Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

DESCRIPTION OF THE COMPANY

We are one of the world’s largest food companies and a recognized leader in protein. Founded in 1935 by John W. Tyson and grown under three generations of family leadership, the Company has a broad portfolio of products and brands like Tyson®, Jimmy Dean®, Hillshire Farm®, Ball Park®, Wright®, Aidells®, ibp® and State Fair®. Some of the key factors influencing our business are customer demand for our products; the ability to maintain and grow relationships with customers and introduce new and innovative products to the marketplace; accessibility of international markets; market prices for our products; the cost and availability of live cattle and hogs, raw materials and feed ingredients; and operating efficiencies of our facilities.

We operate in four reportable segments: Beef, Pork, Chicken, and Prepared Foods. Other primarily includes our foreign chicken production operations in China and India, third-party merger and integration costs and corporate overhead related to Tyson New

Ventures, LLC.

On June 7, 2017, we acquired and consolidated AdvancePierre Foods Holdings, Inc. ("AdvancePierre"), a producer and distributor of value-added, convenient, ready-to-eat sandwiches, sandwich components and other entrées and snacks. AdvancePierre's results from operations subsequent to the acquisition closing are included in the Prepared Foods and Chicken segments.

OVERVIEW

•	Fiscal year – Our accounting cycle resulted in a 52-week year for both fiscal 2017 and 2016 and a 53-week year for fiscal 2015.

•

General – Our fiscal 2017 operating income grew 3% compared to fiscal 2016 to a record $2,931 million, which was led by record earnings in our Beef and Pork segments. The Beef segment's operating income improved $530 million and the Pork segment improved $117 million in fiscal 2017 due to favorable market conditions and strong operational execution. Our Chicken segment's lower operating income was impacted by increased operating costs and $56 million of restructuring and related charges. Our Prepared Foods segment's lower operating income was impacted by increased operating costs, impairments of $52 million related to our San Diego Prepared Foods operation and $45 million related to the expected sale of a non-protein business and $82 million of restructuring and related charges. In addition, we incurred an incremental $95 million of compensation and benefit integration expense in fiscal 2017, as we continued to integrate and make investments in our talent, and incurred $85 million of AdvancePierre purchase accounting and acquisition related operating costs. Sales increased 4% in fiscal 2017 over fiscal 2016, primarily due to increased sales volumes and increased beef, pork and chicken prices, as well as the net incremental impact of AdvancePierre's sales of $508 million.

•

Market Environment – According to the United States Department of Agriculture (USDA), domestic protein production (beef, pork, chicken and turkey) increased approximately 3% in fiscal 2017 compared to fiscal 2016. The Beef segment experienced strong export demand and more favorable domestic market conditions associated with an increase in cattle supply. The Pork segment had favorable market conditions associated with strong demand for our pork products and improved export markets. There was stronger demand for our chicken products and reduced feed ingredient costs of $80 million, which benefited the Chicken segment. Our Prepared Foods segment had improved demand for our retail products but experienced a decline in foodservice and higher input costs of $50 million.

•	Margins – Our total operating margin was 7.7% in fiscal 2017. Operating margins by segment were as follows:

•	Beef – 5.9%

•	Pork – 12.3%

•	Chicken –9.2% (included $56 million of restructuring and related charges)

•	Prepared Foods – 5.9% (included $52 million impairment related to our San Diego Prepared Foods operation, $45 million impairment related to the expected sale of a non-protein business, $82 million of restructuring and related charges and $34 million of purchase accounting and acquisition related costs from the acquisition of AdvancePierre.)

•

Hillshire Integration – The impact of the The Hillshire Brands Company ("Hillshire Brands") synergies, along with the profit improvement plan related to our legacy Prepared Foods business, had a positive incremental impact of approximately $90 million in fiscal 2017 above the $258 million captured in fiscal 2016 and $322 million captured in fiscal 2015, for a total of $670 million of synergies realized. The majority of these benefits were realized in the Prepared Foods segment and were partially used to invest in innovation, new product launches and supporting the growth of our brands.

•	Liquidity – During fiscal 2017, we generated $2.6 billion of operating cash flows. At September 30, 2017, we had $1.0 billion of liquidity, which included $318 million of cash and cash equivalents and the availability under our revolving credit facility after deducting amounts outstanding under our commercial paper program.

•

Strategy - In fiscal 2017, we announced our strategy to sustainably feed the world with the fastest growing portfolio of protein-packed brands. We intend to accomplish this by growing our portfolio of protein-packed brands and delivering food at scale, which will be enabled by driving profitable growth with and for our customers through differentiated capabilities and creating fuel for reinvestment through a disciplined financial fitness model.

•

On June 7, 2017, we acquired all of the outstanding stock of AdvancePierre as part of our overall strategy. The purchase price was equal to $40.25 per share in cash for AdvancePierre's outstanding common stock, or approximately $3.2 billion. We funded the acquisition with existing cash on hand, net proceeds from the issuance of new senior notes, as well as borrowings under our commercial paper program and new term loan facility. AdvancePierre’s results from operations subsequent to the acquisition closing are included in the Prepared Foods and Chicken segments. For further description refer to Part II, Item 8, Notes to the Consolidated Financial Statements, Note 3: Acquisition and Dispositions.

•

On April 24, 2017, we announced our intent to sell three non-protein businesses, Sara Lee® Frozen Bakery, Kettle and Van’s®, which are all included in our Prepared Foods segment, as part of our strategic focus on protein-packed brands. We have reclassified the assets and liabilities related to these businesses to assets and liabilities held for sale in our Consolidated Balance Sheet as of September 30, 2017. In the fourth quarter of 2017, we recorded an impairment charge totaling $45 million related to one of these businesses due to a revised estimate of the business’ fair value based on current expected net sales proceeds. The impairment charge was recorded in Cost of Sales in our Consolidated Statement of Income for fiscal 2017, and consisted of goodwill and intangible assets previously classified within assets held for sale. We anticipate we will close the transactions by the end of calendar 2017, or early calendar 2018, and expect to record a net pretax gain as a result of the sale of these businesses. For further description refer to Part II, Item 8, Notes to the Consolidated Financial Statements, Note 3: Acquisition and Dispositions.

•

In the fourth quarter of fiscal 2017, our Board of Directors approved a multi-year restructuring program (the “Financial Fitness Program”), which is expected to contribute to the Company’s overall strategy of financial fitness through increased operational effectiveness and overhead reduction. Through a combination of synergies from the integration of AdvancePierre and additional elimination of non-valued added costs, the Financial Fitness Program is estimated to result in cumulative net savings of $200 million in fiscal 2018, $400 million in fiscal 2019 including new savings of $200 million, and $600 million in fiscal 2020 including additional savings of $200 million. Approximately 50-60% of these net savings, which are focused on supply chain, procurement, and overhead improvements, are expected to be realized in the Prepared Foods segment with the majority of the remaining net savings impacting the Chicken segment. Additionally, we estimate that approximately 75% of the net savings will be reflected in Cost of Sales in our Consolidated Statement of Income, with the remaining in Selling, General and Administrative.

