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Item 1. Financial Statements

2023-05-08 compared with 2023-02-06 · 179 added, 118 removed, 686 unchanged (30% of the section changed)

3 unchanged sentences

(In millions, except per share data)

Three Months Ended

December 31, 2022 January 1, 2022

Three Months Ended Six Months Ended

April 1, 2023 April 2, 2022 April 1, 2023 April 2, 2022

Sales $ 13,133 $ 13,117 $ 26,393 $ 26,050

2 unchanged sentences

Selling, General and Administrative 576 579 1,077 1,139

Operating Income 467 1,455

Operating Income (Loss) ( 49 ) 1,156 418 2,611

Other (Income) Expense:

3 unchanged sentences

Total Other (Income) Expense 81 69 114 114

Income before Income Taxes 434 1,410

Income Tax Expense 114 284

Net Income 320 1,126

Net Income Attributable to Noncontrolling Interests 4 5

Net Income Attributable to Tyson $ 316 $ 1,121

Income (Loss) before Income Taxes ( 130 ) 1,087 304 2,497

Income Tax Expense (Benefit) ( 39 ) 254 75 538

Net Income (Loss) ( 91 ) 833 229 1,959

Net Income (Loss) Attributable to Noncontrolling Interests 6 4 10 9

Net Income (Loss) Attributable to Tyson $ ( 97 ) $ 829 $ 219 $ 1,950

Weighted Average Shares Outstanding:

2 unchanged sentences

Diluted 354 364 356 364

Net Income Per Share Attributable to Tyson:

Net Income (Loss) Per Share Attributable to Tyson:

Class A Basic $ ( 0.28 ) $ 2.34 $ 0.63 $ 5.50

5 unchanged sentences

(In millions)

Three Months Ended

December 31, 2022 January 1, 2022

Net Income $ 320 $ 1,126

Three Months Ended Six Months Ended

April 1, 2023 April 2, 2022 April 1, 2023 April 2, 2022

Net Income (Loss) $ ( 91 ) $ 833 $ 229 $ 1,959

Other Comprehensive Income (Loss), Net of Taxes:

4 unchanged sentences

Total Other Comprehensive Income (Loss), Net of Taxes 21 28 103 28

Comprehensive Income 402 1,126

Comprehensive Income (Loss) ( 70 ) 861 332 1,987

Comprehensive Income Attributable to Noncontrolling Interests 6 4 10 9

Comprehensive Income Attributable to Tyson $ 398 $ 1,121

Comprehensive Income (Loss) Attributable to Tyson $ ( 76 ) $ 857 $ 322 $ 1,978

See accompanying Notes to Consolidated Condensed Financial Statements.

2 unchanged sentences

(In millions, except share and per share data)

December 31, 2022 October 1, 2022

April 1, 2023 October 1, 2022

Current Assets:

26 unchanged sentences

Accumulated other comprehensive gain (loss) ( 194 ) ( 297 )

Treasury stock, at cost – 92 million shares at December 31, 2022 and 88 million shares at October 1, 2022 ( 4,944 ) ( 4,683 )

Treasury stock, at cost – 92 million shares at April 1, 2023 and 88 million shares at October 1, 2022 ( 4,955 ) ( 4,683 )

Total Tyson Shareholders’ Equity 19,399 19,702

6 unchanged sentences

(In millions)

Three Months Ended

December 31, 2022 January 1, 2022

Shares Amount Shares Amount

Three Months Ended Six Months Ended

April 1, 2023 April 2, 2022 April 1, 2023 April 2, 2022

Shares Amount Shares Amount Shares Amount Shares Amount

Class A Common Stock:

8 unchanged sentences

Balance at beginning of period 20,225 18,453 20,084 17,502

Net income attributable to Tyson 316 1,121

Net income (loss) attributable to Tyson ( 97 ) 829 219 1,950

Dividends ( 166 ) ( 163 ) ( 341 ) ( 333 )

21 unchanged sentences

(In millions)

Three Months Ended

December 31, 2022 January 1, 2022

Six Months Ended

April 1, 2023 April 2, 2022

Cash Flows From Operating Activities:

16 unchanged sentences

Payments on debt ( 121 ) ( 1,088 )

Proceeds from issuance of commercial paper 4,773 —

Repayments of commercial paper ( 4,182 ) —

Purchases of Tyson Class A common stock ( 332 ) ( 511 )

4 unchanged sentences

Effect of Exchange Rate Changes on Cash 20 6

(Decrease) Increase in Cash and Cash Equivalents and Restricted Cash ( 377 ) 491

Decrease in Cash and Cash Equivalents and Restricted Cash ( 488 ) ( 1,422 )

Cash and Cash Equivalents and Restricted Cash at Beginning of Year 1,031 2,637

13 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 December 31, 2022 and the results of operations for the three months ended December 31, 2022 and January 1, 2022.

