item 14 exhibits financial statements schedules reports form 8k following documents filed part report 1 following consolidated financial statements registrant included pages 2742 companys annual report fiscal year ended october 1 1994 report independent auditors page 44 annual report incorporated herein reference page references page numbers annual report schedules omitted neither applicable required separate parent company financial statements omitted since registrant primarily operating company 3 exhibits filed report listed exhibit index end item 14 4 company file reports form 8k quarter ended october 1 1994 exhibit index following exhibits filed report incorporated reference previously filed material page references consecutively numbered pages attached exhibit signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized tyson foods inc gerald johnston november 18 1994 gerald johnston executive vice president finance pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities date indicated sneely cassady private investor november 18 1994 arkansas state senator neely cassady lloyd v hackley chancellor fayetteville november 18 1994 state university lloyd v hackley gary johnson corporate controller november 18 1994 principal accounting gary johnson officer sgerald johnston executive vice president november 18 1994 finance principal gerald johnston financial officer shelby massey private investor november 18 1994 shelby massey joe f starr vice president november 18 1994 joe f starr leland e tollett vice chairman board november 18 1994 chief executive officer leland e tollett president barbara tyson vice president november 18 1994 barbara tyson chairman board november 18 1994 tyson john h tyson president november 18 1994 beef pork division john h tyson fred vorsanger vice presidentemeritus november 18 1994 university arkansas fred vorsanger private investor donald e wray chief operating officer november 18 1994 donald e wray financial statement schedules report independent auditors audited consolidated financial statements tyson foods inc october 1 1994 october 2 1993 three years period ended october 1 1994 issued report thereon dated november 14 1994 audits also included financial statement schedules listed item 14a annual report form 10k schedules responsibility companys management responsibility express opinion based audits opinion financial statement schedules referred considered relation basic financial statements taken whole present fairly material respects information set forth therein ernst young llp ernst young llp november 14 1994 little rock arkansas 1 reclassification 2 includes 1433 million 1994 acquisition gorges foodservice inc culinary foods inc cobbvantress international trasgo sa de cv includes 2219 million 1993 acquisition arctic alaska fisheries corporation brandywine foods inc 1 reclassification 2 adjustments 1 uncollectible accounts writtenoff 1 average borrowings determined based daily amounts outstanding 2 weighted average interest rate period computed dividing actual interest expense weighted average shortterm borrowings amortization intangible assets amounts expended taxes payroll income taxes royalties less 1 total sales revenues presenteditem 14 exhibits financial statements schedules reports form 8k following documents filed part report 1 following consolidated financial statements registrant included pages 22 26 2830 3241 companys annual report fiscal year ended september 30 1995 report independent auditors page 43 annual report incorporated herein reference page references set forth index page numbers exhibit 13 form 10k 2 following additional information years 1995 1994 1993 submitted herewith page references consecutively numbered pages report form 10k schedules omitted neither applicable required 3 exhibits filed report listed exhibit index end item 14 4 july 20 1995 company filed current report form 8k related offer mediumterm notes due nine months thirty years date issuance principal amount 350 million exhibit index following exhibits filed report incorporated reference previously filed material page references cover page preceding attached exhibit signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized tyson foods inc gerald johnston november 20 1995 gerald johnston executive vice president finance pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities date indicated financial statement schedules report independent auditors audited consolidated financial statements tyson foods inc september 30 1995 october 1 1994 three years period ended september 30 1995 issued report thereon dated november 13 1995 audits also included financial statement schedule listed item 14a annual report form 10k schedule responsibility companys management responsibility express opinion based audits opinion financial statement schedule