What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-05-06 compared with 2024-02-05 · 189 added, 134 removed, 291 unchanged (53% of the section changed)

18 unchanged sentences

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.

Sales decreased slightly in the second quarter and were flat in the first six months of fiscal 2024 as decreased sales in our Chicken and Prepared Foods segments were largely offset by increased sales in our Beef and Pork segments.

We recorded operating income of $312 million for the second quarter of fiscal 2024 as compared to an operating loss of $49 million in the second quarter of fiscal 2023 as we experienced higher operating income in our Chicken and Pork segments, partially offset by lower operating income in our Beef and Prepared Foods segments.

During the second quarter and first six months of fiscal 2024, we incurred higher performance-based compensation costs of $104 million and $200 million, respectively, driven by improved consolidated results.

Due to the nature of our performance-based compensation plans, our segments were primarily impacted based on their relative number of eligible team members, and thus, our Chicken and Prepared Foods segments incurred a greater proportion of the total costs.

Additionally, in the second quarter of fiscal 2024, our operating income was impacted by $54 million of costs related to a production facility fire and our current intention to discontinue the use of certain productive assets in the Netherlands and $39 million in plant closure charges.

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.

Operating income of $543 million for the first six months of fiscal 2024 was up 30% compared to the first six months of fiscal 2023 as we experienced higher operating income in our Chicken and Pork segments, partially offset by lower operating income for our Beef and Prepared Foods segments.

In the first six months of fiscal 2024, our operating income was impacted by $114 million of plant closure charges, $80 million of costs related to a production facility fire and our current intention to discontinue the use of certain productive assets in the Netherlands, $73 million in legal contingency accruals and $31 million of restructuring and related charges, partially offset by the benefit of $24 million of insurance proceeds, net of costs incurred related to facility fires.

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.

Market Environment

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.

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

The Beef segment experienced limited supply of market-ready cattle in the second quarter of fiscal 2024 as well as increased cattle costs.

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

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

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.

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

As of March 30, 2024, 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.

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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.

At March 30, 2024, we had $4.4 billion of liquidity and our current debt was $1.3 billion, which we intend to repay with the remaining proceeds from our $1.5 billion of senior notes issued in March 2024.

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.

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

Our total operating margin was 2.4% in the second quarter of fiscal 2024.

Operating margins by segment were as follows:

3 unchanged sentences

• Prepared Foods – 9.6%

Our strategy is to sustainably feed the world with the fastest growing protein brands.

We intend to achieve our strategy as we:

grow our business by delivering superior value to consumers and customers;

deliver fuel for growth and returns through commercial, operational and financial excellence;

and sustain our Company and our world for future generations.

We are a world-class food company and recognized leader in protein.

Our strategy is to deliver margins in the core protein business by driving efficiencies and valuing-up offerings to better serve consumers;

grow branded portfolio by innovating new occasions, categories and channels;

and scale in international markets by delivering profitable value-added food offerings in high growth categories.

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.

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.

We recognized $1 million and $22 million of pretax charges in the three months ended March 30, 2024 and April 1, 2023, respectively, and $31 million and $43 million of pretax charges in the six months ended March 30, 2024 and 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.

The Company currently anticipates the 2022 Program will result in cumulative pretax charges of approximately $228 million.

3 unchanged sentences

Restructuring and Related Charges (in millions).

Three Months Ended

December 30, 2023 December 31, 2022

Three Months Ended Six Months Ended

March 30, 2024 April 1, 2023 March 30, 2024 April 1, 2023

Cost of Sales $ (3) $ (4) $ — $ 4

1 unchanged sentence

Total Restructuring and related charges, pretax $ 1 $ 22 $ 31 $ 43

Three Months Ended 2022 Program charges to date Total estimated

December 30, 2023

December 31, 2022 December 30, 2023

2022 Program charges

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

March 30, 2024 April 1, 2023 March 30, 2024 April 1, 2023 March 30, 2024 2022 Program charges

Beef $ — $ 8 $ 4 $ 13 $ 53 $ 54

5 unchanged sentences

Summary of Results

in millions Three Months Ended

December 30, 2023 December 31, 2022

in millions Three Months Ended Six Months Ended

March 30, 2024 April 1, 2023 March 30, 2024 April 1, 2023

Sales $ 13,072 $ 13,133 $ 26,391 $ 26,393

2 unchanged sentences

Sales growth (0.5) % — %

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.

