What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-08 compared with 2022-05-09 · 148 added, 132 removed, 304 unchanged (48% of the section changed)

22 unchanged sentences

The most significant challenge we face is the availability of team members to operate our production facilities as our production facilities continue to experience varying levels of absenteeism.

In the second quarter of fiscal 2022, we experienced an increase in COVID-19 cases associated with the Omicron variant.

The health and safety of our team members remains our top priority, and we continue to provide a variety of health and safety resources and services to team members and their family members.

Additionally, we have experienced some challenges in our supply chain such as volatility of inputs, availability of shipping containers and port congestion.

These challenges impacted our operating costs, but generally, we experienced lower direct incremental costs associated with COVID-19 in the first six months of fiscal 2022 as compared to the same period in fiscal 2021, and we expect this trend to continue throughout the remainder of fiscal 2022.

These challenges impacted our operating costs, but generally, we experienced lower direct incremental costs associated with COVID-19 in the first nine months of fiscal 2022 as compared to the same period in fiscal 2021, and we expect this trend to continue throughout the remainder of fiscal 2022.

For fiscal 2022, we expect retail demand to remain elevated as compared to the pre-pandemic levels and foodservice demand to continue to return to more historic levels.

13 unchanged sentences

At this time, we do not anticipate costs associated with this program to be material.

Sales grew 16% and 20% in the second quarter and first six months of fiscal 2022, respectively, largely due to increased average sales prices across each of our segments and a $320 million legal contingency accrual recognized as a reduction to sales in the first quarter of fiscal 2021.

Sales grew 8% and 16% in the third quarter and first nine months of fiscal 2022, respectively, largely due to increased sales growth across each of our segments in the first nine months of fiscal 2022 primarily due to higher average sales price partially offset by reduced sales volumes, combined with $225 million and $545 million in legal contingency accruals recognized as a reduction to sales in the third quarter and first nine months of fiscal 2021, respectively.

The higher average sales prices were primarily due to the current inflationary environment and recovery of rapidly rising costs, such as labor, freight and transportation, livestock, feed ingredients and other input costs.

Operating income of $1,156 million for the second quarter of fiscal 2022 was up 61% due to improved operating income in our Beef, Chicken, and Prepared Foods segments, partially offset by a decline in the results of our Pork segment.

Operating income of $2,611 million for the first six months of fiscal 2022 was up 83% due to improved operating income in our Beef, Pork, and Chicken segments, partially offset by a decline in the results of our Prepared Foods segment.

In the second quarter of fiscal 2022, our operating income was impacted by $5 million of ongoing costs related to a fire in the fourth quarter of fiscal 2021 at one of our Chicken segment production facilities, net of insurance proceeds.

In the six months ended April 2, 2022, our operating income was impacted by $18 million of insurance proceeds, net of costs, related to the same fire.

In the six months ended April 3, 2021, our results were impacted by $19 million of charges related to the relocation of a production facility in China.

Operating income of $1,033 million for the third quarter of fiscal 2022 was down 3% due to declining operating income in our Beef and Pork segments, partially offset by an increase in the results of our Chicken and Prepared Foods segments.

Operating income of $3,644 million for the first nine months of fiscal 2022 was up 47% due to improved operating income in our Beef, Chicken, and Prepared Foods segments.

In the third quarter of fiscal 2022, our operating income was impacted by $35 million of insurance proceeds related to fires at our production facilities, net of costs incurred.

Results in the third quarter of fiscal 2021 were impacted by $306 million of charges related to legal contingency accruals.

In the nine months ended July 2, 2022, our operating income was impacted by $53 million of insurance proceeds, net of costs incurred, related to the same fires.

In the nine months ended July 3, 2021, our results were impacted by $23 million of charges related to the relocation of a production facility in China.

Market Environment

According to the United States Department of Agriculture (“USDA”), domestic protein production (beef, pork, chicken and turkey) decreased less than 1% in the second quarter of fiscal 2022 compared to the same period in fiscal 2021.

All segments experienced strong demand, challenging labor conditions and inflation in operating costs, especially in labor, freight and transportation and certain materials, and we expect these trends to continue through the remainder of fiscal 2022.

According to the United States Department of Agriculture, domestic protein production (beef, pork, chicken and turkey) was relatively flat in the third quarter of fiscal 2022 compared to the same period in fiscal 2021.

All segments experienced inflation in operating costs, especially in labor, freight and transportation and certain materials, and we expect these trends to continue through the remainder of fiscal 2022.

Additionally, grain and feed ingredient costs have increased substantially, which impacts all of our segments.

We pursue recovery of these increased costs through pricing.

The Beef segment experienced strong global demand, sufficient supply of market-ready cattle and increased live cattle costs.

The Federal Reserve recently increased interest rates, and it is anticipated that interest rates will continue to rise in the near term.

Our direct exposure to rising interest rates is somewhat tempered given our strong liquidity position in addition to our current debt structure in which nearly all of our borrowings have fixed interest rates.

At July 2, 2022, our current debt was $67 million, and we have approximately $470 million of debt coming due over the next 24 months.