referred considered relation basic financial statements taken whole presents fairly material respects information set forth therein sernst young llp ernst young llp little rock arkansas november 13 1995item 14 exhibits financial statements schedules reports form 8k following documents filed part report 1 following consolidated financial statements registrant included pages 28 31 32 34 3644 companys annual report fiscal year ended september 28 1996 report independent auditors page 46 annual report incorporated herein reference page references set forth index page numbers exhibit 13 form 10k 2 following additional information years 1996 1995 1994 submitted herewith page references consecutively numbered pages report form 10k schedules omitted neither applicable required 3 exhibits filed report listed exhibit index end item 14 4 company file reports form 8k fiscal year ended september 28 1996 exhibit index following exhibits filed report incorporated reference previously filed material page references cover page preceding attached exhibit signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized tyson foods inc wayne britt december 13 1996 wayne britt executive vice president chief financial officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities date indicated financial statement schedules report independent auditors audited consolidated financial statements tyson foods inc september 28 1996 september 30 1995 three years period ended september 28 1996 issued report thereon dated november 15 1996 audits also included financial statement schedule listed item 14a annual report form 10k schedule responsibility companys management responsibility express opinion based audits opinion financial statement schedule referred considered relation basic financial statements taken whole presents fairly material respects information set forth therein sernst young llp ernst young llp little rock arkansas november 15 1996item 14 exhibits financial statements schedules reports form 8k following documents filed part report 1 following consolidated financial statements registrant included pages 32 45 companys annual report fiscal year ended september 27 1997 report independent auditors page 46 annual report incorporated herein reference page references set forth index page numbers exhibit 13 form 10k pages consolidated statements income 47 three years ended september 27 1997 consolidated balance sheets 48 september 27 1997 september 28 1996 consolidated statements shareholders equity 49 three years ended september 27 1997 consolidated statements cash flows 50 three years ended september 27 1997 notes consolidated financial statements 5163 report independent auditors 65 2 following additional information years 1997 1996 1995 submitted herewith page references consecutively numbered pages report form 10k pages report independent auditors 31 schedule viii valuation qualifying 32 accounts reserves three years ended september 27 1997 schedules omitted neither applicable required 3 exhibits filed report listed exhibit index end item 14 4 september 9 1997 company filed current report form 8k related definitive agreement plan merger hudson foods inc exhibit index following exhibits filed report incorporated reference previously filed material page references cover page preceding attached exhibit page 31 certificate incorporation company amended previously filed exhibit 3a companys registration statement form s4 filed commission july 8 1992 commission file 3349368 incorporated herein reference 32 amended restated bylaws company previously filed exhibit 32 companys annual report form 10k fiscal year ended september 28 1996 commission file 03400 incorporated herein reference 41 form indenture company chase manhattan bank na trustee relating issuance debt securities previously filed exhibit 4 amendment 1 registration statement form s3 filed commission may 8 1995 registration 3358177 incorporated herein reference 42 form 675 150 million note due june 1 2005 previously filed exhibit 4b companys quarterly report form 10q period ended july 1 1995 commission file 03400 incorporated herein reference 43 form fixed rate mediumterm note previously filed exhibit 42 companys current report form 8k filed commission july 20 1995 commission file 03400 incorporated herein reference 44 form floating rate mediumterm note previously filed exhibit 43 companys current report form 8k filed commission july 20 1995 commission file 03400 incorporated herein reference 45 form calculation agent agreement previously filed exhibit 44 companys current report form 8k filed commission july 20 1995 commission file 03400 incorporated herein reference 46 amended restated note purchase agreement dated june 30 1993 company various purchasers listed purchaser schedule attached said agreement together following documents