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Item 8. Financial Statements and Supplementary Data

2020-11-16 compared with 2019-11-12 · 410 added, 420 removed, 1099 unchanged (43% of the section changed)

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CONSOLIDATED STATEMENTS OF INCOME

Three years ended September 28, 2019

Three years ended October 3, 2020

in millions, except per share data

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three years ended September 28, 2019

Three years ended October 3, 2020

Other Comprehensive Income (Loss), Net of Taxes:

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CONSOLIDATED BALANCE SHEETS

September 28, 2019, and September 29, 2018

October 3, 2020, and September 28, 2019

in millions, except share and per share data

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Accumulated other comprehensive gain (loss)

Treasury stock, at cost – 82 million shares at September 28, 2019 and September 29, 2018

Treasury stock, at cost – 83 million shares at October 3, 2020 and 82 million shares at September 28, 2019

Total Tyson Shareholders’ Equity

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Three years ended September 28, 2019

Three years ended October 3, 2020

Class A Common Stock:

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Balance at beginning of year

Stock-based compensation

Stock-based compensation and other

Balance at end of year

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Total Shareholders’ Equity

(1) Reclass from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act, following adoption of the applicable new accounting standard for the fiscal year ended September 29, 2018.

(1) Reclass from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act ("Tax Act"), following adoption of the applicable new accounting standard for the fiscal year ended September 29, 2018.

See accompanying notes.

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CONSOLIDATED STATEMENTS OF CASH FLOWS

Three years ended September 28, 2019

Three years ended October 3, 2020

Cash Flows From Operating Activities:

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Proceeds from sale of businesses

Acquisition of equity investments

Cash Used for Investing Activities

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Repayments of commercial paper

Payment of AdvancePierre TRA liability

Purchases of Tyson Class A common stock

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Effect of Exchange Rate Change on Cash

Increase (decrease) in Cash and Cash Equivalents

Cash and Cash Equivalents at Beginning of Year

Increase (decrease) in Cash and Cash Equivalents and Restricted Cash

Cash and Cash Equivalents and Restricted Cash at Beginning of Year

Cash and Cash Equivalents and Restricted Cash at End of Year

Restricted Cash at End of Year

Cash and Cash Equivalents at End of Year

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We utilize a 52- or 53-week accounting period ending on the Saturday closest to September 30.

The Company’s accounting cycle resulted in a 52-week year for fiscal 2019 , fiscal 2018 , and fiscal 2017 .

The Company’s accounting cycle resulted in a 53-week year for fiscal 2020 and a 52-week year for fiscal 2019 and fiscal 2018 .

Cash and Cash Equivalents:

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These negative book cash balances are included in accounts payable and other current liabilities.

At September 28, 2019 , and September 29, 2018 , checks outstanding in excess of related book cash balances totaled approximately $ 200 million and $ 220 million , respectively.

At October 3, 2020 , and September 28, 2019 , checks outstanding in excess of related book cash balances totaled approximately $ 200 million .

Accounts Receivable:

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We calculate this allowance based on our history of write-offs, level of past due accounts and relationships with and economic status of our customers.

At September 28, 2019 , and September 29, 2018 , our allowance for uncollectible accounts was $ 21 million and $ 19 million , respectively.

At October 3, 2020 , and September 28, 2019 , our allowance for uncollectible accounts was $ 26 million and $ 21 million , respectively.

We generally do not have collateral for our receivables, but we do periodically evaluate the credit worthiness of our customers.

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In fiscal 2020 and fiscal 2019, the cost of inventories was determined by either the first-in, first-out ("FIFO") method or the weighted-average method .

The following table reflects the major components of inventory at September 28, 2019 , and September 29, 2018 :

The following table reflects the major components of inventory at October 3, 2020 , and September 28, 2019 (in millions):

Processed products

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Recoverability is assessed using undiscounted cash flows based on historical results and current projections of earnings before interest, taxes, depreciation and amortization.

We measure impairment as the excess of carrying value over the fair value of an asset.

The fair value of an asset is generally measured using discounted cash flows including market participant assumptions of future operating results and discount rates.

We measure impairment as the excess of carrying value over the fair value of an asset group.

The fair value of an asset group is generally measured using discounted cash flows including market participant assumptions of future operating results and discount rates.

Goodwill and Intangible Assets:

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If the carrying amount of the reporting unit exceeds the fair value, an impairment loss is recognized in an amount equal to that excess, not to exceed the carrying amount of goodwill.

We estimate the fair value of our reporting units using a combination of various valuation techniques, including an income approach (discounted cash flow analysis) and market approaches (earnings before interest, taxes, depreciation and amortization or "EBITDA" multiples of comparable publicly-traded companies and precedent transactions).

Our primary technique is discounted cash flow analysis.

These approaches use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy and requires us to make various judgmental assumptions about sales, operating margins, growth rates and discount rates which consider our budgets, business plans and economic projections, and are believed to reflect market participant views which would exist in an exit transaction.

We estimate the fair value of our reporting units considering the use of various valuation techniques, with the primary technique being an income approach (discounted cash flow method), with another technique being a market approach (guideline public company method), which use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy.

We include assumptions about sales, operating margins, growth rates, discount rates and valuations multiples which consider our budgets, business plans, economic projections and marketplace data, and are believed to reflect market participant views which would exist in an exit transaction.

Assumptions are also made for varying perpetual growth rates for periods beyond the long-term business plan period.

Generally, we utilize normalized operating margin assumptions based on future expectations and operating margins historically realized in the reporting units' industries.

Generally, we utilize operating margin assumptions based on future expectations, operating margins historically realized in the reporting units' industries and industry marketplace valuation multiples.

Some of the inherent estimates and assumptions used in determining fair value of the reporting units are outside the control of management, including interest rates, cost of capital, tax rates, market EBITDA comparables and credit ratings.

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During fiscal 2020 , 2019 and 2018 , we determined none of our material reporting units' fair values were below its carrying value.

All of our material reporting units’ estimated fair value exceeded their carrying value by more than 20 % at the date of their most recent estimated fair value determination, other than the Domestic Chicken reporting unit, which had $ 3,266 million of goodwill at October 3, 2020.

For our indefinite life intangible assets, a qualitative assessment can also be performed to determine whether the existence of events and circumstances indicates it is more likely than not an intangible asset is impaired.

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Upon performing the quantitative test, if the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

The fair value of our indefinite life intangible assets is calculated principally using relief-from-royalty and multi-period excess earnings valuation approaches, which use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy, and is believed to reflect market participant views which would exist in an exit transaction.

The fair value of our indefinite life intangible assets is calculated principally using multi-period excess earnings and relief-from-royalty valuation approaches, which use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy, and is believed to reflect market participant views which would exist in an exit transaction.

Under these valuation approaches, we are required to make estimates and assumptions about sales, operating margins, growth rates, royalty rates and discount rates based on budgets, business plans, economic projections, anticipated future cash flows and marketplace data.

During fiscal 2020 , 2019 and 2018 , we determined the fair value of each of our indefinite life intangible assets exceeded its carrying value.

The discount rate used in our indefinite life intangible test decreased to 7.5 % in fiscal 2019 from 8.2 % in fiscal 2018 .

All of our indefinite life intangible assets’ estimated fair value exceeded their carrying value by more than 20 % at the date of their most recent estimated fair value determination.

We determine if an agreement is or contains a lease at its inception by evaluating if an identified asset exists that we control for a period of time.

When a lease exists, we classify it as a finance or operating lease and record a right-of-use ("ROU") asset and a corresponding lease liability at lease commencement.

We have elected to not record leases with a term of 12 months or less in our Consolidated Balance Sheets, and accordingly, lease expense for these short-term leases is recognized on a straight-line basis over the lease term.

Finance lease assets are presented within Net Property, Plant and Equipment and finance lease liabilities are presented within Current and Long-Term Debt in our Consolidated Balance Sheets.

Finance lease disclosures are omitted as they are deemed immaterial.

Operating ROU assets are presented within Other Assets, and operating lease liabilities are recorded within Other current liabilities and Other Liabilities in our Consolidated Balance Sheets.

Lease assets are subject to review for impairment within the related long-lived asset group.

ROU assets are presented in our Consolidated Balance Sheets based on the present value of the corresponding liabilities and are adjusted for any prepayments, lease incentives received or initial direct costs incurred.

The measurement of our ROU assets and liabilities includes all fixed payments and any variable payments based on an index or rate.

Variable lease payments which do not depend on an index, or where rates are unknown, are excluded from lease payments in the measurement of the ROU asset and lease liability, and accordingly, are recognized as lease expense in the period the obligation for those payments is incurred.

The present value of lease payments is based on our incremental borrowing rate according to the lease term and information available at the lease commencement date, as our lease arrangements generally do not provide an implicit interest rate.

The incremental borrowing rate is derived using a hypothetically-collateralized borrowing cost, based on our revolving credit facility, plus a country risk factor, where applicable.

We consider our credit rating and the current economic environment in determining the collateralized rate.

Our lease arrangements can include fixed or variable non-lease components, such as common area maintenance, taxes and labor.

We account for each lease and any non-lease components associated with that lease as a single lease component for all asset classes, except production and livestock grower asset classes embedded in service and supply agreements, and other asset classes that include significant maintenance or service components.

We account for lease and non-lease components of an agreement separately based on relative stand-alone prices either observable or estimated if observable prices are not readily available.

For asset classes where an election was made not to separate lease and non-lease components, all costs associated with a lease contract are disclosed as lease costs.

The accounting for some of the Company's leases may require significant judgment when determining whether a contract is or contains a lease, the lease term, and the likelihood of exercising renewal or termination options.

Our leases can include options to extend or terminate use of the underlying assets.

These options are included in the lease term used to determine ROU assets and corresponding liabilities when we are reasonably certain we will exercise the option.

Additionally, certain leases can have residual value guarantees, which are included within our operating lease liabilities when considered probable.

Our lease agreements do not include significant restrictions or covenants.

Recognition, measurement and presentation of expenses and cash flows arising from a lease will depend on classification as a finance or operating lease.

Operating lease expense is recognized on a straight-line basis over the lease term, whereas the amortization of finance lease assets is recognized on a straight-line basis over the shorter of the estimated useful life of the underlying asset or the lease term.

Operating lease expense and finance lease amortization are presented in Cost of Sales or Selling, General and Administrative in our Consolidated Statements of Income depending on the nature of the leased item.

Interest expense on finance lease obligations is recorded over the lease term and is presented in Interest expense, based on the effective interest method.

All operating lease cash payments and interest on finance leases are presented within Net cash provided by operating activities and all finance lease principal payments are presented within Net cash used in financing activities in our Consolidated Statements of Cash Flows.

We have investments in joint ventures and other entities.

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Other Current Liabilities:

Other current liabilities at September 28, 2019 , and September 29, 2018 , include:

Other current liabilities at October 3, 2020 , and September 28, 2019 , include (in millions):

Accrued salaries, wages and benefits

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Contracts designated and highly effective at meeting risk reduction and correlation criteria are recorded using hedge accounting.

If a derivative instrument is accounted for as a hedge, depending on the nature of the hedge, changes in the fair value of the instrument will be offset either against the change in fair value of the hedged assets, liabilities or firm commitments through earnings or recognized in other comprehensive income (loss) until the hedged item is recognized in earnings.

The ineffective portion of an instrument’s change in fair value is immediately recognized in earnings as a component of cost of sales.

If a derivative instrument is accounted for as a hedge, depending on the nature of the hedge, changes in the fair value of the instrument either will be offset against the change in fair value of the hedged assets, liabilities or firm commitments through earnings, or be recognized in other comprehensive income (loss) until the hedged item is recognized in earnings.

The ineffective portion of an instrument’s change in fair value is recognized immediately.

Instruments we hold as part of our risk management activities that do not meet the criteria for hedge accounting are marked to fair value with unrealized gains or losses reported currently in earnings.

Changes in market value of derivatives used in our risk management activities relating to forward sales contracts are recorded in sales.

Changes in market value of derivatives used in our risk management activities relating to inputs of forward sales contracts are recorded in cost of sales.

Changes in market value of derivatives used in our risk management activities surrounding inventories on hand or anticipated purchases of inventories are recorded in cost of sales.

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Revenue Recognition:

We recognize revenue mainly through consumer products retail, foodservice, international, industrial and other distribution channels.

We recognize revenue mainly through retail, foodservice, international, industrial and other distribution channels.

Our revenues primarily result from contracts with customers and are generally short term in nature with the delivery of product as the single performance obligation.

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Actual results could differ from those estimates.

Risks and Uncertainties:

We have considered the impact of the global novel coronavirus pandemic (“COVID-19” or “pandemic”) on our consolidated financial statements.

In addition to the COVID-19 impacts already experienced, there likely will be future impacts, the extent of which is uncertain and largely subject to whether the severity worsens or duration lengthens.

These impacts could include but may not be limited to risks and uncertainty related to worker availability, our ability to operate production facilities, demand-driven production facility idling, shifts in demand between sales channels and market volatility in our supply chain.

Consequently, this may subject us to future risk of material goodwill, intangible and long-lived asset impairments, increased reserves for uncollectible accounts, and adjustments for inventory and market volatility for items subject to fair value measurements such as derivatives and investments.

Recently Issued Accounting Pronouncements:

In August 2017, the Financial Accounting Standards Board ("FASB") issued guidance that eases certain documentation and assessment requirements of hedge effectiveness and modifies the accounting for components excluded from the assessment.

Some of the modifications include the ineffectiveness of derivative gain/loss in highly effective cash flow hedges to be recorded in Other Comprehensive Income, alignment of the recognition and presentation of the effects related to the hedging instrument and hedged item in the financial statements, and additional disclosures required on the cumulative basis adjustment in fair value hedges and the effect of hedging on financial statement lines for components excluded from the assessment.

The amendment also simplifies the application of hedge accounting in certain situations to permit new hedging strategies to be eligible for hedge accounting.

The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2018, our fiscal 2020 and the modified retrospective transition method should be applied.

We will adopt this guidance beginning in the first quarter of fiscal 2020.

