What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-10 compared with 2023-05-08 · 225 added, 167 removed, 325 unchanged (55% of the section changed)

18 unchanged sentences

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

Sales were relatively flat in the second quarter and grew 1% in the first six months of fiscal 2023 largely due to improved sales volume in our Chicken and Prepared Foods segments.

We incurred an operating loss of $49 million for the second quarter of fiscal 2023 as compared to operating income of $1,156 million in the second quarter of fiscal 2022 as we experienced lower operating income across all segments.

Operating income of $418 million for the first six months of fiscal 2023 was down 84% compared to the first six months of fiscal 2022 as we experienced lower operating income in our Beef, Pork and Chicken segments, partially offset by improved operating income in our Prepared Foods segment.

In the second quarter of fiscal 2023, our operating income was impacted by $22 million of restructuring and related charges and $92 million of charges related to plant closures.

Additionally, in the six months ended April 1, 2023, our operating income was impacted by $43 million of restructuring and related charges and benefited from $35 million of insurance proceeds net of costs, related to facility fires.

Operating income in the second quarter of fiscal 2022 was impacted by $5 million of production facility fire costs, 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.

Sales were relatively flat in the first nine months of fiscal 2023, but decreased 3% in the third quarter largely due to decreased sales in our Pork segment.

We incurred an operating loss of $350 million for the third quarter of fiscal 2023 as compared to operating income of $1,033 million in the third quarter of fiscal 2022 as we experienced lower operating income in all our segments other than the Prepared Foods segment.

In the third quarter of fiscal 2023, our operating income was impacted by $448 million of goodwill impairment charges, $50 million of restructuring and related charges, $15 million in plant closures charges, a $38 million legal contingency accrual, and benefited from $22 million of insurance proceeds, net of costs incurred associated with a production facility fire.

In the third quarter of fiscal 2022, operating income was impacted by $35 million of insurance proceeds, net of costs.

For the first nine months of fiscal 2023, operating income was $68 million as compared to operating income of $3,644 million for the same period in fiscal 2022 as we experienced lower operating income in all our segments other than the Prepared Foods segment.

In the nine months ended July 1, 2023, our operating income was impacted by $93 million of restructuring and related charges, $107 million in plant closures charges and benefited from $57 million of insurance proceeds net of costs, related to facility fires.

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

Market Environment

According to the United States Department of Agriculture, domestic protein production (beef, pork, chicken and turkey) increased approximately 1% in the second quarter of fiscal 2023 compared to the same period in fiscal 2022.

According to the United States Department of Agriculture, domestic protein production (beef, pork, chicken and turkey) decreased slightly in the third quarter of fiscal 2023 as compared to the same period in fiscal 2022.

All segments experienced inflation in operating costs, especially in labor and certain materials, however, the rate of inflation is starting to decrease and protein prices are beginning to level off.

1 unchanged sentence

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

As of April 1, 2023, the impact of this conflict has not had a material direct impact on our financial performance.

As of July 1, 2023, 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.

1 unchanged sentence

The Beef segment experienced reduced supply of market-ready cattle and increased live cattle costs.

The Pork segment experienced sufficient supply, despite herd health challenges in the industry, and reduced live hog costs.

The Chicken segment experienced increased feed ingredient and other input costs, challenging market conditions impacting sales pricing, and challenging export markets associated with Avian Influenza.

The Prepared Foods segment experienced increased costs largely due to the impacts of an inflationary environment.

The Pork segment experienced sufficient supply, despite herd health challenges in the industry, and reduced live hog costs, but was negatively impacted by softening export demand.

The Chicken segment experienced increased feed ingredient and other input costs along with excess domestic supply impacts to sales pricing.

The Prepared Foods segment experienced decreased raw material costs primarily due to lower meat costs.

The Federal Reserve has 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 most of our borrowings have fixed interest rates.

At April 1, 2023, we had $2.2 billion of liquidity and our current debt was $1.1 billion.

At July 1, 2023, we had $3.7 billion of liquidity and our current debt was $0.5 billion.

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.

On May 3, 2023, we entered into two new term loan facilities totaling $1.75 billion to refinance our commercial paper program and for general liquidity purposes.

A more detailed description of our new term loan facilities is set forth in Part II, Item 5 of this Quarterly Report on Form 10-Q.

We continue to proactively monitor and respond to the evolving nature of the COVID-19 pandemic and its impact to our global business.

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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 second quarter and first six months of fiscal 2023 as compared to previous fiscal years.

These challenges impacted our operating costs, but generally, we experienced lower direct incremental costs associated with COVID-19 in the third quarter and first nine months of fiscal 2023 as compared to previous fiscal years.

The long-term impacts of COVID-19 remain uncertain and will depend on future developments, including the duration and spread of potential future COVID-19 variants and the resurgence of existing COVID-19 variants, and related actions taken by federal, state and local government officials to prevent and manage disease spread, and effectively distribute and administer vaccinations, all of which contain some level of uncertainty and cannot be easily predicted.

Our total operating margin was (0.4)% in the second quarter of fiscal 2023.

Our total operating margin was (2.7)% in the third quarter of fiscal 2023.

Operating margins by segment were as follows:

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We were targeting $1 billion in productivity savings by the end of fiscal 2024 relative to a fiscal 2021 cost baseline.

We realized more than $700 million of productivity savings in fiscal 2022, which partially offset the impacts of inflationary market conditions, and we have surpassed our aggregate $1 billion target as of the end of the second quarter of fiscal 2023, more than a year ahead of our plan.

We realized more than $700 million of productivity savings in fiscal 2022, which partially offset the impacts of inflationary market conditions, and we surpassed our aggregate $1 billion target in the second quarter of fiscal 2023, more than a year ahead of our plan.

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 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 commencing in early calendar year 2023.

We recognized $22 million and $43 million of pretax charges in the three months and six months ended April 1, 2023, respectively, associated with the 2022 Program consisting of severance related costs, relocation and related costs, accelerated depreciation, contract and lease termination and professional and other fees.

