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Item 7. Management’s Discussion and Analysis

2024-11-12 compared with 2023-11-13 · 184 added, 232 removed, 494 unchanged (46% of the section changed)

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DESCRIPTION OF THE COMPANY

We are one of the world’s largest food companies and a recognized leader in protein.

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

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 including Tyson®, Jimmy Dean®, Hillshire Farm®, Ball Park®, Wright®, Aidells®, ibp® and State Fair®.

Tyson, it has grown under four generations of family leadership.

The Company is unified by this purpose:

We Feed the World Like Family™ and has a broad portfolio of iconic products and brands including Tyson®, Jimmy Dean®, Hillshire Farm®, Ball Park®, Wright®, State Fair®, Aidells® and ibp®.

Tyson Foods is dedicated to bringing high-quality food to every table in the world, safely, sustainably, and affordably, now and for future generations.

We operate in four reportable segments:

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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, Thailand and the Kingdom of Saudi Arabia, third-party merger and integration costs and corporate overhead related to Tyson New Ventures, LLC.

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

For further description of the business, refer to Part I, Item 1, Business.

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The Company’s accounting cycle resulted in a 52-week year for fiscal 2024, 2023 and 2022.

Sales decreased slightly to $52.9 billion in fiscal 2023 as compared to fiscal 2022, largely due to decreased sales volumes in our Beef and Pork segments and lower average sales price in our Chicken and Pork segments, partially offset by increased sales volumes in our Chicken segment.

We incurred an operating loss of $395 million in fiscal 2023 as compared to operating income of $4,410 million fiscal 2022, as we experienced lower operating income in all our segments other than the Prepared Foods segment.

In fiscal 2023, our operating income was impacted by $781 million of goodwill impairment charges, $322 million of plant closure charges, $156 million of legal contingency accruals, $124 million of restructuring and related charges, $17 million of product line discontinuation charges, and benefited by $53 million of insurance proceeds, net of costs incurred, related to fires at our production facilities and $19 million related to the relocation of a production facility in China.

In fiscal 2022, our results were impacted by $66 million of restructuring and related charges and $62 million of insurance proceeds, net of costs incurred related to fires at our production facilities.

Sales increased $0.4 billion to $53.3 billion in fiscal 2024, largely due to higher average sales prices in our Beef segment.

We reported operating income of $1,409 million in fiscal 2024 as compared to an operating loss of $395 million in fiscal 2023, as we experienced higher operating income in all our segments other than the Beef segment.

During fiscal 2024, we incurred higher performance-based compensation costs of $378 million 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 fiscal 2024, our operating income was impacted by $182 million of plant closure and disposal charges, $174 million in legal contingency accruals, $86 million of costs related to a production facility fire in the Netherlands and the subsequent decision to sell the facility, $31 million of restructuring and related charges and $8 million of brand discontinuation costs, partially offset by the benefit of $70 million of insurance proceeds, net of costs incurred, related to fires at our production facilities.

In fiscal 2023, our results were impacted by $781 million of goodwill impairment charges, $322 million of plant closure and disposal charges, $156 million of legal contingency accruals, $124 million of restructuring and related charges, $17 million of product line discontinuation charges, and benefited from $53 million of insurance proceeds, net of costs incurred, related to fires at our production facilities and $19 million related to the relocation of a production facility in China.

Market Environment

According to the USDA, domestic protein production (beef, pork, chicken and turkey) decreased slightly in fiscal 2023 compared to fiscal 2022.

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

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

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

As of September 30, 2023, the impact of this conflict has not had a material direct impact on our consolidated 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.

Furthermore, the conflict in the Middle East escalated in October 2023 creating economic and political uncertainty within the region.

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

The Pork segment experienced sufficient supply and reduced live hog costs, but was negatively impacted by softening global 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 September 30, 2023, we had $3.0 billion of liquidity and our current debt was $1.9 billion.

Should we need to issue additional debt or borrow under our existing revolving and term loan facilities, we may be exposed to higher interest rates than our current outstanding borrowings.

According to the USDA, domestic protein production (beef, pork, chicken and turkey) increased slightly in fiscal 2024 compared to fiscal 2023.

The Beef segment experienced limited supply of market-ready cattle and increased live 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 reduced raw material costs primarily due to lower meat costs.

Additionally, the conflicts between Ukraine and Russia, in addition to the Middle East, are ongoing and there are many risks and uncertainties in relation to the conflicts that are outside of our control.

As of September 28, 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 have additional economic sanctions imposed, it could have a material impact on our business operations and financial performance.

Our total operating margin was 2.6% in fiscal 2024.

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• Prepared Foods – 8.9%

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

We intend to achieve our strategy as we:

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 launched a new productivity program in fiscal 2022 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 the 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 fiscal 2023, more than a year ahead of our plan.

The Company approved a restructuring program in fiscal 2022, 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 relocated all of 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 $124 million and $66 million of pretax charges in fiscal 2023 and 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 $224 million.

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

The following tables set forth the pretax impact of restructuring and related charges in the Consolidated Statements of Income and the pretax impact by our reportable segments for fiscal years ended 2023 and 2022.

For further description refer to Part II, Item 8, Notes to the Consolidated Financial Statements, Note 7:

Restructuring and Related Charges (in millions).

Cost of Sales $ 29 $ 18

Selling, General and Administrative 95 48

Total Restructuring and related charges, pretax $ 124 $ 66

2022 charges 2023 charges Estimated future charges Total estimated 2022 Program charges

Beef $ 16 $ 33 $ 3 $ 52

Pork 5 11 1 17

Chicken 6 16 2 24

Prepared Foods 36 49 24 109

International/Other 3 15 4 22

Total Restructuring and related charges, pretax $ 66 $ 124 $ 34 $ 224

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.

SUMMARY OF RESULTS

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Sales growth 0.8 % (0.8) %

• Sales Volume – Sales were positively impacted by a increase in sales volume, which accounted for an increase of $507 million, driven by increased volumes in our Chicken segment partially offset by decreased volumes in our Beef segment due to the reduced domestic availability of live cattle and our Pork segment as a result of balancing our supply with customer demand.

