# TYSON FOODS, INC. (TSN) FY 2024 MD&A Verbatim Item 7 Management's Discussion and Analysis from TYSON FOODS, INC.'s 10-K for fiscal year 2024. SEC filing source: https://www.sec.gov/Archives/edgar/data/100493/000010049324000119/tsn-20240928.htm Accession: 0000100493-24-000119 Filing date: 2024-11-12 Report date: 2024-09-28 Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture. Confidence: high Company profile: /company/TSN/ All MD&A years: /company/TSN/mda/ Previous year: /company/TSN/mda/fy2023/ (FY 2023) Next year: /company/TSN/mda/fy2025/ (FY 2025) ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OBJECTIVE The following discussion provides an analysis of the Company’s financial condition, cash flows and results of operations from management’s perspective and should be read in conjunction with the consolidated financial statements and notes thereto included in Part II, Item 8 of this Annual Report on Form 10-K. Our objective is to also provide discussion of events and uncertainties known to management that are reasonably likely to cause reported financial information not to be indicative of future operating results or of future financial condition and to offer information that provides understanding of our financial condition, cash flows and results of operations. Refer to the Company's Annual Report on Form 10-K for the fiscal year ended October 1, 2022 for additional information related to fiscal 2022. DESCRIPTION OF THE COMPANY We are a world-class food company and recognized leader in protein. Founded in 1935 by John W. Tyson, it has grown under four generations of family leadership. The Company is unified by this purpose: Tyson Foods. 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: Beef, Pork, Chicken and Prepared Foods. We measure segment profit as operating income (loss). 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. OVERVIEW Fiscal year We utilize a 52- or 53-week accounting period ending on the Saturday closest to September 30. The Company’s accounting cycle resulted in a 52-week year for fiscal 2024, 2023 and 2022. General 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 $19 million related to the relocation of a production facility in China. Market Environment According to the USDA, domestic protein production (beef, pork, chicken and turkey) increased slightly in fiscal 2024 compared to fiscal 2023. The Beef segment experienced limited supply of market-ready cattle and increased live cattle costs. Additionally, uncertainty exists regarding the timing of the anticipated cattle herd rebuilding. The Pork segment experienced sufficient supply and reduced hog costs. The Chicken segment experienced reduced feed ingredient costs. The Prepared Foods segment experienced reduced raw material costs primarily due to lower meat costs. Additionally, the conflicts between Ukraine and Russia, in addition to the Middle East, are ongoing and there are many risks and uncertainties in relation to the conflicts that are outside of our control. As of September 28, 2024, the impact of these conflicts have not had a material direct impact on our financial performance. If these conflicts escalate further, impact additional regions or countries, or have additional economic sanctions imposed, it could have a material impact on our business operations and financial performance. 24 Margins Our total operating margin was 2.6% in fiscal 2024. Operating margins by segment were as follows: •Beef – (1.9)% •Pork – (0.7)% •Chicken – 6.0% •Prepared Foods – 8.9% Strategy We are a world-class food company and recognized leader in protein. Our strategy is to deliver margins in the core protein business by driving efficiencies and valuing-up offerings to better serve consumers; grow branded portfolio by innovating new occasions, categories and channels; and scale in international markets by delivering profitable value-added food offerings in high growth categories. SUMMARY OF RESULTS [[GREPCENT_TABLE]] [["Sales","in millions"],["","2024","","2023","","2022"],["Sales","$","53,309","","","$","52,881","","","$","53,282"],["Change in sales volume","\u2014","%","","1.0","%"],["Change in average sales price","0.6","%","","(1.5)","%"],["Sales growth","0.8","%","","(0.8)","%"]] [[/GREPCENT_TABLE]] 2024 vs. 2023 – •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. 2023 vs. 2022 – •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 $156 million reduction of Sales from the recognition of legal contingency accruals. [[GREPCENT_TABLE]] [["Cost of Sales","in millions"],["","2024","","2023","2022"],["Cost of sales","$","49,682","","","$","50,250","","$","46,614"],["Gross profit","3,627","","","2,631"],["Cost of sales as a percentage of sales","93.2","%","","95.0","%"]] [[/GREPCENT_TABLE]] 2024 vs. 2023 – •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. 25 •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. 2023 vs. 2022 – •Cost of sales increased $3,636 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: •Increase in live cattle costs of approximately $2,135 million in our Beef segment. •Increase due to net derivative losses of $117 million in fiscal 2023, compared to net derivative gains of $225 million in fiscal 2022 due to our risk management activities. These amounts exclude offsetting impacts from related physical purchase transactions, which are included in the change in live cattle and hog costs and raw material and feed ingredient costs described herein. •Increase of $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. •Increase of approximately $36 million in our Chicken segment related to net increases in feed ingredients costs and growout expenses, partially offset by reduced outside meat purchases. •Increase of approximately $24 million in our Chicken segment due to $11 million of insurance proceeds, net of costs incurred, in fiscal 2023 compared to $35 million of insurance proceeds, net of costs incurred, in fiscal 2022 related to the fire at our production facility in fiscal 2021. •Decrease in live hog costs of approximately $295 million in our Pork segment. •Decrease in freight and transportation costs of approximately $175 million. •Decrease in raw material and other input costs of approximately $45 million in our Prepared Foods segment. •Remaining increase in costs across all of our segments primarily driven by net impacts on average cost per pound from mix changes as well as the impact of the inflationary environment on our labor and other input costs, partially offset by savings from our productivity program. •The $444 million impact of increased sales volume was primarily driven by increased volumes in our Chicken segment. [[GREPCENT_TABLE]] [["Selling, General and Administrative","in millions"],["","2024","","2023","","2022"],["Selling, general and administrative","$","2,218","","","$","2,245","","","$","2,258"],["As a percentage of sales","4.2","%","","4.2","%"]] [[/GREPCENT_TABLE]] 2024 vs. 2023 – •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. 26 •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. 