TYSON FOODS INC

Previous wording

Sales decreased slightly in the second quarter and were flat in the first six months of fiscal 2024 as decreased sales in our Chicken and Prepared Foods segments were largely offset by increased sales in our Beef and Pork segments. We recorded operating income of $312 million for the second quarter of fiscal 2024 as compared to an operating loss of $49 million in the second quarter of fiscal 2023 as we experienced higher operating income in our Chicken and Pork segments, partially offset by lower operating income in our Beef and Prepared Foods segments. During the second quarter and first six months of fiscal 2024, we incurred higher performance-based compensation costs of $104 million and $200 million, respectively, driven by improved consolidated results. Due to the nature of our performance-based compensation plans, our segments were primarily impacted based on their relative number of eligible team members, and thus, our Chicken and Prepared Foods segments incurred a greater proportion of the total costs.

Current wording

Sales increased in the third quarter and in the first nine months of fiscal 2024 driven by increased sales in our Beef, Pork and Prepared Foods segments, partially offset by decreased sales in our Chicken segment. We recorded operating income of $341 million for the third quarter of fiscal 2024 as compared to an operating loss of $350 million in the third quarter of fiscal 2023 primarily driven by higher operating income in our Chicken segment and International/Other, partially offset by lower operating income in our Beef segment. During the third quarter and first nine months of fiscal 2024, we incurred higher performance-based compensation costs of $89 million and $308 million, respectively, driven by improved consolidated results. Due to the nature of our performance-based compensation plans, our segments were primarily impacted based on their relative number of eligible team members, and thus, our Chicken and Prepared Foods segments incurred a greater proportion of the total costs.

Previous wording

Additionally, in the second quarter of fiscal 2024, our operating income was impacted by $54 million of costs related to a production facility fire and our current intention to discontinue the use of certain productive assets in the Netherlands and $39 million in plant closure charges. In the second quarter of fiscal 2023, our operating income was impacted by $22 million of restructuring and related charges and $92 million of charges related to plant closures. Operating income of $543 million for the first six months of fiscal 2024 was up 30% compared to the first six months of fiscal 2023 as we experienced higher operating income in our Chicken and Pork segments, partially offset by lower operating income for our Beef and Prepared Foods segments. In the first six months of fiscal 2024, our operating income was impacted by $114 million of plant closure charges, $80 million of costs related to a production facility fire and our current intention to discontinue the use of certain productive assets in the Netherlands, $73 million in legal contingency accruals and $31 million of restructuring and related charges, partially offset by the benefit of $24 million of insurance proceeds, net of costs incurred related to facility fires. Additionally, in the six months ended April 1, 2023, our operating income was impacted by $43 million of restructuring and related charges and benefited from $35 million of insurance proceeds net of costs, related to facility fires.

Current wording

Additionally, in the third quarter of fiscal 2024, our operating income was impacted by $101 million in legal contingency accruals and $41 million in plant closure charges. In the third quarter of fiscal 2023, our operating income was impacted by $448 million of goodwill impairment charges, $50 million of restructuring and related charges, $15 million in plant closures charges, a $38 million legal contingency accrual, and benefited from $22 million of insurance proceeds, net of costs incurred associated with a production facility fire. We recorded operating income of $884 million for the first nine months of fiscal 2024 as compared to operating income of $68 million for the first nine months of fiscal 2023 primarily driven by higher operating income in our Chicken and Pork segments and International/Other, partially offset by lower operating income in our Beef segment. In the first nine months of fiscal 2024, our operating income was impacted by $174 million in legal contingency accruals, $155 million of plant closure charges, $83 million of costs related to a production facility fire in the Netherlands and the subsequent decision to sell the facility and $31 million of restructuring and related charges, partially offset by the benefit of $19 million of insurance proceeds, net of costs incurred related to facility fires. In the nine months ended July 1, 2023, our operating income was impacted by $448 million of goodwill impairment charges, $107 million in plant closures charges, $93 million of restructuring and related charges, and a $38 million legal contingency accrual and benefited from $57 million of insurance proceeds net of costs, related to facility fires.

