Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

TYSON FOODS, INC.

CONSOLIDATED STATEMENTS OF INCOME

	Three years ended September 28, 2019
	in millions, except per share data
	2019				2018				2017
Sales	$	42,405			$	40,052			$	38,260
Cost of Sales	37,383				34,956				33,198
Gross Profit	5,022				5,096				5,062
Selling, General and Administrative	2,195				2,064				2,141
Operating Income	2,827				3,032				2,921
Other (Income) Expense:
Interest income	(11		)		(7		)		(7		)
Interest expense	462				350				279
Other, net	(55		)		(56		)		21
Total Other (Income) Expense	396				287				293
Income before Income Taxes	2,431				2,745				2,628
Income Tax Expense (Benefit)	396				(282		)		850
Net Income	2,035				3,027				1,778
Less: Net Income Attributable to Noncontrolling Interests	13				3				4
Net Income Attributable to Tyson	$	2,022			$	3,024			$	1,774
Weighted Average Shares Outstanding:
Class A Basic	293				295				296
Class B Basic	70				70				70
Diluted	366				369				370
Net Income Per Share Attributable to Tyson:
Class A Basic	$	5.67			$	8.44			$	4.94
Class B Basic	$	5.10			$	7.59			$	4.45
Diluted	$	5.52			$	8.19			$	4.79

See accompanying notes.

TYSON FOODS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Three years ended September 28, 2019
	in millions
	2019				2018				2017
Net Income	$	2,035			$	3,027			$	1,778
Other Comprehensive Income (Loss), Net of Taxes:
Derivatives accounted for as cash flow hedges	(15		)		(7		)		—
Investments	2				(1		)		(1		)
Currency translation	(23		)		(29		)		6
Postretirement benefits	(66		)		(7		)		56
Total Other Comprehensive Income (Loss), Net of Taxes	(102		)		(44		)		61
Comprehensive Income	1,933				2,983				1,839
Less: Comprehensive Income Attributable to Noncontrolling Interests	13				3				4
Comprehensive Income Attributable to Tyson	$	1,920			$	2,980			$	1,835

See accompanying notes.

TYSON FOODS, INC.

CONSOLIDATED BALANCE SHEETS

September 28, 2019, and September 29, 2018
in millions, except share and per share data
	2019				2018
Assets
Current Assets:
Cash and cash equivalents	$	484			$	270
Accounts receivable, net	2,173				1,723
Inventories	4,108				3,513
Other current assets	404				182
Total Current Assets	7,169				5,688
Net Property, Plant and Equipment	7,282				6,169
Goodwill	10,844				9,739
Intangible Assets, net	7,037				6,759
Other Assets	765				754
Total Assets	$	33,097			$	29,109
Liabilities and Shareholders’ Equity
Current Liabilities:
Current debt	$	2,102			$	1,911
Accounts payable	1,926				1,694
Other current liabilities	1,485				1,426
Total Current Liabilities	5,513				5,031
Long-Term Debt	9,830				7,962
Deferred Income Taxes	2,356				2,107
Other Liabilities	1,172				1,198
Commitments and Contingencies (Note 20)
Shareholders’ Equity:
Common stock ($0.10 par value):
Class A-authorized 900 million shares, issued 378 million shares	38				38
Convertible Class B-authorized 900 million shares, issued 70 million shares	7				7
Capital in excess of par value	4,378				4,387
Retained earnings	13,787				12,329
Accumulated other comprehensive gain (loss)	(117		)		(15		)
Treasury stock, at cost – 82 million shares at September 28, 2019 and September 29, 2018	(4,011		)		(3,943		)
Total Tyson Shareholders’ Equity	14,082				12,803
Noncontrolling Interests	144				8
Total Shareholders’ Equity	14,226				12,811
Total Liabilities and Shareholders’ Equity	$	33,097			$	29,109

See accompanying notes.

TYSON FOODS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

	Three years ended September 28, 2019
											in millions
	2019							2018							2017
	Shares			Amount				Shares			Amount				Shares			Amount
Class A Common Stock:
Balance at beginning of year	378			$	38			378			$	38			364			$	36
Issuance of Class A common stock	—			—				—			—				14			2
Balance at end of year	378			38				378			38				378			38
Class B Common Stock:
Balance at beginning and end of year	70			7				70			7				70			7
Capital in Excess of Par Value:
Balance at beginning of year				4,387							4,378							4,355
Stock-based compensation				(9		)					9							23
Balance at end of year				4,378							4,387							4,378
Retained Earnings:
Balance at beginning of year				12,329							9,776							8,348
Net income attributable to Tyson				2,022							3,024							1,774
Dividends				(564		)					(458		)					(346		)
Reclass from Accumulated Other Comprehensive Income (Loss), Net of Tax (1)				—							(13		)					—
Balance at end of year				13,787							12,329							9,776
Accumulated Other Comprehensive Income (Loss), Net of Tax:
Balance at beginning of year				(15		)					16							(45		)
Other Comprehensive Income (Loss)				(102		)					(44		)					61
Reclass to Retained Earnings (1)				—							13
Balance at end of year				(117		)					(15		)					16
Treasury Stock:
Balance at beginning of year	82			(3,943		)		80			(3,674		)		73			(3,093		)
Purchase of Class A common stock	4			(252		)		6			(427		)		14			(860		)
Stock-based compensation	(4	)		184				(4	)		158				(7	)		279
Balance at end of year	82			(4,011		)		82			(3,943		)		80			(3,674		)
Total Shareholders’ Equity Attributable to Tyson				$	14,082						$	12,803						$	10,541
Equity Attributable to Noncontrolling Interests:
Balance at beginning of year				$	8						$	18						$	16
Net income attributable to noncontrolling interests				13							3							4
Distributions to noncontrolling interest				(3		)					(3		)					(2		)
Business combination and other				126							(10		)					—
Total Equity Attributable to Noncontrolling Interests				$	144						$	8						$	18
Total Shareholders’ Equity				$	14,226						$	12,811						$	10,559

(1) Reclass from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act, following adoption of the applicable new accounting standard for the fiscal year ended September 29, 2018.

See accompanying notes.

TYSON FOODS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three years ended September 28, 2019
	in millions
	2019				2018				2017
Cash Flows From Operating Activities:
Net income	$	2,035			$	3,027			$	1,778
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation	819				723				642
Amortization	279				220				119
Deferred income taxes	92				(865		)		(39		)
Gain on dispositions of businesses	(17		)		(42		)		—
Impairment of assets	94				175				214
Stock-based compensation expense	77				69				92
Other, net	(20		)		(58		)		(57		)
(Increase) decrease in accounts receivable	(226		)		(2		)		(55		)
(Increase) decrease in inventories	(214		)		(207		)		(246		)
Increase (decrease) in accounts payable	(55		)		(44		)		61
Increase (decrease) in income taxes payable/receivable	(254		)		111				55
Increase (decrease) in interest payable	47				(3		)		16
Net changes in other operating assets and liabilities	(144		)		(141		)		19
Cash Provided by Operating Activities	2,513				2,963				2,599
Cash Flows From Investing Activities:
Additions to property, plant and equipment	(1,259		)		(1,200		)		(1,069		)
Purchases of marketable securities	(64		)		(42		)		(79		)
Proceeds from sale of marketable securities	63				37				61
Acquisitions, net of cash acquired	(2,462		)		(1,474		)		(3,081		)
Proceeds from sale of businesses	170				797				—
Other, net	88				(24		)		4
Cash Used for Investing Activities	(3,464		)		(1,906		)		(4,164		)
Cash Flows From Financing Activities:
Proceeds from issuance of debt	4,634				1,148				5,444
Payments on debt	(3,208		)		(1,307		)		(3,159		)
Borrowings on revolving credit facility	1,135				1,755				1,810
Payments on revolving credit facility	(1,065		)		(1,755		)		(2,110		)
Proceeds from issuance of commercial paper	17,722				21,024				8,138
Repayments of commercial paper	(17,327		)		(21,197		)		(7,360		)
Payment of AdvancePierre TRA liability	—				—				(223		)
Purchases of Tyson Class A common stock	(252		)		(427		)		(860		)
Dividends	(537		)		(431		)		(319		)
Stock options exercised	99				102				154
Other, net	(30		)		(14		)		15
Cash Provided by (Used for) Financing Activities	1,171				(1,102		)		1,530
Effect of Exchange Rate Change on Cash	(6		)		(3		)		4
Increase (decrease) in Cash and Cash Equivalents	214				(48		)		(31		)
Cash and Cash Equivalents at Beginning of Year	270				318				349
Cash and Cash Equivalents at End of Year	$	484			$	270			$	318

See accompanying notes.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

TYSON FOODS, INC.

NOTE 1: BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business: Tyson Foods, Inc. (collectively, “Company,” “we,” “us” or “our”), is 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 including Tyson®, Jimmy Dean®, Hillshire Farm®, Ball Park®, Wright®, Aidells®, ibp® and State Fair®. We innovate continually to make protein more sustainable, tailor food for everywhere it’s available and raise the world’s expectations for how much good food can do.

Consolidation: The consolidated financial statements include the accounts of all wholly-owned subsidiaries, as well as majority-owned subsidiaries over which we exercise control and, when applicable, entities for which we have a controlling financial interest or variable interest entities for which we are the primary beneficiary. All significant intercompany accounts and transactions have been eliminated in consolidation.

Fiscal Year: We utilize a 52- or 53-week accounting period ending on the Saturday closest to September 30. The Company’s accounting cycle resulted in a 52-week year for fiscal 2019, fiscal 2018, and fiscal 2017.

Cash and Cash Equivalents: Cash equivalents consist of investments in short-term, highly liquid securities having original maturities of three months or less, which are made as part of our cash management activity. The carrying values of these assets approximate their fair values. We primarily utilize a cash management system with a series of separate accounts consisting of lockbox accounts for receiving cash, concentration accounts where funds are moved to, and several zero-balance disbursement accounts for funding payroll, accounts payable, livestock procurement, livestock grower payments, etc. As a result of our cash management system, checks issued, but not presented to the banks for payment, may result in negative book cash balances. These negative book cash balances are included in accounts payable and other current liabilities. At September 28, 2019, and September 29, 2018, checks outstanding in excess of related book cash balances totaled approximately $200 million and $220 million, respectively.

Accounts Receivable: We record accounts receivable at net realizable value. This value includes an appropriate allowance for estimated uncollectible accounts to reflect any loss anticipated on the accounts receivable balances and charged to the provision for doubtful accounts. We calculate this allowance based on our history of write-offs, level of past due accounts and relationships with and economic status of our customers. At September 28, 2019, and September 29, 2018, our allowance for uncollectible accounts was $21 million and $19 million, respectively. We generally do not have collateral for our receivables, but we do periodically evaluate the credit worthiness of our customers.

Inventories: Processed products, livestock and supplies and other are valued at the lower of cost or net realizable value. Cost includes purchased raw materials, live purchase costs, livestock growout costs (primarily feed, livestock grower pay and catch and haul costs), labor and manufacturing and production overhead, which are related to the purchase and production of inventories.

In fiscal 2019 and fiscal 2018, the cost of inventories was determined by either the first-in, first-out ("FIFO") method or the weighted-average method.

The following table reflects the major components of inventory at September 28, 2019, and September 29, 2018:

					in millions
	2019				2018
Processed products	$	2,362			$	1,981
Livestock	1,150				1,006
Supplies and other	596				526
Total inventory	$	4,108			$	3,513

Property, Plant and Equipment: Property, plant and equipment are stated at cost and generally depreciated on a straight-line method over the estimated lives for buildings and leasehold improvements of 10 to 33 years, machinery and equipment of 3 to 12 years and land improvements and other of 3 to 20 years. Major repairs and maintenance costs that significantly extend the useful life of the related assets are capitalized. Normal repairs and maintenance costs are charged to operations.

We review the carrying value of long-lived assets at each balance sheet date if indication of impairment exists. Recoverability is assessed using undiscounted cash flows based on historical results and current projections of earnings before interest, taxes, depreciation and amortization. We measure impairment as the excess of carrying value over the fair value of an asset. The fair value of an asset is generally measured using discounted cash flows including market participant assumptions of future operating results and discount rates.

Goodwill and Intangible Assets: Definite life intangibles are initially recorded at fair value and amortized over the estimated period of benefit. Brands and trademarks are generally amortized using the straight-line method over 20 years or less. Customer relationships and supply arrangements are generally amortized over 7 to 30 years based on the pattern of revenue expected to be generated from the use of the asset. The gross cost and accumulated amortization of intangible assets are removed when the recorded amounts are fully amortized and the asset is no longer in use or the contract has expired. Amortization expense is generally recognized in selling, general, and administrative expense. We review the carrying value of definite life intangibles at each balance sheet date if indication of impairment exists. Recoverability is assessed using undiscounted cash flows based on historical results and current projections of earnings before interest, taxes, depreciation and amortization. We measure impairment as the excess of carrying value over the fair value of the definite life intangible asset. We use various valuation techniques to estimate fair value, with the primary techniques being discounted cash flows, relief-from-royalty and multi-period excess earnings valuation approaches, which use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy. 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.

Goodwill and indefinite life intangible assets are initially recorded at fair value and not amortized, but are reviewed for impairment at least annually or more frequently if impairment indicators arise. Our goodwill is allocated by reporting unit and 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 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. Additionally, we can elect to forgo the qualitative assessment and perform the quantitative test. The quantitative test is to identify if a potential impairment exists by comparing the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying amount of the reporting unit exceeds the fair value, an impairment loss is recognized in an amount equal to that excess, not to exceed the carrying amount of goodwill.

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 (earnings before interest, taxes, depreciation and amortization or "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 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.

Some of the inherent estimates and assumptions used in determining fair value of the reporting units 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, 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.

During fiscal 2019, 2018 and 2017, we determined none of our material reporting units' fair values were below its carrying value.

For our 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.

The fair value of our indefinite life intangible assets is calculated principally using relief-from-royalty and multi-period excess earnings valuation approaches, which use 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. During fiscal 2019, 2018 and 2017, we determined the fair value of each of our indefinite life intangible assets exceeded its carrying value. The discount rate used in our indefinite life intangible test decreased to 7.5% in fiscal 2019 from 8.2% in fiscal 2018.

Investments: We have investments in joint ventures and other entities. The equity method of accounting is used for entities in which we exercise significant influence but do not have a controlling interest or a variable interest in which we are the primary beneficiary. Investments not accounted for using the equity method do not have readily determinable fair values and do not qualify for the practical expedient to measure the investment using a net asset value per share. These investments are recorded using the measurement alternative in which our equity interests are recorded at cost, less impairments, adjusted for observable price changes in orderly transactions for an identical or similar investment of the same issuer. At each reporting period, we assess if these investments continue to qualify for this measurement alternative. An impairment is recorded when there is evidence that the expected fair value of the investment has declined to below the recorded cost. Adjustments to the carrying value are recorded in Other, net in the Consolidated Statements of Income. Investments in joint ventures and other entities are reported in the Consolidated Balance Sheets in Other Assets.

We also have investments in marketable debt securities. We have determined all of our marketable debt securities are available-for-sale investments. These investments are reported at fair value based on quoted market prices as of the balance sheet date, with unrealized gains and losses, net of tax, recorded in other comprehensive income.

The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is recorded in interest income. The cost of securities sold is based on the specific identification method. Realized gains and losses on the sale of debt securities and declines in value judged to be other than temporary are recorded on a net basis in other income. Interest and dividends on securities classified as available-for-sale are recorded in interest income.

Accrued Self-Insurance: We use a combination of insurance and self-insurance mechanisms in an effort to mitigate the potential liabilities for health and welfare, workers’ compensation, auto liability and general liability risks. Liabilities associated with our risks retained are estimated, in part, by considering claims experience, demographic factors, severity factors and other actuarial assumptions.

Other Current Liabilities: Other current liabilities at September 28, 2019, and September 29, 2018, include:

	in millions
	2019				2018
Accrued salaries, wages and benefits	$	620			$	549
Other	865				877
Total other current liabilities	$	1,485			$	1,426

Defined Benefit Plans: We recognize the funded status of defined pension and postretirement plans in the Consolidated Balance Sheets. The funded status is measured as the difference between the fair value of the plan assets and the benefit obligation. We measure our plan assets and liabilities at the end of our fiscal year. For a defined benefit pension plan, the benefit obligation is the projected benefit obligation; for any other defined benefit postretirement plan, such as a retiree health care plan, the benefit obligation is the accumulated postretirement benefit obligation. Any overfunded status is recognized as an asset and any underfunded status is recognized as a liability. Any transitional asset/liability, prior service cost or actuarial gain/loss that has not yet been recognized as a component of net periodic cost is recognized in accumulated other comprehensive income. Accumulated other comprehensive income will be adjusted as these amounts are subsequently recognized as a component of net periodic benefit costs in future periods.

