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, third-party merger and integration costs and corporate overhead related to Tyson New Ventures, LLC.

In fiscal 2017, we acquired and consolidated AdvancePierre, a producer and distributor of value-added, convenient, ready-to-eat sandwiches, sandwich components and other entrées and snacks, and in fiscal 2018, we acquired Original Philly, a valued added protein business. The results from operations of these businesses are included in the Prepared Foods and Chicken segments. In fiscal 2018, we acquired Tecumseh, a vertically integrated value-added protein business, and American Proteins, a poultry rendering and blending operation as part of our strategic expansion and sustainability initiatives. The results from operations of these businesses are included in our Chicken segment. For further description of these transactions, refer to Part II, Item 8, Notes to Consolidated Financial Statements, Note 3: Acquisitions and Dispositions.

In fiscal 2018, we completed the sale of four non-protein businesses as part of our strategic focus on protein brands. All of these businesses were part of our Prepared Foods segment and included Sara Lee® Frozen Bakery, Kettle, Van’s®, and TNT Crust and produced items such as frozen desserts, waffles, snack bars, soups, sauces, sides and pizza crusts. The sales included the Chef Pierre®, Bistro Collection®, Kettle Collection™, and Van’s® brands, a license to use the Sara Lee® brand in various channels, as well as our Tarboro, North Carolina, Fort Worth, Texas, Traverse City, Michigan, and Green Bay, Wisconsin prepared foods facilities. For further description of these transactions, refer to Part II, Item 8, Notes to Consolidated Financial Statements, Note 3: Acquisitions and Dispositions.

OVERVIEW

•	Fiscal year – Our accounting cycle resulted in a 52-week year for fiscal 2018, 2017 and 2016.

•

General – Our fiscal 2018 operating income increased compared to fiscal 2017, as record Beef and Prepared Foods segment results were partially offset by a decline in Chicken and Pork segment margins. In fiscal 2018, our results were impacted by $109 million of one-time cash bonus to frontline employees, as we continued to make investments in our talent, $68 million impairment, net of realized gains, associated with the divestitures of non-protein businesses, and $59 million of restructuring and related charges. Sales increased 5% in fiscal 2018 over fiscal 2017, primarily due to increased sales volumes and average sales prices in Beef, Chicken and Prepared Foods.

•

Market Environment – According to the United States Department of Agriculture (USDA), domestic protein production (beef, pork, chicken and turkey) increased approximately 2% in fiscal 2018 compared to fiscal 2017. We continue to monitor recent trade and tariff activity and its potential impact to exports and inputs costs across all of our segments. Currently, we are experiencing impacts to domestic and export prices, primarily chicken and pork, resulting from uncertainty in trade policies and increased tariffs. Additionally, all segments experienced increased freight and labor costs. We will pursue recovery of increased costs related to tariffs, freight and labor through pricing. The Beef segment experienced strong export demand and more favorable domestic market conditions associated with an increase in cattle supply. With excess domestic availability of pork products, the Pork segment experienced periods of challenging market conditions despite decreased input costs. Our Chicken segment also faced challenging market conditions associated with increased domestic availability of supply, sluggish demand, reduced export prices and higher feed ingredient costs. Our Prepared Foods segment continued its strong performance despite experiencing reduced volumes as we divested of certain non-protein businesses.

•	Margins – Our total operating margin was 7.6% in fiscal 2018. Operating margins by segment were as follows:

•	Beef – 6.5%

•	Pork – 7.4%

•	Chicken –7.2%

•	Prepared Foods – 10.0%

•	Liquidity – We generated approximately $3 billion of operating cash flows during fiscal 2018. At September 29, 2018, we had $1.4 billion of liquidity, which included $270 million of cash and cash equivalents and the availability under our revolving credit facility after deducting amounts outstanding under our commercial paper program.

•	Strategy - Our strategy is to sustainably feed the world with the fastest growing protein brands. We intend to achieve our strategy as we: grow our business through differentiated capabilities; deliver ongoing financial fitness through continuous improvement; and sustain our company and our world for future generations.

•

During fiscal 2018, we acquired three operations for a total of approximately $1.5 billion, net of cash acquired. These operations, which consisted of American Proteins Inc., a poultry rendering and blending operation, Tecumseh Poultry, LLC, a vertically integrated valued-added business, and Original Philly Holdings, Inc., a value-added protein business, were acquired as part of our growth and sustainability initiatives and our acquisition strategy of new brands, new capabilities, scale and synergy, and new geographies and markets. For further description refer to Part II, Item 8, Notes to the Consolidated Financial Statements, Note 3: Acquisition and Dispositions.