Second quarter – Fiscal 2024 vs Fiscal 2023

• Sales Volume – Sales were negatively impacted by a decrease in sales volume, which accounted for a $193 million decrease in sales driven by decreased sales volume in our Chicken segment, partially offset by increased sales volume in our Beef, Pork and Prepared Foods segments.

• Average Sales Price – Sales were positively impacted by higher average sales prices, which accounted for an increase of $132 million, driven by increased pricing in our Beef and Pork segments, partially offset by lower average sales prices in our Chicken and Prepared Foods segments.

Six months – Fiscal 2024 vs Fiscal 2023

• Sales Volume – Sales were negatively impacted by a decrease in sales volume, which accounted for a $195 million decrease in sales driven by decreased sales volume in our Beef and Chicken segments, partially offset by increased sales volume in our Pork and Prepared Foods segments.

• Average Sales Price – Sales were positively impacted by higher average sales prices, which accounted for an increase of $193 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

December 30, 2023 December 31, 2022

in millions Three Months Ended Six Months Ended

March 30, 2024 April 1, 2023 March 30, 2024 April 1, 2023

Cost of sales $ 12,206 $ 12,606 $ 24,702 $ 24,898

1 unchanged sentence

Cost of sales as a percentage of sales 93.4 % 96.0 % 93.6 % 94.3 %

First quarter – Fiscal 2024 vs Fiscal 2023

• Cost of sales increased $204 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:

Second quarter – Fiscal 2024 vs Fiscal 2023

• Cost of sales decreased $400 million.

Lower sales volume decreased cost of sales by $182 million while lower input cost per pound decreased cost of sales by $218 million.

• The $218 million impact of lower input cost per pound was impacted by:

• Increase in cattle costs of approximately $325 million in our Beef segment.

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

• Increase in performance-based compensation costs of $48 million.

• Increase of $54 million in International/Other from costs related to a production facility fire and our current intention to discontinue the use of certain productive assets in the Netherlands.

• Increase due to net derivative losses of $46 million in the second quarter of fiscal 2024, compared to net derivative losses of $21 million in the second quarter of fiscal 2023 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.

• Decrease of approximately $190 million in our Chicken segment related to decreased feed ingredient costs.

• Decrease in freight and transportation costs of approximately $80 million.

• Decrease in hog costs of approximately $75 million in our Pork segment.

• Decrease of $53 million due to costs associated with plant closures.

• Decrease in raw material and other input costs of approximately $20 million in our Prepared Foods segment.

• 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.

Six months – Fiscal 2024 vs Fiscal 2023

• Cost of sales decreased $196 million.

Lower sales volume decreased cost of sales by $184 million while lower input cost per pound decreased cost of sales by $12 million.

• The $12 million impact of lower input cost per pound was impacted by:

• Increase in cattle costs of approximately $900 million in our Beef segment.

• Increase of $80 million in International/Other from costs related to a production facility fire and our current intention to discontinue the use of certain productive assets in the Netherlands.

• 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 in performance-based compensation costs of $93 million.

• 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 due to net derivative losses of $51 million in the first six months of fiscal 2024, compared to net derivative losses of $9 million in the first six months of fiscal 2023 due to our risk management activities.

• Increase of $22 million due to costs associated with plant closures.

• Decrease of approximately $360 million in our Chicken segment related to decreased feed ingredient costs.