form series note b form series note previously filed exhibit 4a companys quarterly report form 10q period ended july 3 1993 commission file 03400 incorporated herein reference 47 amendment agreement dated november 1 1994 amended restated note purchase agreements dated june 30 1993 company various purchasers listed purchaser schedule attached said agreement previously filed exhibit 10a companys quarterly report form 10q period ended december 31 1994 commission file 03400 incorporated herein reference 48 second amendment agreement dated june 29 1996 amended restated note purchase agreements dated june 30 1993 company various purchasers listed purchaser schedule attached said agreement previously filed exhibit 48 companys annual report form 10k fiscal year ended september 28 1996 commission file 03400 incorporated herein reference 49 amended restated note agreement dated june 30 1993 company various purchasers listed purchaser schedule attached said agreement together following related documents form series e note b form series f note c form series g note previously filed exhibit 4b companys quarterly report form 10q period ended july 3 1993 commission file 03400 incorporated herein reference 410 amendment agreement dated november 1 1994 amended restated note agreement dated june 30 1993 company various purchasers listed purchaser schedule attached said agreement previously filed exhibit 10b companys quarterly report form 10q period ended december 31 1994 commission file 03400 incorporated herein reference 411 second amendment agreement dated june 29 1996 amended restated note agreement dated june 30 1993 company purchasers listed purchaser schedule attached said agreement previously filed exhibit 411 companys annual report form 10k fiscal year ended september 28 1996 commission file 03400 incorporated herein reference 101 master shelf agreement dated january 13 1995 company prudential insurance company america previously filed exhibit 10c companys quarterly report form 10q period ended december 31 1994 commission file 03400 incorporated herein reference 102 first amended restated credit agreement dated may 26 1995 among company borrower chase manhattan bank na chemical bank cooperative centrale raiffeisen boerenleenbank barabobank nederland morgan guaranty trust company new york national westminister bank plc nationsbank texas na societe generale coagents bank america national trust savings association agent previously filed exhibit 4g companys quarterly report form 10q period ended july 1 1995 commission file 03400 incorporated herein reference 103 amendment 1 first amended restated credit agreement dated may 24 1996 among company borrower banks party thereto chase manhatten bank na chemical bank cooperative centrale raiffeisenboerenleenbank ba rabobank nederland morgan guaranty trust company new york national westminister bank plc nationsbank texas na societe generale coagents bank america national trust savings association agent previously filed exhibit 4a companys form 10q quarter ended june 29 1996 commission file 03400 incorporated herein reference 104 amendment 2 first amended restated credit agreement dated may 23 1997 among company borrower banks party thereto chase manhatten bank na chemical bank cooperative centrale raiffeisenboerenleenbank ba rabobank nederland morgan guaranty trust company new york national westminister bank plc nationsbank texas na societe generale coagents bank america national trust savings association agent previously filed exhibit 4a companys form 10q quarter ended june 28 1997 commission file 03400 incorporated herein reference 105 fourth amended restated credit agreement including exhibits thereto dated may 26 1995 among company borrower chase manhattan bank na chemical bank cooperative centrale raiffeisenboerenleenbank ba rabobank nederland morgan guaranty trust company new york national westminister bank plc nationsbank texas na societe generale coagents bank america national trust savings association agent previously filed exhibit 4f companys quarterly report form 10q period ended july 1 1995 commission file 03400 incorporated herein reference 106 amendment 1 fourth amended restated credit agreement dated may 24 1996 among company borrower banks party thereto chase manhatten bank na chemical bank cooperative centrale raiffeisenboerenleenbank ba rabobank nederland morgan guaranty trust company new york national westminister bank plc nationsbank texas na societe generale coagents bank america national trust savings association agent previously filed exhibit 4b companys form 10q quarter ended june 29 1996 commission file 03400 incorporated herein reference 107 amendment 2 fourth amended restated credit agreement dated may 23 1997 among company borrower banks party thereto chase manhatten bank na chemical bank cooperative