Upon adoption, we do not expect this guidance will have a material impact on our consolidated financial statements.

In June 2016, the FASB issued guidance that provides more decision-useful information about the expected credit losses on financial instruments and changes the loss impairment methodology.

In August 2020, the Financial Accounting Standards Board ("FASB") issued guidance that simplifies the accounting for debt with conversion options, revises the criteria for applying the derivative scope exception for contracts in an entity’s own equity, and improves the consistency for the calculation of earnings per share.

The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2021, our fiscal 2023.

Early adoption is permitted for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2018, our fiscal 2020.

Early adoption is permitted for annual periods and interim periods within those annual periods beginning after December 15, 2020, our fiscal 2022.

We are currently evaluating the impact this guidance will have on our consolidated financial statements.

In March 2020, the FASB issued guidance providing optional expedients and exceptions to account for the effects of reference rate reform to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued.

The optional guidance, which became effective on March 12, 2020 and can be applied through December 21, 2022, has not impacted our consolidated financial statements.

The Company has various contracts that reference LIBOR and is assessing how this standard may be applied to specific contract modifications through December 31, 2022.

In December 2019, the FASB issued guidance that simplifies the accounting for income taxes by removing certain exceptions to general principles in Topic 740 and clarifies other general principles by adding certain requirements to Topic 740.

The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2020, our fiscal 2022.

Early adoption is permitted for periods for which financial statements have not yet been issued , beginning our fiscal 2020.

An entity that elects to early ad opt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period.

The application of the guidance requires various transition methods depending on the specific amendment.

We will adopt this guidance beginning in the first quarter of fiscal 2020.

We are currently evaluating the impact this guidance will have on our consolidated financial statements.

In June 2016, the FASB issued guidance that provides more decision-useful information about the expected credit losses on financial instruments and changes the loss impairment methodology.

The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2019, our fiscal 2021.

We will adopt this guidance using the modified retrospective and prospective transition methods beginning in the first quarter of fiscal 2021.

We do not expect the adoption of this guidance will have a material impact on our consolidated financial statements.

CHANGES IN ACCOUNTING PRINCIPLES

In August 2017, the FASB issued guidance that eases certain documentation and assessment requirements of hedge effectiveness and modifies the accounting for components excluded from the assessment.

Some of the modifications included the ineffectiveness of derivative gain/loss in highly effective cash flow hedges to be recorded in Other Comprehensive Income, alignment of the recognition and presentation of the effects related to the hedging instrument and hedged item in the financial statements, and additional disclosures required on the cumulative basis adjustment in fair value hedges and the effect of hedging on financial statement lines for components excluded from the assessment.

The amendment also simplified the application of hedge accounting in certain situations to permit new hedging strategies to be eligible for hedge accounting.

The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2018, our fiscal 2020.

We adopted this guidance in the first quarter of fiscal 2020 using the modified retrospective transition approach, and it did not have a material impact on our consolidated financial statements.

In February 2016, the FASB issued guidance that created new accounting and reporting guidelines for leasing arrangements.

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The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2018, our fiscal 2020.

Early adoption is permitted.

In July 2018, the FASB issued an adoption approach that allows entities to apply the guidance as of the date of the initial application.

We will adopt the standard in the first quarter of fiscal 2020 using this transition method, and as a result, we will not adjust comparative period financial information or make the new required lease disclosures for periods before the effective date.

We have performed a review of the lease portfolio and have implemented a leasing software solution to support the future state lease accounting requirements.

We have elected the package of practical expedients available under the transition guidance which allows us to not reassess prior conclusions related to lease classifications, existing contracts containing leases, and initial direct costs.

We continue to finalize our implementation efforts and currently estimate that upon adoption we will record operating right of use assets and related lease liabilities of approximately 2 % of total assets, subject to the completion of our assessment including finalizing the impacts from recent business acquisitions.

We expect our financial statement disclosures will be expanded to present additional details of our leasing arrangements, but do not expect the adoption of this standard to have a material impact on the Consolidated Statements of Income or our Consolidated Statements of Cash Flows.

CHANGES IN ACCOUNTING PRINCIPLES

In August 2018, the FASB issued guidance aligning the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2019, our fiscal 2021.

The prospective transition method should be applied to all qualified implementation costs incurred after the adoption date.

We elected to early adopt this guidance beginning in the first quarter of fiscal 2019, and it did not have a material impact on our consolidated financial statements.

In May 2017, the FASB issued guidance that clarifies which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718.

The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2017, our fiscal 2019.

The prospective transition method should be applied to awards modified on or after the adoption date.

We adopted this guidance in the first quarter of fiscal 2019 and it did not have a material impact on our consolidated financial statements.

In March 2017, the FASB issued guidance that changes the presentation of net periodic benefit cost related to employer sponsored defined benefit plans and other postretirement benefits.

Service cost will be included within the same income statement line item as other compensation costs arising from services rendered during the period, while other components of net periodic benefit pension cost will be presented separately outside of operating income.

Additionally, only the service cost component will be eligible for capitalization when applicable.

The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2017, our fiscal 2019.

The retrospective transition method should be applied for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement, and the prospective transition method should be applied, on and after the effective date, for the capitalization of the service cost component of net periodic pension cost and net periodic postretirement benefit in assets.

The guidance includes a practical expedient allowing entities to estimate amounts for comparative periods using the information previously disclosed in the pension and other postretirement benefit plan footnote.

We adopted this guidance in the first quarter of fiscal 2019 on a retrospective basis using the practical expedient and it did not have a material impact on our consolidated financial statements.

The following reconciliations provide the effect of the reclassification of the net periodic benefit cost from operating expenses to other (income) expense in our consolidated statements of income for fiscal year 2018 and 2017 (in millions):

Twelve Months Ended September 29, 2018:

As Previously Reported

Cost of Sales

Selling, General and Administrative

Operating Income

Other (Income) Expense

Twelve Months Ended September 30, 2017:

As Previously Reported

Cost of Sales

Selling, General and Administrative

Operating Income

Other (Income) Expense

In November 2016, the FASB issued guidance that requires entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows.

The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2017, our fiscal 2019.

The retrospective transition method should be applied.

We adopted this guidance in the first quarter of fiscal 2019 and it did not have a material impact on our consolidated financial statements.

In October 2016, the FASB issued guidance that requires companies to recognize the income tax effects of intercompany sales and transfers of assets, other than inventory, in the period in which the transfer occurs.

The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2017, our fiscal 2019.

The modified retrospective transition method should be applied.

We adopted this guidance in the first quarter of fiscal 2019 and it did not have a material impact on our consolidated financial statements.

In August 2016, the FASB issued guidance that aims to eliminate diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows.

The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2017, our fiscal 2019.

The retrospective transition method should be applied.

We adopted this guidance in the first quarter of fiscal 2019 and it did not have a material impact on our consolidated financial statements.

In January 2016, the FASB issued guidance that requires most equity investments be measured at fair value, with subsequent other changes in fair value recognized in net income.

The guidance also impacts financial liabilities under the fair value option and the presentation and disclosure requirements on the classification and measurement of financial instruments.

The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2017, our fiscal 2019.

It should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, unless equity securities do not have readily determinable fair values, in which case the amendments should be applied prospectively.

We adopted this guidance in the first quarter of fiscal 2019.

We did not use prospective amendments for any investments and adoption did not have a material impact on our consolidated financial statements.

In May 2014, the FASB issued guidance that changes the criteria for recognizing revenue.

The guidance provides for a single five-step model to be applied to all revenue contracts with customers.

The standard also requires additional financial statement disclosures that will enable users to understand the nature, amount, timing and uncertainty of revenue and cash flows relating to customer contracts, including disaggregated revenue disclosures.

Companies have an option to use either a retrospective approach or cumulative effect adjustment approach to implement the standard.

This guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2017, our fiscal 2019.

We adopted this guidance in the first quarter of fiscal 2019 using the modified retrospective transition method.

Prior periods were not adjusted and, based on our implementation assessment, no cumulative-effect adjustment was made to the opening balance of retained earnings.

The adoption of this standard did not have a material impact on our consolidated financial statements.

For further description of our revenue recognition policy refer to Part I, Item 1, Notes to the Consolidated Financial Statements, Note 1:

Business and Summary of Significant Accounting Policies.

For disaggregated revenue information refer to Part I, Item 1, Notes to the Consolidated Condensed Financial Statements, Note 17:

Segment Reporting.

We adopted this guidance in the first quarter of fiscal 2020 using the optional transition method that allows for a cumulative-effect adjustment in the period of adoption with no restatement of prior periods.

We did not elect the practical expedient for the use of hindsight in evaluating the expected lease term of existing leases.

The adoption resulted in the recording of operating lease assets and operating lease liabilities of $ 549 million and $ 546 million , respectively, as of September 29, 2019, with no changes to our finance leases.

The difference between the additional lease assets and lease liabilities, represents existing deferred rent and prepaid lease balances that were reclassified on the balance sheet.

The adoption did not have a material impact on our Consolidated Statements of Income or our Consolidated Statements of Cash Flows.

For further description of our lease policy refer to Note 1:

Business and Summary of Significant Accounting Policies, and for quantitative lease information refer to Note 6:

ACQUISITIONS AND DISPOSITIONS

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Its results, subsequent to the acquisition closing, are included in International/Other for segment presentation.

Certain estimated values for the acquisition, including goodwill, intangible assets, property, plant and equipment, noncontrolling interest, and deferred income taxes are not yet finalized and are subject to revision as additional information becomes available and more detailed analyses are completed.

The preliminary purchase price allocation includes $ 307 million of net working capital, including $ 56 million of cash acquired, $ 93 million of Property, Plant and Equipment, $ 1 million of Goodwill, $ 23 million of Intangible Assets, $ 24 million of Other Liabilities, $ 11 million of Deferred Income Taxes and $ 7 million of Noncontrolling Interest.

The purchase price allocation included $ 262 million of net working capital, including $ 56 million of cash acquired, $ 89 million of Property, Plant and Equipment, $ 47 million of Goodwill, $ 23 million of Intangible Assets, $ 24 million of Other Liabilities, $ 8 million of Deferred Income Taxes and $ 7 million of Noncontrolling Interest.

Intangible Assets included customer relationships which will be amortized over a life of 7 years.

We do not expect the goodwill to be deductible for income tax purposes.

During the fourth quarter of fiscal 2019, we recorded measurement period adjustments, including $ 15 million of purchase price adjustments, which collectively decreased Goodwill by $ 66 million , including an increase in net working capital of $ 3 million , a reduction of Intangible Assets of $ 11 million , a reduction of Property, Plant and Equipment of $ 13 million , a reduction of Deferred Income Taxes of $ 4 million , and a reduction of Noncontrolling Interest of $ 68 million .

During fiscal 2020, we recorded measurement period adjustments, which increased Goodwill by $ 46 million , including a reduction to net working capital of $ 45 million , a reduction to Property, Plant and Equipment of $ 4 million , and a decrease in Deferred Income Taxes of $ 3 million .

On November 30, 2018, we acquired all of the outstanding common stock of MFG (USA) Holdings, Inc.

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(“Keystone Foods”) from Marfrig Global Foods ("Marfrig") for $ 2.3 billion in cash, subject to certain adjustments.

We initially funded the acquisition with existing cash on hand, net proceeds from the issuance of a 364-day term loan and borrowings under our commercial paper program.

In February 2019, we used the net proceeds from the issuance of senior notes to repay amounts outstanding under the 364-day term loan and commercial paper obligations.

Keystone Foods' domestic and international results, subsequent to the acquisition closing, are included in our Chicken segment and International/Other, respectively.

The following table summarizes the preliminary purchase price allocation for Keystone Foods and fair values of the assets acquired and liabilities assumed at the acquisition date, which are subject to change pending finalization of working capital adjustments.

Certain estimated values for the acquisition, including goodwill, intangible assets, inventory, property, plant and equipment, and deferred income taxes, are not yet finalized and are subject to revision as additional information becomes available and more detailed analyses are completed.

The purchase price was allocated based on information currently available as of the acquisition date.

During fiscal 2019, we recorded measurement period adjustments, including $ 61 million of purchase price adjustments, which collectively increased goodwill by $ 47 million , primarily consisting of a reduction of Intangible Assets of $ 86 million , a reduction of Property, Plant and Equipment of $ 49 million , a reduction of Deferred Income Taxes of $ 36 million and a reduction in net working capital of $ 13 million .

The acquisition was accounted for using the acquisition method of accounting and the results of Keystone Foods' domestic and international results, subsequent to the acquisition closing, are included in our Chicken segment and International/Other, respectively.

The following table summarizes the purchase price allocation for Keystone Foods and fair values of the assets acquired and liabilities assumed at the acquisition date (in millions):

Cash and cash equivalents

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As a result of the acquisition, we recognized a total of $ 1,120 million of goodwill.

The purchase price was allocated to assets acquired and liabilities assumed based on their preliminary estimated fair values as of the date of acquisition, and any excess was allocated to goodwill, as shown in the table above.

The purchase price was assigned to assets acquired and liabilities assumed based on their estimated fair values as of the date of acquisition, and any excess was allocated to goodwill, as shown in the table above.

Goodwill represents the value we expect to achieve through the implementation of operational synergies and growth opportunities.

The preliminary allocation of goodwill to our segments was $ 779 million and $ 341 million to our Chicken segment and International/Other, respectively.

We allocated goodwill to our segments using the acquisition method approach.

This resulted in $ 779 million and $ 341 million of goodwill allocated to our Chicken segment and International/Other, respectively.

We do not expect the goodwill to be deductible for income tax purposes.

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Under these valuation approaches, we are required to make estimates and assumptions about sales, operating margins, growth rates, attrition rates, royalty rates, EBITDA multiples, and discount rates based on budgets, business plans, economic projections, anticipated future cash flows and marketplace data.

The acquisition of Keystone Foods was accounted for using the acquisition method of accounting and, consequently, the results of operations are reported in our consolidated financial statements from the date of acquisition.

Keystone Foods sales from the date of acquisition through September 28, 2019 were $ 1,970 million and its results for that period were not significant to our overall Consolidated Statements of Income.

