What changed in this filing

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Item 1. Financial Statements

2021-02-11 compared with 2020-08-03 · 284 added, 391 removed, 565 unchanged (54% of the section changed)

4 unchanged sentences

Three Months Ended

Nine Months Ended

June 27, 2020

June 29, 2019

June 27, 2020

June 29, 2019

January 2, 2021 December 28, 2019

Sales $ 10,460 $ 10,815

Cost of Sales 9,283 9,375

Gross Profit 1,177 1,440

Selling, General and Administrative 472 682

3 unchanged sentences

Interest expense 110 120

Other, net ( 19 ) ( 16 )

Total Other (Income) Expense 89 101

1 unchanged sentence

Income Tax Expense 144 148

Net Income 472 509

Net Income Attributable to Noncontrolling Interests 5 4

3 unchanged sentences

Class B Basic 70 70

Diluted 365 367

Net Income Per Share Attributable to Tyson:

1 unchanged sentence

Class B Basic $ 1.18 $ 1.27

Diluted $ 1.28 $ 1.38

See accompanying Notes to Consolidated Condensed Financial Statements.

3 unchanged sentences

Three Months Ended

Nine Months Ended

June 27, 2020

June 29, 2019

June 27, 2020

June 29, 2019

January 2, 2021 December 28, 2019

Net Income $ 472 $ 509

Other Comprehensive Income (Loss), Net of Taxes:

10 unchanged sentences

(In millions, except share and per share data)

June 27, 2020

September 28, 2019

January 2, 2021 October 3, 2020

Current Assets:

1 unchanged sentence

Accounts receivable, net 1,900 1,952

Inventories 3,915 3,859

Other current assets 323 367

1 unchanged sentence

Net Property, Plant and Equipment 7,664 7,596

Goodwill 10,913 10,899

Intangible Assets, net 6,719 6,774

Other Assets 1,618 1,589

Total Assets $ 35,458 $ 34,456

Liabilities and Shareholders’ Equity

Current Liabilities:

Current debt $ 566 $ 548

Accounts payable 1,997 1,876

12 unchanged sentences

Accumulated other comprehensive gain (loss) ( 102 ) ( 179 )

Treasury stock, at cost – 83 million shares at June 27, 2020 and 82 million shares at September 28, 2019

Treasury stock, at cost – 83 million shares at January 2, 2021 and October 3, 2020 ( 4,115 ) ( 4,145 )

Total Tyson Shareholders’ Equity 15,638 15,254

7 unchanged sentences

Three Months Ended

Nine Months Ended

June 27, 2020

June 29, 2019

June 27, 2020

June 29, 2019

January 2, 2021 December 28, 2019

Shares Amount Shares Amount

Class A Common Stock:

5 unchanged sentences

Stock-based compensation

( 22 ) ( 24 )

Balance at end of period 4,411 4,354

1 unchanged sentence

Balance at beginning of period

15,100 13,655

Net income attributable to Tyson

( 168 ) ( 166 )

Balance at end of period 15,399 13,994

1 unchanged sentence

Balance at beginning of period

( 179 ) ( 117 )

Other comprehensive income (loss) 77 38

2 unchanged sentences

Balance at beginning of period

83 ( 4,145 ) 82 ( 4,011 )

Purchase of Class A common stock — ( 17 ) 2 ( 132 )

Stock-based compensation

— 47 ( 1 ) 64

Balance at end of period 83 ( 4,115 ) 83 ( 4,079 )

Total Shareholders’ Equity Attributable to Tyson

$ 15,638 $ 14,235

Equity Attributable to Noncontrolling Interests:

1 unchanged sentence

Net income attributable to noncontrolling interests

Business combination and other

Other 6 ( 1 )

Total Equity Attributable to Noncontrolling Interests

4 unchanged sentences

(In millions)

Nine Months Ended

June 27, 2020

June 29, 2019

Three Months Ended

January 2, 2021 December 28, 2019

Cash Flows From Operating Activities:

Net income $ 472 $ 509

Depreciation and amortization 298 288

Deferred income taxes 17 ( 13 )

Other, net 18 27

Net changes in operating assets and liabilities 580 83

4 unchanged sentences

Proceeds from sale of marketable securities 15 19

Acquisitions, net of cash acquired

Proceeds from sale of business — 29

Acquisition of equity investments

Other, net 29 ( 82 )

Cash Used for Investing Activities ( 259 ) ( 381 )

7 unchanged sentences

Purchases of Tyson Class A common stock ( 17 ) ( 132 )

Dividends ( 159 ) ( 150 )

Stock options exercised 4 20

Cash (Used for) Provided by Financing Activities

Other, net ( 1 ) ( 2 )

Cash Used for Financing Activities ( 173 ) ( 507 )

Effect of Exchange Rate Changes on Cash 16 7

11 unchanged sentences

(“Tyson,” “the Company,” “we,” “us” or “our”).

Certain information and accounting policies and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations of the United States Securities and Exchange Commission.

Although we believe the disclosures contained herein are adequate to make the information presented not misleading, these consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended September 28, 2019 .

1 on Form 10-K/A filed with the SEC on February 11, 2021 (the “10-K/A”).

Preparation of consolidated condensed financial statements requires us to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated condensed financial statements and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

We believe the accompanying consolidated condensed financial statements contain all adjustments, which are of a normal recurring nature, necessary to state fairly our financial position as of June 27, 2020 , and the results of operations for the three and nine months ended June 27, 2020 , and June 29, 2019 .