As part of the Financial Fitness Program, we anticipate eliminating approximately 500 positions across several areas and job levels with most of the eliminated positions originating from the corporate offices in Springdale, Arkansas; Chicago, Illinois; and Cincinnati, Ohio. As a result, in the fourth quarter of fiscal 2017, the Company recognized restructuring and related charges of $150 million that consisted of $53 million severance and employee related costs, $72 million technology impairment and related costs, and $25 million for contract termination costs. The Company currently anticipates the Financial Fitness Program will result in cumulative pretax charges, once implemented, of approximately $215 million which consist primarily of severance and employee related costs, asset impairments, accelerated depreciation, incremental costs to implement new technology, and contract termination costs. The following tables set forth the pretax impact of restructuring and related charges incurred in fiscal 2017 in the Consolidated Statements of Income and the pretax impact by our reportable segments. For further description refer to Part II, Item 8, Notes to the Consolidated Financial Statements, Note 6: Restructuring and Related Charges.

in millions
		2017
Cost of Sales		$	35
Selling, general and administrative expenses		115
Total restructuring and related charges, pretax		$	150

							in millions
	2017 charges			Estimated 2018 charges			Total estimated Financial Fitness Program charges
Beef	$	8		$	6		$	14
Pork	3			2			5
Chicken	56			32			88
Prepared Foods	82			25			107
Other	1			—			1
Total restructuring and related charges, pretax	$	150		$	65		$	215

	in millions, except per share data
	2017				2016				2015
Net income attributable to Tyson	$	1,774			$	1,768			$	1,220
Net income attributable to Tyson - per diluted share	4.79				4.53				2.95

2017 – Included the following items:

•	$103 million pretax, or ($0.18) per diluted share, of AdvancePierre purchase accounting and acquisition related costs, which included a $36 million purchase accounting adjustment for the amortization of the fair value step-up of inventory, $49 million of acquisition related costs and $18 million of acquisition bridge financing fees.

•	$150 million pretax, or ($0.15) per diluted share, of restructuring and related charges.

•	$52 million pretax, or ($0.09) per diluted share, impairment charge related to our San Diego Prepared Foods operation.

•	$45 million pretax, or $0.01 per diluted share, impairment net of tax benefit related to the expected sale of a non-protein business.

2016 – Included the following items:

•	$53 million post tax, or $0.14 per diluted share, related to recognition of previously unrecognized tax benefits and audit settlements.

2015 – Included the following items:

•	$169 million pretax, or ($0.41) per diluted share, related to an impairment charge in China.

•	$59 million pretax, or ($0.09) per diluted share, related to Prepared Foods network optimization impairment charges.

•	$57 million pretax, or ($0.09) per diluted share, related to merger and integration costs.

•	$12 million pretax, or ($0.02) per diluted share, related to closure and impairment charges related to the ceasing of beef operations at our Denison facility.

•	$161 million pretax, or $0.24 per diluted share, related to a gain on sale of the Mexico operation.

•	$39 million pretax, or $0.06 per diluted share, related to the additional week in fiscal 2015.

•	$26 million post tax, or $0.06 per diluted share, related to recognition of previously unrecognized tax benefits.

•	$21 million pretax, or $0.03 per diluted share, related to a gain on sale of equity securities.

•	$8 million pretax, or $0.02 per diluted share, of insurance proceeds (net of costs) related to a legacy Hillshire Brands plant fire.

SUMMARY OF RESULTS

Sales	in millions
	2017				2016				2015
Sales	$	38,260			$	36,881			$	41,373
Change in sales volume	1.0		%		(4.6		)%
Change in average sales price	2.7		%		(6.5		)%
Sales growth	3.7		%		(10.9		)%

2017 vs. 2016 –

•	Sales Volume – Sales were positively impacted by an increase in sales volume, which accounted for an increase of $477

million. Each segment had an increase in sales volume with the Beef and Prepared Foods segments contributing to the

majority of the increase driven by better demand for our beef products and incremental volumes from the acquisition

of AdvancePierre.

•

Average Sales Price – Sales were positively impacted by higher average sales prices, which accounted for an increase of $902 million. Each segment had an increase in average sales price with the Pork, Chicken and Prepared Foods segments contributing to the majority of the increase due to strong demand for our pork products, improved mix and higher chicken pricing in our Chicken segment and better product mix in our Prepared Foods segment which was positively impacted by the acquisition of AdvancePierre.

•	The above amounts include a net increase of $508 million related to the inclusion of AdvancePierre results post

acquisition.

2016 vs. 2015 –

•

Sales Volume – Sales were negatively impacted by lower sales volume, which accounted for a decrease of $1.9 billion. Each segment had a decline in sales volume primarily attributed to the additional week in fiscal 2015. The decrease in sales volume was also attributable to the divestitures of the Mexico and Brazil chicken production operations in fiscal 2015. When excluding these impacts along with the divestiture of our Heinold Hog Markets business in the first quarter of fiscal 2015, total company sales volume increased 0.1%.

•	Average Sales Price – Sales were negatively impacted by lower average sales prices, which accounted for a decrease of $2.6 billion. Each segment had a decrease in average sales prices largely due to decreased pricing associated with lower beef, pork, and chicken prices, with the largest decrease in the Beef segment.

Cost of Sales	in millions
	2017				2016				2015
Cost of sales	$	33,177			$	32,184			$	37,456
Gross profit	5,083				4,697				3,917
Cost of sales as a percentage of sales	86.7		%		87.3		%		90.5		%

2017 vs 2016 –

•	Cost of sales increased $993 million. Higher input cost per pound increased cost of sales $588 million while higher sales volume increased cost of sales $405 million. These amounts include a net increase of $425 million related to the inclusion of AdvancePierre results post acquisition, which included $36 million from the fair value step-up of inventory as part of purchase accounting.

•	The $588 million impact of higher input cost per pound was primarily driven by:

•	Increase of approximately $170 million in our Chicken segment related to increase in freight, growout expenses and outside meat purchases, partially offset by a decrease in feed costs of $80 million.

•	Increase due to impairment charges of $44 million related to our San Diego Prepared Foods operation and $45 million related to the expected sale of a non-protein business, in addition to an increase of $17 million related to net costs associated with fires at two chicken plants.

•	Increase in raw material and other input costs of approximately $50 million in our Prepared Foods segment.

