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Item 2. Management’s Discussion and Analysis

2024-02-05 compared with 2023-08-10 · 163 added, 288 removed, 262 unchanged (63% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion provides an analysis of the Company’s financial condition, cash flows and results of operations from management’s perspective and should be read in conjunction with the consolidated condensed financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q and within the Company’s Annual Report on Form 10-K filed for the fiscal year ended October 1, 2022.

Our objective is to also provide discussion of events and uncertainties known to management that are reasonably likely to cause reported financial information not to be indicative of future operating results or of future financial condition and to offer information that provides understanding of our financial condition, cash flows and results of operations.

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Founded in 1935 by John W.

Tyson and grown under four generations of family leadership, the Company has a broad portfolio of products and brands like Tyson®, Jimmy Dean®, Hillshire Farm®, Ball Park®, Wright®, Aidells®, ibp® and State Fair®.

Tyson and grown under four generations of family leadership, the Company has a broad portfolio of products and brands including Tyson®, Jimmy Dean®, Hillshire Farm®, Ball Park®, Wright®, Aidells®, ibp® and State Fair®.

Some of the key factors influencing our business are customer demand for our products;

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We measure segment profit as operating income (loss).

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 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.

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

Sales increased slightly in the first quarter of fiscal 2024 as increased sales in our Beef segment were partially offset by decreased sales in our Chicken segment.

Operating income of $231 million for the first quarter of fiscal 2024 was down 51% as we experienced lower operating income in our Beef segment, partially offset by improved operating income in our Pork and Chicken segments.

In the first quarter of fiscal 2024, our operating income was impacted by $75 million in plant closure charges, $73 million in legal contingency accruals and $30 million of restructuring and related charges.

In the first quarter of fiscal 2023, our operating income was impacted by $21 million of restructuring and related charges and benefited from $35 million of insurance proceeds, net of costs incurred related to fires at our production facilities.

Market Environment

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.

We continue to pursue recovery of increased input costs through pricing.

According to the United States Department of Agriculture, domestic protein production (beef, pork, chicken and turkey) increased slightly in the first quarter of fiscal 2024 as compared to the same period in fiscal 2023.

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

Additionally, uncertainty exists regarding the timing of the anticipated cattle herd rebuilding.

The Pork segment experienced sufficient supply and reduced hog costs.

The Chicken segment experienced reduced feed ingredient costs.

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

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

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.

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

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

Furthermore, the ongoing conflict in the Middle East escalated during the first quarter of fiscal 2024 creating economic and political uncertainty within the region.

As of December 30, 2023, the impact of these conflicts have not had a material direct impact on our financial performance.

If these conflicts escalate further, impact additional regions or countries, or additional economic sanctions are imposed, it could have a material impact on our business operations and financial performance.

The Federal Reserve has increased interest rates, and may continue to increase interest rates or maintain elevated interest rates in the near term.

Our direct exposure to elevated 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 December 30, 2023, we had $3.7 billion of liquidity and our current debt was $1.3 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.

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

Our ongoing COVID-19 task force was formed for the primary purposes of maintaining the health and safety of our team members, ensuring our ability to operate our processing facilities and maintaining the liquidity of our business.

We have experienced and continue to experience multiple challenges related to the pandemic.

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

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

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

These challenges impacted our operating costs, but generally, we experienced lower direct incremental costs associated with COVID-19 in the 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 (2.7)% in the third quarter of fiscal 2023.

Our total operating margin was 1.7% in the first quarter of fiscal 2024.

Operating margins by segment were as follows:

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and sustain our Company and our world for future generations.

Beginning in fiscal 2022, we launched a new productivity program, which is designed to drive a better, faster and more agile organization that is supported by a culture of continuous improvement and faster decision-making.

The execution of this program is supported by a program management office that ensures delivery of key project milestones and reports on savings achievements connected with the three pillars of the program.

The first pillar is operational and functional excellence, which includes functional efficiency efforts in Finance, HR and Procurement focused on applying best practices to reduce costs.

The second pillar is the use of new digital solutions like artificial intelligence and predictive analytics to drive efficiency in operations, supply chain planning, logistics and warehousing.

The third pillar is automation, which will leverage automation and robotics technologies to automate difficult and higher turnover positions.

We expect the productivity savings to be recognized in each of our reportable segments as they benefit from the achievements connected with the three pillars of the program.

At this time, we do not anticipate costs associated with this program to be material and capital expenditures associated with automation and other activities are included in our capital expenditure expectations.