Derivative Financial Instruments: We purchase certain commodities, such as grains and livestock in the course of normal operations. As part of our commodity risk management activities, we use derivative financial instruments, primarily futures and options, to reduce our exposure to various market risks related to these purchases, as well as to changes in foreign currency exchange and interest rates. Contract terms of a financial instrument qualifying as a hedge instrument closely mirror those of the hedged item, providing a high degree of risk reduction and correlation. Contracts designated and highly effective at meeting risk reduction and correlation criteria are recorded using hedge accounting. If a derivative instrument is accounted for as a hedge, depending on the nature of the hedge, changes in the fair value of the instrument will be offset either against the change in fair value of the hedged assets, liabilities or firm commitments through earnings or recognized in other comprehensive income (loss) until the hedged item is recognized in earnings. The ineffective portion of an instrument’s change in fair value is immediately recognized in earnings as a component of cost of sales. Instruments we hold as part of our risk management activities that do not meet the criteria for hedge accounting are marked to fair value with unrealized gains or losses reported currently in earnings. Changes in market value of derivatives used in our risk management activities relating to forward sales contracts are recorded in sales. Changes in market value of derivatives used in our risk management activities surrounding inventories on hand or anticipated purchases of inventories are recorded in cost of sales. Changes in market value of derivatives used in our risk management activities related to interest rates are recorded in interest expense. Changes in the market value of derivatives used in our risk management activities related to foreign exchange contracts are recorded in other, net. We generally do not hedge anticipated transactions beyond 18 months.

Litigation Reserves: There are a variety of legal proceedings pending or threatened against us. Accruals are recorded when it is probable a liability has been incurred and the amount of the liability can be reasonably estimated based on current law, progress of each case, opinions and views of legal counsel and other advisers, our experience in similar matters and intended response to the litigation. These amounts, which are not discounted and are exclusive of claims against third parties, are adjusted periodically as assessment efforts progress or additional information becomes available. We expense amounts for administering or litigating claims as incurred. Accruals for legal proceedings are included in Other current liabilities in the Consolidated Balance Sheets.

Revenue Recognition: We recognize revenue mainly through consumer products retail, foodservice, international, industrial and other distribution channels. Our revenues primarily result from contracts with customers and are generally short term in nature with the delivery of product as the single performance obligation. We recognize revenue for the sale of the product at the point in time when our performance obligation has been satisfied and control of the product has transferred to our customer, which generally occurs upon shipment or delivery to a customer based on terms of the sale. We elected to account for shipping and handling activities that occur after the customer has obtained control of the product as a fulfillment cost rather than an additional promised service. Our contracts are generally less than one year, and therefore we recognize costs paid to third party brokers to obtain contracts as expenses. Additionally, items that are not material in the context of the contract are recognized as expense. Any taxes collected on behalf of government authorities are excluded from net revenues.

Revenue is measured by the transaction price, which is defined as the amount of consideration we expect to receive in exchange for providing goods to customers. The transaction price is adjusted for estimates of known or expected variable consideration, which includes consumer incentives, trade promotions, and allowances, such as coupons, discounts, rebates, volume-based incentives, cooperative advertising, and other programs. Variable consideration related to these programs is recorded as a reduction to revenue based on amounts we expect to pay. We base these estimates on current performance, historical utilization, and projected redemption rates of each program. We review and update these estimates regularly until the incentives or product returns are realized and the impact of any adjustments are recognized in the period the adjustments are identified. In many cases, key sales terms such as pricing and quantities ordered are established on a regular basis such that most customer arrangements and related incentives have a duration of less than one year. Amounts billed and due from customers are short term in nature and are classified as receivables since payments are unconditional and only the passage of time is required before payments are due. Additionally, we do not grant payment financing terms greater than one year. Freight expense associated with products shipped to customers is recognized in cost of sales.

Advertising Expenses: Advertising expense is charged to operations in the period incurred and is recorded as selling, general and administrative expense. Advertising expense totaled $276 million, $243 million and $238 million in fiscal 2019, 2018 and 2017, respectively.

Research and Development: Research and development costs are expensed as incurred. Research and development costs totaled $97 million, $114 million and $113 million in fiscal 2019, 2018 and 2017, respectively.

Business Combinations: We account for acquired businesses using the acquisition method of accounting, which requires that once control of a business is obtained, 100% of the assets acquired and liabilities assumed, including amounts attributable to noncontrolling interests, be recorded at the date of acquisition at their respective fair values. Any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. Acquisition-related expenses including transaction and integration costs are expensed as incurred.

We use various models to determine the value of assets acquired such as net realizable value to value inventory, cost method and market approach to value property, relief-from-royalty and multi-period excess earnings to value intangibles, and discounted cash flow to value goodwill. We make estimates and assumptions about projected future cash flows including sales, operating margins, attrition rates, growth rates, and discount rates based on historical results, business plans, expected synergies, perceived risk, and market place data considering the perspective of marketplace participants. Determining the useful life of an intangible asset also requires judgment as different types of intangible assets will have different useful lives and certain assets may be considered to have indefinite useful lives.

Use of Estimates: The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States, which require us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Recently Issued Accounting Pronouncements:

In August 2017, the Financial Accounting Standards Board ("FASB") issued guidance that eases certain documentation and assessment requirements of hedge effectiveness and modifies the accounting for components excluded from the assessment. Some of the modifications include the ineffectiveness of derivative gain/loss in highly effective cash flow hedges to be recorded in Other Comprehensive Income, alignment of the recognition and presentation of the effects related to the hedging instrument and hedged item in the financial statements, and additional disclosures required on the cumulative basis adjustment in fair value hedges and the effect of hedging on financial statement lines for components excluded from the assessment. The amendment also simplifies the application of hedge accounting in certain situations to permit new hedging strategies to be eligible for hedge accounting. The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2018, our fiscal 2020 and the modified retrospective transition method should be applied. We will adopt this guidance beginning in the first quarter of fiscal 2020. Upon adoption, we do not expect this guidance will have a material impact on our consolidated financial statements.

In June 2016, the FASB issued guidance that provides more decision-useful information about the expected credit losses on financial instruments and changes the loss impairment methodology. The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2019, our fiscal 2021. Early adoption is permitted for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2018, our fiscal 2020. The application of the guidance requires various transition methods depending on the specific amendment. We will adopt this guidance beginning in the first quarter of fiscal 2020. We do not expect the adoption of this guidance will have a material impact on our consolidated financial statements.

In February 2016, the FASB issued guidance that created new accounting and reporting guidelines for leasing arrangements. The guidance requires lessees to recognize a right-of-use asset and lease liability for all leases with terms of more than 12 months. Recognition, measurement and presentation of expenses and cash flows arising from a lease will depend on classification as a finance or operating lease. The guidance also requires qualitative and quantitative disclosures regarding the amount, timing, and uncertainty of cash flows arising from leases. The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2018, our fiscal 2020. Early adoption is permitted. In July 2018, the FASB issued an adoption approach that allows entities to apply the guidance as of the date of the initial application. We will adopt the standard in the first quarter of fiscal 2020 using this transition method, and as a result, we will not adjust comparative period financial information or make the new required lease disclosures for periods before the effective date. We have performed a review of the lease portfolio and have implemented a leasing software solution to support the future state lease accounting requirements. We have elected the package of practical expedients available under the transition guidance which allows us to not reassess prior conclusions related to lease classifications, existing contracts containing leases, and initial direct costs. We continue to finalize our implementation efforts and currently estimate that upon adoption we will record operating right of use assets and related lease liabilities of approximately 2% of total assets, subject to the completion of our assessment including finalizing the impacts from recent business acquisitions. We expect our financial statement disclosures will be expanded to present additional details of our leasing arrangements, but do not expect the adoption of this standard to have a material impact on the Consolidated Statements of Income or our Consolidated Statements of Cash Flows.

NOTE 2: CHANGES IN ACCOUNTING PRINCIPLES

In August 2018, the FASB issued guidance aligning the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2019, our fiscal 2021. The prospective transition method should be applied to all qualified implementation costs incurred after the adoption date. We elected to early adopt this guidance beginning in the first quarter of fiscal 2019, and it did not have a material impact on our consolidated financial statements.

In May 2017, the FASB issued guidance that clarifies which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2017, our fiscal 2019. The prospective transition method should be applied to awards modified on or after the adoption date. We adopted this guidance in the first quarter of fiscal 2019 and it did not have a material impact on our consolidated financial statements.

In March 2017, the FASB issued guidance that changes the presentation of net periodic benefit cost related to employer sponsored defined benefit plans and other postretirement benefits. Service cost will be included within the same income statement line item as other compensation costs arising from services rendered during the period, while other components of net periodic benefit pension cost will be presented separately outside of operating income. Additionally, only the service cost component will be eligible for capitalization when applicable. The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2017, our fiscal 2019. The retrospective transition method should be applied for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement, and the prospective transition method should be applied, on and after the effective date, for the capitalization of the service cost component of net periodic pension cost and net periodic postretirement benefit in assets. The guidance includes a practical expedient allowing entities to estimate amounts for comparative periods using the information previously disclosed in the pension and other postretirement benefit plan footnote. We adopted this guidance in the first quarter of fiscal 2019 on a retrospective basis using the practical expedient and it did not have a material impact on our consolidated financial statements.

The following reconciliations provide the effect of the reclassification of the net periodic benefit cost from operating expenses to other (income) expense in our consolidated statements of income for fiscal year 2018 and 2017 (in millions):

Twelve Months Ended September 29, 2018:	As Previously Reported			Adjustments			As Recast
Cost of Sales	$	34,926		$	30		$	34,956
Selling, General and Administrative	$	2,071		$	(7	)	$	2,064
Operating Income	$	3,055		$	(23	)	$	3,032
Other (Income) Expense	$	310		$	(23	)	$	287

Twelve Months Ended September 30, 2017:	As Previously Reported			Adjustments			As Recast
Cost of Sales	$	33,177		$	21		$	33,198
Selling, General and Administrative	$	2,152		$	(11	)	$	2,141
Operating Income	$	2,931		$	(10	)	$	2,921
Other (Income) Expense	$	303		$	(10	)	$	293

In November 2016, the FASB issued guidance that requires entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2017, our fiscal 2019. The retrospective transition method should be applied. We adopted this guidance in the first quarter of fiscal 2019 and it did not have a material impact on our consolidated financial statements.

In October 2016, the FASB issued guidance that requires companies to recognize the income tax effects of intercompany sales and transfers of assets, other than inventory, in the period in which the transfer occurs. The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2017, our fiscal 2019. The modified retrospective transition method should be applied. We adopted this guidance in the first quarter of fiscal 2019 and it did not have a material impact on our consolidated financial statements.

In August 2016, the FASB issued guidance that aims to eliminate diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2017, our fiscal 2019. The retrospective transition method should be applied. We adopted this guidance in the first quarter of fiscal 2019 and it did not have a material impact on our consolidated financial statements.

In January 2016, the FASB issued guidance that requires most equity investments be measured at fair value, with subsequent other changes in fair value recognized in net income. The guidance also impacts financial liabilities under the fair value option and the presentation and disclosure requirements on the classification and measurement of financial instruments. The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2017, our fiscal 2019. It should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, unless equity securities do not have readily determinable fair values, in which case the amendments should be applied prospectively. We adopted this guidance in the first quarter of fiscal 2019. We did not use prospective amendments for any investments and adoption did not have a material impact on our consolidated financial statements.

In May 2014, the FASB issued guidance that changes the criteria for recognizing revenue. The guidance provides for a single five-step model to be applied to all revenue contracts with customers. The standard also requires additional financial statement disclosures that will enable users to understand the nature, amount, timing and uncertainty of revenue and cash flows relating to customer contracts, including disaggregated revenue disclosures. Companies have an option to use either a retrospective approach or cumulative effect adjustment approach to implement the standard. This guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2017, our fiscal 2019. We adopted this guidance in the first quarter of fiscal 2019 using the modified retrospective transition method. Prior periods were not adjusted and, based on our implementation assessment, no cumulative-effect adjustment was made to the opening balance of retained earnings. The adoption of this standard did not have a material impact on our consolidated financial statements. For further description of our revenue recognition policy refer to Part I, Item 1, Notes to the Consolidated Financial Statements, Note 1: Business and Summary of Significant Accounting Policies. For disaggregated revenue information refer to Part I, Item 1, Notes to the Consolidated Condensed Financial Statements, Note 17: Segment Reporting.

NOTE 3: ACQUISITIONS AND DISPOSITIONS

Acquisitions

On June 3, 2019, we acquired the Thai and European operations of BRF S.A. ("Thai and European operations") for $326 million, net of cash acquired, subject to certain adjustments, as a part of our growth strategy to expand offerings of value-added protein in global markets. Its results, subsequent to the acquisition closing, are included in International/Other for segment presentation. Certain estimated values for the acquisition, including goodwill, intangible assets, property, plant and equipment, noncontrolling interest, and deferred income taxes are not yet finalized and are subject to revision as additional information becomes available and more detailed analyses are completed. The preliminary purchase price allocation includes $307 million of net working capital, including $56 million of cash acquired, $93 million of Property, Plant and Equipment, $1 million of Goodwill, $23 million of Intangible Assets, $24 million of Other Liabilities, $11 million of Deferred Income Taxes and $7 million of Noncontrolling Interest. Intangible Assets included customer relationships which will be amortized over a life of 7 years. We do not expect the goodwill to be deductible for income tax purposes. During the fourth quarter of fiscal 2019, we recorded measurement period adjustments, including $15 million of purchase price adjustments, which collectively decreased Goodwill by $66 million, including an increase in net working capital of $3 million, a reduction of Intangible Assets of $11 million, a reduction of Property, Plant and Equipment of $13 million, a reduction of Deferred Income Taxes of $4 million, and a reduction of Noncontrolling Interest of $68 million.

On November 30, 2018, we acquired all of the outstanding common stock of MFG (USA) Holdings, Inc. and McKey Luxembourg Holdings S.à.r.l. (“Keystone Foods”) from Marfrig Global Foods ("Marfrig") for $2.3 billion in cash, subject to certain adjustments. We initially funded the acquisition with existing cash on hand, net proceeds from the issuance of a 364-day term loan and borrowings under our commercial paper program. In February 2019, we used the net proceeds from the issuance of senior notes to repay amounts outstanding under the 364-day term loan and commercial paper obligations. Keystone Foods' domestic and international results, subsequent to the acquisition closing, are included in our Chicken segment and International/Other, respectively.

The following table summarizes the preliminary purchase price allocation for Keystone Foods and fair values of the assets acquired and liabilities assumed at the acquisition date, which are subject to change pending finalization of working capital adjustments. Certain estimated values for the acquisition, including goodwill, intangible assets, inventory, property, plant and equipment, and deferred income taxes, are not yet finalized and are subject to revision as additional information becomes available and more detailed analyses are completed. The purchase price was allocated based on information currently available as of the acquisition date. During fiscal 2019, we recorded measurement period adjustments, including $61 million of purchase price adjustments, which collectively increased goodwill by $47 million, primarily consisting of a reduction of Intangible Assets of $86 million, a reduction of Property, Plant and Equipment of $49 million, a reduction of Deferred Income Taxes of $36 million and a reduction in net working capital of $13 million.

	in millions
Cash and cash equivalents		$	186
Accounts receivable		106
Inventories		257
Other current assets		34
Property, Plant and Equipment		676
Goodwill		1,120
Intangible Assets		659
Other Assets		28
Current debt		(73		)
Accounts payable		(208		)
Other current liabilities		(99		)
Long-Term Debt		(113		)
Deferred Income Taxes		(177		)
Other Liabilities		(8		)
Noncontrolling Interests		(122		)
Net assets acquired		$	2,266

The fair value of identifiable intangible assets primarily consisted of customer relationships with a weighted average life of 25 years. As a result of the acquisition, we recognized a total of $1,120 million of goodwill. The purchase price was allocated to assets acquired and liabilities assumed based on their preliminary estimated fair values as of the date of acquisition, and any excess was allocated to goodwill, as shown in the table above. Goodwill represents the value we expect to achieve through the implementation of operational synergies and growth opportunities. The preliminary allocation of goodwill to our segments was $779 million and $341 million to our Chicken segment and International/Other, respectively. We do not expect the goodwill to be deductible for income tax purposes.

We used various valuation techniques to determine fair value, with the primary techniques being discounted cash flow, relief-from-royalty, market pricing multiple and multi-period excess earnings valuation approaches, which use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy. Under these valuation approaches, we are required to make estimates and assumptions about sales, operating margins, growth rates, attrition rates, royalty rates, EBITDA multiples, and discount rates based on budgets, business plans, economic projections, anticipated future cash flows and marketplace data.

The acquisition of Keystone Foods was accounted for using the acquisition method of accounting and, consequently, the results of operations are reported in our consolidated financial statements from the date of acquisition. Keystone Foods sales from the date of acquisition through September 28, 2019 were $1,970 million and its results for that period were not significant to our overall Consolidated Statements of Income.