•	Increase in live hog costs of approximately $40 million in our Pork segment.

•	Increase of $35 million related to restructuring and related charges.

•	Increase in input cost per pound related to the acquisition of AdvancePierre on June 7, 2017.

•	Increase due to net realized derivative losses of $79 million for fiscal 2017, compared to net realized derivative gains of $96 million for fiscal 2016 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 costs described above. Additionally, cost of sales increased due to net unrealized losses of $40 million for fiscal 2017, compared to net unrealized gains of $11 million for fiscal 2016, primarily due to our Beef segment commodity risk management activities.

•	Decrease in live cattle costs of approximately $600 million in our Beef segment.

•	Remainder of net change is mostly due to increased cost per pound from a mix upgrade in the Chicken segment as we increased sales volume in value-added products as well as increased operating costs, freight, and plant variances across all segments, which also included $71 million of compensation and benefit integration expense.

•	The $405 million impact of higher sales volume was driven by increases in sales volume in all segments, with the majority of the increase in the Beef and Prepared Foods segment.

2016 vs. 2015 –

•	Cost of sales decreased by approximately $5.3 billion. Lower input costs per pound decreased cost of sales approximately $3.6 billion and lower sales volume decreased cost of sales approximately $1.7 billion.

•	The approximate $3.6 billion impact of lower input costs was primarily driven by:

•	Decrease in live cattle cost of approximately $2.6 billion in our Beef segment.

•	Decrease in live hog costs of approximately $360 million in our Pork segment.

•	Decrease in raw material and other input costs of approximately $300 million in our Prepared Foods segment.

•	Decreases in feed costs of approximately $170 million in our Chicken segment.

•

Decrease due to net realized derivative gains of $96 million in fiscal 2016, compared to net realized derivative losses of $102 million in fiscal 2015 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 costs described above. Additionally, cost of sales increased due to net unrealized gains of $11 million in fiscal 2016, compared to net unrealized gains of $80 million in fiscal 2015, primarily due to our Beef, Pork, and Chicken segment commodity risk management activities.

•	The $1.7 billion impact of lower sales volume was primarily due to the sale of our Mexico chicken production operation in fiscal 2015 along with the additional week in fiscal 2015.

Selling, General and Administrative	in millions
	2017				2016				2015
Selling, general and administrative	$	2,152			$	1,864			$	1,748
As a percentage of sales	5.6		%		5.1		%		4.2		%

2017 vs 2016

•	Increase of $288 million in selling, general and administrative was primarily driven by:

•	Increase of $124 million related to the AdvancePierre acquisition, which was composed of $49 million in acquisition related costs, $37 million in incremental amortization and $38 million from the inclusion of AdvancePierre results post-acquisition.

•	Increase of $115 million from restructuring and related charges.

•	Increase of $53 million in employee costs including $34 million in non-restructuring severance related expenses and $24 million compensation and benefit integration expense, which was partially offset by reduced incentive-based compensation.

•	Increase of $8 million due to an impairment related to our San Diego Prepared Foods operation.

•	Remainder of net change was primarily related to professional fees.

2016 vs. 2015 –

•	Increase of $116 million in selling, general and administrative was primarily driven by:

•	Increase of $88 million related to marketing, advertising and promotion expense to drive sales growth.

•	Increase of $71 million of employee costs including payroll and stock-based and incentive-based compensation.

•	Increase of $11 million related to bad debt expense.

•	Increase of $17 million in all other primarily related to professional fees, information technology costs and rent.

•	Decrease of $26 million due to a reduction in amortization and other expense related to our intangible assets.

•	Decrease of $25 million related to fiscal 2015 sale of our chicken production operations in Brazil and Mexico.

•	Decrease of $20 million of merger and integration costs.

Interest Income	in millions
	2017				2016				2015
	$	(7	)		$	(6	)		$	(9	)

2017/2016/2015 – Interest income remained relatively flat due to continued low interest rates.

Interest Expense	in millions
	2017				2016				2015
Cash interest expense	$	278			$	248			$	293
Non-cash interest expense	1				1				—
Total Interest Expense	$	279			$	249			$	293

2017/2016/2015 –

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Cash interest expense primarily included interest expense related to the coupon rates for senior notes and term loans and commitment/letter of credit fees incurred on our revolving credit facilities. The increase in cash interest expense in fiscal 2017 was primarily due to debt issued in connection with the AdvancePierre acquisition. The decrease in cash interest expense in fiscal 2016 was primarily due to a reduction of our debt.

•	Non-cash interest expense primarily included amounts related to the amortization of debt issuance costs and discounts/premiums on note issuances, offset by interest capitalized.

Other (Income) Expense, net	in millions
	2017				2016				2015
	$	31			$	(8	)		$	(36	)

2017 – Included $28 million of legal costs related to two former subsidiaries of Hillshire Brands, which were sold by Hillshire Brands in 1986 and 1994. Also, included $18 million of bridge financing fees related to the AdvancePierre acquisition and $19 million of income from equity earnings in joint ventures.

2016 – Included $12 million of equity earnings in joint ventures and $4 million in net foreign currency exchange losses.

2015 – Included $12 million of equity earnings in joint ventures and $21 million of gains on the sale of equity securities.

Effective Tax Rate
	2017			2016			2015
	32.3	%		31.8	%		36.3	%

The effective tax rate on continuing operations was impacted by a number of items which result in a difference between our effective tax rate and the United States statutory rate of 35%. The table below reflects significant items impacting the rate as indicated.

2017 –

•	Domestic production activity deduction reduced the rate 3.1%.

•	State income taxes increased the rate 2.3%.

2016 –

•	Domestic production activity deduction reduced the rate 2.6%.

•	Unrecognized tax benefits activity, mostly related to expiration of statutes of limitations and settlements with taxing authorities, reduced the rate 1.7%.

•	State income taxes increased the rate 2.7%.

2015 –

•	Domestic production activity deduction reduced the rate 3.7%.

•	Unrecognized tax benefits activity, mostly related to expiration of statutes of limitations, reduced the rate 1.8%.

•	State income taxes increased the rate 3.1%.

•	Foreign rate differences and valuation allowances increased the rate 3.8%.

SEGMENT RESULTS

We operate in four reportable segments: Beef, Pork, Chicken, and Prepared Foods. Other primarily includes our foreign chicken production operations in China and India, third-party merger and integration costs and corporate overhead related to Tyson New Ventures, LLC.

On June 7, 2017, we acquired AdvancePierre, a producer and distributor of value-added, convenient, ready-to-eat sandwiches, sandwich components and other entrées and snacks. AdvancePierre's results from operations subsequent to the acquisition closing are included in the Prepared Foods and Chicken segments.

