What changed in this filing

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Item 1. Financial Statements

2021-08-09 compared with 2021-05-10 · 126 added, 125 removed, 801 unchanged (24% of the section changed)

3 unchanged sentences

(In millions, except per share data)

Three Months Ended Six Months Ended

April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020

Three Months Ended Nine Months Ended

July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

Sales $ 12,478 $ 10,022 $ 34,238 $ 31,725

25 unchanged sentences

(In millions)

Three Months Ended Six Months Ended

April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020

Three Months Ended Nine Months Ended

July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

Net Income $ 753 $ 526 $ 1,702 $ 1,414

1 unchanged sentence

Derivatives accounted for as cash flow hedges — 1 2 ( 1 )

1 ( 5 ) 2 ( 2 )

( 1 ) — ( 1 ) —

Investments — 1 ( 1 ) 1

Currency translation 25 10 51 ( 59 )

( 49 ) ( 104 ) 26 ( 69 )

Postretirement benefits — 1 2 ( 41 )

1 ( 42 ) 2 ( 42 )

Total Other Comprehensive Income (Loss), Net of Taxes 25 13 54 ( 100 )

6 unchanged sentences

(In millions, except share and per share data)

April 3, 2021 October 3, 2020

July 3, 2021 October 3, 2020

Current Assets:

26 unchanged sentences

Accumulated other comprehensive gain (loss) ( 125 ) ( 179 )

Treasury stock, at cost – 83 million shares at April 3, 2021 and October 3, 2020 ( 4,123 ) ( 4,145 )

Treasury stock, at cost – 83 million shares at July 3, 2021 and October 3, 2020 ( 4,128 ) ( 4,145 )

Total Tyson Shareholders’ Equity 16,561 15,254

6 unchanged sentences

(In millions)

Three Months Ended Six Months Ended

April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020

Three Months Ended Nine Months Ended

July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

Shares Amount Shares Amount Shares Amount Shares Amount

5 unchanged sentences

Balance at beginning of period 4,443 4,378 4,433 4,378

4,411 4,354 4,433 4,378

Stock-based compensation 26 22 36 22

Other ( 5 ) — ( 5 ) —

Balance at end of period 4,464 4,400 4,464 4,400

1 unchanged sentence

Balance at beginning of period 15,716 14,220 15,100 13,655

15,399 13,994 15,100 13,655

Net income attributable to Tyson 749 526 1,692 1,407

476 376 943 881

( 159 ) ( 150 ) ( 327 ) ( 316 )

Dividends ( 160 ) ( 150 ) ( 487 ) ( 466 )

Balance at end of period 16,305 14,596 16,305 14,596

1 unchanged sentence

Balance at beginning of period ( 150 ) ( 230 ) ( 179 ) ( 117 )

( 102 ) ( 79 ) ( 179 ) ( 117 )

Other comprehensive income (loss) 25 13 54 ( 100 )

2 unchanged sentences

Balance at beginning of period 83 ( 4,123 ) 83 ( 4,136 ) 83 ( 4,145 ) 82 ( 4,011 )

83 ( 4,115 ) 83 ( 4,079 ) 83 ( 4,145 ) 82 ( 4,011 )

Purchase of Class A common stock — ( 16 ) — ( 4 ) — ( 50 ) 2 ( 200 )

Stock-based compensation — 11 — 1 — 67 ( 1 ) 72

— 9 — 7 — 56 ( 1 ) 71

Balance at end of period 83 ( 4,128 ) 83 ( 4,139 ) 83 ( 4,128 ) 83 ( 4,139 )

Total Shareholders’ Equity Attributable to Tyson $ 16,561 $ 14,685 $ 16,561 $ 14,685

$ 15,931 $ 14,277 $ 15,931 $ 14,277

Equity Attributable to Noncontrolling Interests:

3 unchanged sentences

Total Equity Attributable to Noncontrolling Interests $ 132 $ 146 $ 132 $ 146

$ 139 $ 145 $ 139 $ 145

Total Shareholders’ Equity $ 16,693 $ 14,831 $ 16,693 $ 14,831

3 unchanged sentences

(In millions)

Six Months Ended

April 3, 2021 March 28, 2020

Nine Months Ended

July 3, 2021 June 27, 2020

Cash Flows From Operating Activities:

26 unchanged sentences

Effect of Exchange Rate Changes on Cash 11 ( 8 )

(Decrease)/Increase in Cash and Cash Equivalents and Restricted Cash ( 494 ) 35

Increase in Cash and Cash Equivalents and Restricted Cash 342 963

Cash and Cash Equivalents and Restricted Cash at Beginning of Year 1,466 484

14 unchanged sentences

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 April 3, 2021, and the results of operations for the three and six months ended April 3, 2021, and March 28, 2020.