We believe the accompanying consolidated condensed financial statements contain all adjustments, which are of a normal recurring nature, necessary to state fairly our financial position as of January 2, 2021, and the results of operations for the three months ended January 2, 2021, and December 28, 2019.

Results of operations and cash flows for the periods presented are not necessarily indicative of results to be expected for the full year.

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All significant intercompany accounts and transactions have been eliminated in consolidation.

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 Condensed 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 Condensed 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 Condensed Balance Sheets.

Lease assets are subject to review for impairment in a manner consistent with Property, Plant and Equipment.

ROU assets are presented in our Consolidated Condensed 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 Condensed 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 Condensed Statements of Cash Flows.

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 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 June 27, 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 Condensed Balance Sheet.

Total payments of approximately $ 1 million in each of the nine months ended June 27, 2020 and June 29, 2019 were paid to lease the facilities.

Use of Estimates

The consolidated condensed financial statements are prepared in conformity with accounting principles generally accepted in the United States, which require us to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes.

The consolidated condensed financial statements are prepared in conformity with accounting principles generally accepted in the United States, which require us to make estimates and assumptions that affect the amounts reported in the consolidated condensed financial statements and accompanying notes.

Actual results could differ from those estimates.

2 unchanged sentences

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.

Revision of Previously Issued Unaudited Consolidated Condensed Financial Statements

As previously disclosed in the 10-K/A for the year ended October 3, 2020, during the first quarter of fiscal 2021, the Company discovered information that led to an internal investigation relating to one of its cattle suppliers and determined that this supplier made misrepresentations regarding the number of cattle the supplier purchased on behalf of the Company’s Beef segment.

Based upon its investigation, the Company determined that the misappropriation of Company funds by the supplier caused the Company to overstate live cattle inventory for fiscal years and interim periods from 2017 through 2020.

The resulting loss to the Company and related inventory misstatement was isolated to the Beef segment and was attributable solely to this cattle supplier.

Although the Company evaluated the materiality of the misstatements and concluded that the misstatements did not have a material impact on the previously issued annual or interim financial statements, the Company revised its previously issued 2020, 2019 and 2018 annual financial statements to correct for such misstatements as set forth in the 10-K/A.

In connection with the filing of this Quarterly Report on Form 10-Q, the Company has revised the accompanying consolidated condensed interim financial statements as of and for the quarter ended December 28, 2019 to correct for the impact of the misstatements.

The applicable notes to the accompanying financials have also been corrected to reflect the impact of the revisions of the previously filed consolidated condensed interim financial statements.

The following tables represent revisions to our consolidated condensed financial information for the first quarter of fiscal 2020:

First Quarter in millions, except per share data

Quarter ended December 28, 2019

As originally reported Adjustments As revised

Consolidated Statement of Income:

Selling, General and Administrative $ 614 $ 68 $ 682

Operating Income 826 ( 68 ) 758

Income before Income Taxes 725 ( 68 ) 657

Income Tax Expense (Benefit) 164 ( 16 ) 148

Net Income 561 ( 52 ) 509

Net Income Attributable to Tyson 557 ( 52 ) 505

Net Income Per Share Attributable to Tyson

Class A Basic $ 1.56 $ ( 0.14 ) $ 1.42

Class B Basic $ 1.40 $ ( 0.13 ) $ 1.27

Diluted $ 1.52 $ ( 0.14 ) $ 1.38

Consolidated Statement of Comprehensive Income:

Net Income $ 561 $ ( 52 ) $ 509

Comprehensive Income 599 ( 52 ) 547

Comprehensive Income Attributable to Tyson 595 ( 52 ) 543

As of December 28, 2019

As originally reported Adjustments As revised

Consolidated Balance Sheet:

Inventories $ 4,304 $ ( 247 ) $ 4,057

Total Current Assets 7,193 ( 247 ) 6,946

Total Assets 33,811 ( 247 ) 33,564

Deferred Income Taxes 2,369 ( 63 ) 2,306

Retained Earnings (a)

14,178 ( 184 ) 13,994

Total Tyson Shareholders' Equity 14,419 ( 184 ) 14,235

Total Shareholders' Equity 14,566 ( 184 ) 14,382

Total Liabilities and Shareholders' Equity 33,811 ( 247 ) 33,564

Quarter ended December 28, 2019

As originally reported Adjustments As revised

Consolidated Statement of Cash Flows:

Net Income $ 561 $ ( 52 ) $ 509

Deferred income taxes 3 ( 16 ) ( 13 )

Net changes in operating assets and liabilities 15 68 83

(a) The adjustment to retained earnings includes an impact of $ 132 million related to misstatements that originated prior to fiscal 2020.

Recently Issued Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board ("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 is effective as of March 12, 2020 through December 31, 2022.

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

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 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.

4 unchanged sentences

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.

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

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

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.

The guidance requires lessees to recognize a right-of-use asset and lease liability for all leases with terms of more than 12 months.

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

The guidance also requires qualitative and quantitative disclosures regarding the amount, timing, and uncertainty of cash flows arising from leases.

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 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 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, as well as the practical expedient that allows the continued historical treatment of land easements.

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 Condensed Statements of Income or our Consolidated Condensed Statements of Cash Flows.

For further description of our lease policy refer to the Leases section above, and for quantitative lease information refer to Part I, Item 1, Notes to Consolidated Condensed Financial Statements, Note 5:

On June 3, 2019, we acquired the Thai and European operations of BRF S.A.