The following table is a summary of segment sales and operating income (loss), which is how we measure segment income (loss).

																					in millions
	Sales												Operating Income (Loss)
	2017				2016				2015				2017				2016				2015
Beef	$	14,823			$	14,513			$	17,236			$	877			$	347			$	(66	)
Pork	5,238				4,909				5,262				645				528				380
Chicken	11,409				10,927				11,390				1,053				1,305				1,366
Prepared Foods	7,853				7,346				7,822				462				734				588
Other	349				380				879				(106		)		(81		)		(99		)
Intersegment Sales	(1,412		)		(1,194		)		(1,216		)		—				—				—
Total	$	38,260			$	36,881			$	41,373			$	2,931			$	2,833			$	2,169

Beef Segment Results																	in millions
	2017				2016				Change 2017 vs. 2016				2015				Change 2016 vs. 2015
Sales	$	14,823			$	14,513			$	310			$	17,236			$	(2,723	)
Sales Volume Change									1.8		%						(1.1		)%
Average Sales Price Change									0.4		%						(14.9		)%
Operating Income (Loss)	$	877			$	347			$	530			$	(66	)		$	413
Operating Margin	5.9		%		2.4		%						(0.4		)%

2017 vs. 2016 –

•	Sales Volume – Sales volume increased due to improved availability of cattle supply, stronger domestic demand for our beef products and increased exports.

•	Average Sales Price – Average sales price increased as demand for our beef products and strong exports outpaced the increase in live cattle supplies.

•	Operating Income – Operating income increased due to more favorable market conditions as we maximized our revenues relative to the decline in live fed cattle costs, partially offset by higher operating costs.

2016 vs. 2015 –

•	Sales Volume – Sales volume decreased due to the additional week in fiscal 2015. When excluding the additional week in fiscal 2015, sales volume increased 0.8% due to increased availability of cattle supply and better demand for our beef products despite a reduction in live cattle processing capacity due to the closure of our Denison, Iowa, facility in the fourth quarter of fiscal 2015.

•	Average Sales Price – Average sales price decreased due to higher domestic availability of beef supplies and lower livestock cost.

•	Operating Income – Operating income increased due to more favorable market conditions as we maximized our revenues relative to the decline in live fed cattle cost, in addition to reduced losses from mark-to-market open derivative positions and lower-of-cost-or market inventory adjustments that were incurred in the fourth quarter of fiscal 2015, partially offset by higher operating costs.

Pork Segment Results																	in millions
	2017				2016				Change 2017 vs. 2016				2015				Change 2016 vs. 2015
Sales	$	5,238			$	4,909			$	329			$	5,262			$	(353	)
Sales Volume Change									0.6		%						(2.5		)%
Average Sales Price Change									6.1		%						(4.4		)%
Operating Income	$	645			$	528			$	117			$	380			$	148
Operating Margin	12.3		%		10.8		%						7.2		%

2017 vs. 2016 –

•	Sales Volume – Sales volume increased due to strong demand for our pork products and increased exports.

•	Average Sales Price – Average sales price increased as demand for our pork products and strong exports outpaced the increase in live hog supplies.

•	Operating Income – Operating income increased as we maximized our revenues relative to the live hog markets, partially attributable to stronger export markets and operational and mix performance, which were partially offset by higher operating costs.

2016 vs. 2015 –

•	Sales Volume – Sales volume decreased due to the divestiture of our Heinold Hog Markets business in the first quarter of fiscal 2015 and the additional week in fiscal 2015. Excluding these impacts, sales volume grew 1.2%, driven by better demand for our pork products.

•	Average Sales Price – Average sale price decreased due to increased live hog supplies and lower livestock cost.

•	Operating Income – Operating income increased as we maximized our revenues relative to the decline in live hog markets and due to better plant utilization associated with increased volume processed, which were partially offset by higher operating costs, losses incurred in our live hog operation and the additional week in fiscal 2015.

Chicken Segment Results																	in millions
	2017				2016				Change 2017 vs. 2016				2015				Change 2016 vs. 2015
Sales	$	11,409			$	10,927			$	482			$	11,390			$	(463	)
Sales Volume Change									1.2		%						(2.6		)%
Average Sales Price Change									3.1		%						(1.5		)%
Operating Income	$	1,053			$	1,305			$	(252	)		$	1,366			$	(61	)
Operating Margin	9.2		%		11.9		%						12.0		%

2017 vs. 2016 –

•	Sales Volume – Sales volume was up due to better demand for our chicken products along with the incremental volume from the AdvancePierre acquisition.

•	Average Sales Price – Average sales price increased due to sales mix changes.

•

Operating Income – Operating income for fiscal 2017 was below prior year record results due to higher operating costs, which included increased compensation and benefit integration expense of $41 million, $17 million of incremental net costs attributable to two plant fires, in addition to restructuring and related charges of $56 million, partially offset with lower feed ingredient costs of approximately $80 million.

2016 vs. 2015 –

•	Sales Volume – Sales volume decreased primarily due to the additional week in fiscal 2015, in addition to a planned temporary decrease in production in the fourth quarter of fiscal 2016 while we transitioned our mix to sell more value-added and less commodity products along with optimizing our mix and our buy versus grow strategy.

•	Average Sales Price – Average sales price decreased as feed costs declined, partially offset by mix changes.

•	Operating Income – Operating income was negatively impacted by the additional week in fiscal 2015 along with increases in operating costs and marketing, advertising and promotion expenses, partially offset by lower feed costs of $170 million.

Prepared Foods Segment Results													in millions
	2017				2016				Change 2017 vs. 2016				2015				Change 2016 vs. 2015
Sales	$	7,853			$	7,346			$	507			$	7,822			$	(476	)
Sales Volume Change									3.2		%						(2.8		)%
Average Sales Price Change									3.6		%						(3.4		)%
Operating Income	$	462			$	734			$	(272	)		$	588			$	146
Operating Margin	5.9		%		10.0		%						7.5		%

2017 vs. 2016 –

•	Sales Volume – Sales volume increased due to improved demand for our retail products and incremental volumes from the AdvancePierre acquisition, partially offset by declines in foodservice.

•	Average Sales Price – Average sales price increased due to better product mix which was positively impacted by the acquisition of AdvancePierre as well as higher input costs of $50 million.

•

Operating Income – Operating income decreased due to impairments of $52 million related to our San Diego operation and of $45 million related to the expected sale of a non-protein business, $30 million of compensation and benefit integration expense, $34 million related to AdvancePierre purchase accounting and acquisition related costs, $82 million of restructuring and related charges, in addition to higher operating costs at some of our facilities. Additionally, Prepared Foods operating income was positively impacted by $538 million in synergies, of which $97 million was incremental synergies in fiscal 2017 above the $156 million of synergies realized in fiscal 2016 and $285 million realized in fiscal 2015. The positive impact of these synergies to operating income was partially offset with investments in innovation, new product launches and supporting the growth of our brands.