•

During fiscal 2017, we acquired AdvancePierre, a producer and distributor of value-added, convenient, ready-to-eat sandwiches, sandwich components and other entrées and snacks, 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. For further description refer to Part II, Item 8, Notes to the Consolidated Financial Statements, Note 3: Acquisition and Dispositions.

•

In August 2018, we reached a definitive agreement to buy the Keystone Foods business (“Keystone”) from Marfrig Global Foods for $2.16 billion in cash. The anticipated acquisition of Keystone, a major supplier to the growing global foodservice industry, is our latest investment in the furtherance of our growth strategy and expansion of our value-added protein capabilities. The transaction is expected to close in the first quarter or early second quarter of fiscal 2019 and is subject to customary closing conditions, including regulatory approvals, however, there can be no assurance that the acquisition will close at such time. We expect the majority of Keystone’s domestic results to be included in the Chicken segment and its international results to be in included in Other for segment presentation.

•

During fiscal 2018, we sold four non-protein operations for net proceeds of $805 million, as part of our strategic focus on protein brands. These operations, which were all part of our Prepared Foods segment, included Sara Lee® Frozen Bakery, Van’s®, Kettle and TNT Crust. For further description refer to Part II, Item 8, Notes to the Consolidated Financial Statements, Note 3: Acquisitions 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 business acquisitions and additional elimination of non-valued added costs, the program is focused on supply chain, procurement and overhead improvements, and net savings are expected to be realized in the Prepared Foods and Chicken segments.

The Financial Fitness Program included the elimination of approximately 550 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, the Company recognized restructuring and related charges of $59 million and $150 million, in fiscal 2018 and fiscal 2017, respectively. In fiscal 2018, these charges consisted primarily of incremental costs to implement new technology and accelerated depreciation of technology assets. In fiscal 2017, these charges consisted of $53 million severance and employee related costs, $72 million technology impairment and related costs and $25 million of contract termination costs. The Company currently anticipates the Financial Fitness Program will result in cumulative pretax charges, once implemented, of approximately $253 million which consist primarily of severance and employee related costs, impairments and accelerated depreciation of technology assets, incremental costs to implement new technology, and contract termination costs. Through September 29, 2018, $209 million of the estimated $253 million total pretax charges, has been recognized. The majority of the remaining estimated charges are related to incremental costs to implement new technology. The following tables set forth the pretax impact of restructuring and related charges in the Consolidated Statements of Income and the pretax impact by our reportable segments. For further description refer to Part II, Item 8, Notes to the Consolidated Financial Statements, Note 6: Restructuring and Related Charges.

in millions
	2018			2017
Cost of Sales	$	—		$	35
Selling, general and administrative expenses	59			115
Total restructuring and related charges, pretax	$	59		$	150

										in millions
	2017 charges			2018 charges			Estimated future charges			Total estimated Financial Fitness Program charges
Beef	$	8		$	4		$	6		$	18
Pork	3			1			3			7
Chicken	56			30			16			102
Prepared Foods	82			24			19			125
Other	1			—			—			1
Total restructuring and related charges, pretax	$	150		$	59		$	44		$	253

	in millions, except per share data
	2018				2017				2016
Net income attributable to Tyson	$	3,024			$	1,774			$	1,768
Net income attributable to Tyson - per diluted share	8.19				4.79				4.53

2018 – Included the following items:

•	$1,003 million post tax, or $2.71 per diluted share, tax benefit from remeasurement of net deferred tax liabilities at lower enacted tax rates.

•	$109 million pretax, or ($0.22) per diluted share, related to one-time cash bonus to frontline employees.

•	$68 million pretax, or ($0.34) per diluted share, impairments net of realized gains associated with the divestitures of non-protein businesses.

•	$59 million pretax, or ($0.12) per diluted share, of restructuring and related charges.

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.

SUMMARY OF RESULTS

Sales	in millions
	2018				2017				2016
Sales	$	40,052			$	38,260			$	36,881
Change in sales volume	2.5		%		1.0		%
Change in average sales price	2.1		%		2.7		%
Sales growth	4.7		%		3.7		%

2018 vs. 2017 –

•

Sales Volume – Sales were positively impacted by an increase in sales volume, which accounted for an increase of $1,041 million. The Beef, Chicken and Prepared Foods segments had an increase in sales volume driven by strong demand for our beef products and incremental volumes from business acquisitions in the Chicken and Prepared Foods segments net of business divestitures in the Prepared Foods segment.

•

Average Sales Price – Sales were positively impacted by higher average sales prices, which accounted for an increase of $751 million. All segments had an increase in average sales price, other than the Pork segment. The Beef segment experienced strong demand, while the Chicken and Prepared Foods segments were positively impacted by improved mix and business acquisitions net of business divestitures in the Prepared Foods segment.