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Selling, General and Administrative

in millions Three Months Ended

December 30, 2023 December 31, 2022

in millions Three Months Ended Six Months Ended

March 30, 2024 April 1, 2023 March 30, 2024 April 1, 2023

Selling, general and administrative expense $ 554 $ 576 $ 1,146 $ 1,077

As a percentage of sales 4.2 % 4.4 % 4.3 % 4.1 %

First quarter – Fiscal 2024 vs Fiscal 2023

Second quarter – Fiscal 2024 vs Fiscal 2023

• Decrease of $22 million in selling, general and administrative was primarily driven by:

• Decrease of $22 million in restructuring and related costs.

• Decrease of $11 million in marketing, advertising and promotion expenses.

• Decrease of $11 million in product donations.

• Increase of $27 million in team member costs including $56 million in performance-based compensation partially offset by a decrease of $29 million in all other team member costs.

Six months – Fiscal 2024 vs Fiscal 2023

• Increase of $69 million in selling, general and administrative was primarily driven by:

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

• Increase of $17 million in technology related costs.

• Increase of $74 million in team member costs including $107 million in performance-based compensation partially offset by a decrease of $33 million in all other team member costs.

• Increase of $20 million in professional fees.

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

• Decrease of $8 million in restructuring and related costs.

Interest Expense

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.

in millions Three Months Ended Six Months Ended

March 30, 2024 April 1, 2023 March 30, 2024 April 1, 2023

$ 111 $ 89 $ 216 $ 173

Second quarter and six months – Fiscal 2024 vs Fiscal 2023

• The increase in interest expense for the three and six months ended March 30, 2024 was primarily due to interest expense on the balance of our term loan facilities.

Other (Income) Expense, net

in millions Three Months Ended

December 30, 2023 December 31, 2022

in millions Three Months Ended Six Months Ended

March 30, 2024 April 1, 2023 March 30, 2024 April 1, 2023

Total other (income) expense, net $ 12 $ (1) $ (13) $ (43)

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.

Second quarter and six months – Fiscal 2024

• Included $15 million of foreign exchange losses in the second quarter of fiscal 2024.

Included $10 million of income related to an amendment of a postretirement benefit plan in the first six months of fiscal 2024.

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.

Effective Tax Rate

Three Months Ended

December 30, 2023 December 31, 2022

Three Months Ended Six Months Ended

March 30, 2024 April 1, 2023 March 30, 2024 April 1, 2023

26.9 % 29.4 % 28.0 % 24.7 %

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:

Second quarter – Fiscal 2024 vs Fiscal 2023

• The second quarter of fiscal 2024 was impacted by increased foreign losses.

In both periods, the effective tax rates were impacted by state taxes 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, resulting in a higher effective tax rate in the second quarter of fiscal 2023.

• 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 2024.

Six months – Fiscal 2024 vs Fiscal 2023

• In both periods, the effective tax rates were increased by state taxes, partially offset by various tax benefits;

however, increased foreign losses in fiscal 2024 resulted in a higher effective tax rate compared to fiscal 2023.

Net Income (Loss) Attributable to Tyson

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

March 30, 2024 April 1, 2023 March 30, 2024 April 1, 2023

Net income (loss) attributable to Tyson $ 145 $ (97) $ 252 $ 219

Net income (loss) attributable to Tyson – per diluted share 0.41 (0.28) 0.71 0.61

Second quarter – Fiscal 2024 – Net income (loss) attributable to Tyson included the following items:

• $54 million pretax, or ($0.15) per diluted share, of charges related to a production facility fire and our current intention to discontinue the use of certain productive assets in the Netherlands.

• $39 million pretax, or ($0.06) per diluted share, of charges related to plant closures.

Six months – Fiscal 2024 – Net income (loss) attributable to Tyson included the following items:

• $114 million pretax, or ($0.22) per diluted share, of charges related to plant closures.

• $80 million pretax, or ($0.22) per diluted share, of charges related to a production facility fire and our current intention to discontinue the use of certain productive assets in the Netherlands.

• $73 million pretax, or ($0.16) per diluted share, related to the recognition of a legal contingency accrual.

1 unchanged sentence

• $27 million pretax, or $0.06 per diluted share, of production facilities fire insurance proceeds, net of costs incurred.

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

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

• $22 million pretax, or ($0.05) per diluted share, of restructuring and related charges.

