What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-03-24 compared with 2025-03-25 · 599 added, 492 removed, 1194 unchanged (48% of the section changed)

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We have audited the accompanying consolidated balance sheets of Smithfield Foods, Inc.

and subsidiaries (the Company) as of December 29, 2024 and December 31, 2023, the related consolidated statements of income, comprehensive income, shareholder’s equity and cash flows for each of the three years in the period ended December 29, 2024, and the related notes and financial statement schedule listed in the Index at Item 15(2) (collectively referred to as the “consolidated financial statements”).

and subsidiaries (the Company) as of December 28, 2025 and December 29, 2024, the related consolidated statements of income, comprehensive income , shareholders’ equity and cash flows for each of the three years in the period ended December 28, 2025, and the related notes and financial statement schedule listed in the Index at Item 15(2) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 28, 2025 and December 29, 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 28, 2025, in conformity with U.S.

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Pension Accounting

Description of the Matter At December 31, 2024, the Company’s defined benefit pension obligation was $1.80 billion, offset by the fair value of plan assets totaling $1.50 billion.

Description of the Matter

At December 31, 2025, the Company’s defined benefit pension obligation was $1.82 billion, offset by the fair value of plan assets totaling $1.62 billion.

As discussed in Notes 1 and 14 of the consolidated financial statements, the Company, with the assistance of a third-party actuary, measures the defined benefit pension obligation at December 31, or upon a remeasurement event, using actuarial assumptions including discount rates.

Auditing the defined benefit pension obligation was complex due to the significant estimation uncertainty in evaluating the discount rate used in the Company’s measurement process.

How We Addressed the Matter in Our Audit To test the Company's accounting for the defined benefit pension obligation, we performed audit procedures that included, among others, evaluating the discount rate assumption with the assistance of our actuarial specialists.

How We Addressed the Matter in Our Audit

To test the Company's accounting for the defined benefit pension obligation, we performed audit procedures that included, among others, evaluating the discount rate assumption with the assistance of our actuarial specialists.

For example, we compared the discount rate used by management to historical trends, independently calculated an expected range for the discount rate based on the maturity and duration of the projected benefit payments, and compared the projected benefit payments to the historical benefits paid.

Contingent Liabilities

Description of the Matter As described in Note 18 of the consolidated financial statements, the Company is involved in antitrust price-fixing litigation with a number of individual parties.

Description of the Matter

As described in Note 19 of the consolidated financial statements, the Company is involved in antitrust price-fixing litigation with a number of individual parties.

The Company recognizes a contingent liability, including future defense costs, when an assessment of the risk of loss is probable and can be reasonably estimated.

For the antitrust price-fixing litigation, where a settlement agreement has not yet been reached with the claimant, judgment is required to determine the probability and estimate of the loss.

Auditing management’s measurement and disclosure of the amount of contingent liabilities for antitrust price-fixing litigation was subjective and required more complex auditor judgment.

Auditing management’s measurement of the amount of contingent liabilities for antitrust price-fixing litigation was subjective and required more complex auditor judgment.

For instance, auditing management's judgments related to the outcome of litigation with claimants where the matter has not yet been tried in court or where the Company has not otherwise agreed to a settlement with claimants was more complex due to the judgment applied in evaluating the likelihood of the outcomes.

How We Addressed the Matter in Our Audit To test the Company's accounting for and disclosure of ongoing antitrust price-fixing litigation, our audit procedures included, among others, reviewing the initial complaint, testing the Company's evaluation of the probability of outcome through inspection of responses to inquiry letters to both internal and external counsel, evaluating relevant events up to the audit report date, and by obtaining written representations from executives of the Company.

When applicable, we also compared the Company's evaluation of these matters with its relevant history for similar legal contingencies that have been settled or otherwise resolved by obtaining and evaluating settlement agreements.

In addition, we evaluated the adequacy of the Company’s financial statement disclosures.