In the third quarter of fiscal 2023, the Company approved an extension to the program related to removing additional redundancies in corporate overhead.

We recognized $50 million and $93 million of pretax charges in the three months and nine months ended July 1, 2023, respectively, associated with the 2022 Program consisting of severance related costs, relocation and related costs, accelerated depreciation, contract and lease termination and professional and other fees.

The Company currently anticipates the 2022 Program will result in cumulative pretax charges of approximately $232 million.

3 unchanged sentences

Restructuring and Related Charges (in millions).

Three Months Ended Six Months Ended

April 1, 2023

Three Months Ended Nine Months Ended

Cost of Sales $ 19 $ 23

1 unchanged sentence

Total Restructuring and related charges, pretax $ 50 $ 93

Three Months Ended Six Months Ended 2022 Program charges to date Total estimated

April 1, 2023

April 1, 2023 April 1, 2023

Three Months Ended Nine Months Ended 2022 Program charges to date Total estimated

July 1, 2023 July 1, 2023

2022 Program charges

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Summary of Results

in millions Three Months Ended Six Months Ended

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

in millions Three Months Ended Nine Months Ended

July 1, 2023 July 2, 2022 July 1, 2023 July 2, 2022

Sales $ 13,140 $ 13,495 $ 39,533 $ 39,545

2 unchanged sentences

Sales growth (2.6) % — %

Second quarter – Fiscal 2023 vs Fiscal 2022

• Sales Volume – Sales were positively impacted by an increase in sales volume, which accounted for an increase of $434 million, driven by increased volumes in our Chicken and Pork segments partially offset by decreased volumes in our Beef segment due to reduced domestic availability of live cattle and in our Prepared Foods segment due to uneven foodservice recovery.

• Average Sales Price – Sales were negatively impacted by lower average sales prices, which accounted for a decrease of $418 million, driven by reduced pricing in our Beef and Pork segments, partially offset by higher average sales prices in our Chicken and Prepared Foods segments.

Six months – Fiscal 2023 vs Fiscal 2022

• Sales Volume – Sales were positively impacted by an increase in sales volume, which accounted for an increase of $539 million, driven by increased volumes in our Chicken and Prepared Foods segments partially offset by decreased volumes in our Pork segment as a result of balancing our supply with customer demand during a period of margin compression.

Third quarter – Fiscal 2023 vs Fiscal 2022

• Sales Volume – Sales were positively impacted by an increase in sales volume, which accounted for an increase of $47 million, driven by increased volumes in our Chicken segment partially offset by decreased volumes in our Beef segment due to reduced domestic availability of live cattle, our Prepared Foods segment due to uneven foodservice recovery and our Pork segment as a result of balancing our supply with customer demand.

• Average Sales Price – Sales were negatively impacted by lower average sales prices, which accounted for a decrease of $364 million, driven by reduced pricing in our Pork, Chicken and Prepared Foods segments, partially offset by higher average sales prices in our Beef segment.

◦ The above change in average sales price for the third quarter of fiscal 2023 excludes a $38 million reduction of Sales from the recognition of legal contingency accrual.

Nine months – Fiscal 2023 vs Fiscal 2022

• Sales Volume – Sales were positively impacted by an increase in sales volume, which accounted for an increase of $586 million, driven by increased volumes in our Chicken segment partially offset by decreased volumes in our Beef segment due to reduced domestic availability of live cattle and our Pork segment as a result of balancing our supply with customer demand.

• Average Sales Price – Sales were negatively impacted by lower average sales prices, which accounted for a decrease of $560 million, driven by reduced pricing in our Beef and Pork segments, partially offset by higher average sales prices in our Chicken and Prepared Foods segments.

◦ The above change in average sales price for the nine months ended July 1, 2023 excludes a $38 million reduction of Sales from the recognition of legal contingency accrual.

Cost of Sales

in millions Three Months Ended Six Months Ended

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

in millions Three Months Ended Nine Months Ended

July 1, 2023 July 2, 2022 July 1, 2023 July 2, 2022

Cost of sales $ 12,463 $ 11,884 $ 37,361 $ 34,184

1 unchanged sentence

Cost of sales as a percentage of sales 94.8 % 88.1 % 94.5 % 86.4 %

Second quarter – Fiscal 2023 vs Fiscal 2022

Third quarter – Fiscal 2023 vs Fiscal 2022

• Cost of sales increased $579 million.

2 unchanged sentences

• Increase in live cattle costs of approximately $610 million in our Beef segment.

• Increase due to net derivative losses of $21 million in the second quarter of fiscal 2023, compared to net derivative gains of $86 million in the second quarter of fiscal 2022 due to our risk management activities.

• Increase due to net derivative losses of $89 million in the third quarter of fiscal 2023, compared to net derivative losses of $25 million in the third quarter of fiscal 2022 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.

• Increase of $50 million related to inventory lower of cost or net realizable value adjustments, primarily in our Pork and Prepared Foods segments.

• Increase of $27 million in our Beef segment related to insurance proceeds, net of costs, in the third quarter of fiscal 2022 related to a production facility fire in the fourth quarter of 2019.

• Increase of $15 million due to costs associated with plant closures.

• Increase of $71 million related to an increase in inventory lower of cost or net realizable value adjustments, primarily in our Chicken segment.

• Increase in raw material and other input costs of approximately $55 million in our Prepared Foods segment.

• Increase of approximately $45 million in our Chicken segment related to net increases in feed ingredient costs, growout expenses, partially offset by reduced outside meat purchases.

• Decrease in freight and transportation costs of approximately $40 million.

• Decrease in live hog costs of approximately $185 million in our Pork segment.

• Decrease in raw material and other input costs of approximately $115 million in our Prepared Foods segment.

• Decrease of approximately $60 million in our Chicken segment related to net decreases in outside meat purchases, partially offset by increased feed ingredient costs and growout expenses.