• Sales Volume – Volumes were essentially flat and resulted in an increase of $19 million as increased sales volume in our Beef, Pork and Prepared Foods segments were mostly offset by decreased sales volume in our Chicken segment.

• Average Sales Price – Sales were positively impacted by higher average sales prices, which accounted for an increase of $298 million, driven by increased pricing in our Beef segment.

◦ The above changes in average sales price exclude the impacts of $45 million and $156 million reductions of Sales from the recognition of legal contingency accruals in fiscal 2024 and 2023, respectively.

• Sales Volume – Sales were positively impacted by an increase in sales volume, which accounted for an increase of $507 million, driven by increased volumes in our Chicken segment, partially offset by decreased volumes in our Beef segment due to the 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 $752 million, driven by reduced pricing in our Pork and Chicken segments, partially offset by higher average sales prices in our Beef and Prepared Foods segments.

◦ The above change in average sales price for fiscal 2023 excludes the impact of a $156 million reduction of Sales from the recognition of legal contingency accruals.

• Sales Volume – Sales were negatively impacted by a decrease in sales volume, which accounted for a decrease of $121 million, driven by decreased volumes in our Pork and Prepared Foods segments and impacts associated with the challenging labor environment and continued supply chain constraints, partially offset by an increase in sales volume in our Chicken segment.

• Average Sales Price – Sales were positively impacted by higher average sales prices, which accounted for an increase of $5,809 million.

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

• The above change in average sales price for fiscal 2022 excludes the impact of a $545 million reduction of Sales from the recognition of legal contingency accruals in fiscal 2021.

Cost of Sales in millions

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Cost of sales as a percentage of sales 93.2 % 95.0 %

• Cost of sales decreased $568 million.

Higher sales volume increased cost of sales by $18 million while lower input cost per pound decreased cost of sales by $586 million.

• The $586 million impact of lower input cost per pound was impacted by:

• Decrease of approximately $895 million in our Chicken segment related to decreased feed ingredient costs.

• Decrease in freight and transportation costs of approximately $310 million.

• Decrease of $140 million due to plant closures and disposals.

• Decrease in hog costs of approximately $135 million in our Pork segment.

• Decrease in raw material and other input costs of approximately $65 million in our Prepared Foods segment.

• Decrease due to net derivative losses of $55 million in fiscal 2024, compared to net derivative losses of $117 million in 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 $59 million in our Chicken segment from insurance proceeds, net of costs, related to a production facility fire in the fourth quarter of fiscal 2021.

• Decrease of $29 million in restructuring and related costs.

• Increase in cattle costs of approximately $1,315 million in our Beef segment.

• Increase in performance-based compensation costs of $173 million.

• Increase of $129 million related to the recognition of legal contingency accruals in our Beef, Pork and Chicken segments.

• Increase of $86 million in International/Other from costs related to a production facility fire in the Netherlands and subsequent decision to sell the facility.

• 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.

• 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.

• The $18 million impact of increased sales volume was primarily driven by increased volumes in our Beef, Pork and Prepared Foods segments.

• Cost of sales increased $3,636 million.

Higher sales volume increased cost of sales $444 million while higher input cost per pound increased cost of sales $3,192 million.

Higher sales volume increased cost of sales by $444 million while higher input cost per pound increased cost of sales by $3,192 million.

• The $3,192 million impact of higher input cost per pound was impacted by:

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• Increase of $322 million due to costs associated with plant closures.

• Increase of $322 million due to costs associated with plant closures and disposals.

• Increase of $238 million related to inventory lower of cost or net realizable value adjustments.

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• The $444 million impact of increased sales volume was primarily driven by increased volumes in our Chicken segment.

• Cost of sales increased $6,091 million.

Lower sales volume decreased cost of sales $104 million while higher input cost per pound increased cost of sales $6,195 million.

• The $6,195 million impact of higher input cost per pound was impacted by:

• Increase in live cattle costs of approximately $1,950 million in our Beef segment.

• Increase of approximately $635 million in our Chicken segment related to the net impact of increased feed ingredient costs and growout expenses, partially offset by a reduction in outside meat purchases.

• Increase in raw material and other input costs of approximately $615 million in our Prepared Foods segment.

• Increase in live hog costs of approximately $270 million in our Pork segment.

• Increase in freight and transportation costs of approximately $485 million.

• Increase of approximately $120 million in frontline bonuses.

• Increase due to the recognition of a $784 million gain on the sale of our pet treats business in fiscal 2021.

• Decrease due to net derivative gains of $225 million in fiscal 2022, compared to net derivative gains of $14 million in fiscal 2021 due to our risk management activities.

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

• Decrease of approximately $58 million in our Chicken segment related to insurance proceeds, net of costs incurred, related to the fire at our production facility in the fourth quarter of fiscal 2021.

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

• Remaining increase in costs across all of our segments primarily driven by net impacts on average cost per pound from mix changes, the impact of the inflationary environment on our labor and other input costs and restructuring and related charges, partially offset by savings from our productivity program.

• The $104 million impact of lower sales volume was primarily driven by decreased volumes in our Pork and Prepared Foods segments.

Selling, General and Administrative in millions

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• Decrease of $27 million in selling, general and administrative was primarily driven by:

• Decrease of $71 million in marketing, advertising and promotion expenses.

• Decrease of $64 million in restructuring and related costs.

• Decrease of $28 million in corporate facilities and assets costs.

• Decrease of $18 million in donations.

• Increase of $155 million in team member costs including $205 million in performance-based compensation partially offset by a decrease of $50 million in all other team member costs.

• Increase of $8 million in brand discontinuation costs.

• Decrease of $13 million in selling, general and administrative was primarily driven by:

• Decrease of $171 million in employee costs primarily from incentive-based compensation.

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• Increase of $47 million in restructuring and related costs.

• Increase of $128 million in selling, general and administrative was primarily driven by:

• Increase of $48 million in restructuring and related costs.

• Increase of $47 million in marketing, advertising and promotion expenses.

• Increase of $38 million in technology related costs.

• Increase of $34 million in employee costs.

• Increase of $24 million in donations.

• Increase of $15 million in travel and entertainment costs.