How We Addressed the Matter in Our Audit

To test the Company's accounting for ongoing antitrust price-fixing litigation, our audit procedures included, among others, reviewing the initial complaint, testing the Company's evaluation of the probability of outcome through inspection of responses to inquiry letters to both internal and external counsel, evaluating relevant events up to the audit report date, and by obtaining written representations from executives of the Company.

When applicable, we also compared the Company's evaluation of these matters with its relevant history for similar legal contingencies that have been settled by obtaining and evaluating settlement agreements.

/s/ Ernst & Young LLP

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2025 December 29,

2023 January 1,

2024 December 31,

Sales $ 15,531 $ 14,142 $ 14,640

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Operating gains ( 52 ) ( 60 ) ( 105 )

( 60 ) ( 105 ) ( 429 )

Operating profit (loss) 1,292 1,118 ( 56 )

1,118 ( 56 ) 1,117

Interest expense, net 41 66 76

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Net income (loss) from continuing operations attributable to Smithfield 987 783 ( 138 )

783 ( 138 ) 800

Income from discontinued operations before income taxes — 184 185

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Net income (loss) per common share attributable to Smithfield:

Basic and diluted:

Continuing operations $ 2.52 $ 2.06 $ ( 0.36 )

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Total $ 2.52 $ 2.51 $ 0.05

Continuing operations $ 2.51 $ 2.06 $ ( 0.36 )

Discontinued operations — 0.45 0.41

Total $ 2.51 $ 2.51 $ 0.05

Weighted-average shares outstanding:

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2025 December 29,

2023 January 1,

2024 December 31,

Net income $ 998 $ 970 $ 23

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Total other comprehensive income (loss) 164 ( 130 ) 234

( 130 ) 234 ( 41 )

Comprehensive income 1,162 839 256

Comprehensive income (loss) attributable to noncontrolling interest ( 19 ) 31 22

Comprehensive income (loss) attributable to noncontrolling interests 37 ( 19 ) 31

Comprehensive income attributable to Smithfield $ 1,125 $ 858 $ 226

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Inventories, net 2,328 2,412

Current assets of discontinued operations — 958

Prepaid expenses and other current assets 276 290

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Equity method investments 209 202

Long-term assets of discontinued operations — 1,347

Other assets 306 260

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Current portion of operating lease obligations 71 56

Current liabilities of discontinued operations — 406

Accrued expenses and other current liabilities 811 871

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Net long-term pension obligation 207 279

Long-term liabilities of discontinued operations — 86

Other liabilities 185 208

Redeemable noncontrolling interests 264 225

Commitments and contingencies (Note 18)

Shareholder’s 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, 380,069,232 issued and outstanding

Commitments and contingencies (Notes 12 and 19)

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 December 28, 2025 and 380,069,232 shares issued and outstanding as of December 29, 2024

Additional paid-in capital 3,338 3,102

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Accumulated other comprehensive loss ( 314 ) ( 452 )

Total shareholder’s equity 5,834 7,241

Noncontrolling interests — —

Total equity 5,834 7,241

Total shareholders’ equity 6,801 5,834

Total liabilities and equity $ 12,177 $ 11,054

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2025 December 29,

2023 January 1,

2024 December 31,

Cash flows from operating activities:

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Net income (loss) from continuing operations $ 998 $ 798 $ ( 133 )

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

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

Depreciation and amortization 332 339 427

Deferred income taxes 91 ( 130 ) 2

Impairment of assets 1 1 40

Gain on sale/dilution of equity method investments — — ( 56 )

Deferred income tax expense 94 91 ( 130 )

Stock compensation expense 9 — —

(Gain) loss on sale of property, plant and equipment and other assets 12 ( 21 ) ( 73 )

(Income) loss from equity method investments ( 12 ) ( 8 ) 46

(Gain) loss on sale of businesses and other assets

15 11 ( 414 )

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

( 35 ) ( 85 ) 1

Gain on assets held in rabbi trusts ( 34 ) ( 16 ) ( 12 )