("Thai and European operations") for $ 326 million , net of cash acquired, subject to certain adjustments, as a part of our growth strategy to expand offerings of value-added protein in global markets.

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

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 fiscal 2020, we have 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.

and McKey Luxembourg Holdings S.à.r.l.

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

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.

Cash and cash equivalents

Accounts receivable

Other current assets

Property, Plant and Equipment

Intangible Assets

Accounts payable

Other current liabilities

Long-Term Debt

Deferred Income Taxes

Other Liabilities

Noncontrolling Interests

Net assets acquired

The fair value of identifiable intangible assets primarily consisted of customer relationships with a weighted average life of 25 years.

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

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.

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.

We used various valuation techniques to determine fair value, with the primary techniques being discounted cash flow, relief-from-royalty, market pricing multiple and multi-period excess earnings valuation approaches, which use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy.

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

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.

For available-for-sale debt securities previously impaired, the amendments should be applied prospectively;

otherwise, the modified-retrospective transition method should be applied.

We adopted this guidance in the first quarter of fiscal 2021 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 policy for available-for-sale debt securities, refer to Note 11:

Fair Value Measurements.

Processed products, livestock, and supplies and other are valued at the lower of cost or net realizable value.

Cost includes purchased raw materials, live purchase costs, growout costs (primarily feed, livestock grower pay and catch and haul costs), labor and manufacturing, and production overhead, which are related to the purchase and production of inventories.

At June 27, 2020 , the cost of inventories was determined by either the first-in, first-out ("FIFO") method or the weighted-average method, which is consistent with the methods used at September 28, 2019 .

At January 2, 2021, the cost of inventories was determined by either the first-in, first-out (“FIFO”) method or the weighted-average method, which is consistent with the methods used at October 3, 2020.

The following table reflects the major components of inventory (in millions):

June 27, 2020

September 28, 2019

January 2, 2021 October 3, 2020

Processed products $ 2,142 $ 2,223

Livestock 1,068 977

Supplies and other 705 659

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The major categories of property, plant and equipment and accumulated depreciation are as follows (in millions):

June 27, 2020

September 28, 2019

January 2, 2021 October 3, 2020

Land $ 208 $ 196

Buildings and leasehold improvements 5,030 4,961

2 unchanged sentences

Buildings and equipment under construction 1,079 991

15,853 15,581

Less accumulated depreciation 8,189 7,985

Net Property, Plant and Equipment $ 7,664 $ 7,596

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 Part I, Item 1, Notes to the Consolidated Condensed Financial Statements, Note 1:

Accounting Policies.

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

June 27, 2020

Other current liabilities

Other Liabilities

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

Three Months Ended

Nine Months Ended

June 27, 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:

Nine months ended June 27, 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 June 27, 2020 , future maturities of operating leases were as follows (in millions):

Operating Lease Commitments

2020 (remaining year)

2025 and beyond

Total undiscounted operating lease payments

Imputed interest

Present value of total operating lease liabilities

At June 27, 2020 , our leases that had not yet commenced were insignificant.

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 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.

We have recognized $ 39 million of cumulative pretax charges associated with the 2020 Program consisting of severance and employee related costs.

As part of the 2020 Program, we estimate the elimination of approximately 500 positions across several areas and job levels, with most of the eliminated positions originating from the corporate offices in Springdale, Arkansas and Chicago, Illinois.

We 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.

We do not anticipate future costs of the 2020 Program to be significant.

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

The 2017 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.

Through June 27, 2020 , $ 265 million of the estimated $ 280 million total pretax charges has been recognized.

The remaining estimated charges relate to incremental costs to implement new technology.

For the three months ended June 27, 2020 , restructuring and related charges consisted of $ 2 million of technology related costs from the 2017 Program recorded in Selling, General and Administrative in our Consolidated Condensed Statements of Income.

We recognized restructuring and related charges of $ 54 million for the nine months ended June 27, 2020 , consisting of $ 39 million of severance and employee related costs from the 2020 Program and $ 15 million of technology related costs from the 2017 Program.

For the nine months ended June 27, 2020 , we recorded $ 5 million in Cost of Sales from the 2020 Program, and we recorded $ 49 million in Selling, General and Administrative in our Consolidated Condensed Statements of Income, of which $ 34 million is related to the 2020 Program and $ 15 million is related to the 2017 Program.

We recognized $ 15 million and $ 31 million for the three and nine months ended June 29, 2019 , respectively, of restructuring and related charges from the 2017 Program which were recorded in Selling, General and Administrative in our Consolidated Condensed Statements of Income and represent incremental costs to implement new technology and accelerated depreciation of technology assets.

The following table reflects the pretax impact of restructuring and related charges incurred in the three and nine months ended June 27, 2020 , the charges to date and the total estimated charges, by reportable segment (in millions):

Three Months Ended

Nine Months Ended

Restructuring and related charges to date

Total estimated Restructuring and related charges

June 27, 2020

Prepared Foods

Total restructuring and related charges, pretax

The total estimated restructuring charges include $ 15 million of estimated charges from the 2017 Program yet to be incurred and represent incremental costs to implement new technology in our Prepared Foods and Chicken segments.

The timing and actual amounts of the estimated charges may change.

Our restructuring liability was $ 26 million at June 27, 2020 and we had no restructuring liability at September 28, 2019 .