• Decrease in freight and transportation costs of approximately $60 million.

• Decrease of $14 million in our Chicken segment from insurance proceeds, net of costs, related to a production facility fire in the fourth quarter of fiscal 2021.

• 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, partially offset by savings from our productivity program.

• The $373 million impact of increased sales volume was primarily driven by increased volumes in our Chicken and Pork segments.

Six months – Fiscal 2023 vs Fiscal 2022

• The $45 million impact of increased sales volume was primarily driven by increased volumes in our Chicken segment.

Nine months – Fiscal 2023 vs Fiscal 2022

• Cost of sales increased $3,177 million.

2 unchanged sentences

• Increase in live cattle costs of approximately $1,445 million in our Beef segment.

• Increase of approximately $220 million in our Chicken segment related to net increases in feed ingredient costs, growout expenses, partially offset by reduced outside meat purchases.

• Increase due to net derivative losses of $9 million in the first six months of fiscal 2023, compared to net derivative gains of $164 million in the first six months of fiscal 2022 due to our risk management activities.

• Increase of $188 million related to inventory lower of cost or net realizable value adjustments, primarily in our Pork, Chicken and Prepared Foods segments.

• Increase due to net derivative losses of $98 million in the first nine months of fiscal 2023, compared to net derivative gains of $139 million in the first nine months of fiscal 2022 due to our risk management activities.

• Increase in raw material and other input costs of approximately $105 million in our Prepared Foods segment.

• Increase of approximately $160 million in our Chicken segment related to net increases in feed ingredient costs, growout expenses, partially offset by reduced outside meat purchases.

• Increase of $107 million due to costs associated with plant closures.

• Increase of $85 million related to an increase in inventory lower of cost or net realizable value adjustments, primarily in our Chicken segment.

• Increase in live hog costs of approximately $25 million in our Pork segment.

• Increase of $25 million in our Chicken segment due to $7 million of costs incurred, net of insurance proceeds, for the first six months of fiscal 2023 compared to $18 million of insurance proceeds, net of costs incurred, in the first six months of fiscal 2022 related to a fire at our production facility in the fourth quarter of fiscal 2021.

• Decrease of approximately $42 million in our Beef segment from insurance proceeds related to the fire at our production facility in the fourth quarter of fiscal 2019.

• Increase of $11 million in our Chicken segment due to $15 million of insurance proceeds, net of costs incurred, for the first nine months of fiscal 2023 compared to $26 million of insurance proceeds, net of costs incurred, in the first nine months of fiscal 2022 related to a fire at our production facility in the fourth quarter of fiscal 2021.

• Decrease in live hog costs of approximately $160 million in our Pork segment.

• Decrease in freight and transportation costs of approximately $75 million.

• Decrease of approximately $15 million in our Beef segment from insurance proceeds related to the fire at our production facility in the fourth quarter of fiscal 2019.

• Decrease in raw material and other input costs of approximately $10 million in our Prepared Foods segment.

• The $462 million impact of increased sales volume was primarily driven by increased volumes in our Chicken and Prepared Foods segments.

• The $507 million impact of increased sales volume was primarily driven by increased volumes in our Chicken segment.

Selling, General and Administrative

in millions Three Months Ended Six Months Ended

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

in millions Three Months Ended Nine Months Ended

July 1, 2023 July 2, 2022 July 1, 2023 July 2, 2022

Selling, general and administrative expense $ 579 $ 578 $ 1,656 $ 1,717

As a percentage of sales 4.4 % 4.3 % 4.2 % 4.3 %

Second quarter – Fiscal 2023 vs Fiscal 2022

• Decrease of $3 million in selling, general and administrative was primarily driven by:

• Decrease of $55 million in employee costs primarily from incentive-based compensation.

• Decrease of $13 million in professional fees.

Third quarter – Fiscal 2023 vs Fiscal 2022

• Increase of $1 million in selling, general and administrative was primarily driven by:

• Increase of $31 million in restructuring and related costs.

• Increase of $21 million in marketing, advertising and promotion expenses.

• Increase of $11 million in product donations.

• Increase of $6 million in technology related costs.

Six months – Fiscal 2023 vs Fiscal 2022

• Decrease of $48 million in employee costs primarily from incentive-based compensation.

Nine months – Fiscal 2023 vs Fiscal 2022

• Decrease of $61 million in selling, general and administrative was primarily driven by:

5 unchanged sentences

• Increase of $21 million in product donations.

Goodwill Impairment

Third quarter and nine months – Fiscal 2023 vs Fiscal 2022

• Due to lower than anticipated operating results and changing market fundamentals, as well as a drop in our market capitalization to below our book value, we performed an interim assessment of goodwill.

Based on this assessment, we recorded $448 million goodwill impairment charge.

Interest Expense

in millions Three Months Ended Six Months Ended

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

in millions Three Months Ended Nine Months Ended

July 1, 2023 July 2, 2022 July 1, 2023 July 2, 2022

$ 89 $ 85 $ 262 $ 282

Second quarter and six months – Fiscal 2023 vs Fiscal 2022

Third quarter and nine months – Fiscal 2023 vs Fiscal 2022

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

The decrease in interest expense for the three and six months ended April 1, 2023 was primarily due to the redemption of the June 2022 Senior Notes in fiscal 2022.

The increase in interest expense for the three months ended July 1, 2023 was primarily due to outstanding commercial paper balances during the quarter and interest expense on the balance of one of our term loan facilities.

The decrease in interest expense for the nine months ended July 1, 2023 was primarily due to the redemption of the June 2022 Senior Notes in fiscal 2022.

Other (Income) Expense, net

in millions Three Months Ended Six Months Ended

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

in millions Three Months Ended Nine Months Ended

July 1, 2023 July 2, 2022 July 1, 2023 July 2, 2022

Total other (income) expense, net $ (7) $ (34) $ (50) $ (111)

Second quarter and six months – Fiscal 2023

• Included $18 million of joint venture earnings and $29 million of foreign exchange gains in the first six months of fiscal 2023.