Change in accounts receivable ( 470 ) ( 6 ) 157

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Investments in partnerships and other assets ( 12 ) ( 13 ) ( 27 )

Proceeds from the sale of investments — — 21

Business dispositions — — 13

Proceeds from sale of property, plant and equipment and other assets 14 99 219

Net cash flows from (used in) investing activities of continuing operations

( 298 ) ( 194 ) 274

Cash receipts on notes receivable 25 — —

Net cash flows used in investing activities of continuing operations ( 309 ) ( 298 ) ( 194 )

Cash flows from financing activities:

Payment of dividends ( 396 ) ( 288 ) ( 323 )

Principal payments on long-term debt and finance lease obligations ( 3 ) ( 24 ) ( 4 )

Payment of deferred purchase consideration for acquisition ( 2 ) ( 2 ) ( 2 )

Repayments to Securitization Facility — ( 14 ) ( 226 )

Proceeds from Securitization Facility — 14 226

Purchase of redeemable noncontrolling interest — ( 15 ) —

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

Twelve Months Ended

2024 December 31,

2023 January 1,

Principal payments on long-term debt and finance lease obligations ( 24 ) ( 4 ) ( 3 )

Payment of deferred purchase consideration for acquisition

( 2 ) ( 2 ) ( 55 )

Purchase of redeemable noncontrolling interest — — ( 15 )

Net proceeds from issuance of common stock 236 — —

Other 1 1 ( 2 )

Net cash flows used in financing activities of continuing operations ( 164 ) ( 321 ) ( 353 )

( 321 ) ( 353 ) ( 567 )

Effect of foreign exchange rate changes on cash from continuing operations 11 ( 7 ) 3

Cash flows from discontinued operations:

Net cash flows from (used in) operating activities of discontinued operations

221 346 ( 4 )

Net cash flows from (used in) investing activities of discontinued operations

( 171 ) ( 128 ) ( 81 )

Net cash flows from (used in) financing activities of discontinued operations

( 143 ) ( 180 ) 90

Net cash flows from operating activities of discontinued operations — 221 346

Net cash flows used in investing activities of discontinued operations — ( 171 ) ( 128 )

Net cash flows used in financing activities of discontinued operations — ( 143 ) ( 180 )

Effect of foreign exchange rate changes on cash from discontinued operations — ( 5 ) —

Twelve Months Ended

2025 December 29,

2024 December 31,

Net change in cash and cash equivalents of discontinued operations — ( 98 ) 38

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Cash, cash equivalents and restricted cash at end of period (including discontinued operations) 1,539 943 751

Cash, cash equivalents and restricted cash attributable discontinued operations at end of period — ( 64 ) ( 23 )

Cash, cash equivalents and restricted cash attributable to discontinued operations at end of period — — ( 64 )

Cash, cash equivalents and restricted cash at end of period $ 1,539 $ 943 $ 687

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDER’S EQUITY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in millions)

Comprehensive

Shareholder’s

Non-controlling

Interests Total

Balance, January 2, 2022 $ 4,190 $ 3,521 $ ( 656 ) $ 7,054 $ — $ 7,054

Dividends — ( 496 ) — ( 496 ) — ( 496 )

Adjustment to redeemable noncontrolling interests ( 2 ) — — ( 2 ) — ( 2 )

Comprehensive income:

Net income — 870 — 870 — 870

Other comprehensive loss, net of tax — — ( 52 ) ( 52 ) — ( 52 )

Shareholders’

Balance, January 1, 2023 $ 4,188 $ 3,894 $ ( 708 ) $ 7,374

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Adjustment to redeemable noncontrolling interests ( 36 ) — — ( 36 )

Redemption of redeemable noncontrolling interest — — — — — —

Comprehensive income:

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Balance, December 29, 2024 3,102 3,184 ( 452 ) 5,834

Dividends — ( 395 ) — ( 395 )

Adjustment to redeemable noncontrolling interests ( 3 ) — — ( 3 )