• Decrease of $33 million in commission and brokerage fees.

• Decrease of $27 million in depreciation and amortization.

• Decrease of $16 million from the change in the impact of a cattle supplier’s misappropriation of Company funds, resulting from a $71 million gain related to the recovery of cattle inventory in the fiscal year ended October 1, 2022 as compared to a $55 million gain recognized in the fiscal year ended October 2, 2021.

Goodwill Impairment in millions

Goodwill Impairment $ — $ 781

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

Consequently, we performed an interim assessment of goodwill and recorded a $448 million goodwill impairment charge.

In the fourth quarter of fiscal 2023, long-term treasury rates increased which caused an increase in the discount rates we utilize in determining the fair value of our reporting units.

The increased discount rates caused the Company to perform goodwill impairment assessments in the fourth quarter of fiscal 2023, which resulted in an additional $333 million goodwill impairment charge.

Interest Expense in millions

2023 / 2022 –

• Interest expense primarily included interest expense related to our senior notes, commercial paper, term loans and commitment fees incurred on our revolving credit facility less capitalized interest.

The decrease in interest expense in fiscal 2023 was primarily due to increased capitalized interest of $25 million and the impact of the redemption of the June 2022 Senior Notes in fiscal 2022, partially offset by increased commercial paper term loan balances.

• We recorded $781 million in goodwill impairment charges in fiscal 2023.

Interest (Income) Expense in millions

Interest income $ (89) $ (30)

Interest expense 481 355

• The increase in interest income for fiscal 2024 was primarily due to higher cash and cash equivalents held and increased interest rates.

• The increase in interest expense for fiscal 2024 was primarily due to interest expense related to our term loan facilities and the recently issued 5.40% 2029 Notes and 5.70% 2034 Notes.

Other (Income) Expense, net in millions

$ (75) $ (42)

2024 – Included $34 million of production facilities fire insurance proceeds, $15 million gain on sale of an equity method investment, $15 million of joint venture earnings and $11 million of foreign exchange gains.

2023 – Included $22 million of production facilities fire insurance proceeds, $17 million of foreign exchange gains and $12 million of joint venture earnings.

2022 – Included $58 million of foreign exchange losses, $52 million of production facilities fires insurance proceeds, $45 million of joint venture earnings and $37 million of gains on equity investments due to observable price changes in fiscal 2022.

Effective Tax Rate

The percentage impacts 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.

Additionally, tax benefits increased the effective tax rate on a pretax loss in fiscal 2023 and decreased the effective tax rate on pretax income in fiscal 2022.

The percentage impacts on the effective tax rate were greater in fiscal 2023 due to the level of pretax (loss) in fiscal 2023 compared to fiscal 2024.

Additionally, the impact of tax benefits decreased the effective tax rate on pretax income in fiscal 2024 and increased the effective tax rate in fiscal 2023 due to the pretax loss.

2024 – The effective tax rate is higher than the statutory rate due to state taxes and the impact of $63 million of non-deductible goodwill associated with the sale of our Vienna, Georgia facility.

2023 – The effective tax rate is lower than the statutory rate due to a $781 million non-deductible goodwill impairment, partially offset by income tax credits and a $26 million benefit from the remeasurement of deferred income taxes, primarily due to legislation decreasing state tax rates enacted in fiscal 2023.

2022 – The effective tax rate includes a $36 million benefit from the remeasurement of deferred income taxes, primarily due to legislation decreasing state tax rates enacted in fiscal 2022.

Net Income (Loss) Attributable to Tyson in millions, except per share data

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2024 – Included the following items:

• $182 million pretax, or ($0.41) per diluted share, of charges related to plant closures and disposals.

• $174 million pretax, or ($0.38) per diluted share, related to the recognition of legal contingency accruals.

• $86 million pretax, or ($0.21) per diluted share, of charges related to a production facility fire in the Netherlands and our subsequent decision to sell the facility.

• $31 million pretax, or ($0.06) per diluted share, of restructuring and related charges.

• $8 million pretax, or ($0.02) per diluted share, of brand discontinuation charges.

• $104 million pretax, or $0.23 per diluted share, of production facilities fire insurance proceeds, net of costs incurred.

2023 – Included the following items:

• $757 million pretax, or ($2.13) per diluted share, of goodwill impairment charges (non-tax deductible) net of $24 million associated with Net Income (Loss) Attributable to Noncontrolling Interests.

• $322 million pretax, or ($0.67) per diluted share, of charges related to plant closures.

• $322 million pretax, or ($0.67) per diluted share, of charges related to plant closures and disposals.

• $156 million pretax, or ($0.33) per diluted share, related to the recognition of legal contingency accruals.

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• $16 million pretax, or $0.03 per diluted share, related to the relocation of a production facility in China net of $3 million associated with Net Income (Loss) Attributable to Noncontrolling Interests.

2022 – Included the following items:

• $114 million pretax, or $0.23 per diluted share, of production facilities fire insurance proceeds, net of costs incurred.

• $66 million pretax, or ($0.14) per diluted share, of restructuring and related charges.

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

SEGMENT RESULTS

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Beef, Pork, Chicken, and Prepared Foods.

Additional information regarding the geographic areas of our foreign operations is set forth in Part II, Item 8, Notes to Consolidated Financial Statements, Note 17:

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2024 2023 2022 2024 2023 2022

Beef $ 19,325 $ 19,854 $ 17,999 $ (91) $ 2,502 $ 3,240

Pork 5,768 6,414 6,277 (139) 193 328

Chicken 17,060 16,961 13,733 (770) 955 (625)

Prepared Foods 9,845 9,689 8,853 823 746 1,456

International/Other 2,515 2,355 1,990 (218) 14 (3)

$ 20,479 $ 19,325 $ 19,854 $ (381) $ (91) $ 2,502

5,903 5,768 6,414 (40) (139) 193

16,425 17,060 16,961 988 (770) 955

Prepared Foods (d)

9,851 9,845 9,689 879 823 746

International/Other (e)

2,353 2,515 2,355 (37) (218) 14

Intersegment Sales (1,702) (1,632) (1,991) — — —

Total $ 53,309 $ 52,881 $ 53,282 $ 1,409 $ (395) $ 4,410

(a) Beef segment results for fiscal 2024 included a $45 million legal contingency accrual and $41 million of costs related to plant closures and disposals.