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 July 3, 2021, and the results of operations for the three and nine months ended July 3, 2021, and June 27, 2020.

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

14 unchanged sentences

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 three and six months ended March 28, 2020 to correct for the impact of the misstatements.

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 three and nine months ended June 27, 2020 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 periods ended March 28, 2020:

Second Quarter in millions, except per share data

Three months ended March 28, 2020 Six months ended March 28, 2020

The following tables represent revisions to our consolidated condensed financial information for the periods ended June 27, 2020:

Third Quarter in millions, except per share data

Three months ended June 27, 2020 Nine months ended June 27, 2020

As originally reported Adjustments As revised As originally reported Adjustments As revised

14 unchanged sentences

Comprehensive Income Attributable to Tyson 540 ( 1 ) 539 1,348 ( 41 ) 1,307

As of March 28, 2020

As of June 27, 2020

As originally reported Adjustments As revised

9 unchanged sentences

Total Liabilities and Shareholders' Equity 34,558 ( 235 ) 34,323

Six months ended March 28, 2020

Nine months ended June 27, 2020

As originally reported Adjustments As revised

4 unchanged sentences

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

Asset Held for Sale

In the second quarter of fiscal 2021, we initiated a plan to sell a business included in our Prepared Foods segment.

The business had a net carrying value of approximately $ 410 million at April 3, 2021, which included approximately $ 40 million of working capital consisting of inventory, accounts receivable and accounts payable, $ 20 million of property, plant and equipment and $ 350 million of allocated goodwill.

The net carrying value will change in future periods due to such items as normal business operations, timing of closing of the sale, as well as final negotiated deal terms.

We anticipate we will be able to identify a buyer and close the transaction within the next twelve months and expect to record a pretax gain as a result of the sale of this business.

We have reclassified the assets and liabilities held for sale related to this business to Other current assets and Other current liabilities in our Consolidated Condensed Balance Sheet as of April 3, 2021.

Recently Issued Accounting Pronouncements

22 unchanged sentences

Fair Value Measurements.

ACQUISITIONS AND DISPOSITIONS

In the third quarter of fiscal 2021, we acquired a 49 % minority interest in a Malaysian producer of feed and poultry products for $ 44 million in addition to future contingent payments of up to approximately $ 65 million.

We are accounting for the investment under the equity method.

In the second quarter of fiscal 2021, we initiated a plan to sell our pet treats business, which is included in our Prepared Foods segment.

In the third quarter of fiscal 2021, we entered into a definitive agreement to sell the business for $ 1.2 billion in cash, subject to certain adjustments.

The business had a net carrying value of approximately $ 411 million as of July 3, 2021, which included approximately $ 44 million of working capital consisting of inventory, accounts receivable and accounts payable, $ 17 million of property, plant and equipment and $ 350 million of goodwill.

The goodwill is not deductible for tax purposes.

The transaction closed on July 6, 2021 and we anticipate recognizing a gain from the sale of this business in the fourth quarter of fiscal 2021.

The Company concluded the business was not a significant disposal and did not represent a strategic shift, and therefore was not classified as a discontinued operation for any of the periods presented.

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 April 3, 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.

At July 3, 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):

April 3, 2021 October 3, 2020

July 3, 2021 October 3, 2020

Processed products $ 2,301 $ 2,223

4 unchanged sentences

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

April 3, 2021 October 3, 2020

July 3, 2021 October 3, 2020

Land $ 208 $ 196

12 unchanged sentences

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

For the three and six months ended April 3, 2021, we did not incur restructuring and related charges.

For the three months ended March 28, 2020, we did not incur significant restructuring and related charges.

For the six months ended March 28, 2020, we recognized restructuring and related charges of $ 52 million, primarily consisting of severance and employee related costs, of which $ 5 million was recorded in Cost of Sales and $ 47 million was recorded in Selling, General and Administrative in our Consolidated Condensed Statements of Income.

