Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

OBJECTIVE

The following discussion provides an analysis of the Company’s financial condition, cash flows and results of operations from management’s perspective and should be read in conjunction with the consolidated condensed financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q and within the Company’s Annual Report on Form 10-K filed for the fiscal year ended October 2, 2021. Our objective is to also provide discussion of events and uncertainties known to management that are reasonably likely to cause reported financial information not to be indicative of future operating results or of future financial condition and to offer information that provides understanding of our financial condition, cash flows and results of operations.

RESULTS OF OPERATIONS

Description of the Company

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

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

Overview

COVID-19

We continue to proactively monitor and respond to the evolving nature of the global novel coronavirus pandemic (“COVID-19” or “pandemic”) and its impact to our global business. Our ongoing COVID-19 task force was formed for the primary purposes of maintaining the health and safety of our team members, ensuring our ability to operate our processing facilities and maintaining the liquidity of our business. We have experienced and continue to experience multiple challenges related to the pandemic. The most significant challenge we face is the availability of team members to operate our production facilities as our production facilities continue to experience varying levels of absenteeism. The health and safety of our team members remains our top priority, and we continue to provide a variety of health and safety resources and services to team members and their family members. Additionally, we have experienced some challenges in our supply chain such as volatility of inputs, availability of shipping containers and port congestion. These challenges impacted our operating costs, but generally, we experienced lower direct incremental costs associated with COVID-19 in the first nine months of fiscal 2022 as compared to the same period in fiscal 2021, and we expect this trend to continue throughout the remainder of fiscal 2022. For fiscal 2022, we expect retail demand to remain elevated as compared to the pre-pandemic levels and foodservice demand to continue to return to more historic levels. However, the long-term impacts of COVID-19 remains uncertain and will depend on future developments, including the duration and spread of the pandemic, COVID-19 variants and resurgences, and related actions taken by federal, state and local government officials to prevent and manage disease spread, and effectively distribute and administer vaccinations, all of which contain some level of uncertainty and cannot be easily predicted.

Strategy

Our strategy is to sustainably feed the world with the fastest growing protein brands. We intend to achieve our strategy as we: grow our business by delivering superior value to consumers and customers; deliver fuel for growth and returns through commercial, operational and financial excellence; and sustain our Company and our world for future generations.

Beginning in fiscal 2022, we launched a new productivity program, which is designed to drive a better, faster and more agile organization that is supported by a culture of continuous improvement and faster decision making. The execution of this program will be supported by a program management office that will ensure delivery of key project milestones and report on savings achievements connected with the three pillars of the program. The first pillar is operational and functional excellence, which includes functional efficiency efforts in Finance, HR and Procurement focused on applying best practices to reduce costs. The second pillar is the use of new digital solutions like artificial intelligence and predictive analytics to drive efficiency in operations, supply chain planning, logistics and warehousing. The third pillar is automation, which will leverage automation and robotics technologies to automate difficult and higher turnover positions. We are targeting $1 billion in productivity savings by the end of fiscal 2024 and more than $400 million in fiscal 2022, relative to a fiscal 2021 cost baseline. We are currently on track to achieve our planned productivity savings for fiscal 2022. At this time, we do not anticipate costs associated with this program to be material.

General

Sales grew 8% and 16% in the third quarter and first nine months of fiscal 2022, respectively, largely due to increased sales growth across each of our segments in the first nine months of fiscal 2022 primarily due to higher average sales price partially offset by reduced sales volumes, combined with $225 million and $545 million in legal contingency accruals recognized as a reduction to sales in the third quarter and first nine months of fiscal 2021, respectively. The higher average sales prices were primarily due to the current inflationary environment and recovery of rapidly rising costs, such as labor, freight and transportation, livestock, feed ingredients and other input costs. Operating income of $1,033 million for the third quarter of fiscal 2022 was down 3% due to declining operating income in our Beef and Pork segments, partially offset by an increase in the results of our Chicken and Prepared Foods segments. Operating income of $3,644 million for the first nine months of fiscal 2022 was up 47% due to improved operating income in our Beef, Chicken, and Prepared Foods segments. In the third quarter of fiscal 2022, our operating income was impacted by $35 million of insurance proceeds related to fires at our production facilities, net of costs incurred. Results in the third quarter of fiscal 2021 were impacted by $306 million of charges related to legal contingency accruals. In the nine months ended July 2, 2022, our operating income was impacted by $53 million of insurance proceeds, net of costs incurred, related to the same fires. In the nine months ended July 3, 2021, our results were impacted by $23 million of charges related to the relocation of a production facility in China.