On August 20, 2018, we acquired the assets of American Proteins, Inc. and AMPRO Products, Inc. ("American Proteins"), a poultry rendering and blending operation for $864 million, as part of our strategic expansion and sustainability initiatives. Its results, subsequent to the acquisition closing, are included in our Chicken segment. The purchase price allocation included $56 million of net working capital, $152 million of Property, Plant and Equipment, $361 million of Intangible Assets, $308 million of Goodwill, and $13 million of Other liabilities. Intangible Assets primarily included $310 million assigned to supply network which will be amortized over 14 years and $51 million assigned to customer relationships which will be amortized over a weighted average of 12 years. All of the goodwill acquired is amortizable for tax purposes. During fiscal 2019, we settled the net-working capital purchase price adjustment reducing the purchase price by $2 million and recorded measurement period adjustments which increased goodwill by $66 million, including a reduction to net working capital of $15 million, a reduction to Property, Plant and Equipment of $3 million, and a reduction to intangible assets of $50 million.

On June 4, 2018, we acquired Tecumseh Poultry, LLC ("Tecumseh"), a vertically integrated value-added protein business for $382 million, net of cash acquired, as part of our strategy to grow in the high quality, branded poultry market. Its results, subsequent to the acquisition closing, are included in our Chicken segment. The purchase price allocation included $13 million of net working capital, including $1 million of cash acquired, $49 million of Property, Plant and Equipment, $227 million of Intangible Assets and $94 million of Goodwill. Intangible Assets included $193 million assigned to brands and trademarks which will be amortized over 20 years. All of the goodwill acquired is amortizable for tax purposes.

On November 10, 2017, we acquired Original Philly Holdings, Inc. ("Original Philly"), a value-added protein business, for $226 million, net of cash acquired, as part of our strategic expansion initiative. Its results, subsequent to the acquisition closing, are included in our Prepared Foods and Chicken segments. The purchase price allocation included $21 million of net working capital, including $10 million of cash acquired, $13 million of Property, Plant and Equipment, $90 million of Intangible Assets and $111 million of Goodwill. We allocated $82 million and $29 million of goodwill to our Prepared Foods and Chicken segments, respectively, using the acquisition method approach. All of the goodwill acquired is amortizable for tax purposes.

On June 7, 2017, we acquired all of the outstanding common stock of AdvancePierre Foods Holdings, Inc. ("AdvancePierre") as part of our strategy to sustainably feed the world with the fastest growing portfolio of protein-packed brands. The purchase price was equal to $40.25 per share for AdvancePierre's outstanding common stock, or approximately $3.2 billion. AdvancePierre's results from operations subsequent to the acquisition closing are included in the Prepared Foods and Chicken segments.

The following unaudited pro forma information presents the combined results of operations as if the acquisition of AdvancePierre had occurred at the beginning of fiscal 2017. AdvancePierre's pre-acquisition results have been added to our historical results. The pro forma results contained in the table below include adjustments for amortization of acquired intangibles, depreciation expense, interest expense related to the financing and related income taxes. Any potential cost savings or other operational efficiencies that could result from the acquisition are not included in these pro forma results. These pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the results of operations as they would have been had the acquisitions occurred on the assumed dates, nor is it necessarily an indication of future operating results.

		in millions (unaudited)
		2017
Pro forma sales		$	39,330
Pro forma net income attributable to Tyson		1,837
Pro forma net income per diluted share attributable to Tyson		$	4.97

Dispositions

On April 24, 2017, we announced our intent to sell three non-protein businesses as part of our strategic focus on protein brands. These businesses, which were all part of our Prepared Foods segment, included Sara Lee® Frozen Bakery, Kettle and Van’s® and produce items such as frozen desserts, waffles, snack bars, and soups, sauces and sides. The sale also 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, and Traverse City, Michigan, prepared foods facilities.

We completed the sale of our Kettle business on December 30, 2017, and received net proceeds of $125 million including a working capital adjustment. As a result of the sale, we recorded a pretax gain of $22 million, which is reflected in Cost of Sales in our Consolidated Statement of Income for our fiscal 2018. We utilized the net proceeds to pay down term loan debt.

We completed the sale of our Sara Lee® Frozen Bakery and Van’s® businesses on July 30, 2018 for $623 million including a working capital adjustment. As a result of the sale, we recorded a pretax gain of $11 million, which is reflected in Cost of Sales in our Consolidated Statement of Income for our fiscal 2018. We utilized the net proceeds to repay commercial paper.

Previously in fiscal 2018 and 2017, we recorded pretax impairment charges for these businesses of $101 million and $45 million, respectively, due to revised estimates of the businesses' fair value based on expected net sales proceeds at the time of the impairments. These charges were recorded in Cost of Sales in our Consolidated Statement of Income, and primarily consisted of goodwill previously classified within assets held for sale.

In the first quarter of fiscal 2018, we made the decision to sell TNT Crust, our pizza crust business, which was also included in our Prepared Foods segment, as part of our strategic focus on protein brands. We completed the sale of this business on September 2, 2018, for $57 million net of adjustments. As a result of the sale, we recorded a pretax gain of $9 million, which is reflected in Cost of Sales in our Consolidated Statement of Income for our fiscal 2018. We utilized the net proceeds to repay commercial paper.

We completed the sale of a chicken further processing facility acquired during the Keystone Foods acquisition on August 31, 2019 for $170 million net proceeds, which did not result in a significant gain or loss.

In the fourth quarter of fiscal 2019, we made the decision to sell a Prepared Foods business. We recorded a pretax impairment charge for this business of $41 million due to our estimate of the business' fair value based on current expected net sales proceeds. The remaining carrying value of this business is not significant.

NOTE 4: PROPERTY, PLANT AND EQUIPMENT

The following table reflects major categories of property, plant and equipment and accumulated depreciation at September 28, 2019, and September 29, 2018:

	in millions
	2019				2018
Land	$	198			$	154
Building and leasehold improvements	4,747				4,115
Machinery and equipment	8,607				7,720
Land improvements and other	385				357
Buildings and equipment under construction	713				689
	14,650				13,035
Less accumulated depreciation	7,368				6,866
Net property, plant and equipment	$	7,282			$	6,169

Approximately $1,772 million required to complete buildings and equipment under construction at September 28, 2019.

NOTE 5: GOODWILL AND INTANGIBLE ASSETS

The following table reflects goodwill activity for fiscal 2019 and 2018:

in millions
	Beef				Pork				Chicken				Prepared Foods				International/Other				Unallocated				Consolidated
Balance at September 30, 2017
Goodwill	$	1,236			$	423			$	1,565			$	3,678			$	57			$	2,982			$	9,941
Accumulated impairment losses	(560		)		—				—				—				(57		)		—				(617		)
	$	676			$	423			$	1,565			$	3,678			$	—			$	2,982			$	9,324
Fiscal 2018 Activity:
Acquisition	$	—			$	—			$	365			$	82			$	—			$	—			$	447
Measurement period adjustments	—				—				—				—				—				(2		)		(2		)
Allocation of acquired goodwill	—				—				568				2,412				—				(2,980		)		—
Reclass to assets held for sale	—				—				—				(30		)		—				—				(30		)
Balance at September 29, 2018
Goodwill	1,236				423				2,498				6,142				57				—				10,356
Accumulated impairment losses	(560		)		—				—				—				(57		)		—				(617		)
	$	676			$	423			$	2,498			$	6,142			$	—			$	—			$	9,739
Fiscal 2019 Activity:
Acquisition	$	—			$	—			$	779			$	—			$	342			$	—			$	1,121
Measurement period adjustments	—				—				66				—				—				—				66
Reclass to assets held for sale	—				—				(70		)		(7		)		—				—				(77		)
Currency translation and other	—				—				1				(1		)		(5		)		—				(5		)
Balance at September 28, 2019
Goodwill	1,236				423				3,274				6,134				394				—				11,461
Accumulated impairment losses	(560		)		—				—				—				(57		)		—				(617		)
	$	676			$	423			$	3,274			$	6,134			$	337			$	—			$	10,844

The following table reflects intangible assets by type at September 28, 2019, and September 29, 2018:

in millions
	2019				2018
Amortizable intangible assets:
Brands and trademarks	$	945			$	950
Customer relationships	2,389				1,793
Supply Arrangements	310				358
Patents, intellectual property and other	34				107
Land use rights	8				9
Total gross amortizable intangible assets	$	3,686			$	3,217
Less accumulated amortization	727				536
Total net amortizable intangible assets	$	2,959			$	2,681
Brands and trademarks not subject to amortization	4,078				4,078
Total intangible assets	$	7,037			$	6,759

Amortization expense of $267 million, $210 million and $107 million was recognized during fiscal 2019, 2018 and 2017, respectively. We estimate amortization expense on intangible assets for the next five fiscal years subsequent to September 28, 2019, will be: 2020 - $276 million; 2021 - $258 million; 2022 - $244 million; 2023 - $225 million; 2024 - $221 million.

NOTE 6: RESTRUCTURING AND RELATED CHARGES

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. The Financial Fitness Program is expected to result in cumulative pretax charges of approximately $280 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. The Company recognized restructuring and related charges of $41 million, $59 million and $150 million associated with the program during fiscal 2019, 2018 and 2017, respectively.

For fiscal 2019 and 2018, the restructuring and related charges consisted of $41 million and $59 million, respectively, of incremental costs to implement new technology and accelerated depreciation of technology assets. These costs were recorded in Selling, General and Administrative in our Consolidated Statements of Income. For fiscal 2017, the restructuring and related charges consisted of $53 million severance and employee related costs, $72 million technology impairment and related costs, and $25 million for contract termination costs. Of these costs, $35 million was recorded to Cost of Sales and $115 million was recorded to Selling, General and Administrative in our Consolidated Statements of Income.

We had no restructuring liability at September 28, 2019 and our restructuring liability was $10 million at September 29, 2018.

NOTE 7: DEBT

The following table reflects major components of debt as of September 28, 2019, and September 29, 2018:

					in millions
	2019				2018
Revolving credit facility	$	70			$	—
Commercial Paper	1,000				605
Senior notes:
Notes due May 2019 ("2019 Notes")	—				300
Notes due August 2019 ("2019 Notes")	—				1,000
Notes due June 2020 (2.68% at 09/28/2019)	350				350
Notes due August 2020 (2.60% at 09/28/2019)	400				400
4.10% Notes due September 2020	280				281
2.25% Notes due August 2021	500				500
4.50% Senior notes due June 2022	1,000				1,000
3.90% Notes due September 2023	400				400
3.95% Notes due August 2024	1,250				1,250
4.00% Notes due March 2026 ("2026 Notes")	800				—
3.55% Notes due June 2027	1,350				1,350
7.00% Notes due January 2028	18				18
4.35% Notes due March 2029 ("2029 Notes")	1,000				—
6.13% Notes due November 2032	161				161
4.88% Notes due August 2034	500				500
5.15% Notes due August 2044	500				500
4.55% Notes due June 2047	750				750
5.10% Notes due September 2048 ("2048 Notes")	1,500				500
Discount on senior notes	(48		)		(15		)
Other	216				73
Unamortized debt issuance costs	(65		)		(50		)
Total debt	11,932				9,873
Less current debt	2,102				1,911
Total long-term debt	$	9,830			$	7,962

Annual maturities of debt for the five fiscal years subsequent to September 28, 2019 are: 2020 - $2,104 million; 2021 - $535 million; 2022 - $1,033 million; 2023 - $493 million; 2024 - $1,266 million.

Revolving Credit Facility and Letters of Credit

We have a $1.75 billion revolving credit facility that supports short-term funding needs and serves as a backstop to our commercial paper program. This facility will mature and the commitments thereunder will terminate in March 2023. Amounts available for borrowing under this facility totaled $1.68 billion at September 28, 2019, before deducting amounts to backstop our commercial paper program. At September 28, 2019, we had $70 million in borrowings and no outstanding letters of credit issued under this facility. At September 28, 2019 we had $99 million of bilateral letters of credit issued separately from the revolving credit facility, none of which were drawn upon. Our letters of credit are issued primarily in support of leasing obligations and workers’ compensation insurance programs and other legal obligations.

If in the future any of our subsidiaries shall guarantee any of our material indebtedness, such subsidiary shall be required to guarantee the indebtedness, obligations and liabilities under this facility.

Commercial Paper Program

We have a commercial paper program under which we may issue unsecured short-term promissory notes ("commercial paper") up to an aggregate maximum principal amount of $1 billion as of September 28, 2019. As of September 28, 2019, we had $1 billion of commercial paper outstanding at a weighted average interest rate of 2.24% with maturities of less than 25 days.

2019 Notes

During fiscal 2019, we extinguished the $300 million outstanding balance of the Senior Notes due May 2019 and the $1 billion outstanding balance of the Senior Notes due August 2019 using cash on hand and other liquidity sources.

364-Day Term Loan

In November 2018, as part of the financing for the Keystone Foods acquisition, we borrowed $1.8 billion under an unsecured term loan facility, which was due November 2019. The interest rate was set based on the selected LIBOR interest period plus 1.125%. In the second quarter of fiscal 2019, we extinguished the $1.8 billion outstanding balance using funds borrowed under the 2026 and 2029 Notes and funds borrowed under the reopening of the 2048 Notes.

2026/2029/2048 Notes

In February 2019, we issued senior unsecured notes with an aggregate principal amount of $1.8 billion, consisting of $800 million due March 2026 and $1 billion due March 2029. Additionally, we reopened the 2048 Notes issuing an additional $1 billion, bringing the aggregate principal amount outstanding on the 2048 Notes to $1.5 billion. The net proceeds from the issuances were used to repay amounts outstanding under the 364-Day Term Loan Agreement and commercial paper obligations and to fund the acquisition of the Thai and European operations. The 2026 Notes carry a fixed interest rate of 4.00% and the 2029 Notes carry a fixed interest rate of 4.35%. Interest payments on the 2026 and 2029 Notes are due semi-annually on March 1 and September 1. After the original issue discounts of $36 million, we received net proceeds of $2,764 million and incurred debt issuance costs of $26 million related to the issuances.

Debt Covenants

Our revolving credit facility contains 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 28, 2019.

NOTE 8: EQUITY

Capital Stock

We have two classes of capital stock, Class A Common stock, $0.10 par value ("Class A stock") and Class B Common Stock, $0.10 par value ("Class B stock"). Holders of Class B stock may convert such stock into Class A stock on a share-for-share basis. Holders of Class B stock are entitled to 10 votes per share, while holders of Class A stock are entitled to one vote per share on matters submitted to shareholders for approval. As of September 28, 2019, Tyson Limited Partnership (the "TLP") owned 99.985% of the outstanding shares of Class B stock and the TLP and members of the Tyson family owned, in the aggregate, 2.15% of the outstanding shares of Class A stock, giving them, collectively, control of approximately 70.97% of the total voting power of the outstanding voting stock.

The Class B stock is considered a participating security requiring the use of the two-class method for the computation of basic earnings per share. The two-class computation method for each period reflects the cash dividends paid for each class of stock, plus the amount of allocated undistributed earnings (losses) computed using the participation percentage, which reflects the dividend rights of each class of stock. Basic earnings per share were computed using the two-class method for all periods presented. The shares of Class B stock are considered to be participating convertible securities since the shares of Class B stock are convertible on a share-for-share basis into shares of Class A stock. Diluted earnings per share were computed assuming the conversion of the Class B shares into Class A shares as of the beginning of each period.

Dividends

Cash dividends cannot be paid to holders of Class B stock unless they are simultaneously paid to holders of Class A stock. The per share amount of the cash dividend paid to holders of Class B stock cannot exceed 90% of the cash dividend simultaneously paid to holders of Class A stock. We pay quarterly cash dividends to Class A and Class B shareholders. We paid Class A dividends per share of $1.50, $1.20, and $0.90 in fiscal 2019, 2018, and 2017, respectively. We paid Class B dividends per share of $1.35, $1.08, and $0.81 in fiscal 2019, 2018, and 2017, respectively. Effective November 11, 2019, the Board of Directors increased the quarterly dividend previously declared on August 8, 2019, to $0.42 per share on our Class A stock and $0.378 per share on our Class B stock. The increased quarterly dividend is payable on December 13, 2019, to shareholders of record at the close of business on November 29, 2019.

Share Repurchases

As of September 28, 2019, 20.7 million shares remained available for repurchase under the Company's share repurchase program. The program has no fixed or scheduled termination date and the timing and extent to which we repurchase shares will depend upon, among other things, our working capital needs, markets, industry conditions, liquidity targets, limitations under our debt obligations and regulatory requirements. In addition to the share repurchase program, we purchase shares on the open market to fund certain obligations under our equity compensation plans.