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 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.

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.

We recognized $30 million and $21 million of pretax charges in the three months ended December 30, 2023 and December 31, 2022, 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 $238 million.

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Restructuring and Related Charges (in millions).

Three Months Ended Nine Months Ended

Three Months Ended

December 30, 2023 December 31, 2022

Cost of Sales $ 3 $ 8

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Total Restructuring and related charges, pretax $ 30 $ 21

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

July 1, 2023 July 1, 2023

Three Months Ended 2022 Program charges to date Total estimated

December 30, 2023

December 31, 2022 December 30, 2023

2022 Program charges

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Summary of Results

in millions Three Months Ended Nine Months Ended

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

in millions Three Months Ended

December 30, 2023 December 31, 2022

Sales $ 13,319 $ 13,260

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Sales growth 0.4 %

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.

First quarter – Fiscal 2024 vs Fiscal 2023

• Sales Volume – Volumes were essentially flat, accounting for a $2 million decrease in sales as increased sales volume in our Pork and Prepared Foods segments was offset by decreased sales volume in our Beef and Chicken segments.

• Average Sales Price – Sales were positively impacted by higher average sales prices, which accounted for an increase of $61 million, driven by increased pricing in our Beef segment, partially offset by lower average sales prices in our Pork, Chicken and Prepared Foods segments.

Cost of Sales

in millions Three Months Ended Nine Months Ended

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

in millions Three Months Ended

December 30, 2023 December 31, 2022

Cost of sales $ 12,496 $ 12,292

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Cost of sales as a percentage of sales 93.8 % 92.7 %

Third quarter – Fiscal 2023 vs Fiscal 2022

First quarter – Fiscal 2024 vs Fiscal 2023

• Cost of sales increased $204 million.

Higher sales volume increased cost of sales $45 million while higher input cost per pound increased cost of sales $534 million.

Lower sales volume decreased cost of sales $2 million while higher input cost per pound increased cost of sales $206 million.

• The $206 million impact of higher input cost per pound was impacted by:

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

• 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 in cattle costs of approximately $575 million in our Beef segment.

• Increase of $75 million due to costs associated with plant closures.

• 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 $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.

Higher sales volume increased cost of sales $507 million while higher input cost per pound increased cost of sales $2,670 million.

• The $2,670 million impact of higher input cost per pound was impacted by:

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

• 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 of $73 million related to the recognition of legal contingency accruals in our Beef and Pork segments.

• Increase of $56 million related to inventory lower of cost or net realizable value adjustments in our Beef segment incurred in the first quarter of fiscal 2024.

• Increase of $42 million in our Beef segment from insurance proceeds received in the first quarter of fiscal 2023 related to the fire at our production facility in the fourth quarter of fiscal 2019.

• Increase of $26 million in International/Other from costs related to a production facility fire in Europe.

• Increase due to net derivative losses of $5 million in the first quarter of fiscal 2024, compared to net derivative gains of $12 million in the first quarter of fiscal 2023 due to our risk management activities.

• 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 $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 of approximately $170 million in our Chicken segment related to decreased feed ingredient costs.

• Decrease in hog costs of approximately $105 million in our Pork segment.

• Decrease in freight and transportation costs of approximately $90 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 $55 million in our Prepared Foods segment.

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

• Decrease of $31 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 decrease in costs across all of our segments primarily driven by net impacts on average cost per pound from mix changes in addition to savings from our productivity program.

Selling, General and Administrative

in millions Three Months Ended Nine Months Ended

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

in millions Three Months Ended

December 30, 2023 December 31, 2022

Selling, general and administrative expense $ 592 $ 501

As a percentage of sales 4.4 % 3.8 %

Third quarter – Fiscal 2023 vs Fiscal 2022

First quarter – Fiscal 2024 vs Fiscal 2023

• Increase of $91 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.

• 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:

• Decrease of $159 million in employee costs primarily from incentive-based compensation.

• Decrease of $37 million in professional fees.

• Decrease of $15 million in technology related costs.

• Increase of $50 million in employee costs primarily from incentive-based compensation.

• Increase of $17 million in technology related costs.

• Increase of $17 million in professional fees.

• Increase of $14 million in restructuring and related costs.

• Increase of $50 million in marketing, advertising and promotion expenses.