2016 vs. 2015 –

•	Sales Volume – Sales volume decreased due to the additional week in fiscal 2015 and lower sales volume in the first six months of fiscal 2016 due to changes in sales mix and the carryover effect of the 2015 turkey avian influenza occurrence into the first half of fiscal 2016.

•	Average Sales Price – Average sales price decreased primarily due to a decline in input costs, partially offset by a change in product mix.

•

Operating Income – Operating income increased due to mix changes as well as lower input costs of approximately $300 million, partially offset with higher marketing, advertising, and promotion spend along with the additional week in fiscal 2015. Additionally, Prepared Foods operating income was positively impacted by $441 million in synergies, of which $156 million was incremental synergies in fiscal 2016 above the $285 million of synergies realized in fiscal 2015. The positive impact of these synergies to operating income was partially offset with heavy investments in innovation, new product launches and supporting the growth of our brands.

Other Results													in millions
	2017				2016				Change 2017 vs. 2016				2015				Change 2016 vs. 2015
Sales	$	349			$	380			$	(31	)		$	879			$	(499	)
Operating Loss	(106		)		(81		)		(25		)		(99		)		18

2017 vs. 2016 –

•	Sales – Sales decreased due to a decline in average sales price and foreign produced sales volume.

•	Operating loss – Operating loss increased primarily from $43 million of AdvancePierre third-party acquisition related costs, partially offset by better performance at our China operation and reduced other merger and integration costs outside of AdvancePierre.

2016 vs. 2015 –

•	Sales – Sales decreased due to the sale of the Mexico and Brazil chicken production operations in fiscal 2015.

•	Operating loss – Operating loss improved due to better performance at our China operation and reduced third-party merger and integration costs partially offset by the results of the Mexico chicken production operation sold in fiscal 2015.

LIQUIDITY AND CAPITAL RESOURCES

Our cash needs for working capital, capital expenditures, growth opportunities, the repurchases of senior notes, repayment of term loans 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.

Cash Flows from Operating Activities					in millions
	2017				2016				2015
Net income	$	1,778			$	1,772			$	1,224
Non-cash items in net income:
Depreciation and amortization	761				705				711
Deferred income taxes	(39		)		84				38
Gain on dispositions of businesses	—				—				(177		)
Impairment of assets	214				45				285
Stock-based compensation expense	92				81				69
Other, net	(57		)		(34		)		71
Net changes in operating assets and liabilities	(150		)		63				349
Net cash provided by operating activities	$	2,599			$	2,716			$	2,570

•	Gain on dispositions of businesses in fiscal 2015 primarily relates to the sale of the Mexico chicken production operation.

•	Impairment of assets included the following:

•

2017 – Included a $73 million impairment of assets associated with restructuring and related charges, $45 million impairment related to the expected sale of a non-protein business and an impairment of $51 million related to our San Diego Prepared Foods operation. For further description regarding these charges refer to Part II, Item 8, Notes to Consolidated Financial Statements, Note 3: Acquisitions and Dispositions, Note 6: Restructuring and Related Charges and Note 10: Other Income and Charges.

•	2015 – Included $59 million of impairment charges related to our Prepared Foods network optimization and $169 million of impairments related to our China operation. For further description regarding these charges refer to Part II, Item 8, Notes to Consolidated Financial Statements, Note 3: Acquisitions and Dispositions and Note 10: Other Income and Charges.

•	Other, net increase in fiscal 2015 is primarily driven by non-cash pension expense.

•	Cash flows associated with changes in operating assets and liabilities:

•

2017 – Decreased primarily due to higher accounts receivable and inventory, partially offset by increased accounts payable and increased accrued salaries and wages. The higher accounts receivable, inventory and accounts payable balances are primarily attributable to price increases associated with higher input costs and the timing of sales and payments. The increase in accrued salaries and wages is primarily attributable to the restructuring accrual. For further description regarding this accrual refer to Part II, Item 8, Notes to Consolidated Financial Statements, Note 6: Restructuring and Related Charges.

•

2016 – Increased primarily due to decreased inventory and accounts receivable balances and increased accrual for incentive compensation, which were partially offset by decreased accounts payable, increased tax receivable and contributions to pension plans. The decreased inventory, accounts receivable and accounts payable balances were largely due to decreased raw material costs and timing of sales and payments.

•	2015 – Increased primarily due to the decrease in inventory and accounts receivable balances and an increase in taxes payable, partially offset by the decrease in accounts payable. The decreased inventory, accounts receivable and accounts payable balances were largely due to decreased raw material costs and timing of sales and payments.

Cash Flows from Investing Activities									in millions
	2017				2016				2015
Additions to property, plant and equipment	$	(1,069	)		$	(695	)		$	(854	)
(Purchases of)/Proceeds from marketable securities, net	(18		)		(9		)		14
Acquisitions, net of cash acquired	(3,081		)		—				—
Proceeds from sale of businesses	—				—				539
Other, net	4				20				31
Net cash used for investing activities	$	(4,164	)		$	(684	)		$	(270	)

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

•	Capital spending for fiscal 2018 is expected to approximate $1.4 billion and will include spending for production growth, safety, animal well-being, infrastructure replacements and upgrades, and operational improvements that will result in production and labor efficiencies, yield improvements and sales channel flexibility.

•	Purchases of marketable securities included funding for our deferred compensation plans.

•	Proceeds from sale of businesses primarily included proceeds, net of cash transferred, from the sale of the Mexico and Brazil operations.

•

Acquisition, net of cash acquired, in fiscal 2017 related to acquiring AdvancePierre as part of our strategy to sustainably feed the world with the fastest growing portfolio of protein-packed brands. AdvancePierre's results from operations subsequent to the acquisition closing are included in the Prepared Foods and Chicken segments. For further description regarding this transaction refer to Part II, Item 8, Notes to the Consolidated Financial Statements, Note 3: Acquisition and Dispositions.