On August 20, 2018, we acquired the assets of American Proteins, Inc.

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All of the goodwill acquired is amortizable for tax purposes.

On June 7, 2017, we acquired all of the outstanding common stock of AdvancePierre Foods Holdings, Inc.

("AdvancePierre") as part of our strategy to sustainably feed the world with the fastest growing portfolio of protein-packed brands.

The purchase price was equal to $ 40.25 per share for AdvancePierre's outstanding common stock, or approximately $ 3.2 billion .

AdvancePierre's results from operations subsequent to the acquisition closing are included in the Prepared Foods and Chicken segments.

The following unaudited pro forma information presents the combined results of operations as if the acquisition of AdvancePierre had occurred at the beginning of fiscal 2017.

AdvancePierre's pre-acquisition results have been added to our historical results.

The pro forma results contained in the table below include adjustments for amortization of acquired intangibles, depreciation expense, interest expense related to the financing and related income taxes.

Any potential cost savings or other operational efficiencies that could result from the acquisition are not included in these pro forma results.

These pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the results of operations as they would have been had the acquisitions occurred on the assumed dates, nor is it necessarily an indication of future operating results.

in millions (unaudited)

Pro forma sales

Pro forma net income attributable to Tyson

Pro forma net income per diluted share attributable to Tyson

On January 15, 2020, we acquired a 40 % minority interest in a vertically-integrated Brazilian poultry producer for $ 122 million .

On February 7, 2020, we acquired a 50 % interest in a joint venture serving the worldwide fats and oils market for $ 61 million .

We are accounting for both of these investments under the equity method.

On April 24, 2017, we announced our intent to sell three non-protein businesses as part of our strategic focus on protein brands.

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We utilized the net proceeds to repay commercial paper.

Previously in fiscal 2018 and 2017, we recorded pretax impairment charges for these businesses of $ 101 million and $ 45 million , respectively, due to revised estimates of the businesses' fair value based on expected net sales proceeds at the time of the impairments.

These charges were recorded in Cost of Sales in our Consolidated Statement of Income, and primarily consisted of goodwill previously classified within assets held for sale.

Previously in fiscal 2018, we recorded a pretax impairment charge for these businesses of $ 101 million due to revised estimates of the businesses' fair value based on expected net sales proceeds at the time of the impairment.

This charge was recorded in Cost of Sales in our Consolidated Statement of Income, and primarily consisted of goodwill previously classified within assets held for sale.

In the first quarter of fiscal 2018, we made the decision to sell TNT Crust, our pizza crust business, which was also included in our Prepared Foods segment, as part of our strategic focus on protein brands.

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We completed the sale of a chicken further processing facility acquired during the Keystone Foods acquisition on August 31, 2019 for $ 170 million net proceeds, which did not result in a significant gain or loss.

In the fourth quarter of fiscal 2019, we made the decision to sell a Prepared Foods business.

We recorded a pretax impairment charge for this business of $ 41 million due to our estimate of the business' fair value based on current expected net sales proceeds.

The remaining carrying value of this business is not significant.

PROPERTY, PLANT AND EQUIPMENT

The following table reflects major categories of property, plant and equipment and accumulated depreciation at September 28, 2019 , and September 29, 2018 :

The following table reflects major categories of property, plant and equipment and accumulated depreciation at October 3, 2020 , and September 28, 2019 (in millions):

Building and leasehold improvements

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Net property, plant and equipment

Approximately $ 1,772 million required to complete buildings and equipment under construction at September 28, 2019 .

Approximately $ 1,102 million will be necessary to complete buildings and equipment under construction at October 3, 2020 .

GOODWILL AND INTANGIBLE ASSETS

The following table reflects goodwill activity for fiscal 2019 and 2018 :

The following table reflects goodwill activity for fiscal 2020 and 2019 (in millions):

International/Other

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Measurement period adjustments

Allocation of acquired goodwill

Reclass to assets held for sale

Currency translation and other

Balance at September 28, 2019

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Measurement period adjustments

Reclass to assets held for sale

Currency translation and other

Balance at September 28, 2019

Balance at October 03, 2020

Accumulated impairment losses

The following table reflects intangible assets by type at September 28, 2019 , and September 29, 2018 :

The following table reflects intangible assets by type at October 3, 2020 , and September 28, 2019 (in millions):

Amortizable intangible assets:

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Amortization expense of $ 278 million , $ 267 million and $ 210 million was recognized during fiscal 2020 , 2019 and 2018 , respectively.

We estimate amortization expense on intangible assets for the next five fiscal years subsequent to September 28, 2019 , will be:

We estimate amortization expense on intangible assets for the next five fiscal years subsequent to October 3, 2020 , will be:

2021 - $ 261 million ;

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2025 - $ 214 million .

We lease certain equipment, buildings and land related to transportation, distribution, storage, production, livestock grower assets and office activities.

These lease arrangements can be structured as a standard lease agreement or embedded in a service or supply agreement and are primarily classified as operating leases.

For further description of our lease accounting policy, refer to Note 1:

Business and Summary of Significant Accounting Policies.

Operating lease ROU assets and liabilities presented in our Consolidated Balance Sheets were as follows (in millions):

October 3, 2020

Other current liabilities

Other Liabilities

The components of lease costs were as follows (in millions):

Twelve Months Ended

October 3, 2020

Operating lease cost (a)

Variable lease cost (b)

Short-term lease cost

(a) Sublease income is immaterial and not deducted from operating lease cost.

(b) Variable lease costs are determined based on volume of output received, flocks placed or other performance metrics.

Other operating lease information includes the following:

Twelve months ended October 3, 2020

Operating cash outflows from operating leases (in millions)

ROU assets obtained in exchange for new operating lease liabilities (in millions)

Weighted-average remaining lease term

Weighted-average discount rate

At October 3, 2020 , future maturities of operating leases were as follows (in millions):

Operating Lease Commitments

2026 and beyond

Total undiscounted operating lease payments

Imputed interest

Present value of total operating lease liabilities

At October 3, 2020 , our leases that had not yet commenced were not significant.

Prior Year Lease Disclosures

The following pertains to previously disclosed information set forth in the Company's 2019 Form 10-K, Part II, Item 8, Notes to the Consolidated Financial Statements, Note 20:

Commitments and Contingencies.

We lease equipment, properties and certain farms for which total rentals approximated $ 220 million and $ 200 million , in fiscal 2019 and 2018, respectively.

Most leases have initial terms of up to seven years, some with varying renewal periods.

Minimum lease commitments under non-cancelable leases at September 28, 2019 were (in millions):

Operating Lease Commitments

2025 and beyond

We enter into agreements with livestock growers that can have fixed and variable payment structures, but are generally cancelable and based on flocks placed with growers.

Livestock grower fixed or estimable non-cancelable commitments at September 28, 2019 were (in millions):

Livestock Grower Commitments

2025 and beyond

RESTRUCTURING AND RELATED CHARGES

In the fourth quarter of fiscal 2017, our Board of Directors approved a multi-year restructuring program (the “Financial Fitness Program”), which is expected to contribute to the Company’s overall strategy of financial fitness through increased operational effectiveness and overhead reduction.

The Financial Fitness Program is expected to result in cumulative pretax charges of approximately $ 280 million which consist primarily of severance and employee related costs, impairments and accelerated depreciation of technology assets, incremental costs to implement new technology, and contract termination costs.

The Company recognized restructuring and related charges of $ 41 million , $ 59 million and $ 150 million associated with the program during fiscal 2019, 2018 and 2017, respectively.

For fiscal 2019 and 2018, the restructuring and related charges consisted of $ 41 million and $ 59 million , respectively, of incremental costs to implement new technology and accelerated depreciation of technology assets.

In the first quarter of fiscal 2020, the Company approved a restructuring program (the "2020 Program"), which is expected to contribute to the Company’s overall strategy of financial fitness through the elimination of overhead and consolidation of certain enterprise functions.

In the fourth quarter of fiscal 2020, the Company extended the 2020 Program as it identified additional opportunities to eliminate overhead by optimizing organizational structures and other activities.

We have recognized $ 60 million of cumulative pretax charges in fiscal 2020 associated with the 2020 Program consisting of severance and employee related costs.

As part of the 2020 Program, we are eliminating positions across several areas and job levels, with eliminated positions originating from the corporate offices in Springdale, Arkansas and Chicago, Illinois, as well as certain production facility and supply chain administrative positions.

The majority of the positions have already been or are expected to be eliminated by the end of fiscal 2021.

In the fourth quarter of fiscal 2017, our Board of Directors approved a multi-year restructuring program (the “2017 Program”), which contributed to the Company’s overall strategy of financial fitness through increased operational effectiveness and overhead reduction.

The 2017 Program resulted in cumulative pretax charges of $ 267 million which consisted of $ 117 million incremental costs to implement new technology and accelerated depreciation of technology assets, $ 53 million severance and employee related costs, $ 72 million technology impairment, and $ 25 million for contract termination costs.

The 2017 Program concluded in fiscal 2020.

We recognized restructuring and related charges of $ 77 million during fiscal 2020, consisting of $ 60 million of severance and team member related costs from the 2020 Program and $ 17 million of incremental costs to implement new technology from the 2017 Program.

For fiscal 2020, we recorded $ 17 million in Cost of Sales from the 2020 Program, and we recorded $ 60 million in Selling, General and Administrative in our Consolidated Statements of Income, of which $ 43 million is related to the 2020 Program and $ 17 million is related to the 2017 Program.

For fiscal 2019 and 2018 the restructuring and related charges related to the 2017 Program consisted of $ 41 million and $ 59 million , respectively, of incremental costs to implement new technology and accelerated depreciation of technology assets.

These costs were recorded in Selling, General and Administrative in our Consolidated Statements of Income.

For fiscal 2017, the restructuring and related charges consisted of $ 53 million severance and employee related costs, $ 72 million technology impairment and related costs, and $ 25 million for contract termination costs.

Of these costs, $ 35 million was recorded to Cost of Sales and $ 115 million was recorded to Selling, General and Administrative in our Consolidated Statements of Income.

We had no restructuring liability at September 28, 2019 and our restructuring liability was $ 10 million at September 29, 2018.

The following table reflects major components of debt as of September 28, 2019 , and September 29, 2018 :

The following table reflects the pretax impact of restructuring and related charges during fiscal 2020, 2019 and 2018 and the charges to date, by reportable segment (in millions):

Total charges to date

Prepared Foods

International/Other

Total restructuring and related charges, pretax

We do not anticipate future costs of the 2020 Program to be significant, however, as the Company continues to evaluate its business strategies and long-term growth targets, additional restructuring activities may occur.

Our restructuring liability was $ 37 million at October 3, 2020 and we had no restructuring liability at September 28, 2019 .

The change in the restructuring liability was due to additional charges of $ 77 million , net of $ 40 million primarily consisting of payments, during fiscal 2020.

The following table reflects major components of debt as of October 3, 2020 , and September 28, 2019 (in millions):

Revolving credit facility

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Senior notes:

Notes due May 2019 ("2019 Notes")

Notes due June 2020 ("2020 Notes")

Notes due August 2020 ("2020 Notes")

Notes due June 2020 (2.68% at 09/28/2019)

Notes due August 2020 (2.60% at 09/28/2019)

4.10% Notes due September 2020

4.10% Notes due September 2020 ("2020 Notes")

2.25% Notes due August 2021

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Discount on senior notes

Term loan facility due March 2022 (1.69% at October 3, 2020)

Unamortized debt issuance costs

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Total long-term debt

Annual maturities of debt for the five fiscal years subsequent to September 28, 2019 are:

Annual maturities of debt for the five fiscal years subsequent to October 3, 2020 are:

2021 - $ 550 million ;

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We have a $ 1.75 billion revolving credit facility that supports short-term funding needs and serves as a backstop to our commercial paper program.

This facility will mature and the commitments thereunder will terminate in March 2023.

Amounts available for borrowing under this facility totaled $ 1.68 billion at September 28, 2019 , before deducting amounts to backstop our commercial paper program.

At September 28, 2019 , we had $ 70 million in borrowings and no outstanding letters of credit issued under this facility.

At September 28, 2019 we had $ 99 million of bilateral letters of credit issued separately from the revolving credit facility, none of which were drawn upon.

Our letters of credit are issued primarily in support of leasing obligations and workers’ compensation insurance programs and other legal obligations.

If in the future any of our subsidiaries shall guarantee any of our material indebtedness, such subsidiary shall be required to guarantee the indebtedness, obligations and liabilities under this facility.

The facility will mature and the commitments thereunder will terminate in March 2023.

Amounts available for borrowing under this facility totaled $ 1.75 billion at October 3, 2020 .

At October 3, 2020 , we had no borrowings and no outstanding letters of credit issued under this facility.

At October 3, 2020 we had $ 101 million of bilateral letters of credit issued separately from the revolving credit facility, none of which were drawn upon.

Our letters of credit are issued primarily in support of workers’ compensation insurance programs and other legal obligations.

In the future, if any of our subsidiaries shall guarantee any of our material indebtedness, such subsidiary shall be required to guarantee the indebtedness, obligations and liabilities under this facility.

Commercial Paper Program

We have a commercial paper program under which we may issue unsecured short-term promissory notes ("commercial paper") up to an aggregate maximum principal amount of $ 1 billion as of September 28, 2019 .

As of September 28, 2019 , we had $ 1 billion of commercial paper outstanding at a weighted average interest rate of 2.24 % with maturities of less than 25 days .

During fiscal 2019, we extinguished the $ 300 million outstanding balance of the Senior Notes due May 2019 and the $ 1 billion outstanding balance of the Senior Notes due August 2019 using cash on hand and other liquidity sources.

364-Day Term Loan

In November 2018, as part of the financing for the Keystone Foods acquisition, we borrowed $ 1.8 billion under an unsecured term loan facility, which was due November 2019.

The interest rate was set based on the selected LIBOR interest period plus 1.125 % .

In the second quarter of fiscal 2019, we extinguished the $ 1.8 billion outstanding balance using funds borrowed under the 2026 and 2029 Notes and funds borrowed under the reopening of the 2048 Notes.