Stock compensation expense 9 — — 9

Net proceeds from issuance of common stock 236 — — 236

Other ( 6 ) — — ( 6 )

Comprehensive income:

Net income — 987 — 987

Other comprehensive income, net of tax — — 138 138

Balance, December 28, 2025 $ 3,338 $ 3,776 0 $ ( 314 ) $ 6,801

See Notes to Consolidated Financial Statements

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Smithfield Foods, Inc., together with its subsidiaries (“Smithfield,” “the Company,” “we,” “us” or “our”) produces a wide variety of packaged meats and fresh pork products primarily in the United States (“U.S.”) and markets them both domestically and internationally.

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.

Smithfield is a majority-owned subsidiary of Hong Kong-based WH Group Limited (“WH Group”).

We are an indirect, majority-owned subsidiary of Hong Kong-based WH Group Limited (“WH Group”).

Basis of Presentation

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The consolidated financial statements include the accounts of all wholly owned subsidiaries, as well as all majority-owned subsidiaries and other entities for which we have a controlling financial interest.

All intercompany transactions and accounts have been eliminated.

We evaluate contractual, equity and other variable interests in entities that may be deemed variable interest entities (“VIE”).

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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.

The Company maintains rabbi trusts to fund nonqualified defined benefit pension plans and deferred compensation plans.

The assets held in these trusts are restricted to satisfy our liabilities for these plans and are subject to the claims of our general creditors in the event of insolvency.

These trusts are VIEs and are included in our consolidated financial statements.

The carrying value of assets held in rabbi trusts was $ 213 million and $ 187 million as of December 28, 2025 and December 29, 2024, respectively.

These assets are classified in other assets on the consolidated balance sheets except for the amount of participant distributions scheduled to occur within twelve months of the balance sheet dates, which are classified in prepaid expenses and other current assets.

The functional currency of our 66 %-owned subsidiary, Granjas Carroll de Mexico, S.

de C.V., (“Altosano”) is the Mexican Peso.

de C.V., (commonly known as “Altosano”) is the Mexican Peso.

The assets and liabilities of Altosano are translated into U.S.

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The net effect of translating the accounts of Altosano into U.S.

dollars is included as a component of shareholder’s equity in accumulated other comprehensive loss.

dollars is included as a component of shareholders’ equity in accumulated other comprehensive loss.

Gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are recognized in earnings as incurred and included in selling, general and administrative expenses (“SG&A”) for operating transactions or non-operating gains for non-operating transactions.

Stock-Based Compensation

In connection with our initial public offering (“IPO”) in January 2025, 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 SG&A in the consolidated statements of income.

Cash and Cash Equivalents

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The majority of our cash is concentrated in demand deposit accounts or money market funds.

Cash and cash equivalents excludes money market funds held in rabbi trusts, which we classify as investments.

The carrying value of cash and cash equivalents approximates fair value.

Accounts Receivable, Net

We maintain a cash management structure with one of our banking institutions that incorporates a master netting arrangement.

This structure utilizes concentration accounts, automated sweep mechanisms and zero‑balance disbursement accounts to fund disbursements, such as payroll and accounts payable.

All accounts under this structure are netted and presented in either cash and cash equivalents or accounts payable on the consolidated balance sheet depending on whether the net balance is positive or in an overdraft position.

As of December 28, 2025 and December 29, 2024, the net overdraft balances were $ 29 million and $ 53 million, respectively, which were presented in accounts payable on the consolidated balance sheets.

Accounts Receivable, Net and Revenue Recognition

Accounts receivable, net is comprised of both receivables from contracts with customers and other receivables.

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 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.

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 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 transaction price, which is the amount of consideration we expect to receive in exchange for providing goods to customers.

The transaction price may be adjusted for estimates of known or expected variable consideration, including consumer incentives, trade promotions and other programs.

Our estimates of variable consideration are based on a number of factors including history with the respective customer, current performance, and future projections.