Our restructuring liability was $ 13 million at April 3, 2021 and $ 37 million at October 3, 2020.

The change in the restructuring liability was due to reductions of $ 24 million, primarily consisting of payments, during the six months ended April 3, 2021.

For the three and nine months ended July 3, 2021, we did not incur restructuring and related charges.

For the three months ended June 27, 2020, we did not incur significant restructuring and related charges.

For the nine months ended June 27, 2020, we recognized restructuring and related charges of $ 54 million, primarily consisting of severance and employee related costs and technology related costs, of which $ 5 million was recorded in Cost of Sales and $ 49 million was recorded in Selling, General and Administrative in our Consolidated Condensed Statements of Income.

Our restructuring liability was $ 8 million at July 3, 2021 and $ 37 million at October 3, 2020.

The change in the restructuring liability was due to reductions of $ 29 million, primarily consisting of payments, during the nine months ended July 3, 2021.

OTHER CURRENT LIABILITIES

Other current liabilities are as follows (in millions):

April 3, 2021 October 3, 2020

July 3, 2021 October 3, 2020

Accrued salaries, wages and benefits $ 850 $ 823

3 unchanged sentences

Total other current liabilities $ 2,668 $ 1,810

(a) As of April 3, 2021, $ 80 million of funds held in an escrow account for litigation settlements was included as restricted cash within Other current assets in the Consolidated Condensed Balance Sheets.

(a) As of July 3, 2021, $ 184 million of funds held in an escrow account for litigation settlements was included as restricted cash within Other current assets in the Consolidated Condensed Balance Sheets.

As of October 3, 2020, no restricted cash was included within Other current assets in the Consolidated Condensed Balance Sheets.

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

April 3, 2021 October 3, 2020

July 3, 2021 October 3, 2020

Revolving credit facility $ — $ —

23 unchanged sentences

Revolving Credit Facility and Letters of Credit

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.

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

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

At April 3, 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 April 3, 2021, we had $ 100 million of bilateral letters of credit issued separately from the revolving credit facility, none of which were drawn upon.

At July 3, 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 July 3, 2021, we had $ 100 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.

2 unchanged sentences

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 April 3, 2021, we had no commercial paper outstanding .

As of July 3, 2021, we had no commercial paper outstanding .

Our ability to access commercial paper in the future may be limited or its costs increased.

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

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

3 unchanged sentences

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

August 2021 Notes

On July 23, 2021, subsequent to the end of our third quarter of fiscal 2021, we redeemed all of our 2.25% Senior Notes due August 2021 using cash on hand at a redemption price equal to 100% of the principal amount, plus accrued and unpaid interest as of the redemption date.

At July 3, 2021, the outstanding principal amount was $ 500 million.

Debt Covenants

12 unchanged sentences

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

We were in compliance with all debt covenants at April 3, 2021.

We were in compliance with all debt covenants at July 3, 2021.

Share Repurchases

As of April 3, 2021, 18.9 million shares remained available for repurchase under our share repurchase program.

As of July 3, 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.

1 unchanged sentence

A summary of share repurchases of our Class A stock is as follows (in millions):

Three Months Ended Six Months Ended

April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020

Three Months Ended Nine Months Ended

July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

Shares Dollars Shares Dollars Shares Dollars Shares Dollars

3 unchanged sentences

Total share repurchases 0.2 $ 16 0.1 $ 4 0.7 $ 50 2.4 $ 200

Our effective tax rate was 23.5 % and 25.1 % for the second quarter of fiscal 2021 and 2020, respectively and 23.5 % and 23.6 % for the first six months of fiscal 2021 and 2020, respectively.

The effective tax rates for the second quarter and first six months 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 $ 168 million and $ 165 million at April 3, 2021 and October 3, 2020, respectively.

Our effective tax rate was 22.1 % and 20.9 % for the third quarter of fiscal 2021 and 2020, respectively and 22.9 % and 22.6 % for the first nine months of fiscal 2021 and 2020, respectively.

The effective tax rates for the third quarter and first nine months of fiscal 2021 and 2020 were increased by state taxes and decreased by various tax benefits.

Unrecognized tax benefits were $ 171 million and $ 165 million at July 3, 2021 and October 3, 2020, respectively.