2023 vs. 2022 – •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. •Decrease of $26 million in professional fees. •Increase of $71 million from a gain recognized in the fiscal year ended October 1, 2022 from recoveries related to a cattle suppliers misappropriation of Company funds. •Increase of $57 million in marketing, advertising and promotion expenses. •Increase of $47 million in restructuring and related costs. [[GREPCENT_TABLE]] [["Goodwill Impairment","in millions"],["","2024","","2023"],["Goodwill Impairment","$","\u2014","","","$","781"]] [[/GREPCENT_TABLE]] 2024 vs. 2023 – •We recorded $781 million in goodwill impairment charges in fiscal 2023. [[GREPCENT_TABLE]] [["Interest (Income) Expense","in millions"],["","2024","","2023"],["Interest income","$","(89)","","","$","(30)"],["Interest expense","481","","","355"]] [[/GREPCENT_TABLE]] 2024 vs. 2023 – •The increase in interest income for fiscal 2024 was primarily due to higher cash and cash equivalents held and increased interest rates. •The increase in interest expense for fiscal 2024 was primarily due to interest expense related to our term loan facilities and the recently issued 5.40% 2029 Notes and 5.70% 2034 Notes. [[GREPCENT_TABLE]] [["Other (Income) Expense, net","in millions"],["","2024","","2023"],["","$","(75)","","","$","(42)"]] [[/GREPCENT_TABLE]] 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. [[GREPCENT_TABLE]] [["Effective Tax Rate"],["","2024","","2023"],["","24.8","%","","4.3","%"]] [[/GREPCENT_TABLE]] 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 $26 million benefit from the remeasurement of deferred income taxes, primarily due to legislation decreasing state tax rates enacted in fiscal 2023. 27 [[GREPCENT_TABLE]] [["Net Income (Loss) Attributable to Tyson","in millions, except per share data"],["","2024","","2023"],["Net income (loss) attributable to Tyson","$","800","","","$","(648)"],["Net income (loss) attributable to Tyson - per diluted share","2.25","","","(1.87)"]] [[/GREPCENT_TABLE]] 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 and disposals. •$156 million pretax, or ($0.33) per diluted share, related to the recognition of legal contingency accruals. •$124 million pretax, or ($0.26) per diluted share, of restructuring and related charges. •$75 million pretax, or $0.16 per diluted share, of production facilities fire insurance proceeds, net of costs incurred. •$26 million post tax, or $0.07 per diluted share, from remeasurement of net deferred tax liabilities at lower enacted state tax rates. •$17 million pretax, or ($0.04) per diluted share, of product line discontinuation charges. •$16 million pretax, or $0.03 per diluted share, related to the relocation of a production facility in China net of $3 million associated with Net Income (Loss) Attributable to Noncontrolling Interests. SEGMENT RESULTS We operate in four reportable segments: Beef, Pork, Chicken, and Prepared Foods. International/Other primarily includes our foreign operations in Australia, China, Malaysia, Mexico, South Korea, Thailand and the Kingdom of Saudi Arabia, third-party merger and integration costs and corporate overhead related to Tyson New Ventures, LLC. Additional information regarding the geographic areas of our foreign operations is set forth in Part II, Item 8, Notes to Consolidated Financial Statements, Note 17: Segment Reporting. The following table is a summary of segment sales and operating income (loss) for fiscal years ended 2024, 2023 and 2022, which is how we measure segment income (loss): [[GREPCENT_TABLE]] [["","","","","","","","","","in millions"],["","Sales","","Operating Income (Loss)"],["","2024","","2023","","2022","","2024","","2023","","2022"],["Beef(a)","$","20,479","","","$","19,325","","","$","19,854","","","$","(381)","","","$","(91)","","","$","2,502"],["Pork(b)","5,903","","","5,768","","","6,414","","","(40)","","","(139)","","","193"],["Chicken(c)","16,425","","","17,060","","","16,961","","","988","","","(770)","","","955"],["Prepared Foods(d)","9,851","","","9,845","","","9,689","","","879","","","823","","","746"],["International/Other(e)","2,353","","","2,515","","","2,355","","","(37)","","","(218)","","","14"],["Intersegment Sales","(1,702)","","","(1,632)","","","(1,991)","","","\u2014","","","\u2014","","","\u2014"],["Total","$","53,309","","","$","52,881","","","$","53,282","","","$","1,409","","","$","(395)","","","$","4,410"]] [[/GREPCENT_TABLE]] (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. 28 (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 $238 million goodwill impairment. [[GREPCENT_TABLE]] [["Beef Segment Results","","","","","","","","","in millions"],["","2024","","2023","","Change 2024 vs. 2023","","2022","","Change 2023 vs. 2022"],["Sales","$","20,479","","","$","19,325","","","$","1,154","","","$","19,854","","","$","(529)"],["Sales Volume Change","","","","","1.6","%","","","","(3.1)","%"],["Average Sales Price Change","","","","","4.4","%","","","","0.4","%"],["Operating Income (Loss)","$","(381)","","","$","(91)","","","$","(290)","","","$","2,502","","","$","(2,593)"],["Operating Margin","(1.9)","%","","(0.5)","%","","","","12.6","%"]] [[/GREPCENT_TABLE]] 2024 vs. 2023 – •Sales Volume – Sales volume increased primarily due to higher average carcass weights. •Average Sales Price – Average sales price increased due to increased input costs and increased demand. •Operating Income (Loss) – Operating income decreased primarily due to compressed beef margins, the recognition of a legal contingency accrual and plant closures and disposal charges in fiscal 2024, and insurance proceeds in fiscal 2023 related to a fire at a production facility in 2019, partially offset by a goodwill impairment charge recorded in fiscal 2023. 2023 vs. 2022 – •Sales Volume – Sales volume decreased due to lower availability of live cattle. •Average Sales Price – Average sales price increased slightly due to price increases associated with reduced live cattle supply and increased input costs, partially offset by reduced export demand and softening demand. •Operating Income (Loss) – Operating income decreased due to unfavorable market conditions, including higher fed cattle costs. Additionally, operating income in fiscal 2023 was impacted by a goodwill impairment charge and benefited from increased insurance proceeds related to a fire at a production facility in fiscal 2019, partially offset by increased restructuring and related charges. [[GREPCENT_TABLE]] [["Pork Segment Results","","","","","","","","","in millions"],["","2024","","2023","","Change 2024 vs. 2023","","2022","","Change 2023 vs. 2022"],["Sales","$","5,903","","","$","5,768","","","$","135","","","$","6,414","","","$","(646)"],["Sales Volume Change","","","","","3.8","%","","","","(2.2)","%"],["Average Sales Price Change","","","","","(0.7)","%","","","","(7.9)","%"],["Operating Income (Loss)","$","(40)","","","$","(139)","","","$","99","","","$","193","","","$","(332)"],["Operating Margin","(0.7)","%","","(2.4)","%","","","","3.0","%"]] [[/GREPCENT_TABLE]] 2024 vs. 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 driven by lower pricing on drop credit items. The change in average sales price excludes the impact of a $45 million reduction of Sales from the recognition of a legal contingency accrual in fiscal 2024. •Operating Income (Loss) – Operating income increased primarily due to higher pork margins, improved results in our live hog operations and lapping the impacts of a production facility fire in the third quarter of fiscal 2023, partially offset by the recognition of legal contingency accruals and plant closures and disposal costs in fiscal 2024. 