Market Environment

According to the United States Department of Agriculture, domestic protein production (beef, pork, chicken and turkey) was relatively flat in the third quarter of fiscal 2022 compared to the same period in fiscal 2021. All segments experienced inflation in operating costs, especially in labor, freight and transportation and certain materials, and we expect these trends to continue through the remainder of fiscal 2022. Additionally, grain and feed ingredient costs have increased substantially, which impacts all of our segments. We pursue recovery of these increased costs through pricing. The Federal Reserve recently increased interest rates, and it is anticipated that interest rates will continue to rise in the near term. Our direct exposure to rising interest rates is somewhat tempered given our strong liquidity position in addition to our current debt structure in which nearly all of our borrowings have fixed interest rates. At July 2, 2022, our current debt was $67 million, and we have approximately $470 million of debt coming due over the next 24 months. However, should we need to issue additional debt or borrow under our existing revolving credit facility, we may be exposed to higher interest rates than our current outstanding borrowings. The Beef segment experienced strong demand, sufficient supply of market-ready cattle and increased live cattle costs. The Pork segment experienced adequate supply of live hogs. The Chicken segment experienced strong demand and increased feed ingredient and other input costs. Feed ingredient costs are expected to be higher for fiscal 2022 versus fiscal 2021. The Prepared Foods segment experienced increased costs largely due to the impacts of an inflationary environment. Additionally, the conflict between Ukraine and Russia has led to economic sanctions against Russia and certain regions of Ukraine and Belarus. As of July 2, 2022, the impact of this conflict has not had a material direct impact on our financial performance. However, the conflict is still ongoing and there are many risks and uncertainties in relation to the conflict that are outside of our control. If the conflict escalates further or if additional countries join the conflict and additional economic sanctions are imposed, it could have a material impact on our business operations and financial performance.

Margins

Our total operating margin was 7.7% in the third quarter of fiscal 2022. Operating margins by segment were as follows:

Beef – 10.7%
Pork – 1.5%
Chicken – 6.3%
Prepared Foods – 7.6%


in millions, except per share data	Three Months Ended				Nine Months Ended
	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021






Net income attributable to Tyson	$	750	$	749	$	2,700	$	1,692
Net income attributable to Tyson – per diluted share	2.07		2.05		7.42		4.63

Third quarter – Fiscal 2022 – Net income attributable to Tyson included the following items:

$67 million pretax, or $0.13 per diluted share, of production facilities fire insurance proceeds, net of costs incurred.

Nine months – Fiscal 2022 – Net income attributable to Tyson included the following items:

$107 million pretax, or $0.22 per diluted share, of production facilities fire insurance proceeds, net of costs incurred.
$36 million post tax, or $0.10 per diluted share, from remeasurement of net deferred tax liabilities at lower enacted state tax rates.

Third quarter – Fiscal 2021 – Net income attributable to Tyson included the following items:

$306 million pretax, or ($0.64) per diluted share, related to the recognition of legal contingency accruals.
$4 million pretax, or ($0.01) per diluted share, related to the relocation of a production facility in China.

Nine months – Fiscal 2021 – Net income attributable to Tyson included the following items:

$626 million pretax, or ($1.31) per diluted share, related to the recognition of legal contingency accruals.
$23 million pretax, or ($0.05) per diluted share, related to the relocation of a production facility in China.
$6 million pretax, or $0.01 per diluted share, of Beef production facility fire insurance proceeds, net of costs incurred.

Summary of Results

Sales


in millions	Three Months Ended					Nine Months Ended
	July 2, 2022			July 3, 2021		July 2, 2022			July 3, 2021
Sales	$	13,495		$	12,478	$	39,545		$	34,238
Change in sales volume	(1.9)		%			(1.0)		%
Change in average sales price	8.1		%			14.7		%
Sales growth	8.2		%			15.5		%

Third quarter – Fiscal 2022 vs Fiscal 2021

Sales Volume** – Sales were negatively impacted by a decrease in sales volume, which accounted for a decrease of $223 million, driven by decreased volumes in our Pork, Chicken and Prepared Foods segments and impacts associated with reduced global Pork demand and impacts associated with increased pricing, partially offset by an increase in sales volume in our Beef segment.
Average Sales Price** – Sales were positively impacted by higher average sales prices, which accounted for an increase of $1,015 million. The increase in average sales price was primarily due to the current inflationary environment and recovery of rapidly rising costs.
The above change in average sales price for the third quarter of fiscal 2022 excludes the impact of a $225 million reduction of Sales from the recognition of legal contingency accruals in the third quarter of fiscal 2021.

Nine months – Fiscal 2022 vs Fiscal 2021

Sales Volume** – Sales were negatively impacted by a decrease in sales volume, which accounted for a decrease of $353 million, driven by decreased volumes in our Beef, Pork and Prepared Foods segments and impacts associated with the challenging labor environment and continued supply chain constraints, partially offset by increases in sales volume in our Chicken segment.
Average Sales Price** – Sales were positively impacted by higher average sales prices, which accounted for an increase of $5,115 million. The increase in average sales price was primarily due to the current inflationary environment and recovery of rapidly rising costs.
The above change in average sales price for the nine months ended July 2, 2022 excludes the impact of a $545 million reduction of Sales from the recognition of legal contingency accruals in the nine months ended July 3, 2021.