Previous wording

According to the United States Department of Agriculture, domestic protein production (beef, pork, chicken and turkey) decreased slightly in the second quarter of fiscal 2024 as compared to the same period in fiscal 2023. The Beef segment experienced limited supply of market-ready cattle in the second quarter of fiscal 2024 as well as increased cattle costs. Additionally, uncertainty exists regarding the timing of the anticipated cattle herd rebuilding. The Pork segment experienced sufficient supply and reduced hog costs. The Chicken segment experienced reduced feed ingredient costs. The Prepared Foods segment experienced decreased raw material costs primarily due to lower meat costs. Additionally, the conflict between Ukraine and Russia has led to economic sanctions against Russia and certain regions of Ukraine and Belarus. However, the conflict is still ongoing and there are many risks and uncertainties in relation to the conflict that are outside of our control. Furthermore, the ongoing conflict in the Middle East escalated during the first six months of fiscal 2024 creating economic and political uncertainty within the region. As of March 30, 2024, the impact of these conflicts have not had a material direct impact on our financial performance. If these conflicts escalate further, impact additional regions or countries, or additional economic sanctions are imposed, it could have a material impact on our business operations and financial performance.

Current wording

According to the United States Department of Agriculture, domestic protein production (beef, pork, chicken and turkey) increased slightly in the third quarter of fiscal 2024 as compared to the same period in fiscal 2023. The Beef segment experienced limited supply of market-ready cattle in the third quarter of fiscal 2024 as well as increased cattle costs. Additionally, uncertainty exists regarding the timing of the anticipated cattle herd rebuilding. The Pork segment experienced sufficient supply and increased hog costs. The Chicken segment experienced reduced feed ingredient costs. The Prepared Foods segment is currently experiencing increased raw material costs primarily due to higher meat costs. Additionally, the conflict between Ukraine and Russia has led to economic sanctions against Russia and certain regions of Ukraine and Belarus. 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, during fiscal 2024, the ongoing conflict in the Middle East escalated and created economic and political uncertainty within the region. As of June 29, 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.

Previous wording

The Federal Reserve has increased interest rates, and may continue to increase interest rates or maintain elevated interest rates in the near term. Our direct exposure to elevated interest rates is somewhat tempered given our strong liquidity position in addition to our current debt structure in which most of our borrowings have fixed interest rates. At March 30, 2024, we had $4.4 billion of liquidity and our current debt was $1.3 billion, which we intend to repay with the remaining proceeds from our $1.5 billion of senior notes issued in March 2024. Should we need to issue additional debt or borrow under our existing revolving credit facility, we may be exposed to higher interest rates than our current outstanding borrowings.

Current wording

The Federal Reserve has increased interest rates, and may continue to increase interest rates or maintain elevated interest rates in the near term. Our direct exposure to elevated interest rates is somewhat tempered given our strong liquidity position in addition to our current debt structure in which most of our borrowings have fixed interest rates. At June 29, 2024, we had $4.8 billion of liquidity and our current debt was $1.3 billion, which we intend to repay with the remaining proceeds from our $1.5 billion of senior notes issued in March 2024. Should we need to issue additional debt or borrow under our existing revolving credit facility, we may be exposed to higher interest rates than our current outstanding borrowings.

Previous wording

Our total operating margin was 2.4% in the second quarter of fiscal 2024. Operating margins by segment were as follows:

Current wording

Our total operating margin was 2.6% in the third quarter of fiscal 2024. Operating margins by segment were as follows:

Previous wording

In the fourth quarter of fiscal 2022, the Company approved a restructuring program, the 2022 Program, which is expected to improve business performance, increase collaboration, enhance team member agility, enable faster decision-making and reduce redundancies. We recognized $1 million and $22 million of pretax charges in the three months ended March 30, 2024 and April 1, 2023, respectively, and $31 million and $43 million of pretax charges in the six months ended March 30, 2024 and April 1, 2023, respectively, associated with the 2022 Program consisting of severance related costs, relocation and related costs, accelerated depreciation, contract and lease termination and professional and other fees. The Company currently anticipates the 2022 Program will result in cumulative pretax charges of approximately $228 million. 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 Condensed Statements of Income and the pretax impact by our reportable segments. For further description refer to Part I, Item 1, Notes to the Consolidated Condensed Financial Statements, Note 6: Restructuring and Related Charges (in millions).