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

1 unchanged sentence

The following table sets forth the computation of basic and diluted earnings per share (in millions, except per share data):

Three Months Ended Six Months Ended

April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020

Three Months Ended Nine Months Ended

July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

Net income $ 753 $ 526 $ 1,702 $ 1,414

21 unchanged sentences

Class B $ 0.400 $ 0.378 $ 1.224 $ 1.175

Approximately 5 million of our stock-based compensation shares were antidilutive for each of the three and six months ended April 3, 2021.

Approximately 3 million and 2 million of our stock-based compensation shares were antidilutive for the three and six months ended March 28, 2020, respectively.

Approximately 2 million and 4 million of our stock-based compensation shares were antidilutive for the three and nine months ended July 3, 2021.

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.

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

12 unchanged sentences

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 related to our derivative financial instruments existed at April 3, 2021.

No significant concentrations of credit risk related to our derivative financial instruments existed at July 3, 2021.

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

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

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

Corn Bushels 32 43

11 unchanged sentences

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 April 3, 2021, we had $ 15 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 six months ended April 3, 2021 and March 28, 2020, we did not reclassify significant pretax gains or losses into earnings as a result of the discontinuance of cash flow hedges.

As of July 3, 2021, we had $ 15 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 nine months ended July 3, 2021 and June 27, 2020, 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 and derivative instruments recognized in Other Comprehensive Income (in millions):

Gain (Loss) Recognized in OCI

On Derivatives Three Months Ended Six Months Ended

April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020

On Derivatives Three Months Ended Nine Months Ended

July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

Cash flow hedge – derivatives designated as hedging instruments:

7 unchanged sentences

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 six months ended April 3, 2021, and March 28, 2020.

The following table sets forth the carrying amount of fair value hedge (assets) liabilities as of April 3, 2021 and October 3, 2020 (in millions):

Consolidated Condensed Balance Sheets Classification April 3, 2021 October 3, 2020

Ineffectiveness related to fair value hedges was not significant for the three and nine months ended July 3, 2021, and June 27, 2020.

The following table sets forth the carrying amount of fair value hedge (assets) liabilities as of July 3, 2021 and October 3, 2020 (in millions):

Consolidated Condensed Balance Sheets Classification July 3, 2021 October 3, 2020

Inventory $ 23 $ 6

6 unchanged sentences

Consolidated Condensed

Statements of Income Classification Three Months Ended Six Months Ended

April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020

Statements of Income Classification Three Months Ended Nine Months Ended

July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

Cost of Sales $ 10,858 $ 8,709 $ 30,188 $ 27,951

3 unchanged sentences

Consolidated Condensed

Statements of Income Classification Three Months Ended Six Months Ended

April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020

Statements of Income Classification Three Months Ended Nine Months Ended

July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

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

29 unchanged sentences

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):

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

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

Other Current Assets:

28 unchanged sentences

(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 April 3, 2021, and October 3, 2020, we had $ 6 million and $ 16 million, respectively, of net cash collateral with various counterparties where master netting arrangements exist and held no cash collateral.

Additionally, at July 3, 2021, and October 3, 2020, we had $ 17 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):

Six Months Ended

April 3, 2021 March 28, 2020

Nine Months Ended

July 3, 2021 June 27, 2020

Balance at beginning of year $ 53 $ 52

Total realized and unrealized gains (losses):

Included in earnings — —

Included in other comprehensive income (loss) ( 1 ) —

3 unchanged sentences

Balance at end of period $ 49 $ 48

Total gains (losses) for the six 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 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 $ — $ —

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

14 unchanged sentences

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):

April 3, 2021 October 3, 2020

July 3, 2021 October 3, 2020

Cost Basis Fair

13 unchanged sentences

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 and six months ended April 3, 2021, and March 28, 2020.

We recognized no direct write-offs or allowances for credit losses in earnings for the three and nine months ended July 3, 2021, and June 27, 2020.

Deferred Compensation Assets

9 unchanged sentences

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 six months ended April 3, 2021, and March 28, 2020.

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 July 3, 2021, and June 27, 2020.