The change in the restructuring liability was due to additional charges of $ 54 million , net of $ 28 million primarily consisting of payments, during the nine months ended June 27, 2020 .

For the three months ended January 2, 2021, we did not incur restructuring and related charges.

For the three months ended December 28, 2019, we recognized restructuring and related charges of $ 52 million, primarily consisting of severance and employee related costs, of which $ 9 million was recorded in Cost of Sales and $ 43 million was recorded in Selling, General and Administrative in our Consolidated Condensed Statements of Income.

Our restructuring liability was $ 23 million at January 2, 2021 and $ 37 million at October 3, 2020.

The change in the restructuring liability was due to reductions of $ 14 million, primarily consisting of payments, during the three months ended January 2, 2021.

OTHER CURRENT LIABILITIES

Other current liabilities are as follows (in millions):

June 27, 2020

September 28, 2019

January 2, 2021 October 3, 2020

Accrued salaries, wages and benefits $ 655 $ 823

Taxes payable 407 152

Accrued current legal contingencies 339 18

Other 885 817

Total other current liabilities $ 2,286 $ 1,810

The major components of debt are as follows (in millions):

June 27, 2020

September 28, 2019

January 2, 2021 October 3, 2020

Revolving credit facility $ — $ —

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Senior notes:

Notes due June 2020 ("2020 Notes")

Notes due August 2020 (0.82% at 6/27/2020)

4.10% Notes due September 2020

2.25% Notes due August 2021 500 500

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Term loan facility due March 2022 (1.69% at 1/2/2021) 1,500 1,500

Other 231 216

Unamortized debt issuance costs ( 58 ) ( 60 )

Total debt 11,357 11,339

Less current debt 566 548

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

On April 1, 2020, we borrowed the full $ 1.5 billion available under the term loan facility and used it to repay the $ 1.0 billion of outstanding commercial paper obligations and to repay the $ 200 million outstanding balance under our revolving credit facility.

In February 2021, we repaid $750 million of the $1.5 billion outstanding.

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

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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 June 27, 2020 .

At June 27, 2020 , we had no borrowings and no outstanding letters of credit issued under this facility.

At June 27, 2020 , we had $ 121 million of bilateral letters of credit issued separately from the revolving credit facility, none of which were drawn upon.

At January 2, 2021, amounts available for borrowing under this facility totaled $ 1.75 billion and we had no borrowings and no outstanding letters of credit issued under this facility.

At January 2, 2021, 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 leasing and workers’ compensation insurance programs and other legal obligations.

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

As of June 27, 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.

As of January 2, 2021, we had no commercial paper outstanding .

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 the third quarter of fiscal 2020, we extinguished the $ 350 million outstanding balance of the senior notes due June 2020 using cash on hand.

Debt Covenants

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

We were in compliance with all debt covenants at June 27, 2020 .

We were in compliance with all debt covenants at January 2, 2021.

Share Repurchases

As of June 27, 2020 , 18.9 million shares remained available for repurchase under our share repurchase program.

As of January 2, 2021, 18.9 million shares remained available for repurchase under our share repurchase program.

The share repurchase 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.

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Three Months Ended

Nine Months Ended

June 27, 2020

June 29, 2019

June 27, 2020

June 29, 2019

January 2, 2021 December 28, 2019

Shares Dollars Shares Dollars

Shares repurchased:

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Total share repurchases 0.3 $ 17 1.5 $ 132

Our effective tax rate was 21.0 % and 6.0 % for the third quarter of fiscal 2020 and 2019 , respectively, and 22.7 % and 15.4 % for the first nine months of fiscal 2020 and 2019 , respectively.

The effective tax rates for the third quarter and first nine months of fiscal 2020 and 2019 were increased by state taxes and decreased by various tax benefits.

The reversal of tax reserves due to expirations of federal, state and foreign statutes of limitations in the third quarter of fiscal 2019 further reduced the effective tax rate by 17.3% and 6.4% in the third quarter and first nine months of fiscal 2019, respectively.

Unrecognized tax benefits were $ 161 million and $ 169 million at June 27, 2020 and September 28, 2019 , respectively.

Our effective tax rate was 23.4 % and 22.5 % for the first quarter of fiscal 2021 and 2020, respectively.

The effective tax rates for the first quarter of fiscal 2021 and 2020 were higher than the federal statutory tax rate primarily due to state taxes, partially offset by various tax benefits.

Unrecognized tax benefits were $ 163 million and $ 165 million at January 2, 2021 and October 3, 2020, respectively.

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

OTHER INCOME AND CHARGES

During the third quarter of fiscal 2019, we sold an investment for $ 79 million in net proceeds resulting in a pretax gain of $ 55 million , which was recorded in the Consolidated Condensed Statements of Income in Other, net.

During the first nine months of fiscal 2019 , we recognized $ 21 million of net periodic pension and postretirement benefit cost, excluding the service cost component, and recorded the amount in the Consolidated Condensed Statements of Income in Other, net.

Additionally, we recognized $ 17 million of equity earnings in joint ventures, which was also recorded in the Consolidated Condensed Statements of Income in Other, net.

EARNINGS PER SHARE

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Three Months Ended

Nine Months Ended

June 27, 2020

June 29, 2019

June 27, 2020

June 29, 2019

January 2, 2021 December 28, 2019

Net income $ 472 $ 509

Net income attributable to noncontrolling interests 5 4

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Less dividends declared:

Class A 138 137

Class B 30 29

Undistributed earnings $ 299 $ 339

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Class B basic $ 1.18 $ 1.27

Diluted $ 1.28 $ 1.38

Dividends Declared Per Share:

Approximately 4 million and 3 million of our stock-based compensation shares were antidilutive for the three and nine months ended June 27, 2020 , respectively.