Cash Flows from Financing Activities									in millions
	2017				2016				2015
Payments on debt	$	(3,159	)		$	(714	)		$	(1,995	)
Proceeds from issuance of long-term debt	5,444				1				501
Borrowings on revolving credit facility	1,810				1,065				1,345
Payments on revolving credit facility	(2,110		)		(765		)		(1,345		)
Proceeds from issuance of commercial paper	8,138				—				—
Repayments of commercial paper	(7,360		)		—				—
Payment of AdvancePierre TRA liability	(223		)		—				—
Purchases of Tyson Class A common stock	(860		)		(1,944		)		(495		)
Dividends	(319		)		(216		)		(147		)
Stock options exercised	154				128				84
Other, net	15				68				17
Net cash provided by (used for) financing activities	$	1,530			$	(2,377	)		$	(2,035	)

•	Payments on debt included –

•	2017 – We extinguished $1,146 million of AdvancePierre's debt, which we assumed in the acquisition, and fully retired the $1,800 million term loan tranche due June 2020, which was issued as part of the AdvancePierre acquisition financing.

•	2016 – We fully retired the $638 million outstanding balance of our 6.60% senior notes due April 2016.

•	2015 – We fully retired the $401 million outstanding balance of the 2.75% senior notes due September 2015 and paid $353 million related to the 5-year tranche A term loan facility and $1,172 million related to the 3-year tranche A term loan facility.

•	Proceeds from issuance of long-term debt and borrowings/payments on revolving credit facility –

•

2017 – Proceeds from issuance of long-term debt included a $1,800 million term loan and $2,743 million from senior unsecured notes after original issue discounts of $7 million, to fund the AdvancePierre acquisition. In addition, proceeds from issuance of long-term debt included $899 million of senior unsecured notes after original issue discounts of $1 million that was used to repay amounts outstanding under the term loan tranche due June 2020. We had net payments on our revolving credit facility of $300 million in fiscal 2017, which was used for general corporate purposes.

•

2016 – We had borrowings of $1,065 million and payments of $765 million on our revolving credit facility for fiscal 2016. We utilized our revolving credit facility to balance our cash position with the retirement of the 2016 Notes and changes in working capital. Additionally, total debt of our foreign subsidiaries was $7 million at October 1, 2016, $6 million of which is classified as long-term in our Consolidated Balance Sheets.

•

2015 – $500 million from term loans, the full balance of which was used to prepay outstanding borrowings under the 3-year tranche A term loan facility. In addition, we had borrowings and payments on our revolver of $1,345 million for fiscal 2015. We utilized our revolving credit facility to balance our cash position with term loan deleveraging and changes in working capital. Additionally, total debt of our foreign subsidiaries was $10 million at October 3, 2015, all of which is classified as long-term in our Consolidated Balance Sheets.

•	Proceeds from issuance and repayment of short-term debt in the form of commercial paper –

•	2017- We had net issuances of $778 million in unsecured short-term promissory notes (commercial paper) pursuant to our commercial paper program. We used the net proceeds from the commercial paper program as partial financing for the AdvancePierre acquisition and for general corporate purposes.

•	Payments on TRA obligation in the acquisition of AdvancePierre –

•	2017- AdvancePierre Tax Receivable Agreement (TRA) liability of $223 million was paid to its former shareholders as a result of our assumption of this obligation in the acquisition of AdvancePierre.

•	Purchases of Tyson Class A common stock include –

•	$797 million, $1,868 million, and $455 million for shares repurchased pursuant to our share repurchase program in fiscal 2017, 2016 and 2015, respectively.

•	$63 million, $76 million and $40 million for shares repurchased to fund certain obligations under our equity compensation plans in fiscal 2017, 2016 and 2015, respectively.

•	We currently do not plan to repurchase shares, other than to fund obligations under equity compensation programs, until we reach our net debt to EBITDA target of around 2x. We currently anticipate reaching this goal by the third quarter of fiscal 2018.

•	Dividends paid during fiscal 2017 included a 50% increase to our fiscal 2016 quarterly dividend rate.

•	Other, net increase in fiscal 2016 is primarily driven by tax benefits associated with stock option exercises.

Liquidity																in millions
		Commitments Expiration Date		Facility Amount				Outstanding Letters of Credit (no draw downs)				Outstanding Amount Borrowed				Amount Available
Cash and cash equivalents																$	318
Short-term investments																3
Revolving credit facility		May 2022		$	1,500			$	8			$	—			1,492
Commercial Paper																(778		)
Total liquidity																$	1,035

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

•	At September 30, 2017, we had current debt of $906 million, which we intend to repay with cash generated from our operating activities and other liquidity sources.

•	The revolving credit facility supports our short-term funding needs and letters of credit and also serves to backstop our commercial paper program. The letters of credit issued under this facility are primarily in support of leasing obligations and workers’ compensation insurance programs. Our maximum borrowing under the revolving credit facility during fiscal 2017 was $590 million.

•	We expect net interest expense will approximate $325 million for fiscal 2018.

•

At September 30, 2017, approximately $308 million of our cash was held in the accounts of our foreign subsidiaries. Generally, we do not rely on the foreign cash as a source of funds to support our ongoing domestic liquidity needs. Rather, 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. The repatriation of cash balances from certain of our foreign subsidiaries could have adverse tax consequences or be subject to regulatory capital requirements; however, those balances are generally available without legal restrictions to fund ordinary business operations. United States income taxes, net of applicable foreign tax credits, have not been provided on undistributed earnings of foreign subsidiaries. Our intention is to reinvest the cash held by foreign subsidiaries permanently or to repatriate the cash only when it is tax efficient to do so.

•	Our ratio of short-term assets to short-term liabilities ("current ratio") was 1.55 to 1 and 1.77 to 1 at September 30, 2017, and October 1, 2016, respectively.

Capital Resources

Credit Facility

Cash flows from operating activities and current 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 $1.5 billion, to provide additional liquidity for working capital needs, letters of credit and to backstop our commercial paper program. As of September 30, 2017, we had no outstanding borrowings and $8 million of outstanding letters of credit issued under this facility, none of which were drawn upon, which left $1,492 million available for borrowing. Our revolving credit facility is funded by a syndicate of 41 banks, with commitments ranging from $0.3 million to $106 million per bank. The syndicate includes bank holding companies that are required to be adequately capitalized under federal bank regulatory agency requirements.

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 $800 million. The maturities of the notes may vary, but may not exceed 397 days from the date of issuance. As of September 30, 2017, $778 million was outstanding under this program with maturities less than 45 days.

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 30, 2017, and October 1, 2016, the ratio of our net debt to EBITDA was 2.7x and 1.7x, respectively. Refer to Part II, Item 6, Selected Financial Data, for an explanation and reconciliation to comparable GAAP measures. The increase in this ratio for fiscal 2017 is primarily a result of the incremental debt from the AdvancePierre acquisition.

Credit Ratings

Term Loans: Tranche B due August 2019 and Tranche B due August 2020

Standard & Poor's Rating Services, a Standard & Poor's Financial Services LLC business (S&P), credit rating for both term loans is "BBB." Moody’s Investor Service, Inc. (Moody's) credit rating for both term loans is "Baa2." Fitch Ratings, a wholly owned subsidiary of Fimlac, S.A. (Fitch) credit rating for both term loans is "BBB." The below table outlines the borrowing spread on the outstanding principal balances of our term loans that correspond to the ratings levels from S&P, Moody's and Fitch.