Other Financial Instruments

1 unchanged sentence

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

April 3, 2021 October 3, 2020

July 3, 2021 October 3, 2020

Fair Value Carrying Value Fair Value Carrying Value

1 unchanged sentence

PENSIONS AND OTHER POSTRETIREMENT BENEFIT PLANS

The components of the net periodic cost for the pension and postretirement benefit plans for the three and six months ended April 3, 2021 and March 28, 2020 are as follows (in millions):

The components of the net periodic cost for the pension and postretirement benefit plans for the three and nine months ended July 3, 2021 and June 27, 2020 are as follows (in millions):

Pension Plans

Three Months Ended Six Months Ended

April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020

Three Months Ended Nine Months Ended

July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

Service cost $ — $ — $ — $ —

2 unchanged sentences

Amortization of:

Amortization of net actuarial loss 1 1 2 2

Net actuarial loss 1 1 3 3

Prior service cost 1 1 1 1

Settlement (gain) loss — ( 6 ) — ( 112 )

1 unchanged sentence

Postretirement Benefit Plans

Three Months Ended Six Months Ended

April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020

Three Months Ended Nine Months Ended

July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

Interest cost $ — $ 1 $ — $ 1

3 unchanged sentences

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.

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

2 unchanged sentences

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

Three Months Ended Six Months Ended

April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020

Three Months Ended Nine Months Ended

July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

Before Tax Tax After Tax Before Tax Tax After Tax Before Tax Tax After Tax Before Tax Tax After Tax

33 unchanged sentences

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

Three Months Ended Six Months Ended

April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020

Three Months Ended Nine Months Ended

July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

Beef $ 4,954 $ 3,653 $ 12,987 $ 11,470

5 unchanged sentences

Total sales $ 12,478 $ 10,022 $ 34,238 $ 31,725

Three Months Ended Six Months Ended

April 3, 2021 March 28, 2020 April 3, 2021 March 28, 2020

Three Months Ended Nine Months Ended

July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020

Operating income (loss):

4 unchanged sentences

International/Other (c)

( 15 ) 9 ( 4 ) 19

Total operating income 1,062 773 2,487 2,046

1 unchanged sentence

Income before income taxes $ 966 $ 665 $ 2,206 $ 1,827

(a) Beef segment results for the six months ended April 3, 2021 included a $ 55 million gain from the recovery of cattle inventory from a cattle supplier that misappropriated Company funds as compared to results for the three and six months ended March 28, 2020, which included a $ 14 million gain and $ 54 million loss, respectively, as further described in Note 1:

(a) Beef segment results for the nine months ended July 3, 2021 included a $ 55 million gain from the recovery of cattle inventory from a cattle supplier that misappropriated Company funds as compared to results for the three and nine months ended June 27, 2020, which included a $ 2 million loss and $ 56 million loss, respectively, as further described in Note 1:

Accounting Policies.

(b) Chicken segment results for the six months ended April 3, 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.

(c) International/Other results for the three and six months ended April 3, 2021 included a $ 19 million loss related to the relocation of a production facility in China.

(b) Chicken segment results for the three and nine months ended July 3, 2021 included charges of $ 306 million and $ 626 million, respectively, related to the recognition of legal contingency accruals, of which $ 225 million and $ 545 million, respectively, was recorded as a reduction to Sales pursuant to FASB guidance related to accounting for revenue from contracts with customers and $ 81 million was recorded as an increase to Cost of Sales in the three and nine months ended July 3, 2021.

(c) International/Other results included a $ 4 million loss and a $ 23 million loss related to the relocation of a production facility in China for the three and nine months ended July 3, 2021, respectively.

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

Three months ended April 3, 2021

Three months ended July 3, 2021

Foodservice (b)

9 unchanged sentences

Total $ 5,724 $ 3,774 $ 1,750 $ 1,230 $ — $ 12,478

Three months ended March 28, 2020

Three months ended June 27, 2020

Foodservice (b)

9 unchanged sentences

Total $ 5,403 $ 2,432 $ 1,235 $ 952 $ — $ 10,022

Six months ended April 3, 2021

Nine months ended July 3, 2021

Foodservice (b)

9 unchanged sentences

Total $ 16,357 $ 9,801 $ 4,885 $ 3,195 $ — $ 34,238

Six months ended March 28, 2020

Nine months ended June 27, 2020

Foodservice (b)

13 unchanged sentences

(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 six months ended April 3, 2021, the Chicken segment included a $ 320 million reduction in Other due to the recognition of a legal contingency accrual.

For the three and nine months ended July 3, 2021, the Chicken segment included a $ 225 million and $ 545 million reduction in Other, respectively, due to the recognition of legal contingency accruals.

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 April 3, 2021, was no t significant.