A summary of cumulative share repurchases of our Class A stock for fiscal 2019, 2018 and 2017 is as follows:

																in millions
		September 28, 2019							September 29, 2018							September 30, 2017
		Shares			Dollars				Shares			Dollars				Shares			Dollars
Shares repurchased:
Under share repurchase program		2.3			$	150			4.9			$	350			12.5			$	797
To fund certain obligations under equity compensation plans		1.4			102				1.0			77				1.0			63
Total share repurchases		3.7			$	252			5.9			$	427			13.5			$	860

NOTE 9: INCOME TAXES

Detail of the provision for income taxes from continuing operations consists of the following:

									in millions
	2019				2018				2017
Federal	$	325			$	(426	)		$	755
State	42				118				81
Foreign	29				26				14
	$	396			$	(282	)		$	850
Current	$	304			$	583			$	889
Deferred	92				(865		)		(39		)
	$	396			$	(282	)		$	850

The reasons for the difference between the statutory federal income tax rate and our effective income tax rate from continuing operations are as follows:

	2019			2018			2017
Federal income tax rate	21.0	%		24.5	%		35.0	%
State income taxes	2.9			3.3			2.3
Unrecognized tax benefits, net	(6.6	)		(0.1	)		(0.1	)
Impact of the Tax Act	—			(37.9	)		—
Domestic production deduction	—			(1.7	)		(3.1	)
Impairment and sale of non-protein businesses	—			3.1			—
Other	(1.0	)		(1.5	)		(1.8	)
	16.3	%		(10.3	)%		32.3	%

During fiscal 2019, changes in unrecognized tax benefits decreased tax expense by $160 million, and state tax expense, excluding changes in unrecognized tax benefits and net of federal tax benefit, was $69 million.

During fiscal 2018, the domestic production deduction decreased tax expense by $46 million, and state tax expense, net of federal tax benefit, was $90 million. The change in federal tax rate from the Tax Act resulted in a tax benefit of $1,004 million related to deferred tax remeasurement. Additionally, favorable timing differences deductible in fiscal 2018 at the 24.5% blended tax rate but reversing in future years at 21% resulted in a $35 million tax benefit. The impacts of the non-deductible impairment and sale of certain assets in our non-protein businesses increased the effective tax rate by 3.1%.

During fiscal 2017, the domestic production deduction decreased tax expense by $80 million, and state tax expense, net of federal tax benefit, was $61 million.

Approximately $2,332 million, $2,700 million and $2,603 million of income from continuing operations before income taxes for fiscal 2019, 2018 and 2017, respectively, were from our operations based in the United States.

On December 22, 2017, President Trump signed into law the Tax Act. The Tax Act made significant changes to the U.S. tax code including, but not limited to, (1) reducing the corporate federal income tax rate from 35% to 21% effective January 1, 2018, (2) a general elimination of U.S. federal income taxes on dividends from foreign subsidiaries, (3) the repeal of the domestic production activity deduction beginning with our fiscal 2019, and (4) new provisions designed to tax global intangible low-taxed income and to allow a deduction for foreign-derived intangible income beginning with our fiscal 2019.

Under generally accepted accounting principles ("U.S. GAAP"), specifically ASC Topic 740, Income Taxes, the tax effects of changes in tax laws must be recognized in the period in which the law is enacted, or December 22, 2017, for the Tax Act. ASC 740 also requires deferred tax assets and liabilities to be measured at the enacted tax rate expected to apply when temporary differences are to be realized or settled. Thus, at the date of enactment, the Company’s deferred taxes were remeasured based upon the new tax rates. The change in deferred taxes was recorded as an adjustment to our fiscal 2018 deferred tax provision.

During the first quarter of fiscal 2019 we completed our accounting for the Tax Act and recorded an immaterial adjustment to income tax expense.

We recognize deferred income taxes for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The tax effects of major items recorded as deferred tax assets and liabilities as of September 28, 2019, and September 29, 2018, are as follows:

													in millions
	2019								2018
	Deferred Tax								Deferred Tax
	Assets				Liabilities				Assets				Liabilities
Property, plant and equipment	$	—			$	891			$	—			$	714
Intangible assets	—				1,624				—				1,533
Accrued expenses	297				—				230				—
Net operating loss and other carryforwards	99				—				92				—
Other	84				231				98				193
	$	480			$	2,746			$	420			$	2,440
Valuation allowance	$	(86	)						$	(79	)
Net deferred tax liability					$	2,352							$	2,099

At September 28, 2019, our gross state tax net operating loss carryforwards approximated $691 million and expire in fiscal years 2020 through 2039. Gross foreign net operating loss carryforwards approximated $98 million, of which $65 million expire in fiscal years 2020 through 2031, and the remainder has no expiration. We also have tax credit carryforwards of approximately $42 million, of which $38 million expire in fiscal years 2020 through 2033, and the remainder has no expiration.

We have accumulated undistributed earnings of foreign subsidiaries aggregating approximately $252 million and $210 million at September 28, 2019, and September 29, 2018, respectively. The Tax Act generally eliminates U.S. federal income taxes on dividends from foreign subsidiaries after December 31, 2017. As a result, our intention is that excess cash held by our foreign subsidiaries that is not subject to regulatory restrictions will be repatriated net of applicable withholding taxes which are expected to be immaterial. The remainder of accumulated undistributed earnings are expected to be indefinitely reinvested outside of the United States. If these earnings were distributed in the form of dividends or otherwise, we could be subject to state income taxes and withholding taxes payable to various foreign countries. Due to the uncertainty of the manner in which the undistributed earnings would be brought back to the United States and the tax laws in effect at that time, it is not currently practicable to estimate the tax liability that might be payable on the repatriation of these foreign earnings; however, we do not expect any tax due to be material.

The following table summarizes the activity related to our gross unrecognized tax benefits at September 28, 2019, September 29, 2018, and September 30, 2017:

									in millions
	2019				2018				2017
Balance as of the beginning of the year	$	308			$	316			$	305
Increases related to current year tax positions	20				19				38
Increases related to prior year tax positions	21				8				5
Increase related to AdvancePierre acquisition	—				—				9
Reductions related to prior year tax positions	(17		)		(18		)		(27		)
Reductions related to settlements	(9		)		(8		)		(4		)
Reductions related to expirations of statutes of limitations	(154		)		(9		)		(10		)
Balance as of the end of the year	$	169			$	308			$	316

The amount of unrecognized tax benefits, if recognized, that would impact our effective tax rate was $116 million at September 28, 2019 and $216 million at September 29, 2018. We classify interest and penalties on unrecognized tax benefits as income tax expense. At September 28, 2019, and September 29, 2018, before tax benefits, we had $46 million and $73 million, respectively, of accrued interest and penalties on unrecognized tax benefits.

As of September 28, 2019, certain United States federal income tax returns are subject to examination for fiscal years 2013 through 2018. We are also subject to income tax examinations by major state and foreign jurisdictions for fiscal years 2012 through 2018 and 2002 through 2018, respectively. We do not expect material changes to our unrecognized tax benefits during the next twelve months.

NOTE 10: OTHER INCOME AND CHARGES

During fiscal 2019, we recognized $48 million of net periodic pension and postretirement benefit cost, excluding the service cost component, and pension plan settlements which were recorded in the Consolidated Statements of Income in Other, net. We recognized $20 million of equity earnings in joint ventures which was also recorded in the Consolidated Statements of Income in Other, net. Additionally, we sold an investment for $79 million in net proceeds resulting in a pretax gain of $55 million, which was recorded in the Consolidated Statements of Income in Other, net.

During fiscal 2018, we recognized a one-time cash bonus to our hourly frontline employees of $109 million using incremental cash savings from the Tax Act, which was predominantly recorded in the Consolidated Statements of Income in Cost of Sales. Additionally, we recorded $11 million of insurance proceeds, $21 million of equity earnings in joint ventures and $1 million in net foreign currency exchange gains, which were recognized in the Consolidated Statements of Income in Other, net.

During fiscal 2017, we recorded $28 million of legal costs related to two former subsidiaries of Hillshire Brands, which were sold by Hillshire Brands in 1986 and 1994, $18 million of acquisition bridge financing fees related to the AdvancePierre acquisition and $19 million of equity earnings in joint ventures, which were recorded in the Consolidated Statements of Income in Other, net.

During fiscal 2017, we recorded a $52 million impairment charge related to our San Diego Prepared Foods operation. The impairment was comprised of $43 million of property, plant and equipment, $8 million of definite lived intangible assets and $1 million of other assets. This charge, of which $44 million was included in the Consolidated Statements of Income in Cost of Sales and $8 million was included in the Consolidated Statements of Income in Selling, General and Administrative, was triggered by a change in a co-manufacturing contract and ongoing losses.

Additionally, in accordance with recently adopted accounting guidance, we have retrospectively recognized $23 million and $10 million of net periodic pension and postretirement benefit credit, excluding the service cost component, for fiscal 2018 and fiscal 2017, respectively, and recorded the amounts in the Consolidated Condensed Statements of Income in Other, net.

NOTE 11: EARNINGS PER SHARE

The earnings and weighted average common shares used in the computation of basic and diluted earnings per share are as follows:

	in millions, except per share data
	2019				2018				2017
Numerator:
Net income	$	2,035			$	3,027			$	1,778
Less: Net income attributable to noncontrolling interests	13				3				4
Net income attributable to Tyson	2,022				3,024				1,774
Less dividends declared:
Class A	465				378				285
Class B	99				80				61
Undistributed earnings	$	1,458			$	2,566			$	1,428
Class A undistributed earnings	$	1,200			$	2,115			$	1,177
Class B undistributed earnings	258				451				251
Total undistributed earnings	$	1,458			$	2,566			$	1,428
Denominator:
Denominator for basic earnings per share:
Class A weighted average shares	293				295				296
Class B weighted average shares, and shares under if-converted method for diluted earnings per share	70				70				70
Effect of dilutive securities:
Stock options and restricted stock	3				4				4
Denominator for diluted earnings per share – adjusted weighted average shares and assumed conversions	366				369				370
Net Income Per Share Attributable to Tyson:
Class A Basic	$	5.67			$	8.44			$	4.94
Class B Basic	$	5.10			$	7.59			$	4.45
Diluted	$	5.52			$	8.19			$	4.79
Dividends Declared Per Share:
Class A	$	1.575			$	1.275			$	0.975
Class B	$	1.418			$	1.148			$	0.878

Approximately 1 million of our stock-based compensation shares were antidilutive for each of fiscal 2019, 2018 and 2017. These shares were not included in the dilutive earnings per share calculation.

We have two classes of capital stock, Class A stock and Class B stock. Cash dividends cannot be paid to holders of Class B stock unless they are simultaneously paid to holders of Class A stock. The per share amount of cash dividends paid to holders of Class B stock cannot exceed 90% of the cash dividends paid to holders of Class A stock.

We allocate undistributed earnings based upon a 1 to 0.9 ratio per share to Class A stock and Class B stock, respectively. We allocate undistributed earnings based on this ratio due to historical dividend patterns, voting control of Class B shareholders and contractual limitations of dividends to Class B stock.

NOTE 12: DERIVATIVE FINANCIAL INSTRUMENTS

Our business operations give rise to certain market risk exposures mostly due to changes in commodity prices, foreign currency exchange rates and interest rates. We manage a portion of these risks through the use of derivative financial instruments to reduce our exposure to commodity price risk, foreign currency risk and interest rate risk. Our risk management programs are periodically reviewed by our Board of Directors' Audit Committee. These programs are monitored by senior management and may be revised as market conditions dictate. Our current risk management programs utilize industry-standard models that take into account the implicit cost of hedging. Risks associated with our market risks and those created by derivative instruments and the fair values are strictly monitored, using value-at-risk and stress tests. Credit risks associated with our derivative contracts are not significant as we minimize counterparty concentrations, utilize margin accounts or letters of credit, and deal with credit-worthy counterparties. Additionally, our derivative contracts are mostly short-term in duration and we generally do not make use of credit-risk-related contingent features. No significant concentrations of credit risk existed at September 28, 2019.

We had the following aggregated outstanding notional amounts related to our derivative financial instruments:

				in millions, except soy meal tons
		Metric		September 28, 2019				September 29, 2018
Commodity:
Corn		Bushels		111				112
Soy Meal		Tons		1,078,800				651,700
Live Cattle		Pounds		14				105
Lean Hogs		Pounds		309				39
Foreign Currency		United States dollar		$	148			$	89
Interest Rate Swaps		Average monthly debt		$	400			$	400

We recognize all derivative instruments as either assets or liabilities at fair value in the Consolidated Balance Sheets, with the exception of normal purchases and normal sales expected to result in physical delivery. For those derivative instruments that are designated and qualify as hedging instruments, we designate the hedging instrument based upon the exposure being hedged (i.e., cash flow hedge or fair value hedge). We designate certain forward contracts as follows:

•	Cash Flow Hedges – include certain commodity forward and option contracts of forecasted purchases (i.e., grains), interest rate swaps and locks, and certain foreign exchange forward contracts.

•	Fair Value Hedges – include certain commodity forward contracts of firm commitments (i.e., livestock).

Cash flow hedges

Derivative instruments are designated as hedges against changes in the amount of future cash flows related to procurement of certain commodities utilized in our production processes as well as interest rates to our variable rate debt. For the derivative instruments we designate and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income ("OCI") and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses representing hedge ineffectiveness are recognized in earnings in the current period. Ineffectiveness related to our cash flow hedges was not significant during fiscal 2019, 2018 and 2017. As of September 28, 2019, we have net pretax losses of $8 million for our commodity contracts, and $3 million pretax losses related to our interest swaps, which are expected to be reclassified into earnings within the next 12 months. Additionally, we incurred $19 million of realized losses related to treasury rate locks in connection with the issuance of the 2026, 2029 and 2048 Notes, which will be reclassified to earnings over the lives of these notes. During fiscal 2019, 2018 and 2017, we did not reclassify significant pretax gains or losses into earnings as a result of the discontinuance of cash flow hedges.

The following table sets forth the pretax impact of cash flow hedge derivative instruments in the Consolidated Statements of Income:

																			in millions
	Gain (Loss) Recognized in OCI on Derivatives												Consolidated Statements of Income Classification		Gain (Loss) Reclassified from OCI to Earnings
	2019				2018				2017						2019				2018				2017
Cash Flow Hedge – Derivatives designated as hedging instruments:
Commodity contracts	$	(15	)		$	(21	)		$	(3	)		Cost of Sales		$	(18	)		$	(12	)		$	(4	)
Interest rate hedges	(24		)		1				—				Interest expense		(1		)		—				—
Total	$	(39	)		$	(20	)		$	(3	)				$	(19	)		$	(12	)		$	(4	)

Fair value hedges

We designate certain derivative contracts as fair value hedges of firm commitments to purchase livestock for harvest. Our objective of these hedges is to minimize the risk of changes in fair value created by fluctuations in commodity prices associated with fixed price livestock firm commitments. For these derivative instruments we designate and qualify as a fair value hedge, the gain or loss on the derivative, as well as the offsetting gain or loss on the hedged item attributable to the hedged risk, are recognized in earnings in the same period. We include the gain or loss on the hedged items (i.e., livestock purchase firm commitments) in the same line item, Cost of Sales, as the offsetting gain or loss on the related livestock forward position.

				in millions
		Consolidated Statements of Income Classification		2019				2018				2017
Gain (Loss) on forwards		Cost of Sales		$	42			$	12			$	(20	)
Gain (Loss) on purchase contract		Cost of Sales		(42		)		(12		)		20

Ineffectiveness related to our fair value hedges was not significant during fiscal 2019, 2018 and 2017.

Undesignated positions

In addition to our designated positions, we also hold derivative contracts for which we do not apply hedge accounting. These include certain derivative instruments related to commodities price risk, including grains, livestock, energy and foreign currency risk. We mark these positions to fair value through earnings at each reporting date.

The following table sets forth the pretax impact of the undesignated derivative instruments in the Consolidated Statements of Income:

								in millions
		Consolidated Statements of Income Classification		Gain (Loss) Recognized in Earnings
				2019				2018				2017
Derivatives not designated as hedging instruments:
Commodity contracts		Sales		$	(23	)		$	18			$	111
Commodity contracts		Cost of Sales		2				(33		)		(95		)
Foreign exchange contracts		Other Income/Expense		8				(3		)		—
Total				$	(13	)		$	(18	)		$	16

The fair value of all outstanding derivative instruments in the Consolidated Balance Sheets are included in Note 13: Fair Value Measurements.

NOTE 13: FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy contains three levels as follows:

Level 1 — Unadjusted quoted prices available in active markets for the identical assets or liabilities at the measurement date.

Level 2 — Other observable inputs available at the measurement date, other than quoted prices included in Level 1, either directly or indirectly, including:

•	Quoted prices for similar assets or liabilities in active markets;

•	Quoted prices for identical or similar assets in non-active markets;

•	Inputs other than quoted prices that are observable for the asset or liability; and

•	Inputs derived principally from or corroborated by other observable market data.

Level 3 — Unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The fair value hierarchy requires the use of observable market data when available. In instances where the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined based on the lowest level input significant to the fair value measurement in its entirety. Our assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability.