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 1, 2023 and the results of operations for the three and six months ended April 1, 2023 and April 2, 2022.

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

4 unchanged sentences

Our goodwill is evaluated for impairment by first performing a qualitative assessment to determine whether a quantitative goodwill test is necessary.

If it is determined, based on qualitative factors, the fair value of the reporting unit may be more likely than not less than carrying amount, or if significant changes to macro-economic factors related to the reporting unit have occurred that could materially impact fair value, a quantitative goodwill impairment test would be required.

If it is determined, based on qualitative factors, the fair value of the reporting unit may be more likely than not less than the carrying amount, or if significant changes to macro-economic factors related to the reporting unit have occurred that could materially impact fair value, a quantitative goodwill impairment test would be required.

The quantitative test is to identify if a potential impairment exists by comparing the fair value of a reporting unit with its carrying amount, including goodwill.

2 unchanged sentences

Conditions existed as of the end our first quarter that required an interim assessment of goodwill for two of our International reporting units which had goodwill totaling $ 0.2 billion at December 31, 2022;

Based on the interim assessment, we determined no impairment was necessary as the fair value of the reporting units exceeded their carrying value.

we determined no impairment was necessary as the fair value of the reporting units exceeded their carrying value.

Our qualitative assessment for the second quarter did not indicate that it was more likely than not the fair value of any of our reporting units may be impaired, and as such, no quantitative goodwill test was deemed necessary.

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

8 unchanged sentences

The guidance, except for a requirement for rollforward information, is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2022, our fiscal 2024.

Disclosure of rollforward information is effective for fiscal years after December 15, 2023, our fiscal 2025.

Disclosure of rollforward information is effective for fiscal years beginning after December 15, 2023, our fiscal 2025.

Early adoption is permitted and the retrospective transition method should be applied for all amendments except rollforward information, which should be applied prospectively.

5 unchanged sentences

ACQUISITIONS AND DISPOSITIONS

In the second quarter of fiscal 2023, the Company announced it had reached a definitive agreement to acquire Williams Sausage Company, which we anticipate upon closing will be included in the Prepared Foods segment.

The transaction, which is expected to close in the back half of fiscal 2023, is subject to certain customary closing conditions.

There can be no assurance that the acquisition will close at such time.

In the first quarter of fiscal 2023, we completed the acquisition of a 60 % equity stake in Supreme Foods Processing Company ("SFPC"), a producer and distributor of value-added and cooked chicken and beef products, and a 15 % equity stake in Agricultural Development Company ("ADC"), a fully integrated poultry company, for a total purchase price of approximately $ 75 million, net of cash acquired.

1 unchanged sentence

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

SFPC's results from the date of acquisition through December 31, 2022 were insignificant to our Consolidated Condensed Statements of Income.

SFPC's results from the date of acquisition through April 1, 2023 were insignificant to our Consolidated Condensed Statements of Income.

We are accounting for the investment in ADC under the equity method.

1 unchanged sentence

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 December 31, 2022, the cost of inventories was determined by either the first-in, first-out method or the weighted-average method, which is consistent with the methods used at October 1, 2022.

At April 1, 2023, the cost of inventories was determined by either the first-in, first-out method or the weighted-average method, which is consistent with the methods used at October 1, 2022.

Inventories are presented net of lower of cost or net realizable value adjustments of $ 145 million and $ 60 million at April 1, 2023 and October 1, 2022, respectively.

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

December 31, 2022 October 1, 2022

April 1, 2023 October 1, 2022

Processed products $ 3,024 $ 3,188

4 unchanged sentences

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

December 31, 2022 October 1, 2022

April 1, 2023 October 1, 2022

Land $ 218 $ 214

8 unchanged sentences

Other current liabilities are as follows (in millions):

December 31, 2022 October 1, 2022

April 1, 2023 October 1, 2022

Accrued salaries, wages and benefits $ 680 $ 995

5 unchanged sentences

In the fourth quarter of fiscal 2022, the Company approved a restructuring program (the “2022 Program”), which is expected to improve business performance, increase collaboration, enhance team member agility, enable faster decision-making and reduce redundancies.