•	The above amounts included an incremental impact of $1,060 million related to the inclusion of the AdvancePierre results post acquisition through the first anniversary of the acquisition on June 7, 2018.

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.

Cost of Sales	in millions
	2018				2017				2016
Cost of sales	$	34,926			$	33,177			$	32,184
Gross profit	5,126				5,083				4,697
Cost of sales as a percentage of sales	87.2		%		86.7		%		87.3		%

2018 vs. 2017 –

•	Cost of sales increased $1,749 million. Higher input cost per pound increased cost of sales $918 million while higher sales volume increased cost of sales $831 million. These amounts include an incremental impact of $797 million related to the inclusion of AdvancePierre results post acquisition through the first anniversary of the acquisition on June 7, 2018.

•	The $918 million impact of higher input cost per pound was primarily driven by:

•	Increase in freight of approximately $270 million incurred across all our segments.

•	Increase from one-time cash bonus to frontline employees of $108 million.

•	Increase due to impairment charges of $101 million associated with the divestiture of a non-protein business in fiscal 2018, partially offset by $33 million of realized gains related to the sale of non-protein businesses in fiscal 2018 and impairment charges of $44 million related to our San Diego Prepared Foods operation in fiscal 2017.

•	Increase of approximately $52 million in our Chicken segment related to net increases in feed ingredient costs, growout expenses and outside meat purchases.

•	Decrease in live cattle costs of approximately $25 million in our Beef segment.

•	Decrease in live hog costs of approximately $90 million in our Pork segment.

•

Decrease due to net realized derivative losses of $30 million for fiscal 2018, compared to net realized derivative loss of $79 million for fiscal 2017 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 decreased due to net unrealized losses of $3 million for fiscal 2018, compared to net unrealized losses of $40 million for fiscal 2017, primarily due to our Beef segment commodity risk management activities.

•	Remaining net change across all of our segments was primarily driven by increased operating costs and impacts on average input cost per pound from mix changes as well as from business acquisitions and divestitures.

•	The $831 million impact of higher sales volume was driven by increases in sales volume in our Beef, Chicken and Prepared Foods segments, partially offset by a decrease in sales volume in our Pork segment.

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.

Selling, General and Administrative	in millions
	2018				2017				2016
Selling, general and administrative	$	2,071			$	2,152			$	1,864
As a percentage of sales	5.2		%		5.6		%		5.1		%

2018 vs. 2017

•	Decrease of $81 million in selling, general and administrative was primarily driven by:

•	Decrease of $92 million in employee costs primarily from stock-based and incentive-based compensation, which also included a reduction of $24 million compensation and benefit integration expense incurred in fiscal 2017 that did not recur in fiscal 2018.

•	Decrease of $56 million from restructuring and related charges.

•	Decrease of $49 million in AdvancePierre acquisition related fees incurred as part of the acquisition in fiscal 2017 that did not recur in fiscal 2018.

•	Decrease of $18 million in commission and brokerage fees.

•	Decrease of $14 million in non-restructuring severance related expenses.

•	Decrease of $10 million in marketing, advertising, and promotion expense.

•	Increase of $153 million related to the AdvancePierre acquisition through the first anniversary of the acquisition on June 7, 2018, which included $91 million in incremental amortization and $62 million from the inclusion of AdvancePierre results post-acquisition.

•	Increase of $15 million from technology related costs.

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

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.

Interest Income	in millions
	2018				2017				2016
	$	(7	)		$	(7	)		$	(6	)

2018/2017/2016 – Interest income remained relatively flat as lower deposit levels offset higher interest rates.

Interest Expense	in millions
	2018				2017				2016
Cash interest expense	$	357			$	278			$	248
Non-cash interest (expense) income	(7		)		1				1
Total Interest Expense	$	350			$	279			$	249

2018/2017/2016 –

•	Cash interest expense primarily included interest expense related to our senior notes, term loans and commercial paper. The increase in cash interest expense in fiscal 2018 and fiscal 2017 was primarily due to debt issued in connection with business acquisitions and higher interest rates.

•	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
	2018				2017				2016
	$	(33	)		$	31			$	(8	)

2018 – Included $21 million of equity earnings in joint ventures and $11 million in insurance proceeds.

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.

Effective Tax Rate
	2018			2017			2016
	(10.3	)%		32.3	%		31.8	%

Our effective income tax rate was (10.3)% for fiscal 2018 compared to 32.3% for fiscal 2017. The effective tax rate for fiscal 2018 reflects impacts of the Tax Cuts and Jobs Act signed into law on December 22, 2017. These impacts include a $1,004 million benefit related to the remeasurement of deferred taxes existing at the date of enactment, which reduced the fiscal year effective tax rate by 36.6%, as well as a 24.5% statutory federal income tax rate for fiscal 2018 compared to the 35% statutory federal income tax rate effective for the prior year. Additionally, current year favorable timing differences currently deductible at the 24.5% blended tax rate, but reversing in future years at 21%, reduced the fiscal 2018 rate 1.3%. The non-deductible impairment and sale of certain assets in our non-protein businesses increased the fiscal 2018 rate 3.1%.