centrale raiffeisenboerenleenbank ba rabobank nederland morgan guaranty trust company new york national westminister bank plc nationsbank texas na societe generale coagents bank america national trust savings association agent previously filed exhibit 4b companys form 10q quarter ended june 28 1997 commission file 03400 incorporated herein reference 108 issuing paying agency agreement dated july 1 1993 company morgan guaranty trust company new york previously filed exhibit 10d companys quarterly report form 10q period ended july 3 1993 commission file 03400 incorporated herein reference 109 commercial paper dealer agreement dated july 1 1993 company merrill lynch money markets inc previously filed exhibit 10e companys quarterly report form 10q period ended july 3 1993 commission file 03400 incorporated herein reference 1010 commercial paper dealer agreement dated july 1 1993 company first boston corporation previously filed exhibit 10g companys quarterly report form 10q period ended july 3 1993 commission file 03400 incorporated herein reference 1011 commercial paper dealer agreement dated july 1 1993 company jp morgan securities inc previously filed exhibit 10h companys quarterly report form 10q period ended july 3 1993 commission file 03400 incorporated herein reference 1012 commercial paper dealer agreement dated july 1 1993 company bank america national trust savings association previously filed exhibit 10i companys quarterly report form 10q period ended july 3 1993 commission file 03400 incorporated herein reference 1013 commercial paper dealer agreement dated september 1 1994 company chase securities inc previously filed exhibit 10j companys annual report form 10k fiscal year ended october 1 1994 commission file 03400 incorporated herein reference 1014 tyson foods inc senior executive performance bonus plan adopted november 18 1994 previously filed exhibit 10k companys annual report form 10k fiscal year ended october 1 1994 commission file 03400 incorporated herein reference 1015 tyson foods inc restricted stock bonus plan effective august 21 1989 amended restated april 15 1994 amendment restricted stock bonus plan effective november 18 1994 previously filed exhibit 10l companys annual report form 10k fiscal year ended october 1 1994 commission file 03400 incorporated herein reference 1016 profit sharing plan trust tyson foods inc amended restated april 1 1993 amendment no1 thereto effective april 1 1995 terminating resolution effective march 31 1996 previously filed exhibit 10b companys form 10q quarter ended march 30 1996 commission file 03400 incorporated herein reference 1017 tyson foods inc employee stock purchase plan amended restated april 1 1993 amendment nos 1 2 thereto effective april 1 1996 previously filed exhibit 10d companys form 10q quarter ended march 30 1996 commission file 03400 incorporated herein reference 1018 tyson foods inc incentive stock option plan 1982 amended restated september 5 1987 previously filed exhibit 10c companys annual report form 10k fiscal year ended october 3 1987 commission file 03400 incorporated herein reference 1019 tyson foods inc nonstatutory stock option plan amended restated november 18 1994 previously filed exhibit 99 companys registration statement form s8 filed commission january 30 1995 commission file 3354716 incorporated herein reference 1020 tyson foods inc employee stock ownership plan amended restated april 1 1993 terminating resolution effective march 31 1996 previously filed exhibit 10c companys form 10q quarter ended march 30 1996 commission file 03400 incorporated herein reference 1021 second amended restated employment agreement dated 3335 august 1 1997 company tyson senior chairman board directors company 1022 retirement savings plan tyson foods inc qualified section 401k internal revenue code 1986 amended originally effective october 3 1987 amended restated january 1 1993 amendments nos 15 thereto previously filed exhibit 10a companys form 10q quarter ended march 30 1996 commission file 03400 incorporated herein reference 1023 tyson employee retirement income savings plan amended restated effective april 1 1987 previously filed exhibit 10h companys annual report form 10k fiscal year ended october 3 1987 commission file 03400 incorporated herein reference 1024 executive savings plan tyson foods inc effective april 1 1991 amendment no1 thereto effective april 1 1996 previously filed exhibit 10e companys form 10q quarter ended march 30 1996 commission file 03400 incorporated herein reference 1025 form indemnity agreement tyson foods inc directors certain executive officers previously filed exhibit 10t companys annual report form 10k fiscal year ended september 30 1995 commission file 03400 incorporated herein reference 11 statement regarding computation earnings per share 36 12 ratio earnings