Second quarter and six months – Fiscal 2022

• Included $14 million of joint venture earnings in the second quarter of fiscal 2022.

Included $22 million of production facilities fire insurance proceeds and a $37 million gain on an equity investment due to an observable price change in the first six months of fiscal 2022.

Third quarter and nine months – Fiscal 2023

• Included $22 million of production facilities fire insurance proceeds offset by $7 million of foreign exchange losses in the third quarter of fiscal 2023.

Included $22 million of foreign exchange gains and $16 million of joint venture earnings in the first nine months of fiscal 2023.

Third quarter and nine months – Fiscal 2022

• Included $19 million of joint venture earnings in the third quarter of fiscal 2022.

Included $54 million of production facilities fire insurance proceeds and a $37 million gain on an equity investment due to an observable price change in the first nine months of fiscal 2022.

Effective Tax Rate

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

July 1, 2023 July 2, 2022 July 1, 2023 July 2, 2022

(1.8) % 23.6 % (67.9) % 22.1 %

Second quarter – Fiscal 2023 vs Fiscal 2022

Third quarter – Fiscal 2023 vs Fiscal 2022

• The percentage impacts of items on the effective tax rate were greater in fiscal 2023 due to the level of pretax income (loss) in fiscal 2023 compared to fiscal 2022.

• In both periods, 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, resulting in a higher effective tax rate in the second quarter of fiscal 2023.

Six months – Fiscal 2023 vs Fiscal 2022

• The effective tax rates for both periods were increased by state taxes and decreased by various tax benefits.

• 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.

• The fiscal 2023 third quarter effective tax rate was impacted by a $448 million non-deductible goodwill impairment.

• In both periods, the effective tax rates were impacted by state tax expense and 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.

Nine months – Fiscal 2023 vs Fiscal 2022

• The percentage impacts of items on the effective tax rate were greater in fiscal 2023 due to the level of pretax income (loss) in fiscal 2023 compared to fiscal 2022.

• The effective tax rate for the first nine months of fiscal 2023 was impacted by a $448 million non-deductible goodwill impairment.

• In both periods, the effective tax rates were impacted by state tax expense and 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.

• The effective tax rate for the first nine months of fiscal 2022 included 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.

Net Income (Loss) Attributable to Tyson

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

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

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

July 1, 2023 July 2, 2022 July 1, 2023 July 2, 2022

Net income (loss) attributable to Tyson $ (417) $ 750 $ (198) $ 2,700

Net income (loss) attributable to Tyson – per diluted share (1.18) 2.07 (0.56) 7.42

Second quarter – Fiscal 2023 – Net income (loss) attributable to Tyson included the following items:

Third quarter – Fiscal 2023 – Net income (loss) attributable to Tyson included the following items:

• $44 million pretax, or $0.10 per diluted share, of production facilities fire insurance proceeds, net of costs incurred.

• $424 million pretax, or ($1.20) per diluted share, of goodwill impairment charges (non-tax deductible) net of $24 million associated with Net Income (Loss) Attributable to Noncontrolling Interests.

• $50 million pretax, or ($0.11) per diluted share, of restructuring and related charges.

• $38 million pretax, or ($0.08) per diluted share, related to the recognition of a legal contingency accrual.

• $15 million pretax, or ($0.04) per diluted share, of charges related to plant closures.

Six months – Fiscal 2023 – Net income attributable to Tyson included the following items:

Nine months – Fiscal 2023 – Net income (loss) attributable to Tyson included the following items:

• $79 million pretax, or $0.17 per diluted share, of production facilities fire insurance proceeds, net of costs incurred.

• $43 million pretax, or ($0.09) per diluted share, of restructuring and related charges.

• $107 million pretax, or ($0.22) per diluted share, of charges related to plant closures.

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:

• $93 million pretax, or ($0.20) per diluted share, of restructuring and related charges.

• $38 million pretax, or ($0.08) per diluted share, related to the recognition of a legal contingency accrual.

Third quarter – Fiscal 2022 – Net income (loss) 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 (loss) 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.

4 unchanged sentences

in millions Sales

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

July 1, 2023 July 2, 2022 July 1, 2023 July 2, 2022

Beef $ 4,956 $ 4,959 $ 14,296 $ 14,995

6 unchanged sentences

in millions Operating Income (Loss)

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

July 1, 2023 July 2, 2022 July 1, 2023 July 2, 2022

Beef $ 66 $ 533 $ 232 $ 2,127

5 unchanged sentences

Beef Segment Results

in millions Three Months Ended Six Months Ended

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

in millions Three Months Ended Nine Months Ended

July 1, 2023 July 2, 2022 Change July 1, 2023 July 2, 2022 Change

Sales $ 4,956 $ 4,959 $ (3) $ 14,296 $ 14,995 $ (699)

3 unchanged sentences

Operating margin 1.3 % 10.7 % 1.6 % 14.2 %

Second quarter and six months – Fiscal 2023 vs Fiscal 2022

• Sales Volume - Sales volume decreased in the second quarter of fiscal 2023 driven by lower availability of live cattle.

Sales volume remained flat in the first six months of fiscal 2023.

• Average Sales Price - Average sales price decreased due to reduced export demand and softening domestic demand associated with increased supply of competing proteins in the market.

• Operating Income - Operating income decreased due to unfavorable market conditions, including higher fed cattle costs and reduced demand for beef products, which made it difficult to pass along increased input costs.

Additionally, operating income in the first six months of fiscal 2023 benefited from $42 million of insurance proceeds related to a fire at a production facility in the fourth quarter of fiscal 2019.

Third quarter and nine months – Fiscal 2023 vs Fiscal 2022

• Sales Volume - Sales volume decreased in the third quarter and the first nine months of fiscal 2023 due to lower availability of live cattle.