2026/2029/2048 Notes

In February 2019, we issued senior unsecured notes with an aggregate principal amount of $ 1.8 billion , consisting of $ 800 million due March 2026 and $ 1 billion due March 2029.

Additionally, we reopened the 2048 Notes issuing an additional $ 1 billion , bringing the aggregate principal amount outstanding on the 2048 Notes to $ 1.5 billion .

The net proceeds from the issuances were used to repay amounts outstanding under the 364-Day Term Loan Agreement and commercial paper obligations and to fund the acquisition of the Thai and European operations.

The 2026 Notes carry a fixed interest rate of 4.00 % and the 2029 Notes carry a fixed interest rate of 4.35 % .

Interest payments on the 2026 and 2029 Notes are due semi-annually on March 1 and September 1.

After the original issue discounts of $ 36 million , we received net proceeds of $ 2,764 million and incurred debt issuance costs of $ 26 million related to the issuances.

We have a commercial paper program under which we may issue unsecured short-term promissory notes ("commercial paper") up to an aggregate maximum principal amount of $ 1 billion .

As of October 3, 2020 , we had no commercial paper outstanding.

On April 1, 2020, we repaid the outstanding balance of the commercial paper using proceeds from the Term Loan Facility due March 2022.

Our ability to access commercial paper in the future may be limited or its costs increased, due to market conditions which have been impacted in part by COVID-19.

During fiscal 2020, we extinguished the $ 350 million outstanding balance of the senior notes due June 2020, the $ 400 million outstanding balance of the senior notes due August 2020 and the $ 278 million outstanding balance of the senior notes due September 2020 using cash on hand and other liquidity sources.

Term Loan Facility due March 2022

On March 27, 2020, we executed a new $ 1.5 billion term loan facility to refinance our commercial paper program, repay outstanding balances under our revolving credit facility and for general liquidity purposes.

The term loan facility expires on March 27, 2022 and is subject to prepayment under certain conditions.

Additionally, the term loan facility contains covenants that are similar to those contained in the revolving credit facility.

Debt Covenants

Our revolving credit facility contains affirmative and negative covenants that, among other things, may limit or restrict our ability to:

Our revolving credit and term loan facilities contain affirmative and negative covenants that, among other things, may limit or restrict our ability to:

create liens and encumbrances;

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and engage in certain consolidations, mergers and sales of assets.

We were in compliance with all debt covenants at September 28, 2019 .

We were in compliance with all debt covenants at October 3, 2020 .

Capital Stock

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Holders of Class B stock are entitled to 10 votes per share, while holders of Class A stock are entitled to one vote per share on matters submitted to shareholders for approval.

As of September 28, 2019 , Tyson Limited Partnership (the "TLP") owned 99.985 % of the outstanding shares of Class B stock and the TLP and members of the Tyson family owned, in the aggregate, 2.15 % of the outstanding shares of Class A stock, giving them, collectively, control of approximately 70.97 % of the total voting power of the outstanding voting stock.

As of October 3, 2020 , Tyson Limited Partnership (the "TLP") owned 99.985 % of the outstanding shares of Class B stock and the TLP and members of the Tyson family owned, in the aggregate, 2.23 % of the outstanding shares of Class A stock, giving them, collectively, control of approximately 71.06 % of the total voting power of the outstanding voting stock.

The Class B stock is considered a participating security requiring the use of the two-class method for the computation of basic earnings per share.

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Effective November 13, 2020, the Board of Directors increased the quarterly dividend previously declared on August 6, 2020, to $ 0.445 per share on our Class A stock and $ 0.4005 per share on our Class B stock.

The increased quarterly dividend is payable on December 13, 2019, to shareholders of record at the close of business on November 29, 2019.

The increased quarterly dividend is payable on December 15, 2020, to shareholders of record at the close of business on December 1, 2020.

Share Repurchases

As of September 28, 2019 , 20.7 million shares remained available for repurchase under the Company's share repurchase program.

As of October 3, 2020 , 18.9 million shares remained available for repurchase under the Company's share repurchase program.

The program has no fixed or scheduled termination date and the timing and extent to which we repurchase shares will depend upon, among other things, our working capital needs, markets, industry conditions, liquidity targets, limitations under our debt obligations and regulatory requirements.

In addition to the share repurchase program, we purchase shares on the open market to fund certain obligations under our equity compensation plans.

A summary of cumulative share repurchases of our Class A stock for fiscal 2019 , 2018 and 2017 is as follows:

September 28, 2019

A summary of cumulative share repurchases of our Class A stock for fiscal 2020 , 2019 and 2018 is as follows (in millions):

October 3, 2020

September 28, 2019

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Total share repurchases

Detail of the provision for income taxes from continuing operations consists of the following:

Detail of the provision (benefit) for income taxes from continuing operations consists of the following (in millions):

The reasons for the difference between the statutory federal income tax rate and our effective income tax rate from continuing operations are as follows:

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Impairment and sale of non-protein businesses

During fiscal 2020, state tax expense, net of federal benefit, was $ 83 million .

During fiscal 2019, changes in unrecognized tax benefits decreased tax expense by $ 160 million , and state tax expense, excluding changes in unrecognized tax benefits and net of federal tax benefit, was $ 69 million .

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The impacts of the non-deductible impairment and sale of certain assets in our non-protein businesses increased the effective tax rate by 3.1 % .

During fiscal 2017, the domestic production deduction decreased tax expense by $ 80 million , and state tax expense, net of federal tax benefit, was $ 61 million .

Approximately $ 2,711 million , $ 2,332 million and $ 2,700 million of income from continuing operations before income taxes for fiscal 2020 , 2019 and 2018 , respectively, were from our operations based in the United States.

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The change in deferred taxes was recorded as an adjustment to our fiscal 2018 deferred tax provision.

During the first quarter of fiscal 2019 we completed our accounting for the Tax Act and recorded an immaterial adjustment to income tax expense.

We recognize deferred income taxes for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

Deferred tax assets and liabilities are measured using tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The tax effects of major items recorded as deferred tax assets and liabilities as of September 28, 2019 , and September 29, 2018 , are as follows:

The tax effects of major items recorded as deferred tax assets and liabilities as of October 3, 2020 , and September 28, 2019 , are as follows (in millions):

Property, plant and equipment

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Accrued expenses

Lease liabilities

Net operating loss and other carryforwards

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Net deferred tax liability

At September 28, 2019 , our gross state tax net operating loss carryforwards approximated $ 691 million and expire in fiscal years 2020 through 2039 .

At October 3, 2020 , our gross state tax net operating loss carryforwards approximated $ 799 million , of which $ 747 million expire in fiscal years 2021 through 2039 , and the remainder has no expiration.

Gross foreign net operating loss carryforwards approximated $ 238 million , of which $ 104 million expire in fiscal years 2021 through 2032 , and the remainder has no expiration.

We also have tax credit carryforwards of approximately $ 48 million , of which $ 46 million expire in fiscal years 2021 through 2034 , and the remainder has no expiration.

We have accumulated undistributed earnings of foreign subsidiaries aggregating approximately $ 252 million and $ 210 million at September 28, 2019 , and September 29, 2018 , respectively.

We have accumulated undistributed earnings of foreign subsidiaries aggregating approximately $ 318 million and $ 252 million at October 3, 2020 , and September 28, 2019 , respectively.

The Tax Act generally eliminates U.S.

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however, we do not expect any tax due to be material.

The following table summarizes the activity related to our gross unrecognized tax benefits at September 28, 2019 , September 29, 2018 , and September 30, 2017 :

The following table summarizes the activity related to our gross unrecognized tax benefits at October 3, 2020 , September 28, 2019 , and September 29, 2018 (in millions):

Balance as of the beginning of the year

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Increases related to prior year tax positions

Increase related to AdvancePierre acquisition

Reductions related to prior year tax positions

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Balance as of the end of the year

The amount of unrecognized tax benefits, if recognized, that would impact our effective tax rate was $ 116 million at September 28, 2019 and $ 216 million at September 29, 2018 .

The amount of unrecognized tax benefits, if recognized, that would impact our effective tax rate was $ 118 million at October 3, 2020 and $ 116 million at September 28, 2019 .

We classify interest and penalties on unrecognized tax benefits as income tax expense.

At September 28, 2019 , and September 29, 2018 , before tax benefits, we had $ 46 million and $ 73 million , respectively, of accrued interest and penalties on unrecognized tax benefits.

As of September 28, 2019 , certain United States federal income tax returns are subject to examination for fiscal years 2013 through 2018.

We are also subject to income tax examinations by major state and foreign jurisdictions for fiscal years 2012 through 2018 and 2002 through 2018, respectively.

At October 3, 2020 , and September 28, 2019 , before tax benefits, we had $ 51 million and $ 46 million , respectively, of accrued interest and penalties on unrecognized tax benefits.

As of October 3, 2020 , certain United States federal income tax returns are subject to examination for fiscal years 2013 through 2019 .

We are also subject to income tax examinations by major state and foreign jurisdictions for fiscal years 2015 through 2019 .

We do not expect material changes to our unrecognized tax benefits during the next twelve months.

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Additionally, we sold an investment for $ 79 million in net proceeds resulting in a pretax gain of $ 55 million , which was recorded in the Consolidated Statements of Income in Other, net.

During fiscal 2018, we recognized a one-time cash bonus to our hourly frontline employees of $ 109 million using incremental cash savings from the Tax Act, which was predominantly recorded in the Consolidated Statements of Income in Cost of Sales.

During fiscal 2018, we recognized a one-time cash bonus to our hourly frontline team members of $ 109 million using incremental cash savings from the Tax Act, which was predominantly recorded in the Consolidated Statements of Income in Cost of Sales.

Additionally, we recorded $ 11 million of insurance proceeds, $ 21 million of equity earnings in joint ventures and $ 1 million in net foreign currency exchange gains, which were recognized in the Consolidated Statements of Income in Other, net.

During fiscal 2017, we recorded $ 28 million of legal costs related to two former subsidiaries of Hillshire Brands, which were sold by Hillshire Brands in 1986 and 1994, $ 18 million of acquisition bridge financing fees related to the AdvancePierre acquisition and $ 19 million of equity earnings in joint ventures, which were recorded in the Consolidated Statements of Income in Other, net.

During fiscal 2017, we recorded a $ 52 million impairment charge related to our San Diego Prepared Foods operation.

The impairment was comprised of $ 43 million of property, plant and equipment, $ 8 million of definite lived intangible assets and $ 1 million of other assets.

This charge, of which $ 44 million was included in the Consolidated Statements of Income in Cost of Sales and $ 8 million was included in the Consolidated Statements of Income in Selling, General and Administrative, was triggered by a change in a co-manufacturing contract and ongoing losses.

Additionally, in accordance with recently adopted accounting guidance, we have retrospectively recognized $ 23 million and $ 10 million of net periodic pension and postretirement benefit credit, excluding the service cost component, for fiscal 2018 and fiscal 2017, respectively, and recorded the amounts in the Consolidated Condensed Statements of Income in Other, net.

Additionally, in accordance with recently adopted accounting guidance, we have retrospectively recognized $ 23 million of net periodic pension and postretirement benefit credit, excluding the service cost component for fiscal 2018, and recorded the amount in the Consolidated Statements of Income in Other, net.

EARNINGS PER SHARE

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Dividends Declared Per Share:

Approximately 1 million of our stock-based compensation shares were antidilutive for each of fiscal 2019 , 2018 and 2017 .

Approximately 2 million of our stock-based compensation shares were antidilutive for fiscal 2020 and approximately 1 million for fiscal 2019 and 2018 .

These shares were not included in the dilutive earnings per share calculation.

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Our risk management programs are periodically reviewed by our Board of Directors' Audit Committee.

These programs are monitored by senior management and may be revised as market conditions dictate.

Our current risk management programs utilize industry-standard models that take into account the implicit cost of hedging.

Risks associated with our market risks and those created by derivative instruments and the fair values are strictly monitored, using value-at-risk and stress tests.

Credit risks associated with our derivative contracts are not significant as we minimize counterparty concentrations, utilize margin accounts or letters of credit, and deal with credit-worthy counterparties.

These programs and risks are monitored by senior management and may be revised as market conditions dictate.

Our current risk management programs utilize various industry-standard models that take into account the implicit cost of hedging.

Credit risks associated with our derivative contracts are not significant as we minimize counterparty exposure by dealing with credit-worthy counterparties and utilizing exchange traded instruments, margin accounts or letters of credit.

Additionally, our derivative contracts are mostly short-term in duration and we generally do not make use of credit-risk-related contingent features.

No significant concentrations of credit risk existed at September 28, 2019 .

No significant concentrations of credit risk existed at October 3, 2020 .

We had the following aggregated outstanding notional amounts related to our derivative financial instruments:

in millions, except soy meal tons

September 28, 2019

in millions, except soybean meal tons

October 3, 2020

September 28, 2019

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Ineffectiveness related to our cash flow hedges was not significant during fiscal 2020 , 2019 and 2018 .

As of September 28, 2019 , we have net pretax losses of $ 8 million for our commodity contracts, and $ 3 million pretax losses related to our interest swaps, which are expected to be reclassified into earnings within the next 12 months.

Additionally, we incurred $ 19 million of realized losses related to treasury rate locks in connection with the issuance of the 2026, 2029 and 2048 Notes, which will be reclassified to earnings over the lives of these notes.

As of October 3, 2020 , we have net pretax losses of $ 1 million for our commodity contracts, which are expected to be reclassified into earnings within the next 12 months.

Additionally, we have $ 16 million of realized losses related to treasury rate locks in connection with the issuance of the 2026, 2029 and 2048 Notes, which will be reclassified to earnings over the lives of these notes.

During fiscal 2020 , 2019 and 2018 , we did not reclassify significant pretax gains or losses into earnings as a result of the discontinuance of cash flow hedges.