2023 vs. 2022 – •Sales Volume – Sales volume decreased as a result of balancing our supply with customer demand. •Average Sales Price – Average sales price decreased due to reduced global demand. 29 •Operating Income (Loss) – Operating income decreased due to compressed pork margins, increased operating costs as a result of the inflationary market environment, losses incurred in our live hog operations and impacts from a production facility fire in the third quarter of fiscal 2023. [[GREPCENT_TABLE]] [["Chicken Segment Results","","","","","","","","","in millions"],["","2024","","2023","","Change 2024 vs. 2023","","2022","","Change 2023 vs. 2022"],["Sales","$","16,425","","","$","17,060","","","$","(635)","","","$","16,961","","","$","99"],["Sales Volume Change","","","","","(2.2)","%","","","","3.4","%"],["Average Sales Price Change","","","","","(2.4)","%","","","","(1.9)","%"],["Operating Income (Loss)","$","988","","","$","(770)","","","$","1,758","","","$","955","","","$","(1,725)"],["Operating Margin","6.0","%","","(4.5)","%","","","","5.6","%"]] [[/GREPCENT_TABLE]] 2024 vs. 2023 – •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. 2023 vs. 2022 – •Sales Volume – Sales volume increased primarily due to improved domestic production and the sell-through of inventory, partially offset by strategic initiative mix impacts. •Average Sales Price – Average sales price decreased due to the challenging market conditions. 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 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 $195 million of net derivative gains in fiscal 2022. Operating income in fiscal 2023 was impacted by plant closures and disposal charges, goodwill impairment charges, legal contingency accruals and restructuring and related charges, offset by insurance proceeds, net of costs incurred associated with a production facility fire in fiscal 2021. [[GREPCENT_TABLE]] [["Prepared Foods Segment Results","","","","","","","in millions"],["","2024","","2023","","Change 2024 vs. 2023","","2022","","Change 2023 vs. 2022"],["Sales","$","9,851","","","$","9,845","","","$","6","","","$","9,689","","","$","156"],["Sales Volume Change","","","","","0.9","%","","","","0.3","%"],["Average Sales Price Change","","","","","(0.8)","%","","","","1.3","%"],["Operating Income","$","879","","","$","823","","","$","56","","","$","746","","","$","77"],["Operating Margin","8.9","%","","8.4","%","","","","7.7","%"]] [[/GREPCENT_TABLE]] 2024 vs. 2023 – •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. 2023 vs. 2022 – •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. 30 •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 $49 million of restructuring and related charges. [[GREPCENT_TABLE]] [["International/Other Results","","","","","","","in millions"],["","2024","","2023","","Change 2024 vs. 2023","","2022","","Change 2023 vs. 2022"],["Sales","$","2,353","","","$","2,515","","","$","(162)","","","$","2,355","","","$","160"],["Operating Income (Loss)","(37)","","","(218)","","","181","","","14","","","(232)"]] [[/GREPCENT_TABLE]] 2024 vs. 2023 – •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. 2023 vs. 2022 – •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 Income (Loss) – Operating income (loss) decreased due to a $238 million goodwill impairment. LIQUIDITY AND CAPITAL RESOURCES Our cash needs for working capital, capital expenditures, growth opportunities, repurchases of senior notes, repayment of maturing debt, the payment of dividends and share repurchases are expected to be met with current cash on hand, cash flows provided by operating activities or short-term borrowings. Based on our current expectations, we believe our liquidity and capital resources will be sufficient to operate our business. However, we may take advantage of opportunities to generate additional liquidity or refinance existing debt through capital market transactions. The amount, nature and timing of any capital market transactions will depend on our operating performance and other circumstances; our then-current commitments and obligations; the amount, nature and timing of our capital requirements; any limitations imposed by our current credit arrangements; and overall market conditions. [[GREPCENT_TABLE]] [["Cash Flows from Operating Activities","","","in millions"],["","2024","","2023"],["Net income (loss)","$","822","","","$","(649)"],["Non-cash items in net income (loss)","1,544","","","2,214"],["Net changes in operating assets and liabilities:"],["(Increase) decrease in accounts receivable","59","","","136"],["(Increase) decrease in inventories","153","","","175"],["Increase (decrease) in accounts payable","(205)","","","47"],["Increase (decrease) in income taxes payable/receivable","89","","","108"],["Net changes in other operating assets and liabilities","128","","","(279)"],["Net cash provided by operating activities","$","2,590","","","$","1,752"]] [[/GREPCENT_TABLE]] •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 $136 million in fiscal 2023. The reduced decline in accounts receivable was primarily due to the decreased level of sales in the last few weeks of each year end partially offset by a net decrease in days sales outstanding. 31 [[GREPCENT_TABLE]] [["Cash Flows from Investing Activities","","in millions"],["","2024","","2023"],["Additions to property, plant and equipment","$","(1,132)","","","$","(1,939)"],["(Purchases of)/Proceeds from marketable securities, net","(3)","","","(2)"],["Proceeds from sale of business","174","","","\u2014"],["Acquisitions, net of cash acquired","\u2014","","","(262)"],["Acquisition of equity investments","(29)","","","(115)"],["Other, net","102","","","19"],["Net cash used for investing activities","$","(888)","","","$","(2,299)"]] [[/GREPCENT_TABLE]] •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 $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. •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 $39 million for the 60% equity stake in Supreme Foods Processing Company, a producer and distributor of value-added and cooked chicken and beef products. •Acquisition of equity investments for fiscal 2023 primarily included: the purchase of minority interest in a global insect-based ingredients company; the purchase of a minority interest in a fully integrated poultry company in the Middle East that produces broiler chickens and operates hatcheries and feed mills; and deferred payments related to prior year equity method investment. •Other, net for fiscal 2024 primarily included proceeds from disposition of corporate assets, proceeds on the sale of an equity method investment and insurance proceeds related to fires at our production facilities. [[GREPCENT_TABLE]] [["Cash Flows from Financing Activities","","in millions"],["","2024","","2023"],["Proceeds from issuance of debt","$","2,415","","","$","1,130"],["Payments on debt","(1,641)","","","(603)"],["Proceeds from issuance of commercial paper","1,694","","","7,693"],["Repayments of commercial paper","(2,285)","","","(7,103)"],["Purchases of Tyson Class A common stock","(49)","","","(354)"],["Dividends","(684)","","","(670)"],["Stock options exercised","14","","","11"],["Other, net","(45)","","","(16)"],["Net cash provided by (used for) financing activities","$","(581)","","","$","88"]] [[/GREPCENT_TABLE]] •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. •Purchases