• Average Sales Price - Average sales price decreased in the first nine months of fiscal 2023 due to reduced export demand and softening domestic demand associated with increased supply of competing proteins in the market.

However, average sales price increased for the third quarter of fiscal 2023 primarily due to price increases associated with reduced industry supply and increased input costs.

• Operating Income - Operating income decreased due to unfavorable market conditions, including higher fed cattle costs and reduced demand for beef product.

Additionally, operating income in the first nine months of 2022 and 2023 benefited from $27 million and $42 million, respectively, of insurance proceeds related to a fire at a production facility in 2019.

Pork Segment Results

in millions Three Months Ended Six Months Ended

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

in millions Three Months Ended Nine Months Ended

July 1, 2023 July 2, 2022 Change July 1, 2023 July 2, 2022 Change

Sales $ 1,324 $ 1,619 $ (295) $ 4,274 $ 4,810 $ (536)

3 unchanged sentences

Operating margin (5.6) % 1.5 % (3.0) % 5.2 %

Second quarter and six months – Fiscal 2023 vs Fiscal 2022

• Sales Volume - Sales volume increased during the second quarter of fiscal 2023 due to increased availability of live hogs.

Sales volume decreased in the first six months of fiscal 2023 as a result of balancing our supply with customer demand during a period of margin compression.

Third quarter and nine months – Fiscal 2023 vs Fiscal 2022

• Sales Volume - Sales volume decreased in the third quarter and the first nine months of fiscal 2023 as a result of balancing our supply with customer demand.

• Average Sales Price - Average sales price decreased due to reduced global demand.

• Operating Income (Loss) - Operating income decreased due to compressed pork margins and increased operating costs as a result of the inflationary market environment.

Additionally, volatile market conditions resulted in net derivative gains of $25 million and $5 million in the second quarter and first six months of fiscal 2023, respectively, as compared to net derivative losses of $30 million and $15 million in the second quarter and first six months of fiscal 2022, respectively, which excludes the impacts of related physical purchase transactions.

• Operating Income (Loss) - Operating income decreased due to compressed pork margins, increased operating costs as a result of the inflationary market environment, losses incurred in our live hog operations and impacts from a production facility fire in the third quarter of fiscal 2023.

Chicken Segment Results

in millions Three Months Ended Six Months Ended

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

in millions Three Months Ended Nine Months Ended

July 1, 2023 July 2, 2022 Change July 1, 2023 July 2, 2022 Change

Sales $ 4,212 $ 4,366 $ (154) $ 12,905 $ 12,342 $ 563

3 unchanged sentences

Operating margin (7.5) % 6.3 % (3.9) % 5.0 %

Second quarter and six months – Fiscal 2023 vs Fiscal 2022

• Sales Volume - Sales volume increased primarily due to improved domestic production as well as the sell-through of inventory, partially offset by strategic initiative mix impacts.

• Average Sales Price - Average sales price increased primarily due to the effects of pricing initiatives in the second half of fiscal 2022, partially offset by challenging market conditions and the sell-through of inventory.

• Operating Income (Loss) - Operating income decreased primarily due to the impacts of inflationary market conditions including increased supply chain and labor costs as well as operational impacts associated with strategic decisions.

In the second quarter of fiscal 2023, we experienced $145 million of higher feed ingredient costs and $35 million of net derivative losses as compared to $101 million of net derivative gains in the second quarter of fiscal 2022.

In the first six months of fiscal 2023, we experienced $370 million of higher feed ingredient costs and $15 million of net derivative losses as compared to $159 million of net derivative gains in the first six months of fiscal 2022.

Additionally, operating income was impacted by $92 million of charges associated with plant closures and a $25 million reduction in insurance proceeds, net of costs incurred related to a fire at a production facility compared to the first six months of fiscal 2022.

Third quarter and nine months – Fiscal 2023 vs Fiscal 2022

• Sales Volume - Sales volume increased primarily due to improved domestic production and the sell-through of inventory, partially offset by strategic initiative mix impacts.

• Average Sales Price - Average sales price decreased in the third quarter of fiscal 2023 due to the challenging market conditions.

Average sales price increased in the first nine months of fiscal 2023 primarily due to the effects of pricing initiatives in the last half of fiscal 2022, partially offset by challenging market conditions.

The change in average sales price for the three and nine months ended July 1, 2023 excludes a $38 million reduction of Sales from the recognition of legal contingency accruals.

• Operating Income (Loss) - Operating income decreased primarily due to the impacts of inflationary market conditions as well as operational impacts associated with strategic decisions in the first half of fiscal 2023.

In the third quarter of fiscal 2023, we experienced $30 million of higher feed ingredient costs and $65 million of net derivative losses as compared to $23 million of net derivative losses in the third quarter of fiscal 2022.

Additionally, operating income in the third quarter of fiscal 2023 was impacted by $210 million of goodwill impairment charges, $38 million in legal contingency accruals, $15 million in plant closure charges, and $10 million in restructuring and related charges, offset by $22 million of insurance proceeds, net of costs incurred associated with a production facility fire in the fourth quarter of fiscal 2021.

In the first nine months of fiscal 2023, we experienced $400 million of higher feed ingredient costs and $80 million of net derivative losses as compared to $136 million of net derivative gains in the first nine months of fiscal 2022.

Additionally, operating income in the first nine months of 2023 was impacted by $210 million of goodwill impairment charges, $38 million in legal contingency accruals, $107 million in plant closure charges, and $11 million in restructuring and related charges, offset by $15 million of insurance proceeds, net of costs incurred associated with a production facility fire in the fourth quarter of fiscal 2021.

Prepared Foods Segment Results

in millions Three Months Ended Six Months Ended

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

in millions Three Months Ended Nine Months Ended

July 1, 2023 July 2, 2022 Change July 1, 2023 July 2, 2022 Change

Sales $ 2,383 $ 2,447 $ (64) $ 7,343 $ 7,173 $ 170

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Operating margin 8.6 % 7.6 % 9.6 % 8.9 %

Second quarter and six months – Fiscal 2023 vs Fiscal 2022

• Sales Volume – Sales volume decreased slightly in the second quarter of fiscal 2023 due to uneven foodservice recovery.