Beef segment results for fiscal 2023 included a $333 million goodwill impairment, $42 million of insurance proceeds, net of costs incurred and $33 million of restructuring and related costs.

Beef segment results for fiscal 2022 included $27 million of insurance proceeds, net of costs incurred and $16 million of restructuring and related costs.

(b) Pork segment results for fiscal 2024 included $108 million of costs related to plant closures and disposals and $73 million of legal contingency accruals.

(c) Chicken segment results for fiscal 2024 included a $56 million legal contingency accrual, $33 million of costs related to plant closures and disposals and $70 million of insurance proceeds, net of costs incurred.

Chicken segment results for fiscal 2023 included $322 million of costs related to plant closures and disposals, a $210 million goodwill impairment, $156 million of legal contingency accruals, $16 million of restructuring and related costs and $11 million of insurance proceeds, net of costs incurred.

Chicken results for fiscal 2022 included $35 million of insurance proceeds, net of costs incurred.

(d) Prepared Foods segment results for fiscal 2024 included $24 million of restructuring and related costs.

Prepared Foods segment results for fiscal 2023 include $49 million of restructuring and related costs and $17 million of product line discontinuation charges.

Prepared Foods segment results for fiscal 2022 included $36 million of restructuring and related costs.

(e) International/Other results for fiscal 2024 included $86 million of costs, net of insurance proceeds, related to a fire at our production facility in the Netherlands and subsequent decision to sell.

International/Other results for fiscal 2023 included a $238 million goodwill impairment.

Beef Segment Results in millions

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Operating Margin (1.9) % (0.5) % 12.6 %

• Sales Volume – Sales volume decreased in fiscal 2023 due to lower availability of live cattle.

• Sales Volume – Sales volume increased primarily due to higher average carcass weights.

• Average Sales Price – Average sales price increased due to increased input costs and increased demand.

• Operating Income (Loss) – Operating income decreased primarily due to compressed beef margins, the recognition of a legal contingency accrual and plant closures and disposal charges in fiscal 2024, and insurance proceeds in fiscal 2023 related to a fire at a production facility in 2019, partially offset by a goodwill impairment charge recorded in fiscal 2023.

• Sales Volume – Sales volume decreased due to lower availability of live cattle.

• Average Sales Price – Average sales price increased slightly due to price increases associated with reduced live cattle supply and increased input costs, partially offset by reduced export demand and softening demand.

• Operating Income (Loss) – Operating income decreased due to unfavorable market conditions, including higher fed cattle costs.

Additionally, operating income in fiscal 2023 was impacted by a $333 million goodwill impairment charge and benefited from $42 million of insurance proceeds related to a fire at a production facility in fiscal 2019, partially offset by $33 million of restructuring and related charges.

Operating income in fiscal 2022 was impacted by $27 million of insurance proceeds related to a fire at a production facility in fiscal 2019, and $16 million of restructuring and related charges.

• Sales Volume – Sales volume was relatively flat in fiscal 2022.

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

• Operating Income – Operating income decreased as margins compressed from historically high levels, paired with continued increased operating costs as a result of inflationary market environment.

Operating income benefited from a $71 million gain due to a settlement in fiscal 2022, compared to a $55 million gain from the recovery of cattle inventory in fiscal 2021, related to a cattle supplier’s misappropriation of Company funds.

Additionally, operating income in fiscal 2022 benefited from $27 million of insurance proceeds related to a fire at a production facility in the fourth quarter of fiscal 2019, partially offset by $16 million of restructuring and related charges.

Additionally, operating income in fiscal 2023 was impacted by a goodwill impairment charge and benefited from increased insurance proceeds related to a fire at a production facility in fiscal 2019, partially offset by increased restructuring and related charges.

Pork Segment Results in millions

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Operating Margin (0.7) % (2.4) % 3.0 %

• 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 driven by lower pricing on drop credit items.

The change in average sales price excludes the impact of a $45 million reduction of Sales from the recognition of a legal contingency accrual in fiscal 2024.

• Operating Income (Loss) – Operating income increased primarily due to higher pork margins, improved results in our live hog operations and lapping the impacts of a production facility fire in the third quarter of fiscal 2023, partially offset by the recognition of legal contingency accruals and plant closures and disposal costs in fiscal 2024.

• Sales Volume – Sales volume decreased as a result of balancing our supply with customer demand.

1 unchanged sentence

• 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.

• Sales Volume – Sales volume decreased due to reduced domestic availability of live hogs.

• Average Sales Price – Average sales price increased as input costs such as live hogs, labor, freight and transportation costs increased, partially offset by unfavorable mix associated with labor shortages.

• Operating Income – Operating income decreased due to periods of compressed pork margins and increased operating costs as a result of the inflationary market environment.

Additionally, volatile market conditions resulted in net derivative gains of $10 million in fiscal 2022 and net derivative losses of $90 million in fiscal 2021, which excludes the impacts of related physical purchase transactions.

Chicken Segment Results in millions

6 unchanged sentences

Operating Margin 6.0 % (4.5) % 5.6 %

• Sales Volume – Sales volume decreased primarily due to reduced domestic production.

• Average Sales Price – Average sales price decreased due to the impact of lower input costs.

The change in average sales price excludes the impact of a $156 million reduction of Sales from the recognition of legal contingency accruals in fiscal 2023.

• Operating Income (Loss) – Operating income increased primarily due to improved operational efficiencies, a goodwill impairment charge recorded in fiscal 2023, lower plant closures and disposal charges, reduced legal contingency accruals, decreased freight costs and an increase in insurance proceeds, net of costs incurred associated with a production facility fire in the fourth quarter of fiscal 2021.

Additionally, we experienced $895 million of lower feed ingredient costs in fiscal 2024 which was partially offset by associated decreases in average sales price.

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

1 unchanged sentence

The change in average sales price for the fiscal 2023 excludes the impact of a $156 million reduction of Sales from the recognition of legal contingency accruals.

• Operating Income (Loss) – Operating income decreased in fiscal 2023 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.