Cost of Sales


in millions	Three Months Ended						Nine Months Ended
	July 2, 2022			July 3, 2021			July 2, 2022			July 3, 2021
Cost of sales	$	11,884		$	10,858		$	34,184		$	30,188
Gross profit	$	1,611		$	1,620		$	5,361		$	4,050
Cost of sales as a percentage of sales	88.1		%	87.0		%	86.4		%	88.2		%

Third quarter – Fiscal 2022 vs Fiscal 2021

Cost of sales increased $1,026 million. Lower sales volume decreased cost of sales $193 million while higher input cost per pound increased cost of sales $1,219 million.
The $1,219 million impact of higher input cost per pound was impacted by:
Increase in live cattle costs of approximately $480 million in our Beef segment.
Increase of approximately $195 million in our Chicken segment related to net increases in feed ingredient costs, growout expenses and outside meat purchases.
Increase in raw material and other input costs of approximately $135 million in our Prepared Foods segment.
Increase in freight and transportation costs of approximately $100 million.
Increase due to net derivative losses of $25 million in the third quarter of fiscal 2022, compared to net derivative gain of $41 million in the third quarter of fiscal 2021 due to our risk management activities. These amounts exclude offsetting impacts from related physical purchase transactions, which are included in the change in live cattle and hog costs and raw material and feed ingredient costs described herein.
Decrease of approximately $81 million in our Chicken segment related to the recognition of legal contingency accruals in the third quarter of fiscal 2021.
Decrease in live hog costs of approximately $40 million in our Pork segment.
Decrease of approximately $8 million in our Chicken segment related to insurance proceeds, net of costs incurred, related to the fire at our production facility in the fourth quarter of fiscal 2021.
Decrease of approximately $27 million in our Beef segment related to insurance proceeds related to the fire at our production facility in the fourth quarter of fiscal 2019.
Remaining increase in costs across all of our segments primarily driven by net impacts on average cost per pound from mix changes as well as the impact of the inflationary environment on our labor and other input costs, partially offset by savings from our productivity program.
The $193 million impact of lower sales volume was primarily driven by decreased volumes in our Prepared Foods, Chicken and Pork segments.

Nine months – Fiscal 2022 vs Fiscal 2021

Cost of sales increased $3,996 million. Lower sales volume decreased cost of sales $307 million while higher input cost per pound increased cost of sales $4,303 million.
The $4,303 million impact of higher input cost per pound was impacted by:
Increase in live cattle costs of approximately $1,470 million in our Beef segment.
Increase of approximately $595 million in our Chicken segment related to net increases in feed ingredient costs, growout expenses and outside meat purchases.
Increase in raw material and other input costs of approximately $560 million in our Prepared Foods segment.
Increase in live hog costs of approximately $180 million in our Pork segment.
Increase in freight and transportation costs of approximately $400 million.
Increase of approximately $90 million in frontline bonuses.
Decrease due to net derivative gains of $139 million in the first nine months of fiscal 2022, compared to net derivative gains of $121 million in the first nine months of fiscal 2021 due to our risk management activities. These amounts exclude offsetting impacts from related physical purchase transactions, which are included in the change in live cattle and hog costs and raw material and feed ingredient costs described herein.
Decrease of approximately $81 million in our Chicken segment related to the recognition of legal contingency accruals in the third quarter of fiscal 2021.
Decrease of approximately $26 million in our Chicken segment related to insurance proceeds, net of costs incurred, related to the fire at our production facility in the fourth quarter of fiscal 2021.
Decrease of approximately $27 million in our Beef segment related to insurance proceeds related to the fire at our production facility in the fourth quarter of fiscal 2019.
Remaining increase in costs across all of our segments primarily driven by net impacts on average cost per pound from mix changes as well as the impact of the inflationary environment on our labor and other input costs, partially offset by savings from our productivity program.
The $307 million impact of lower sales volume was primarily driven by decreased volumes in our Prepared Foods, Beef and Pork segments.

Selling, General and Administrative


in millions	Three Months Ended						Nine Months Ended
	July 2, 2022			July 3, 2021			July 2, 2022			July 3, 2021
Selling, general and administrative expense	$	578		$	558		$	1,717		$	1,563
As a percentage of sales	4.3		%	4.5		%	4.3		%	4.6		%

Third quarter – Fiscal 2022 vs Fiscal 2021

Increase of $20 million in selling, general and administrative was primarily driven by:
Increase of $16 million in marketing, advertising and promotion expenses.
Increase of $7 million in technology related costs.
Decrease of $11 million in commission and brokerage fees
Remaining increase is primarily attributable to increased donations, employee costs and travel and entertainment costs.