Approximately 1 million and 3 million of our stock-based compensation shares were antidilutive for the three and nine months ended June 29, 2019 , respectively.

Class A $ 0.470 $ 0.465

Class B $ 0.423 $ 0.419

Approximately 6 million and 2 million of our stock-based compensation shares were antidilutive for the three months ended January 2, 2021 and December 28, 2019, respectively.

These shares were not included in the diluted 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 June 27, 2020 .

No significant concentrations of credit risk related to our derivative financial instruments existed at January 2, 2021.

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

in millions, except soy meal tons

June 27, 2020

September 28, 2019

Foreign Currency

United States dollar

Interest Rate Swaps

Average monthly debt

in millions, except soybean meal tons Metric January 2, 2021 October 3, 2020

Corn Bushels 5 43

Soybean Meal Tons 579,833 428,300

Live Cattle Pounds 165 234

Lean Hogs Pounds 254 283

Foreign Currency United States dollar $ 412 $ 536

We recognize all derivative instruments as either assets or liabilities at fair value in the Consolidated Condensed Balance Sheets, with the exception of normal purchases and normal sales expected to result in physical delivery.

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For the derivative instruments we designate and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income (“OCI”) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.

As of June 27, 2020 , we have net pretax losses of $ 12 million for our commodity contracts and net pretax losses of $ 3 million for our interest rate swap hedges, expected to be reclassified into earnings within the next 12 months.

Additionally, we have $ 18 million of realized losses related to treasury rate locks in connection with our 364-day term loan extinguished during the second quarter of fiscal 2019, which will be reclassified to earnings over the lives of the 2026, 2029 and 2048 Notes.

During the nine months ended June 27, 2020 , and June 29, 2019 , 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 recognized in Other Comprehensive Income (in millions):

Gain (Loss) Recognized in OCI

On Derivatives

Three Months Ended

Nine Months Ended

June 27, 2020

June 29, 2019

June 27, 2020

June 29, 2019

Cash flow hedge – derivatives designated as hedging instruments:

Commodity contracts

Interest rate hedges

As of January 2, 2021, 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 the three months ended January 2, 2021 and December 28, 2019, we did not reclassify significant pretax gains or losses into earnings as a result of the discontinuance of cash flow hedges.

For the three months ended January 2, 2021 and December 28, 2019, we recognized no gains or losses in OCI on derivatives designated as cash flow hedges.

Fair Value Hedges

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

Ineffectiveness related to fair value hedges was insignificant for the three and nine months ended June 27, 2020 , and June 29, 2019 .

The carrying amount of fair value hedge (assets) liabilities as of June 27, 2020 and September 28, 2019 were as follows (in millions):

Consolidated Condensed Balance Sheets Classification

June 27, 2020

September 28, 2019

Ineffectiveness related to fair value hedges was insignificant for the three months ended January 2, 2021, and December 28, 2019.

The carrying amount of fair value hedge (assets) liabilities as of January 2, 2021 and October 3, 2020 were as follows (in millions):

Consolidated Condensed Balance Sheets Classification January 2, 2021 October 3, 2020

Inventory $ 8 $ 6

Undesignated Positions

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Consolidated Condensed

Statements of Income Classification

Three Months Ended

Nine Months Ended

June 27, 2020

June 29, 2019

June 27, 2020

June 29, 2019

Statements of Income Classification Three Months Ended

January 2, 2021 December 28, 2019

Cost of Sales $ 9,283 $ 9,375

Interest Expense 110 120

Other, net ( 19 ) ( 16 )

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

Consolidated Condensed

Statements of Income Classification

Three Months Ended

Nine Months Ended

June 27, 2020

June 29, 2019

June 27, 2020

June 29, 2019

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:

Statements of Income Classification Three Months Ended

January 2, 2021 December 28, 2019

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

Commodity contracts $ ( 1 ) $ ( 2 )

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Commodity contracts 98 29

Interest Expense

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

Total $ 95 $ 43

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

Interest rate contracts $ — $ ( 1 )

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

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

Foreign exchange contracts $ 1 $ 4

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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 (in millions):

June 27, 2020

January 2, 2021 Level 1 Level 2 Level 3 Netting (a) Total

Other Current Assets:

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Designated as hedges $ — $ 1 $ — $ — $ 1

Available-for-sale securities:

Undesignated — 210 — ( 146 ) 64

Other Assets:

Available-for-sale securities:

Non-current — 57 51 — 108

Deferred compensation assets 11 373 — — 384

Total assets $ 11 $ 641 $ 51 $ ( 146 ) $ 557

Other Current Liabilities:

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Designated as hedges $ — $ 9 $ — $ ( 9 ) $ —

Undesignated — 98 — ( 82 ) 16

Total liabilities $ — $ 107 $ — $ ( 91 ) $ 16

September 28, 2019

October 3, 2020 Level 1 Level 2 Level 3 Netting (a) Total

Other Current Assets:

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Designated as hedges $ — $ 4 $ — $ ( 2 ) $ 2

Available-for-sale securities:

Undesignated — 96 — ( 51 ) 45

Other Assets:

Available-for-sale securities:

Non-current — 55 53 — 108

Deferred compensation assets 19 336 — — 355

Total assets $ 19 $ 491 $ 53 $ ( 53 ) $ 510

Other Current Liabilities:

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Designated as hedges $ — $ 10 $ — $ ( 10 ) $ —

Undesignated — 74 — ( 59 ) 15

Total liabilities $ — $ 84 $ — $ ( 69 ) $ 15

(a) Our derivative assets and liabilities are presented in our Consolidated Condensed 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 June 27, 2020 , and September 28, 2019 , we had $ 85 million and $ 95 million , respectively, of net cash collateral with various counterparties where master netting arrangements exist .