However, should we need to issue additional debt or borrow under our existing revolving credit facility, we may be exposed to higher interest rates than our current outstanding borrowings.

The Beef segment experienced strong demand, sufficient supply of market-ready cattle and increased live cattle costs.

The Pork segment experienced adequate supply of live hogs.

The Chicken segment experienced strong demand and increased feed ingredient costs.

The Chicken segment experienced strong demand and increased feed ingredient and other input costs.

Feed ingredient costs are expected to be higher for fiscal 2022 versus fiscal 2021.

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Additionally, the conflict between Ukraine and Russia has led to economic sanctions against Russia and certain regions of Ukraine and Belarus.

As of April 2, 2022, the impact of this conflict has not had a material direct impact on our financial performance.

As of July 2, 2022, the impact of this conflict has not had a material direct impact on our financial performance.

However, the conflict is still ongoing and there are many risks and uncertainties in relation to the conflict that are outside of our control.

If the conflict escalates further or if additional countries join the conflict and additional economic sanctions are imposed, it could have a material impact on our business operations and financial performance.

Our total operating margin was 8.8% in the second quarter of fiscal 2022.

Our total operating margin was 7.7% in the third quarter of fiscal 2022.

Operating margins by segment were as follows:

3 unchanged sentences

• Prepared Foods – 7.6%

in millions, except per share data Three Months Ended Six Months Ended

April 2, 2022 April 3, 2021 April 2, 2022 April 3, 2021

in millions, except per share data Three Months Ended Nine Months Ended

July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021

Net income attributable to Tyson $ 750 $ 749 $ 2,700 $ 1,692

Net income attributable to Tyson – per diluted share 2.07 2.05 7.42 4.63

Second quarter – Fiscal 2022 – Net income attributable to Tyson included the following items:

• $5 million pretax, or ($0.01) per diluted share, of production facilities fire costs, net of insurance proceeds.

Six months – Fiscal 2022 – Net income attributable to Tyson included the following items:

Third quarter – Fiscal 2022 – Net income attributable to Tyson included the following items:

• $67 million pretax, or $0.13 per diluted share, of production facilities fire insurance proceeds, net of costs incurred.

Nine months – Fiscal 2022 – Net income attributable to Tyson included the following items:

• $107 million pretax, or $0.22 per diluted share, of production facilities fire insurance proceeds, net of costs incurred.

• $36 million post tax, or $0.10 per diluted share, from remeasurement of net deferred tax liabilities at lower enacted state tax rates.

Second quarter – Fiscal 2021 – Net income attributable to Tyson included the following items:

Third quarter – Fiscal 2021 – Net income attributable to Tyson included the following items:

• $306 million pretax, or ($0.64) per diluted share, related to the recognition of legal contingency accruals.

• $4 million pretax, or ($0.01) per diluted share, related to the relocation of a production facility in China.

Six months – Fiscal 2021 – Net income attributable to Tyson included the following items:

• $320 million pretax, or ($0.67) per diluted share, related to the recognition of a legal contingency accrual.

• $6 million pretax, or $0.01 per diluted share, of Beef production facility fire insurance proceeds, net of costs incurred.

Nine months – Fiscal 2021 – Net income attributable to Tyson included the following items:

• $626 million pretax, or ($1.31) per diluted share, related to the recognition of legal contingency accruals.

• $23 million pretax, or ($0.05) per diluted share, related to the relocation of a production facility in China.

• $6 million pretax, or $0.01 per diluted share, of Beef production facility fire insurance proceeds, net of costs incurred.

Summary of Results

in millions Three Months Ended Six Months Ended

April 2, 2022 April 3, 2021 April 2, 2022 April 3, 2021

in millions Three Months Ended Nine Months Ended

July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021

Sales $ 13,495 $ 12,478 $ 39,545 $ 34,238

2 unchanged sentences

Sales growth 8.2 % 15.5 %

Second quarter – Fiscal 2022 vs Fiscal 2021

• Sales Volume – Sales were negatively impacted by a decrease in sales volume, which accounted for a decrease of $166 million, driven by decreased volumes in our Pork and Prepared Foods segments and impacts associated with the challenging labor environment and continued supply chain constraints, partially offset by slight increases in sales volume in our Beef and Chicken segments.

Third quarter – Fiscal 2022 vs Fiscal 2021

• Sales Volume – Sales were negatively impacted by a decrease in sales volume, which accounted for a decrease of $223 million, driven by decreased volumes in our Pork, Chicken and Prepared Foods segments and impacts associated with reduced global Pork demand and impacts associated with increased pricing, partially offset by an increase in sales volume in our Beef segment.

• Average Sales Price – Sales were positively impacted by higher average sales prices, which accounted for an increase of $1,015 million.

The increase in average sales price was primarily due to the current inflationary environment and recovery of rapidly rising costs.

Six months – Fiscal 2022 vs Fiscal 2021

• The above change in average sales price for the third quarter of fiscal 2022 excludes the impact of a $225 million reduction of Sales from the recognition of legal contingency accruals in the third quarter of fiscal 2021.