In conjunction with the 2022 Program, the Company plans to bring together all its corporate team members from the Chicago, Downers Grove and Dakota Dunes area corporate locations to its world headquarters in Springdale, Arkansas, through a phased relocation commencing in early calendar year 2023.

In conjunction with the 2022 Program, the Company is bringing together all its corporate team members from the Chicago, Downers Grove and Dakota Dunes area corporate locations to its world headquarters in Springdale, Arkansas, through a phased relocation which commenced in early calendar year 2023.

We anticipate the 2022 Program and associated expenses will be substantially complete in our fiscal 2025.

10 unchanged sentences

Included in the table above are $ 241 million of charges that have resulted or will result in cash outflows and $ 30 million in non-cash charges.

The following table reflects the pretax impact of the 2022 Program’s restructuring and related charges during the first quarter of fiscal 2023 by reportable segment (in millions):

The following table reflects the pretax impact of the 2022 Program’s restructuring and related charges during the second quarter of fiscal 2023 by reportable segment (in millions):

Beef Pork Chicken Prepared Foods International/Other Total

5 unchanged sentences

Total $ 8 $ 2 $ — $ 11 $ 1 $ 22

For the first quarter of fiscal 2023, we recorded restructuring and related charges associated with the 2022 Program of $ 8 million and $ 13 million in Cost of Sales and Selling, General and Administrative, respectively, in our Consolidated Condensed Statements of Income.

For the second quarter of fiscal 2023, we recorded restructuring and related charges of $ 26 million in Selling, General and Administrative and a reduction of $ 4 million in Cost of Sales in our Consolidated Condensed Statements of Income.

Included in the above results are $ 18 million of charges that have resulted or will result in cash outflows and $ 4 million in non-cash charges.

The following table reflects the pretax impact of the 2022 Program’s restructuring and related charges during the first six months of fiscal 2023 by reportable segment (in millions):

Beef Pork Chicken Prepared Foods International/Other Total

Severance costs $ 2 $ 1 $ ( 1 ) $ 6 $ 6 $ 14

Relocation and related costs 7 2 2 6 — 17

Accelerated depreciation 3 1 — 6 — 10

Contract and lease terminations — — — ( 2 ) — ( 2 )

Professional and other fees 1 — — 3 — 4

Total $ 13 $ 4 $ 1 $ 19 $ 6 $ 43

For the first six months of fiscal 2023, we recorded restructuring and related charges of $ 4 million and $ 39 million in Cost of Sales and Selling, General and Administrative, respectively, in our Consolidated Condensed Statements of Income.

Included in the above results are $ 35 million of charges that have resulted or will result in cash outflows and $ 8 million in non-cash charges.

The following table reflects the pretax 2022 Program charges to date by reportable segment (in millions):

6 unchanged sentences

Total $ 29 $ 9 $ 7 $ 55 $ 9 $ 109

As of the first quarter of fiscal 2023, we recorded restructuring and related charges to date associated with the 2022 Program of $ 26 million and $ 61 million in Cost of Sales and Selling, General and Administrative, respectively, in our Consolidated Condensed Statements of Income.

As of the second quarter of fiscal 2023, we recorded restructuring and related charges to date of $ 22 million and $ 87 million in Cost of Sales and Selling, General and Administrative, respectively, in our Consolidated Condensed Statements of Income.

Included in the above results are $ 101 million of charges to date that have resulted or will result in cash outflows and $ 8 million in non-cash charges to date.

The following table reflects our liability related to the 2022 Program, which was recognized in other current liabilities in our Consolidated Condensed Balance sheet as of December 31, 2022 (in millions):

The following table reflects our liability related to the 2022 Program, which was recognized in other current liabilities in our Consolidated Condensed Balance sheet as of April 1, 2023 (in millions):

Balance at October 1, 2022 Restructuring Expense Payments Changes in Estimates Balance at

December 31, 2022

April 1, 2023

Severance costs $ 66 $ 18 $ 7 $ ( 4 ) $ 73

3 unchanged sentences

As the Company continues to evaluate its business strategies and long-term growth targets, additional restructuring activities may occur.

Plant Closures

In the second quarter of fiscal 2023, in order to further optimize our network to reach full capacity in our facilities, management approved and communicated the planned closure of two of the Company's Chicken facilities in Glen Allen, Virginia and Van Buren, Arkansas.