Current wording

In the fourth quarter of fiscal 2022, the Company approved a restructuring program, the 2022 Program, which is expected to improve business performance, increase collaboration, enhance team member agility, enable faster decision-making and reduce redundancies. We recognized $50 million of pretax charges in the three months ended July 1, 2023, and $31 million and $93 million of pretax charges in the nine months ended June 29, 2024 and July 1, 2023, respectively, associated with the 2022 Program consisting of severance related costs, relocation and related costs, accelerated depreciation, contract and lease termination and professional and other fees. The Company currently anticipates the 2022 Program will result in cumulative pretax charges of approximately $225 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 Condensed Statements of Income and the pretax impact by our reportable segments. For further description refer to Part I, Item 1, Notes to the Consolidated Condensed Financial Statements, Note 6: Restructuring and Related Charges (in millions).

Previous wording

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

Current wording

•Sales Volume – Sales were positively impacted by an increase in sales volume, which accounted for a $142 million increase in sales driven by increased sales volume in our Beef, Pork and Prepared Foods segments, partially offset by decreased sales volume in our Chicken segment.

Previous wording

•Average Sales Price – Sales were positively impacted by higher average sales prices, which accounted for an increase of $193 million, driven by increased pricing in our Beef segment, partially offset by lower average sales prices in our Pork, Chicken and Prepared Foods segments.

Current wording

•Average Sales Price – Sales were positively impacted by higher average sales prices, which accounted for an increase of $78 million, driven by increased pricing in our Beef and Pork segments, partially offset by lower average sales prices in our Chicken segment.

Previous wording

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

Current wording

•Sales Volume – Sales were negatively impacted by a decrease in sales volume, which accounted for a $53 million decrease in sales driven by decreased sales volume in our Chicken segment, partially offset by increased sales volume in our Beef, Pork and Prepared Foods segments.

Previous wording

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

Current wording

•Average Sales Price – Sales were positively impacted by higher average sales prices, which accounted for an increase of $271 million, driven by increased pricing in our Beef and Pork segments, partially offset by lower average sales prices in our Chicken and Prepared Foods segments.

Previous wording

•Cost of sales decreased $400 million. Lower sales volume decreased cost of sales by $182 million while lower input cost per pound decreased cost of sales by $218 million.

Current wording

•Cost of sales increased $12 million. Higher sales volume increased cost of sales by $133 million while lower input cost per pound decreased cost of sales by $121 million.

Previous wording

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

Current wording

•The $121 million impact of lower input cost per pound was impacted by:

Previous wording

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

Current wording

•Decrease of approximately $305 million in our Chicken segment related to decreased feed ingredient costs.

Previous wording

•Increase due to net derivative losses of $46 million in the second quarter of fiscal 2024, compared to net derivative losses of $21 million in the second quarter of fiscal 2023 due to our risk management activities. These amounts exclude offsetting impacts from related physical purchase transactions, which are included in the change in live cattle and hog costs and raw material and feed ingredient costs described herein.

Current wording

•Decrease due to net derivative gains of $6 million in the third quarter of fiscal 2024, compared to net derivative losses of $89 million in the third quarter of fiscal 2023 due to our risk management activities. These amounts exclude offsetting impacts from related physical purchase transactions, which are included in the change in live cattle and hog costs and raw material and feed ingredient costs described herein.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

•Increase in cattle costs of approximately $240 million in our Beef segment.

Previous wording

•Decrease in hog costs of approximately $180 million in our Pork segment.

Current wording

•Increase in hog costs of approximately $110 million in our Pork segment.

Previous wording

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

Current wording

•Increase in performance-based compensation costs of $27 million.