Nine months – Fiscal 2022 vs Fiscal 2021

• Sales Volume – Sales were negatively impacted by a decrease in sales volume, which accounted for a decrease of $353 million, driven by decreased volumes in our Beef, Pork and Prepared Foods segments and impacts associated with the challenging labor environment and continued supply chain constraints, partially offset by increases in sales volume in our Chicken segment.

1 unchanged sentence

The increase in average sales price was primarily due to the current inflationary environment and recovery of rapidly rising costs.

• The above change in average sales price for the first six months of fiscal 2022 excludes a $320 million reduction of Sales from the recognition of a legal contingency accrual in the first six months of fiscal 2021.

• The above change in average sales price for the nine months ended July 2, 2022 excludes the impact of a $545 million reduction of Sales from the recognition of legal contingency accruals in the nine months ended July 3, 2021.

Cost of Sales

in millions Three Months Ended Six Months Ended

April 2, 2022 April 3, 2021 April 2, 2022 April 3, 2021

in millions Three Months Ended Nine Months Ended

July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021

Cost of sales $ 11,884 $ 10,858 $ 34,184 $ 30,188

1 unchanged sentence

Cost of sales as a percentage of sales 88.1 % 87.0 % 86.4 % 88.2 %

Second quarter – Fiscal 2022 vs Fiscal 2021

Third quarter – Fiscal 2022 vs Fiscal 2021

• Cost of sales increased $1,026 million.

4 unchanged sentences

• Increase in raw material and other input costs of approximately $135 million in our Prepared Foods segment.

• Increase in live hog costs of approximately $115 million in our Pork segment.

• Increase in freight and transportation costs of approximately $100 million.

• Increase of approximately $25 million in frontline bonuses.

• Increase of approximately $5 million in our Chicken segment related to costs incurred related to the fire at our production facility, net of insurance proceeds.

• Decrease due to net derivative gains of $86 million in the second quarter of fiscal 2022, compared to net derivative loss of $15 million in the second quarter of fiscal 2021 due to our risk management activities.

• Increase due to net derivative losses of $25 million in the third quarter of fiscal 2022, compared to net derivative gain of $41 million in the third quarter of fiscal 2021 due to our risk management activities.

These amounts exclude offsetting impacts from related physical purchase transactions, which are included in the change in live cattle and hog costs and raw material and feed ingredient costs described herein.

• Remaining increase in costs across all of our segments primarily driven by net impacts on average cost per pound from mix changes as well as the impact of the inflationary environment on our labor and other input costs.

• The $145 million impact of lower sales volume was primarily driven by decreased volumes in our Prepared Foods and Pork segments.

Six months – Fiscal 2022 vs Fiscal 2021

• Decrease of approximately $81 million in our Chicken segment related to the recognition of legal contingency accruals in the third quarter of fiscal 2021.

• Decrease in live hog costs of approximately $40 million in our Pork segment.

• Decrease of approximately $8 million in our Chicken segment related to insurance proceeds, net of costs incurred, related to the fire at our production facility in the fourth quarter of fiscal 2021.

• Decrease of approximately $27 million in our Beef segment related to insurance proceeds related to the fire at our production facility in the fourth quarter of fiscal 2019.

• The $193 million impact of lower sales volume was primarily driven by decreased volumes in our Prepared Foods, Chicken and Pork segments.

Nine months – Fiscal 2022 vs Fiscal 2021

• Cost of sales increased $3,996 million.

7 unchanged sentences

• Increase of approximately $90 million in frontline bonuses.

• Decrease due to net derivative gains of $164 million in the first six months of fiscal 2022, compared to net derivative gains of $80 million in the first six months of fiscal 2021 due to our risk management activities.

• Decrease due to net derivative gains of $139 million in the first nine months of fiscal 2022, compared to net derivative gains of $121 million in the first nine months of fiscal 2021 due to our risk management activities.

• Decrease of approximately $18 million in our Chicken segment related to insurance proceeds net of costs incurred related to the fire at our production facility.

• The $114 million impact of lower sales volume was primarily driven by decreased volumes in our Beef, Prepared Foods and Pork segments.

• Decrease of approximately $81 million in our Chicken segment related to the recognition of legal contingency accruals in the third quarter of fiscal 2021.

• Decrease of approximately $26 million in our Chicken segment related to insurance proceeds, net of costs incurred, related to the fire at our production facility in the fourth quarter of fiscal 2021.

• Decrease of approximately $27 million in our Beef segment related to insurance proceeds related to the fire at our production facility in the fourth quarter of fiscal 2019.

• The $307 million impact of lower sales volume was primarily driven by decreased volumes in our Prepared Foods, Beef and Pork segments.

Selling, General and Administrative

in millions Three Months Ended Six Months Ended

April 2, 2022 April 3, 2021 April 2, 2022 April 3, 2021

in millions Three Months Ended Nine Months Ended

July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021

Selling, general and administrative expense $ 578 $ 558 $ 1,717 $ 1,563

As a percentage of sales 4.3 % 4.5 % 4.3 % 4.6 %

Second quarter – Fiscal 2022 vs Fiscal 2021

Third quarter – Fiscal 2022 vs Fiscal 2021

• Increase of $20 million in selling, general and administrative was primarily driven by:

• Increase of $20 million in employee costs.