Ratings Level (S&P/Moody's/Fitch)	Tranche B due August 2019 Borrowing Spread		Tranche B due August 2020 Borrowing Spread
BBB+/Baa1/BBB+ or higher	1.250	%	0.750	%
BBB/Baa2/BBB (current level)	1.500	%	0.800	%
BBB-/Baa3/BBB-	1.750	%	1.125	%
BB+/Ba1/BB+	2.000	%	1.375	%
BB/Ba2/BB or lower	2.500	%	1.375	%

Revolving Credit Facility

S&P’s corporate credit rating for Tyson Foods, Inc. is "BBB." Moody’s, senior unsecured, long-term debt rating for Tyson Foods, Inc. is "Baa2." Fitch's issuer default rating for Tyson Foods, Inc. is "BBB." The below table outlines the fees paid on the unused portion of the facility (Facility Fee Rate) and letter of credit fees (Undrawn Letter of Credit Fee and Borrowing Spread) depending on the rating levels of Tyson Foods, Inc. from S&P, Moody's and Fitch.

Ratings Level (S&P/Moody's/Fitch)	Facility Fee Rate		Undrawn Letter of Credit Fee and Borrowing Spread
A-/A3/A- or above	0.100	%	1.000	%
BBB+/Baa1/BBB+	0.125	%	1.125	%
BBB/Baa2/BBB (current level)	0.150	%	1.250	%
BBB-/Baa3/BBB-	0.200	%	1.500	%
BB+/Ba1/BB+ or lower	0.250	%	1.750	%

In the event the rating levels are split, the applicable fees and spread will be based upon the rating level in effect for two of the rating agencies, or, if all three rating agencies have different rating levels, the applicable fees and spread will be based upon the rating level that is between the rating levels of the other two rating agencies.

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 minimum interest expense coverage and maximum debt-to-capitalization ratios.

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 30, 2017.

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 $195 million at the end of fiscal 2017 as compared to an underfunded position of $336 million at the end of fiscal 2016.

We expect to contribute approximately $38 million of cash to our pension plans in fiscal 2018 as compared to approximately $53 million in fiscal 2017 and $64 million in fiscal 2016. 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 2018 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 debt of outside third parties, including leases and 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.

CONTRACTUAL OBLIGATIONS

The following table summarizes our contractual obligations as of September 30, 2017:

																	in millions
	Payments Due by Period
	2018				2019-2020				2021-2022				2023 and thereafter				Total
Debt and capital lease obligations:
Principal payments (1)	$	906			$	3,274			$	1,518			$	4,552			$	10,250
Interest payments (2)	341				613				492				2,159				3,605
Guarantees (3)	22				57				44				15				138
Operating lease obligations (4)	137				174				80				73				464
Purchase obligations (5)	1,750				646				195				110				2,701
Capital expenditures (6)	1,084				303				—				—				1,387
Other long-term liabilities (7)	—				—				—				—				581
Total contractual commitments	$	4,240			$	5,067			$	2,329			$	6,909			$	19,126

(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 30, 2017, and expected payment dates.

(3)	Amounts include guarantees of debt of outside third parties, which consist of leases and 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)	Amounts include minimum lease payments under lease agreements.

(5)

Amounts include agreements 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, livestock contracts and fixed grower fees, 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 30, 2017. 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 cancelable. 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 30, 2017.

(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 of these payments beyond fiscal 2018; 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 $258 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 $296 million and related interest and penalties of $63 million at September 30, 2017, recorded as liabilities.

The potential maximum contractual obligation associated with our cash flow assistance programs at September 30, 2017, based on the estimated fair values of the livestock supplier’s net tangible assets on that date, aggregated to approximately $380 million. There were no receivables under these programs at September 30, 2017.

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.

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.

Description		Judgments and Uncertainties		Effect if Actual Results Differ From Assumptions
Contingent liabilities
We are subject to lawsuits, investigations and other claims related to wage and hour/labor, 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.		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.		We have not made any material changes in the accounting methodology used to establish our contingent liabilities 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 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.
Marketing, advertising and promotion costs
We promote our products with marketing, advertising, trade promotions, and consumer incentives. These programs include, but are not limited to, coupons, discounts, rebates, volume-based incentives, cooperative advertising, and other programs. Marketing, advertising, and promotion costs are charged to operations in the period incurred. We accrue costs based on the estimated performance, historical utilization and redemption rates of each program. Cash consideration given to customers is considered a reduction in the price of our products, thus recorded as a reduction to sales. The remainder of marketing, advertising and promotion costs is recorded as a selling, general and administrative expense.		Recognition of the costs related to these programs contains uncertainties due to judgment required in estimating the potential performance, utilization and redemption rates of each program. These estimates are based on many factors, including experience of similar promotional programs.		We have not made any material changes in the accounting methodology used to establish our marketing, advertising, and promotion accruals 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 marketing, advertising, and promotion accruals. 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 our marketing, advertising, and promotion accruals at September 30, 2017, would impact pretax earnings by approximately $15 million.

Description		Judgments and Uncertainties		Effect if Actual Results Differ From Assumptions
Accrued self-insurance
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 within the central to high point of the actuarial range.		Our self-insurance liability contains uncertainties due to assumptions required and judgment 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.		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% increase in the actuarial estimate at September 30, 2017, would result in an increase in the amount we recorded for our self-insurance liability of approximately $27 million. A 10% decrease in the actuarial estimate at September 30, 2017, would result in a decrease in the amount we recorded for our self-insurance liability of approximately $11 million.

Description		Judgments and Uncertainties		Effect if Actual Results Differ From Assumptions
Defined benefit pension plans
We sponsor nine defined benefit pension plans that provide retirement benefits to certain employees. We also participate in a multi-employer plan that provides defined benefits to certain employees 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 $28 million in fiscal 2017. The projected benefit obligation was $1,707 million at the end of fiscal 2017. Unrecognized actuarial gain was $44 million at the end of fiscal 2017. We currently expect net periodic benefit cost for fiscal 2018 to be approximately $15 million, excluding the pending settlement as described in Note 15: Pension and Other Postretirement Benefits. Plan assets are currently comprised of approximately 87% fixed income securities and 9% equity securities. Fixed income securities can include, but are not limited to, direct bond investments and pooled or indirect bond investments. Other investments may include, but are not limited to, international and domestic equities, real estate, commodities and private equity. We expect to contribute approximately $38 million of cash to our pension plans in fiscal 2018. The exact amount of cash contributions made to pension plans in any year is dependent upon a number of factors, including minimum funding requirements.		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 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 employees. 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.		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% increase in the discount rate at September 30, 2017, would result in a decrease in the projected benefit obligation and net periodic benefit cost of approximately $187 million and $19 million, respectively. A 1% decrease in the discount rate at September 30, 2017, would result in an increase in the projected benefit obligation and net periodic benefit cost of approximately $229 million and $14 million, respectively. A 1% change in the return on plan assets at September 30, 2017, would impact the net periodic benefit cost by approximately $15 million. 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 that the effect of changes in assumptions are not necessarily linear.