The fiscal 2018 effective tax rate also includes a 1.7% benefit related to domestic production activity deduction which is less than the 3.1% benefit in fiscal 2017, primarily due to the lower enacted federal tax rate. The fiscal 2018 effective tax rate includes 3.3% expense for state taxes, net of federal tax benefit, compared to 2.3% in fiscal 2017. This increase is also due in part to the lower enacted federal tax rate.

The fiscal 2017 effective tax rate was 32.3% compared to 31.8% in fiscal 2016. This change was due in part to 1.7% benefit for unrecognized tax benefits activity in fiscal 2016 that didn’t recur in fiscal 2017, partially offset by more favorable domestic production activity deduction and state income taxes in 2017.

We currently expect an annual effective tax rate of approximately 23.5% in 2019. For further description of drivers for these rates refer to Part I, Item 1, Notes to the Consolidated Condensed Financial Statements, Note 9: Income Taxes.

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.

In fiscal 2017, we acquired and consolidated AdvancePierre, a producer and distributor of value-added, convenient, ready-to-eat sandwiches, sandwich components and other entrées and snacks, and in fiscal 2018, we acquired Original Philly, a valued added protein business. The results from operations of these businesses are included in the Prepared Foods and Chicken segments. In fiscal 2018, we acquired Tecumseh, a vertically integrated value-added protein business, and American Proteins, a poultry rendering and blending operation as part of our strategic expansion and sustainability initiatives. The results from operations of these businesses are included in our Chicken segment. For further description of these transactions, refer to Part II, Item 8, Notes to Consolidated Financial Statements, Note 3: Acquisitions and Dispositions.

In fiscal 2018, we completed the sale of four non-protein businesses as part of our strategic focus on protein brands. All of these businesses were part of our Prepared Foods segment and included Sara Lee® Frozen Bakery, Kettle, Van’s®, and TNT Crust and produced items such as frozen desserts, waffles, snack bars, soups, sauces, sides and pizza crusts. The sales included the Chef Pierre®, Bistro Collection®, Kettle Collection™, and Van’s® brands, a license to use the Sara Lee® brand in various channels, as well as our Tarboro, North Carolina, Fort Worth, Texas, Traverse City, Michigan, and Green Bay, Wisconsin prepared foods facilities. For further description of these transactions, refer to Part II, Item 8, Notes to Consolidated Financial Statements, Note 3: Acquisitions and Dispositions.

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)
	2018				2017				2016				2018				2017				2016
Beef	$	15,473			$	14,823			$	14,513			$	1,013			$	877			$	347
Pork	4,879				5,238				4,909				361				645				528
Chicken	12,044				11,409				10,927				866				1,053				1,305
Prepared Foods	8,668				7,853				7,346				868				462				734
Other	305				349				380				(53		)		(106		)		(81		)
Intersegment Sales	(1,317		)		(1,412		)		(1,194		)		—				—				—
Total	$	40,052			$	38,260			$	36,881			$	3,055			$	2,931			$	2,833

Beef Segment Results																	in millions
	2018				2017				Change 2018 vs. 2017				2016				Change 2017 vs. 2016
Sales	$	15,473			$	14,823			$	650			$	14,513			$	310
Sales Volume Change									3.1		%						1.8		%
Average Sales Price Change									1.2		%						0.4		%
Operating Income (Loss)	$	1,013			$	877			$	136			$	347			$	530
Operating Margin	6.5		%		5.9		%						2.4		%

2018 vs. 2017 –

•	Sales Volume – Sales volume increased due to improved availability of cattle supply, stronger 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 as we continued to maximize our revenues relative to live fed cattle costs, partially offset by increased labor and freight costs and one-time cash bonus to frontline employees of $27 million.

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.

Pork Segment Results																	in millions
	2018				2017				Change 2018 vs. 2017				2016				Change 2017 vs. 2016
Sales	$	4,879			$	5,238			$	(359	)		$	4,909			$	329
Sales Volume Change									(2.1		)%						0.6		%
Average Sales Price Change									(4.8		)%						6.1		%
Operating Income	$	361			$	645			$	(284	)		$	528			$	117
Operating Margin	7.4		%		12.3		%						10.8		%

2018 vs. 2017 –

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

•	Average Sales Price – The average sales price decrease was associated with lower livestock costs.

