on closed derivatives (1) 1 4 Mark to market - commodity contracts 4 ( 5 ) Total derivative gain (loss) recognized in cost of sales 4 ( 5 ) Selling, general and administrative expenses Mark to market - foreign exchange contracts — 1 Total derivative gain (loss) $ 2 $ ( 16 ) ________________ (1) Represents the amount of fair value hedge adjustment applied to the carrying amount of hedged assets that is recognized in cost of sales as the underlying hedged assets are relieved from inventories and charged to cost of sales. 17 NOTE 10: EQUITY METHOD INVESTMENTS Murphy Family Farms and VisionAg 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 account for Murphy Family Farms under the equity method of accounting. 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 account for VisionAg under the equity method of accounting as we have the ability to exercise significant influence over operating and financial policies through our representation on its board of directors. See “Note 6: Restructuring” for more information on Murphy Family Farms and VisionAg. Monarch Sale Notice On January 16, 2025, TPG Rise Climate (“TPG”), one of the other two equal joint venture partners in Monarch Bio Energy, LLC (“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 may require that Monarch purchase TPG’s ownership interests in Monarch. NOTE 11: DEBT 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, with the option to extend the maturity date for up to two one-year periods, subject to obtaining the lenders’ consent and satisfaction of certain other conditions. The Senior Revolving Credit Facility capacity remains at $ 2,100 million. 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 Secured Overnight Financing Rate 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 earnings before interest, taxes, depreciation and amortization (“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. Accounts Receivable Securitization Facility We maintain a $ 225 million accounts receivable securitization facility (“Securitization Facility”), which matures in November 2027. 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 condensed consolidated financial statements and therefore the accounts receivable owned by 18 it are included in our condensed 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 March 30, 2025, the SPV held $ 432 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 March 30, 2025, we had $ 22 million in letters of credit issued under the Securitization Facility. None of the letters of credit were drawn upon. Monetization Facility In addition to the Securitization Facility, we maintain an uncommitted $ 250 million accounts receivable monetization facility (“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 condensed consolidated balance sheet upon transfer of control to the purchasing bank, and recognizing a discount on the sale in SG&A in the condensed consolidated statement of income. The proceeds from the sale of receivables are included in net cash flows from operating activities in the condensed consolidated statement of cash flows. On behalf of the purchasing banks, we continue to service all receivables sold under the Monetization Facility. As of March 30, 2025, the uncollected balance of receivables that had been sold to purchasing banks was $ 240 million. We had no servicing asset or liability outstanding as of March 30, 2025. In the first quarter of 2023, we sold $ 227 million of accounts receivable at a discount and received proceeds totaling $ 225 million. We reinvested $ 785 million and $ 821 million of cash collections from customers in the revolving sale of accounts receivable to purchasing banks in the three months ended March 30, 2025 and March 31, 2024, respectively. We recognized charges totaling $ 3 million and $ 3 million in the first quarters of 2025 and 2024, respectively, attributable to the discount on the sale of accounts receivable in SG&A in the condensed consolidated statement of income. NOTE 12: GUARANTEES Smithfield and certain other joint venture partners in Monarch joint and severally guarantee Monarch’s debt, interest and fees. As of March 30, 2025, 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 $ 56 million as of March 30, 2025. The guarantee involves elements of performance and credit risk and is not included in the condensed 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 condensed consolidated balance sheet. NOTE 13: PENSION AND OTHER RETIREMENT PLANS The following table presents the components of the net periodic pension cost for the periods indicated. Three Months Ended March 30, 2025 March 31, 2024 (in