of Tyson Class A common stock included: •$300 million of cash paid for shares repurchased pursuant to our share repurchase program in fiscal 2023. •$49 million and $54 million for shares repurchased to fund certain obligations under our equity compensation plans in fiscal 2024 and 2023, respectively. •Dividends paid during fiscal 2024 included a 2% increase to our fiscal 2023 quarterly dividend rate. 32 [[GREPCENT_TABLE]] [["Liquidity","","","","","","","","","","in millions"],["","","Commitments Expiration Date","","Facility Amount","","Outstanding Letters of Credit (no draw downs)","","Amount Borrowed","","Amount Available at September 28, 2024"],["Cash and cash equivalents","","","","","","","","","","$","1,717"],["Short-term investments","","","","","","","","","","10"],["Revolving credit facility","","September 2026","","$","2,250","","","$","\u2014","","","$","\u2014","","","2,250"],["Commercial Paper","","","","","","","","","","\u2014"],["Total liquidity","","","","","","","","","","$","3,977"]] [[/GREPCENT_TABLE]] •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. •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 fiscal 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 will approximate $380 million for fiscal 2025. •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. Generally, we do not rely on the foreign cash as a source of funds to support our ongoing domestic liquidity needs. We manage our worldwide cash requirements by reviewing available funds among our foreign subsidiaries and the cost effectiveness with which those funds can be accessed. We intend to repatriate any excess cash (net of applicable withholding taxes) not subject to regulatory requirements and to indefinitely reinvest outside of the United States the remainder of cash held by foreign subsidiaries. We do not expect the regulatory restrictions or taxes on repatriation to have a material effect on our overall liquidity, financial condition or the results of operations for the foreseeable future. Capital Resources 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. 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. Commercial Paper Program Our commercial paper program provides a low-cost source of borrowing to fund general corporate purposes including working capital requirements. The maximum borrowing capacity under the commercial paper program is $1.5 billion. The maturities of the notes may vary, but may not exceed 397 days from the date of issuance. 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. Capitalization To monitor our credit ratings and our capacity for long-term financing, we consider various qualitative and quantitative factors. We monitor the ratio of our net debt to EBITDA as support for our long-term financing decisions. At 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 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 Term Loan Facility due May 2028 Standard & Poor’s Rating Services’, a Standard & Poor’s Financial Services LLC business (“S&P”), applicable rating is “BBB”. Moody’s Investor Service, Inc.’s (“Moody’s”) applicable rating is “Baa2”. The below table outlines the commitment fee on any unused borrowing capacity and the borrowing spread on the outstanding principal balance of our term loan facility due May 2028 that corresponds to the applicable ratings levels from S&P and Moody’s. 33 [[GREPCENT_TABLE]] [["Ratings Level (Moody\u2019s/S&P)","Commitment Fee","Borrowing Spread"],["Baal/BBB+ or above","0.100","%","1.625","%"],["Baa2/BBB (current level)","0.125","%","1.750","%"],["Baa3/BBB- or lower","0.175","%","1.875","%"]] [[/GREPCENT_TABLE]] Revolving Credit Facility 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. [[GREPCENT_TABLE]] [["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+","0.100","%","1.125","%"],["Baa2/BBB (current level)","0.125","%","1.250","%"],["Baa3/BBB or lower","0.175","%","1.375","%"]] [[/GREPCENT_TABLE]] In the event the ratings fall within different levels, the applicable rate will be based upon the higher of the two Levels or, if there is more than a one-notch split between the two Levels, then the Applicable Rate will be based upon the Level that is one Level below the higher Level. Debt Covenants Our revolving credit and term loan facilities contain affirmative and negative covenants that, among other things, may limit or restrict our ability to: create liens and encumbrances; incur debt; merge, dissolve, liquidate or consolidate; make acquisitions and investments; dispose of or transfer assets; change the nature of our business; engage in certain transactions with affiliates; and enter into hedging transactions, in each case, subject to certain qualifications and exceptions. In addition, we are required to maintain a minimum interest expense coverage ratio. Our senior notes also contain affirmative and negative covenants that, among other things, may limit or restrict our ability to: create liens; engage in certain sale/leaseback transactions; and engage in certain consolidations, mergers and sales of assets. We were in compliance with all debt covenants at September 28, 2024 and expect that we will maintain compliance. Pension Plans As further described in Part II, Item 8, Notes to Consolidated Financial Statements, Note 15: Pensions and Other Postretirement Benefits, the funded status of our defined benefit pension plans is defined as the amount the projected benefit obligation exceeds the plan assets. The funded status of the plans is an underfunded position of $158 million at the end of fiscal 2024 as compared to an underfunded position of $149 million at the end of fiscal 2023. We contributed $14 million in fiscal 2024 and expect to contribute approximately $14 million of cash to our pension plans in fiscal 2025. The exact amount of cash contributions made to pension plans in any year is dependent upon a number of factors, including minimum funding requirements. As a result, the actual funding in fiscal 2025 may be different from the estimate. Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements material to our financial position or results of operations. The off-balance sheet arrangements we have are guarantees of obligations related to certain outside third parties, including leases, debt and livestock grower loans, and residual value guarantees covering certain operating leases for various types of equipment. See Part II, Item 8, Notes to Consolidated Financial Statements, Note 20: Commitments and Contingencies for further discussion. 