•	Operating Income – Operating income decreased from prior year record results due to periods of compressed pork margins caused by excess domestic availability of pork, higher labor and freight costs, and one-time cash bonus to frontline employees of $12 million.

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.

Chicken Segment Results																	in millions
	2018				2017				Change 2018 vs. 2017				2016				Change 2017 vs. 2016
Sales	$	12,044			$	11,409			$	635			$	10,927			$	482
Sales Volume Change									4.9		%						1.2		%
Average Sales Price Change									0.7		%						3.1		%
Operating Income	$	866			$	1,053			$	(187	)		$	1,305			$	(252	)
Operating Margin	7.2		%		9.2		%						11.9		%

2018 vs. 2017 –

•	Sales Volume – Sales volume increased primarily due to incremental volume from business acquisitions.

•	Average Sales Price – Average sales price increased due to sales mix changes and price increases associated with cost inflation.

•	Operating Income – Operating income decreased due to increased labor, freight and growout expenses, in addition to $103 million of higher feed ingredient costs and net realized and mark-to-market derivative losses, and one-time cash bonus to frontline employees of $51 million.

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.

Prepared Foods Segment Results													in millions
	2018				2017				Change 2018 vs. 2017				2016				Change 2017 vs. 2016
Sales	$	8,668			$	7,853			$	815			$	7,346			$	507
Sales Volume Change									4.1		%						3.2		%
Average Sales Price Change									6.1		%						3.6		%
Operating Income	$	868			$	462			$	406			$	734			$	(272	)
Operating Margin	10.0		%		5.9		%						10.0		%

2018 vs. 2017 –

•	Sales Volume – Sales volume increased primarily due to incremental volume from business acquisitions net of business divestitures. Excluding the impact of the business divestitures, sales volumes in fiscal 2018 increased by 9.8%.

•	Average Sales Price – Average sales price increased due to product mix which was positively impacted by business acquisitions and divestitures.

•

Operating Income – Operating income increased due to improved mix and net incremental results from business acquisitions, net of divestitures, partially offset by higher input and freight costs and one-time cash bonus to frontline employees of $19 million. Additionally, operating income was impacted in fiscal 2018 by $68 million of impairments, net of realized gains, related to the divestitures of non-protein businesses. For fiscal 2017, operating income was impacted from $34 million of AdvancePierre purchase accounting and acquisition related costs, $97 million of impairments related to our San Diego Prepared Foods operation and the expected sale of a non-protein business, $30 million of compensation and benefits integration expense and $82 million of restructuring and related charges.

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 cost savings, of which $97 million was incremental savings in fiscal 2017 above the $156 million of savings realized in fiscal 2016 and $285 million realized in fiscal 2015. The positive impact of these savings to operating income was partially offset with investments in innovation, new product launches and supporting the growth of our brands.

Other Results													in millions
	2018				2017				Change 2018 vs. 2017				2016				Change 2017 vs. 2016
Sales	$	305			$	349			$	(44	)		$	380			$	(31	)
Operating Loss	(53		)		(106		)		53				(81		)		(25		)

2018 vs. 2017 –

•	Sales – Sales decreased due to a decline in sales volume in our foreign chicken production operations.

•	Operating loss – Operating loss improved primarily from lower third-party merger and integration costs.

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.

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
	2018				2017				2016
Net income	$	3,027			$	1,778			$	1,772
Non-cash items in net income:
Depreciation and amortization	943				761				705
Deferred income taxes	(865		)		(39		)		84
Gain on dispositions of businesses	(42		)		—				—
Impairment of assets	175				214				45
Stock-based compensation expense	69				92				81
Other, net	(58		)		(57		)		(34		)
Net changes in operating assets and liabilities	(286		)		(150		)		63
Net cash provided by operating activities	$	2,963			$	2,599			$	2,716

•	Deferred income taxes for fiscal 2018 included a $1,004 million benefit related to remeasurement of net deferred income tax liabilities at newly enacted tax rates.

•	Gain on dispositions of businesses in fiscal 2018 primarily relates to the sale of the Sara Lee® Frozen Bakery, Kettle, Van’s® and TNT Crust businesses.

•	Impairment of assets included the following:

•	2018 – $101 million impairment related to the expected sale of a non-protein business. For further description regarding this charge refer to Part II, Item 8, Notes to Consolidated Financial Statements, Note 3: Acquisitions and Dispositions.

•

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.

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

•

2018 – Decreased primarily due to increased inventory and decreased accrued employee costs, partially offset by increased income taxes payable. The increase in inventory is primarily due to livestock inventories. The decrease in accrued salaries and wages are primarily due to reduced restructuring and incentive-based compensation accruals. Increased taxes payable is due to timing of payments related to the sale of non-protein businesses in the fourth quarter.