• 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 Nine Months Ended

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

$ 89 $ 85 $ 262 $ 282

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 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.

in millions Three Months Ended

December 30, 2023 December 31, 2022

First quarter – Fiscal 2024 vs Fiscal 2023

• The increase in interest expense for the three months ended December 30, 2023 was primarily due to interest expense on the balance of our term loan facilities.

Other (Income) Expense, net

in millions Three Months Ended Nine Months Ended

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

in millions Three Months Ended

December 30, 2023 December 31, 2022

Total other (income) expense, net $ (25) $ (42)

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.

First quarter – Fiscal 2024

• Included $19 million of foreign exchange gains and $10 million related to an amendment of a postretirement benefit plan.

First quarter – Fiscal 2023

• Included $15 million of joint venture earnings and $25 million of foreign exchange gains.

Effective Tax Rate

Three Months Ended Nine Months Ended

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

Three Months Ended

December 30, 2023 December 31, 2022

29.4 % 26.1 %

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.

• 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 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

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.

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.

First quarter – Fiscal 2024 vs Fiscal 2023

• The effective tax rates for both periods were increased by state taxes and net unfavorable permanent book-to-tax differences, partially offset by various tax benefits;

however, the relatively lower level of pretax income in the first quarter of fiscal 2024 resulted in a higher effective tax rate compared to the first quarter of fiscal 2023.

Net Income Attributable to Tyson

in millions, except per share data Three Months Ended

December 30, 2023 December 31, 2022

Net income attributable to Tyson $ 107 $ 316

Net income attributable to Tyson – per diluted share 0.30 0.88

First quarter – Fiscal 2024 – Net income attributable to Tyson included the following items:

• $75 million pretax, or ($0.16) per diluted share, of charges related to plant closures.

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

• $73 million pretax, or ($0.16) 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:

• $30 million pretax, or ($0.06) per diluted share, of restructuring and related charges.

• $1 million pretax, or ($0.01) 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:

First quarter – Fiscal 2023 – Net income attributable to Tyson included the following items:

• $35 million pretax, or $0.07 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.

• $21 million pretax, or ($0.04) per diluted share, of restructuring and related charges.

Segment Results

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in millions Sales

Three Months Ended Nine Months Ended

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

Three Months Ended

December 30, 2023 December 31, 2022

Beef $ 5,023 $ 4,723

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in millions Operating Income (Loss)

Three Months Ended Nine Months Ended

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

Three Months Ended

December 30, 2023 December 31, 2022

Beef $ (206) $ 166

Pork (74) 25 (128) 248

Chicken 177 69

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Beef Segment Results

in millions Three Months Ended Nine Months Ended

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

in millions Three Months Ended

December 30, 2023 December 31, 2022 Change

Sales $ 5,023 $ 4,723 $ 300

1 unchanged sentence

Average sales price change 10.5 %

Operating income $ 66 $ 533 $ (467) $ 232 $ 2,127 $ (1,895)

Operating income (loss) $ (206) $ 166 $ (372)

Operating margin (4.1) % 3.5 %

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.

First quarter – Fiscal 2024 vs Fiscal 2023

• Sales Volume - Sales volume decreased due to lower availability of market-ready cattle.

• Average Sales Price - Average sales price increased primarily due to increased input costs.

• Operating Income (Loss) - Operating income decreased primarily due to compressed beef margins as well as $56 million for an inventory lower of cost or net realizable value adjustment, a $45 million legal contingency accrual and $40 million of costs related to plant closures.

Operating income for the first quarter of fiscal 2023 benefited from $42 million of insurance proceeds related to a fire at a production facility in 2019.

Pork Segment Results

in millions Three Months Ended Nine Months Ended

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

in millions Three Months Ended

December 30, 2023 December 31, 2022 Change

Sales $ 1,517 $ 1,529 $ (12)

3 unchanged sentences

Operating margin 2.6 % (1.4) %

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, 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.

First quarter – Fiscal 2024 vs Fiscal 2023

• Sales Volume - Sales volume increased due to improved market conditions and increased domestic availability of market-ready hogs.

• Average Sales Price - Average sales price decreased due to lower hog costs.

• Operating Income (Loss) - Operating income increased due to improved pork margins, partially offset by a $28 million legal contingency accrual.

Chicken Segment Results

in millions Three Months Ended Nine Months Ended

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

in millions Three Months Ended

December 30, 2023 December 31, 2022 Change

Sales $ 4,033 $ 4,263 $ (230)

1 unchanged sentence

Average sales price change (3.9) %

Operating income (loss) $ (314) $ 277 $ (591) $ (503) $ 615 $ (1,118)

Operating income $ 177 $ 69 $ 108

Operating margin 4.4 % 1.6 %

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.