• 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.

Operating income in fiscal 2023 was impacted by $300 million of higher feed ingredient costs and $80 million of net derivative losses as compared to $195 million of net derivative gains in fiscal 2022.

Operating income in fiscal 2023 was impacted by $322 million in plant closure charges, $210 million of goodwill impairment charges, $156 million in legal contingency accruals and $16 million in restructuring and related charges, offset by $11 million of insurance proceeds, net of costs incurred associated with a production facility fire in fiscal 2021.

• Sales Volume – Sales volume increased primarily due to improved domestic production partially offset by inventory growth and strategic initiative mix impacts.

• Average Sales Price – Average sales price increased primarily due to the effects of pricing initiatives in an inflationary cost environment.

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

Operating income in fiscal 2022 was impacted by $595 million of higher feed ingredient costs, offset by $195 million of net derivative gains as compared to $65 million of net derivative gains in fiscal 2021.

Additionally, operating income in fiscal 2022 benefited from $35 million of insurance proceeds, net of costs incurred related to a fire at a production facility.

Operating income in fiscal 2021 was impacted by $626 million of losses from the recognition of legal contingency accruals and $23 million of expenses related to a fire at a production facility.

Operating income in fiscal 2023 was impacted by plant closures and disposal charges, goodwill impairment charges, legal contingency accruals and restructuring and related charges, offset by insurance proceeds, net of costs incurred associated with a production facility fire in fiscal 2021.

Prepared Foods Segment Results in millions

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Operating Margin 8.9 % 8.4 % 7.7 %

• Sales Volume – Sales volume increased slightly for fiscal 2023 as increased retail volumes were partially offset by a reduction in foodservice volumes.

• Sales Volume – Sales volume increased primarily due to the acquisition of Williams Sausage Company in the third quarter of 2023.

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

• Operating Income – Operating income increased primarily due to lower raw materials costs, freight costs, marketing, advertising and promotion expenses and restructuring and related charges.

• Sales Volume – Sales volume increased slightly as increased retail volumes were partially offset by a reduction in foodservice volumes.

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

• Operating Income – Operating income increased in fiscal 2023 driven by higher average sales prices and a $45 million reduction in raw material costs, partially offset by increased marketing, advertising and promotion spend.

• Operating Income – Operating income increased in fiscal 2023 primarily due to higher average sales prices and a $45 million reduction in raw material costs, partially offset by increased marketing, advertising and promotion spend.

Operating income in fiscal 2023 was impacted by $17 million of product line discontinuation charges and $49 million of restructuring and related charges.

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

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

• Operating Income – Operating income decreased in fiscal 2022 due to the recognition of a $784 million gain on the sale of our pet treats business in the fourth quarter of fiscal 2021.

Higher average sales prices were offset by the impacts of inflationary market conditions, including $615 million of increased raw materials and other input costs in fiscal 2022 in addition to increased supply chain and labor costs.

Additionally, operating income in fiscal 2022 was impacted by $36 million of restructuring and related charges.

International/Other Results in millions

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Operating Income (Loss) (37) (218) 181 14 (232)

• Sales – Sales decreased due to lower average sales price and the impact of the production facility fire in the Netherlands partially offset by increased volumes in the other regions.

• Operating Income (Loss) – Operating income increased primarily due to a goodwill impairment charge recorded in fiscal 2023, partially offset by the impacts of a production facility fire in the first quarter of fiscal 2024 and the subsequent decision to sell the facility.

• Sales – Sales increased due to volume growth and pricing actions to offset the high inflationary cost environment, which was partially offset by foreign exchange rate movements.

• Operating Loss – Operating income (loss) decreased in fiscal 2023 due to a $238 million goodwill impairment.

• Sales – Sales increased due to volume growth and higher pricing in an inflationary cost environment.

• Operating Loss – Operating income increased primarily due to $27 million of charges incurred in 2021 related to the relocation of a production facility in China which did not recur in fiscal 2022, partially offset by the impacts of global inflationary market conditions.

• Operating Income (Loss) – Operating income (loss) decreased due to a $238 million goodwill impairment.

LIQUIDITY AND CAPITAL RESOURCES

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Non-cash items in net income (loss) 1,544 2,214

Depreciation and amortization 1,339 1,202

Deferred income taxes (183) 264

Impairment of goodwill 781 —

Impairments and disposals of assets 101 34

Stock-based compensation expense 61 93

Other, net 115 (51)

Net changes in operating assets and liabilities:

(Increase) decrease in accounts receivable 59 136

(Increase) decrease in inventories 153 175

Increase (decrease) in accounts payable (205) 47

Increase (decrease) in income taxes payable/receivable 89 108

Net changes in other operating assets and liabilities 128 (279)

Net cash provided by operating activities $ 2,590 $ 1,752

• The decrease in net cash provided by operating activities was primarily due to lower earnings as a result of operations and a decrease in Accounts Payable, offset by decreases in legal, annual incentive and tax payments, decreases in Accounts Receivable and Inventory, and an increase in insurance proceeds received.

• Non-cash items in net income (loss) primarily included depreciation and amortization of $1,400 million and $1,339 million in fiscal 2024 and fiscal 2023, respectively, and a $781 million goodwill impairment in fiscal 2023.

• Cash provided by operating activities for fiscal 2024 was $2.6 billion, an increase of $838 million compared to fiscal 2023, due to $801 million of higher earnings, net of non-cash items, and a $37 million increase in cash provided by the net changes in operating assets and liabilities which was primarily impacted by:

• An increase of $407 million due to an increase of $128 million in the net changes in other operating assets and liabilities in fiscal 2024, compared to a decrease of $279 million in fiscal 2023, primarily driven by an increase in performance-based compensation.

• Partially offset by:

• A decrease of $252 million due to a decrease in accounts payable of $205 million during fiscal 2024, compared to an increase of $47 million in fiscal 2023, primarily due to lower input costs and decrease in days payables outstanding.

• A decrease of $77 million due to a decrease in accounts receivable of $59 million of fiscal 2024, compared to a decrease of $136 million in fiscal 2023.