•

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.

•	Incremental tax reform cash flow in fiscal 2018 was $274 million which we invested in our frontline team members to sustainably grow our businesses. As part of this, we recognized expense of $109 million in one-time cash bonuses to our frontline employees.

Cash Flows from Investing Activities									in millions
	2018				2017				2016
Additions to property, plant and equipment	$	(1,200	)		$	(1,069	)		$	(695	)
(Purchases of)/Proceeds from marketable securities, net	(5		)		(18		)		(9		)
Acquisitions, net of cash acquired	(1,474		)		(3,081		)		—
Proceeds from sale of businesses	797				—				—
Other, net	(24		)		4				20
Net cash used for investing activities	$	(1,906	)		$	(4,164	)		$	(684	)

•	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 2019 is expected to approximate $1.5 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.

•	Acquisitions, net of cash acquired, included:

•	2018 - We acquired three valued-added protein businesses in fiscal 2018. For further description regarding these acquisitions refer to Part II, Item 8, Notes to the Consolidated Financial Statements, Note 3: Acquisitions and Dispositions.

•	2017 - We acquired AdvancePierre in the third quarter of fiscal 2017. For further description of this acquisition refer to Part II, Item 8, Notes to the Consolidated Financial Statements, Note 3: Acquisitions and Dispositions.

•	Proceeds from sale of businesses related to the proceeds received from sale of our non-protein businesses during fiscal 2018. For further description refer to Part II, Item 8, Notes to the Consolidated Financial Statements, Note 3: Acquisitions and Dispositions.

•	In August 2018, the Company announced it had reached a definitive agreement to buy the Keystone business from Marfrig Global Foods for $2.16 billion in cash. Refer to further description regarding this transaction under Part II, Item 8, Notes to the Consolidated Financial Statements, Note 3: Acquisitions and Dispositions.

Cash Flows from Financing Activities									in millions
	2018				2017				2016
Payments on debt	$	(1,307	)		$	(3,159	)		$	(714	)
Proceeds from issuance of long-term debt	1,148				5,444				1
Borrowings on revolving credit facility	1,755				1,810				1,065
Payments on revolving credit facility	(1,755		)		(2,110		)		(765		)
Proceeds from issuance of commercial paper	21,024				8,138				—
Repayments of commercial paper	(21,197		)		(7,360		)		—
Payment of AdvancePierre TRA liability	—				(223		)		—
Purchases of Tyson Class A common stock	(427		)		(860		)		(1,944		)
Dividends	(431		)		(319		)		(216		)
Stock options exercised	102				154				128
Other, net	(14		)		15				68
Net cash provided by (used for) financing activities	$	(1,102	)		$	1,530			$	(2,377	)

•	Payments on debt included:

•

2018 – We extinguished the $750 million outstanding balance of the Term Loan Tranche B due August 2020, which was increased during fiscal 2018 by $250 million, using cash on hand and proceeds from the issuance of Senior Notes due 2023 and 2048. We extinguished the $427 million outstanding balance of the Term Loan Tranche B due August 2019 using cash on hand and proceeds received from the sale of our Kettle business. We extinguished the $120 million outstanding balance of the Senior Notes due May 2018 using cash on hand.

•	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.

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

•

2018 – Proceeds from issuance of long-term debt included a $250 million increase in our Term Loan Tranche B due August 2020, primarily to fund an acquisition. Subsequently, proceeds from issuance of long-term debt included $400 million Senior Notes due 2023 and $500 million Senior Notes due 2048, which were primarily used to extinguish our Term Loan Tranche B due August 2020 and to repay commercial paper obligations.

•

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.

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

•	2018 – We had net repayments of $173 million to our unsecured short-term promissory notes (commercial paper) pursuant to our commercial paper program.

•	2017 – We had net issuances of $778 million in unsecured short-term promissory notes 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 included:

•	$350 million, $797 million, and $1,868 million for shares repurchased pursuant to our share repurchase program in fiscal 2018, 2017 and 2016, respectively.

•	$77 million, $63 million and $76 million for shares repurchased to fund certain obligations under our equity compensation plans in fiscal 2018, 2017 and 2016, respectively.

•	Dividends paid during fiscal 2018 included a 33% increase to our fiscal 2017 quarterly dividend rate.

•	Other, net in fiscal 2016 includes tax benefits associated with stock option exercises.

•

Keystone acquisition financing - In August 2018, the Company announced it had reached a definitive agreement to buy the Keystone business from Marfrig Global Foods for $2.16 billion in cash. The transaction is expected to close in the first quarter or early second quarter of fiscal 2019 and is subject to customary closing conditions, including regulatory approvals, however, there can be no assurance that the acquisition will close at such time. Permanent financing for the Keystone acquisition is expected to include a mix of senior notes, term loans, commercial paper and cash on hand.