The remaining terms of the underlying obligations cover periods up to 10 years, and the maximum potential amount of future payments as of July 3, 2021, was no t significant.

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

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

At July 3, 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 April 3, 2021 was approximately $ 315 million.

The total receivables under these programs were $ 24 million and $ 29 million at April 3, 2021 and October 3, 2020, respectively.

The potential maximum commitment as of July 3, 2021 was approximately $ 315 million.

The total receivables under these programs were $ 9 million and $ 29 million at July 3, 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 April 3, 2021, and October 3, 2020.

After analyzing residual credit risks and general market conditions, we have no allowance for these programs’ estimated uncollectible receivables at July 3, 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 $ 15 million and $ 46 million at April 3, 2021 and October 3, 2020, respectively.

These funds are generally considered restricted cash, which is reported in the Consolidated Condensed Balance Sheets in Other Assets, and totaled $ 11 million and $ 46 million at July 3, 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 April 3, 2021, the total amount under these types of arrangements totaled $ 620 million.

At July 3, 2021, the total amount under these types of arrangements totaled $ 609 million.

Contingencies

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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.

The parties have briefed the issue of class certification, and the defendants are scheduled to file summary judgment motions in late calendar year 2021.

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

The parties have briefed the issue of class certification, and if necessary, trial is expected to occur in calendar 2023 after rulings on class certification and summary judgment motions.

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

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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 in a conspiracy to fix prices and rig bids for broiler chicken products from at least 2012 until at least early 2019.

Subsequently, the DOJ has announced additional indictments, bringing charges against additional individuals, as well as poultry processing companies, and alleging a conspiracy to fix prices and rig bids for broiler chicken products from at least 2012 until at least early 2019.

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

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On February 23, 2021 and March 22, 2021, the Court granted preliminary approval of the settlements with the putative Direct Purchaser Plaintiff Class and the putative End-User Plaintiff Class, respectively.

On June 29, 2021, the Court granted final approval to the settlement with the Direct Purchaser Plaintiff Class.

The settlement with the putative Commercial and Institutional Indirect Purchaser Plaintiff Class remains subject to court approval.

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In the first quarter of fiscal 2021, the Company 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.

We are currently pursuing settlement discussions with the opt-out plaintiffs with respect to the remaining claims.

For the third quarter of fiscal 2021, the Company accrued an additional $ 225 million for the estimated costs to resolve the remaining claims brought by opt-out plaintiffs, bringing the total recorded legal contingency accrual for claims related to this matter to $ 545 million, which amount includes our existing settlements.

This amount reflects an adjustment to our estimate of the probable losses with respect to claims in the Broiler Antitrust Civil Litigation and bid-rigging claims of potentially affected parties identified by the DOJ in the indictments noted above.

We are currently pursuing settlement discussions with the remaining opt-out plaintiffs with respect to the remaining claims.

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.

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

In February 2021, we received a CID from the Office of the Attorney General of the State of Louisiana.

In February and May of 2021, we received CIDs from the Office of the Attorney General of the State of Louisiana.

This Louisiana 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 Louisiana’s Attorney General’s office.

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

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.

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

On January 27, 2017, Haff Poultry, Inc., Craig Watts, Johnny Upchurch, Jonathan Walters and Brad Carr, acting on behalf of themselves and a putative class of broiler chicken farmers, filed a class action complaint against us and certain of our poultry subsidiaries, as well as several other vertically-integrated poultry processing companies, in the United States District Court for the Eastern District of Oklahoma.

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On December 15, 2020, the JPML granted the plaintiffs’ motion and consolidated all actions in the Eastern District of Oklahoma.

The parties are now conducting discovery.

In June 2021, we reached an agreement to settle with the putative class of broiler chicken farmers all claims raised in this consolidated action for $ 21 million.

The settlement is subject to court approval.

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 parties are now conducting discovery.

On June 29, 2021, the Office of the Attorney General of the State of New Mexico filed a complaint against us and certain of our pork subsidiaries, as well as several other pork processing companies and Agri Stats, 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 exchange information and manipulate the supply of pork.

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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On April 7, 2021, we and the other defendants answered the second amended complaint.

The parties are now conducting discovery.

For the third quarter of fiscal 2021, the Company recorded an accrual for estimated probable losses that it expects to incur for this matter in the Company’s Consolidated Financial Statements.

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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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