Nine months – Fiscal 2022 vs Fiscal 2021

Increase of $154 million in selling, general and administrative was primarily driven by:
Increase of $55 million from the change in the impact of a cattle supplier’s misappropriation of Company funds, as the result of a $55 million gain related to the recovery of cattle inventory in the nine months ended July 3, 2021, as compared to no gain or loss recognized in the nine months ended July 2, 2022.
Increase of $40 million in employee costs.
Increase of $35 million in marketing, advertising and promotion expenses.
Increase of $29 million in technology related costs.
Increase of $18 million in professional fees.
Increase of $12 million in travel and entertainment costs.
Decrease of $31 million in commission and brokerage fees.
Decrease of $20 million in depreciation and amortization.
Remaining increase is primarily attributable to increased donations and other miscellaneous expenses.

Interest Expense


in millions	Three Months Ended				Nine Months Ended
	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Cash interest expense	$	94	$	111	$	303	$	338


Non-cash interest expense	(9)		(6)		(21)		(13)
Total interest expense	$	85	$	105	$	282	$	325

Third quarter and nine months – Fiscal 2022 vs Fiscal 2021

Cash interest expense primarily included interest expense related to our senior notes, in addition to commitment fees incurred on our revolving credit facility. The decrease in cash interest expense in fiscal 2022 was primarily due to the redemption of senior notes in fiscal 2022 and repayments of term loans and the redemption of the August 2021 Notes in fiscal 2021.

Other (Income) Expense, net


in millions	Three Months Ended				Nine Months Ended
	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Total other (income) expense, net	$	(34)	$	(7)	$	(111)	$	(38)

Third quarter and nine months – Fiscal 2022 vs Fiscal 2021

Included $32 million of production facilities fire insurance proceeds in the third quarter of fiscal 2022 and $54 million of production facilities fires insurance proceeds and $37 million of gains on equity investments due to observable price changes in the first nine months of fiscal 2022.

Effective Tax Rate


Three Months Ended				Nine Months Ended
July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
23.6	%	22.1	%	22.1	%	22.9	%

Third quarter and nine months – Fiscal 2022 vs Fiscal 2021

Our effective income tax rate was 23.6% for the third quarter of fiscal 2022 compared to 22.1% for the same period of fiscal 2021, and the effective income tax rates for the first nine months of fiscal 2022 and 2021 were 22.1% and 22.9%, respectively. The effective tax rates for the third quarter and first nine months of fiscal 2022 and 2021 were increased by state taxes and decreased by various tax benefits. Additionally, the effective tax rate for the first nine months of fiscal 2022 includes a $36 million benefit from the remeasurement of deferred income taxes, primarily due to legislation decreasing state tax rates enacted in the first quarter.

Segment Results

We operate in four segments: Beef, Pork, Chicken, and Prepared Foods. The following table is a summary of sales and operating income (loss), which is how we measure segment profit.


in millions	Sales
	Three Months Ended				Nine Months Ended
	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Beef	$	4,959	$	4,954	$	14,995	$	12,987
Pork	1,619		1,715		4,810		4,631
Chicken	4,366		3,476		12,342		9,860
Prepared Foods	2,447		2,323		7,173		6,600
International/Other	602		488		1,717		1,444
Intersegment sales	(498)		(478)		(1,492)		(1,284)
Total	$	13,495	$	12,478	$	39,545	$	34,238


in millions	Operating Income (Loss)
	Three Months Ended				Nine Months Ended
	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Beef	$	533	$	1,120	$	2,127	$	2,093
Pork	25		67		248		250
Chicken	277		(279)		615		(489)
Prepared Foods	186		150		635		633
International/Other	12		4		19		—
Total	$	1,033	$	1,062	$	3,644	$	2,487

Beef Segment Results


in millions	Three Months Ended									Nine Months Ended
	July 2, 2022			July 3, 2021			Change			July 2, 2022			July 3, 2021			Change
Sales	$	4,959		$	4,954		$	5		$	14,995		$	12,987		$	2,008
Sales volume change							1.3		%							(1.5)		%
Average sales price change							(1.2)		%							17.0		%
Operating income	$	533		$	1,120		$	(587)		$	2,127		$	2,093		$	34
Operating margin	10.7		%	22.6		%				14.2		%	16.1		%

Third quarter and nine months – Fiscal 2022 vs Fiscal 2021

Sales Volume** – Sales volume decreased for the first nine months of fiscal 2022 despite strong global demand, due to the impacts associated with a challenging labor environment and supply chain constraints. Sales volume increased in the third quarter of fiscal 2022 driven by a strong global demand environment, partially offset by a challenging labor environment and continued supply chain constraints.
Average Sales Price** – Average sales price increased in the first nine months of fiscal 2022 as input costs such as live cattle, labor, freight and transportation costs increased and demand for our beef products remained strong. Average sales price decreased slightly in the third quarter of fiscal 2022 driven by reduced demand for premium cuts of beef as compared to exceptionally high demand in the third quarter of fiscal 2021.
Operating Income** – Operating income increased slightly during the first nine months of fiscal 2022 due to strong demand as we continued to optimize revenues relative to live cattle supply and a reduction in direct incremental expenses related to COVID-19, partially offset by production inefficiencies due to the impacts associated with a challenging labor environment and continued supply chain constraints. Additionally, operating income in fiscal 2021 was impacted by a $55 million gain from the recovery of cattle inventory related to a cattle supplier's misappropriation of Company funds. Operating income decreased in the third quarter of fiscal 2022 as margins began to reduce from historically high levels paired with continued increased operating costs. Additionally, operating income in the third quarter of fiscal 2022 benefited from $27 million of insurance proceeds related to a fire at a production facility in the fourth quarter of fiscal 2019.