Additionally, at January 2, 2021, and October 3, 2020, we had $ 22 million and $ 16 million, respectively, of net cash collateral 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) (in millions):

Nine Months Ended

June 27, 2020

June 29, 2019

Three Months Ended

January 2, 2021 December 28, 2019

Balance at beginning of year $ 53 $ 52

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Included in other comprehensive income (loss) — —

Purchases 5 3

Issuances — —

Settlements ( 7 ) ( 6 )

Balance at end of period $ 51 $ 49

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

Total gains (losses) for the three month period included in earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities still held at end of period $ — $ —

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

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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):

June 27, 2020

September 28, 2019

January 2, 2021 October 3, 2020

Cost Basis Fair

Value Unrealized

Gain (Loss) Amortized

Cost Basis Fair

Value Unrealized

Available-for-sale securities:

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Unrealized holding gains (losses), net of tax, are excluded from earnings and reported in OCI until the security is settled or sold.

On a quarterly basis, we evaluate whether losses related to our available-for-sale securities are temporary in nature.

Losses on equity securities are recognized in earnings if the decline in value is judged to be other than temporary.

If losses related to our debt securities are determined to be other than temporary, the loss would be recognized in earnings if we intend, or will more likely than not be required, to sell the security prior to recovery.

For debt securities in which we have the intent and ability to hold until maturity, losses determined to be other than temporary would remain in OCI, other than expected credit losses which are recognized in earnings.

We consider many factors in determining whether a loss is temporary, including the length of time and extent to which the fair value has been below cost, the financial condition and near-term prospects of the issuer and our ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery.

We recognized no other than temporary impairment in earnings and no other than temporary losses in OCI for the three and nine months ended June 27, 2020 , and June 29, 2019 .

On a quarterly basis, we evaluate whether losses related to our available-for-sale securities are due to credit or non-credit factors.

Losses on debt securities where we have the intent, or will more than likely be required, to sell the security prior to recovery, would be recorded as a direct write-off of amortized cost basis through earnings.

Losses on debt securities where we do not have the intent, or would not more than likely be required to sell the security prior to recovery, would be further evaluated to determine whether the loss is credit or non-credit related.

Credit-related losses would be recorded through an allowance for credit losses in earnings and non-credit related losses in OCI.

We consider many factors in determining whether a loss is credit-related, including the financial condition and near-term prospects of the issuer, borrower repayment characteristics for asset-backed securities, and our ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery.

We recognized no direct write-offs or allowances for credit losses in earnings for the three months ended January 2, 2021, and October 3, 2020.

Deferred Compensation Assets:

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Generally, assets are recorded at fair value on a nonrecurring basis as a result of impairment charges.

We did not have any significant measurements of assets or liabilities at fair value on a nonrecurring basis subsequent to their initial recognition during the nine months ended June 27, 2020 , and June 29, 2019 .

We did not have any significant measurements of assets or liabilities at fair value on a nonrecurring basis subsequent to their initial recognition during the three months ended January 2, 2021, and October 3, 2020.

Other Financial Instruments

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

June 27, 2020

September 28, 2019

Carrying Value

PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS

The components of the net periodic cost for the pension and postretirement benefit plans for the three and nine months ended June 27, 2020 , and June 29, 2019 , are as follows (in millions):

January 2, 2021 October 3, 2020

Fair Value Carrying Value Fair Value Carrying Value

Total debt $ 13,332 $ 11,357 $ 12,982 $ 11,339

PENSIONS AND OTHER POSTRETIREMENT BENEFIT PLANS

The components of the net periodic cost for the pension and postretirement benefit plans for the three months ended January 2, 2021 and December 28, 2019 are as follows (in millions):

Pension Plans

Three Months Ended

Nine Months Ended

June 27, 2020

June 29, 2019

June 27, 2020

June 29, 2019

January 2, 2021 December 28, 2019

Service cost $ — $ —

Interest cost 2 10

Expected return on plan assets — ( 9 )

Amortization of:

Net actuarial loss

Prior service cost

Settlement (gain) loss

Amortization of net actuarial loss 1 1

Net periodic cost (credit) $ 3 $ 2

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Three Months Ended

Nine Months Ended

June 27, 2020

June 29, 2019

June 27, 2020

June 29, 2019

January 2, 2021 December 28, 2019

Interest cost $ — $ —

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Net periodic benefit cost, excluding the service cost component, was recorded in the Consolidated Condensed Statements of Income in Other, net.

We contributed $ 2 million to our pension plans for the three months ended June 27, 2020 and had no contributions for the three months ended June 29, 2019 .

We contributed $ 12 million to our pension plans for each of the nine months ended June 27, 2020 and June 29, 2019 .

The amount of contributions made to pension plans in any year is dependent upon a number of factors, including minimum funding requirements in the jurisdictions in which we operate.