As a result, we recorded $ 92 million in closure charges, primarily related to grower contract terminations, accelerated depreciation, and severance, retention and related costs.

The facilities are expected to cease operations in the third quarter of fiscal 2023.

The charges are reflected in the Consolidated Condensed Statements of Income in Cost of Sales.

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

December 31, 2022 October 1, 2022

April 1, 2023 October 1, 2022

Revolving credit facility $ — $ —

21 unchanged sentences

The facility will mature and the commitments thereunder will terminate in September 2026 with options for two one-year extensions.

At December 31, 2022, amounts available for borrowing under this facility totaled $ 2.25 billion and we had no borrowings and no outstanding letters of credit issued under this facility.

At December 31, 2022 we had $ 103 million of bilateral letters of credit issued separately from the revolving credit facility, none of which were drawn upon.

At April 1, 2023, amounts available for borrowing under this facility totaled $ 2.25 billion before deducting amounts to backstop our commercial paper program.

At April 1, 2023 we had no outstanding borrowings and no outstanding letters of credit issued under this facility.

At April 1, 2023 we had $ 102 million of bilateral letters of credit issued separately from the revolving credit facility, none of which were drawn upon.

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

3 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 $ 1.5 billion.

As of December 31, 2022, we had no commercial paper outstanding .

As of April 1, 2023, we had $ 593 million of commercial paper outstanding at a weighted average interest rate of 5.41 % with maturities of less than 25 days .

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

Term Loan Facilities

On May 3, 2023, we executed two new term loan facilities totaling $ 1.75 billion to refinance our short-term promissory notes ("commercial paper program") and for general corporate purposes.

The first term loan facility totaling $ 1.0 billion matures three years following the date of the initial borrowing.

The second term loan facility totaling $ 750 million matures five years from May 3, 2023, the date of closing.

Both term loans may be prepaid under certain conditions.

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

Debt Covenants

12 unchanged sentences

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

We were in compliance with all debt covenants at December 31, 2022.

We were in compliance with all debt covenants at April 1, 2023.

Share Repurchases

As of December 31, 2022, 7.3 million shares remained available for repurchase under the Company's share repurchase program.

As of April 1, 2023, 7.3 million shares remained available for repurchase under the Company's share repurchase program.

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

1 unchanged sentence

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

Three Months Ended

December 31, 2022 January 1, 2022

Shares Dollars Shares Dollars

Three Months Ended Six Months Ended

April 1, 2023 April 2, 2022 April 1, 2023 April 2, 2022

Shares Dollars Shares Dollars Shares Dollars Shares Dollars

Shares repurchased:

2 unchanged sentences

Total share repurchases 0.3 $ 19 2.0 $ 175 5.2 $ 332 6.2 $ 523

Our effective tax rate was 26.1 % and 20.2 % for the first quarter of fiscal 2023 and 2022, respectively.

The effective tax rate for the first quarter of fiscal 2023 was higher than the federal statutory tax rate primarily due to state taxes.

The effective tax rate for the first quarter of fiscal 2022 includes the impact of state taxes, offset by a $ 36 million benefit from the remeasurement of deferred income taxes, primarily due to legislation decreasing state tax rates enacted in the first quarter of fiscal 2022, and various other tax benefits.

Unrecognized tax benefits were $ 154 million and $ 152 million at December 31, 2022 and October 1, 2022, respectively.

Our effective tax rate was 29.4 % on pretax loss for the second quarter of fiscal 2023, 23.4 % on pretax income for the second quarter of fiscal 2022, and 24.7 % and 21.6 % on pretax income for the first six months of fiscal 2023 and 2022, respectively.

In all periods presented, the effective tax rates were increased due to state taxes and include the impact of various tax benefits;

however, tax benefits increase the effective tax rate in a period of pretax loss and decrease the effective tax rate in a period of pretax income.

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 of fiscal 2022.

Unrecognized tax benefits were $ 157 million and $ 152 million at April 1, 2023 and October 1, 2022, respectively.

In December 2021, we received an assessment from the Mexican tax authorities related to the 2015 sale of our direct and indirect equity interests in subsidiaries which held our Mexico operations.

2 unchanged sentences

Based on our analysis of this assessment in accordance with FASB guidance related to unrecognized tax benefits, we have not recorded a liability related to the issue.