The following tables set forth by level within the fair value hierarchy our financial assets and liabilities accounted for at fair value on a recurring basis according to the valuation techniques we used to determine their fair values:

																	in millions
September 28, 2019	Level 1				Level 2				Level 3				Netting (a)				Total
Other Current Assets:
Derivative financial instruments:
Designated as hedges	$	—			$	26			$	—			$	(3	)		$	23
Undesignated	—				58				—				(5		)		53
Available for sale securities:
Current	—				—				1				—				1
Other assets:
Available for sale securities:
Non-current	—				51				51				—				102
Deferred compensation assets	7				311				—				—				318
Total assets	$	7			$	446			$	52			$	(8	)		$	497
Other Current Liabilities:
Derivative financial instruments:
Designated as hedges	$	—			$	17			$	—			$	(13	)		$	4
Undesignated	—				93				—				(90		)		3
Total liabilities	$	—			$	110			$	—			$	(103	)		$	7
September 29, 2018	Level 1				Level 2				Level 3				Netting (a)				Total
Other Current Assets:
Derivative financial instruments:
Designated as hedges	$	—			$	2			$	—			$	(1	)		$	1
Undesignated	—				44				—				(19		)		25
Available for sale securities:
Current	—				1				—				—				1
Other Assets:
Available for sale securities:
Non-current	—				46				51				—				97
Deferred Compensation assets	21				295				—				—				316
Total assets	$	21			$	388			$	51			$	(20	)		$	440
Other Current Liabilities:
Derivative financial instruments:
Designated as hedges	$	—			$	8			$	—			$	(8	)		$	—
Undesignated	—				35				—				(30		)		5
Total liabilities	$	—			$	43			$	—			$	(38	)		$	5

(a)

Our derivative assets and liabilities are presented in our Consolidated Balance Sheets on a net basis when a legally enforceable master netting arrangement exists between the counterparty to a derivative contract and us. Additionally, at September 28, 2019, and September 29, 2018, we had $95 million and $18 million, respectively, of net cash collateral posted with various counterparties where master netting arrangements exist and held no cash collateral.

The following table provides a reconciliation between the beginning and ending balance of marketable debt securities measured at fair value on a recurring basis in the table above that used significant unobservable inputs (Level 3):

					in millions
	September 28, 2019				September 29, 2018
Balance at beginning of year	$	51			$	51
Total realized and unrealized gains (losses):
Included in earnings	—				—
Included in other comprehensive income (loss)	1				(1		)
Purchases	20				20
Issuances	—				—
Settlements	(20		)		(19		)
Balance at end of year	$	52			$	51
Total gains (losses) for the periods included in earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities still held at end of year	$	—			$	—

The following methods and assumptions were used to estimate the fair value of each class of financial instrument:

Derivative Assets and Liabilities: Our derivative financial instruments primarily include exchange-traded and over-the-counter contracts which are further described in Note 12: Derivative Financial Instruments. We record our derivative financial instruments at fair value using quoted market prices, adjusted where necessary for credit and non-performance risk and internal models that use readily observable market inputs as their basis, including current and forward market prices and rates. We classify these instruments in Level 2 when quoted market prices can be corroborated utilizing observable current and forward commodity market prices on active exchanges or observable market transactions.

Available for Sale Securities: Our investments in marketable debt securities are classified as available-for-sale and are reported at fair value based on pricing models and quoted market prices adjusted for credit and non-performance risk. Short-term investments with maturities of less than 12 months are included in Other current assets in the Consolidated Balance Sheets and primarily include certificates of deposit and commercial paper. All other marketable debt securities are included in Other Assets in the Consolidated Balance Sheets and have maturities ranging up to 41 years. We classify our investments in U.S. government, U.S. agency, certificates of deposit and commercial paper debt securities as Level 2 as fair value is generally estimated using discounted cash flow models that are primarily industry-standard models that consider various assumptions, including time value and yield curve as well as other readily available relevant economic measures. We classify certain corporate, asset-backed and other debt securities as Level 3 as there is limited activity or less observable inputs into valuation models, including current interest rates and estimated prepayment, default and recovery rates on the underlying portfolio or structured investment vehicle. Significant changes to assumptions or unobservable inputs in the valuation of our Level 3 instruments would not have a significant impact to our consolidated financial statements.

The following table sets forth our available-for-sale securities' amortized cost basis, fair value and unrealized gain (loss) by significant investment category:

																	in millions
	September 28, 2019												September 29, 2018
	Amortized Cost Basis				Fair Value				Unrealized Gain/(Loss)				Amortized Cost Basis				Fair Value				Unrealized Gain/(Loss)
Available for Sale Securities:
Debt Securities:
United States Treasury and Agency	$	51			$	51			$	—			$	48			$	47			$	(1	)
Corporate and Asset-Backed	51				52				1				52				51				(1		)

Unrealized holding gains (losses), net of tax, are excluded from earnings and reported in OCI until the security is settled or sold. On a quarterly basis, we evaluate whether losses related to our available-for-sale securities are temporary in nature. Losses on equity securities are recognized in earnings if the decline in value is judged to be other than temporary. If losses related to our debt securities are determined to be other than temporary, the loss would be recognized in earnings if we intend, or more likely than not will be required, to sell the security prior to recovery.

For debt securities in which we have the intent and ability to hold until maturity, losses determined to be other than temporary would remain in OCI, other than expected credit losses which are recognized in earnings. We consider many factors in determining whether a loss is temporary, including the length of time and extent to which the fair value has been below cost, the financial condition and near-term prospects of the issuer and our ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery. We recognized no other than temporary impairment in earnings for fiscal 2019 and fiscal 2018. No other than temporary losses were deferred in OCI as of September 28, 2019, and September 29, 2018.

Deferred Compensation Assets: We maintain non-qualified deferred compensation plans for certain executives and other highly compensated employees. Investments are generally maintained within a trust and include money market funds, mutual funds and life insurance policies. The cash surrender value of the life insurance policies is invested primarily in mutual funds. The investments are recorded at fair value based on quoted market prices and are included in Other Assets in the Consolidated Balance Sheets. We classify the investments which have observable market prices in active markets in Level 1 as these are generally publicly-traded mutual funds. The remaining deferred compensation assets are classified in Level 2, as fair value can be corroborated based on observable market data. Realized and unrealized gains (losses) on deferred compensation are included in earnings.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

In addition to assets and liabilities that are recorded at fair value on a recurring basis, we record assets and liabilities at fair value on a nonrecurring basis. Generally, assets are recorded at fair value on a nonrecurring basis as a result of impairment charges.

In fiscal 2019, we recorded a $41 million impairment charge related to a Prepared Foods business held for sale, due to our 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 2019. Our valuation included unobservable Level 3 inputs and was based on expected sales proceeds from a competitive bidding process and ongoing discussions with potential buyers.

In fiscal 2018, we recorded $101 million of impairment charges related to the expected sale of non-protein businesses held for sale, due to revised estimates of the businesses' fair value based on current expected net sales proceeds at the time of the impairment. These charges were recorded in Cost of Sales in our Consolidated Statement of Income, and primarily consisted of Goodwill previously classified within Assets held for sale. Our valuation included unobservable Level 3 inputs and was based on expected sales proceeds from a competitive bidding process and ongoing discussions with potential buyers.

In the fourth quarter of fiscal 2017, we recorded an impairment charge totaling $45 million, related to one of the non-protein businesses held for sale, 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. Our valuation included unobservable Level 3 inputs and was based on expected sales proceeds following a competitive bidding process.

In the second quarter of fiscal 2017, we recorded a $52 million impairment charge related to our San Diego Prepared Foods operation. The impairment was comprised of $43 million of property, plant and equipment, $8 million of definite lived intangibles assets and $1 million of other assets. This charge, of which $44 million was included in the Consolidated Statements of Income in Cost of Sales and $8 million was included in the Consolidated Statements of Income in Selling, General and Administrative, was triggered by a change in a co-manufacturing contract and ongoing losses. Our valuation of these assets was primarily based on discounted cash flows and relief-from-royalty models, which included unobservable Level 3 inputs.

Other Financial Instruments

Fair value of our debt is principally estimated using Level 2 inputs based on quoted prices for those or similar instruments. Fair value and carrying value for our debt are as follows:

									in millions
	September 28, 2019								September 29, 2018
	Fair Value				Carrying Value				Fair Value				Carrying Value
Total Debt	$	12,978			$	11,932			$	9,775			$	9,873

Concentrations of Credit Risk

Our financial instruments exposed to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. Our cash equivalents are in high quality securities placed with major banks and financial institutions. Concentrations of credit risk with respect to receivables are limited due to the large number of customers and their dispersion across geographic areas. We perform periodic credit evaluations of our customers’ financial condition and generally do not require collateral. At September 28, 2019, and September 29, 2018, 16.2% and 18.6%, respectively, of our net accounts receivable balance was due from Walmart Inc. No other single customer or customer group represented greater than 10% of net accounts receivable.

NOTE 14: STOCK-BASED COMPENSATION

We issue shares under our stock-based compensation plans by issuing Class A stock from treasury. The total number of shares available for future grant under the Tyson Foods, Inc. 2000 Stock Incentive Plan ("Incentive Plan") was 12,952,617 at September 28, 2019.

Stock Options

Shareholders approved the Incentive Plan in January 2001. The Incentive Plan is administered by the Compensation and Leadership Development Committee of the Board of Directors ("Compensation Committee"). The Incentive Plan includes provisions for granting incentive stock options for shares of Class A stock at a price not less than the fair value at the date of grant. Nonqualified stock options may be granted at a price equal to or more than the fair value of Class A stock on the date the option is granted. Stock options under the Incentive Plan generally become exercisable ratably over three years from the date of grant and must be exercised within 10 years from the date of grant. Our policy is to recognize compensation expense on a straight-line basis over the requisite service period for the entire award. Forfeitures are recognized as they occur.

	Shares Under Option			Weighted Average Exercise Price Per Share				Weighted Average Remaining Contractual Life (in Years)		Aggregate Intrinsic Value (in millions)
Outstanding, September 29, 2018	5,994,148			$	48.37
Exercised	(2,345,001	)		43.27
Forfeited or expired	(152,650	)		63.04
Granted	1,866,175			59.42
Outstanding, September 28, 2019	5,362,672			54.03				7.0		$	167
Exercisable, September 28, 2019	2,656,960			$	44.14			5.3		$	109

We generally grant stock options once a year. The weighted average grant-date fair value of options granted in fiscal 2019, 2018 and 2017 was $11.35, $18.31 and $13.42, respectively. The fair value of each option grant is established on the date of grant using a binomial lattice method. We use historical volatility for a period of time comparable to the expected life of the option to determine volatility assumptions. Expected life is calculated based on the contractual term of each grant and takes into account the historical exercise and termination behavior of participants. Risk-free interest rates are based on the five-year Treasury bond rate. In fiscal 2018, an additional grant was awarded for two executive officers who joined the Company subsequent to the initial annual grant. Accordingly, the assumptions below for fiscal 2018 are calculated using the weighted average amounts for the two fiscal 2018 grants. Assumptions as of the grant date used in the fair value calculation of each year’s grants are outlined in the following table.

	2019			2018			2017
Expected life (in years)	4.3			5.9			5.4
Risk-free interest rate	2.8	%		2.1	%		1.8	%
Expected volatility	25.4	%		23.5	%		24.7	%
Expected dividend yield	2.5	%		1.5	%		1.3% - 1.4%

We recognized stock-based compensation expense related to stock options, net of income taxes, of $16 million, $13 million and $22 million for fiscal 2019, 2018 and 2017, respectively. The related tax benefit for fiscal 2019, 2018 and 2017 was $3 million, $6 million and $14 million, respectively. We had 1.2 million, 2.2 million and 4.1 million options vest in fiscal 2019, 2018 and 2017, respectively, with a grant date fair value of $18 million, $27 million and $47 million, respectively.

In fiscal 2019, 2018 and 2017, we received cash of $99 million, $102 million and $154 million, respectively, for the exercise of stock options. Shares are issued from treasury for stock option exercises. The related tax benefit realized from stock options exercised during fiscal 2019, 2018 and 2017, was $21 million, $30 million and $65 million, respectively. The total intrinsic value of options exercised in fiscal 2019, 2018 and 2017, was $79 million, $103 million and $164 million, respectively. Cash flows resulting from tax deductions in excess of the compensation cost of those options (excess tax deductions) are classified as financing cash flows. We realized $14 million, $20 million and $42 million related to excess tax deductions during fiscal 2019, 2018 and 2017, respectively.

As of September 28, 2019, we had $18 million of total unrecognized compensation cost related to stock option plans that will be recognized over a weighted average period of 1.5 years.

Restricted Stock

We issue restricted stock at the market value as of the date of grant, with restrictions expiring over periods through fiscal 2022. Unearned compensation is recognized over the vesting period for the particular grant using a straight-line method.

	Number of Shares			Weighted Average Grant- Date Fair Value Per Share				Weighted Average Remaining Contractual Life (in Years)		Aggregate Intrinsic Value (in millions)
Nonvested, September 29, 2018	1,499,976			$	62.68
Granted	779,497			60.59
Dividends	36,077			64.39
Vested	(540,075	)		53.60
Forfeited	(113,397	)		64.63
Nonvested, September 28, 2019	1,662,078			$	64.55			1.4		$	142

As of September 28, 2019, we had $46 million of total unrecognized compensation cost related to restricted stock awards that will be recognized over a weighted average period of 1.9 years.

We recognized stock-based compensation expense related to restricted stock, net of income taxes, of $26 million, $22 million and $18 million for fiscal 2019, 2018 and 2017, respectively. The related tax benefit for fiscal 2019, 2018 and 2017 was $8 million, $9 million and $11 million, respectively. We had 0.5 million, 0.6 million and 0.5 million restricted stock awards vest in fiscal 2019, 2018 and 2017, respectively, with a grant date fair value of $29 million, $27 million and $19 million, respectively.

Performance-Based Shares

We award performance-based shares of our Class A stock to certain employees. These awards are typically granted once a year. Performance-based shares vest based upon the passage of time and the achievement of performance or market performance criteria, ranging from 0% to 200%, as determined by the Compensation Committee prior to the date of the award. Vesting periods for these awards are three years. We review progress toward the attainment of the performance criteria each quarter during the vesting period. When it is probable the minimum performance criteria for an award will be achieved, we begin recognizing the expense equal to the proportionate share of the total fair value of the Class A stock price on the grant date. The total expense recognized over the duration of performance awards will equal the Class A stock price on the date of grant multiplied by the number of shares ultimately awarded based on the level of attainment of the performance criteria. For grants with market performance criteria, the fair value is determined on the grant date and is calculated using the same inputs for expected volatility, expected dividend yield, and risk-free rate as stock options, noted above, with a duration of three years. The total expense recognized over the duration of the award will equal the fair value, regardless if the market performance criteria is met.

The following table summarizes the performance-based shares at the maximum award amounts based upon the respective performance share agreements. Actual shares that will vest depend on the level of attainment of the performance-based criteria.

	Number of Shares			Weighted Average Grant- Date Fair Value Per Share				Weighted Average Remaining Contractual Life (in Years)		Aggregate Intrinsic Value (in millions)
Nonvested, September 29, 2018	2,196,299			$	47.99
Granted	858,676			45.12
Vested	(825,361	)		35.08
Forfeited	(202,555	)		52.67
Nonvested, September 28, 2019	2,027,059			$	51.03			1.0		$	173

We recognized stock-based compensation expense related to performance shares, net of income taxes, of $16 million, $12 million and $16 million for fiscal 2019, 2018 and 2017, respectively. The related tax benefit for fiscal 2019, 2018 and 2017 was $4 million, $5 million and $10 million, respectively. As of September 28, 2019, we had $26 million of total unrecognized compensation based upon our progress toward the attainment of criteria related to performance-based share awards that will be recognized over a weighted average period of 1.8 years.

NOTE 15: PENSIONS AND OTHER POSTRETIREMENT BENEFITS

At September 28, 2019, we had nine defined benefit pension plans consisting of five funded qualified plans, which are all frozen and noncontributory, and four unfunded non-qualified plans. The benefits provided under these plans are based on a formula using years of service and either a specified benefit rate or compensation level. The non-qualified defined benefit plans are for certain contracted officers and use a formula based on years of service and final average salary. We also have other postretirement benefit plans for which substantially all of our employees may receive benefits if they satisfy applicable eligibility criteria. The postretirement healthcare plans are contributory with participants’ contributions adjusted when deemed necessary.

We have defined contribution retirement programs for various groups of employees. We recognized expenses of $97 million, $84 million and $78 million in fiscal 2019, 2018 and 2017, respectively.

We use a fiscal year end measurement date for our defined benefit plans and other postretirement plans. We recognize the effect of actuarial gains and losses into earnings immediately for other postretirement plans rather than amortizing the effect over future periods. Other postretirement benefits include postretirement medical costs and life insurance.