The following table sets forth the pretax impact of cash flow hedge derivative instruments in the Consolidated Statements of Income:

Recognized in OCI

on Derivatives

Statements of Income

Classification

Reclassified from

OCI to Earnings

The following table sets forth the pretax impact of cash flow hedge derivative instruments in Other Comprehensive Income (in millions):

Gain (Loss) Recognized in OCI on Derivatives

Cash Flow Hedge – Derivatives designated as hedging instruments:

Commodity contracts

Cost of Sales

Interest rate hedges

Interest expense

Fair value hedges

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We include the gain or loss on the hedged items (i.e., livestock purchase firm commitments) in the same line item, Cost of Sales, as the offsetting gain or loss on the related livestock forward position.

Statements of Income

Classification

Gain (Loss) on forwards

Cost of Sales

Gain (Loss) on purchase contract

Cost of Sales

Ineffectiveness related to our fair value hedges was not significant during fiscal 2020 , 2019 and 2018 .

The carrying amount of fair value hedge (assets) liabilities as of fiscal 2020 , 2019 and 2018 were as follows (in millions):

Consolidated Balance Sheets Classification

Undesignated positions

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We mark these positions to fair value through earnings at each reporting date.

The following table sets forth the pretax impact of the undesignated derivative instruments in the Consolidated Statements of Income:

Statements of Income

Classification

Derivatives not designated as hedging instruments:

Commodity contracts

Reclassification to Earnings

The following table sets forth the total amounts of each income and expense line item presented in the Consolidated Statements of Income in which the effects of hedges are recorded (in millions):

Consolidated Statements of Income Classification

Cost of Sales

Interest Expense

The following table sets forth the pretax impact of the cash flow, fair value and undesignated derivative instruments in the Consolidated Statements of Income (in millions):

Consolidated Statements of Income Classification

Gain (Loss) on derivatives not designated as hedging instruments:

Commodity contracts

Cost of Sales

Gain (Loss) on cash flow hedges reclassified from OCI to Earnings:

Commodity contracts

Gain (Loss) on fair value hedges:

Commodity contracts (a)

Gain (Loss) on derivatives not designated as hedging instruments:

Commodity contracts

Interest Expense

Gain (Loss) on cash flow hedges reclassified from OCI to Earnings:

Interest rate contracts

Gain (Loss) on derivatives not designated as hedging instruments:

Foreign exchange contracts

Other Income/Expense

(a) Amounts represent gains/(losses) on commodity contracts designated as fair value hedges of firm commitments that were realized during the period presented, which were offset by a corresponding gain/(loss) on the underlying hedged inventory.

Gains or losses related to changes in the fair value of unrealized commodity contracts, along with the offsetting gain or loss on the hedged inventory, are also marked-to-market through earnings with no impact on a net basis.

The fair value of all outstanding derivative instruments in the Consolidated Balance Sheets are included in Note 14:

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Our assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability.

The following tables set forth by level within the fair value hierarchy our financial assets and liabilities accounted for at fair value on a recurring basis according to the valuation techniques we used to determine their fair values:

September 28, 2019

October 3, 2020

Other Current Assets:

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Total liabilities

Our derivative assets and liabilities are presented in our Consolidated Balance Sheets on a net basis when a legally enforceable master netting arrangement exists between the counterparty to a derivative contract and us.

Additionally, at September 28, 2019 , and September 29, 2018 , we had $ 95 million and $ 18 million , respectively, of net cash collateral posted with various counterparties where master netting arrangements exist and held no cash collateral.

The following table provides a reconciliation between the beginning and ending balance of marketable debt securities measured at fair value on a recurring basis in the table above that used significant unobservable inputs (Level 3):

September 28, 2019

(a) Our derivative assets and liabilities are presented in our Consolidated Balance Sheets on a net basis when a legally enforceable master netting arrangement exists between the counterparty to a derivative contract and us.

Additionally, at October 3, 2020 , and September 28, 2019 , we had $ 16 million and $ 95 million , respectively, of net cash collateral posted with various counterparties where master netting arrangements exist and held no cash collateral.

October 3, 2020

September 28, 2019

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Balance at end of year

Total gains (losses) for the periods included in earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities still held at end of year

The following methods and assumptions were used to estimate the fair value of each class of financial instrument:

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Significant changes to assumptions or unobservable inputs in the valuation of our Level 3 instruments would not have a significant impact to our consolidated financial statements.

The following table sets forth our available-for-sale securities' amortized cost basis, fair value and unrealized gain (loss) by significant investment category:

September 28, 2019

The following table sets forth our available-for-sale securities' amortized cost basis, fair value and unrealized gain (loss) by significant investment category (in millions):

October 3, 2020

September 28, 2019

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We recognized no other than temporary impairment in earnings for fiscal 2020 and fiscal 2019.

No other than temporary losses were deferred in OCI as of September 28, 2019 , and September 29, 2018 .

No other than temporary losses were deferred in OCI as of October 3, 2020 , and September 28, 2019 .

Deferred Compensation Assets:

We maintain non-qualified deferred compensation plans for certain executives and other highly compensated employees.

We maintain non-qualified deferred compensation plans for certain executives and other highly compensated team members.

Investments are generally maintained within a trust and include money market funds, mutual funds and life insurance policies.

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Our valuation included unobservable Level 3 inputs and was based on expected sales proceeds from a competitive bidding process and ongoing discussions with potential buyers.

In the fourth quarter of fiscal 2017, we recorded an impairment charge totaling $ 45 million , related to one of the non-protein businesses held for sale, due to a revised estimate of the business’ fair value based on current expected net sales proceeds.

The impairment charge was recorded in Cost of Sales in our Consolidated Statement of Income for fiscal 2017, and consisted of Goodwill and Intangible Assets previously classified within Assets held for sale.

Our valuation included unobservable Level 3 inputs and was based on expected sales proceeds following a competitive bidding process.

In the second quarter of fiscal 2017, we recorded a $ 52 million impairment charge related to our San Diego Prepared Foods operation.

The impairment was comprised of $ 43 million of property, plant and equipment, $ 8 million of definite lived intangibles assets and $ 1 million of other assets.

Our valuation of these assets was primarily based on discounted cash flows and relief-from-royalty models, which included unobservable Level 3 inputs.

Other Financial Instruments

Fair value of our debt is principally estimated using Level 2 inputs based on quoted prices for those or similar instruments.

Fair value and carrying value for our debt are as follows:

September 28, 2019

Fair value and carrying value for our debt are as follows (in millions):

October 3, 2020

September 28, 2019

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We perform periodic credit evaluations of our customers’ financial condition and generally do not require collateral.

At September 28, 2019 , and September 29, 2018 , 16.2 % and 18.6 % , respectively, of our net accounts receivable balance was due from Walmart Inc.

At October 3, 2020 , and September 28, 2019 , 16.5 % and 16.2 % , respectively, of our net accounts receivable balance was due from Walmart Inc.

No other single customer or customer group represented greater than 10% of net accounts receivable.

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The total number of shares available for future grant under the Tyson Foods, Inc.

2000 Stock Incentive Plan ("Incentive Plan") was 12,952,617 at September 28, 2019 .

2000 Stock Incentive Plan ("Incentive Plan") was 9,979,081 at October 3, 2020 .

Stock Options

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Forfeited or expired

Outstanding, September 28, 2019

Exercisable, September 28, 2019

We generally grant stock options once a year.

Outstanding, October 3, 2020

Exercisable, October 3, 2020

The weighted average grant-date fair value of options granted in fiscal 2020 , 2019 and 2018 was $ 16.77 , $ 11.35 and $ 18.31 , respectively.

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Risk-free interest rates are based on the five-year Treasury bond rate.

In fiscal 2018, an additional grant was awarded for two executive officers who joined the Company subsequent to the initial annual grant.

Accordingly, the assumptions below for fiscal 2018 are calculated using the weighted average amounts for the two fiscal 2018 grants.

Assumptions as of the grant date used in the fair value calculation of each year’s grants are outlined in the following table.

Assumptions used in the fair value calculation are as of the grant dates and are outlined in the following table.

Expected life (in years)

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We realized $ 4 million , $ 14 million and $ 20 million related to excess tax deductions during fiscal 2020 , 2019 and 2018 , respectively.

As of September 28, 2019 , we had $ 18 million of total unrecognized compensation cost related to stock option plans that will be recognized over a weighted average period of 1.5 years .

As of October 3, 2020 , we had $ 21 million of total unrecognized compensation cost related to stock option plans that will be recognized over a weighted average period of 1.3 years .

Restricted Stock

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Nonvested, September 28, 2019

As of September 28, 2019 , we had $ 46 million of total unrecognized compensation cost related to restricted stock awards that will be recognized over a weighted average period of 1.9 years .

Nonvested, October 3, 2020

As of October 3, 2020 , we had $ 49 million of total unrecognized compensation cost related to restricted stock awards that will be recognized over a weighted average period of 1.8 years .

We recognized stock-based compensation expense related to restricted stock, net of income taxes, of $ 36 million , $ 26 million and $ 22 million for fiscal 2020 , 2019 and 2018 , respectively.

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Performance-Based Shares

We award performance-based shares of our Class A stock to certain employees.

We award performance-based shares of our Class A stock to certain team members.

These awards are typically granted once a year.

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Nonvested, September 28, 2019

Nonvested, October 3, 2020

We recognized stock-based compensation expense related to performance shares, net of income taxes, of $ 18 million , $ 16 million and $ 12 million for fiscal 2020 , 2019 and 2018 , respectively.

The related tax benefit for fiscal 2020 , 2019 and 2018 was $ 4 million , $ 4 million and $ 5 million , respectively.

As of September 28, 2019 , we had $ 26 million of total unrecognized compensation based upon our progress toward the attainment of criteria related to performance-based share awards that will be recognized over a weighted average period of 1.8 years .

As of October 3, 2020 , we had $ 33 million of total unrecognized compensation based upon our progress toward the attainment of criteria related to performance-based share awards that will be recognized over a weighted average period of 1.9 years .

PENSIONS AND OTHER POSTRETIREMENT BENEFITS

At September 28, 2019 , we had nine defined benefit pension plans consisting of five funded qualified plans, which are all frozen and noncontributory, and four unfunded non-qualified plans.

At October 3, 2020 , we had six defined benefit pension plans consisting of two frozen and noncontributory funded qualified plans and four unfunded non-qualified plans.

Additionally, we have two plans that were terminated during fiscal 2020, which have residual plan assets of $ 27 million and no benefit obligations as of October 3, 2020 .

The benefits provided under these plans are based on a formula using years of service and either a specified benefit rate or compensation level.

The non-qualified defined benefit plans are for certain contracted officers and use a formula based on years of service and final average salary.

We also have other postretirement benefit plans for which substantially all of our employees may receive benefits if they satisfy applicable eligibility criteria.

We also have other postretirement benefit plans for which substantially all of our team members may receive benefits if they satisfy applicable eligibility criteria.

The postretirement healthcare plans are contributory with participants’ contributions adjusted when deemed necessary.

We have defined contribution retirement programs for various groups of employees.

We have defined contribution retirement programs for various groups of team members.

We recognized expenses of $ 103 million , $ 97 million and $ 84 million in fiscal 2020 , 2019 and 2018 , respectively.

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During fiscal 2019, we issued a notice of intent to terminate three other qualified pension plans.

The settlements of these plans are expected to occur in fiscal 2020, through purchased annuities.

Since the amount of the settlements depends on a number of factors determined as of the liquidation date, including the annuity pricing, interest rates and investment performance, we are currently unable to determine the ultimate cost of the settlements.

However, based on current market rates, we estimate that we will incur settlement gains at final liquidation in the range of approximately $ 40 million to $ 60 million .

Contributions to purchase annuities at the time of settlement are expected to be in the range of approximately $ 10 million to $ 30 million based on current market conditions of each plan at September 28, 2019 .

The settlements of the terminated plans occurred during fiscal 2020, through purchased annuities, and we incurred settlement gains of approximately $ 112 million related to the plan terminations.

No significant contributions to purchase annuities at the time of settlement were necessary.

Due to favorable annuity pricing at the time of settlement, approximately $ 52 million in residual plan assets remained in the plan following the annuity purchase.

A portion of these funds have been transferred to a qualified replacement plan during fiscal 2020, with the remaining funds to be transferred in fiscal 2021.

Benefit Obligations and Funded Status

The following table provides a reconciliation of the changes in the plans’ benefit obligations, assets and funded status at September 28, 2019 , and September 29, 2018 :

The following table provides a reconciliation of the changes in the plans’ benefit obligations, assets and funded status at October 3, 2020 , and September 28, 2019 (in millions):

Pension Benefits

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Funded status

Amounts recognized in the Consolidated Balance Sheets consist of:

Amounts recognized in the Consolidated Balance Sheets consist of (in millions):

Pension Benefits

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Total assets (liabilities)

Amounts recognized in Accumulated Other Comprehensive Income consist of:

Amounts recognized in Accumulated Other Comprehensive Income consist of (in millions):

Pension Benefits

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Total accumulated other comprehensive (income)/loss:

We had five pension plans at September 28, 2019 , and September 29, 2018 , that had an accumulated benefit obligation in excess of plan assets.

Plans with accumulated benefit obligations in excess of plan assets are as follows:

We had four pension plans at October 3, 2020 and five pension plans at September 28, 2019 , that had an accumulated benefit obligation in excess of plan assets.

Plans with accumulated benefit obligations in excess of plan assets are as follows (in millions):

Pension Benefits

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Fair value of plan assets

The accumulated benefit obligation for all qualified pension plans was $ 1,478 million and $ 1,392 million at September 28, 2019 , and September 29, 2018 , respectively.

The accumulated benefit obligation for all qualified pension plans was $ 31 million and $ 1,478 million at October 3, 2020 , and September 28, 2019 , respectively.

Net Periodic Benefit Cost (Credit)

Components of net periodic benefit cost (credit) for pension and postretirement benefit plans recognized in the Consolidated Statements of Income are as follows:

Components of net periodic benefit cost (credit) for pension and postretirement benefit plans recognized in the Consolidated Statements of Income are as follows (in millions):

Pension Benefits

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Net periodic benefit cost (credit)

As of September 28, 2019 , we expect no amounts to be reclassified into earnings within the next 12 months related to net periodic benefit cost (credit) for the qualified pension plans, excluding pending settlements.