• Increase of $16 million in marketing, advertising and promotion expenses.

• Increase of $7 million in technology related costs.

• Decrease of $11 million in commission and brokerage fees

• Remaining increase is primarily attributable to increased travel and entertainment costs, professional fees and increased donations.

Six months – Fiscal 2022 vs Fiscal 2021

• Remaining increase is primarily attributable to increased donations, employee costs and travel and entertainment costs.

Nine months – Fiscal 2022 vs Fiscal 2021

• Increase of $154 million in selling, general and administrative was primarily driven by:

◦ Increase of $55 million from the change in the impact of a cattle supplier’s misappropriation of Company funds, as the result of a $55 million gain related to the recovery of cattle inventory in the six months ended April 3, 2021, as compared to no gain or loss recognized in the six months ended April 2, 2022.

• Increase of $55 million from the change in the impact of a cattle supplier’s misappropriation of Company funds, as the result of a $55 million gain related to the recovery of cattle inventory in the nine months ended July 3, 2021, as compared to no gain or loss recognized in the nine months ended July 2, 2022.

• Increase of $40 million in employee costs.

◦ Increase of $22 million in technology related costs.

• Increase of $35 million in marketing, advertising and promotion expenses.

◦ Increase of $12 million professional fees.

• Increase of $29 million in technology related costs.

• Increase of $18 million in professional fees.

• Increase of $12 million in travel and entertainment costs.

• Decrease of $31 million in commission and brokerage fees.

◦ Remaining increase is primarily attributable to increased travel and entertainment costs and increased donations.

• Decrease of $20 million in depreciation and amortization.

• Remaining increase is primarily attributable to increased donations and other miscellaneous expenses.

Interest Expense

in millions Three Months Ended Six Months Ended

April 2, 2022 April 3, 2021 April 2, 2022 April 3, 2021

in millions Three Months Ended Nine Months Ended

July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021

Cash interest expense $ 94 $ 111 $ 303 $ 338

1 unchanged sentence

Total interest expense $ 85 $ 105 $ 282 $ 325

Second quarter and six months – Fiscal 2022 vs Fiscal 2021

Third quarter and nine months – Fiscal 2022 vs Fiscal 2021

• Cash interest expense primarily included interest expense related to our senior notes, in addition to commitment fees incurred on our revolving credit facility.

1 unchanged sentence

Other (Income) Expense, net

in millions Three Months Ended Six Months Ended

April 2, 2022 April 3, 2021 April 2, 2022 April 3, 2021

in millions Three Months Ended Nine Months Ended

July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021

Total other (income) expense, net $ (34) $ (7) $ (111) $ (38)

Second quarter and six months – Fiscal 2022 vs Fiscal 2021

• Included $22 million of production facilities fires insurance proceeds and $37 million of gains on equity investments due to observable price changes in the first six months of fiscal 2022.

Third quarter and nine months – Fiscal 2022 vs Fiscal 2021

• Included $32 million of production facilities fire insurance proceeds in the third quarter of fiscal 2022 and $54 million of production facilities fires insurance proceeds and $37 million of gains on equity investments due to observable price changes in the first nine months of fiscal 2022.

Effective Tax Rate

Three Months Ended Six Months Ended

April 2, 2022 April 3, 2021 April 2, 2022 April 3, 2021

Three Months Ended Nine Months Ended

July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021

23.6 % 22.1 % 22.1 % 22.9 %

Second quarter and six months – Fiscal 2022 vs Fiscal 2021

• Our effective income tax rate was 23.4% for the second quarter of fiscal 2022 compared to 23.5% for the same period of fiscal 2021, and the effective income tax rates for the first six months of fiscal 2022 and 2021 were 21.6% and 23.5%, respectively.

The effective tax rates for the second quarter and first six months of fiscal 2022 and 2021 were increased by state taxes and decreased by various tax benefits.

Additionally, the effective tax rate for the first six months of fiscal 2022 includes a $36 million benefit from the remeasurement of deferred income taxes, primarily due to legislation decreasing state tax rates enacted in the first quarter.

Third quarter and nine months – Fiscal 2022 vs Fiscal 2021

• Our effective income tax rate was 23.6% for the third quarter of fiscal 2022 compared to 22.1% for the same period of fiscal 2021, and the effective income tax rates for the first nine months of fiscal 2022 and 2021 were 22.1% and 22.9%, respectively.

The effective tax rates for the third quarter and first nine months of fiscal 2022 and 2021 were increased by state taxes and decreased by various tax benefits.

Additionally, the effective tax rate for the first nine months of fiscal 2022 includes a $36 million benefit from the remeasurement of deferred income taxes, primarily due to legislation decreasing state tax rates enacted in the first quarter.