First quarter – Fiscal 2024 vs Fiscal 2023

• Sales Volume - Sales volume decreased primarily due to reduced domestic production, partially offset by the sell-through of inventory.

• Average Sales Price - Average sales price decreased due to the impact of lower commodity protein prices.

• Operating Income - Operating income increased due to improved operational efficiencies and a $170 million reduction in feed ingredient costs, partially offset by lower average sales price.

Additionally, operating income in the first quarter of fiscal 2024 was impacted by $35 million in plant closure charges, offset by $24 million of insurance proceeds, net of costs incurred associated with a production facility fire in the fourth quarter of fiscal 2021.

Operating income for the first quarter of fiscal 2023 benefited from $20 million of net derivative gains and was impacted by $7 million of costs, net of insurance proceeds, associated with a production facility fire in the fourth quarter of fiscal 2021.

Prepared Foods Segment Results

in millions Three Months Ended Nine Months Ended

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

in millions Three Months Ended

December 30, 2023 December 31, 2022 Change

Sales $ 2,543 $ 2,538 $ 5

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Operating margin 9.6 % 10.2 %

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.

First quarter – Fiscal 2024 vs Fiscal 2023

• Sales Volume – Sales volume increase due to the acquisition of Williams Sausage Company in the third quarter of 2023 and increased foodservice volumes.

• Average Sales Price – Average sales price decreased primarily due to sales mix.

• Operating Income – Operating income decreased due to lower average sales price, increased marketing, advertising and promotion spend and $21 million of restructuring and related costs, partially offset by a $55 million reduction in raw material costs.

International/Other Results

in millions Three Months Ended Nine Months Ended

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

in millions Three Months Ended

December 30, 2023 December 31, 2022 Change

Sales $ 582 $ 612 $ (30)

Operating income (loss) (22) (5) (17)

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.

First quarter – Fiscal 2024 vs Fiscal 2023

• Sales – Sales were negatively impacted by lower volume in Malaysia and unfavorable sales mix across the Asia-Pacific region and China due to macroeconomic headwinds, which were partially offset by volume increases in the other regions.

• Operating Income (Loss) – Operating income decreased primarily due to a production facility fire in Europe in the first quarter of fiscal 2024.

LIQUIDITY AND CAPITAL RESOURCES

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Cash Flows from Operating Activities

in millions Nine Months Ended

July 1, 2023 July 2, 2022

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

in millions Three Months Ended

December 30, 2023 December 31, 2022

Net income $ 114 $ 320

Non-cash items in net income:

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Deferred income taxes (14) 8

Impairment of goodwill 448 —

Other, net 129 68

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Net cash provided by operating activities $ 1,300 $ 762

• 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 a decrease in Inventories.

• The increase in net cash provided by operating activities was primarily due to decreases in annual incentive payments, inventory and accounts receivable, partially offset by lower earnings as a result of operations and a decrease in insurance proceeds received.

Cash Flows from Investing Activities

in millions Nine Months Ended

July 1, 2023 July 2, 2022

in millions Three Months Ended

December 30, 2023 December 31, 2022

Additions to property, plant and equipment $ (354) $ (589)

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• Additions to property, plant and equipment included spending for production growth, safety and animal well-being, new equipment, infrastructure replacements and upgrades to maintain competitive standing and position us for future opportunities.

• 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 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.

• We expect capital expenditures between $1 billion and $1.5 billion for fiscal 2024.

Capital expenditures include investments in profit improvement projects as well as projects for maintenance and repair.

This includes completion of capacity expansion projects as well as new equipment, automation technology and processes for product innovation.

• Acquisition, net of cash acquired for the three months ended December 31, 2022 included our 60% equity stake in Supreme Foods Processing Company, a producer and distributor of value-added and cooked chicken and beef products.

Cash Flows from Financing Activities

in millions Nine Months Ended

July 1, 2023 July 2, 2022

in millions Three Months Ended

December 30, 2023 December 31, 2022

Proceeds from issuance of debt $ 771 $ 54

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Other, net 3 —

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.

Net cash used for financing activities $ (26) $ (482)

• During the first three months of fiscal 2024, proceeds from issuance of debt included $750 million of proceeds from the term loan facility due May 2028.