EARNINGS PER SHARE

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

Three Months Ended

December 31, 2022 January 1, 2022

Net income $ 320 $ 1,126

EARNINGS (LOSS) PER SHARE

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

Three Months Ended Six Months Ended

April 1, 2023 April 2, 2022 April 1, 2023 April 2, 2022

Net income (loss) $ ( 91 ) $ 833 $ 229 $ 1,959

Net income attributable to noncontrolling interests 6 4 10 9

Net income attributable to Tyson 316 1,121

Net income (loss) attributable to Tyson ( 97 ) 829 219 1,950

Less dividends declared:

1 unchanged sentence

Class B 30 29 62 59

Undistributed earnings $ 141 $ 951

Class A undistributed earnings $ 116 $ 782

Class B undistributed earnings 25 169

Total undistributed earnings $ 141 $ 951

Undistributed earnings (losses) $ ( 263 ) $ 666 $ ( 122 ) $ 1,617

Class A undistributed earnings (losses) $ ( 216 ) $ 547 $ ( 100 ) $ 1,329

Class B undistributed earnings (losses) ( 47 ) 119 ( 22 ) 288

Total undistributed earnings (losses) $ ( 263 ) $ 666 $ ( 122 ) $ 1,617

Denominator for basic earnings per share:

3 unchanged sentences

Stock options, restricted stock and performance units — 3 1 3

Denominator for diluted earnings per share – adjusted weighted average shares and assumed conversions 358 365

Net income per share attributable to Tyson:

Denominator for diluted earnings (loss) per share – adjusted weighted average shares and assumed conversions 354 364 356 364

Net income (loss) per share attributable to Tyson:

Class A basic $ ( 0.28 ) $ 2.34 $ 0.63 $ 5.50

4 unchanged sentences

Class B $ 0.432 $ 0.414 $ 0.882 $ 0.842

Approximately 4 million and 2 million of our stock-based compensation shares were antidilutive for the three months ended December 31, 2022 and January 1, 2022, respectively.

Approximately 10 million and 5 million of our stock-based compensation shares were antidilutive for the three and six months ended April 1, 2023, respectively.

Approximately 2 million of our stock-based compensation shares were antidilutive for the three and six months ended April 2, 2022.

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

2 unchanged sentences

The per share amount of cash dividends paid to holders of Class B stock cannot exceed 90 % of the cash dividends paid to holders of Class A stock.

We allocate undistributed earnings based upon a 1.0 to 0.9 ratio per share to Class A stock and Class B stock, respectively.

We allocate undistributed earnings (losses) based upon a 1.0 to 0.9 ratio per share to Class A stock and Class B stock, respectively.

We allocate undistributed earnings based on this ratio due to historical dividend patterns, voting control of Class B shareholders and contractual limitations of dividends to Class B stock.

7 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 existed at December 31, 2022.

No significant concentrations of credit risk existed at April 1, 2023.

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

in millions, except soybean meal tons Metric December 31, 2022 October 1, 2022

in millions, except soybean meal tons Metric April 1, 2023 October 1, 2022

Corn Bushels 91 44

12 unchanged sentences

Gains and losses representing hedge ineffectiveness are recognized in earnings in the current period.

Ineffectiveness related to our cash flow hedges was not significant for the three months ended December 31, 2022, and January 1, 2022.

As of December 31, 2022, we had $ 13 million of realized losses related to treasury rate locks in connection with the issuance of the 2026, 2029 and 2048 Notes, which will be reclassified to earnings over the lives of these notes.

During the three months ended December 31, 2022 and January 1, 2022, we did not reclassify significant pretax gains or losses into earnings as a result of the discontinuance of cash flow hedges.

For the three months ended December 31, 2022 and January 1, 2022, we had no gains or losses recognized in OCI on derivatives designated as cash flow hedges.

Ineffectiveness related to our cash flow hedges was not significant for the three and six months ended April 1, 2023, and April 2, 2022.

As of April 1, 2023, we had $ 13 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 1, 2023 and April 2, 2022, we did not reclassify significant pretax gains or losses into earnings as a result of the discontinuance of cash flow hedges.

For the six months ended April 1, 2023 and April 2, 2022, we had no gains or losses recognized in OCI on derivatives designated as cash flow hedges.

Fair Value Hedges

3 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 not significant for the three months ended December 31, 2022, and January 1, 2022.

The following table sets forth the carrying amount of fair value hedge (assets) liabilities as of December 31, 2022 and October 1, 2022 (in millions):

Consolidated Condensed Balance Sheets Classification December 31, 2022 October 1, 2022

Ineffectiveness related to fair value hedges was not significant for the three and six months ended April 1, 2023, and April 2, 2022.