Segment Results

3 unchanged sentences

in millions Sales

Three Months Ended Six Months Ended

April 2, 2022 April 3, 2021 April 2, 2022 April 3, 2021

Three Months Ended Nine Months Ended

July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021

Beef $ 4,959 $ 4,954 $ 14,995 $ 12,987

6 unchanged sentences

in millions Operating Income (Loss)

Three Months Ended Six Months Ended

April 2, 2022 April 3, 2021 April 2, 2022 April 3, 2021

Three Months Ended Nine Months Ended

July 2, 2022 July 3, 2021 July 2, 2022 July 3, 2021

Beef $ 533 $ 1,120 $ 2,127 $ 2,093

5 unchanged sentences

Beef Segment Results

in millions Three Months Ended Six Months Ended

April 2, 2022 April 3, 2021 Change April 2, 2022 April 3, 2021 Change

in millions Three Months Ended Nine Months Ended

July 2, 2022 July 3, 2021 Change July 2, 2022 July 3, 2021 Change

Sales $ 4,959 $ 4,954 $ 5 $ 14,995 $ 12,987 $ 2,008

3 unchanged sentences

Operating margin 10.7 % 22.6 % 14.2 % 16.1 %

Second quarter and six months – Fiscal 2022 vs Fiscal 2021

• Sales Volume – Sales volume was up slightly in the second quarter of fiscal 2022 driven by strong global demand, partially offset by a challenging labor environment and continued supply chain constraints.

Sales volume decreased for the first six months due to the impacts associated with a challenging labor environment and increased supply chain constraints, partially offset by strong global demand.

• Average Sales Price – Average sales price increased in the second quarter and the first six months of fiscal 2022 as input costs such as live cattle, labor, freight and transportation costs increased and demand for our beef products remained strong.

• Operating Income – Operating income increased in the second quarter and first six months of fiscal 2022 due to strong demand as we continued to optimize revenues relative to live cattle supply and a reduction in direct incremental expenses related to COVID-19, partially offset by production inefficiencies due to the impacts associated with a challenging labor environment and continued supply chain constraints.

Third quarter and nine months – Fiscal 2022 vs Fiscal 2021

• Sales Volume – Sales volume decreased for the first nine months of fiscal 2022 despite strong global demand, due to the impacts associated with a challenging labor environment and supply chain constraints.

Sales volume increased in the third quarter of fiscal 2022 driven by a strong global demand environment, partially offset by a challenging labor environment and continued supply chain constraints.

• Average Sales Price – Average sales price increased in the first nine months of fiscal 2022 as input costs such as live cattle, labor, freight and transportation costs increased and demand for our beef products remained strong.

Average sales price decreased slightly in the third quarter of fiscal 2022 driven by reduced demand for premium cuts of beef as compared to exceptionally high demand in the third quarter of fiscal 2021.

• Operating Income – Operating income increased slightly during the first nine months of fiscal 2022 due to strong demand as we continued to optimize revenues relative to live cattle supply and a reduction in direct incremental expenses related to COVID-19, partially offset by production inefficiencies due to the impacts associated with a challenging labor environment and continued supply chain constraints.

Additionally, operating income in fiscal 2021 was impacted by a $55 million gain from the recovery of cattle inventory related to a cattle supplier's misappropriation of Company funds.

Operating income decreased in the third quarter of fiscal 2022 as margins began to reduce from historically high levels paired with continued increased operating costs.

Additionally, operating income in the third quarter of fiscal 2022 benefited from $27 million of insurance proceeds related to a fire at a production facility in the fourth quarter of fiscal 2019.

Pork Segment Results

in millions Three Months Ended Six Months Ended

April 2, 2022 April 3, 2021 Change April 2, 2022 April 3, 2021 Change

in millions Three Months Ended Nine Months Ended

July 2, 2022 July 3, 2021 Change July 2, 2022 July 3, 2021 Change

Sales $ 1,619 $ 1,715 $ (96) $ 4,810 $ 4,631 $ 179

3 unchanged sentences

Operating margin 1.5 % 3.9 % 5.2 % 5.4 %

Second quarter and six months – Fiscal 2022 vs Fiscal 2021

• Sales Volume – Sales volume decreased in the second quarter and first six months of fiscal 2022 primarily due to the impacts associated with a challenging labor environment.

• Average Sales Price – Average sales price increased in the second quarter and first six months of fiscal 2022 as input costs such as live hogs, labor, freight and transportation costs increased, partially offset by unfavorable mix associated with labor shortages.

• Operating Income – Operating income decreased slightly in the second quarter of fiscal 2022 due to higher input costs such as live hogs, labor and freight and transportation costs.

Operating income for the first six months of fiscal 2022 increased as we optimized revenues relative to live hog supply and due to a reduction in direct incremental expenses related to COVID-19, partially offset by higher inputs costs and the impacts associated with a challenging labor environment.

Third quarter and nine months – Fiscal 2022 vs Fiscal 2021

• Sales Volume – Sales volume decreased in the third quarter and first nine months of fiscal 2022 due to reduced global demand.

• Average Sales Price – Average sales price decreased in the third quarter due to reduced export and retail demand.

Average sales price increased in the first nine months of fiscal 2022 as input costs such as live hogs, labor, freight and transportation costs increased, partially offset by unfavorable mix associated with labor shortages.