34 CONTRACTUAL OBLIGATIONS The following table summarizes our contractual obligations as of September 28, 2024 (in millions): [[GREPCENT_TABLE]] [["","Payments Due by Period"],["","2025","","2026-2027","","2028-2029","","2030 and thereafter","","Total"],["Debt principal payments (1)","$","75","","","$","2,975","","","$","2,404","","","$","4,415","","","$","9,869"],["Interest payments (2)","489","","","854","","","608","","","2,847","","","4,798"],["Guarantees (3)","24","","","16","","","26","","","17","","","83"],["Operating lease obligations (4)","197","","","266","","","157","","","187","","","807"],["Purchase obligations (5)","368","","","401","","","179","","","247","","","1,195"],["Capital expenditures (6)","625","","","\u2014","","","\u2014","","","\u2014","","","625"],["Other long-term liabilities (7)","\u2014","","","\u2014","","","\u2014","","","\u2014","","","904"],["Total contractual commitments","$","1,778","","","$","4,512","","","$","3,374","","","$","7,713","","","$","18,281"]] [[/GREPCENT_TABLE]] (1)In the event of a default on payment, acceleration of the principal payments could occur. (2)Interest payments include interest on all outstanding debt. Payments are estimated for variable rate and variable term debt based on effective interest rates at September 28, 2024, and expected payment dates. (3)Amounts include guarantees of obligations related to certain outside third parties, which consist of leases, debt and livestock grower loans, all of which are substantially collateralized by the underlying assets, as well as residual value guarantees covering certain operating leases for various types of equipment. The amounts included are the maximum potential amount of future payments. (4)For additional information regarding operating leases, refer to Part II, Item 8, Notes to the Consolidated Financial Statements, Note 6: Leases. (5)Amounts include agreements with a remaining term in excess of one year to purchase goods or services that are enforceable and legally binding and specify all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. The purchase obligations amount included items, such as future purchase commitments for grains and livestock purchase contracts, that provide terms that meet the above criteria. For certain grain purchase commitments with a fixed quantity provision, we have assumed the future obligations under the commitment based on available commodity futures prices as published in observable active markets as of September 28, 2024. We have excluded future purchase commitments for contracts that do not meet these criteria. Purchase orders are not included in the table, as a purchase order is an authorization to purchase and is cancellable. Contracts for goods or services that contain termination clauses without penalty have also been excluded. (6)Amounts include estimated amounts to complete buildings and equipment under construction as of September 28, 2024. (7)Other long-term liabilities primarily consist of deferred compensation, deferred income, self-insurance and asset retirement obligations. We are unable to reliably estimate the amount and timing of the remaining payments beyond fiscal 2024; therefore, we have only included the total liability in the table above. We also have employee benefit obligations consisting of pensions and other postretirement benefits of $180 million that are excluded from the table above. A discussion of the Company's pension and postretirement plans, including funding matters, is included in Part II, Item 8, Notes to Consolidated Financial Statements, Note 15: Pensions and Other Postretirement Benefits. In addition to the amounts shown above in the table, we have unrecognized tax benefits of $137 million and related interest and penalties of $59 million at September 28, 2024, recorded in Other long-term liabilities. 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 a $14 million allowance for these programs' estimated credit losses at September 28, 2024. 35 OTHER KEY FINANCIAL MEASURES The following are other key financial measures used by the Company for the purposes of assessing performance and highlighting operational trends as well as our ability to generate earnings sufficient to service our debt: [[GREPCENT_TABLE]] [["in millions, except ratio data"],["","2024","","2023","","2022"],["Net income (loss)","$","822","","","$","(649)","","","$","3,249"],["Less: Interest income","(89)","","","(30)","","","(17)"],["Add: Interest expense","481","","","355","","","365"],["Add/(Less): Income tax expense (benefit)","270","","","(29)","","","900"],["Add: Depreciation","1,159","","","1,100","","","945"],["Add: Amortization (a)","229","","","229","","","246"],["EBITDA","$","2,872","","","$","976","","","$","5,688"],["Total gross debt","9,787","","","9,506","","","8,321"],["Less: Cash and cash equivalents","(1,717)","","","(573)","","","(1,031)"],["Less: Short-term investments","(10)","","","(15)","","","(1)"],["Total net debt","$","8,060","","","$","8,918","","","$","7,289"],["Ratio Calculations:"],["Gross debt/EBITDA","3.4x","","9.7x","","1.5x"],["Net debt/EBITDA","2.8x","","9.1x","","1.3x"],["Return on invested capital (b)","3.9%","","(1.4%)","","13.4%"],["Total debt to capitalization (c)","34.6%","","34.2%","","29.6%"],["Book value per share (d)","$","52.03","","$","51.37","","$","55.04"]] [[/GREPCENT_TABLE]] (a)Excludes the amortization of debt issuance and debt discount expense of $12 million, $10 million, $11 million for fiscal 2024, 2023 and 2022, respectively, as it is included in Interest expense. (b)Return on invested capital is calculated by dividing after-tax operating income (loss), calculated by applying the Company’s effective tax rate to operating income (loss), by the average of beginning and ending total debt and shareholders’ equity less cash and cash equivalents. (c)For the total debt to capitalization calculation, capitalization is defined as total debt plus total shareholders’ equity. (d)Book value per share is calculated by dividing shareholders’ equity by the sum of Class A and B shares outstanding. EBITDA is defined as net income (loss) before interest, income taxes, depreciation and amortization. Net debt to EBITDA represents the ratio of our debt, net of cash and short-term investments, to EBITDA. EBITDA and net debt to EBITDA are presented as supplemental financial measurements in the evaluation of our business. We believe the presentation of these financial measures helps investors to assess our operating performance from period to period, including our ability to generate earnings sufficient to service our debt, enhances understanding of our financial performance and highlights operational trends. These measures are widely used by investors and rating agencies in the valuation, comparison, rating and investment recommendations of companies; 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 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. As a result, actual cash available to service our debt obligations will be different from EBITDA. Investors should rely primarily on our GAAP results, and use non-GAAP financial measures only supplementally, in making investment decisions. RECENTLY ISSUED/ADOPTED ACCOUNTING PRONOUNCEMENTS Refer to the discussion under Part II, Item 8, Notes to Consolidated Financial Statements, Note 1: Business and Summary of Significant Accounting Policies and Note 2: Changes in Accounting Principles. 