millions) Interest cost $ 25 $ 25 Amortization 5 5 Service cost 3 3 Expected return on plan assets ( 26 ) ( 28 ) Net periodic pension cost $ 7 $ 5 19 The components of net periodic pension cost other than service cost, which is included in operating profit, are included in non-operating (gains) losses in the condensed consolidated statements of income. NOTE 14: REDEEMABLE NONCONTROLLING INTERESTS Certain noncontrolling interest holders have the right to exercise a put option that would obligate us to redeem a portion or all of their interest. These noncontrolling interests are classified as redeemable noncontrolling interests outside of equity on our condensed consolidated balance sheets. At the end of each period we adjust the value of redeemable noncontrolling interests, if necessary, to the redemption value (as defined in the subsidiary’s operating agreement) through additional paid-in capital. The following table presents the changes in redeemable noncontrolling interests for our continuing operations for the periods presented. Three Months Ended March 30, 2025 March 31, 2024 (in millions) Beginning balance $ 225 $ 246 Attribution of net income (loss) 4 ( 2 ) Attribution of comprehensive income (loss) ( 1 ) 5 Adjustment to redemption value (1) 15 11 Ending balance $ 243 $ 260 _______________ (1) See “Note 17: Fair Value Measurements” for a discussion of the assessment of redemption value. NOTE 15: EQUITY Stock Split On January 17, 2025, the Company’s board of directors and shareholder approved a 380,069.232 -for-one stock split of its issued and outstanding shares of common stock, resulting in issued and outstanding shares of common stock of 380,069,232 , which was effected through filing of an amendment to the Company’s articles of incorporation on January 17, 2025. As part of the amendment, the number of authorized shares of common stock was revised to 5,000,000,000 , the par value of which was not adjusted, and 100,000,000 shares of preferred stock were authorized. All share and per share amounts for all periods presented in the accompanying financial statements have been adjusted retroactively to reflect this stock split. Initial Public Offering On January 29, 2025, we completed our initial public offering (“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 that option and purchased 2,506,936 additional shares of common stock from our existing shareholder. We received net proceeds from the IPO of $ 236 million after deducting underwriting discounts, commissions and fees. Stock-Based Compensation In connection with the IPO, we granted to certain of our directors and employees and certain directors and employees of WH Group: (1) options to purchase 9,822,467 shares with an exercise price equal to the IPO price of $ 20.00 per share option and (2) 1,527,000 RSUs. The options and substantially all RSUs vest over a five year period, with 20 % vesting each year. We recognized compensation expense totaling $2 million associated with these equity instruments in the first quarter of 2025. Unrecognized compensation expense totaled $ 45 million as of March 30, 2025, which is expected to be recognized on a straight-line basis over the remaining vesting period of 4.8 20 years. No compensation expense was recognized for stock options and RSUs granted to directors and employees of WH Group. Such awards will be accounted for as a dividend upon issuance of the shares based on the grant-date fair value. Accumulated Other Comprehensive Loss The following tables present the beginning and ending balances of accumulated other comprehensive gain (loss) by component. Three Months Ended March 30, 2025 Foreign Currency Translation Pension Accounting Hedge Accounting Accumulated Other Comprehensive Loss (in millions) Balance, December 30, 2024 $ ( 8 ) $ ( 418 ) $ ( 26 ) $ ( 452 ) Other comprehensive loss, net of tax ( 1 ) 3 41 43 Balance, March 30, 2025 $ ( 9 ) $ ( 414 ) $ 15 $ ( 408 ) Three Months Ended March 31, 2024 Foreign Currency Translation Pension Accounting Hedge Accounting Accumulated Other Comprehensive Loss (in millions) Balance, December 31, 2023 $ ( 134 ) $ ( 373 ) $ 8 $ ( 500 ) Other comprehensive loss, net of tax ( 11 ) 3 ( 43 ) ( 51 ) Balance, March 31, 2024 $ ( 144 ) $ ( 370 ) $ ( 36 ) $ ( 550 ) Other Comprehensive Income (Loss) The following table presents the details of other comprehensive income (loss). 