The following table sets forth the carrying amount of fair value hedge (assets) liabilities as of April 1, 2023 and October 1, 2022 (in millions):

Consolidated Condensed Balance Sheets Classification April 1, 2023 October 1, 2022

Inventory $ 1 $ ( 12 )

5 unchanged sentences

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

Consolidated Condensed Statements of Income Classification Three Months Ended

December 31, 2022 January 1, 2022

Consolidated Condensed Statements of Income Classification Three Months Ended Six Months Ended

April 1, 2023 April 2, 2022 April 1, 2023 April 2, 2022

Cost of Sales $ 12,606 $ 11,382 $ 24,898 $ 22,300

2 unchanged sentences

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

Consolidated Condensed Statements of Income Classification Three Months Ended

December 31, 2022 January 1, 2022

Consolidated Condensed Statements of Income Classification Three Months Ended Six Months Ended

April 1, 2023 April 2, 2022 April 1, 2023 April 2, 2022

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):

December 31, 2022 Level 1 Level 2 Level 3 Netting (a) Total

April 1, 2023 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 December 31, 2022, and October 1, 2022, we had $ 30 million and $ 10 million, respectively, of net cash collateral with various counterparties where master netting arrangements exist and held no cash collateral.

Additionally, at April 1, 2023, and October 1, 2022, we had $ 45 million and $ 10 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):

Three Months Ended

December 31, 2022 January 1, 2022

Six Months Ended

April 1, 2023 April 2, 2022

Balance at beginning of year $ 35 $ 48

5 unchanged sentences

Balance at end of period $ 33 $ 46

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

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

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

7 unchanged sentences

Short-term investments with maturities of less than 12 months are included in Other current assets in the Consolidated Condensed Balance Sheets.

All other marketable debt securities are included in Other Assets in the Consolidated Condensed Balance Sheets and have maturities generally less than 47 years.

All other marketable debt securities are included in Other Assets in the Consolidated Condensed Balance Sheets and have maturities ranging up to 47 years.

We classify our investments in U.S.

4 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):

December 31, 2022 October 1, 2022

April 1, 2023 October 1, 2022

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 months ended December 31, 2022, and January 1, 2022.

We recognized no direct write-offs or allowances for credit losses in earnings for the three and six months ended April 1, 2023, and April 2, 2022.

Deferred Compensation Assets

9 unchanged sentences

Generally, assets are recorded at fair value on a nonrecurring basis as a result of impairment charges and, with respect to our equity investments without readily determinable fair values, recorded by applying the measurement alternative for which such investments are recorded at cost and adjusted for an observable price change in an orderly transaction for an identical or similar investment of the same issuer.

In the three months ended January 1, 2022, we recognized gains of $ 30 million in Other, net in the Consolidated Condensed Statements of Income, based upon observable price changes.

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 1, 2023.

In the six months ended April 2, 2022, we recognized gains of $ 37 million in Other, net in the Consolidated Condensed Statements of Income, based upon observable price changes.

Equity investments without readily determinable fair values are measured using Level 3 inputs and are included in Other Assets in the Consolidated Condensed Balance Sheets.

We did not have any significant measurements of assets or liabilities at fair value on a nonrecurring basis subsequent to their initial recognition during the three months ended December 31, 2022.

Other Financial Instruments

1 unchanged sentence

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

December 31, 2022 October 1, 2022

April 1, 2023 October 1, 2022

Fair Value Carrying Value Fair Value Carrying Value

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

December 31, 2022 January 1, 2022

Before Tax Tax After Tax Before Tax Tax After Tax

Three Months Ended Six Months Ended

April 1, 2023 April 2, 2022 April 1, 2023 April 2, 2022

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

Derivatives accounted for as cash flow hedges:

29 unchanged sentences

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

Three Months Ended

December 31, 2022 January 1, 2022

Three Months Ended Six Months Ended

April 1, 2023 April 2, 2022 April 1, 2023 April 2, 2022

Beef $ 4,617 $ 5,034 $ 9,340 $ 10,036

5 unchanged sentences

Total Sales $ 13,133 $ 13,117 $ 26,393 $ 26,050

Three Months Ended

December 31, 2022 January 1, 2022

Three Months Ended Six Months Ended

April 1, 2023 April 2, 2022 April 1, 2023 April 2, 2022

Operating Income (Loss):