fixed charges 37 13 pages 2648 back cover annual report 3868 shareholders fiscal year ended september 27 1997 21 subsidiaries company 6970 23 consent independent auditors 71 27 financial data schedule signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized tyson foods inc wayne britt december 10 1997 wayne britt executive vice president chief financial officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities date indicated wayne britt executive vice president december 10 1997 chief financial officer wayne britt neely cassady private investor december 10 1997 arkansas state senator neely cassady james g ennis vice president controller december 10 1997 chief accounting officer james g ennis lloyd v hackley president ceo lloyd v december 10 1997 hackley associates inc lloyd v hackley gerald johnston private investor december 10 1997 gerald johnston shelby massey private investor december 10 1997 shelby massey joe f starr private investor december 10 1997 joe f starr leland e tollett chairman board december 10 1997 directors chief leland e tollett executive officer barbara tyson vice president december 10 1997 barbara tyson senior chairman december 10 1997 board directors tyson john h tyson vice chairman december 10 1997 board directors john h tyson fred vorsanger vice presidentemeritus december 10 1997 university arkansas fred vorsanger private investor donald e wray president chief december 10 1997 operating officer donald e wray financial statement schedule report independent auditors audited consolidated financial statements tyson foods inc september 27 1997 september 28 1996 three years period ended september 27 1997 issued report thereon dated november 14 1997 audits also included financial statement schedule listed item 14a annual report form 10k schedule responsibility companys management responsibility express opinion based audits opinion financial statement schedule referred considered relation basic financial statements taken whole presents fairly material respects information set forth therein little rock arkansas sernst young llp november 14 1997 ernst young llp tyson foods inc schedule viii valuation qualifying accounts reserves three years ended september 27 1997 dollars millions balance charged balance beginning costs additions end description period expenses accounts deductions period allowance doubtful accounts 1997 35 20 0 11 44 1996 36 19 0 20 35 1995 33 11 0 08 36item 14 exhibits financial statements schedules reports form 8k following documents filed part report 1 following consolidated financial statements registrant included pages 24 40 companys annual report fiscal year ended october 3 1998 report independent auditors page 41 annual report incorporated herein reference page references set forth index page numbers exhibit 13 form 10k pages consolidated statements income 62 three years ended october 3 1998 consolidated balance sheets 63 october 3 1998 september 27 1997 consolidated statements shareholders equity 64 three years ended october 3 1998 consolidated statements cash flows 65 three years ended october 3 1998 notes consolidated financial statements 6681 report independent auditors 83 2 following additional information years 1998 1997 1996 submitted herewith page references consecutively numbered pages report form 10k pages report independent auditors 32 schedule viii valuation qualifying 33 accounts reserves three years ended october 3 1998 schedules omitted neither applicable required 3 exhibits filed report listed exhibit index end item 14 4 september 4 1998 company filed current report form 8k related board directors approval combined financial program exhibit index following exhibits filed report incorporated reference previously filed material page references cover page preceding attached exhibit pages 21 agreement plan merger dated september 4 1997 among company hfi acquisition sub inc hudson foods inc previously filed exhibit 21 companys registration statement form s4 filed securities exchange commission december 10 1997 registration 33341887 incorporated herein reference 31 restated certificate incorporation company 3443 32 amended restated bylaws company previously filed exhibit 32 companys annual report form 10k fiscal year ended september 28 1996 commission file 03400 incorporated herein reference 41 form indenture company chase manhattan bank na trustee relating issuance debt securities previously filed exhibit 4 amendment 1 registration statement form s3 filed commission may 8 1995 registration 3358177 incorporated herein reference 42 form 675 150 million note due june 1 2005 previously filed exhibit 4b companys quarterly report form 10q period ended july 1 1995 commission file 03400 incorporated herein reference 43 form fixed rate mediumterm note previously filed exhibit 42 companys current report form 8k