• $92 million pretax, or ($0.19) per diluted share, of charges related to plant closures.

Six months – Fiscal 2023 – Net income (loss) 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.

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

• $92 million pretax, or ($0.19) per diluted share, of charges related to plant closures.

Segment Results

3 unchanged sentences

in millions Sales

Three Months Ended

December 30, 2023 December 31, 2022

Three Months Ended Six Months Ended

March 30, 2024 April 1, 2023 March 30, 2024 April 1, 2023

Beef $ 4,954 $ 4,617 $ 9,977 $ 9,340

6 unchanged sentences

in millions Operating Income (Loss)

Three Months Ended

December 30, 2023 December 31, 2022

Three Months Ended Six Months Ended

March 30, 2024 April 1, 2023 March 30, 2024 April 1, 2023

Beef $ (35) $ — $ (241) $ 166

Pork (1) (33) 38 (54)

Chicken 158 (258) 335 (189)

3 unchanged sentences

Beef Segment Results

in millions Three Months Ended

December 30, 2023 December 31, 2022 Change

in millions Three Months Ended Six Months Ended

March 30, 2024 April 1, 2023 Change March 30, 2024 April 1, 2023 Change

Sales $ 4,954 $ 4,617 $ 337 $ 9,977 $ 9,340 $ 637

3 unchanged sentences

Operating margin (0.7) % — % (2.4) % 1.8 %

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.

Second quarter and six months – Fiscal 2024 vs Fiscal 2023

• Sales Volume - Sales volume increased in the second quarter of fiscal 2024 primarily due to higher average carcass weights.

Sales volume for the first six months decreased due to overall lower availability of market-ready cattle.

• Average Sales Price - Average sales price increased in the second quarter and first six months of fiscal 2024 primarily due to increased input costs.

• Operating Income (Loss) - Operating income decreased in the second quarter and first six months of fiscal 2024 primarily due to compressed beef margins.

Operating income for the first six months of fiscal 2024 was impacted by a $45 million legal contingency accrual and $41 million of costs related to plant closures.

Operating income for the second quarter of fiscal 2023 was impacted by $8 million of restructuring and related charges while operating income for the first six months of fiscal 2023 was impacted by $13 million of restructuring and related charges and 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

December 30, 2023 December 31, 2022 Change

in millions Three Months Ended Six Months Ended

March 30, 2024 April 1, 2023 Change March 30, 2024 April 1, 2023 Change

Sales $ 1,486 $ 1,421 $ 65 $ 3,003 $ 2,950 $ 53

3 unchanged sentences

Operating margin (0.1) % (2.3) % 1.3 % (1.8) %

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.

Second quarter and six months – Fiscal 2024 vs Fiscal 2023

• Sales Volume - Sales volume increased in the second quarter and first six months of fiscal 2024 due to improved market conditions and increased domestic availability of market-ready hogs.

• Average Sales Price - Average sales price increased in the second quarter of fiscal 2024 due to improved demand.

For the first six months of fiscal 2024, average sales price decreased as pork product supplies outpaced the recovering demand environment.

• Operating Income (Loss) - Operating income increased in the second quarter and first six months of fiscal 2024 primarily due to improved pork margins.

Operating income for the second quarter and first six months of fiscal 2024 was impacted by $34 million of costs related to a plant closure.

Additionally, operating income for the first six months of fiscal 2024 was impacted by a $28 million legal contingency accrual.

Chicken Segment Results

in millions Three Months Ended

December 30, 2023 December 31, 2022 Change

in millions Three Months Ended Six Months Ended

March 30, 2024 April 1, 2023 Change March 30, 2024 April 1, 2023 Change

Sales $ 4,065 $ 4,430 $ (365) $ 8,098 $ 8,693 $ (595)

1 unchanged sentence

Average sales price change (2.1) % (3.0) %

Operating income $ 177 $ 69 $ 108

Operating income (loss) $ 158 $ (258) $ 416 $ 335 $ (189) $ 524

Operating margin 3.9 % (5.8) % 4.1 % (2.2) %

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.