$ — $ 638 $ 166 $ 1,594

Pork ( 33 ) 59 ( 54 ) 223

( 258 ) 198 ( 189 ) 338

Prepared Foods 241 263 499 449

International/Other 1 ( 2 ) ( 4 ) 7

Total Operating Income 467 1,455

Total Operating Income (Loss) ( 49 ) 1,156 418 2,611

Total Other (Income) Expense 81 69 114 114

Income before Income Taxes $ 434 $ 1,410

(a) Beef segment results for the three months ended December 31, 2022 included $ 42 million of insurance proceeds, net of costs incurred, recognized in Cost of Sales.

(b) Chicken segment results for the three months ended December 31, 2022 included $ 7 million of costs related to a fire at one of our production facilities, net of insurance proceeds, recognized in Cost of Sales.

Additionally, Chicken segment results for the three months ended January 1, 2022 included $ 23 million of insurance proceeds, net of costs incurred, recognized in Cost of Sales, related to a fire at our production facility in the fourth quarter of fiscal 2021.

Income (Loss) before Income Taxes $ ( 130 ) $ 1,087 $ 304 $ 2,497

(a) Beef segment results for the six months ended April 1, 2023 included $ 42 million of insurance proceeds, net of costs incurred, recognized in Cost of Sales.

(b) Chicken segment results for the six months ended April 1, 2023 included $ 7 million of costs related to a fire at one of our production facilities, net of insurance proceeds, recognized in Cost of Sales.

Chicken segment results for the three months ended April 1, 2023 included $ 92 million of costs related to plant closures, recognized in Cost of Sales.

Additionally, Chicken segment results for the three months ended April 2, 2022 included $ 5 million of costs related to a fire at one of our production facilities, net of insurance proceeds.

Chicken segments results for the six months ended April 2, 2022 included $ 18 million of insurance proceeds, net of costs incurred, recognized in Cost of Sales.

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

Three months ended December 31, 2022

Three months ended April 1, 2023

Foodservice (b)

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Total $ 5,947 $ 3,863 $ 1,843 $ 1,480 $ — $ 13,133

Three months ended January 1, 2022

Three months ended April 2, 2022

Foodservice (b)

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Total $ 5,752 $ 3,873 $ 1,961 $ 1,531 $ — $ 13,117

Six months ended April 1, 2023

Foodservice (b)

International (c)

Industrial and Other (d)

Intersegment Total

Beef $ 4,268 $ 2,320 $ 1,307 $ 1,207 $ 238 $ 9,340

Pork 874 231 632 689 524 2,950

Chicken 3,845 3,266 494 1,054 34 8,693

Prepared Foods 2,938 1,836 107 79 — 4,960

International/Other — — 1,246 — — 1,246

Intersegment — — — — ( 796 ) ( 796 )

Total $ 11,925 $ 7,653 $ 3,786 $ 3,029 $ — $ 26,393

Six months ended April 2, 2022

Foodservice (b)

International (c)

Industrial and Other (d)

Intersegment Total

Beef $ 4,431 $ 2,500 $ 1,664 $ 1,165 $ 276 $ 10,036

Pork 908 258 571 799 655 3,191

Chicken 3,332 3,150 498 933 63 7,976

Prepared Foods 2,735 1,826 90 75 — 4,726

International/Other — — 1,115 — — 1,115

Intersegment — — — — ( 994 ) ( 994 )

Total $ 11,406 $ 7,734 $ 3,938 $ 2,972 $ — $ 26,050

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

4 unchanged sentences

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 8 years, and the maximum potential amount of future payments as of December 31, 2022, was not significant.

The remaining terms of the underlying obligations cover periods up to 8 years, and the maximum potential amount of future payments as of April 1, 2023, was not significant.

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

At December 31, 2022 and October 1, 2022, no significant liabilities for guarantees were recorded.

At April 1, 2023 and October 1, 2022, no significant liabilities for guarantees were recorded.

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

3 unchanged sentences

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 December 31, 2022 was approximately $ 290 million.

The total receivables under these programs were $ 7 million and $ 6 million at December 31, 2022 and October 1, 2022, respectively.

The potential maximum commitment as of April 1, 2023 was approximately $ 295 million.

The total receivables under these programs were $ 11 million and $ 6 million at April 1, 2023 and October 1, 2022, 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 had no allowance for these programs’ estimated uncollectible receivables at December 31, 2022, and January 1, 2022.