Additionally, in determining whether an estimate of variable consideration is constrained, we consider the likelihood and magnitude of a potential revenue reversal.

We review and update these estimates regularly until the incentives or product returns are realized.

The impact of any adjustment is recognized in the period in which the adjustment is identified.

Payment terms vary per contract.

However, payment is typically received within a few weeks of the invoice date.

The balances for receivables from contracts with customers and deferred revenue are presented in the following table:

2025 December 29,

2024 December 31,

(in millions)

Receivables from contracts with customers $ 963 $ 494 $ 475

Other receivables 60 64 102

Total accounts receivable $ 1,023 $ 558 $ 577

Deferred revenue $ 5 $ 7 $ 9

Inventories, Net

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$ 2,328 $ 2,412

Inventories are generally valued at the lower of historical average cost or net realizable value.

The cost of livestock includes feed, medications, contract grower fees and other production expenses.

Fresh pork in the U.S.

is valued based on U.S.

Inventories are generally valued at the lower of historical average cost or net realizable value, except for fresh pork in the U.S., which is valued based on U.S.

Department of Agriculture (“USDA”) published market prices and adjusted for the cost of further processing.

We primarily use batch-specific costing to record the cost of inventories sold, which approximates the first-in, first-out method.

Costs for fresh and packaged meats include meat, labor, supplies and overhead.

The cost of livestock includes feed, medications, contract grower fees and other production expenses.

Manufacturing supplies principally consist of ingredients and packaging materials.

We primarily use batch-specific costing to record the cost of inventories sold, which approximates the first-in, first-out method.

Derivative Financial Instruments and Hedging Activities

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When cash flow hedge accounting is applied, derivative gains or losses are recognized as a component of other comprehensive income (loss) and reclassified into earnings in the same period or periods during which the hedged transactions affect earnings.

The initial fair value of hedge components excluded from the assessment of effectiveness is recognized in earnings on a straight-line basis over the life of the hedging instrument and is presented in the same income statement line item as the hedged item.

The initial fair value of hedge components excluded from the assessment of

effectiveness is recognized in earnings on a straight-line basis over the life of the hedging instrument and is presented in the same income statement line item as the hedged item.

Any difference between the change in fair value of the hedge components excluded from the assessment of effectiveness and the amounts recognized in earnings is recorded as a component of other comprehensive income (loss).

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A portion of our derivatives are exchange traded futures contracts held with brokers, subject to netting arrangements that are enforceable during the ordinary course of business.

Additionally, we have a portfolio of over-the-counter

derivatives that are held by counterparties under netting arrangements found in typical master netting agreements.

Additionally, we have a portfolio of over-the-counter derivatives that are held by counterparties under netting arrangements found in typical master netting agreements.

These agreements legally allow for net settlement in the event of bankruptcy.

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PP&E is generally stated at historical cost and depreciated on a straight-line basis over the estimated useful lives of the assets.

Assets held under finance leases are classified in property, plant and equipment, net and depreciated over the lease term or, in the instance where title transfers to us at the end of the lease term, the estimated useful lives of the assets.

Assets held under finance leases are classified in PP&E and depreciated over the lease term or, in the instance where title transfers to us at the end of the lease term, the estimated useful lives of the assets.

The depreciation of assets held under finance leases is included in depreciation expense.

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(in millions)

Balance, January 1, 2023 $ 1,503 $ 34 $ 4 $ 77 $ 1,617

Balance, December 31, 2023 $ 1,503 $ 34 $ 4 $ 87 $ 1,627

Foreign currency translation — — — ( 14 ) ( 14 )

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(1) Includes our Mexico and Bioscience operations.

Goodwill for each reporting unit is tested for impairment annually in the fourth quarter, or sooner if impairment indicators arise.

Goodwill for each reporting unit is tested for impairment annually on the first day of the fourth quarter, or sooner if impairment indicators arise.

Goodwill is considered to be impaired if the carrying amount of a reporting unit exceeds its fair value, in which case an impairment loss would be recognized in an amount equal to that excess.