• Purchases of Tyson Class A stock included:

• $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.

• $300 million of cash paid for shares repurchased pursuant to our share repurchase program during the three months ended December 31, 2022.

• $13 million of shares repurchased to fund certain obligations under our equity compensation programs during each of the three months ended December 30, 2023 and December 31, 2022.

• Dividends paid during the three months ended December 30, 2023 reflected a 2% increase to our fiscal 2023 quarterly dividend rate.

Expiration Date Facility

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Borrowed Amount

December 30, 2023

Cash and cash equivalents $ 1,484

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• 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.

• At December 30, 2023, we had current debt of $1,308 million, which we intend to pay with cash generated from our operating activities and other existing or new liquidity sources.

• In the first quarter of fiscal 2024, we borrowed the full $750 million available under the term loan facility due May 2028 to repay $592 million of outstanding commercial paper obligations and for general corporate purposes.

• 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 nine months ended July 1, 2023.

We had no borrowings under the revolving credit facility during the three months ended December 30, 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.

• We expect net interest expense to approximate $400 million for fiscal 2024.

• 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.

• Our current ratio was 1.5 to 1 at December 30, 2023 and 1.3 to 1 at September 30, 2023.

The increase in fiscal 2024 is primarily due to increased cash and cash equivalents.

• At December 30, 2023, approximately $563 million of our cash was held in the accounts of our foreign subsidiaries.

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

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

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.

Additionally, we have $1.75 billion in committed term loan facilities of which the full $1.75 billion was drawn upon as of December 30, 2023.

At December 30, 2023, amounts available for borrowing under our revolving credit and term loan facilities totaled $2.25 billion.

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

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

As of July 1, 2023, we had no commercial paper outstanding under this program.

As of December 30, 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.

Capitalization

To monitor our credit ratings and our capacity for long-term financing, we consider various qualitative and quantitative factors.

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

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

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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 %

Baal/BBB+ or above 0.100 % 1.625 %

Baa2/BBB (current level) 0.125 % 1.750 %

Baa3/BBB- or lower 0.175 % 1.875 %

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A3/A- 1.000 %

Baal/BBB+ (current level) 1.125 %

Baa2/BBB 1.250 %

Baal/BBB+ 1.125 %

Baa2/BBB (current level) 1.250 %

Baa3/BBB- or lower 1.375 %

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A3/A- 0.090 % 1.000 %

Baal/BBB+ (current level) 0.100 % 1.125 %

Baa2/BBB 0.125 % 1.250 %

Baal/BBB+ 0.100 % 1.125 %

Baa2/BBB (current level) 0.125 % 1.250 %

Baa3/BBB- or lower 0.175 % 1.375 %

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

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

We were in compliance with all debt covenants at December 30, 2023, and we expect that we will maintain compliance.

RECENTLY ISSUED/ADOPTED ACCOUNTING PRONOUNCEMENTS

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and income taxes to be critical accounting estimates.

These policies are summarized in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended October 1, 2022.

These policies are summarized in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023.

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 nine months ended July 1, 2023.

Accounting Policies, for updates to our significant accounting policies during the three months ended December 30, 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.

As further described in the 'Impairment of goodwill and indefinite life intangible assets' critical accounting estimate included in our Annual Report on Form 10-K for the fiscal year ended October 1, 2022, we assess goodwill and indefinite life assets for impairment at least annually as of the first day the fourth quarter and whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

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.

The first quarter interim assessment was deemed necessary due to higher discount rates used in estimating the fair value of the reporting units as well as lower than anticipated operating results during the first quarter of fiscal 2023.

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.

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, 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.

Potential circumstances that could have a negative effect on the fair value of our reporting units include, but are not limited to, lower than forecasted growth rates or operating margins and changes in discount rates.

A reduction in the estimated fair value of the reporting units could trigger an impairment in the future.

We cannot predict the occurrence of certain events or changes in circumstances that might adversely affect the carrying value of our goodwill and indefinite lived assets.

Our qualitative assessment for the first quarter of fiscal 2024 did not indicate that it was more likely than not the fair value of any of our reporting units or indefinite lived intangibles was less than the carrying amount, and as such, no quantitative test was deemed necessary.

We consider reporting units and indefinite lived intangibles that have 20% or less excess fair value over carrying amount to have a heightened risk of impairment.