Previous wording

•Decrease in raw material and other input costs of approximately $75 million in our Prepared Foods segment.

Current wording

•Increase in raw material and other input costs of approximately $35 million in our Prepared Foods segment.

Previous wording

•Decrease of $31 million in our Chicken segment from insurance proceeds, net of costs, related to a production facility fire in the fourth quarter of fiscal 2021.

Current wording

•Increase of $27 million in our Chicken segment from insurance proceeds, net of costs, related to a production facility fire in the fourth quarter of fiscal 2021.

Previous wording

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

Current wording

•Increase of $26 million due to costs associated with plant closures.

Previous wording

•Cost of sales decreased $196 million. Lower sales volume decreased cost of sales by $184 million while lower input cost per pound decreased cost of sales by $12 million.

Current wording

•Cost of sales decreased $184 million. Lower sales volume decreased cost of sales by $51 million while lower input cost per pound decreased cost of sales by $133 million.

Previous wording

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

Current wording

•The $133 million impact of lower input cost per pound was impacted by:

Previous wording

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

Current wording

•Decrease of approximately $665 million in our Chicken segment related to decreased feed ingredient costs.

Previous wording

•Decrease in freight and transportation costs of approximately $170 million.

Current wording

•Decrease in freight and transportation costs of approximately $230 million.

Previous wording

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

Current wording

•Decrease in hog costs of approximately $70 million in our Pork segment.

Previous wording

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

Current wording

•Decrease due to net derivative losses of $45 million in the first nine months of fiscal 2024, compared to net derivative losses of $98 million in the first nine months of fiscal 2023 due to our risk management activities. These amounts exclude offsetting impacts from related physical purchase transactions, which are included in the change in live cattle and hog costs and raw material and feed ingredient costs described herein.

Previous wording

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

Current wording

•Decrease in raw material and other input costs of approximately $40 million in our Prepared Foods segment.

Previous wording

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

Current wording

•Increase in cattle costs of approximately $1,140 million in our Beef segment.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

•Increase of $83 million in International/Other from costs related to a production facility fire in the Netherlands and subsequent decision to sell the facility.

Previous wording

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

Current wording

•Increase of $48 million due to costs associated with plant closures.

Previous wording

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

Current wording

•Decrease of $42 million in selling, general and administrative was primarily driven by:

Previous wording

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

Current wording

•Decrease of $45 million in marketing, advertising and promotion expenses.

Previous wording

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

Current wording

•Increase of $51 million in team member costs including $62 million in performance-based compensation partially offset by a decrease of $11 million in all other team member costs.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

•Increase of $125 million in team member costs including $168 million in performance-based compensation partially offset by a decrease of $43 million in all other team member costs.

Previous wording

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

Current wording

•The increase in interest expense for the three and nine months ended June 29, 2024 was primarily due to interest expense related to our recently issued 5.40% 2029 Notes and 5.70% 2034 Notes and interest expense on the balance of our term loan facilities.

Previous wording

•Included $15 million of foreign exchange losses in the second quarter of fiscal 2024. Included $10 million of income related to an amendment of a postretirement benefit plan in the first six months of fiscal 2024.

Current wording

•Included $19 million and $22 million of joint venture earnings in the third quarter and the first nine months of fiscal 2024, respectively, offset by $9 million and $4 million of foreign exchange losses in the third quarter and the first nine months of fiscal 2024, respectively. Additionally, included $14 million of income related to an amendment of a postretirement benefit plan in the first nine months of fiscal 2024.

Previous wording

•The second quarter of fiscal 2024 was impacted by increased foreign losses. In both periods, the effective tax rates were impacted by state taxes and various tax benefits; however, tax benefits increase the effective tax rate in a period of pretax loss and decrease the effective tax rate in a period of pretax income, resulting in a higher effective tax rate in the second quarter of fiscal 2023.

Current wording

•In both periods, the effective tax rates were impacted by state taxes and various tax benefits; however, tax benefits increase the effective tax rate in a period of pretax loss and decrease the effective tax rate in a period of pretax income.