During the second quarter of fiscal 2020, we recognized a one-time gain of $ 110 million related to the termination of two qualified pension plans and one multi-employer pension plan and recorded the amount in the Consolidated Condensed Statements of Income in Other, net.

The settlements of the two qualified plans through purchased annuities did not require any significant contributions.

During the third quarter of fiscal 2020, we recognized an additional pretax gain of $ 6 million related to the termination of these pension plans and recorded the amount in the Consolidated Condensed Statements of Income in Other, net.

The benefit obligations and fair value of plan assets of the two qualified plans were approximately $ 1.4 billion at September 28, 2019.

OTHER COMPREHENSIVE INCOME (LOSS)

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

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

Three Months Ended

Nine Months Ended

June 27, 2020

June 29, 2019

June 27, 2020

June 29, 2019

January 2, 2021 December 28, 2019

Before Tax Tax After Tax Before Tax Tax After Tax

Derivatives accounted for as cash flow hedges:

(Gain) loss reclassified to interest expense

$ — $ — $ — $ 1 $ — $ 1

(Gain) loss reclassified to cost of sales

Unrealized gain (loss)

Currency translation:

Translation adjustment

75 — 75 35 — 35

Postretirement benefits:

Unrealized gain (loss) 1 — 1 — — —

Pension settlement reclassified to other (income) expense

Total other comprehensive income (loss) $ 77 $ — $ 77 $ 38 $ — $ 38

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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 cuts and case-ready products.

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Three Months Ended

Nine Months Ended

June 27, 2020

June 29, 2019

June 27, 2020

June 29, 2019

January 2, 2021 December 28, 2019

Beef $ 3,987 $ 3,838

Pork 1,439 1,379

Chicken 2,831 3,292

Prepared Foods 2,113 2,140

International/Other 469 498

Intersegment ( 379 ) ( 332 )

Total sales $ 10,460 $ 10,815

Three Months Ended

Nine Months Ended

June 27, 2020

June 29, 2019

June 27, 2020

June 29, 2019

January 2, 2021 December 28, 2019

Operating income (loss):

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Income before income taxes $ 616 $ 657

(a) Chicken operating income included $ 13 million in Keystone Foods purchase accounting and acquisition related costs for the nine months ended June 29, 2019 .

(b) International/Other operating results included $ 24 million in Keystone Foods purchase accounting and acquisition related costs for the nine months ended June 29, 2019 , and third-party merger and integration costs and corporate overhead of Tyson New Ventures, LLC of $ 1 million and $ 10 million for the three months ended June 27, 2020 and June 29, 2019 , respectively, and $ 5 million and $ 15 million for the nine months ended June 27, 2020 , and June 29, 2019 , respectively.

(a) Beef segment results for the three months ended January 2, 2021, included a $ 55 million gain from the recovery of cattle inventory from a cattle supplier that misappropriated Company funds as compared to a $ 68 million loss recognized in the three months ended December 28, 2019, as further described in Note 1:

Accounting Policies.

(b) Chicken segment results for the three months ended January 2, 2021 included a $ 320 million charge related to the recognition of a legal contingency accrual.

The accrual was recorded as a reduction to Sales pursuant to FASB guidance related to accounting for revenue from contracts with customers.

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

Three months ended June 27, 2020

Consumer Products (a)

Foodservice (b)

International (c)

Industrial and Other (d)

Prepared Foods

International/Other

Three months ended June 29, 2019

Consumer Products (a)

Foodservice (b)

International (c)

Industrial and Other (d)

Prepared Foods

International/Other

Nine months ended June 27, 2020

Consumer Products (a)

Three months ended January 2, 2021

Foodservice (b)

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Industrial and Other (d)

Intersegment Total

Beef $ 2,134 $ 821 $ 618 $ 323 $ 91 $ 3,987

Pork 432 92 293 342 280 1,439

Chicken 1,436 1,185 152 50 8 2,831

Prepared Foods 1,303 740 31 39 — 2,113

International/Other — — 469 — — 469

Nine months ended June 29, 2019

Consumer Products (a)

Intersegment — — — — ( 379 ) ( 379 )

Total $ 5,305 $ 2,838 $ 1,563 $ 754 $ — $ 10,460

Three months ended December 28, 2019

Foodservice (b)

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Industrial and Other (d)

Intersegment Total

Beef $ 1,857 $ 1,045 $ 514 $ 326 $ 96 $ 3,838

Pork 400 117 280 360 222 1,379

Chicken 1,389 1,307 161 421 14 3,292

Prepared Foods 1,211 846 37 46 — 2,140

International/Other — — 498 — — 498

Intersegment — — — — ( 332 ) ( 332 )

Total $ 4,857 $ 3,315 $ 1,490 $ 1,153 $ — $ 10,815

(a) Includes sales to consumer products and food retailers, such as grocery retailers, warehouse club stores and internet-based retailers .

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(c) Includes sales to international markets for 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.

For the three months ended January 2, 2021, the Chicken segment included a $ 320 million reduction in Other due to the recognition of a legal contingency accrual.

COMMITMENTS AND CONTINGENCIES

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 June 27, 2020 , was no t significant.

Additionally, the maximum potential amount of lease related residual value guarantees is $ 88 million , all of which could be recoverable through various recourse provisions and an additional undeterminable recoverable amount based on the fair value of the underlying leased assets.