Description		Judgments and Uncertainties		Effect if Actual Results Differ From Assumptions
Income taxes
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. Federal income tax includes an estimate for taxes on earnings of foreign subsidiaries expected to be taxable upon remittance to the United States, except for 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.		Changes in tax laws and rates could affect recorded deferred tax assets and liabilities in the future. 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.		We do not believe there is a reasonable likelihood there will be a material change in the tax related balances or valuation allowances. However, due to the complexity of some of these 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.

Impairment of long-lived assets and definite life intangibles
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. 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 impairment charges related to long-lived assets and definite life intangibles of $214 million, $45 million and $262 million, in fiscal 2017, 2016 and 2015, respectively.		Our impairment analysis contains uncertainties due to judgment in assumptions, including useful lives and intended use of assets, observable market valuations, forecasted sales, operating margins, growth rates, 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.		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. Additionally, we continue to evaluate our international operations and strategies. 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.

Impairment of goodwill and indefinite life intangible assets

Description: Goodwill is evaluated 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 be more likely than not 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. We can elect to forgo the qualitative assessment and perform the quantitative test.

In January 2017, the FASB issued updated guidance simplifying the accounting for goodwill impairment. The guidance removes Step 2 of the goodwill impairment test, which required a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. We early adopted this guidance in the third quarter of fiscal 2017; however, the adoption did not have an impact to our fiscal 2017 goodwill impairment assessment. For further description of this new guidance, refer to Part II, Item 8, Notes to Consolidated Financial Statements, Note 2: Changes in Accounting Principles.

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. We elected to forgo the qualitative assessment on our indefinite life intangible assets for the fiscal 2017 impairment test.

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 prior to 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 or a sustained decline in market capitalization.

Judgments and Uncertainties: We estimate the fair value of our reporting units using a combination of various valuation techniques, including an income approach (discounted cash flow analysis) and market approaches (EBITDA multiples of comparable publicly-traded companies and precedent transactions). Our primary technique is discounted cash flow analysis. These approaches use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy and requires us to make various judgmental assumptions about sales, operating margins, growth rates and discount rates.

We include assumptions about sales, operating margins and growth rates which consider our budgets, business plans and economic projections, and are believed to reflect market participant views which would exist in an exit transaction. Assumptions are also made for varying perpetual growth rates for periods beyond the long-term business plan period. Generally, we utilize normalized operating margin assumptions based on future expectations and operating margins historically realized in the reporting units' industries.

Our Prepared Foods reporting unit, which is our Prepared Foods operating segment, had goodwill at September 30, 2017, totaling $3,678 million. We generally assumed operating margins in future years would be in our normalized range of 10% to 12%, as we believe this is consistent with market participant views in an exit transaction. Had we assumed future operating margins consistent with those realized in the current fiscal year, we would have failed the quantitative step of the annual impairment test, which may have resulted in a material goodwill impairment loss. The current year Prepared Foods reporting unit results were not indicative of future market participant expectations in an exit transaction primarily due to unusual items in fiscal 2017 including $213 million of charges related to an acquisition, impairment of our San Diego operation, impairment associated with the expected sale of a non-protein business, and restructuring and related charges. Additionally, we are in the process of divesting three non-protein businesses and integrating AdvancePierre’s prepared operations into the Prepared Foods reporting unit, as well as executing our Financial Fitness Program which should collectively improve operating results in future periods. To pass the first step of the annual impairment test in fiscal 2017, the Prepared Foods reporting unit’s projected operating margins, utilizing the discounted cash flow valuation technique, had to average 6.6% (breakeven). We exceeded the breakeven operating margin level for the first nine months of fiscal 2017, as well as each of the previous two fiscal years, and expect to well exceed it in fiscal 2018 and in future years.

The fair value of our indefinite life intangible assets is calculated principally using relief-from-royalty and multi-period excess earnings 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, operating margins, growth rates, royalty rates and discount rates based on budgets, business plans, economic projections, anticipated future cash flows and marketplace data.

Our impairment analysis contains uncertainties due to uncontrollable events that could positively or negatively impact the anticipated future economic and operating conditions.

Effect if Actual Results Differ From Assumptions: We have not made any material changes in the accounting methodology used to evaluate impairment of goodwill and intangible assets during the last three years.

During fiscal 2017, 2016 and 2015, all of our material reporting units that underwent a quantitative test passed the goodwill impairment analysis. In fiscal 2015, we recorded a $23 million full impairment of an immaterial reporting unit’s goodwill.

Some of the inherent estimates and assumptions used in determining fair value of the reporting units and indefinite life intangible assets are outside the control of management, including interest rates, cost of capital, tax rates, market EBITDA comparables and credit ratings. While we believe we have made reasonable estimates and assumptions to calculate the fair value of the reporting units and indefinite life intangibles, it is possible a material change could occur. If our actual results are not consistent with our estimates and assumptions used to calculate fair value, it could result in additional material impairments of our goodwill.

All of our material reporting units' estimated fair value exceeded their carrying value by more than 20% at the date of their most recent estimated fair value determination. Consequently, we do not currently consider any of our material reporting units at significant risk of impairment.

The discount rate used in our annual goodwill impairment test increased to 6.7% in fiscal 2017 from 6.2% in fiscal 2016. Discount rates continue to be low compared to historical levels. A 54% increase in the discount rate would have caused the carrying value of our Prepared Foods reporting unit, with $3,678 million of goodwill at September 30, 2017, to exceed its discounted cash flows' fair value.

Our fiscal 2017, 2016, and 2015 indefinite life intangible assets impairment analysis did not result in an impairment charge. All indefinite life intangible assets’ estimated fair value exceeded their carrying value by more than 20% at the date of their most recent estimated fair value determination. Consequently, we do not currently consider any of our material indefinite life intangible assets at significant risk of impairment.

The discount rate used in our annual indefinite life intangible assets impairment test was 7.9% in fiscal 2017 and fiscal 2016. A 20% increase in the discount rate would have caused the carrying value of one intangible asset, which has a carrying value of $533 million, to exceed fair value.