As of September 28, 2019 , the amounts expected to be reclassified into earnings within the next 12 months related to net periodic benefit cost (credit) for the non-qualified pension plans and the other postretirement benefit plans are not significant.

Each of the components other than the service cost component were recorded in the Consolidated Statements of Income in Other, net.

As of October 3, 2020 , we expect no amounts to be reclassified into earnings within the next 12 months related to net periodic benefit cost (credit) for the qualified pension plans, excluding pending settlements.

As of October 3, 2020 , the amounts expected to be reclassified into earnings within the next 12 months related to net periodic benefit cost (credit) for the non-qualified pension plans and the other postretirement benefit plans are not significant.

Weighted average assumptions are as follows:

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Our discount rate assumptions used to account for pension and other postretirement benefit plans reflect the rates at which the benefit obligations could be effectively settled.

The discount rates for two of our plans that are expected to settle in fiscal 2020 were determined using a composite rate comprised of an annuity purchase rate and a lump sum conversion discount rate based on the portions of the populations that are assumed to be purchased under the annuity contract with the insurance company versus those who will elect lump sums, respectively.

The discount rates for two of our plans that were settled in fiscal 2020 were determined using a composite rate comprised of an annuity purchase rate and a lump sum conversion discount rate based on the portions of the populations that were purchased under the annuity contract with the insurance company versus those who elected lump sums, respectively.

The discount rates for our other plans were determined using a cash flow matching technique whereby the rates of a yield curve, developed from high-quality debt securities, were applied to the benefit obligations to determine the appropriate discount rate.

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We have eight other postretirement benefit plans, of which five are healthcare and life insurance related.

Two of these plans, with benefit obligations totaling $ 17 million at September 28, 2019 , were not impacted by healthcare cost trend rates as one consists of fixed annual payments and one is life insurance related.

One of the healthcare plans, with benefit obligations less than $ 1 million at September 28, 2019 , was not impacted by healthcare cost trend rates due to previous plan amendments.

The remaining two plans, with benefit obligations totaling $ 11 million and $ 9 million , at September 28, 2019 , utilized assumed healthcare cost trend rates of 7.3 % and 7.0 % , respectively.

The healthcare cost trend rates will be grading down to an ultimate rate of 5 % in 2026 and 4.5 % in 2027.

Two of these plans, with benefit obligations totaling $ 16 million at October 3, 2020 , were not impacted by healthcare cost trend rates as one consists of fixed annual payments and one is life insurance related.

One of the healthcare plans, with benefit obligations less than $ 1 million at October 3, 2020 , was not impacted by healthcare cost trend rates due to previous plan amendments.

The remaining two plans, with benefit obligations totaling $ 8 million and $ 3 million , at October 3, 2020 , utilized assumed healthcare cost trend rates of 7.0 % and 6.8 % , respectively.

The healthcare cost trend rates will be grading down to an ultimate rate of 4.5 % and 5.0 % , respectively in 2027.

A one-percentage-point change in assumed health-care cost trend rates would not have a significant effect on the postretirement benefit obligation.

The asset allocation for pension plan assets at September 28, 2019 was approximately 73 % fixed income securities and approximately 27 % cash.

The increased allocation to cash is due to the intent to terminate these plans in the next year.

The target asset allocation is 100 % fixed income securities.

Additionally, one of our foreign subsidiary pension plans had $ 31 million in plan assets held in an insurance trust at September 28, 2019 .

The plan trustees have established a set of investment objectives related to the assets of the domestic pension plans and regularly monitor the performance of the funds and portfolio managers.

The 100 % target asset allocation to fixed income securities is based upon the intent to terminate these plans.

Our domestic plan assets consist mainly of common collective trusts which are primarily comprised of fixed income funds and equity securities.

Fixed income securities can include, but are not limited to, direct bond investments, and pooled or indirect bond investments.

Derivative instruments may also be used in concert with either fixed income or equity investments to achieve desired exposure or to hedge certain risks.

Derivative instruments can include, but are not limited to, futures, options, swaps or swaptions.

Our domestic plan assets also include mutual funds.

We believe there are no significant concentrations of risk within our plan assets as of September 28, 2019 .

At September 28, 2019 , 36 % of plan assets were held in cash and cash equivalents (Level 1), 61 % in corporate and municipal bonds (Level 2).

The fair value of plan assets using Level 3 inputs was not significant at September 28, 2019 .

At September 29, 2018 , 97 % of plan assets were invested in common collective trusts measured at net asset value.

The fair value of plan assets using Level 2 and Level 3 inputs was not significant at September 29, 2018 .

The asset allocation for domestic pension plan assets at October 3, 2020 was 100 % cash due to the intent to terminate the remaining domestic qualified pension plan in the next year.

Additionally, one of our foreign subsidiary pension plans had $ 32 million in plan assets held in an insurance trust at October 3, 2020 .

At October 3, 2020 , 7 % of plan assets were held in cash and cash equivalents (Level 1) and 93 % were held in an insurance trust (Level 3).

At September 28, 2019 , 36 % of plan assets were held in cash and cash equivalents (Level 1), 61 % in corporate and municipal bonds (Level 2) and 3 % were held in an insurance trust (Level 3).

Contributions

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Estimated Future Benefit Payments

The following benefit payments are expected to be paid:

The following benefit payments are expected to be paid (in millions):

Pension Benefits

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The above benefit payments for other postretirement benefit plans are not expected to be offset by Medicare Part D subsidies in fiscal 2021 .

The above 2020 benefit payments do not include anticipated accelerated payments for a plan termination within three of our qualified pension plans.

The plan termination process for one of these plans began on October 1, 2018 and for the remaining two plans began on December 31, 2018.

Full settlement is expected to occur in fiscal 2020.

Multi-Employer Plans

Additionally, we participate in three multi-employer plans that provide defined benefits to certain employees covered by collective bargaining agreements.

Additionally, we participate in three multi-employer plans that provide defined benefits to certain team members covered by collective bargaining agreements.

Such plans are usually administered by a board of trustees composed of the management of the participating companies and labor representatives.

The risks of participating in multi-employer plans are different from single-employer plans.

Assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other participating employers.

Assets contributed to the multi-employer plan by one employer may be used to provide benefits to team members of other participating employers.

If a participating employer stops contributing to the plan, the unfunded obligation of the plan may be borne by the remaining participating employers.

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The net pension cost of the plans is equal to the annual contributions determined in accordance with the provisions of negotiated labor contracts.

Contributions to the plans were $ 2 million in fiscal 2019 and 2018 .

Assets contributed to such plans are not segregated or otherwise restricted to provide benefits only to our employees.

Contributions to the plans were $ 1 million in fiscal 2020 and $ 2 million in fiscal 2019 .

Assets contributed to such plans are not segregated or otherwise restricted to provide benefits only to our team members.

The future cost of the plans is dependent on a number of factors including the funded status of the plans and the ability of the other participating companies to meet ongoing funding obligations.

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Additionally, during fiscal 2019, we initiated our withdrawal from the Retail, Wholesale and Department Store International Union and Industry Pension Fund ("RWDSU Fund").

As a result of our anticipated withdrawal from the RWDSU Fund, we recorded a $ 15 million termination liability.

As a result of our withdrawal from the RWDSU Fund, we recorded a $ 15 million termination liability.

We received the withdrawal letter from the RWDSU fund during fiscal 2020 and reduced the termination liability accordingly to $ 10 million .

Subsequently during fiscal 2020, we initiated our withdrawal from the Pension Fund of Local 227.

As a result of our withdrawal from the Pension Fund of Local 227, we recorded a $ 1 million termination liability.

In addition to regular contributions, we could be obligated to pay additional contributions (known as complete or partial withdrawal liabilities) if it has unfunded vested benefits.

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FIP/RP Status

Contributions (in millions)

Contributions

(in millions)

Surcharge Imposed

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52-6118572/001

Pension Fund of Local 227 (b)

Pension Fund of Local 227

61-6054018/001

Retail, Wholesale and Department Store International Union and Industry Pension Fund (c)

Retail, Wholesale and Department Store International Union and Industry Pension Fund

63-0708442/001

Renewal negotiations for the Bakery and Confectionery Union and Industry International Pension Fund are in progress.

Contributions in fiscal 2019 exceeded 5% of plan contributions for the plan year ended October 31, 2018.

Contributions in fiscal 2019 exceeded 5% of plan contributions for the plan year ended December 31, 2018.

COMPREHENSIVE INCOME (LOSS)

The components of accumulated other comprehensive loss are as follows:

The components of accumulated other comprehensive loss are as follows (in millions):

Accumulated other comprehensive income (loss), net of taxes:

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Total accumulated other comprehensive income (loss)

(1) Includes reclass from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act, following adoption of the applicable new accounting standard in fiscal 2018.

The before and after tax changes in the components of other comprehensive income (loss) are as follows:

The before and after tax changes in the components of other comprehensive income (loss) are as follows (in millions):

Derivatives accounted for as cash flow hedges:

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We measure segment profit as operating income (loss).

International/Other primarily includes our foreign operations in Australia, China, South Korea, Malaysia, Mexico, the Netherlands, Thailand and the United Kingdom, third-party merger and integration costs and corporate overhead related to Tyson New Ventures, LLC.

International/Other primarily includes our foreign operations in Australia, China, Malaysia, Mexico, the Netherlands, South Korea and Thailand, third-party merger and integration costs and corporate overhead related to Tyson New Ventures, LLC.

Beef includes our operations related to processing live fed cattle and fabricating dressed beef carcasses into primal and sub-primal meat cuts and case-ready products.

Products are marketed domestically to food retailers, foodservice distributors, restaurant operators, hotel chains and noncommercial foodservice establishments such as schools, healthcare facilities, the military and other food processors, as well as to international export markets.

This segment also includes sales from allied products such as hides and variety meats, as well as logistics operations to move products through the supply chain.

This segment also includes sales from specialty products such as hides and variety meats, as well as logistics operations to move products through the supply chain.

Pork includes our operations related to processing live market hogs and fabricating pork carcasses into primal and sub-primal cuts and case-ready products.

This segment also includes our live swine group, related allied product processing activities and logistics operations to move products through the supply chain.

Chicken includes our domestic operations related to raising and processing live chickens into, and purchasing raw materials for fresh, frozen and value-added chicken products, as well as sales from allied products.

This segment also includes our live swine group, related specialty product processing activities and logistics operations to move products through the supply chain.

Our value-added chicken products primarily include breaded chicken strips, nuggets, patties and other ready-to-fix or fully cooked chicken parts.

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Prepared Foods includes our operations related to manufacturing and marketing frozen and refrigerated food products and logistics operations to move products through the supply chain.

This segment includes brands such as Jimmy Dean®, Hillshire Farm®, Ball Park®, Wright®, State Fair®, as well as artisanal brands Aidells®, Gallo Salame®, and Golden Island®.

This segment includes brands such as Jimmy Dean®, Hillshire Farm®, Ball Park®, Wright®, State Fair®, as well as artisanal brands Aidells® and Gallo Salame®.

Products primarily include ready-to-eat sandwiches, sandwich components such as flame-grilled hamburgers and Philly steaks, pepperoni, bacon, breakfast sausage, turkey, lunchmeat, hot dogs, flour and corn tortilla products, appetizers, snacks, prepared meals, ethnic foods, side dishes, meat dishes, breadsticks and processed meats.

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Assets and additions to property, plant and equipment relating to corporate activities remain in International/Other.

In fiscal 2017, we included $ 3 billion of unallocated goodwill associated with our acquisition of AdvancePierre in International/Other and we completed the allocation of goodwill to our segments in fiscal 2018.

Additionally, as of September 28, 2019, we allocated approximately $ 342 million of goodwill to International/Other as a result of our Keystone Foods and Thai and European operations acquisitions.

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Goodwill and Intangible Assets for further description.

Information on segments and a reconciliation to income from continuing operations before income taxes are as follows:

Information on segments and a reconciliation to income from continuing operations before income taxes are as follows (in millions):

International/Other

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Approximately 95 % , 96 % and 99 % of sales to external customers for fiscal 2020 , 2019 and 2018 , respectively, were sourced from the United States.

Approximately $ 24.8 billion and $ 23.2 billion of long-lived assets were located in the United States at September 28, 2019 , and September 29, 2018 , respectively.

Excluding goodwill and intangible assets, long-lived assets located in the United States totaled approximately $ 7.5 billion and $ 6.7 billion at September 28, 2019 , and September 29, 2018 , respectively.

Approximately $ 1,107 million and $ 212 million of long-lived assets were located in foreign locations, primarily Brazil, China, the European Union, New Zealand and Thailand at September 28, 2019 , and September 29, 2018 , respectively.

Excluding goodwill and intangible assets, long-lived assets in foreign countries totaled approximately $ 506 million and $ 201 million at September 28, 2019 , and September 29, 2018 , respectively.

We sell certain products in foreign markets, primarily Australia, Canada, Central America, China, the European Union, Japan, Mexico, Malaysia, the Middle East, South Korea, Taiwan and Thailand.

Approximately $ 25.6 billion and $ 24.8 billion of long-lived assets were located in the United States at October 3, 2020 , and September 28, 2019 , respectively.

Excluding goodwill and intangible assets, long-lived assets located in the United States totaled approximately $ 8.5 billion and $ 7.5 billion at October 3, 2020 , and September 28, 2019 , respectively.

Approximately $ 1,287 million and $ 1,107 million of long-lived assets were located in foreign locations, primarily Brazil, China, the European Union, New Zealand and Thailand at October 3, 2020 , and September 28, 2019 , respectively.

Excluding goodwill and intangible assets, long-lived assets in foreign countries totaled approximately $ 648 million and $ 506 million at October 3, 2020 , and September 28, 2019 , respectively.

We sell certain products in foreign markets, primarily Australia, Canada, Central America, Chile, China, the European Union, the United Kingdom, Japan, Mexico, Malaysia, the Middle East, South Korea, Taiwan and Thailand .