The following reporting units and indefinite lived intangibles were considered at heightened risk of impairment as of the date of the most recent estimated fair value determination, which was in the fourth quarter of fiscal 2023:

our Chicken segment reporting units, our Beef reporting unit and our Pork reporting unit with goodwill totaling $3.1 billion, $0.3 billion and $0.4 billion, respectively, and two Prepared Foods brands with carrying values of $0.5 billion and $0.3 billion.

We continuously evaluate the changing macroeconomic conditions including inflationary pressures, rising interest rates, demand outlook and export markets as well as the Company's market capitalization.

Our reporting units with heightened risk of future impairments with $3.8 billion carrying value, as well as a brand with $0.5 billion carrying value, all had less than 10% of excess fair value above carrying value as of the date of the most recent estimated fair value determination.

Consequently, their estimated fair values remain highly sensitive to future discount rate increases, changing macroeconomic conditions and achievement of projected long-term operating margins.

Although our remaining reporting units and indefinite life intangible assets generally had more than 20% excess fair value over carrying amount as of the date of the most recent estimated fair value determination, they are also susceptible to impairments if any assumptions, estimates, or market factors significantly change in the future.

CAUTIONARY STATEMENTS RELEVANT TO FORWARD-LOOKING INFORMATION FOR THE PURPOSE OF “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Certain information in this report constitutes forward-looking statements.

These statements are intended to qualify for the “safe harbor” from liability established by the Private Securities Litigation Reform Act of 1995.

Such forward-looking statements include, but are not limited to, current views and estimates of our outlook for fiscal 2024, other future economic circumstances, industry conditions in domestic and international markets, our performance and financial results (e.g., debt levels, return on invested capital, value-added product growth, capital expenditures, tax rates, access to foreign markets and dividend policy).

Words such as “believe,” “expect,” “anticipate,” “estimate,” “intend,” “project,” “forecast,” “target,” “outlook,” “may,” “should,” “could,” and similar expressions, as well as statements written in the future tense, identify forward-looking statements.

These forward-looking statements are subject to a number of factors and uncertainties that could cause our actual results and experiences to differ materially from anticipated results and expectations expressed in such forward-looking statements.

We wish to caution readers not to place undue reliance on any forward-looking statements, which are expressly qualified in their entirety by this cautionary statement and speak only as of the date made.

We wish to caution readers not to place undue reliance on any forward-looking statements, which speak only as of the date made.

We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Among the factors that may cause actual results and experiences to differ from anticipated results and expectations expressed in such forward-looking statements are the following:

(i) the COVID-19 pandemic and associated responses thereto have had an adverse impact on our business and operations, and the extent that the COVID-19 pandemic continues to impact us will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the COVID-19 related impacts on the market, including production delays, labor shortages and increases in costs and inflation;

(ii) the effectiveness of our financial excellence programs;

(i) global pandemics have had, and may in the future have, an adverse impact on our business and operations;

(ii) the effectiveness of restructuring or financial excellence programs;

(iii) access to foreign markets together with foreign economic conditions, including currency fluctuations, import/export restrictions and foreign politics;

(iv) cyberattacks, other cyber incidents, security breaches or other disruptions of our information technology systems;

(iv) cyber attacks, other cyber incidents, security breaches or other disruptions of our information technology systems;

(v) risks associated with our failure to consummate favorable acquisition transactions or integrate certain acquisitions’ operations;

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(xiii) our ability to leverage brand value propositions;

(xiv) changes in availability and relative costs of labor and contract farmers and our ability to maintain good relationships with team members, labor unions, contract farmers and independent producers providing us livestock, including as a result of our plan to relocate certain corporate team members to our world headquarters in Springdale, Arkansas;

(xiv) changes in availability and relative costs of labor and contract farmers and our ability to maintain good relationships with team members, labor unions, contract farmers and independent producers providing us livestock, including as a result of our relocation of certain corporate team members to our world headquarters in Springdale, Arkansas;

(xv) issues related to food safety, including costs resulting from product recalls, regulatory compliance and any related claims or litigation;

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(xxvii) effects related to changes in tax rates, valuation of deferred tax assets and liabilities, or tax laws and their interpretation;

and (xxviii) those factors discussed within Item 1, Item 1A and Item 7 of our Annual Report on Form 10-K for the year ended October 1, 2022 and our other periodic filings with the SEC.

and (xxviii) those factors discussed within Item 1, Item 1A and Item 7 of our Annual Report on Form 10-K for the year ended September 30, 2023 and our other periodic filings with the SEC.

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