filed commission july 20 1995 commission file 03400 incorporated herein reference 44 form floating rate mediumterm note previously filed exhibit 43 companys current report form 8k filed commission july 20 1995 commission file 03400 incorporated herein reference 45 form calculation agent agreement previously filed exhibit 44 companys current report form 8k filed commission july 20 1995 commission file 03400 incorporated herein reference 46 amended restated note purchase agreement dated june 30 1993 company various purchasers listed purchaser schedule attached said agreement together following documents form series note b form series note previously filed exhibit 4a companys quarterly report form 10q period ended july 3 1993 commission file 03400 incorporated herein reference 47 amendment agreement dated november 1 1994 amended restated note purchase agreements dated june 30 1993 company various purchasers listed purchaser schedule attached said agreement previously filed exhibit 10a companys quarterly report form 10q period ended december 31 1994 commission file 03400 incorporated herein reference 48 second amendment agreement dated june 29 1996 amended restated note purchase agreements dated june 30 1993 company various purchasers listed purchaser schedule attached said agreement previously filed exhibit 48 companys annual report form 10 k fiscal year ended september 28 1996 commission file 03400 incorporated herein reference 49 amended restated note agreement dated june 30 1993 company various purchasers listed purchaser schedule attached said agreement together following related documents form series e note b form series f note c form series g note previously filed exhibit 4b companys quarterly report form 10q period ended july 3 1993 commission file 03400 incorporated herein reference 410 amendment agreement dated november 1 1994 amended restated note agreement dated june 30 1993 company various purchasers listed purchaser schedule attached said agreement previously filed exhibit 10b companys quarterly report form 10q period ended december 31 1994 commission file 03400 incorporated herein reference 411 second amendment agreement dated june 29 1996 amended restated note agreement dated june 30 1993 company purchasers listed purchaser schedule attached said agreement previously filed exhibit 411 companys annual report form 10k fiscal year ended september 28 1996 commission file 03400 incorporated herein reference 412 form 150 million 6 note due january 15 2003 previously filed exhibit 41 companys quarterly report form 10q period ended december 27 1997 commission file 03400 incorporated herein reference 413 form 150 million 7 note due january 15 2028 previously filed exhibit 42 companys quarterly report form 10q period ended december 27 1997 commission file 03400 incorporated herein reference 414 form 100 million 608 mopprs due february 1 2010 previously filed exhibit 43 companys quarterly report form 10q period ended december 27 1997 commission file 03400 incorporated herein reference 415 remarketing agreement dated january 28 1998 company merrill lynch pierce fenner smith incorporated relating 608 mopprs due february 1 2010 previously filed exhibit 41 companys current report form 8k filed securities exchange commission february 4 1998 incorporated herein reference 416 form 50 million floating rate mopprs due february 1 2010 previously filed exhibit 45 companys quarterly report form 10q period ended december 27 1997 commission file 03400 incorporated herein reference 417 remarketing agreement dated january 28 1998 company merrell lynch pierce fenner smith incorporated relating floating rate mopprs due february 1 2010 previously filed exhibit 42 companys current report form 8k filed securities exchange commission february 4 1998 incorporated herein reference 418 form 70 200 million note due may 1 2018 previously filed exhibit 41 companys quarterly report form 10q period ended march 28 1998 commission file 03400 incorporated herein reference 419 form 70 40 million note due may 1 2018 previously filed exhibit 42 companys quarterly report form 10q period ended march 28 1998 commission file 03400 incorporated herein reference 101 fourth amended restated credit agreement including exhibits thereto dated may 26 1995 among company borrower chase manhattan bank na chemical bank cooperative centrale raiffeisenboerenleenbank ba rabobank nederland morgan guaranty trust company new york national westminister bank plc nationsbank texas na societe generale coagents bank america national trust savings association agent previously filed exhibit 4f companys quarterly report form 10q period ended july 1 1995 commission file 03400 incorporated herein reference 102 amendment 1 fourth amended restated credit agreement dated may 24 1996 among company borrower banks party thereto