• Operating Income – Operating income decreased in the third quarter of fiscal 2022 due to periods of compressed pork margins.

Operating income for the first nine months of fiscal 2022 was relatively flat as reduced direct incremental expenses related to COVID-19 were offset by higher inputs costs and the impacts associated with a challenging labor environment.

Chicken Segment Results

in millions Three Months Ended Six Months Ended

April 2, 2022 April 3, 2021 Change April 2, 2022 April 3, 2021 Change

in millions Three Months Ended Nine Months Ended

July 2, 2022 July 3, 2021 Change July 2, 2022 July 3, 2021 Change

Sales $ 4,366 $ 3,476 $ 890 $ 12,342 $ 9,860 $ 2,482

3 unchanged sentences

Operating margin 6.3 % (8.0) % 5.0 % (5.0) %

Second quarter and six months – Fiscal 2022 vs Fiscal 2021

• Sales Volume – Sales volume increased in the second quarter and first six months of fiscal 2022 primarily due to a strong demand environment partially offset by continued supply chain constraints.

• Average Sales Price – Average sales price increased in the second quarter and first six months of fiscal 2022 due to the effects of pricing initiatives in an inflationary cost environment.

• Operating Income (Loss) – Operating income increased in the second quarter and first six months of fiscal 2022 due to increased sales volume and higher average sales prices, partially offset by the impacts of inflationary market conditions including increased supply chain costs and a challenging labor environment.

In the second quarter of fiscal 2022, we experienced $100 million of higher feed ingredient costs and $101 million of net derivative gains as compared to $10 million of net derivative gains in the second quarter of fiscal 2021.

In the first six months of fiscal 2022, we experienced $285 million of higher feed ingredient costs and $159 million of net derivative gains as compared to $83 million of net derivative gains in the first six months of fiscal 2021.

Additionally, operating income in the first six months of fiscal 2022 was impacted by $18 million of insurance proceeds, net of costs incurred related to a fire at a production facility and was impacted in the first quarter of fiscal 2021 by a $320 million loss from the recognition of a legal contingency accrual.

Third quarter and nine months – Fiscal 2022 vs Fiscal 2021

• Sales Volume – Sales volume decreased in the third quarter of fiscal 2022 primarily due to a reduction in volumes related to a fire at a production facility in the fourth quarter of fiscal 2021 and a reduction in outside meat purchases.

Sales volume increased slightly in the first nine months of fiscal 2022 primarily due to strong global demand partially offset by a reduction in volumes related to a fire at a production facility in the fourth quarter of fiscal 2021.

• Average Sales Price – Average sales price increased in the third quarter and first nine months of fiscal 2022 due to the effects of pricing initiatives in an inflationary cost environment.

The change in average sales price for the third quarter and nine months ended July 2, 2022 excludes the impact of $225 million and $545 million reductions of Sales from the recognition of legal contingency accruals in the three and nine months ended July 3, 2021, respectively.

• Operating Income (Loss) – Operating income increased in the third quarter and first nine months of fiscal 2022 primarily due to higher average sales prices, partially offset by the impacts of inflationary market conditions including increased supply chain and labor costs.

In the third quarter of fiscal 2022, we experienced $145 million of higher feed ingredient costs and $23 million of net derivative losses as compared to $56 million of net derivative gains in the third quarter of fiscal 2021.

In the first nine months of fiscal 2022, we experienced $430 million of higher feed ingredient costs.

Additionally, operating income in the first nine months of fiscal 2022 benefited from $26 million of insurance proceeds, net of costs incurred related to a fire at a production facility and was impacted in the third quarter and first nine months of fiscal 2021 by $306 million and $626 million of losses, respectively, from the recognition of legal contingency accruals.

Prepared Foods Segment Results

in millions Three Months Ended Six Months Ended

April 2, 2022 April 3, 2021 Change April 2, 2022 April 3, 2021 Change

in millions Three Months Ended Nine Months Ended

July 2, 2022 July 3, 2021 Change July 2, 2022 July 3, 2021 Change

Sales $ 2,447 $ 2,323 $ 124 $ 7,173 $ 6,600 $ 573

3 unchanged sentences

Operating margin 7.6 % 6.5 % 8.9 % 9.6 %

Second quarter and six months – Fiscal 2022 vs Fiscal 2021

• Sales Volume – Sales volume decreased in the second quarter and first six months of fiscal 2022 due to lower production throughput primarily associated with a challenging labor and supply environment, uneven foodservice recovery and the divestiture of our pet treats business in the fourth quarter of fiscal 2021.

• Average Sales Price – Average sales price increased in the second quarter and first six months of fiscal 2022 primarily due to the effects of revenue management in an inflationary cost environment and favorable product mix.

• Operating Income – Operating income increased in the second quarter of fiscal 2022 due to higher average sales prices, partially offset by the impacts of inflationary market conditions, including $210 million of increased raw materials and other input costs, increased supply chain costs and a challenging labor environment.