Sales volume increased slightly in the first six months of fiscal 2023 due to strong retail demand and improved operational performance.

• Average Sales Price – Average sales price increased due to the effects of revenue management in an inflationary cost environment and favorable product mix.

• Operating Income – Operating income decreased in the second quarter of fiscal 2023 due to the impacts of inflationary market conditions, including $55 million of increased raw materials and other input costs, slightly offset by higher average sales price.

Operating income increased in the first six months of fiscal 2023 due to higher average sales price offset by inflationary market conditions, including $105 million of increased raw materials and other input costs.

Third quarter and nine months – Fiscal 2023 vs Fiscal 2022

• Sales Volume – Sales volume decreased slightly in the third quarter of fiscal 2023 due to uneven foodservice recovery.

Sales volume remained relatively flat in the first nine months of fiscal 2023.

• Average Sales Price – Average sales price increased in the first nine months of fiscal 2023 due to the effects of revenue management in an inflationary cost environment.

However, average sales price decreased in the third quarter of fiscal 2023 primarily due to a decline in input costs.

• Operating Income – Operating income increased in the third quarter of fiscal 2023 driven by a $115 million reduction in raw material costs, partially offset by lower average sales prices and increased marketing, advertising and promotion spend.

Operating income increased in the first nine months of fiscal 2023 due to higher average sales prices partially offset by increased marketing, advertising and promotion spend.

International/Other Results

in millions Three Months Ended Six Months Ended

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

in millions Three Months Ended Nine Months Ended

July 1, 2023 July 2, 2022 Change July 1, 2023 July 2, 2022 Change

Sales $ 633 $ 602 $ 31 $ 1,879 $ 1,717 $ 162

Operating income (loss) (234) 12 (246) (238) 19 (257)

Second quarter and six months – Fiscal 2023 vs Fiscal 2022

• Sales – Sales increased due to volume growth as we continued to invest in our business and improved pricing in an inflationary cost environment.

• Operating Income (Loss) – Operating income decreased for the first six months of fiscal 2023 primarily due to the impacts of global inflationary market conditions and the slower than anticipated recovery of the economy in China post COVID-19 lockdowns.

Third quarter and nine months – Fiscal 2023 vs Fiscal 2022

• Sales – Sales increased due to improved pricing in an inflationary cost environment and volume growth as we continued to invest in our international business.

• Operating Income (Loss) – Operating income decreased for the third quarter and nine months of fiscal 2023 due to a $238 million goodwill impairment recorded in the third quarter of fiscal 2023 and restructuring and related charges.

LIQUIDITY AND CAPITAL RESOURCES

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Cash Flows from Operating Activities

in millions Six Months Ended

April 1, 2023 April 2, 2022

Net income $ 229 $ 1,959

in millions Nine Months Ended

July 1, 2023 July 2, 2022

Net income (loss) $ (206) $ 2,712

Non-cash items in net income:

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Deferred income taxes (54) 149

Impairment of goodwill 448 —

Other, net 200 62

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Net cash provided by operating activities $ 1,429 $ 1,890

• The decrease in net cash provided by operating activities was primarily due to lower earnings as a result of operations, offset by lower payments for income taxes, legal accruals and annual incentive payments as well as comparative decreases in Accounts Receivable, Inventories and Accounts Payable.

Cash Flows from Investing Activities

in millions Six Months Ended

April 1, 2023 April 2, 2022

in millions Nine Months Ended

July 1, 2023 July 2, 2022

Additions to property, plant and equipment $ (1,564) $ (1,323)

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• Capital spending for fiscal 2023 is expected to approximate $2.1 billion and includes spending for capacity expansion and utilization, automation to alleviate labor challenges and brand and product innovations.

• Acquisition, net of cash acquired for the six months ended April 1, 2023 included our 60% equity stake in Supreme Foods Processing Company, a producer and distributor of value-added and cooked chicken and beef products.

• 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.

• Acquisition, net of cash acquired for the nine months ended July 1, 2023 included $223 million, net of cash acquired, for our acquisition of Williams Sausage Company and $39 million for the 60% equity stake in Supreme Foods Processing Company, a producer and distributor of value-added and cooked chicken and beef products.

• Other, net for the first nine 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.

Cash Flows from Financing Activities

in millions Six Months Ended

April 1, 2023 April 2, 2022

in millions Nine Months Ended

July 1, 2023 July 2, 2022

Proceeds from issuance of debt $ 1,117 $ 79

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Other, net (5) —

Net cash used for financing activities $ (101) $ (1,767)

• During the first six months of fiscal 2022, we extinguished the $1 billion outstanding balance of our senior notes due June 2022.

• During the first six months of fiscal 2023, we had net borrowings of $591 million pursuant to our commercial paper program.

Net cash provided by (used for) financing activities $ 101 $ (2,128)

• During the first nine months of fiscal 2023, proceeds of $1,117 million from issuance of debt included $1 billion of proceeds from the issuance of a term loan facility due May 2026.

• During the first nine months of fiscal 2022, we extinguished the $1 billion outstanding balance of our senior notes due June 2022.

• Purchases of Tyson Class A stock included:

• $300 million and $420 million of cash paid for shares repurchased pursuant to our share repurchase program during the six months ended April 1, 2023 and April 2, 2022, respectively.

• $32 million and $91 million of shares repurchased to fund certain obligations under our equity compensation programs during the six months ended April 1, 2023 and April 2, 2022, respectively.

• Dividends paid during the six months ended April 1, 2023 reflected a 4% increase to our fiscal 2022 quarterly dividend rate.

• $300 million and $587 million of cash paid for shares repurchased pursuant to our share repurchase program during the nine months ended July 1, 2023 and July 2, 2022, respectively.