The remaining terms of the underlying obligations cover periods up to 10 years, and the maximum potential amount of future payments as of January 2, 2021, was no t significant.

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

At June 27, 2020 , and September 28, 2019 , no significant liabilities for guarantees were recorded.

At January 2, 2021 and October 3, 2020, no significant liabilities for guarantees were recorded.

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

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

The potential maximum commitment as of June 27, 2020 was approximately $ 320 million .

The total receivables under these programs were $ 21 million and $ 5 million at June 27, 2020 and September 28, 2019 , respectively.

The potential maximum commitment as of January 2, 2021 was approximately $ 325 million.

The total receivables under these programs were $ 26 million and $ 29 million at January 2, 2021 and October 3, 2020, respectively.

These receivables are included, net of allowance for uncollectible amounts, in Accounts Receivable in our Consolidated Condensed 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 have no allowance for these programs’ estimated uncollectible receivables at June 27, 2020 , and September 28, 2019 .

After analyzing residual credit risks and general market conditions, we have no allowance for these programs’ estimated uncollectible receivables at January 2, 2021, and October 3, 2020.

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.

Certain arrangements may require cash to be deposited into a fund to cover future expenditures.

These funds are generally considered restricted cash, which is reported in the Consolidated Condensed Balance Sheets in Other Assets, and totaled $ 82 million and $ 0 at June 27, 2020 and September 28, 2019 , respectively.

These funds are generally considered restricted cash, which is reported in the Consolidated Condensed Balance Sheets in Other Assets, and totaled $ 29 million and $ 46 million at January 2, 2021 and October 3, 2020, respectively.

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

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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 June 27, 2020 , the total amount under these types of arrangements totaled $ 573 million .

At January 2, 2021, the total amount under these types of arrangements totaled $ 786 million.

Contingencies

We are involved in various claims and legal proceedings.

We routinely assess the likelihood of adverse judgments or outcomes to those matters, as well as ranges of probable losses, to the extent losses are reasonably estimable.

Each quarter, we assess the likelihood of adverse judgments or outcomes to those matters, as well as ranges of probable losses, to the extent losses are reasonably estimable.

We record accruals in the Company's Consolidated Financial Statements for matters to the extent that we conclude a loss is probable and the financial impact, should an adverse outcome occur, is reasonably estimable.

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In our opinion, we have made appropriate and adequate accruals for these matters.

Regardless of the manner of resolution, frequently the most significant changes in status of a matter occur over a short time period, often following a lengthy period of little substantive activity.

While these accruals reflect the Company’s best estimate of the probable loss for those matters as of the dates of those accruals, the recorded amounts may differ materially from the actual amount of the losses for those matters.

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direct purchasers, indirect purchasers/consumers and commercial/institutional indirect purchasers.

The consolidated actions are styled In re Broiler Chicken Antitrust Litigation .

The consolidated actions are styled In re Broiler Chicken Antitrust Litigation (the “Broiler Antitrust Civil Litigation”).

Since the original filing, certain putative class members have opted out of the matter and are proceeding with individual direct actions making similar claims, and others may do so in the future.

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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.

We have been vigorously contesting the litigation.

In January 2021, as a result of the settlement by a co-defendant in the Broiler Antitrust Civil Litigation, we aggressively pursued settlement discussions with the Classes (as defined below).

On January 19, 2021, we announced that we had reached agreement to settle all class claims related to the Broiler Antitrust Civil Litigation.

Settlement terms were reached with the putativ e Direct Purchaser Plaintiff Class, the putative Commercial and Institutional Indirect Purchaser Plaintiff Class and the putative End-User Plaintiff Class (c ollectively, the “Classes”).

Under the terms of the settlements, we have agreed to pay the Classes an aggregate amount of $ 221.5 million in settlement of all outstanding claims brought by the Classes.

These settlements are subject to the execution of long-form settlement agreements with the respective parties and court approval thereof, and do not settle claims made by plaintiffs who opted out of the Classes in the Broiler Antitrust Civil Litigation.

In the first quarter of fiscal 2021, we recorded an aggregate legal contingency accrual of $ 320 million for the above-referenced settlements and to resolve the remaining claims brought by opt-out plaintiffs.

While we do not admit any liability as part of the settlements, we believe that the settlements were in the best interests of the Company and its shareholders in order to avoid the uncertainty, risk, expense and distraction of protracted litigation.

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

On January 15, 2020, we moved to dismiss the amended complaints.

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.

The parties are now conducting discovery.

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.

On December 28, 2020, the plaintiffs filed an amended complaint.

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.

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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 have moved to dismiss the second amended complaint.

We moved to dismiss the second amended complaint.

The indirect consumer purchaser litigation is styled as Peterson v.

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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 May 22, 2020, we received a civil investigative demand ("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 September 28, 2020, the court granted our motion to dismiss the complaint.

On December 28, 2020, the plaintiffs filed amended complaints.

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 have moved to dismiss the amended consolidated complaint.

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.

On December 18, 2020, defendants moved to dismiss certain claims in the second amended complaint.

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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The Court of Appeals subsequently vacated the NLRC’s award on April 12, 2018.

Complainants filed motions for reconsideration with the Court of Appeals.

Complainants have filed motions for reconsideration with the Court of Appeals.

On November 14, 2018, the Court of Appeals denied claimants’ motions for reconsideration and granted defendants’ motion to release and discharge the preliminary injunction bond.

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We continue to maintain an accrual for this matter.

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.

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-Q

Item 1. Financial Statements