The reduced decline in accounts receivable was primarily due to the decreased level of sales in the last few weeks of each year end partially offset by a net decrease in days sales outstanding.

Cash Flows from Investing Activities in millions

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(Purchases of)/Proceeds from marketable securities, net (3) (2)

Proceeds from sale of business 174 —

Acquisitions, net of cash acquired — (262)

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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.

• Approximately $1.3 billion will be necessary to complete buildings and equipment under construction at September 30, 2023.

• Approximately $625 million will be necessary to complete buildings and equipment under construction at September 28, 2024.

• We expect capital expenditures between $1.0 billion and $1.2 billion for fiscal 2025.

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.

• Acquisitions, net of cash for fiscal 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.

• Proceeds from sale of business related to the sale of our Vienna, Georgia facility in fiscal 2024.

• Acquisitions, net of cash acquired for fiscal 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.

• Acquisition of equity investments for fiscal 2023 primarily included:

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and deferred payments related to prior year equity method investment.

• Acquisition of equity investments for fiscal 2022 included the purchase of a minority interest in a South American-based fully integrated poultry company.

• Other, net for fiscal 2023 primarily included insurance proceeds received related to fires at our production facilities.

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

• Other, net for fiscal 2024 primarily included proceeds from disposition of corporate assets, proceeds on the sale of an equity method investment and insurance proceeds related to fires at our production facilities.

Cash Flows from Financing Activities in millions

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Net cash provided by (used for) financing activities $ (581) $ 88

• During 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.

During fiscal 2023, proceeds from issuance of debt included $1 billion of proceeds from the issuance of a term loan facility due May 2026.

• Payments on debt included:

• 2024 – In March 2024, we issued senior unsecured notes with an aggregate principal amount of $1.5 billion.

A portion of the net proceeds from the issuances were used to repay $250 million of the amount outstanding under our term loan facility due May 2026 and we used the remainder of the proceeds to retire the $1,250 million notes due August 2024.

• 2023 – In September 2023, we extinguished the $400 million outstanding balance of our senior notes due September 2023.

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

• Purchases of Tyson Class A common stock included:

• $300 million and $587 million of cash paid for shares repurchased pursuant to our share repurchase program in fiscal 2023 and 2022, respectively.

• $300 million of cash paid for shares repurchased pursuant to our share repurchase program in fiscal 2023.

• $49 million and $54 million for shares repurchased to fund certain obligations under our equity compensation plans in fiscal 2024 and 2023, respectively.

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Short-term investments 10

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

Term loan facility May 2028 750 — — 750

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

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Total liquidity $ 3,977

• 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.

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

• At September 28, 2024, we had current debt of $74 million, which we intend to pay with cash generated from our operating activities and other existing or new liquidity sources.

• In 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.

The second term loan facility totaling $750 million matures on May 3, 2028 and at September 30, 2023, we had no outstanding borrowings under this facility.

In November 2023, we borrowed the full $750 million available under the second term loan facility to refinance the outstanding commercial paper and for general corporate purposes.

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

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• We expect net interest expense will approximate $380 million for fiscal 2025.

• Our ratio of short-term assets to short-term liabilities (“current ratio”) was 1.3 to 1 and 1.8 to 1 at September 30, 2023, and October 1, 2022, respectively.

The decrease in fiscal 2023 was primarily due to decreased cash and cash equivalents and increased current debt.

• Our ratio of short-term assets to short-term liabilities (“current ratio”) was 2.0 to 1 and 1.3 to 1 at September 28, 2024, and September 30, 2023, respectively.

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

• At September 28, 2024, $708 million of our cash was held in the international accounts of our foreign subsidiaries.

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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 $1.0 billion was drawn upon as of September 30, 2023.

At September 30, 2023, amounts available for borrowing under our revolving credit and term loan facilities totaled $3.0 billion.

At September 28, 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 September 30, 2023, we had $592 million commercial paper outstanding under this program with maturities less than 20 days.

As of September 28, 2024, we had no commercial paper outstanding.

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

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

At September 30, 2023, and October 1, 2022, the ratio of our net debt to EBITDA was 9.1x and 1.3x, respectively.

At September 28, 2024, and September 30, 2023, the ratio of our net debt to EBITDA was 2.8x and 9.1x, respectively.

Refer to Other Key Financial Measures below for an explanation and reconciliation to comparable Generally Accepted Accounting Principles (“GAAP”) measures.

The increase in this ratio at September 30, 2023 is due to an increase in net debt of $1,629 million and a decrease of $4,712 million in EBITDA.

The decrease in this ratio at September 28, 2024 is due to an increase in EBITDA of $1,896 million and decrease in net debt of $858 million.

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 %

Baa3/BBB- or lower 0.175 % 1.875 %

Term Loan Facility due May 2026

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

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

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

A2/A or above 0.875 %

A3/A- 1.000 %

Baal/BBB+ (current level) 1.125 %

Baa2/BBB 1.250 %

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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S&P's applicable rating is “BBB.” Moody's applicable rating is “Baa2.” The below table outlines the fees paid on the unused portion of the facility (“Facility Fee Rate”) and letter of credit fees and borrowings (“All-in Borrowing Spread”) that corresponds to the applicable ratings levels from S&P and Moody's.

Ratings Level (S&P/Moody’s) Facility Fee Rate All-in Borrowing Spread

Ratings Level (Moody's/S&P) Facility Fee Rate All-in Borrowing Spread

A2/A or above 0.700 % 0.875 %

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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The potential maximum contractual obligation associated with our cash flow assistance programs at September 28, 2024, based on the estimated fair values of the livestock supplier’s net tangible assets on that date, aggregated to approximately $280 million.

After analyzing residual credit risks and general market conditions, we have recorded an $8 million allowance for these programs' estimated credit losses at September 30, 2023.

After analyzing residual credit risks and general market conditions, we have recorded a $14 million allowance for these programs' estimated credit losses at September 28, 2024.

OTHER KEY FINANCIAL MEASURES

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however, the measurements of EBITDA and net debt to EBITDA may not be comparable to those of other companies, which limits their usefulness as comparative measures.