• $43 million and $106 million of shares repurchased to fund certain obligations under our equity compensation programs during the nine months ended July 1, 2023 and July 2, 2022, respectively.

• Dividends paid during the nine months ended July 1, 2023 reflected a 4% increase to our fiscal 2022 quarterly dividend rate.

Expiration Date Facility

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Borrowed Amount

April 1, 2023

Cash and cash equivalents $ 699

Short-term investments 7

Term loan facility May 2026 $ 1,000 $ — $ 1,000 —

Term loan facility May 2028 750 — — 750

Revolving credit facility September 2026 2,250 — — 2,250

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Total liquidity $ 3,706

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

• At April 1, 2023, we had current debt of $1,065 million, 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 and term loan facilities, less the outstanding commercial paper balance.

• At July 1, 2023, we had current debt of $457 million, which we intend to pay with cash generated from our operating activities and other existing or new liquidity sources.

• In the third quarter of fiscal 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 on May 3, 2026 and we borrowed the full $1.0 billion available under this loan facility and used it to repay $610 million of outstanding commercial paper obligations.

The second term loan facility totaling $750 million matures on May 3, 2028 and at July 1, 2023, we had no outstanding borrowings under this facility.

• 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 1, 2023.

We had no borrowings under the revolving credit facility during the nine months ended July 1, 2023.

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.

• On May 3, 2023, we entered into two new term loan facilities totaling $1.75 billion to refinance our commercial paper program and for general corporate purposes.

• We have entered into definitive acquisition agreements expected to close in fiscal 2023 that are pending certain customary closing conditions.

We expect to incur net cash outflows from investing activities in the range of $200 million to $250 million associated with the pending activity.

• We expect net interest expense to approximate $340 million for fiscal 2023.

• Our current ratio was 1.7 to 1 at April 1, 2023 and 1.8 to 1 at October 1, 2022.

• At April 1, 2023, approximately $508 million of our cash was held in the accounts of our foreign subsidiaries.

• Our current ratio was 1.8 to 1 at July 1, 2023 and 1.8 to 1 at October 1, 2022.

• At July 1, 2023, approximately $512 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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Capital Resources

Credit Facility

Credit and Term Loan Facilities

Cash flows from operating activities and cash on hand are our primary sources of liquidity for funding debt service, capital expenditures, dividends and share repurchases.

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

Additionally, we have $1.75 billion in committed term loan facilities of which $1.0 billion was drawn upon as of July 1, 2023.

At July 1, 2023, amounts available for borrowing under our revolving credit and term loan facilities totaled $3.0 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 1, 2023, $593 million was outstanding under this program with maturities of less than 25 days.

As of July 1, 2023, 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 1, 2023, and October 1, 2022, the ratio of our net debt to EBITDA was 2.4x and 1.3x, respectively.

At July 1, 2023, and October 1, 2022, the ratio of our net debt to EBITDA was 4.1x and 1.3x, respectively.

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

The increase in this ratio at July 1, 2023 is due to an increase in net debt of $1,325 million and a $3,586 decrease in EBITDA.

Credit Ratings

Revolving Credit Facility

Term Loan Facility due May 2028

Standard & Poor’s Rating Services’, a Standard & Poor’s Financial Services LLC business (“S&P”), applicable rating is “BBB+”.

Moody’s Investor Service, Inc.’s (“Moody’s”) applicable rating is “Baa2”.

The below table outlines the commitment fee on any unused borrowing capacity and the borrowing spread on the outstanding principal balance of our term loan facility due May 2028 that corresponds to the applicable ratings levels from S&P and Moody’s.

Ratings Level (Moody’s/S&P) Commitment Fee Borrowing Spread

Baal/BBB+ or above (current level) 0.100 % 1.625 %

Baa2/BBB 0.125 % 1.750 %

Baa3/BBB- or lower 0.175 % 1.875 %

Term Loan Facility due May 2026

S&P applicable rating is “BBB+” and Moody’s applicable rating is “Baa2”.

The below table outlines the borrowing spread on the outstanding principal balance of our term loan facility due May 2026 that corresponds to the applicable ratings levels from S&P and Moody’s.

Ratings Level (Moody’s/S&P) Borrowing Spread

A2/A or above 0.875 %

A3/A- 1.000 %

Baal/BBB+ (current level) 1.125 %

Baa2/BBB 1.250 %

Baa3/BBB- or lower 1.375 %

Revolving Credit Facility

S&P applicable rating is “BBB+” and Moody’s applicable rating is “Baa2”.

The below table outlines the fees paid on the unused portion of the facility (“Facility Fee Rate ” ) and letter of credit fees and borrowings (“All-in Borrowing Spread ” ) that corresponds to the applicable ratings levels from S&P and Moody’s.

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Debt Covenants

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

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

create liens and encumbrances;

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

We were in compliance with all debt covenants at April 1, 2023, and we expect that we will maintain compliance.

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

Accounting Policies, for updates to our significant accounting policies during the nine months ended July 1, 2023.

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

Had we assumed future operating margins consistent with those realized in the first three months of the current fiscal year, both reporting units would have failed the quantitative step of the first quarter interim impairment test, which may have resulted in a goodwill impairment loss.

The goodwill for these reporting units originated from acquisitions in fiscal 2019 and fiscal 2018, and we are still integrating them and investing in our international and global business strategy, in addition to managing through the temporary impacts of COVID-19.

The reporting units' projected long-term operating margins included in the first quarter interim impairment test had to exceed an average of 4% to achieve breakeven results in the analysis.

A hypothetical increase in the discount rates of approximately 50 basis points, with all other assumptions unchanged, at December 31, 2022, would have caused the carrying values of these reporting units to approximate their fair values.

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;

however the assessment of impairment for these reporting units continues to be sensitive to future discount rate increases and achievement of projected long-term operating margins as previously quantified.