21 Three Months Ended March 30, 2025 March 31, 2024 Before Tax Tax After Tax Before Tax Tax After Tax (in millions) Continuing operations: Foreign currency translation: Translation gains (losses) (1) $ ( 1 ) $ — $ ( 1 ) $ 15 $ — $ 15 Retirement benefits: Amortization of actuarial losses and prior service credits reclassified to non-operating (gains) losses 4 ( 1 ) 3 4 ( 1 ) 3 Derivatives: Gains (losses) arising during the period 45 ( 11 ) 33 ( 61 ) 16 ( 45 ) (Gains) losses reclassified to sales 9 ( 2 ) 6 ( 1 ) — ( 1 ) Losses reclassified to cost of sales 2 — 1 4 ( 1 ) 3 Total other comprehensive income (loss) from continuing operations $ 58 $ ( 15 ) $ 43 $ ( 38 ) $ 14 $ ( 24 ) Discontinued operations: Foreign currency translation: Translation losses (1) — — — ( 21 ) — ( 21 ) Total other comprehensive loss from discontinued operations $ — $ — $ — $ ( 21 ) $ — $ ( 21 ) Total other comprehensive income (loss) $ 58 $ ( 15 ) $ 43 $ ( 59 ) $ 14 $ ( 45 ) Other comprehensive income attributable to noncontrolling interest — — — 5 — 5 Other comprehensive income (loss) attributable to Smithfield $ 59 $ ( 15 ) $ 43 $ ( 64 ) $ 14 $ ( 51 ) ________________ (1) We consider the earnings in our non-U.S. subsidiaries to be indefinitely reinvested, and accordingly, record no deferred income taxes on such amounts. The three months ended March 31, 2024 included $ 5 million of translation gains attributable to noncontrolling interests, which are included in redeemable noncontrolling interests on the condensed consolidated balance sheet. NOTE 16: EARNINGS PER SHARE The computation of basic earnings per share (“EPS”) is based on the weighted-average shares of common stock outstanding during the period. Diluted EPS adjusts basic EPS for the dilutive effect of stock options and RSUs. The incremental shares from stock options and RSUs are computed using the treasury stock method. There were no adjustments to the numerator in the computations of earnings per share for the periods presented. The following table provides the weighted-average shares used in the denominator for those computations. Three Months Ended March 30, 2025 March 31, 2024 Basic weighted-average shares outstanding 388,812,663 380,069,232 Add: Dilutive effect of stock options and RSUs 251,549 — Diluted weighted-average shares outstanding (1) 389,064,212 380,069,232 __________________ (1) Approximately 5.3 million stock options were excluded from the computation of diluted weighted-average shares outstanding for the three months ended March 30, 2025 because their effect would have been anti-dilutive. 22 NOTE 17: FAIR VALUE MEASUREMENTS Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We are required to consider and reflect the assumptions of market participants in fair value calculations. These factors include nonperformance risk (the risk that an obligation will not be fulfilled) and credit risk, both of the reporting entity (for liabilities) and of the counterparty (for assets). We use, as appropriate, a market approach (generally, data from market transactions), an income approach (generally, present value techniques), and/or a cost approach (generally, replacement cost) to measure the fair value of an asset or liability. These valuation approaches incorporate inputs, such as observable, independent market data, that we believe are predicated on the assumptions market participants would use to price an asset or liability. These inputs may incorporate, as applicable, certain risks such as nonperformance risk, which includes credit risk. The FASB has established a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The fair value hierarchy gives the highest priority to quoted market prices (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of inputs used to measure fair value are as follows: • Level 1 —Quoted prices in active markets for identical assets or liabilities accessible by the reporting entity. • Level 2 —Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. • Level 3 —Unobservable for an asset or liability. Unobservable inputs should only be used to the extent observable inputs are not available. We have classified assets and liabilities measured at fair value based on the lowest level of input that is significant to the fair value measurement. For the periods presented, we had no transfers of assets or liabilities between levels within the fair value hierarchy. The timing of any such transfers would be determined at the end of each reporting period. Assets and Liabilities Measured at Fair Value on a Recurring Basis The following tables set forth, by level within the fair value hierarchy, our financial assets and liabilities, including assets held in a rabbi trust used to fund our non-qualified defined benefit plan, that were measured at fair value on a recurring basis. March 30, 2025 December 29, 2024 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total (in millions) Assets: Derivatives: Commodity contracts $ 38 $ 9 $ — $ 47 $ 9 $ 6 $ — $ 15 Mutual funds (1) 69 — — 80 74 — — 84 Insurance contracts — 105 — 105 — 104 — 104 Total $ 108 $ 114 $ — $ 232 $ 83 $ 110 $ — $ 202 Liabilities: Derivatives: Commodity contracts 5 6 — 11 32 12 — 44 Total $ 5 $ 6 $ — $ 11 $ 32 $ 12 $ — $ 44 __________________ (1) Institutional funds that are not publicly traded are estimated at fair value using the net asset value (“NAV”) per share of the investment as a practical expedient and are not categorized in the fair value hierarchy. Therefore, the sum of the values categorized in the fair value hierarchy above do not agree to the total. 