EBITDA and net debt to EBITDA are not measures required by or calculated in accordance with generally accepted accounting principles (“GAAP”) and should not be considered as substitutes for net income or any other measure of financial performance reported in accordance with GAAP or as a measure of operating cash flow or liquidity.

EBITDA and net debt to EBITDA are not measures required by or calculated in accordance with GAAP and should not be considered as substitutes for net income or any other measure of financial performance reported in accordance with GAAP or as a measure of operating cash flow or liquidity.

EBITDA is a useful tool for assessing, but is not a reliable indicator of, our ability to generate cash to service our debt obligations because certain of the items added to net income to determine EBITDA involve outlays of cash.

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As set forth in Part II, Item 8, Notes to the Consolidated Financial Statements, Note 20:

Commitments and Contingencies, we recognized $156 million and $626 million of charges in fiscal 2023 and 2021, respectively, from legal accruals related to our broiler antitrust civil litigation, broiler chicken grower litigation, and wage rate litigation based on our assessment of the likelihood and amount of probable losses.

Commitments and Contingencies, we recognized $174 million and $156 million of charges in fiscal 2024 and 2023, respectively, from legal accruals related to our broiler antitrust civil litigation, broiler chicken grower litigation, pork antitrust litigation and wage rate litigation based on our assessment of the likelihood and amount of probable losses.

We do not believe there is a reasonable likelihood there will be a material change in the estimates or assumptions used to calculate our contingent liabilities.

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The projected benefit obligation was $188 million at the end of fiscal 2024.

Unrecognized actuarial gain was $13 million at the end of fiscal 2023.

Unrecognized actuarial loss was $3 million at the end of fiscal 2024.

We currently expect net periodic benefit cost associated with our pension plans to be approximately $7 million in fiscal 2025.

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

Our fiscal 2022 and 2021 goodwill impairment analyses did not result in impairment charges.

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 book value.

Consequently, based on our qualitative assessment, we determined it was necessary 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 values exceeded their carrying values other than one of our Chicken segment reporting units and two of our International/Other reporting units.

For these reporting units, we recognized a $448 million goodwill impairment charge including $210 million to partially impair the goodwill of a Chicken segment reporting unit and $238 million to fully impair the goodwill of two of our International/Other reporting units.

We performed our annual impairment assessment as of the first day of our fourth quarter of fiscal 2023 and determined it was necessary to perform quantitative assessments for our Beef, Pork and two Chicken segment reporting units, as all of these reporting units were at heightened risk of impairment following the third quarter assessment.

Based on this assessment, we determined that our Beef, Pork and two Chicken reporting units’ estimated fair values exceeded their carrying value, and thus, it did not result in any additional goodwill impairments.

However, during the fourth quarter of fiscal 2023, we experienced an increase in long-term treasury rates which caused a net 50 basis point increase in the discount rates used in estimating the fair value of the reporting units.

Consequently, because of our qualitative assessment, we determined it was necessary to perform a quantitative assessment for our Beef, Pork and two Chicken segment reporting units as of September 30, 2023.

Based on this quantitative assessment, we determined that our Pork and two Chicken segment reporting units' estimated fair values exceeded their carrying values.

The fair value of our Beef reporting unit, which had $676 million of goodwill at the time of the assessment, did not exceed its carrying value.

For the Beef reporting unit, the increased discount rate resulted in a decrease in its estimated fair value to below its carrying value.

Accordingly, we recognized a $333 million goodwill impairment charge to partially impair its goodwill.

Following the September 30, 2023 assessment, our Beef, Pork and two Chicken segment reporting units, with total goodwill of approximately $3.8 billion, are at heightened risk of impairment.

Our Beef segment reporting unit had goodwill of $0.3 billion at September 30, 2023, after the impairment.

Our fiscal 2024 and fiscal 2022 goodwill impairment analyses did not result in impairment charges.

During 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 book value and an increase in long-term treasury rates which caused a net 50 basis point increase in the discount rates used in estimating the fair value of the reporting units.

Based on quantitative assessments, we recognized $781 million of goodwill impairment charges including $333 million to partially impair the goodwill of the Beef reporting unit, $238 million to fully impair the goodwill of two of our International/Other reporting units and $210 million to partially impair the goodwill of a Chicken segment reporting unit.

Following the fiscal 2023 assessments, our Beef, Pork and two Chicken segment reporting units, with total goodwill of approximately $3.8 billion, were at heightened risk of impairment.

We performed our annual impairment assessment as of the first day of our fourth quarter of fiscal 2024 and determined it was necessary to perform quantitative assessments for our Beef, Pork, and two Chicken segment reporting units, as all of these reporting units were at heightened risk of impairment following the fiscal 2023 assessments.

In addition, due to lower than previously anticipated operating results and increased interest rates, we determined it was necessary to perform a quantitative assessment for one of our International/Other reporting units, which had goodwill of $0.2 billion at September 28, 2024.

Based on our assessments, we determined that all of these reporting units’ estimated fair values exceeded their carrying values, and thus, did not result in any additional goodwill impairments.

Following the annual fiscal 2024 assessment, our Beef and two Chicken segment reporting units, with total goodwill of approximately $3.3 billion, were at heightened risk of impairment.

Our Beef segment reporting unit had goodwill of $0.3 billion at September 28, 2024.

In estimating its fair value, 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.

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.

The Beef reporting unit's goodwill was written down to its fair value resulting in no excess fair value over carrying amount as of September 30, 2023.

Any increase in the discount rate or reduced estimated long-term operating margins to below 2.0%-3.0% (breakeven), 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 an additional material goodwill impairment loss.

Our Pork segment reporting unit had goodwill at September 30, 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 in fiscal 2023, we would have failed the impairment quantitative tests, 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 impairment quantitative tests, projected long-term operating margins, utilizing the discounted cash flow method, had to average approximately 4.0%-5.0% (breakeven).

Additionally, a hypothetical increase in the discount rate of approximately 10-25 basis points at September 30, 2023, 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 a material goodwill impairment loss.

Our Chicken segment reporting units had goodwill at September 30, 2023 of $3.1 billion.

An increase of approximately 25-50 basis points in the discount rate or reduced estimated long-term operating margins to below 2.0%-3.0% (breakeven), 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 an additional material goodwill impairment loss.