36 CRITICAL ACCOUNTING ESTIMATES The preparation of consolidated financial statements requires us to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of certain accounting estimates we consider critical. These estimates require levels of subjectivity and judgment, which could result in actual results differing from our estimates. Contingent liabilities Description We are subject to lawsuits, investigations and other claims related to wage and hour/labor, antitrust, environmental, product, taxing authorities and other matters, and are required to assess the likelihood of any adverse judgments or outcomes to these matters, as well as potential ranges of probable losses. A determination of the amount of reserves and disclosures required, if any, for these contingencies is made after considerable analysis of each individual issue. We accrue for contingent liabilities when an assessment of the risk of loss is probable and can be reasonably estimated. We disclose contingent liabilities when the risk of loss is reasonably possible or probable. Judgments and Uncertainties Our contingent liabilities contain uncertainties because the eventual outcome will result from future events, and determination of current reserves requires estimates and judgments related to future changes in facts and circumstances, differing interpretations of the law and assessments of the amount of damages, and the effectiveness of strategies or other factors beyond our control. Effect if Actual Results Differ From Assumptions We have not made any material changes in the accounting methodology used to establish our contingent liabilities during the past three fiscal years. As set forth in Part II, Item 8, Notes to the Consolidated Financial Statements, Note 20: 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. However, if actual results are not consistent with our estimates or assumptions, we may be exposed to gains or losses that could be material. Revenue recognition Description We recognize revenue for the sale of our product at the point in time when our performance obligation has been satisfied and control of the product has transferred to our customer, which generally occurs upon shipment or delivery to a customer based on terms of the sale. Revenue is measured by the transaction price, which is defined as the amount of consideration we expect to receive in exchange for providing goods to customers. The transaction price is adjusted for estimates of known or expected variable consideration, which includes consumer incentives, trade promotions, and allowances, such as coupons, discounts, rebates, volume-based incentives, cooperative advertising, and other programs. Variable consideration related to these programs is recorded as a reduction to revenue based on amounts we expect to pay. Judgments and Uncertainties The transaction price contains estimates of known or expected variable consideration. We base these estimates on current performance, historical utilization, and projected redemption rates of each program. We review and update these estimates regularly until the incentives or product returns are realized and the impact of any adjustments are recognized in the period the adjustments are identified. Effect if Actual Results Differ From Assumptions We do not believe there is a reasonable likelihood there will be a material change in the estimates or assumptions used to recognize revenue. As noted above, estimates are made based on historical experience and other factors. Typically, programs that are offered have a short duration, and historically, the difference between actual experience compared to estimated redemptions and performance has not been significant to the quarterly or annual financial statements. However, if the level of redemption rates or performance were to vary significantly from estimates, we may be exposed to gains or losses that could be material. We have not made any material changes in the accounting methodology used to recognize revenue during the past three fiscal years. Accrued self-insurance Description We are self-insured for certain losses related to health and welfare, workers’ compensation, auto liability and general liability claims. We use an independent third-party actuary to assist in determining our self-insurance liability. We and the actuary consider a number of factors when estimating our self-insurance liability, including claims experience, demographic factors, severity factors and other actuarial assumptions. We periodically review our estimates and assumptions with our third-party actuary to assist us in determining the adequacy of our self-insurance liability. Our policy is to maintain an accrual at the actuarial estimated median. 37 Judgments and Uncertainties Our self-insurance liability contains uncertainties due to assumptions required and judgments used. Costs to settle our obligations, including legal and healthcare costs, could increase or decrease causing estimates of our self-insurance liability to change. Incident rates, including frequency and severity, could increase or decrease causing estimates in our self-insurance liability to change. Effect if Actual Results Differ From Assumptions We have not made any material changes in the accounting methodology used to establish our self-insurance liability during the past three fiscal years. We do not believe there is a reasonable likelihood there will be a material change in the estimates or assumptions used to calculate our self-insurance liability. However, if actual results are not consistent with our estimates or assumptions, we may be exposed to gains or losses that could be material. A 10% change in the actuarial estimate at September 28, 2024, would not have a significant impact on our liability. Income taxes Description We estimate total income tax expense based on statutory tax rates and tax planning opportunities available to us in various jurisdictions in which we earn income. Income tax includes an estimate for withholding taxes on earnings of foreign subsidiaries expected to be remitted but does not include an estimate for taxes on earnings considered to be indefinitely invested in the foreign subsidiary. Deferred income taxes are recognized for the future tax effects of temporary differences between financial and income tax reporting using tax rates in effect for the years in which the differences are expected to reverse. Valuation allowances are recorded when it is likely a tax benefit will not be realized for a deferred tax asset. We record unrecognized tax benefit liabilities for known or anticipated tax issues based on our analysis of whether, and the extent to which, additional taxes will be due. Judgments and Uncertainties Changes in projected future earnings could affect the recorded valuation allowances in the future. Our calculations related to income taxes contain uncertainties due to judgment used to calculate tax liabilities in the application of complex tax regulations across the tax jurisdictions where we operate. Our analysis of unrecognized tax benefits contains uncertainties based on judgment used to apply the more likely than not recognition and measurement thresholds. Effect if Actual Results Differ From Assumptions Due to the complexity of some of these judgments and uncertainties, the ultimate resolution may result in a payment that is materially different from the current estimate of the tax liabilities. To the extent we prevail in matters for which unrecognized tax benefit liabilities have been established, or are required to pay amounts in excess of our recorded unrecognized tax benefit liabilities, our effective tax rate in a given financial statement period could be materially affected. An unfavorable tax settlement would require use of our cash and generally result in an increase in our effective tax rate in the period of resolution. A favorable tax settlement would generally be recognized as a reduction in our effective tax rate in the period of resolution. Changes in tax laws and rates