Liquidity																in millions
		Commitments Expiration Date		Facility Amount				Outstanding Letters of Credit (no draw downs)				Outstanding Amount Borrowed				Amount Available
Cash and cash equivalents																$	270
Short-term investments																1
Revolving credit facility		March 2023		$	1,750			$	—			$	—			1,750
Commercial Paper																(605		)
Total liquidity																$	1,416

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

•	At September 29, 2018, we had current debt of $1,911 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 also serves to backstop our commercial paper program. Our maximum borrowing under the revolving credit facility during fiscal 2018 was $325 million.

•	We expect net interest expense will approximate $350 million for fiscal 2019.

•

At September 29, 2018, $256 million of our cash was held in the international accounts of our foreign subsidiaries. Generally, we do not rely on the foreign cash as a source of funds to support our ongoing domestic liquidity needs. We manage our worldwide cash requirements by reviewing available funds among our foreign subsidiaries and the cost effectiveness with which those funds can be accessed. We intend to repatriate excess cash (net of applicable withholding taxes) not subject to regulatory requirements and to indefinitely reinvest outside of the United States the remainder of cash held by foreign subsidiaries. We do not expect the regulatory restrictions or taxes on repatriation to have a material effect on our overall liquidity, financial condition or the results of operations for the foreseeable future.

•	Our ratio of short-term assets to short-term liabilities ("current ratio") was 1.13 to 1 and 1.55 to 1 at September 29, 2018, and September 30, 2017, respectively. The decrease in fiscal 2018 was due to increased balance of current debt.

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 $1.75 billion, to provide additional liquidity for working capital needs and to backstop our commercial paper program.

As of September 29, 2018, we had no outstanding borrowings under this facility, which left $1.75 billion available for borrowing, before deducting amounts to backstop our commercial paper program. Our revolving credit facility is funded by a syndicate of 39 banks, with commitments ranging from $0.3 million to $123 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 $1 billion. The maturities of the notes may vary, but may not exceed 397 days from the date of issuance. As of September 29, 2018, $605 million was outstanding under this program with maturities less than 25 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 29, 2018, and September 30, 2017, the ratio of our net debt to EBITDA was 2.4x and 2.7x, respectively. Refer to Part II, Item 6, Selected Financial Data, for an explanation and reconciliation to comparable GAAP measures. The decrease in this ratio for fiscal 2018 is due to a decrease in net debt of $280 million and an increase in EBITDA of $373 million.

Credit Ratings

Revolving Credit Facility

Standard & Poor's Rating Services', a Standard & Poor's Financial Services LLC business ("S&P") corporate credit rating for Tyson Foods, Inc. is "BBB." Moody’s Investor Service, Inc.'s ("Moody's"), senior unsecured, long-term debt rating for Tyson Foods, Inc. is "Baa2." Fitch Ratings', a wholly owned subsidiary of Fimlac, S.A. ("Fitch") 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		All-in Borrowing Spread
A-/A3/A- or above	0.090	%	1.000	%
BBB+/Baa1/BBB+	0.100	%	1.125	%
BBB/Baa2/BBB (current level)	0.125	%	1.250	%
BBB-/Baa3/BBB-	0.175	%	1.375	%
BB+/Ba1/BB+ or lower	0.225	%	1.625	%

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 29, 2018.

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 $162 million at the end of fiscal 2018 as compared to an underfunded position of $195 million at the end of fiscal 2017.

We expect to contribute approximately $15 million of cash to our pension plans in fiscal 2019 as compared to approximately $29 million in fiscal 2018 and $53 million in fiscal 2017. 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 2019 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 29, 2018:

																	in millions
	Payments Due by Period
	2019				2020-2021				2022-2023				2024 and thereafter				Total
Debt and capital lease obligations:
Principal payments (1)	$	1,911			$	1,548			$	1,412			$	5,056			$	9,927
Interest payments (2)	360				617				517				2,606				4,100
Guarantees (3)	20				46				38				15				119
Operating lease obligations (4)	128				160				69				61				418
Purchase obligations (5)	1,422				1,083				172				111				2,788
Capital expenditures (6)	1,071				761				—				—				1,832
Other long-term liabilities (7)	—				—				—				—				604
Total contractual commitments	$	4,912			$	4,215			$	2,208			$	7,849			$	19,788

(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 29, 2018, 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 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 29, 2018. 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 29, 2018.

(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 $233 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 $288 million and related interest and penalties of $73 million at September 29, 2018, recorded as liabilities.