During fiscal 2017, we issued a notice of intent to terminate two of our qualified pension plans with a termination date of April 30, 2017. The settlements of the terminated plans occurred during fiscal 2019, through purchased annuities, and we incurred a $19 million settlement charge at final liquidation.

During fiscal 2019, we issued a notice of intent to terminate three other qualified pension plans. The settlements of these plans are expected to occur in fiscal 2020, through purchased annuities. Since the amount of the settlements depends on a number of factors determined as of the liquidation date, including the annuity pricing, interest rates and investment performance, we are currently unable to determine the ultimate cost of the settlements. However, based on current market rates, we estimate that we will incur settlement gains at final liquidation in the range of approximately $40 million to $60 million. Contributions to purchase annuities at the time of settlement are expected to be in the range of approximately $10 million to $30 million based on current market conditions of each plan at September 28, 2019.

Benefit Obligations and Funded Status

The following table provides a reconciliation of the changes in the plans’ benefit obligations, assets and funded status at September 28, 2019, and September 29, 2018:

																	in millions
	Pension Benefits																Other Postretirement
	Qualified								Non-Qualified								Benefits
	2019				2018				2019				2018				2019				2018
Change in benefit obligation
Benefit obligation at beginning of year	$	1,392			$	1,477			$	220			$	230			$	28			$	33
Service cost	—				—				1				7				2				1
Interest cost	56				55				9				8				1				1
Curtailment	—				—				—				(5		)		—				—
Plan amendments	—				—				—				5				4				—
Actuarial (gain)/loss	154				(60		)		17				(10		)		6				(5		)
Benefits paid	(77		)		(80		)		(12		)		(15		)		(4		)		(2		)
Business Acquisition	2				—				4				—				13				—
Plan Terminations	(49		)		—				—				—				—				—
Other	—				—				—				—				27				—
Benefit obligation at end of year	1,478				1,392				239				220				77				28
Change in plan assets
Fair value of plan assets at beginning of year	1,450				1,512				—				—				—				—
Actual return on plan assets	146				4				—				—				—				—
Employer contributions	1				14				12				15				4				2
Benefits paid	(77		)		(80		)		(12		)		(15		)		(4		)		(2		)
Business Acquisition	2				—				—				—				—				—
Plan Terminations	(45		)		—				—				—				—				—
Fair value of plan assets at end of year	1,477				1,450				—				—				—				—
Funded status	$	(1	)		$	58			$	(239	)		$	(220	)		$	(77	)		$	(28	)

Amounts recognized in the Consolidated Balance Sheets consist of:

																	in millions
	Pension Benefits																Other Postretirement
	Qualified								Non-Qualified								Benefits
	2019				2018				2019				2018				2019				2018
Other assets	$	16			$	61			$	—			$	—			$	—			$	—
Other current liabilities	—				(3		)		(12		)		(12		)		(3		)		(3		)
Other liabilities	(17		)		—				(227		)		(208		)		(74		)		(25		)
Total assets (liabilities)	$	(1	)		$	58			$	(239	)		$	(220	)		$	(77	)		$	(28	)

Amounts recognized in Accumulated Other Comprehensive Income consist of:

																	in millions
	Pension Benefits																Other Postretirement
	Qualified								Non-Qualified								Benefits
	2019				2018				2019				2018				2019				2018
Accumulated other comprehensive (income)/loss:
Actuarial (gain) loss	$	(53	)		$	(96	)		$	46			$	31			$	27			$	—
Prior service (credit) cost	—				—				4				5				(42		)		(49		)
Total accumulated other comprehensive (income)/loss:	$	(53	)		$	(96	)		$	50			$	36			$	(15	)		$	(49	)

We had five pension plans at September 28, 2019, and September 29, 2018, that had an accumulated benefit obligation in excess of plan assets. Plans with accumulated benefit obligations in excess of plan assets are as follows:

									in millions
	Pension Benefits
	Qualified								Non-Qualified
	2019				2018				2019				2018
Projected benefit obligation	$	381			$	49			$	239			$	220
Accumulated benefit obligation	381				49				239				219
Fair value of plan assets	364				45				—				—

The accumulated benefit obligation for all qualified pension plans was $1,478 million and $1,392 million at September 28, 2019, and September 29, 2018, respectively.

Net Periodic Benefit Cost (Credit)

Components of net periodic benefit cost (credit) for pension and postretirement benefit plans recognized in the Consolidated Statements of Income are as follows:

																													in millions
	Pension Benefits																								Other Postretirement
	Qualified												Non-Qualified												Benefits
	2019				2018				2017				2019				2018				2017				2019				2018				2017
Service cost	$	—			$	—			$	2			$	1			$	7			$	11			$	2			$	1			$	1
Interest cost	56				55				57				9				8				8				1				1				1
Expected return on plan assets	(57		)		(62		)		(59		)		—				—				—				—				—				—
Amortization of prior service cost	—				1				—				1				1				—				(2		)		(25		)		(25		)
Recognized actuarial loss (gain), net	(1		)		—				1				2				3				6				5				(5		)		(1		)
Recognized settlement loss (gain)	19				—				2				—				—				—				—				—				—
Net periodic benefit cost (credit)	$	17			$	(6	)		$	3			$	13			$	19			$	25			$	6			$	(28	)		$	(24	)

As of September 28, 2019, we expect no amounts to be reclassified into earnings within the next 12 months related to net periodic benefit cost (credit) for the qualified pension plans, excluding pending settlements. As of September 28, 2019, the amounts expected to be reclassified into earnings within the next 12 months related to net periodic benefit cost (credit) for the non-qualified pension plans and the other postretirement benefit plans are not significant.

Assumptions

Weighted average assumptions are as follows:

	Pension Benefits																		Other Postretirement
	Qualified									Non-Qualified									Benefits
	2019			2018			2017			2019			2018			2017			2019			2018			2017
Discount rate to determine net periodic benefit cost	4.26	%		3.85	%		3.72	%		4.31	%		3.88	%		3.77	%		3.99	%		3.39	%		3.09	%
Discount rate to determine benefit obligations	3.23	%		4.26	%		3.85	%		3.16	%		4.31	%		3.88	%		2.68	%		4.11	%		3.39	%
Rate of compensation increase	n/a			n/a			n/a			n/a			2.53	%		2.44	%		n/a			n/a			n/a
Expected return on plan assets	3.50	%		4.20	%		4.21	%		n/a			n/a			n/a			n/a			n/a			n/a

To determine the expected return on plan assets assumption, 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.

Our discount rate assumptions used to account for pension and other postretirement benefit plans reflect the rates at which the benefit obligations could be effectively settled. The discount rates for two of our plans that are expected to settle in fiscal 2020 were determined using a composite rate comprised of an annuity purchase rate and a lump sum conversion discount rate based on the portions of the populations that are assumed to be purchased under the annuity contract with the insurance company versus those who will elect lump sums, respectively. The discount rates for our other plans 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. For all periods presented, all pension and other postretirement benefit plans used the RP-2014 mortality tables.

We have eight other postretirement benefit plans, of which five are healthcare and life insurance related. Two of these plans, with benefit obligations totaling $17 million at September 28, 2019, were not impacted by healthcare cost trend rates as one consists of fixed annual payments and one is life insurance related. One of the healthcare plans, with benefit obligations less than $1 million at September 28, 2019, was not impacted by healthcare cost trend rates due to previous plan amendments. The remaining two plans, with benefit obligations totaling $11 million and $9 million, at September 28, 2019, utilized assumed healthcare cost trend rates of 7.3% and 7.0%, respectively. The healthcare cost trend rates will be grading down to an ultimate rate of 5% in 2026 and 4.5% in 2027. A one-percentage-point change in assumed health-care cost trend rates would not have a significant effect on the postretirement benefit obligation.

Plan Assets

The asset allocation for pension plan assets at September 28, 2019 was approximately 73% fixed income securities and approximately 27% cash. The increased allocation to cash is due to the intent to terminate these plans in the next year. The target asset allocation is 100% fixed income securities. Additionally, one of our foreign subsidiary pension plans had $31 million in plan assets held in an insurance trust at September 28, 2019. The plan trustees have established a set of investment objectives related to the assets of the domestic pension plans and regularly monitor the performance of the funds and portfolio managers. The 100% target asset allocation to fixed income securities is based upon the intent to terminate these plans.

Our domestic plan assets consist mainly of common collective trusts which are primarily comprised of fixed income funds and equity securities. Fixed income securities can include, but are not limited to, direct bond investments, and pooled or indirect bond investments. Derivative instruments may also be used in concert with either fixed income or equity investments to achieve desired exposure or to hedge certain risks. Derivative instruments can include, but are not limited to, futures, options, swaps or swaptions. Our domestic plan assets also include mutual funds. We believe there are no significant concentrations of risk within our plan assets as of September 28, 2019.

At September 28, 2019, 36% of plan assets were held in cash and cash equivalents (Level 1), 61% in corporate and municipal bonds (Level 2). The fair value of plan assets using Level 3 inputs was not significant at September 28, 2019. At September 29, 2018, 97% of plan assets were invested in common collective trusts measured at net asset value. The fair value of plan assets using Level 2 and Level 3 inputs was not significant at September 29, 2018.

Contributions

Our policy is to fund at least the minimum contribution required to meet applicable federal employee benefit and local tax laws. In our sole discretion, we may from time to time fund additional amounts. Expected contributions to pension plans for fiscal 2020 are approximately $33 million. For fiscal 2019, 2018 and 2017, we funded $13 million, $29 million and $53 million, respectively, to pension plans.

Estimated Future Benefit Payments

The following benefit payments are expected to be paid:

									in millions
	Pension Benefits								Other Postretirement
	Qualified				Non-Qualified				Benefits
2020	$	1			$	12			$	4
2021	—				12				4
2022	1				13				4
2023	—				13				4
2024	2				13				4
2024-2028	4				66				14

The above benefit payments for other postretirement benefit plans are not expected to be offset by Medicare Part D subsidies in fiscal 2020.

The above 2020 benefit payments do not include anticipated accelerated payments for a plan termination within three of our qualified pension plans. The plan termination process for one of these plans began on October 1, 2018 and for the remaining two plans began on December 31, 2018. Full settlement is expected to occur in fiscal 2020.

Multi-Employer Plans

Additionally, we participate in three multi-employer plans that provide 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.

The risks of participating in multi-employer plans are different from single-employer plans. Assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other participating employers. If a participating employer stops contributing to the plan, the unfunded obligation of the plan may be borne by the remaining participating employers. If we stop participating in a plan, we may be required to pay that plan an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

The net pension cost of the plans is equal to the annual contributions determined in accordance with the provisions of negotiated labor contracts. Contributions to the plans were $2 million in fiscal 2019 and 2018. Assets contributed to such plans are not segregated or otherwise restricted to provide benefits only to our employees. The future cost of the 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.

Our participation in these multi-employer plans for fiscal 2019 is outlined below. The EIN/Pension Plan Number column provides the Employer Identification Number ("EIN") and the three-digit plan number. Unless otherwise noted, the most recent Pension Protection Act ("PPA") zone status available in fiscal 2019 and fiscal 2018 is for the plan's year beginning January 1, 2019, and 2018, respectively. The zone status is based on information that we have received from the plan and is certified by the plan's actuaries. Among other factors, plans in the red zone are generally less than 65 percent funded. Plans that are critical and declining status are projected to have an accumulated funding deficiency. The FIP/RP Status column indicates plans for which a financial improvement plan ("FIP") or rehabilitation plan ("RP") is either pending or has been implemented. The last column lists the expiration date of the collective-bargaining agreements to which the plan is subject. During fiscal 2019, as part of our acquisition of Keystone Foods, we acquired an interest in four multi-employer plans. Our interest in two of these plans was subsequently disposed of in conjunction with the divestiture of a chicken further processing facility acquired during the Keystone Foods acquisition. See Note 3: Acquisitions and Divestitures for additional information on these transactions. Additionally, during fiscal 2019, we initiated our withdrawal from the Retail, Wholesale and Department Store International Union and Industry Pension Fund ("RWDSU Fund"). As a result of our anticipated withdrawal from the RWDSU Fund, we recorded a $15 million termination liability.

In addition to regular contributions, we could be obligated to pay additional contributions (known as complete or partial withdrawal liabilities) if it has unfunded vested benefits.

			PPA Zone Status				FIP/RP Status		Contributions (in millions)				Surcharge Imposed
Pension Fund Plan Name	EIN/Pension Plan Number		2019		2018		Implemented		2019	2018	2017		2019		Expiration Date of Collective Bargaining Agreement(a)
Bakery and Confectionery Union and Industry International Pension Fund	52-6118572/001		Red		Red		Nov 2012		$1	$2	$2		10%		2015-10-10
Pension Fund of Local 227 (b)	61-6054018/001		Green		n/a		n/a		$0.2	n/a	n/a		None		2019-11-09
Retail, Wholesale and Department Store International Union and Industry Pension Fund (c)	63-0708442/001		Red		n/a		Nov 2015		$0.5	n/a	n/a		9%		2021-11-07

(a)	Renewal negotiations for the Bakery and Confectionery Union and Industry International Pension Fund are in progress.

(b)	Contributions in fiscal 2019 exceeded 5% of plan contributions for the plan year ended October 31, 2018.

(c)	Contributions in fiscal 2019 exceeded 5% of plan contributions for the plan year ended December 31, 2018.

NOTE 16: COMPREHENSIVE INCOME (LOSS)

The components of accumulated other comprehensive loss are as follows:

					in millions
	2019				2018(1)
Accumulated other comprehensive income (loss), net of taxes:
Unrealized net hedging loss	$	(24	)		$	(9	)
Unrealized net gain (loss) on investments	1				(1		)
Currency translation adjustment	(107		)		(84		)
Postretirement benefits reserve adjustments	13				79
Total accumulated other comprehensive income (loss)	$	(117	)		$	(15	)

(1) Includes reclass from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act, following adoption of the applicable new accounting standard in fiscal 2018.

The before and after tax changes in the components of other comprehensive income (loss) are as follows:

																						in millions
		2019										2018										2017
		Before Tax			Tax			After Tax				Before Tax			Tax			After Tax				Before Tax			Tax			After Tax
Derivatives accounted for as cash flow hedges:
(Gain) loss reclassified to interest expense		$	1		$	—		$	1			$	—		$	—		$	—			$	—		$	—		$	—
(Gain) loss reclassified to cost of sales		18			(5		)	13				12			(4		)	8				4			(2		)	2
Unrealized gain (loss)		(39		)	10			(29		)		(20		)	5			(15		)		(3		)	1			(2		)
Investments:
Unrealized gain (loss)		3			(1		)	2				(2		)	1			(1		)		(1		)	—			(1		)
Currency translation:
Translation adjustment		(23		)	—			(23		)		(38		)	2			(36		)		6			—			6
Translation loss reclassified to cost of sales		—			—			—				7			—			7				—			—			—
Postretirement benefits:
Unrealized gain (loss)		(114		)	31			(83		)		(8		)	1			(7		)		91			(35		)	56
Pension settlement reclassified to other (income) expense		23			(6		)	17				—			—			—				—			—			—
Total other comprehensive income (loss)		$	(131	)	$	29		$	(102	)		$	(49	)	$	5		$	(44	)		$	97		$	(36	)	$	61

NOTE 17: SEGMENT REPORTING

We operate in four reportable segments: Beef, Pork, Chicken, and Prepared Foods. We measure segment profit as operating income (loss). International/Other primarily includes our foreign operations in Australia, China, South Korea, Malaysia, Mexico, the Netherlands, Thailand and the United Kingdom, third-party merger and integration costs and corporate overhead related to Tyson New Ventures, LLC.

Beef: Beef includes our operations related to processing live fed cattle and fabricating dressed beef carcasses into primal and sub-primal meat cuts and case-ready products. Products are marketed domestically to food retailers, foodservice distributors, restaurant operators, hotel chains and noncommercial foodservice establishments such as schools, healthcare facilities, the military and other food processors, as well as to international export markets. This segment also includes sales from allied products such as hides and variety meats, as well as logistics operations to move products through the supply chain.

Pork: Pork includes our operations related to processing live market hogs and fabricating pork carcasses into primal and sub-primal cuts and case-ready products. Products are marketed domestically to food retailers, foodservice distributors, restaurant operators, hotel chains and noncommercial foodservice establishments such as schools, healthcare facilities, the military and other food processors, as well as to international export markets. This segment also includes our live swine group, related allied product processing activities and logistics operations to move products through the supply chain.

Chicken: Chicken includes our domestic operations related to raising and processing live chickens into, and purchasing raw materials for fresh, frozen and value-added chicken products, as well as sales from allied products. Our value-added chicken products primarily include breaded chicken strips, nuggets, patties and other ready-to-fix or fully cooked chicken parts. Products are marketed domestically to food retailers, foodservice distributors, restaurant operators, hotel chains and noncommercial foodservice establishments such as schools, convenience stores, healthcare facilities, the military and other food processors, as well as to international export markets. This segment also includes logistics operations to move products through our domestic supply chain and the global operations of our chicken breeding stock subsidiary.