23 The following are descriptions of the valuation methodologies and key inputs used to measure financial assets and liabilities recorded at fair value on a recurring basis: • Derivatives— Derivatives classified within Level 1 are valued using quoted market prices. In some cases where quoted market prices are not available, we value the derivatives using market-based pricing models that utilize the net present value of estimated future cash flows to calculate fair value, in which case the measurements are classified within Level 2. These valuation models make use of market-based observable inputs, including exchange traded prices and rates, yield curves, credit curves and measures of volatility. Level 3 derivatives are valued based on diesel fuel prices and use both observable and unobservable inputs. There is a lack of price transparency with respect to forward prices for diesel fuel. Such unobservable inputs are significant to the diesel fuel derivative contract valuation methodology. • Mutual funds— Mutual funds consist of publicly traded funds and other institutional funds that are not publicly traded. Publicly traded mutual funds are measured at fair value using quoted market prices and are categorized in Level 1 within the fair value hierarchy. • Insurance contracts— Insurance contracts are valued at their cash surrender value using the daily asset unit value which is based on the quoted market price of the underlying securities and classified within Level 2. Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis Certain assets and liabilities are measured at fair value on a nonrecurring basis after initial recognition; that is, the assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances, for example, when there is evidence of impairment. For the three months ended March 30, 2025 and March 31, 2024, respectively, we had no significant assets or liabilities that were measured and recorded at fair value on a nonrecurring basis after initial recognition. Redeemable Noncontrolling Interest The redemption value for the noncontrolling interest in Granjas Carroll de Mexico, S. de R.L. de C.V., (“Altosano”) is fair value. We estimate the redemption value of Altosano using an income and a market approach. Under the income approach, fair value is determined by using the projected discounted cash flows. Under the market approach, the fair value is determined by reference to guideline companies that are reasonably comparable; the fair value is estimated based on the valuation multiples of EBITDA. The significant unobservable inputs used in the determination of the fair value have an inherent measurement uncertainty that if changed could result in higher or lower fair value measurements as of the reporting date. The following table provides the significant unobservable level 3 inputs used in the valuation. Unobservable Inputs March 30, 2025 December 29, 2024 Weighted-average cost of capital 9 % 9 % Growth rate 3 % 3 % EBITDA multiple 9.5 x 10 x Control premium 25 % 25 % Other Financial Instruments We determine the fair value of fixed-rate debt using Level 2 inputs based on quoted market prices. The carrying amount of all other debt approximates fair value as those instruments are based on variable interest rates. The following table presents the fair value and carrying value of total debt. March 30, 2025 December 29, 2024 Fair Value Carrying Value Fair Value Carrying Value (in millions) Debt $ 1,856 $ 1,983 $ 1,821 $ 1,983 24 The carrying amounts of cash and cash equivalents, accounts receivable, notes payable and accounts payable approximate their fair values because of the relatively short-term maturity of these instruments. Concentrations of Credit Risk Our financial instruments exposed to concentrations of credit risk consist primarily of cash and cash equivalents, accounts and notes receivable and derivatives. We may be exposed to losses in the event of nonperformance by our banks, customers, brokers or other