The potential maximum contractual obligation associated with our cash flow assistance programs at September 29, 2018, based on the estimated fair values of the livestock supplier’s net tangible assets on that date, aggregated to approximately $300 million. After analyzing residual credit risks and general market conditions, we had no allowance for these programs' estimated uncollectible receivables at September 29, 2018.

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 29, 2018, would impact pretax earnings by approximately $22 million.
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 at the actuarial estimated median.		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% change in the actuarial estimate at September 29, 2018, would impact our self-insurance liability by approximately $30 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. Currently we are in the process of liquidating five of our nine defined benefit pension plans. 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 $13 million in fiscal 2018. The projected benefit obligation was $1,612 million at the end of fiscal 2018. Unrecognized actuarial gain was $65 million at the end of fiscal 2018. We currently expect net periodic benefit cost for fiscal 2019 to be approximately $11 million, excluding the pending settlement as described in Note 15: Pension and Other Postretirement Benefits. Plan assets are currently comprised of approximately 99% fixed income securities. Fixed income securities can include, but are not limited to, direct bond investments and pooled or indirect bond investments. We expect to contribute approximately $15 million of cash to our pension plans in fiscal 2019. 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 expected liquidation of certain plans has been considered along with these assumptions. The discount rates were determined using a cash flow matching technique whereby the rates of a yield curve, developed from high-quality debt securities, were applied to the benefit obligations to determine the appropriate discount rate. In determining the long-term rate of return on plan assets, we first examined historical rates of return for the various asset classes within the plans. We then determined a long-term projected rate-of-return based on expected returns. Investment, management and other fees paid out of plan assets are factored into the determination of asset return assumptions. Retirement rates are based primarily on actual plan experience, while standard actuarial tables are used to estimate mortality. It is reasonably likely that changes in external factors will result in changes to the assumptions used to measure pension obligations and net periodic benefit cost in future periods. The risks of participating in multi-employer plans are different from single-employer plans. The net pension cost of the multi-employer plans is equal to the annual contribution determined in accordance with the provisions of negotiated labor contracts. Assets contributed to such plans are not segregated or otherwise restricted to provide benefits only to our 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 29, 2018, would result in a decrease in the projected benefit obligation and net periodic benefit cost of approximately $167 million and $19 million, respectively. A 1% decrease in the discount rate at September 29, 2018, would result in an increase in the projected benefit obligation and net periodic benefit cost of approximately $204 million and $1 million, respectively. A 1% change in the return on plan assets at September 29, 2018, would impact the net periodic benefit cost by approximately $14 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. Income tax includes an estimate for withholding taxes on earnings of foreign subsidiaries expected to be remitted to the United States but does not include an estimate for taxes on earnings considered to be indefinitely invested in the foreign subsidiary. Deferred income taxes are recognized for the future tax effects of temporary differences between financial and income tax reporting using tax rates in effect for the years in which the differences are expected to reverse. Valuation allowances are recorded when it is likely a tax benefit will not be realized for a deferred tax asset. We record unrecognized tax benefit liabilities for known or anticipated tax issues based on our analysis of whether, and the extent to which, additional taxes will be due.		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 $175 million, $214 million and $45 million, in fiscal 2018, 2017 and 2016, 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.

Description		Judgments and Uncertainties		Effect if Actual Results Differ From Assumptions
Impairment of goodwill and indefinite life intangible assets
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. Additionally, we can elect to forgo the qualitative assessment and perform the quantitative test. Upon performing the quantitative test, if the carrying value of the reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, not to exceed the carrying amount of goodwill. For indefinite life intangible assets, a qualitative assessment can also be performed to determine whether the existence of events and circumstances indicates it is more likely than not an intangible asset is impaired. Similar to goodwill, we can also elect to forgo the qualitative test for indefinite life intangible assets and perform the quantitative test. Upon performing the quantitative test, if the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. We elected to forgo the qualitative assessment on our indefinite life intangible assets for the fiscal 2018 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.		We estimate the fair value of our reporting units considering the use of various valuation techniques, with the primary technique being an income approach (discounted cash flow analysis), which uses 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 operating margin assumptions based on future expectations and operating margins historically realized in the reporting units' industries. 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.		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 2018, 2017 and 2016, all of our material reporting units that underwent a quantitative test passed the goodwill impairment analysis. 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 6.9% in fiscal 2018 from 6.7% in fiscal 2017. Discount rates continue to be low compared to historical levels. A 40% increase in the discount rate would have caused the carrying value of one of our reporting units, with $6,141 million of goodwill at September 29, 2018 and the least headroom during the fiscal 2018 test, to exceed its discounted cash flows' fair value. Our fiscal 2018, 2017, and 2016 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 8.2% in fiscal 2018. A 20% increase in the discount rate would have caused the carrying value of one intangible asset, which has a carrying value of $301 million, to exceed fair value.