Pork Segment Results


in millions	Three Months Ended									Nine Months Ended
	July 2, 2022			July 3, 2021			Change			July 2, 2022			July 3, 2021			Change
Sales	$	1,619		$	1,715		$	(96)		$	4,810		$	4,631		$	179
Sales volume change							(1.7)		%							(2.1)		%
Average sales price change							(3.9)		%							6.0		%
Operating income	$	25		$	67		$	(42)		$	248		$	250		$	(2)
Operating margin	1.5		%	3.9		%				5.2		%	5.4		%

Third quarter and nine months – Fiscal 2022 vs Fiscal 2021

Sales Volume** – Sales volume decreased in the third quarter and first nine months of fiscal 2022 due to reduced global demand.
Average Sales Price** – Average sales price decreased in the third quarter due to reduced export and retail demand. Average sales price increased in the first nine months of fiscal 2022 as input costs such as live hogs, labor, freight and transportation costs increased, partially offset by unfavorable mix associated with labor shortages.
Operating Income** – Operating income decreased in the third quarter of fiscal 2022 due to periods of compressed pork margins. Operating income for the first nine months of fiscal 2022 was relatively flat as reduced direct incremental expenses related to COVID-19 were offset by higher inputs costs and the impacts associated with a challenging labor environment.

Chicken Segment Results


in millions	Three Months Ended									Nine Months Ended
	July 2, 2022			July 3, 2021			Change			July 2, 2022			July 3, 2021			Change
Sales	$	4,366		$	3,476		$	890		$	12,342		$	9,860		$	2,482
Sales volume change							(2.1)		%							0.7		%
Average sales price change							20.1		%							17.9		%
Operating income (loss)	$	277		$	(279)		$	556		$	615		$	(489)		$	1,104
Operating margin	6.3		%	(8.0)		%				5.0		%	(5.0)		%

Third quarter and nine months – Fiscal 2022 vs Fiscal 2021

Sales Volume** – Sales volume decreased in the third quarter of fiscal 2022 primarily due to a reduction in volumes related to a fire at a production facility in the fourth quarter of fiscal 2021 and a reduction in outside meat purchases. Sales volume increased slightly in the first nine months of fiscal 2022 primarily due to strong global demand partially offset by a reduction in volumes related to a fire at a production facility in the fourth quarter of fiscal 2021.
Average Sales Price** – Average sales price increased in the third quarter and first nine months of fiscal 2022 due to the effects of pricing initiatives in an inflationary cost environment. The change in average sales price for the third quarter and nine months ended July 2, 2022 excludes the impact of $225 million and $545 million reductions of Sales from the recognition of legal contingency accruals in the three and nine months ended July 3, 2021, respectively.
Operating Income (Loss)** – Operating income increased in the third quarter and first nine months of fiscal 2022 primarily due to higher average sales prices, partially offset by the impacts of inflationary market conditions including increased supply chain and labor costs. In the third quarter of fiscal 2022, we experienced $145 million of higher feed ingredient costs and $23 million of net derivative losses as compared to $56 million of net derivative gains in the third quarter of fiscal 2021. In the first nine months of fiscal 2022, we experienced $430 million of higher feed ingredient costs. Additionally, operating income in the first nine months of fiscal 2022 benefited from $26 million of insurance proceeds, net of costs incurred related to a fire at a production facility and was impacted in the third quarter and first nine months of fiscal 2021 by $306 million and $626 million of losses, respectively, from the recognition of legal contingency accruals.

Prepared Foods Segment Results


in millions	Three Months Ended									Nine Months Ended
	July 2, 2022			July 3, 2021			Change			July 2, 2022			July 3, 2021			Change
Sales	$	2,447		$	2,323		$	124		$	7,173		$	6,600		$	573
Sales volume change							(8.5)		%							(5.5)		%
Average sales price change							13.8		%							14.2		%
Operating income	$	186		$	150		$	36		$	635		$	633		$	2
Operating margin	7.6		%	6.5		%				8.9		%	9.6		%

Third quarter and nine months – Fiscal 2022 vs Fiscal 2021

Sales Volume** – Sales volume decreased in the third quarter and first nine months of fiscal 2022 due to the impacts of increased pricing, uneven foodservice recovery, the divestiture of our pet treats business in the fourth quarter of fiscal 2021 and a challenging supply environment impacting the first half of fiscal 2022.
Average Sales Price** – Average sales price increased in the third quarter and first nine months of fiscal 2022 primarily due to the effects of revenue management in an inflationary cost environment.
Operating Income** – Operating income increased in the third quarter of fiscal 2022 due to higher average sales prices, partially offset by the impacts of inflationary market conditions, including $135 million of increased raw materials and other input costs in addition to increased supply chain and labor costs. Operating income was relatively flat in the first nine months of fiscal 2022 as higher average sales prices were offset by the impacts of inflationary market conditions, including $560 million of increased raw materials and other input costs in addition to increased supply chain and labor costs.