Our Chicken segment reporting units had goodwill of $3.0 billion at September 28, 2024.

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 in fiscal 2023, we would have failed the 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 excess domestic supply impacts, losses incurred associated with derivatives, legal contingencies, and restructuring, which impacts we expect to be mostly temporary in nature.

To pass the impairment quantitative test, projected long-term operating margins, utilizing the discounted cash flow method, had to average approximately 4.0%-5.0% (breakeven).

Operating margins for fiscal 2024 exceeded the breakeven amounts.

Additionally, a hypothetical increase in the discount rate of approximately 75-125 basis points at September 28, 2024, with all other assumptions unchanged, would have caused the carrying values of the Chicken segment's reporting units to approximate its fair value, which may have resulted in a material goodwill impairment loss.

Our remaining reporting units had goodwill of $6.0 billion at September 30, 2023, and were not considered at heightened risk of impairment as of the date of its most recent estimated fair value determination which was in the third quarter of fiscal 2023.

A hypothetical increase in the discount rate of approximately 125-150 basis points as of the date of its most recent estimated fair value determination, with all other assumptions unchanged, would have caused the carrying value of the Prepared Foods reporting unit, with goodwill of $5.9 billion at September 30, 2023, to approximate its fair value.

Discount rates utilized in the discounted cash flow method have increased approximately 50 basis points since the third quarter of fiscal 2023 assessment through September 30, 2023.

Our remaining reporting units, Prepared Foods, Pork and International/Other, had goodwill of $6.5 billion at September 28, 2024, and were not considered at heightened risk of impairment following the fiscal 2024 annual assessment.

A hypothetical increase in the discount rate of approximately 125-150 basis points as of the date of its most recent estimated fair value determination, which was in the third quarter of fiscal 2023, with all other assumptions unchanged, would have caused the carrying value of the Prepared Foods reporting unit, with goodwill of $5.9 billion at September 28, 2024, to approximate its fair value.

Discount rates utilized in the discounted cash flow method would have remained unchanged from the third quarter of fiscal 2023 assessment to our annual fiscal 2024 assessment date.

The fair value of our indefinite life intangible assets is calculated principally using multi-period excess earnings and relief-from-royalty valuation approaches, which uses significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy, and is believed to reflect market participant views which would exist in an exit transaction.

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Our fiscal 2024, 2023 and 2022 indefinite life intangible assets impairment analyses did not result in an impairment charge.

All of our indefinite life intangible assets estimated fair values exceeded their carrying values by more than 20% at the date of the most recent estimated fair value determination, which was in the annual assessment as of the beginning of the fourth quarter of fiscal 2023, other than two of our Prepared Foods brands with carrying values of $0.5 billion and $0.3 billion at September 30, 2023.

For the brand with a carrying value $0.5 billion, a hypothetical increase in the discount rate of approximately 50 basis points as of the date of the most recent estimated fair value, with all other assumptions unchanged, would have caused the carrying value to approximate its fair value.

For the brand with a carrying value $0.3 billion, a hypothetical increase in the discount rate of approximately 100 basis points as of the date of the most recent estimated fair value, with all other assumptions unchanged, would have caused the carrying value to approximate its fair value.

All of our indefinite life intangible assets' estimated fair values exceeded their carrying values by more than 20% at the date of the most recent estimated fair value determination, which was in the annual assessment as of the beginning of the fourth quarter of fiscal 2024, other than one of our Prepared Foods brands with a carrying value of $0.5 billion at September 28, 2024.

A hypothetical increase in the discount rate of approximately 75-125 basis points as of the date of the most recent estimated fair value, with all other assumptions unchanged, would have caused the carrying value to approximate its fair value.

We generally assumed operating margins and growth rates 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 and growth rates consistent with those realized in fiscal 2023, we would have failed the impairment quantitative test, which may have resulted in material impairment losses.

The current year results are not indicative of future market participant expectations in an exit transaction primarily due to the impacts of rapid inflationary pressures and volatile market conditions which impacts we expect to be mostly temporary in nature.

Operating margins for fiscal 2024 exceeded the breakeven.

Had we assumed future growth rates consistent with those realized in fiscal 2024, we would have failed the impairment quantitative test, which may have resulted in material impairment losses.

The current year growth rate is not indicative of future market participant expectations in an exit transaction primarily due to the impacts of rapid inflationary pressures and volatile market conditions which impacts we expect to be mostly temporary in nature.

We do not currently consider any of our other indefinite life intangible assets, which had aggregate carrying value of $3.6 billion at September 28, 2024, to be at heightened risk of impairment.

Effect if Actual Results Differ From Assumptions

We have not made material changes in the accounting methodology used to evaluate impairment of goodwill and intangible assets during the last three years.

We have not made material changes in the accounting methodology used to evaluate impairment of goodwill and indefinite life intangible assets during the last three years.

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.

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

We continuously evaluate the changing macro-economic conditions including inflationary pressures, rising interest rates, demand outlook and export markets as well as the Company’s decreased market capitalization.

Our reporting units with heightened risk of future impairments with $3.8 billion carrying value at September 30, 2023, as well as the brand with $0.5 billion carrying value, as described above, all have 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 macro-economic conditions and achievement of projected long-term operating margins.

Discount rates increased by approximately 50 basis points from the date of our annual impairment assessment to September 30, 2023.

Although the 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.

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

Our reporting units with heightened risk of future impairments with $3.3 billion carrying value at September 28, 2024, as well as the brand with $0.5 billion carrying value, as described above, all had less than 20% of excess fair value above carrying value as of the date of the most recent estimated fair value determination with our Beef reporting unit having less than 10% excess fair value above carrying value.

Consequently, their estimated fair values, especially our Beef reporting unit, remain highly sensitive to future discount rate increases, changing macro-economic conditions and achievement of projected long-term operating margins.

Discount rates decreased by approximately 50 basis points from the date of our annual impairment assessment to September 28, 2024.

Although the remaining reporting units and indefinite life intangible assets 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.

Impairment of long-lived assets and definite life intangibles

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What changed 10-K

Item 7. Management’s Discussion and Analysis