Second quarter and six months – Fiscal 2024 vs Fiscal 2023

• Sales Volume - Sales volume decreased in the second quarter and first six months of fiscal 2024 primarily due to reduced domestic production.

• Average Sales Price - Average sales price decreased in the second quarter and first six months of fiscal 2024 due to the impact of lower input costs.

• Operating Income (Loss) - Operating income increased in the second quarter and first six months of fiscal 2024 primarily due to improved operational efficiencies, in addition to reductions of $190 million and $360 million of feed ingredient costs in the second quarter and first six months of fiscal 2024, respectively, partially offset by lower average sales price.

Additionally, operating income in the second quarter and first six months of fiscal 2024 was impacted by $55 million and $65 million of net derivative losses, respectively.

The first six months of fiscal 2024 was impacted by $39 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 second quarter and first six months of fiscal 2023 was impacted by $35 million and $15 million of net derivative losses, respectively, in addition to $92 million of charges associated with plant closures.

Prepared Foods Segment Results

in millions Three Months Ended

December 30, 2023 December 31, 2022 Change

in millions Three Months Ended Six Months Ended

March 30, 2024 April 1, 2023 Change March 30, 2024 April 1, 2023 Change

Sales $ 2,404 $ 2,422 $ (18) $ 4,947 $ 4,960 $ (13)

3 unchanged sentences

Operating margin 9.6 % 10.0 % 9.6 % 10.1 %

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.

Second quarter and six months – Fiscal 2024 vs Fiscal 2023

• Sales Volume – Sales volume increased in the second quarter and first six months of fiscal 2024 primarily due to the acquisition of Williams Sausage Company in the third quarter of 2023.

• Average Sales Price – Average sales price decreased in the second quarter and first six months of fiscal 2024 primarily due to sales mix.

• Operating Income – Operating income decreased in the second quarter and first six months of fiscal 2024 partially due to lower average sales price which was largely offset by reduced raw materials costs.

Additionally, operating income for the first six months of fiscal 2024 was impacted by $24 million of restructuring and related costs.

Operating income for the second quarter and first six months of fiscal 2023 was impacted by $11 million and $19 million of restructuring and related costs, respectively.

International/Other Results

in millions Three Months Ended

December 30, 2023 December 31, 2022 Change

in millions Three Months Ended Six Months Ended

March 30, 2024 April 1, 2023 Change March 30, 2024 April 1, 2023 Change

Sales $ 580 $ 634 $ (54) $ 1,162 $ 1,246 $ (84)

Operating income (loss) (40) 1 (41) (62) (4) (58)

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.

Second quarter and six months – Fiscal 2024 vs Fiscal 2023

• Sales – Sales were negatively impacted in the second quarter and first six months of fiscal 2024 by lower volume and unfavorable sales mix across the Asia-Pacific region and China due to macroeconomic headwinds, partially offset by volume increases in the other regions.

• Operating Income (Loss) – Operating income decreased primarily due to charges related to a production facility fire in the Netherlands in the first quarter of fiscal 2024 and current intention to discontinue the use of certain productive assets in the second quarter of fiscal 2024.

LIQUIDITY AND CAPITAL RESOURCES

8 unchanged sentences

Cash Flows from Operating Activities

in millions Three Months Ended

December 30, 2023 December 31, 2022

in millions Six Months Ended

March 30, 2024 April 1, 2023

Net income $ 262 $ 229

Non-cash items in net income 843 782

Depreciation and amortization 373 303

Deferred income taxes (14) 8

Other, net 129 68

Net changes in operating assets and liabilities:

(Increase) decrease in accounts receivable 116 187

(Increase) decrease in inventories 272 (5)

Increase (decrease) in accounts payable (325) (145)

Increase (decrease) in income taxes payable/receivable 57 62

Net changes in other operating assets and liabilities (48) (341)

Net cash provided by operating activities $ 1,177 $ 769

• 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.

• Non-cash items in net income primarily includes depreciation and amortization of $722 million and $620 million for the six months ended March 30, 2024 and April 1, 2023, respectively.