could affect recorded deferred tax assets and liabilities in the future. Other than those potential impacts, we do not believe there is a reasonable likelihood there will be a material change in the tax related balances or valuation allowances. Defined benefit pension plans Description We sponsor four defined benefit pension plans that provide retirement benefits to certain team members. We also participate in a multi-employer plan that provides defined benefits to certain team members covered by collective bargaining agreements. Such plans are usually administered by a board of trustees composed of the management of the participating companies and labor representatives. We use independent third-party actuaries to assist us in determining our pension obligations and net periodic benefit cost. We and the actuaries review assumptions that include estimates of the present value of the projected future pension payment to all plan participants, taking into consideration the likelihood of potential future events such as salary increases and demographic experience. We accumulate and amortize the effect of actuarial gains and losses over future periods. Net periodic benefit cost for the defined benefit pension plans was $8 million in fiscal 2024. The projected benefit obligation was $188 million at the end of fiscal 2024. 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. We expect to contribute approximately $14 million of cash to our pension plans in fiscal 2025. The exact amount of cash contributions made to pension plans in any year is dependent upon a number of factors, including minimum funding requirements. 38 Judgments and Uncertainties Our defined benefit pension plans contain uncertainties due to assumptions required and judgments used. The key assumptions used in developing the required estimates include such factors as discount rates, expected returns on plan assets, retirement rates, and mortality. These assumptions can have a material impact upon the funded status and the net periodic benefit cost. The expected liquidation of certain plans has been considered along with these assumptions. The discount rates were determined using a cash flow matching technique whereby the rates of a yield curve, developed from high-quality debt securities, were applied to the benefit obligations to determine the appropriate discount rate. In determining the long-term rate of return on plan assets, we first examined historical rates of return for the various asset classes within the plans. We then determined a long-term projected rate-of-return based on expected returns. Investment, management and other fees paid out of plan assets are factored into the determination of asset return assumptions. Retirement rates are based primarily on actual plan experience, while standard actuarial tables are used to estimate mortality. It is reasonably likely that changes in external factors will result in changes to the assumptions used to measure pension obligations and net periodic benefit cost in future periods. The risks of participating in multi-employer plans are different from single-employer plans. The net pension cost of the multi-employer plans is equal to the annual contribution determined in accordance with the provisions of negotiated labor contracts. Assets contributed to such plans are not segregated or otherwise restricted to provide benefits only to our team members. The future cost of these plans is dependent on a number of factors including the funded status of the plans and the ability of the other participating companies to meet ongoing funding obligations. Effect if Actual Results Differ From Assumptions We have not made any material changes in the accounting methodology used to establish our pension obligations and net periodic benefit cost during the past three fiscal years. We do not believe there is a reasonable likelihood there will be a material change in the estimates or assumptions used to calculate our pension obligations and net periodic benefit cost. However, if actual results are not consistent with our estimates or assumptions, they are accumulated and amortized over future periods and, therefore generally affect the net periodic benefit cost in future periods. A 1% change in the discount rate at September 28, 2024, would not have a significant impact on the projected benefit obligation or net periodic benefit cost. A 1% change in the return on plan assets at September 28, 2024, would not have a significant impact on net periodic benefit cost. The sensitivities reflect the impact of changing one assumption at a time with the remaining assumptions held constant. Economic factors and conditions often affect multiple assumptions simultaneously and the effect of changes in assumptions are not necessarily linear. Impairment of goodwill and indefinite life intangible assets Description Goodwill and indefinite life intangible assets are evaluated for impairment annually or more frequently if events or circumstances indicate it is more likely than not that the fair value of a reporting unit or indefinite life intangible asset is less than its carrying amount. We have elected to make the first day of the fourth quarter the annual impairment assessment date for goodwill and indefinite life intangible assets. However, we could be required to evaluate the recoverability of goodwill and indefinite life intangible assets outside of the required annual assessment if, among other things, we experience disruptions to the business, unexpected significant declines in operating results, divestiture of a significant component of the business, sustained decline in market capitalization or significant changes in macro-economic factors such as increased interest and discount rates. We evaluate goodwill for impairment by first performing a qualitative assessment to determine whether a quantitative goodwill test is necessary. If it is determined, based on qualitative factors, the fair value of the reporting unit may more likely than not be less than its carrying amount or if significant changes to macro-economic factors related to the reporting unit have occurred that could materially impact fair value, a quantitative goodwill impairment test would be required. The quantitative test compares the fair value of a reporting unit with its carrying amount. Additionally, we can elect to forgo the qualitative assessment and perform the quantitative test. Upon performing the quantitative test, if the carrying value of the reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, not to exceed the carrying amount of goodwill. For indefinite life intangible assets, a qualitative assessment can also be performed to determine whether the existence of events and circumstances indicates it is more likely than not an intangible asset is impaired. Similar to goodwill, we can also elect to forgo the qualitative test for indefinite life intangible assets and perform the quantitative test. Upon performing the quantitative test, if the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. 