Prepared Foods: Prepared Foods includes our operations related to manufacturing and marketing frozen and refrigerated food products and logistics operations to move products through the supply chain. This segment includes brands such as Jimmy Dean®, Hillshire Farm®, Ball Park®, Wright®, State Fair®, as well as artisanal brands Aidells®, Gallo Salame®, and Golden Island®. Products primarily include ready-to-eat sandwiches, sandwich components such as flame-grilled hamburgers and Philly steaks, pepperoni, bacon, breakfast sausage, turkey, lunchmeat, hot dogs, flour and corn tortilla products, appetizers, snacks, prepared meals, ethnic foods, side dishes, meat dishes, breadsticks and processed meats. Products are marketed domestically to food retailers, foodservice distributors, restaurant operators, hotel chains and noncommercial foodservice establishments such as schools, convenience stores, healthcare facilities, the military and other food processors, as well as to international export markets.

We allocate expenses related to corporate activities to the segments, except for third-party merger and integration costs of $36 million, $26 million and $67 million in fiscal 2019, 2018 and 2017, respectively, which are included in International/Other. Assets and additions to property, plant and equipment relating to corporate activities remain in International/Other. In fiscal 2017, we included $3 billion of unallocated goodwill associated with our acquisition of AdvancePierre in International/Other and we completed the allocation of goodwill to our segments in fiscal 2018. Additionally, as of September 28, 2019, we allocated approximately $342 million of goodwill to International/Other as a result of our Keystone Foods and Thai and European operations acquisitions. Refer to Note 5: Goodwill and Intangible Assets for further description.

Information on segments and a reconciliation to income from continuing operations before income taxes are as follows:

	in millions
	Beef				Pork				Chicken				Prepared Foods				International/Other				Intersegment Sales				Consolidated
Fiscal 2019
Sales	$	15,828			$	4,932			$	13,300			$	8,418			$	1,289			$	(1,362	)		$	42,405
Operating Income (Loss)	1,107				263				621				843				(7		)						2,827
Total Other (Income) Expense																									396
Income before Income Taxes																									2,431
Depreciation and amortization	97				47				513				397				32								1,086
Total Assets	3,137				1,372				10,807				15,138				2,643								33,097
Additions to property, plant and equipment	133				128				637				246				115								1,259
Fiscal 2018
Sales	$	15,473			$	4,879			$	12,044			$	8,668			$	305			$	(1,317	)		$	40,052
Operating Income (Loss)	1,013				361				866				845				(53		)						3,032
Total Other (Income) Expense																									287
Income before Income Taxes																									2,745
Depreciation and amortization	103				42				368				410				10								933
Total Assets	3,061				1,265				8,794				15,063				926								29,109
Additions to property, plant and equipment	107				150				570				228				145								1,200
Fiscal 2017
Sales	$	14,823			$	5,238			$	11,409			$	7,853			$	349			(1,412		)		$	38,260
Operating Income (Loss)	877				645				1,053				452				(106		)						2,921
Total Other (Income) Expense																									293
Income before Income Taxes																									2,628
Depreciation and amortization	92				36				296				315				9								748
Total Assets	2,938				1,132				6,630				13,466				3,900								28,066
Additions to property, plant and equipment	118				101				492				229				129								1,069

The Beef segment had sales of $411 million, $420 million and $386 million for fiscal 2019, 2018 and 2017, respectively, from transactions with other operating segments. The Pork segment had sales of $893 million, $817 million and $966 million for fiscal 2019, 2018 and 2017, respectively, from transactions with other operating segments. The Chicken segment had sales of $58 million, $80 million and $60 million for fiscal 2019, 2018 and 2017, respectively, from transactions with other operating segments. The aforementioned sales from intersegment transactions, which were at market prices, were included in the segment sales in the above table.

Our largest customer, Walmart Inc., accounted for 16.9%, 17.3% and 17.3% of consolidated sales in fiscal 2019, 2018 and 2017, respectively. Sales to Walmart Inc. were included in all the segments. Any extended discontinuance of sales to this customer could, if not replaced, have a material impact on our operations.

The majority of our operations are domiciled in the United States. Approximately 96%, 99% and 98% of sales to external customers for fiscal 2019, 2018 and 2017, respectively, were sourced from the United States. Approximately $24.8 billion and $23.2 billion of long-lived assets were located in the United States at September 28, 2019, and September 29, 2018, respectively. Excluding goodwill and intangible assets, long-lived assets located in the United States totaled approximately $7.5 billion and $6.7 billion at September 28, 2019, and September 29, 2018, respectively. Approximately $1,107 million and $212 million of long-lived assets were located in foreign locations, primarily Brazil, China, the European Union, New Zealand and Thailand at September 28, 2019, and September 29, 2018, respectively. Excluding goodwill and intangible assets, long-lived assets in foreign countries totaled approximately $506 million and $201 million at September 28, 2019, and September 29, 2018, respectively.

We sell certain products in foreign markets, primarily Australia, Canada, Central America, China, the European Union, Japan, Mexico, Malaysia, the Middle East, South Korea, Taiwan and Thailand. Our export sales from the United States totaled $4.1 billion, $4.2 billion and $3.9 billion for fiscal 2019, 2018 and 2017, respectively. Substantially all of our export sales are facilitated through unaffiliated brokers, marketing associations and foreign sales staffs. Sales of products produced in a country other than the United States were less than 10% of consolidated sales for each of fiscal 2019, 2018 and 2017.

The following table further disaggregates our sales to customers by major distribution channels:

	in millions
	Twelve months ended September 28, 2019
	Consumer Products(a)				Foodservice(b)				International(c)				Industrial and Other(d)				Intersegment				Total
Beef	$	7,420			$	4,151			$	2,426			$	1,420			$	411			$	15,828
Pork	1,415				400				890				1,334				893				4,932
Chicken	5,637				5,138				690				1,777				58				13,300
Prepared Foods	4,793				3,270				104				251				—				8,418
International/Other	—				—				1,289				—				—				1,289
Intersegment	—				—				—				—				(1,362		)		(1,362		)
Total	$	19,265			$	12,959			$	5,399			$	4,782			$	—			$	42,405

(a) Includes sales to consumer products and food retailers, such as grocery retailers, warehouse club stores, and internet-based retailers.

(b) Includes sales to foodservice distributors, restaurant operators, hotel chains and noncommercial foodservice establishments such as schools, convenience stores, healthcare facilities and the military.

(c) Includes sales to international markets related to internationally produced products or export sales of domestically produced products.

(d) Includes sales to industrial food processing companies that further process our product to sell to end consumers and any remaining sales not included in the Consumer Products, Foodservice or International categories.

NOTE 18: SUPPLEMENTAL CASH FLOWS INFORMATION

The following table summarizes cash payments for interest and income taxes:

									in millions
	2019				2018				2017
Interest, net of amounts capitalized	$	419			$	368			$	249
Income taxes, net of refunds	557				470				779

NOTE 19: TRANSACTIONS WITH RELATED PARTIES

We have operating leases for two wastewater facilities with an entity owned by the Donald J. Tyson Revocable Trust (for which Mr. John Tyson, Chairman of the Company, is a trustee), Berry Street Waste Water Treatment Plant, LP (90% of which is owned by the TLP), and the sisters of Mr. Tyson. Total payments of approximately $1 million in each of fiscal 2019, 2018 and 2017 were paid to lease the facilities.

As of September 28, 2019, the TLP, of which John Tyson and director Barbara Tyson are general partners, owned 70 million shares, or 99.985% of our outstanding Class B stock and, along with the members of the Tyson family, owned 6.3 million shares of Class A stock, giving it control of approximately 70.97% of the total voting power of our outstanding voting stock.

In August 2017, the Company committed to invest $5 million for a 17.5% equity interest in Buchan Ltd., a Mauritian private holding company of poultry operations in sub-Saharan Africa. Acacia Foods, B.V. is committed to invest $9 million in Buchan Ltd. Donnie Smith, who during the first quarter of fiscal year 2017 was Chief Executive Officer of the Company, serves as the Chairman of Acacia Foods, B.V. and as a director of Buchan Ltd. John Randal Tyson (son of John Tyson and Chief Sustainability Officer) serves as a director of Buchan Ltd. for the Company. We completed our funding commitment in fiscal 2018.

In fiscal 2019, 2018 and 2017, the Company provided administrative services to the Tyson Limited Partnership, the beneficial owner of 70 million shares of Class B stock, and the Tyson Limited Partnership, through TLP Investment, L.P., reimbursed the Company $0.3 million.

NOTE 20: COMMITMENTS AND CONTINGENCIES

Commitments

We lease equipment, properties and certain farms for which total rentals approximated $220 million, $200 million and $186 million, in fiscal 2019, 2018 and 2017, respectively. Most leases have initial terms of up to seven years, some with varying renewal periods. Minimum lease commitments under non-cancelable leases at September 28, 2019, were:

	in millions
	Operating Lease Commitments
2020	$	159
2021	113
2022	74
2023	49
2024	40
2025 and beyond	54
Total	$	489

We guarantee obligations of certain outside third parties, consisting primarily of leases, debt and grower loans, which are substantially collateralized by the underlying assets. Terms of the underlying debt cover periods up to 10 years, and the maximum potential amount of future payments as of September 28, 2019, was $14 million. We also maintain operating leases for various types of equipment, some of which contain residual value guarantees for the market value of the underlying leased assets at the end of the term of the lease. The remaining terms of the lease maturities cover periods over the next 10 years. The maximum potential amount of the residual value guarantees is $93 million, all of which could be recoverable through various recourse provisions, including those based on the fair value of the underlying leased assets. The likelihood of material payments under these guarantees is not considered probable. At September 28, 2019, and September 29, 2018, no significant liabilities for guarantees were recorded.

We have cash flow assistance programs in which certain livestock suppliers participate. Under these programs, we pay an amount for livestock equivalent to a standard cost to grow such livestock during periods of low market sales prices. The amounts of such payments that are in excess of the market sales price are recorded as receivables and accrue interest. Participating suppliers are obligated to repay these receivables balances when market sales prices exceed this standard cost, or upon termination of the agreement. Our potential maximum obligation associated with these programs is limited to the fair value of each participating livestock supplier’s net tangible assets. The potential maximum obligation as of September 28, 2019, was approximately $300 million. The total receivables under these programs were $5 million and $6 million at September 28, 2019 and September 29, 2018, respectively. These receivables are included, net of allowance for uncollectible amounts, in Accounts Receivable in our Consolidated Balance Sheets. Even though these programs are limited to the net tangible assets of the participating livestock suppliers, we also manage a portion of our credit risk associated with these programs by obtaining security interests in livestock suppliers’ assets. After analyzing residual credit risks and general market conditions, we had no allowance for these programs' estimated uncollectible receivables at September 28, 2019, and September 29, 2018.

When constructing new facilities or making major enhancements to existing facilities, we will occasionally enter into incentive agreements with local government agencies in order to reduce certain state and local tax expenditures. Under these agreements, we transfer the related assets to various local government entities and receive Industrial Revenue Bonds. We immediately lease the facilities from the local government entities and have an option to re-purchase the facilities for a nominal amount upon tendering the Industrial Revenue Bonds to the local government entities at various predetermined dates. The Industrial Revenue Bonds and the associated obligations for the leases of the facilities offset, and the underlying assets remain in property, plant and equipment. At September 28, 2019, total amounts under these types of arrangements totaled $698 million.

We enter into agreements with livestock growers that can have fixed and variable payment structures, but are generally cancelable and based on flocks placed with growers. Livestock grower fixed or estimable non-cancelable commitments at September 28, 2019 were:

	in millions
	Livestock Grower Commitments
2020	$	253
2021	131
2022	86
2023	58
2024	49
2025 and beyond	122
Total	$	699

Additionally, we enter into other purchase commitments for various items such as grains and livestock contracts, which at September 28, 2019 were:

	in millions
	Other Purchase Commitments
2020	$	2,466
2021	311
2022	198
2023	43
2024	19
2025 and beyond	23
Total	$	3,060

Contingencies

We are involved in various claims and legal proceedings. We routinely assess the likelihood of adverse judgments or outcomes to those matters, as well as ranges of probable losses, to the extent losses are reasonably estimable. We record accruals in the Company's Consolidated Financial Statements for matters to the extent that we conclude a loss is probable and the financial impact, should an adverse outcome occur, is reasonably estimable. Additionally, for matters in which losses are reasonably possible, no reasonable estimate of the possible loss or range of loss in excess of amounts accrued, if any, can be made because, among other reasons: (i) the proceedings are in preliminary stages; (ii) specific damages have not been sought; (iii) damage claims are unsupported and/or unreasonable; (iv) there is uncertainty as to the outcome of pending appeals or motions; (v) there are significant factual issues to be resolved; or (vi) novel legal issues or unsettled legal theories are being asserted. In our opinion, we have made appropriate and adequate accruals for these matters. While these accruals reflect the Company’s best estimate of the probable loss for those matters as of the dates of those accruals, the recorded amounts may differ materially from the actual amount of the losses for those matters. Listed below are certain claims made against the Company and/or our subsidiaries for which the potential exposure is considered material to the Company’s Consolidated Financial Statements. We believe we have substantial defenses to the claims made and intend to vigorously defend these matters.

On September 2, 2016, Maplevale Farms, Inc., acting on its own behalf and a putative class of direct purchasers of poultry products, filed a class action complaint against us and certain of our poultry subsidiaries, as well as several other poultry processing companies, in the Northern District of Illinois. Subsequent to the filing of this initial complaint, additional lawsuits making similar claims on behalf of putative classes of direct and indirect purchasers were filed in the United States District Court for the Northern District of Illinois. The court consolidated the complaints, for pre-trial purposes, into actions on behalf of three different putative classes: direct purchasers, indirect purchasers/consumers and commercial/institutional indirect purchasers. The consolidated actions are styled In re Broiler Chicken Antitrust Litigation. Since the original filing, certain putative class members have opted out of the matter and are proceeding with individual direct actions making similar claims, and others may do so in the future. All opt out complaints have been filed in, or transferred to, the Northern District of Illinois and are proceeding on a coordinated pre-trial basis with the consolidated actions. The operative complaints, which have been amended throughout the litigation, allege, among other things, that beginning in January 2008 the defendants conspired and combined to fix, raise, maintain, and stabilize the price of broiler chickens in violation of United States antitrust laws. The complaints on behalf of the putative classes of indirect purchasers also include causes of action under various state unfair competition laws, consumer protection laws, and unjust enrichment common laws. The plaintiffs also allege that defendants “manipulated and artificially inflated a widely used Broiler price index, the Georgia Dock.” The plaintiffs further allege that the defendants concealed this conduct from the plaintiffs and the members of the putative classes. The plaintiffs seek treble damages, injunctive relief, pre- and post-judgment interest, costs, and attorneys’ fees on behalf of the putative classes. Decisions on class certification and summary judgment motions likely to be filed by defendants are currently expected in late calendar year 2020 and early 2021. If necessary, trial will occur after rulings on class certification and any summary judgment motions. On April 26, 2019, the plaintiffs notified us that the U.S. Department of Justice ("DOJ") Antitrust Division issued a grand jury subpoena to them requesting discovery produced by all parties in the civil case. On June 21, 2019, the DOJ filed a motion to intervene and sought a limited stay of discovery in the civil action, which the court granted in part. Subsequently, we received a grand jury subpoena from the DOJ seeking additional documents and information related to the chicken industry. We are fully cooperating with the DOJ’s request. On October 16, 2019, the court extended the limited stay of discovery in the civil action through June 27, 2020. The Commonwealth of Puerto Rico, on behalf of its citizens, has also initiated a civil lawsuit against us, certain of our subsidiaries, and several other poultry processing companies alleging activities in violation of the Puerto Rican antitrust laws. This lawsuit has been transferred to the Northern District of Illinois for coordinated pre-trial proceedings.

On March 1, 2017, we received a civil investigative demand ("CID") from the Office of the Attorney General, Department of Legal Affairs, of the State of Florida. The CID requests information primarily related to possible anticompetitive conduct in connection with the Georgia Dock, a chicken products pricing index formerly published by the Georgia Department of Agriculture. We have been cooperating with the Attorney General’s office. In July 2019, the Attorney General issued a subpoena to the In re Broiler Chicken Antitrust Litigation plaintiffs requesting all information provided to the DOJ.

On August 18, 2019, we were advised that the In re Broiler Chicken Antitrust Litigation plaintiffs had received a CID from the Louisiana Department of Justice Office of the Attorney General Public Protection Division. The Louisiana CID requests all deposition transcripts related to the In re Broiler Chicken Antitrust Litigation.