International/Other Results


in millions	Three Months Ended						Nine Months Ended
	July 2, 2022		July 3, 2021		Change		July 2, 2022		July 3, 2021		Change
Sales	$	602	$	488	$	114	$	1,717	$	1,444	$	273


Operating income	12		4		8		$	19	$	—	$	19

Third quarter and nine months – Fiscal 2022 vs Fiscal 2021

Sales** – Sales increased in the third quarter and first nine months of fiscal 2022 primarily due to increased volume and increased pricing in an inflationary cost environment.
Operating Income** – Operating income increased in the third quarter and first nine months of fiscal 2022 primarily due to $23 million of charges incurred in 2021 related to the relocation of a production facility in China.

LIQUIDITY AND CAPITAL RESOURCES

Our cash needs for working capital, capital expenditures, growth opportunities, repurchases of senior notes, repayment of maturing debt, the payment of dividends and share repurchases are expected to be met with current cash on hand, cash flows provided by operating activities or short-term borrowings. Based on our current expectations, we believe our liquidity and capital resources will be sufficient to operate our business. However, we may take advantage of opportunities to generate additional liquidity or refinance existing debt through capital market transactions. The amount, nature and timing of any capital market transactions will depend on our operating performance and other circumstances; our then-current commitments and obligations; the amount, nature and timing of our capital requirements; any limitations imposed by our current credit arrangements; and overall market conditions.

Cash Flows from Operating Activities


in millions	Nine Months Ended
	July 2, 2022		July 3, 2021
Net income	$	2,712	$	1,702
Non-cash items in net income:
Depreciation and amortization	892		906
Deferred income taxes	149		(3)
Other, net	62		72
Net changes in operating assets and liabilities	(1,925)		(21)
Net cash provided by operating activities	$	1,890	$	2,656

The decrease in net cash provided by operating activities was due to higher payments related to legal accruals, deferred payroll tax liabilities under the CARES Act and income taxes and an increase in inventory primarily due to increased finished inventory, offset by a decrease in accounts receivable and higher earnings as a result of strong operations in fiscal 2022.

Cash Flows from Investing Activities


in millions	Nine Months Ended
	July 2, 2022		July 3, 2021
Additions to property, plant and equipment	$	(1,323)	$	(859)
Proceeds from sale of (purchases of) marketable securities, net	(1)		(2)


Acquisition of equity investments	(97)		(44)
Other, net	96		122
Net cash used for investing activities	$	(1,325)	$	(783)

Additions to property, plant and equipment included spending for production growth, safety and animal well-being, acquiring new equipment, infrastructure replacements and upgrades to maintain competitive standing and position us for future opportunities.
Capital spending for fiscal 2022 is expected to approximate $1.9 billion and will include spending for capacity expansion and utilization, automation to alleviate labor challenges and brand and product innovations.
Other, net for the first nine months of fiscal 2022 primarily included insurance proceeds received related to fires at our production facilities, proceeds from the disposition of assets and changes in deposits for capital expenditures. For the first nine months of fiscal 2021, Other, net primarily included changes in deposits for capital expenditures.

Cash Flows from Financing Activities


in millions	Nine Months Ended
	July 2, 2022		July 3, 2021
Proceeds from issuance of debt	$	79	$	573
Payments on debt	(1,148)		(1,608)





Purchases of Tyson Class A common stock	(693)		(50)
Dividends	(491)		(477)
Stock options exercised	125		33
Other, net	—		(13)
Net cash used for financing activities	$	(2,128)	$	(1,542)

During the first nine months of fiscal 2021, proceeds of $573 million from issuance of debt included $500 million of proceeds from the issuance of a term loan facility due March 2023.
In March 2022, we extinguished the $1 billion outstanding balance of our senior notes due June 2022.
During the first nine months of fiscal 2021, we extinguished the $1.5 billion outstanding balance of our term loan facility using proceeds received from the issuance of debt and cash on hand.
Purchases of Tyson Class A stock included:
$587 million of cash paid for shares repurchased pursuant to our share repurchase program during the nine months ended July 2, 2022.
$106 million and $50 million of shares repurchased to fund certain obligations under our equity compensation programs during the nine months ended July 2, 2022 and July 3, 2021, respectively.
Dividends paid during the nine months ended July 2, 2022 reflected a 3% increase to our fiscal 2021 quarterly dividend rate.