During the third quarter of fiscal 2023, we experienced lower than previously anticipated operating results and changing market fundamentals, as well as a drop in our market capitalization to below our book value.

Consequently, based on our qualitative assessment, we determined the fair values of our reporting units were more likely than not less than the carrying amount and proceeded to perform a quantitative assessment for all of our reporting units.

Based on this assessment, we determined that all of our reporting units’ estimated fair value exceeded their carrying value other than one of our Chicken segment reporting units and two of our International reporting units with goodwill totaling $0.6 billion and $0.2 billion, respectively, at the time of our third quarter assessment.

For these reporting units, we recorded a $448 million goodwill impairment charge.

Following the third quarter of fiscal 2023 quantitative assessment, the following reporting units’ estimated fair value exceeded their carrying value by less than 20%:

our Chicken segment reporting units, our Beef reporting unit and our Pork reporting unit with goodwill totaling $3.1 billion, $0.7 billion and $0.4 billion, respectively, at July 1, 2023.

Had we assumed future operating margins consistent with those realized in the first nine months of the current fiscal year, these reporting units would have failed the third quarter interim impairment quantitative test, which may have resulted in additional material goodwill impairment losses.

In the third quarter of fiscal 2023, we recognized an impairment charge of $210 million to partially impair the goodwill of one of the Chicken segment reporting units.

Following the impairment charge, our Chicken segment reporting units had goodwill at July 1, 2023 of $3.1 billion.

We generally assumed operating margins in future years would normalize over time as we believe this is consistent with market participant views in an exit transaction.

Had we assumed future operating margins consistent with those realized through the first nine months of fiscal 2023, we would have failed the interim impairment quantitative test for the Chicken segment's reporting unis that were not impaired, which may have resulted in additional material goodwill impairment losses.

The current year results are not indicative of future market participant expectations in an exit transaction primarily due to challenging market conditions associated with excess domestic supply impacts, losses incurred associated with derivatives, legal contingencies, and restructuring, which impacts we expect to be mostly temporary in nature.

After considering the impact of the impairment charge, in order for the fair value to exceed the carrying value, projected long-term operating margins, utilizing the discounted cash flow method, had to average approximately 5.0%-6.0%.

A hypothetical increase in the discount rate of approximately 50 basis points at the date of the 2023 third quarter interim test, with all other assumptions unchanged, would have caused the carrying value of one Chicken segment's reporting unit with goodwill totaling $2.7 billion at July 1, 2023, to approximate its fair value.

Additionally, any hypothetical increase in the discount rate at the date of the 2023 third quarter interim test, with all other assumptions unchanged, would have caused the carrying value of another Chicken segment's reporting unit with goodwill totaling $0.4 billion at July 1, 2023 to exceed its fair value, which may have resulted in additional material goodwill impairment losses.

Our Beef segment reporting unit had goodwill at July 1, 2023 of $0.7 billion.

We generally assumed operating margins in future years would normalize over time as we believe this is consistent with market participant views in an exit transaction.

Had we assumed future operating margins consistent with those realized through the first nine months of fiscal 2023, we would have failed the interim impairment quantitative test, which may have resulted in material goodwill impairment losses.

The current year results are not indicative of future market participant expectations in an exit transaction primarily due to challenging market conditions associated with lower cattle supplies which impacts we expect to be mostly temporary in nature.

To pass the interim impairment quantitative test, projected long-term operating margins, utilizing the discounted cash flow method, had to average approximately 3.0%-3.5%.

Additionally, any hypothetical increase in the discount rate at the date of the 2023 third quarter interim test, with all other assumptions unchanged, would have caused the carrying value of this reporting unit to exceed its fair value, which may have resulted in additional material goodwill impairment losses.

Our Pork segment reporting unit had goodwill at July 1, 2023 of $0.4 billion.

We generally assumed operating margins in future years would normalize over time as we believe this is consistent with market participant views in an exit transaction.

Had we assumed future operating margins consistent with those realized through the first nine months of fiscal 2023, we would have failed the interim impairment quantitative test, which may have resulted in material goodwill impairment losses.

The current year results are not indicative of future market participant expectations in an exit transaction primarily due to challenging market conditions associated with higher availability of live hogs supplies during a period of reduced global demand and compressed pork margins which impacts we expect to be mostly temporary in nature.

To pass the interim impairment quantitative test, projected long-term operating margins, utilizing the discounted cash flow method, had to average approximately 4.0%-4.5%.

Additionally, any hypothetical increase in the discount rate at the date of the 2023 third quarter interim test, with all other assumptions unchanged, would have caused the carrying value of this reporting unit to exceed its fair value, which may have resulted in additional material goodwill impairment losses.

In the third quarter of fiscal 2023, we recognized impairment charges of $238 million to impair the goodwill of two of our International/Other reporting units.

The impairment charges resulted primarily from sustained lower forecasted future operating results associated with longer than originally anticipated plant ramp-ups, higher operating costs, inflation impacts, demand changes, import bans and other macro-economic trends.

Our assessment of impairment for the reporting units described above continue to be sensitive to future discount rate increases and achievement of projected long-term operating margins as previously quantified.

Our impairment analysis contains inherent estimates and assumptions, many of which are outside the control of management including interest rates, cost of capital, tax rates, market EBITDA comparables and credit ratings, which could positively or negatively impact the anticipated future economic and operating conditions.

The assumptions and estimates used in determining fair value require considerable judgement and are sensitive to changes in underlying assumptions.

These assumptions can change in future periods as a result of overall economic conditions, including the impacts of inflationary pressures, increased interest and discount rates and global supply chain constraints, decreased market capitalization, amongst others.

These assumptions can change in future periods as a result of overall economic conditions, including the impacts of inflationary pressures, increased interest and discount rates, global supply chain constraints and decreased market capitalization, amongst others.

As a result, there can be no assurance that estimates and assumptions made for the purpose of assessing impairments will prove to be an accurate prediction of the future.

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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