On June 18, 2018, a group of plaintiffs acting on their own behalf and on behalf of a putative class of all persons and entities who indirectly purchased pork, filed a class action complaint against us and certain of our pork subsidiaries, as well as several other pork processing companies, in the United States District Court for the District of Minnesota. Subsequent to the filing of the initial complaint, additional lawsuits making similar claims on behalf of putative classes of direct and indirect purchasers were also filed in the same court. The court consolidated the complaints, for pre-trial purposes, into actions on behalf of three different putative classes: direct purchasers, indirect purchasers/consumers and commercial/institutional indirect purchasers. The consolidated actions are styled In re Pork Antitrust Litigation. Since the original filing, a putative class member is proceeding with an individual direct action making similar claims, and others may do so in the future. The individual complaint has been filed in the District of Minnesota and is proceeding on a coordinated pre-trial basis with the consolidated actions. The complaints allege, among other things, that beginning in January 2009 the defendants conspired and combined to fix, raise, maintain, and stabilize the price of pork and pork products in violation of United States antitrust laws. The complaints on behalf of the putative classes of indirect purchasers also include causes of action under various state unfair competition laws, consumer protection laws, and unjust enrichment common laws. The plaintiffs seek treble damages, injunctive relief, pre- and post-judgment interest, costs, and attorneys’ fees on behalf of the putative classes. On August 8, 2019, this matter was dismissed without prejudice. The plaintiffs filed amended complaints on November 6, 2019, in which the plaintiffs again have alleged that the defendants conspired and combined to fix, raise, maintain, and stabilize the price of pork and pork products in violation of state and federal antitrust, consumer protection, and unjust enrichment common laws, and the plaintiffs again are seeking treble damages, injunctive relief, pre- and post-judgment interest, costs, and attorneys’ fees on behalf of the putative classes. We intend to respond to the amended complaints. The Commonwealth of Puerto Rico, on behalf of its citizens, has also initiated a civil lawsuit against us, certain of our subsidiaries, and several other pork processing companies alleging activities in violation of the Puerto Rican antitrust laws. This lawsuit was transferred to the District of Minnesota and remains pending with an amended complaint due on or before December 6, 2019.

On April 23, 2019, a group of plaintiffs, acting on behalf of themselves and on behalf of a putative class of all persons and entities who directly sold to the named defendants any fed cattle for slaughter and all persons who transacted in live cattle futures and/or options traded on the Chicago Mercantile Exchange or another U.S. exchange, filed a class action complaint against us and our beef and pork subsidiary, Tyson Fresh Meats, Inc., as well as other beef packer defendants, in the United States District Court for the Northern District of Illinois. The plaintiffs allege that the defendants engaged in a conspiracy from January 2015 to the present to reduce fed cattle prices in violation of federal antitrust laws, the Grain Inspection, Packers and Stockyards Act of 1921, and the Commodities Exchange Act by periodically reducing their slaughter volumes so as to reduce demand for fed cattle, curtailing their purchases and slaughters of cash-purchased cattle during those same periods, coordinating their procurement practices for fed cattle settled on a cash basis, importing foreign cattle at a loss so as to reduce domestic demand, and closing and idling plants. In addition, the plaintiffs also allege the defendants colluded to manipulate live cattle futures and options traded on the Chicago Mercantile Exchange. The plaintiffs seek, among other things, treble monetary damages, punitive damages, restitution, and pre- and post-judgment interest, as well as declaratory and injunctive relief. This complaint was subsequently voluntarily dismissed and re-filed in the United States District Court for the District of Minnesota. Other similar lawsuits were filed by ranchers in other district courts. All actions seeking relief by ranchers and futures traders have now been transferred to the United States District Court for the District of Minnesota action and are consolidated for pre-trial proceedings as In Re Cattle Antitrust Litigation. Following the filing of defendants’ motion to dismiss this matter, the plaintiffs filed a second amended complaint on October 4, 2019.

On April 26, 2019, a group of plaintiffs, acting on behalf of themselves and on behalf of a putative class of indirect purchasers of beef for personal use filed a class action complaint against us, other beef packers, and Agri Stats, Inc., an information services provider, in the United States District Court for the District of Minnesota. Agri-Stats was subsequently dismissed from the suit. The plaintiffs allege that the packer defendants conspired to reduce slaughter capacity by closing or idling plants, limiting their purchases of cash cattle, coordinating their procurement of cash cattle, and reducing their slaughter numbers so as to reduce beef output, all in order to artificially raise prices of beef. The plaintiffs seek, among other things, damages under state antitrust and consumer protection statutes and the common law of approximately 30 states, as well as injunctive relief. The defendants’ motions to dismiss this matter are pending. The indirect consumer purchaser litigation is styled as Peterson v. JBS USA Food Company Holdings, et al.

On October 16, 2019, a direct purchaser of beef, on behalf of itself and other direct purchasers of beef, filed a class action complaint against us and other beef packer defendants in the United States District Court for the District of Minnesota. The plaintiff alleges that the defendants conspired to reduce slaughter capacity by closing and idling plants, limiting their purchases of cash cattle, coordinating their procurement of cash cattle, and reducing their slaughter numbers, so as to reduce beef output, all in order to artificially raise prices of beef. The plaintiffs seek, among other things, treble monetary damages, punitive damages, restitution, and pre- and post-judgment interest, as well as declaratory and injunctive relief.

On August 30, 2019, Judy Jien, Kieo Jibidi and Elaisa Clement, acting on their own behalf and a putative class of non-supervisory production and maintenance employees at chicken processing plants in the continental United States, filed a class action complaint against us and certain of our subsidiaries, as well as several other poultry processing companies, in the United States District Court for the District of Maryland. An additional complaint making similar allegations was also filed by Emily Earnest. The plaintiffs allege that the defendants directly and through a wage survey and benchmarking service exchanged information regarding labor rates in an effort to depress and fix the rates of wages for non-supervisory production and maintenance workers in violation of federal antitrust laws. The plaintiffs seek, among other things, treble monetary damages, punitive damages, restitution, and pre- and post-judgment interest, as well as declaratory and injunctive relief. The court consolidated the Jien and Earnest cases for coordinated pretrial proceedings. Following the consolidation, two additional lawsuits have been filed by individuals making similar allegations.

Our subsidiary, The Hillshire Brands Company (formerly named Sara Lee Corporation), is a party to a consolidation of cases filed by individual complainants with the Republic of the Philippines, Department of Labor and Employment and the National Labor Relations Commission ("NLRC") from 1998 through July 1999. The complaint was filed against Aris Philippines, Inc., Sara Lee Corporation, Sara Lee Philippines, Inc., Fashion Accessories Philippines, Inc., and Attorney Cesar C. Cruz (collectively, the “respondents”). The complaint alleges, among other things, that the respondents engaged in unfair labor practices in connection with the termination of manufacturing operations in the Philippines in 1995 by Aris Philippines, Inc., a former subsidiary of The Hillshire Brands Company. In late 2004, a labor arbiter ruled against the respondents and awarded the complainants PHP3,453,664,710 (approximately U.S. $66 million) in damages and fees. The respondents appealed the labor arbiter's ruling, and it was subsequently set aside by the NLRC in December 2006. Subsequent to the NLRC’s decision, the parties filed numerous appeals, motions for reconsideration and petitions for review, certain of which remained outstanding for several years. While various of those appeals, motions and/or petitions were pending, The Hillshire Brands Company, on June 23, 2014, without admitting liability, filed a settlement motion requesting that the Supreme Court of the Philippines order dismissal with prejudice of all claims against it and certain other respondents in exchange for payments allocated by the court among the complainants in an amount not to exceed PHP342,287,800 (approximately U.S. $6.6 million). Based in part on its finding that the consideration to be paid to the complainants as part of such settlement was insufficient, the Supreme Court of the Philippines denied the respondents’ settlement motion and all motions for reconsideration thereof. The Supreme Court of the Philippines also set aside as premature the NLRC’s December 2006 ruling. As a result, the cases were remanded back before the NLRC to rule on the merits of the case. On December 15, 2016, we learned that the NLRC rendered its decision on November 29, 2016, regarding the respondents’ appeals regarding the labor arbiter’s 2004 ruling in favor of the complainants. The NLRC increased the award for 4,922 of the total 5,984 complainants to PHP14,858,495,937 (approximately U.S. $285 million). However, the NLRC approved a prior settlement reached with the group comprising approximately 18% of the class of 5,984 complainants, pursuant to which The Hillshire Brands Company agreed to pay each settling complainant PHP68,000 (approximately U.S. $1,300). The settlement payment was made on December 21, 2016, to the NLRC, which is responsible for distributing the funds to each settling complainant. On December 27, 2016, the respondents filed motions for reconsideration with the NLRC asking that the award be set aside. The NLRC denied respondents' motions for reconsideration in a resolution received on May 5, 2017 and entered a judgment on the award on July 24, 2017. Each of Aris Philippines, Inc., Sara Lee Corporation and Sara Lee Philippines, Inc. appealed this award and sought an injunction to preclude enforcement of the award to the Philippines Court of Appeals. On November 23, 2017, the Court of Appeals granted a writ of preliminary injunction that precluded execution of the NLRC award during the pendency of the appeal. The Court of Appeals subsequently vacated the NLRC’s award on April 12, 2018. Complainants have filed motions for reconsideration with the Court of Appeals. On November 14, 2018, the Court of Appeals denied claimants’ motions for reconsideration and granted defendants’ motion to release and discharge the preliminary injunction bond. Claimants have since filed petitions for writ of certiorari with the Supreme Court of the Philippines. The Supreme Court has accepted the case for review. We continue to maintain an accrual for this matter.

The Hillshire Brands Company was named as a defendant in an asbestos exposure case filed by Mark Lopez in May 2014 in the Superior Court of Alameda County, California. Mr. Lopez was diagnosed with mesothelioma in January 2014 and is now deceased. Mr. Lopez’s family members asserted negligence, premises liability and strict liability claims related to Mr. Lopez’s alleged asbestos exposure from 1954-1986 from the Union Sugar plant in Betteravia, California. The plant, which was sold in 1986, was owned by entities that were predecessors-in-interest to The Hillshire Brands Company. In August 2017, the jury returned a verdict of approximately $13 million in favor of the plaintiffs, and a judgment was entered. We appealed the judgment, but the appellate court affirmed the trial court's judgment in full.

NOTE 21: QUARTERLY FINANCIAL DATA (UNAUDITED)

					in millions, except per share data
	First Quarter				Second Quarter				Third Quarter				Fourth Quarter
2019
Sales	$	10,193			$	10,443			$	10,885			$	10,884
Gross profit	1,355				1,192				1,336				1,139
Operating income	807				635				781				604
Net income	552				430				681				372
Net income attributable to Tyson	551				426				676				369
Net income per share attributable to Tyson:
Class A Basic	$	1.54			$	1.20			$	1.90			$	1.03
Class B Basic	$	1.39			$	1.07			$	1.71			$	0.93
Diluted	$	1.50			$	1.17			$	1.84			$	1.01
2018
Sales	$	10,229			$	9,773			$	10,051			$	9,999
Gross profit	1,443				1,015				1,299				1,339
Operating income	922				494				797				819
Net income	1,632				316				542				537
Net income attributable to Tyson	1,631				315				541				537
Net income per share attributable to Tyson:
Class A Basic	$	4.54			$	0.88			$	1.52			$	1.50
Class B Basic	$	4.09			$	0.78			$	1.37			$	1.35
Diluted	$	4.40			$	0.85			$	1.47			$	1.47

First quarter fiscal 2019 net income included $26 million pretax Keystone Foods purchase accounting and acquisition related costs, which included an $11 million purchase accounting adjustment for the amortization of the fair value step-up of inventory and $15 million of acquisition related costs, and $8 million pretax restructuring and related charges.

Second quarter fiscal 2019 net income included $11 million pretax Keystone Foods acquisition related costs and $8 million pretax restructuring and related charges.

Third quarter fiscal 2019 net income included $105 million post tax recognition of previously unrecognized tax benefit, $55 million pretax gain on sale of an investment and $15 million pretax restructuring and related charges.

Fourth quarter fiscal 2019 net income included $31 million pretax Beef production plant fire costs, a $41 million pretax impairment charge related to the divestiture of a business, $15 million pretax pension plan termination charge and $10 million pretax restructuring and related charges.

First quarter fiscal 2018 net income included a $994 million post tax recognition of tax benefit from remeasurement of net deferred tax liabilities at lower enacted tax rates, $4 million pretax impairment charge net of a realized gain related to the divestiture of non-protein businesses and $19 million pretax restructuring and related charges.

Second quarter fiscal 2018 net income included a $9 million post tax recognition of tax benefit from remeasurement of net deferred tax liabilities at lower enacted tax rates, $75 million pretax impairment charge related to the divestiture of non-protein businesses, $109 million one-time cash bonus to frontline employees and $12 million pretax restructuring and related charges.

Third quarter fiscal 2018 net income included $14 million pretax restructuring and related charges.

Fourth quarter fiscal 2018 net income included a $11 million pretax realized gain related to the divestiture of a non-protein business and $14 million pretax restructuring and related charges.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of

Tyson Foods, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Tyson Foods, Inc. and its subsidiaries (the “Company”) as of September 28, 2019 and September 29, 2018, and the related consolidated statements of income, comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended September 28, 2019, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended September 28, 2019 appearing under Item 15 (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of September 28, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO").

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of September 28, 2019 and September 29, 2018**,** and the results of its operations and its cash flows for each of the three years in the period ended September 28, 2019 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 28, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Acquisition of Keystone Foods - Valuation of Acquired Customer Relationships

As described in Note 3 to the consolidated financial statements, during fiscal year 2019 the Company completed the acquisition of Keystone Foods for $2.3 billion in cash, subject to certain adjustments, which resulted in $659 million of intangible assets being recorded, primarily consisting of customer relationships. Management used the multi-period excess earnings valuation approach to determine the fair value of the customer relationships intangible assets acquired. Management applied significant judgment in estimating the fair value of the customer relationships intangible assets acquired, which involved the use of significant estimates and assumptions about sales, operating margins, attrition rates, growth rates, and discount rates based on budgets, business plans, economic projections, anticipated future cash flows and market place data.

The principal considerations for our determination that performing procedures relating to the valuation of the customer relationships intangible assets as a result of the acquisition of Keystone Foods is a critical audit matter are (i) there was a high degree of auditor judgment and subjectivity involved in performing procedures and evaluating audit evidence related to the fair value measurements of the acquired customer relationships intangible assets due to the significant amount of judgment by management when developing the estimates, (ii) significant audit effort was necessary to evaluate management’s anticipated future cash flows and significant assumptions, including the attrition rates, and (iii) the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained from these procedures.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of acquired customer relationships, as well as controls over the development of the significant assumptions related to the acquired customer relationships intangible assets, including the attrition rates. These procedures also included, among others, testing management’s process for estimating the fair value of acquired customer relationships. Testing management’s process included evaluating the appropriateness of the multi-period excess earnings valuation approach, testing the completeness, accuracy, and relevance of underlying data used in the valuation approach, and evaluating the reasonableness of significant assumptions, including the attrition rates. Evaluating management’s assumptions related to the attrition rates involved evaluating whether the assumptions were reasonable considering (i) the current and past performance of the acquired businesses, (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s multi-period excess earnings valuation approach and certain significant assumptions, including the attrition rates*.*

Indefinite Life Intangible Assets Quantitative Impairment Assessments

As described in Notes 1 and 5 to the consolidated financial statements, the Company’s consolidated indefinite life intangible assets balance was $4.1 billion as of September 28, 2019. As disclosed by management, an indefinite life intangible asset impairment test is conducted as of the first day of the fourth quarter each year, or more frequently if impairment indicators arise. Management estimates the fair value of indefinite life intangible assets, where a quantitative impairment assessment is performed, using relief-from-royalty and multi-period excess earnings valuation approaches. Under these valuation approaches, management makes 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.

The principal considerations for our determination that performing procedures relating to the indefinite life intangible assets quantitative impairment assessment is a critical audit matter are (i) there was significant judgment by management when developing the fair value measurements of the indefinite life intangible assets, which in turn led to a high degree of auditor judgment and subjectivity in performing procedures and evaluating audit evidence related to the fair value measurements and (ii) significant audit effort was necessary to evaluate management’s anticipated future cash flows and significant assumptions, including sales growth rates.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the valuation of indefinite life intangible assets. These procedures also included, among others, testing management’s process for developing the fair value estimates; evaluating the appropriateness of the relief-from-royalty and multi-period excess earnings valuation approaches; testing the completeness, accuracy, and relevance of underlying data used in the valuation approaches; and evaluating the significant assumptions used by management, including sales growth rates. Evaluating management’s assumptions related to sales growth rates involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance associated with the related brands, (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

/s/ PricewaterhouseCoopers LLP

Fayetteville, Arkansas

November 12, 2019

We have served as the Company’s auditor since 2009.