• Cash provided by operating activities for the first six months of fiscal 2024 was $1.2 billion, an increase of $408 million compared to the first six months of fiscal 2023, due to $94 million of higher earnings, net of non-cash items, and a $314 million increase in cash provided by the net changes in operating assets and liabilities which was primarily impacted by:

• An increase of $293 million due to a decrease of $48 million in the net changes in other operating assets and liabilities in the first six months of fiscal 2024, compared to a decrease of $341 million in fiscal 2023, primarily driven by performance-based compensation.

• An increase of $277 million due to a decrease in inventory of $272 million in the first six months of fiscal 2024, compared to an increase of $5 million in the first six months of fiscal 2023, primarily driven by decreased average cost of inventory and lower volume of livestock.

• Partially offset by:

• A decrease of $180 million due to a decrease in accounts payable of $325 million during the first six months of fiscal 2024, compared to a decrease of $145 million in the first six months of fiscal 2023, primarily due to lower input costs and changes in days payables outstanding.

• A decrease of $71 million due to a decrease in accounts receivable of $116 million in the first six months of fiscal 2024, compared to a decrease of $187 million in the first six months of fiscal 2023.

The reduced decline in accounts receivable was primarily due to level of sales in the last few weeks of each quarter end.

Cash Flows from Investing Activities

in millions Three Months Ended

December 30, 2023 December 31, 2022

in millions Six Months Ended

March 30, 2024 April 1, 2023

Additions to property, plant and equipment $ (621) $ (1,097)

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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.

• 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.

Cash Flows from Financing Activities

in millions Three Months Ended

December 30, 2023 December 31, 2022

in millions Six Months Ended

March 30, 2024 April 1, 2023

Proceeds from issuance of debt $ 2,327 $ 88

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Other, net (12) 1

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.

Net cash provided by (used for) financing activities $ 1,051 $ (101)

• During the first six months of fiscal 2024, proceeds from issuance of debt included $750 million of proceeds from the term loan facility due May 2028, $600 million of proceeds from the 5.40% 2029 Notes, and $900 million from the 5.70% 2034 Notes.

• Payments on debt during the six months ended March 30, 2024 included a payment of $250 million on our term loan facility due May 2026.

• Purchases of Tyson Class A stock included:

• $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.

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

• $31 million and $32 million of shares repurchased to fund certain obligations under our equity compensation programs during the six months ended March 30, 2024 and April 1, 2023, respectively.

• Dividends paid during the six months ended March 30, 2024 reflected a 2% increase to our fiscal 2023 quarterly dividend rate.

Expiration Date Facility

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Borrowed Amount

December 30, 2023

March 30, 2024

Cash and cash equivalents $ 2,182

Short-term investments 16

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 $ 4,448

• 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 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.

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

• At March 30, 2024, we had current debt of $1,315 million, which we intend to pay with cash generated from our operating activities and other existing or new liquidity sources.

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

We had no borrowings under the revolving credit facility during the three months ended December 30, 2023.

We had no borrowings under the revolving credit facility during the six months ended March 30, 2024.

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 1.5 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.

• Our current ratio was 1.8 to 1 at March 30, 2024 and 1.3 to 1 at September 30, 2023.

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

• At March 30, 2024, approximately $649 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 and Term Loan Facilities

Credit Facility

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.

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.

At March 30, 2024, amounts available for borrowing under our revolving credit facility totaled $2.25 billion.

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

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

As of December 30, 2023, we had no commercial paper outstanding under this program.

As of March 30, 2024, 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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and engage in certain consolidations, mergers and sales of assets.

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

We were in compliance with all debt covenants at March 30, 2024, and we expect that we will maintain compliance.

RECENTLY ISSUED/ADOPTED ACCOUNTING PRONOUNCEMENTS

13 unchanged sentences

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 three months ended December 30, 2023.

Accounting Policies, for updates to our significant accounting policies during the six months ended March 30, 2024.

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.

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.

Our qualitative assessment for the first and second quarters 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.

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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