counterparties. We have significant concentrations of credit risk associated with our cash and cash equivalents. However, our cash and cash equivalents are held by numerous major financial institutions that maintain certain minimum investment grade credit ratings. Concentrations of credit risk with respect to accounts and notes receivable are limited due to our large number of customers. We perform periodic credit evaluations of our customers’ financial condition and generally do not require collateral. As of March 30, 2025, we had accounts and notes receivable from Murphy Family Farms totaling $ 195 million. This balance is secured by the breeding stock and inventories owned by Murphy Family Farms. We have an agreement to purchase 3.2 million market hogs annually from Murphy Family Farms, which further mitigates our exposure to potential credit risk. Our derivative counterparties primarily consist of financial institutions that are investment grade. A portion of our financial instruments are exchange traded derivative contracts held with brokers and counterparties with whom we maintain margin accounts that are settled on a daily basis, thereby limiting our credit exposure to non-exchange traded derivatives. Determination of the credit quality of our counterparties is based upon a number of factors, including credit ratings and our evaluation of their financial condition. As of March 30, 2025, we had gross credit exposure of $ 6 million on non-exchange traded derivative contracts. After taking into account the effect of netting arrangements, we had $ 2 million of credit exposure on non-exchange traded derivative contracts. NOTE 18: REGULATION AND CONTINGENCIES 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 U.S. Department of Agriculture, the Grain Inspection, Packers and Stockyard Administration, the U.S. Food and Drug Administration, the U.S. Occupational Safety and Health Administration, the Commodity and 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. As of March 30, 2025 and December 29, 2024, we had contingent liabilities totaling $ 141 million in accrued expenses and other current liabilities on the condensed consolidated balance sheets related to litigation matters, including those described below. We did not record any significant charges for litigation matters in the three months ended March 30, 2025 and March 31, 2024, respectively. 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. Antitrust Price-Fixing Litigation The Company has been named as one of 16 defendants in a series of class actions filed in 2018 in the U.S. District Court for the District of Minnesota alleging antitrust violations in the pork industry. The class cases were filed by three different groups of plaintiffs. In all of these cases, the plaintiffs alleged that starting in 2009 and continuing through at least June of 2018, the defendant pork producers agreed to reduce the supply of hogs in the U.S. in order 25 to raise the price of hogs and all pork products. The plaintiffs in all of these cases also challenged the defendant pork producers’ use of benchmarking reports from defendant Agri Stats, Inc., alleging that the reports allowed the pork producers to share proprietary information and monitor each producer’s compliance with the supposed agreement to reduce supply. Payments in the aggregate amount of $ 194 million were made by us to settle all class claims. In addition to the class actions, the Company has been named as a defendant in similar antitrust lawsuits and related claims brought by a number of individual parties who opted out of the classes. The plaintiffs in the non-class cases assert the same or similar antitrust claims as the plaintiffs in the class actions. The Company has entered into negotiations with many of these claimants and has settled certain of these cases. Currently, 22 of these cases are pending against the Company. The Attorneys General for the states of New Mexico and Alaska and the Commonwealth of Puerto Rico have filed similar complaints on behalf of their respective states, territories, agencies and citizens. The Company has settled all of these cases. The Company intends to vigorously defend against the remaining claims. Antitrust Wage-Fixing Litigation On November 11, 2022, Smithfield Foods, Inc. and our wholly owned subsidiary, Smithfield Packaged Meats Corp., were named as two of the numerous defendants in a purported class action complaint filed in the U.S. District Court for the District of Colorado alleging wage-fixing violations in the red meat industry. The plaintiffs allege that the defendants, most of whom operate beef or