Operating income decreased in the first six months of fiscal 2022 due to the impacts of inflationary market conditions, including $425 million of increased raw materials and other input costs, increased supply chain costs and a challenging labor environment, partially offset by higher average sales prices.

Third quarter and nine months – Fiscal 2022 vs Fiscal 2021

• Sales Volume – Sales volume decreased in the third quarter and first nine months of fiscal 2022 due to the impacts of increased pricing, uneven foodservice recovery, the divestiture of our pet treats business in the fourth quarter of fiscal 2021 and a challenging supply environment impacting the first half of fiscal 2022.

• Average Sales Price – Average sales price increased in the third quarter and first nine months of fiscal 2022 primarily due to the effects of revenue management in an inflationary cost environment.

• Operating Income – Operating income increased in the third quarter of fiscal 2022 due to higher average sales prices, partially offset by the impacts of inflationary market conditions, including $135 million of increased raw materials and other input costs in addition to increased supply chain and labor costs.

Operating income was relatively flat in the first nine months of fiscal 2022 as higher average sales prices were offset by the impacts of inflationary market conditions, including $560 million of increased raw materials and other input costs in addition to increased supply chain and labor costs.

International/Other Results

in millions Three Months Ended Six Months Ended

April 2, 2022 April 3, 2021 Change April 2, 2022 April 3, 2021 Change

in millions Three Months Ended Nine Months Ended

July 2, 2022 July 3, 2021 Change July 2, 2022 July 3, 2021 Change

Sales $ 602 $ 488 $ 114 $ 1,717 $ 1,444 $ 273

Operating income (loss) (2) (15) 13 $ 7 $ (4) $ 11

Second quarter and six months – Fiscal 2022 vs Fiscal 2021

• Sales – Sales increased in the second quarter and first six months of fiscal 2022 primarily due to increased pricing from favorable product mix and increased volume.

• Operating Income (Loss) – Operating income increased in the second quarter and first six months of fiscal 2022 primarily due to a $19 million charge incurred in the second quarter of fiscal 2021 related to the relocation of a production facility in China, partially offset by increased advertising and promotional investments as well as increased raw material and other input costs.

Operating income 12 4 8 $ 19 $ — $ 19

Third quarter and nine months – Fiscal 2022 vs Fiscal 2021

• Sales – Sales increased in the third quarter and first nine months of fiscal 2022 primarily due to increased volume and increased pricing in an inflationary cost environment.

• Operating Income – Operating income increased in the third quarter and first nine months of fiscal 2022 primarily due to $23 million of charges incurred in 2021 related to the relocation of a production facility in China.

LIQUIDITY AND CAPITAL RESOURCES

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Cash Flows from Operating Activities

in millions Six Months Ended

April 2, 2022 April 3, 2021

in millions Nine Months Ended

July 2, 2022 July 3, 2021

Net income $ 2,712 $ 1,702

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Net cash provided by operating activities $ 1,890 $ 2,656

• The decrease in net cash provided by operating activities was due to higher payments related to legal accruals, deferred payroll tax liabilities under the CARES Act and income taxes and an increase in inventory primarily due to increased finished inventory, offset by higher earnings as a result of strong operations in fiscal 2022.

• The decrease in net cash provided by operating activities was due to higher payments related to legal accruals, deferred payroll tax liabilities under the CARES Act and income taxes and an increase in inventory primarily due to increased finished inventory, offset by a decrease in accounts receivable and higher earnings as a result of strong operations in fiscal 2022.

Cash Flows from Investing Activities

in millions Six Months Ended

April 2, 2022 April 3, 2021

in millions Nine Months Ended

July 2, 2022 July 3, 2021

Additions to property, plant and equipment $ (1,323) $ (859)

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• Capital spending for fiscal 2022 is expected to approximate $1.9 billion and will include spending for capacity expansion and utilization, automation to alleviate labor challenges and brand and product innovations.

• Other, net for the first six months of fiscal 2022 primarily included insurance proceeds received related to a fire at one of our Chicken production facilities, proceeds from the disposition of assets and change in deposits for capital expenditures.

For the first six months of fiscal 2021, Other, net primarily included changes in deposits for capital expenditures.

• Other, net for the first nine months of fiscal 2022 primarily included insurance proceeds received related to fires at our production facilities, proceeds from the disposition of assets and changes in deposits for capital expenditures.

For the first nine months of fiscal 2021, Other, net primarily included changes in deposits for capital expenditures.

Cash Flows from Financing Activities

in millions Six Months Ended

April 2, 2022 April 3, 2021

in millions Nine Months Ended

July 2, 2022 July 3, 2021

Proceeds from issuance of debt $ 79 $ 573

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Net cash used for financing activities $ (2,128) $ (1,542)

• During the first six months of fiscal 2021, proceeds of $557 million from issuance of debt included $500 million of proceeds from the issuance of a term loan facility due March 2023.

• During the first nine months of fiscal 2021, proceeds of $573 million from issuance of debt included $500 million of proceeds from the issuance of a term loan facility due March 2023.

• In March 2022, we extinguished the $1 billion outstanding balance of our senior notes due June 2022.