Our export sales from the United States totaled $ 4.0 billion , $ 4.1 billion and $ 4.2 billion for fiscal 2020 , 2019 and 2018 , respectively.

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Sales of products produced in a country other than the United States were less than 10% of consolidated sales for each of fiscal 2020 , 2019 and 2018 .

The following table further disaggregates our sales to customers by major distribution channels:

The following tables further disaggregate our sales to customers by major distribution channels (in millions):

Twelve months ended October 3, 2020

Foodservice (b)

International (c)

Industrial and Other (d)

Prepared Foods

International/Other

Twelve months ended September 28, 2019

Consumer Products (a)

Foodservice (b)

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(c) Includes sales to international markets related to internationally produced products or export sales of domestically produced products.

(d) Includes sales to industrial food processing companies that further process our product to sell to end consumers and any remaining sales not included in the Consumer Products, Foodservice or International categories.

(d) Includes sales to industrial food processing companies that further process our product to sell to end consumers and any remaining sales not included in the Retail, Foodservice or International categories.

SUPPLEMENTAL CASH FLOWS INFORMATION

The following table summarizes cash payments for interest and income taxes:

The following table summarizes cash payments for interest and income taxes (in millions):

Interest, net of amounts capitalized

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TRANSACTIONS WITH RELATED PARTIES

We have operating leases for two wastewater facilities with an entity owned by the Donald J.

We have related party leases for two wastewater facilities with an entity owned by the Donald J.

Tyson Revocable Trust (for which Mr.

John Tyson, Chairman of the Company, is a trustee), Berry Street Waste Water Treatment Plant, LP ( 90 % of which is owned by the TLP), and the sisters of Mr.

John Tyson, Chairman of the Company, is a trustee), Berry Street Waste Water Treatment Plant, LP ( 90 % of which is owned by the Tyson Limited Partnership), and the sisters of Mr.

Prior to the third quarter of fiscal 2020, these leases were both classified as short-term operating leases.

Based on the assessment of the renewal of these leases, as of October 3, 2020, one lease was classified as a finance lease with a debt balance of $ 7 million which is primarily recognized as Long-term debt in our Consolidated Balance Sheet.

Total payments of approximately $ 1 million in each of fiscal 2020 , 2019 and 2018 were paid to lease the facilities.

As of September 28, 2019 , the TLP, of which John Tyson and director Barbara Tyson are general partners, owned 70 million shares, or 99.985 % of our outstanding Class B stock and, along with the members of the Tyson family, owned 6.3 million shares of Class A stock, giving it control of approximately 70.97 % of the total voting power of our outstanding voting stock.

As of October 3, 2020 , the TLP, of which John Tyson and director Barbara Tyson are general partners, owned 70 million shares, or 99.985 % of our outstanding Class B stock and, along with the members of the Tyson family, owned 6.6 million shares of Class A stock, giving it control of approximately 71.06 % of the total voting power of our outstanding voting stock.

In August 2017, the Company committed to invest $ 5 million for a 17.5 % equity interest in Buchan Ltd., a Mauritian private holding company of poultry operations in sub-Saharan Africa.

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We completed our funding commitment in fiscal 2018.

In fiscal 2019, 2018 and 2017, the Company provided administrative services to the Tyson Limited Partnership, the beneficial owner of 70 million shares of Class B stock, and the Tyson Limited Partnership, through TLP Investment, L.P., reimbursed the Company $ 0.3 million .

In fiscal 2020, 2019 and 2018, the Company provided administrative services to the Tyson Limited Partnership, the beneficial owner of 70 million shares of Class B stock, and the Tyson Limited Partnership, through TLP Investment, L.P., reimbursed the Company $ 0.2 million in fiscal 2020 and $ 0.3 million in both fiscal 2019 and fiscal 2018.

COMMITMENTS AND CONTINGENCIES

We lease equipment, properties and certain farms for which total rentals approximated $ 220 million , $ 200 million and $ 186 million , in fiscal 2019 , 2018 and 2017 , respectively.

Most leases have initial terms of up to seven years , some with varying renewal periods.

M inimum lease commitments under non-cancelable leases at September 28, 2019 , were:

Operating Lease Commitments

2025 and beyond

We guarantee obligations of certain outside third parties, consisting primarily of leases, debt and grower loans, which are substantially collateralized by the underlying assets.

Terms of the underlying debt cover periods up to 10 years, and the maximum potential amount of future payments as of September 28, 2019 , was $ 14 million .

We also maintain operating leases for various types of equipment, some of which contain residual value guarantees for the market value of the underlying leased assets at the end of the term of the lease.

The remaining terms of the lease maturities cover periods over the next 10 years.

The maximum potential amount of the residual value guarantees is $ 93 million , all of which could be recoverable through various recourse provisions, including those based on the fair value of the underlying leased assets.

We guarantee obligations of certain outside third parties, consisting primarily of grower loans, which are substantially collateralized by the underlying assets.

The remaining terms of the underlying obligations cover periods up to 10 years, and the maximum potential amount of future payments as of October 3, 2020 , was $ 13 million .

The likelihood of material payments under these guarantees is not considered probable.

At September 28, 2019 , and September 29, 2018 , no significant liabilities for guarantees were recorded.

At October 3, 2020 , and September 28, 2019 , no significant liabilities for guarantees were recorded.

We have cash flow assistance programs in which certain livestock suppliers participate.

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Our potential maximum obligation associated with these programs is limited to the fair value of each participating livestock supplier’s net tangible assets.

The potential maximum obligation as of September 28, 2019 , was approximately $ 300 million .

The total receivables under these programs were $ 5 million and $ 6 million at September 28, 2019 and September 29, 2018 , respectively.

The potential maximum obligation as of October 3, 2020 , was approximately $ 320 million .

The total receivables under these programs were $ 29 million and $ 5 million at October 3, 2020 and September 28, 2019 , respectively.

These receivables are included, net of allowance for uncollectible amounts, in Accounts Receivable in our Consolidated Balance Sheets.

Even though these programs are limited to the net tangible assets of the participating livestock suppliers, we also manage a portion of our credit risk associated with these programs by obtaining security interests in livestock suppliers’ assets.

After analyzing residual credit risks and general market conditions, we had no allowance for these programs' estimated uncollectible receivables at September 28, 2019 , and September 29, 2018 .

After analyzing residual credit risks and general market conditions, we had no allowance for these programs' estimated uncollectible receivables at October 3, 2020 , and September 28, 2019 .

When constructing new facilities or making major enhancements to existing facilities, we will occasionally enter into incentive agreements with local government agencies in order to reduce certain state and local tax expenditures.

Under these agreements, we transfer the related assets to various local government entities and receive Industrial Revenue Bonds.

These funds are generally considered restricted cash, which is reported in the Consolidated Balance Sheets in Other Assets, and totaled $ 46 million and $ 0 at October 3, 2020 and September 28, 2019 , respectively.

Additionally, under certain agreements, we transfer the related assets to various local government entities and receive Industrial Revenue Bonds.

We immediately lease the facilities from the local government entities and have an option to re-purchase the facilities for a nominal amount upon tendering the Industrial Revenue Bonds to the local government entities at various predetermined dates.

The Industrial Revenue Bonds and the associated obligations for the leases of the facilities offset, and the underlying assets remain in property, plant and equipment.

At September 28, 2019 , total amounts under these types of arrangements totaled $ 698 million .

We enter into agreements with livestock growers that can have fixed and variable payment structures, but are generally cancelable and based on flocks placed with growers.

Livestock grower fixed or estimable non-cancelable commitments at September 28, 2019 were:

Livestock Grower Commitments

2025 and beyond

Additionally, we enter into other purchase commitments for various items such as grains and livestock contracts, which at September 28, 2019 were:

Other Purchase Commitments

At October 3, 2020 , total amounts under these types of arrangements totaled $ 573 million .

Additionally, we enter into other purchase commitments for various items such as grains, livestock contracts and variable livestock grower commitments that are estimable, which at October 3, 2020 were (in millions):

Purchase Obligations

2026 and beyond

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We believe we have substantial defenses to the claims made and intend to vigorously defend these matters.

On September 2, 2016, Maplevale Farms, Inc., acting on its own behalf and a putative class of direct purchasers of poultry products, filed a class action complaint against us and certain of our poultry subsidiaries, as well as several other poultry processing companies, in the Northern District of Illinois.

On September 2, 2016, Maplevale Farms, Inc., acting on its own behalf and on behalf of a putative class of direct purchasers of poultry products, filed a class action complaint against us and certain of our poultry subsidiaries, as well as several other poultry processing companies, in the Northern District of Illinois.

Subsequent to the filing of this initial complaint, additional lawsuits making similar claims on behalf of putative classes of direct and indirect purchasers were filed in the United States District Court for the Northern District of Illinois.

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The plaintiffs seek treble damages, injunctive relief, pre- and post-judgment interest, costs, and attorneys’ fees on behalf of the putative classes.

Decisions on class certification and summary judgment motions likely to be filed by defendants are currently expected in late calendar year 2020 and early 2021.

If necessary, trial will occur after rulings on class certification and any summary judgment motions.

Decisions on class certification and summary judgment motions likely to be filed by defendants are currently expected in late calendar year 2020 and 2021.

If necessary, trial will occur after rulings on class certification and any summary judgment motions in calendar year 2022.

On April 26, 2019, the plaintiffs notified us that the U.S.

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Subsequently, we received a grand jury subpoena from the DOJ seeking additional documents and information related to the chicken industry.

We are fully cooperating with the DOJ’s request.

On October 16, 2019, the court extended the limited stay of discovery in the civil action through June 27, 2020.

On June 2, 2020 a grand jury for the District of Colorado returned an indictment against four individual executives employed by two other poultry processing companies charging a conspiracy to engage in bid-rigging in violation of federal antitrust laws.

On June 10, 2020, we announced that we uncovered information in connection with the grand jury subpoena that we had previously self-reported to the DOJ and have been fully cooperating with the DOJ as part of our application for leniency under the DOJ's Corporate Leniency Program.

On October 7, 2020, the DOJ announced a superseding indictment adding charges against six more individuals to charge a total of 10 executives and employees at poultry processing companies for a conspiracy to fix prices and rig bids for broiler chicken products from at least 2012 until at least early 2019.

The partial stay previously granted by the court in the civil action was lifted and discovery is continuing.

Plaintiffs in the civil action filed complaints expressly referencing the conduct in the DOJ’s indictments or motions arguing that bid-rigging conduct was encompassed by prior complaints.

On September 22, 2020, the court ruled that bid-rigging claims will be consolidated into the existing action but bifurcated from the original supply reduction and Georgia Dock claims.

The original claims will proceed on their current schedule and the bid-rigging claims, including any related discovery, are stayed until the supply reduction and Georgia Dock claims are resolved.

The Commonwealth of Puerto Rico, on behalf of its citizens, has also initiated a civil lawsuit against us, certain of our subsidiaries, and several other poultry processing companies alleging activities in violation of the Puerto Rican antitrust laws.

This lawsuit has been transferred to the Northern District of Illinois for coordinated pre-trial proceedings.

On July 15, 2020, the court ruled that Puerto Rico could pursue claims based on direct purchases from defendants, but dismissed all claims based on indirect purchases or Puerto Rico’s parens patriae status.

On August 26, 2020, Puerto Rico filed a notice of voluntary dismissal without prejudice and withdrew all claims against defendants.

On September 1, 2020, the Office of the Attorney General of the State of New Mexico filed a complaint against us and certain of our poultry subsidiaries, as well as several other poultry processing companies and Agri Stats, Inc., in Santa Fe County, New Mexico.

The complaint alleges violations of New Mexico’s antitrust, unfair trade practice, and unjust enrichment laws based on allegations of conspiracies to manipulate the Georgia Dock, exchange information and reduce the supply of broiler chickens.

On March 1, 2017, we received a civil investigative demand (“CID”) from the Office of the Attorney General, Department of Legal Affairs, of the State of Florida.

The CID requests information primarily related to possible anticompetitive conduct in connection with the Georgia Dock, a chicken products pricing index formerly published by the Georgia Department of Agriculture.

We have been cooperating with the Attorney General’s office.

The Florida CID requests information primarily related to possible anticompetitive conduct in connection with the Georgia Dock, a chicken products pricing index formerly published by the Georgia Department of Agriculture.

We have been cooperating with the Florida Attorney General’s office.

In July 2019, the Attorney General issued a subpoena to the In re Broiler Chicken Antitrust Litigation plaintiffs requesting all information provided to the DOJ.

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The Louisiana CID requests all deposition transcripts related to the In re Broiler Chicken Antitrust Litigation .

On August 6, 2020, we received a CID from the Office of the Attorney General of the State of Washington.

The Washington CID requests information primarily related to possible anticompetitive conduct or violations of state consumer protection laws in connection with the broiler chicken market.

We have been cooperating with the Washington’s Attorney General’s office.

On June 18, 2018, a group of plaintiffs acting on their own behalf and on behalf of a putative class of all persons and entities who indirectly purchased pork, filed a class action complaint against us and certain of our pork subsidiaries, as well as several other pork processing companies, in the United States District Court for the District of Minnesota.

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The plaintiffs filed amended complaints on November 6, 2019, in which the plaintiffs again have alleged that the defendants conspired and combined to fix, raise, maintain, and stabilize the price of pork and pork products in violation of state and federal antitrust, consumer protection, and unjust enrichment common laws, and the plaintiffs again are seeking treble damages, injunctive relief, pre- and post-judgment interest, costs, and attorneys’ fees on behalf of the putative classes.

We intend to respond to the amended complaints.

The Commonwealth of Puerto Rico, on behalf of its citizens, has also initiated a civil lawsuit against us, certain of our subsidiaries, and several other pork processing companies alleging activities in violation of the Puerto Rican antitrust laws.

This lawsuit was transferred to the District of Minnesota and remains pending with an amended complaint due on or before December 6, 2019.

This lawsuit was transferred to the District of Minnesota and an amended complaint was filed on December 6, 2019.

We moved to dismiss the amended complaints, and on October 16, 2020, the court granted the motion with respect to certain state law claims but denied the motion with respect to the plaintiffs’ federal antitrust claims.