Liquidity


in millions
	Commitments Expiration Date	Facility Amount		Outstanding Letters of Credit (no draw downs)		Amount Borrowed		Amount Available at July 2, 2022
Cash and cash equivalents								$	1,056
Short-term investments								—

Revolving credit facility	September 2026	$	2,250	$	—	$	—	2,250
Commercial paper								—
Total liquidity								$	3,306

Liquidity includes cash and cash equivalents, short-term investments and availability under our revolving credit facility, less the outstanding commercial paper balance.
At July 2, 2022, we had accrued legal contingencies and current debt of $203 million and $67 million, respectively, which we intend to pay with cash generated from our operating activities and other existing or new liquidity sources.
The revolving credit facility supports our short-term funding needs and also serves to backstop our commercial paper program. We had no borrowings under the revolving credit facility during the nine months ended July 2, 2022. Under the terms of the facility, we have the option to establish incremental commitment increases of up to $500 million if certain conditions are met.
We expect net interest expense to approximate $350 million for fiscal 2022.
Our current ratio was 2.0 to 1 at July 2, 2022 and 1.6 to 1 at October 2, 2021. The increase in the nine months ended July 2, 2022 was primarily due to the $1 billion debt repayment and payments of deferred payroll tax liabilities under the CARES Act and income taxes, partially offset by increased inventory.
At July 2, 2022, approximately $428 million of our cash was held in the accounts of our foreign subsidiaries. Generally, we do not rely on the foreign cash as a source of funds to support our ongoing domestic liquidity needs. We manage our worldwide cash requirements by reviewing available funds among our foreign subsidiaries and the cost effectiveness with which those funds can be accessed. We intend to repatriate excess cash (net of applicable withholding taxes) not subject to regulatory requirements and to indefinitely reinvest outside of the United States the remainder of cash held by foreign subsidiaries. We do not expect the regulatory restrictions or taxes on repatriation to have a material effect on our overall liquidity, financial condition or the results of operations for the foreseeable future.

Capital Resources

Credit Facility

Cash flows from operating activities and cash on hand are our primary sources of liquidity for funding debt service, capital expenditures, dividends and share repurchases. We also have a revolving credit facility, with a committed capacity of $2.25 billion, to provide additional liquidity for working capital needs and to backstop our commercial paper program.

At July 2, 2022, amounts available for borrowing under our revolving credit facility totaled $2.25 billion. Our revolving credit facility is funded by a syndicate of 20 banks, with commitments ranging from $35 million to $175 million per bank.

Commercial Paper Program

Our commercial paper program provides a low-cost source of borrowing to fund general corporate purposes including working capital requirements. The maximum borrowing capacity under the commercial paper program is $1.5 billion. The maturities of the notes may vary, but may not exceed 397 days from the date of issuance. As of July 2, 2022, we had no commercial paper outstanding under this program. Our ability to access commercial paper in the future may be limited or its costs increased.

Capitalization

To monitor our credit ratings and our capacity for long-term financing, we consider various qualitative and quantitative factors. We monitor the ratio of our net debt to EBITDA as support for our long-term financing decisions. At July 2, 2022, and October 2, 2021, the ratio of our net debt to EBITDA was 1.1x and 1.2x, respectively. Refer to Part I, Item 3, EBITDA Reconciliations, for an explanation and reconciliation to comparable Generally Accepted Accounting Principles (“GAAP”) measures.

Credit Ratings

Revolving Credit Facility

Standard & Poor’s Rating Services’, a Standard & Poor’s Financial Services LLC business (“S&P”), applicable rating is “BBB+”. Moody’s Investor Service, Inc.’s (“Moody’s”) applicable rating is “Baa2”. The below table outlines the fees paid on the unused portion of the facility (“Facility Fee Rate”) and letter of credit fees and borrowings (“All-in Borrowing Spread”) that corresponds to the applicable ratings levels from S&P and Moody’s.


Ratings Level (Moody’s/S&P)	Facility Fee Rate		All-in Borrowing Spread
A2/A or above	0.070	%	0.875	%
A3/A-	0.090	%	1.000	%
Baal/BBB+ (current level)	0.100	%	1.125	%
Baa2/BBB	0.125	%	1.250	%
Baa3/BBB- or lower	0.175	%	1.375	%

In the event the rating levels fall within different levels, the applicable rate will be based upon the higher of the two Levels or, if there is more than a one-notch split between the two Levels, then the Applicable Rate will be based upon the Level that is one Level below the higher Level.

Debt Covenants

Our revolving credit 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 a minimum interest expense coverage ratio.

Our senior notes also contain affirmative and negative covenants that, among other things, may limit or restrict our ability to: create liens; engage in certain sale/leaseback transactions; and engage in certain consolidations, mergers and sales of assets.

We were in compliance with all debt covenants at July 2, 2022, and we expect that we will maintain compliance.

RECENTLY ISSUED/ADOPTED ACCOUNTING PRONOUNCEMENTS

Refer to the discussion of recently issued/adopted accounting pronouncements under Part I, Item 1, Notes to Consolidated Condensed Financial Statements, Note 1: Accounting Policies.