• During the first six months of fiscal 2021, we extinguished the $1.5 billion outstanding balance of our term loan facility using proceeds received from the issuance of debt and cash on hand.

• During the first nine months of fiscal 2021, we extinguished the $1.5 billion outstanding balance of our term loan facility using proceeds received from the issuance of debt and cash on hand.

• Purchases of Tyson Class A stock included:

◦ $420 million of cash paid for shares repurchased pursuant to our share repurchase program during the six months ended April 2, 2022.

◦ $91 million and $34 million of shares repurchased to fund certain obligations under our equity compensation programs during the six months ended April 2, 2022 and April 3, 2021, respectively.

• Dividends paid during the six months ended April 2, 2022 reflected a 3% increase to our fiscal 2021 quarterly dividend rate.

• $587 million of cash paid for shares repurchased pursuant to our share repurchase program during the nine months ended July 2, 2022.

• $106 million and $50 million of shares repurchased to fund certain obligations under our equity compensation programs during the nine months ended July 2, 2022 and July 3, 2021, respectively.

• Dividends paid during the nine months ended July 2, 2022 reflected a 3% increase to our fiscal 2021 quarterly dividend rate.

Expiration Date Facility

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Borrowed Amount

April 2, 2022

Cash and cash equivalents $ 1,056

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Total liquidity $ 3,306

• Liquidity includes cash and cash equivalents, short-term investments and availability under our revolving credit facility, less outstanding commercial paper balance.

• At April 2, 2022, we had accrued legal contingencies and current debt of $267 million and $79 million, respectively, which we intend to pay with cash generated from our operating activities and other existing or new liquidity sources.

• Liquidity includes cash and cash equivalents, short-term investments and availability under our revolving credit facility, less the outstanding commercial paper balance.

• At July 2, 2022, we had accrued legal contingencies and current debt of $203 million and $67 million, respectively, which we intend to pay with cash generated from our operating activities and other existing or new liquidity sources.

• The revolving credit facility supports our short-term funding needs and also serves to backstop our commercial paper program.

We had no borrowings under the revolving credit facility during the six months ended April 2, 2022.

We had no borrowings under the revolving credit facility during the nine months ended July 2, 2022.

Under the terms of the facility, we have the option to establish incremental commitment increases of up to $500 million if certain conditions are met.

• We expect net interest expense to approximate $350 million for fiscal 2022.

• Our current ratio was 1.9 to 1 at April 2, 2022 and 1.6 to 1 at October 2, 2021.

The increase in the six months ended April 2, 2022 was primarily due to the $1 billion debt repayment and payments of deferred payroll tax liabilities under the CARES Act and income taxes, partially offset by increased inventory.

• At April 2, 2022, approximately $454 million of our cash was held in the accounts of our foreign subsidiaries.

• Our current ratio was 2.0 to 1 at July 2, 2022 and 1.6 to 1 at October 2, 2021.

The increase in the nine months ended July 2, 2022 was primarily due to the $1 billion debt repayment and payments of deferred payroll tax liabilities under the CARES Act and income taxes, partially offset by increased inventory.

• At July 2, 2022, approximately $428 million of our cash was held in the accounts of our foreign subsidiaries.

Generally, we do not rely on the foreign cash as a source of funds to support our ongoing domestic liquidity needs.

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We also have a revolving credit facility, with a committed capacity of $2.25 billion, to provide additional liquidity for working capital needs and to backstop our commercial paper program.

At April 2, 2022, amounts available for borrowing under our revolving credit facility totaled $2.25 billion.

At July 2, 2022, amounts available for borrowing under our revolving credit facility totaled $2.25 billion.

Our revolving credit facility is funded by a syndicate of 20 banks, with commitments ranging from $35 million to $175 million per bank.

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The maturities of the notes may vary, but may not exceed 397 days from the date of issuance.

As of April 2, 2022, we had no commercial paper outstanding under this program.

As of July 2, 2022, we had no commercial paper outstanding under this program.

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

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We monitor the ratio of our net debt to EBITDA as support for our long-term financing decisions.

At April 2, 2022, and October 2, 2021, the ratio of our net debt to EBITDA was 1.0x and 1.2x, respectively.

At July 2, 2022, and October 2, 2021, the ratio of our net debt to EBITDA was 1.1x and 1.2x, respectively.

Refer to Part I, Item 3, EBITDA Reconciliations, for an explanation and reconciliation to comparable Generally Accepted Accounting Principles (“GAAP ” ) measures.

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

We were in compliance with all debt covenants at April 2, 2022, and we expect that we will maintain compliance.

We were in compliance with all debt covenants at July 2, 2022, and we expect that we will maintain compliance.

RECENTLY ISSUED/ADOPTED ACCOUNTING PRONOUNCEMENTS

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

Accounting Policies, for updates to our significant accounting policies during the six months ended April 2, 2022.

Accounting Policies, for updates to our significant accounting policies during the nine months ended July 2, 2022.

These critical accounting policies require us to make estimates and assumptions that affect the amounts reported in the consolidated condensed financial statements and accompanying notes.

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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 2. Management’s Discussion and Analysis