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Rights and customer lists 5 - 25

Software licenses 2 - 5

Amortized intangible assets, gross 129 127

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Year (in millions)

Indefinite-lived trademarks are tested for impairment annually in the fourth quarter, or sooner if impairment indicators arise.

Indefinite-lived trademarks are tested for impairment annually on the first day of the fourth quarter, or sooner if impairment indicators arise.

If the carrying amount of our trademarks exceed their estimated fair value, an impairment loss is recognized in an amount equal to that excess.

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We record our share of earnings and losses from our equity method investments in (income) loss from equity method investments in the consolidated statements of income.

The majority of our equity method investments are reported on a one-month lag, which does not materially impact our consolidated financial statements.

The results of certain of our equity method investments are reported on a one-month lag, which does not materially impact our consolidated financial statements.

We account for investments in entities that we do not control and do not have the ability to exercise significant influence at fair value if fair value is readily determinable.

For investments that do not have readily determinable fair values, we account for the investment at cost minus impairment, if any, plus or minus changes resulting from orderly

transactions for the identical or a similar investment of the same issuer.

For investments that do not have readily determinable fair

values, we account for the investment at cost minus impairment, if any, plus or minus changes resulting from orderly transactions for the identical or a similar investment of the same issuer.

These investments are recorded in other assets on the consolidated balance sheets.

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Significant judgment is required in assessing the timing and amounts of deductible and taxable items.

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 liabilities for unrecognized tax benefits 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.

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Changes in assumptions and future investment returns could potentially have a material impact on our expenses and related funding requirements.

We recognize in other comprehensive income (loss) , the gains or losses and prior service costs or credits that arise during the period.

Prior to the freeze of our qualified pension plans for all non-union participants in the second quarter of 2021, these amounts were amortized into net periodic benefit cost over the average remaining service period of active plan participants.

Subsequent to the plan freeze, these amounts are amortized over the average remaining life expectancy of the plan participants.

We recognize in other comprehensive income (loss), the actuarial gains or losses and prior service costs or credits that arise during the period.

These amounts are amortized over the average remaining life expectancy of the plan participants.

Self-Insurance Programs

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We record an asset retirement obligation (“ARO”) related to PP&E when a legal obligation is incurred and the fair value of the obligation can be estimated.

AROs are initially recorded as a liability at fair value and capitalized in property, plant and equipment, net on the consolidated balance sheet.

AROs are initially recorded as a liability at fair value and capitalized in PP&E on the consolidated balance sheet.

We estimate the fair value of AROs based on the projected discounted future cash outflows required to settle the liability.

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Accretion of the liability due to the passage of time is recognized as an expense in current period earnings.

As of December 29, 2024 and December 31, 2023, the balance of our AROs was $ 5 million, and $ 29 million, respectively.

The net reduction in the ARO balance resulted from the sale of land in Utah and Missouri that had related ARO’s in the amount of $ 24 million.

Restructuring” for a discussion of the sale of assets .

As of December 28, 2025 and December 29, 2024, the balance of our AROs was $ 5 million.

Contingent Liabilities

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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 in our 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.

Certain noncontrolling interest (“NCI”) holders have the right to exercise a put option that would obligate us to redeem a portion or all of their interest.

These NCIs are classified as redeemable NCIs outside of equity in our consolidated balance sheets.

At the end of each period we adjust the value of redeemable NCIs, if necessary, to the redemption value (as defined in the subsidiary’s operating agreement) through additional paid-in capital.

See “Note 17:

Fair Value Measurements” for a discussion of the assessment of redemption value.

The following table presents the changes in redeemable noncontrolling interests for our continuing operations for the periods presented:

The following table presents the changes in redeemable NCIs for our continuing operations for the periods presented:

Twelve Months Ended

2025 December 29,

2023 January 1,

2024 December 31,

(in millions)

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Ending balance $ 264 $ 225 $ 246

Revenue Recognition