On April 23, 2019, a group of plaintiffs, acting on behalf of themselves and on behalf of a putative class of all persons and entities who directly sold to the named defendants any fed cattle for slaughter and all persons who transacted in live cattle futures and/or options traded on the Chicago Mercantile Exchange or another U.S.

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Following the filing of defendants’ motion to dismiss this matter, the plaintiffs filed a second amended complaint on October 4, 2019.

We moved to dismiss the second amended complaint, which the court granted on September 28, 2020.

The dismissal is without prejudice, and the plaintiffs are permitted to amend their complaint by December 28, 2020.

On April 26, 2019, a group of plaintiffs, acting on behalf of themselves and on behalf of a putative class of indirect purchasers of beef for personal use filed a class action complaint against us, other beef packers, and Agri Stats, Inc., an information services provider, in the United States District Court for the District of Minnesota.

Agri-Stats was subsequently dismissed from the suit.

The plaintiffs allege that the packer defendants conspired to reduce slaughter capacity by closing or idling plants, limiting their purchases of cash cattle, coordinating their procurement of cash cattle, and reducing their slaughter numbers so as to reduce beef output, all in order to artificially raise prices of beef.

The plaintiffs seek, among other things, damages under state antitrust and consumer protection statutes and the common law of approximately 30 states, as well as injunctive relief.

The defendants’ motions to dismiss this matter are pending.

The plaintiffs filed a first amended complaint in which the claims against Agri Stats were dismissed and subsequently filed a second amended complaint on November 22, 2019.

We moved to dismiss the second amended complaint.

The indirect consumer purchaser litigation is styled as Peterson v.

JBS USA Food Company Holdings, et al.

On October 16, 2019, a direct purchaser of beef, on behalf of itself and other direct purchasers of beef, filed a class action complaint against us and other beef packer defendants in the United States District Court for the District of Minnesota.

The plaintiff alleges that the defendants conspired to reduce slaughter capacity by closing and idling plants, limiting their purchases of cash cattle, coordinating their procurement of cash cattle, and reducing their slaughter numbers, so as to reduce beef output, all in order to artificially raise prices of beef.

The plaintiffs seek, among other things, treble monetary damages, punitive damages, restitution, and pre- and post-judgment interest, as well as declaratory and injunctive relief.

Additional complaints have been filed on behalf of a putative class of direct purchasers of beef alleging violations of Section 1 of the Sherman Act based on an alleged conspiracy to artificially fix, raise, and stabilize the wholesale price for beef, as well as on behalf of a putative class of commercial and institutional indirect purchasers of beef alleging violations of Section 1 of the Sherman Act, various state antitrust laws and unjust enrichment based on an alleged conspiracy to artificially inflate the price for beef.

On September 28, 2020, the court granted our motion to dismiss the second amended complaint.

The dismissal is without prejudice, and the plaintiffs are permitted to amend their complaint by December 28, 2020.

On May 22, 2020, we received a CID from DOJ's Antitrust Division.

The CID requests information related to the fed cattle and beef packing markets.

We have been cooperating with the DOJ's Antitrust Division with respect to the CID.

On August 30, 2019, Judy Jien, Kieo Jibidi and Elaisa Clement, acting on their own behalf and a putative class of non-supervisory production and maintenance employees at chicken processing plants in the continental United States, filed a class action complaint against us and certain of our subsidiaries, as well as several other poultry processing companies, in the United States District Court for the District of Maryland.

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The court consolidated the Jien and Earnest cases for coordinated pretrial proceedings.

Following the consolidation, two additional lawsuits have been filed by individuals making similar allegations.

Following the consolidation, two additional lawsuits were filed by individuals making similar allegations.

The plaintiffs filed an amended consolidated complaint containing additional allegations concerning turkey processing plants and named additional defendants.

We moved to dismiss the amended consolidated complaint.

On September 16, 2020, the court dismissed claims against Tyson and certain other defendants without prejudice because the complaint improperly grouped together corporate subsidiaries.

The court otherwise denied the defendants’ motions to dismiss and sustained claims based on alleged conspiracies to fix wages and exchange information against five other defendants.

The court granted the plaintiffs leave to file an amended complaint to address the impermissible group pleading.

On October 16, 2020, the plaintiffs filed a second amended complaint reasserting their claims.

Our subsidiary, The Hillshire Brands Company (formerly named Sara Lee Corporation), is a party to a consolidation of cases filed by individual complainants with the Republic of the Philippines, Department of Labor and Employment and the National Labor Relations Commission ("NLRC") from 1998 through July 1999.

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We continue to maintain an accrual for this matter.

The Hillshire Brands Company was named as a defendant in an asbestos exposure case filed by Mark Lopez in May 2014 in the Superior Court of Alameda County, California.

Lopez was diagnosed with mesothelioma in January 2014 and is now deceased.

Lopez’s family members asserted negligence, premises liability and strict liability claims related to Mr.

Lopez’s alleged asbestos exposure from 1954-1986 from the Union Sugar plant in Betteravia, California.

The plant, which was sold in 1986, was owned by entities that were predecessors-in-interest to The Hillshire Brands Company.

In August 2017, the jury returned a verdict of approximately $ 13 million in favor of the plaintiffs, and a judgment was entered.

We appealed the judgment, but the appellate court affirmed the trial court's judgment in full.

Various claims have been asserted against the Company, its subsidiaries, and its officers and agents by, and on behalf of, team members who claim to have contracted COVID-19 in our facilities.

QUARTERLY FINANCIAL DATA (UNAUDITED)

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Class B Basic

First quarter fiscal 2020 net income included $ 52 million pretax restructuring and related charges and $ 16 million pretax Beef production facility fire costs, net of insurance proceeds.

Second quarter fiscal 2020 net income included $ 110 million pretax gain from pension plan terminations.

Third quarter fiscal 2020 net income included $ 15 million pretax Beef production facility fire insurance proceeds, net of costs and $ 6 million pretax gain from pension plan terminations.

Fourth quarter fiscal 2020 net income included $ 23 million pretax restructuring and related charges and $ 65 million pretax income related to our accounting cycle resulting in a 53-week year in fiscal 2020.

First quarter fiscal 2019 net income included $ 26 million pretax Keystone Foods purchase accounting and acquisition related costs, which included an $ 11 million purchase accounting adjustment for the amortization of the fair value step-up of inventory and $ 15 million of acquisition related costs, and $ 8 million pretax restructuring and related charges.

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Third quarter fiscal 2019 net income included $ 105 million post tax recognition of previously unrecognized tax benefit, $ 55 million pretax gain on sale of an investment and $ 15 million pretax restructuring and related charges.

Fourth quarter fiscal 2019 net income included $ 31 million pretax Beef production plant fire costs, a $ 41 million pretax impairment charge related to the divestiture of a business, $ 15 million pretax pension plan termination charge and $ 10 million pretax restructuring and related charges.

First quarter fiscal 2018 net income included a $ 994 million post tax recognition of tax benefit from remeasurement of net deferred tax liabilities at lower enacted tax rates, $ 4 million pretax impairment charge net of a realized gain related to the divestiture of non-protein businesses and $ 19 million pretax restructuring and related charges.

Second quarter fiscal 2018 net income included a $ 9 million post tax recognition of tax benefit from remeasurement of net deferred tax liabilities at lower enacted tax rates, $ 75 million pretax impairment charge related to the divestiture of non-protein businesses, $ 109 million one-time cash bonus to frontline employees and $ 12 million pretax restructuring and related charges.

Third quarter fiscal 2018 net income included $ 14 million pretax restructuring and related charges.

Fourth quarter fiscal 2018 net income included a $ 11 million pretax realized gain related to the divestiture of a non-protein business and $ 14 million pretax restructuring and related charges.

Fourth quarter fiscal 2019 net income included $ 31 million pretax Beef production facility fire costs, a $ 41 million pretax impairment charge related to the divestiture of a business, $ 15 million pretax pension plan termination charge and $ 10 million pretax restructuring and related charges.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of

Tyson Foods, Inc.

To the Board of Directors and Shareholders of Tyson Foods, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

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

and its subsidiaries (the “Company”) as of September 28, 2019 and September 29, 2018, and the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended September 28, 2019, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended September 28, 2019 appearing under Item 15 (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of September 28, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO").

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 28, 2019 and September 29, 2018 , and the results of its operations and its cash flows for each of the three years in the period ended September 28, 2019 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 28, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

and its subsidiaries (the “Company”) as of October 3, 2020 and September 28, 2019, and the related consolidated statements of income, of comprehensive income, of shareholders' equity and of cash flows for each of the three years in the period ended October 3, 2020, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended October 3, 2020 appearing under Item 15 (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of October 3, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of October 3, 2020 and September 28, 2019, and the results of its operations and its cash flows for each of the three years in the period ended October 3, 2020 in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of October 3, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases as of September 29, 2019.

Basis for Opinions

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Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Acquisition of Keystone Foods - Valuation of Acquired Customer Relationships

As described in Note 3 to the consolidated financial statements, during fiscal year 2019 the Company completed the acquisition of Keystone Foods for $2.3 billion in cash, subject to certain adjustments, which resulted in $659 million of intangible assets being recorded, primarily consisting of customer relationships.

Management used the multi-period excess earnings valuation approach to determine the fair value of the customer relationships intangible assets acquired.

Management applied significant judgment in estimating the fair value of the customer relationships intangible assets acquired, which involved the use of significant estimates and assumptions about sales, operating margins, attrition rates, growth rates, and discount rates based on budgets, business plans, economic projections, anticipated future cash flows and market place data.

The principal considerations for our determination that performing procedures relating to the valuation of the customer relationships intangible assets as a result of the acquisition of Keystone Foods is a critical audit matter are (i) there was a high degree of auditor judgment and subjectivity involved in performing procedures and evaluating audit evidence related to the fair value measurements of the acquired customer relationships intangible assets due to the significant amount of judgment by management when developing the estimates, (ii) significant audit effort was necessary to evaluate management’s anticipated future cash flows and significant assumptions, including the attrition rates, and (iii) the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained from these procedures.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of acquired customer relationships, as well as controls over the development of the significant assumptions related to the acquired customer relationships intangible assets, including the attrition rates.

These procedures also included, among others, testing management’s process for estimating the fair value of acquired customer relationships.

Testing management’s process included evaluating the appropriateness of the multi-period excess earnings valuation approach, testing the completeness, accuracy, and relevance of underlying data used in the valuation approach, and evaluating the reasonableness of significant assumptions, including the attrition rates.

Evaluating management’s assumptions related to the attrition rates involved evaluating whether the assumptions were reasonable considering (i) the current and past performance of the acquired businesses, (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s multi-period excess earnings valuation approach and certain significant assumptions, including the attrition rates .

Indefinite Life Intangible Assets Quantitative Impairment Assessments

As described in Notes 1 and 5 to the consolidated financial statements, the Company’s consolidated indefinite life intangible assets balance was $4.1 billion as of September 28, 2019.

As disclosed by management, an indefinite life intangible asset impairment test is conducted as of the first day of the fourth quarter each year, or more frequently if impairment indicators arise.

Management estimates the fair value of indefinite life intangible assets, where a quantitative impairment assessment is performed, using relief-from-royalty and multi-period excess earnings valuation approaches.

Under these valuation approaches, management makes estimates and assumptions about sales, operating margins, growth rates, royalty rates and discount rates based on budgets, business plans, economic projections, anticipated future cash flows and marketplace data.

The principal considerations for our determination that performing procedures relating to the indefinite life intangible assets quantitative impairment assessment is a critical audit matter are (i) there was significant judgment by management when developing the fair value measurements of the indefinite life intangible assets, which in turn led to a high degree of auditor judgment and subjectivity in performing procedures and evaluating audit evidence related to the fair value measurements and (ii) significant audit effort was necessary to evaluate management’s anticipated future cash flows and significant assumptions, including sales growth rates.

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill Impairment Assessments - Domestic Chicken and International Reporting Units

As described in Notes 1 and 5 to the consolidated financial statements, the Company’s consolidated goodwill balance was $10,899 million as of October 3, 2020, which included $3,266 million and $392 million for the Domestic Chicken and International reporting units, respectively.

As disclosed by management, a goodwill impairment test is conducted as of the first day of the fourth quarter each year, or more frequently if impairment indicators arise.

Management estimates the fair value of reporting units considering the use of various valuation techniques, with the primary technique being an income approach (discounted cash flow method) and another technique being a market approach (guideline public company method).

The determination of fair value using these techniques includes assumptions about sales, operating margins, growth rates, discount rates and valuation multiples based on budgets, business plans, economic projections and marketplace data.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the Domestic Chicken and International reporting units is a critical audit matter are (i) the significant judgment by management when developing the fair value measurements of the reporting units, (ii) the high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to management’s anticipated future cash flows and significant assumptions related to sales, operating margins, growth rates, discount rates and valuation multiples, and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the valuation of indefinite life intangible assets.

These procedures also included, among others, testing management’s process for developing the fair value estimates;

evaluating the appropriateness of the relief-from-royalty and multi-period excess earnings valuation approaches;

testing the completeness, accuracy, and relevance of underlying data used in the valuation approaches;

and evaluating the significant assumptions used by management, including sales growth rates.

Evaluating management’s assumptions related to sales growth rates involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance associated with the related brands, (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment, including controls over the valuation of the Company’s Domestic Chicken and International reporting units.

These procedures also included, among others, testing management’s process for developing the fair value estimates of the Domestic Chicken and International reporting units;

evaluating the appropriateness of the income and market valuation approaches;

testing the completeness and accuracy of underlying data used in the fair value estimates;

and evaluating management’s cash flow projections and significant assumptions related to sales, operating margins, growth rates, discount rates and valuation multiples.

Evaluating management’s assumptions related to sales, operating margins, growth rates, discount rates and valuation multiples involved evaluating whether the assumptions used were reasonable considering (i) the current and past performance associated with the related reporting units, (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s valuation methods and the sales, operating margins, growth rates, discount rates and valuation multiples significant assumptions.

/s/ PricewaterhouseCoopers LLP

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data