After analyzing residual credit risks and general market conditions, we had a $ 3 million allowance for these programs’ estimated uncollectible receivables at April 1, 2023, and no allowance at October 1, 2022.

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.

These funds are generally considered restricted cash, which is reported in the Consolidated Condensed Balance Sheets in Other Assets.

We had no deposits at December 31, 2022 and October 1, 2022.

We had no deposits at April 1, 2023 and October 1, 2022.

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

1 unchanged sentence

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 December 31, 2022, the total amount under these types of arrangements totaled $ 797 million.

At April 1, 2023, the total amount under these types of arrangements totaled $ 797 million.

Contingencies

5 unchanged sentences

Listed below are certain claims made against the Company for which the magnitude of the potential exposure could be material to the Company’s Consolidated Financial Statements.

There were no significant changes to our loss contingency accruals reflected in the Company’s Consolidated Condensed Statements of Income for the three months ended December 31, 2022 and January 1, 2022.

There were no significant changes to the loss contingency accruals described below reflected in the Company’s Consolidated Condensed Statements of Income for the three and six months ended April 1, 2023.

Broiler Antitrust Civil Litigation

13 unchanged sentences

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 to avoid the uncertainty, risk, expense and distraction of protracted litigation.

During the first quarter of fiscal 2023 and the full fiscal 2022, the Company reduced its total recorded legal contingency accrual by $ 11 million and $ 179 million, respectively, for amounts it had paid in connection with settlements related to this matter.

Accordingly, at December 31, 2022 and October 1, 2022 , the legal contingency accrual for claims related to this matter was $ 111 million and $ 122 million, respectively.

During the first six months of fiscal 2023 and the full fiscal 2022, the Company reduced its total recorded legal contingency accrual by $ 11 million and $ 179 million, respectively, for amounts it had paid in connection with settlements related to this matter.

Accordingly, at April 1, 2023 and October 1, 2022 , the legal contingency accrual for claims related to this matter was $ 111 million and $ 122 million, respectively.

Government Investigations

13 unchanged sentences

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

The other claims with the Offices of Attorney General in New Mexico and Alaska remain outstanding.

In addition, we are cooperating with various state governmental agencies and officials, including the Offices of the Attorney General for Florida and Louisiana, investigating or otherwise seeking information, testimony and/or documents, regarding the conduct alleged in the Broiler Antitrust Civil Litigation and related matters.

The Company has not recorded any liability in connection with these matters as it does not believe a loss is probable or reasonably estimable at this time in respect of the claims by the New Mexico and Alaska Attorneys General and the investigations by the Florida and Louisiana Attorneys General.

Broiler Chicken Grower Litigation

6 unchanged sentences

The Court granted preliminary approval of the settlement on August 23, 2021 and final approval on February 18, 2022, and the Company paid the settlement during fiscal 2022.

The DOJ’s Antitrust Division has opened a civil investigation into grower contracts and performance-based compensation.

We are cooperating with the investigation.

In October 2022, the DOJ’s Antitrust Division opened a civil investigation into grower contracts and performance-based compensation.

We continue to cooperate with the investigation.

Pork Antitrust Litigation

4 unchanged sentences

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

The Company has not recorded any liability for this matter as it does not believe a loss is probable or reasonably estimable because the Company believes that it has valid and meritorious defenses against the allegations and because the classes have not yet been defined or certified by the court.

The Offices of the Attorney General in New Mexico and Alaska have filed complaints against us and certain of our pork subsidiaries, as well as several other pork processing companies and Agri Stats.

34 unchanged sentences

Tyson, Inc., et al .

A notice of potential tag-along has been filed with the Judicial Panel on Multi-District Litigation to transfer and consolidate the case with In re Cattle and Beef Antitrust Litigation , MDL No.

In November 2022, the case was transferred and consolidated with In re Cattle and Beef Antitrust Litigation , MDL No.

The Company has not recorded any liability for this matter as it does not believe a loss is probable or reasonably estimable at this time because the Company believes that it has valid and meritorious defenses against the allegations and because the classes have not yet been defined or certified by the court.

20 unchanged sentences

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

There was no change to the accrual in fiscal 2022 or the first quarter of fiscal 2023.

There was no change to the accrual in fiscal 2022 or the first six months of fiscal 2023.

The DOJ’s Antitrust Division has opened a civil investigation into human resources at several poultry companies.

22 unchanged sentences

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