39 Judgments and Uncertainties We estimate the fair value of our reporting units considering the use of various valuation techniques, with the primary technique being an income approach (discounted cash flow method) and another technique being a market approach (guideline public company method), which use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy. We include assumptions about sales growth, operating margins, discount rates and valuation multiples which consider our budgets, business plans, economic projections and marketplace data, and are believed to reflect market participant views which would exist in an exit transaction. Assumptions are also made for varying growth rates for periods beyond the long-term business plan period. Generally, we utilize operating margin assumptions based on future expectations, macro-economic trends, operating margins historically realized in the reporting units’ industries and industry marketplace valuation multiples. We consider reporting units that have 20% or less excess fair value over carrying amount to have a heightened risk of 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. 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. 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, 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. Under these valuation approaches, we are required to make estimates and assumptions about sales growth, operating margins, royalty rates and discount rates based on budgets, business plans, economic projections, anticipated future cash flows and marketplace data. We consider indefinite life intangible assets that have 20% or less excess fair value over carrying amount to have a heightened risk of impairment. Our fiscal 2024, 2023 and 2022 indefinite life intangible assets impairment analyses did not result in an impairment charge. 40 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. 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 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. The assumptions and estimates used in determining fair value require considerable judgement and are sensitive to changes in underlying assumptions. These assumptions can change in future periods as a result of overall economic conditions, including the impacts of inflationary pressures, increased interest and discount rates, global supply chain constraints and decreased market capitalization, amongst others. As a result, there can be no assurance that estimates and assumptions made for the purpose of assessing impairments will prove to be an accurate prediction of the future. Potential circumstances that could have a negative effect on the fair value of our reporting units and indefinite life intangible assets include, but are not limited to, lower than forecasted growth rates or operating margins and changes in discount rates. A reduction in the estimated fair value of the reporting units and indefinite life intangible assets could trigger an impairment in the future. We cannot predict the occurrence of certain events or changes in circumstances that might adversely affect the carrying value of our goodwill and indefinite life intangible assets. 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 Description Long-lived assets and definite life intangibles are evaluated for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable. Examples include a significant adverse change in the extent or manner in which we use the asset, a change in its physical condition, or an unexpected change in financial performance. When evaluating long-lived assets and definite life intangibles for impairment, we compare the carrying value of the asset to the asset’s estimated undiscounted future cash flows. An impairment is indicated if the estimated future cash flows are less than the carrying value of the asset group. For assets held for sale, we compare the carrying value of the disposal group to fair value. The impairment is the excess of the carrying value over the fair value of the asset. We recorded charges related to long-lived assets of $131 million, $101 million and $34 million, in fiscal 2024, 2023 and 2022, respectively. Judgments and Uncertainties Our impairment analysis contains uncertainties due to judgment in assumptions, including useful lives and intended use of assets, observable market valuations, forecasted sales growth, operating margins, royalty rates and discount rates based on budgets, business plans, economic projections, anticipated future cash flows and marketplace data that reflects the risk inherent in future cash flows to determine fair value. 41 Effect if Actual Results Differ From Assumptions We have not made any material changes in the accounting methodology used to evaluate the impairment of long-lived assets or definite life intangibles during the last three fiscal years. We do not believe there is a reasonable likelihood there will be a material change in the estimates or assumptions used to calculate impairments or useful lives of long-lived assets or definite life intangibles. However, if actual results are not consistent with our estimates and assumptions used to calculate estimated future cash flows, we may be exposed to impairment losses that could be material. We periodically conduct projects to strategically evaluate optimization of such items as network capacity, manufacturing efficiencies and business technology. If we have a significant change in strategies, outlook, or a manner in which we plan to use these assets, we may be exposed to future impairments. Business Combinations Description We account for acquired businesses using the acquisition method of accounting, which requires that once control of a business is obtained, 100% of the assets acquired and liabilities assumed, including amounts attributed to noncontrolling interests, be recorded at the date of acquisition at their respective fair values. Any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. We use various models to determine the value of assets acquired and liabilities assumed such as net realizable value to value inventory, cost method and market approach to value property, relief-from-royalty and multi-period excess earnings to value intangibles and discounted cash flow to value goodwill. For significant acquisitions we may use independent third-party valuation specialists to assist us in determining the fair value of assets acquired and liabilities assumed. Judgments and Uncertainties Significant judgment is often required in estimating the fair value of assets acquired and liabilities assumed, particularly intangible assets. We make estimates and assumptions about projected future cash flows including sales growth, operating margins, attrition rates and discount rates based on historical results, business plans, expected synergies, perceived risk and marketplace data considering the perspective of marketplace participants. Determining the useful life of an intangible asset also requires judgment as different types of intangible assets will have different useful lives and certain assets may be considered to have indefinite useful lives. Effect if Actual Results Differ From Assumptions While management believes those expectations and assumptions are reasonable, they are inherently uncertain. Unanticipated market or macroeconomic events and circumstances may occur, which could affect the accuracy or validity of the estimates and assumptions, which could result in subsequent impairments. For more information regarding business combinations, refer to Part II, Item 8, Notes to Consolidated Financial Statements, Note 3: Acquisitions and Dispositions.