CRITICAL ACCOUNTING ESTIMATES

We consider accounting policies related to: contingent liabilities; revenue recognition; accrued self-insurance; defined benefit pension plans; impairment of long-lived assets and definite life intangibles; impairment of goodwill and indefinite life intangible assets; business combinations; and income taxes to be critical accounting estimates. These policies are summarized in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended October 2, 2021. Refer to Part I, Item 1, Notes to Consolidated Condensed Financial Statements, Note 1: Accounting Policies, for updates to our significant accounting policies during the nine months ended July 2, 2022. These critical accounting policies require us to make estimates and assumptions that affect the amounts reported in the consolidated condensed financial statements and accompanying notes.

CAUTIONARY STATEMENTS RELEVANT TO FORWARD-LOOKING INFORMATION FOR THE PURPOSE OF “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Certain information in this report constitutes forward-looking statements. These statements are intended to qualify for the “safe harbor” from liability established by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, but are not limited to, current views and estimates of our outlook for fiscal 2022, other future economic circumstances, industry conditions in domestic and international markets, our performance and financial results (e.g., debt levels, return on invested capital, value-added product growth, capital expenditures, tax rates, access to foreign markets and dividend policy). Words such as “believe,” “expect,” “anticipate,” “estimate,” “intend,” “project,” “forecast,” “target,” “outlook,” “may,” “should,” “could,” and similar expressions, as well as statements written in the future tense, identify forward-looking statements. These forward-looking statements are subject to a number of factors and uncertainties that could cause our actual results and experiences to differ materially from anticipated results and expectations expressed in such forward-looking statements. We wish to caution readers not to place undue reliance on any forward-looking statements, which are expressly qualified in their entirety by this cautionary statement and speak only as of the date made. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Among the factors that may cause actual results and experiences to differ from anticipated results and expectations expressed in such forward-looking statements are the following: (i) the COVID-19 global pandemic and associated responses thereto have had an adverse impact on our business and operations, and the extent that the COVID-19 pandemic continues to impact us will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, public adoption rates of COVID-19 vaccines and their effectiveness against emerging variants of COVID-19, the speed and effectiveness of new vaccine and treatment developments and their deployment and COVID-19 related impacts on the market, including production delays, labor shortages and increases in costs and inflation; (ii) the effectiveness of our financial excellence programs; (iii) access to foreign markets together with foreign economic conditions, including currency fluctuations, import/export restrictions and foreign politics; (iv) cyber incidents, security breaches or other disruptions of our information technology systems; (v) risks associated with our failure to consummate favorable acquisition transactions or integrate certain acquisitions’ operations; (vi) the Tyson Limited Partnership’s ability to exercise significant control over the Company; (vii) fluctuations in the cost and availability of inputs and raw materials, such as live cattle, live swine, feed grains (including corn and soybean meal) and energy; (viii) market conditions for finished products, including competition from other global and domestic food processors, supply and pricing of competing products and alternative proteins and demand for alternative proteins; (ix) outbreak of a livestock disease (such as African swine fever (ASF), avian influenza (AI) or bovine spongiform encephalopathy (BSE)), which could have an adverse effect on livestock we own, the availability of livestock we purchase, consumer perception of certain protein products or our ability to access certain domestic and foreign markets; (x) changes in consumer preference and diets and our ability to identify and react to consumer trends; (xi) effectiveness of advertising and marketing programs; (xii) significant marketing plan changes by large customers or loss of one or more large customers; (xiii) our ability to leverage brand value propositions; (xiv) changes in availability and relative costs of labor and contract farmers and our ability to maintain good relationships with team members, labor unions, contract farmers and independent producers providing us livestock; (xv) issues related to food safety, including costs resulting from product recalls, regulatory compliance and any related claims or litigation; (xvi) compliance with and changes to regulations and laws (both domestic and foreign), including changes in accounting standards, tax laws, environmental laws, agricultural laws and occupational, health and safety laws; (xvii) adverse results from litigation; (xviii) risks associated with leverage, including cost increases due to rising interest rates or changes in debt ratings or outlook; (xix) impairment in the carrying value of our goodwill or indefinite life intangible assets; (xx) our participation in a multiemployer pension plan; (xxi) volatility in capital markets or interest rates; (xxii) risks associated with our commodity purchasing activities; (xxiii) the effect of, or changes in, general economic conditions; (xxiv) impacts on our operations caused by factors and forces beyond our control, such as natural disasters, fire, bioterrorism, pandemics, armed conflicts or extreme weather; (xxv) failure to maximize or assert our intellectual property rights; (xxvi) effects related to changes in tax rates, valuation of deferred tax assets and liabilities, or tax laws and their interpretation; (xxvii) the effectiveness of our internal control over financial reporting, including identification of material weaknesses; and (xxviii) those factors discussed within Item 1, Item 1A and Item 7 of our Annual Report on Form 10-K for the year ended October 2, 2021 and our other periodic filings with the SEC.

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