pork processing plants, conspired to suppress wages paid to plant workers in the U.S. in violation of the antitrust laws. The plaintiffs sought damages on behalf of all employees of defendants and their subsidiaries from January 1, 2014, to the present. The plaintiffs also sought treble damages and attorneys’ fees. The defendants filed motions to dismiss the complaint, which were largely denied by the court on September 27, 2023. The plaintiffs subsequently amended their complaint adding additional defendants, including our wholly owned subsidiary, Murphy-Brown of Missouri, LLC (which has been dismissed voluntarily), and expanding the class period back to 2000. Since the case was filed, several defendants have settled. On April 5, 2024, the remaining defendants moved to dismiss the amended complaint. On March 26, 2025, the court granted in part defendants’ motion to dismiss the amended complaint and held that certain of plaintiffs’ new allegations are barred by the statute of limitations, Defendants’ answers to the remaining claims are due on May 9, 2025. We intend to vigorously defend against these claims. Maxwell Foods Litigation On August 13, 2020, Maxwell Foods, LLC (“Maxwell”) filed a complaint against Smithfield Foods, Inc. in the General Court of Justice, Superior Court Division for Wayne County, North Carolina. The complaint alleged that Smithfield breached the Production Sales Agreement (“PSA”) between the parties (as well as the duty of good faith and fair dealing): (1) by failing to provide Maxwell with the same pricing as other major hog suppliers in violation of a purported “Most-Favored-Nation Provision” found in a December 6, 1994 letter to Maxwell, (2) by failing to comply with an implicit duty to negotiate the PSA to provide alternative pricing to Maxwell when the Iowa-Southern Minnesota market allegedly ceased to be viable; and (3) by failing to purchase Maxwell’s entire output of hogs since April 2020. Smithfield filed a notice of removal to the U.S. District Court of the Eastern District of North Carolina. Smithfield also filed a motion to dismiss several of Maxwell’s claims. On February 22, 2021, the U.S. District Court granted Maxwell’s motion to remand the case to the Superior Court of Wayne County and left Smithfield’s partial motion to dismiss the complaint for consideration by the state court in Wayne County. On March 1, 2021, Maxwell filed an amended complaint, which added a claim under the North Carolina Unfair and Deceptive Trade Practices Act (“UDTPA”). Smithfield filed a notice of designation seeking assignment of the case to the North Carolina Business Court. Maxwell objected to such designation, and on April 13, 2021 the Business Court overruled Maxwell’s objection. 26 The Business Court also dismissed two of Maxwell’s claims: the implied duty to negotiate claim and the UDTPA claim. Maxwell subsequently filed another amended complaint adding a fraudulent concealment claim and a new breach of contract claim, as well as a request for punitive damages. The court dismissed the fraudulent concealment claim and the request for punitive damages. The three remaining claims, all for breach of contract, are: (1) the claim under the “Most-Favored-Nation Provision,” (2) the claim that Smithfield failed to purchase Maxwell’s entire output of hogs since April 2020, and (3) the claim that from time to time, Smithfield would calculate Maxwell’s payment for a delivery of hogs using an average of the preceding week’s weight rather than the actual weights of the hogs being delivered. The parties filed cross-motions for summary judgment and related motions to exclude expert testimony, which were fully briefed on November 17, 2023. The parties filed cross-motions for summary judgment, and on December 30, 2024, the Business Court entered an order and opinion on the parties’ motions for summary judgment. The Business Court held that: (1) Maxwell’s claim for breach of a “Most-Favored-Nation Provision” was dismissed except as it relates to pricing given to one particular supplier; (2) Smithfield is liable for breaching an output provision in the parties’ contract, with damages to be determined at trial; and (3) Maxwell’s claim that Smithfield breached the pricing term of the parties’ contract by using live-weight pricing shall proceed to trial based on the allegation that Smithfield did not pay the correct live- weight price for certain deliveries, but not based on the allegation that use of live-weight pricing itself breaches the contract. The Business Court has set a trial date of June 9, 2025. We intend to vigorously defend against the remaining claims. 27