chase manhatten bank na chemical bank cooperative centrale raiffeisenboerenleenbank ba rabobank nederland morgan guaranty trust company new york national westminister bank plc nationsbank texas na societe generale coagents bank america national trust savings association agent previously filed exhibit 4b companys form 10q quarter ended june 29 1996 commission file 03400 incorporated herein reference 103 amendment 2 fourth amended restated credit agreement dated may 23 1997 among company borrower banks party thereto chase manhatten bank na chemical bank cooperative centrale raiffeisenboerenleenbank ba rabobank nederland morgan guaranty trust company new york national westminister bank plc nationsbank texas na societe generale coagents bank america national trust savings association agent previously filed exhibit 4b companys form 10q quarter ended june 28 1997 commission file 03400 incorporated herein reference 104 issuing paying agency agreement dated july 1 1993 company morgan guaranty trust company new york previously filed exhibit 10d companys quarterly report form 10q period ended july 3 1993 commission file 03400 incorporated herein reference 105 commercial paper dealer agreement dated july 1 1993 company merrill lynch money markets inc previously filed exhibit 10e companys quarterly report form 10q period ended july 3 1993 commission file 03400 incorporated herein reference 106 commercial paper dealer agreement dated july 1 1993 company first boston corporation previously filed exhibit 10g companys quarterly report form 10q period ended july 3 1993 commission file 03400 incorporated herein reference 107 commercial paper dealer agreement dated july 1 1993 company jp morgan securities inc previously filed exhibit 10h companys quarterly report form 10q period ended july 3 1993 commission file 03400 incorporated herein reference 108 commercial paper dealer agreement dated july 1 1993 company bank america national trust savings association previously filed exhibit 10i companys quarterly report form 10q period ended july 3 1993 commission file 03400 incorporated herein reference 109 commercial paper dealer agreement dated september 1 1994 company chase securities inc previously filed exhibit 10j companys annual report form 10k fiscal year ended october 1 1994 commission file 03400 incorporated herein reference 1010 tyson foods inc senior executive performance bonus plan adopted november 18 1994 previously filed exhibit 10k companys annual report form 10k fiscal year ended october 1 1994 commission file 03400 incorporated herein reference 1011 tyson foods inc restricted stock bonus plan effective august 21 1989 amended restated april 15 1994 amendment restricted stock bonus plan effective november 18 1994 previously filed exhibit 10l companys annual report form 10k fiscal year ended october 1 1994 commission file 03400 incorporated herein reference 1012 profit sharing plan trust tyson foods inc amended restated april 1 1993 amendment no1 thereto effective april 1 1995 terminating resolution effective march 31 1996 previously filed exhibit 10b companys form 10q quarter ended march 30 1996 commission file 0 3400 incorporated herein reference 1013 tyson foods inc employee stock purchase plan amended restated april 1 1993 amendment nos 1 2 thereto effective april 1 1996 previously filed exhibit 10d companys form 10q quarter ended march 30 1996 commission file 03400 incorporated herein reference 1014 tyson foods inc incentive stock option plan 1982 amended restated september 5 1987 previously filed exhibit 10c companys annual report form 10k fiscal year ended october 3 1987 commission file 03400 incorporated herein reference 1015 tyson foods inc employee stock ownership plan amended restated april 1 1993 terminating resolution effective march 31 1996 previously filed exhibit 10c companys form 10q quarter ended march 30 1996 commission file 03400 incorporated herein reference 1016 second amended restated employment agreement dated august 1 1997 company tyson senior chairman board directors company previously filed exhibit 1021 companys form 10k fiscal year ended september 27 1997 commission file 03400 incorporated herein reference 1017 retirement savings plan tyson foods inc qualified section 401k internal revenue code 1986 amended originally effective october 3 1987 amended restated january 1 1993 amendments nos 15 thereto previously filed exhibit 10a companys form 10q quarter ended march 30 1996 commission file 03400 incorporated herein reference 1018 tyson employee retirement income savings plan amended restated effective april 1 1987 previously filed exhibit 10h companys annual report form 10k fiscal year ended october 3 1987 commission file 03400 incorporated herein reference 1019 form indemnity agreement tyson foods inc directors certain executive officers previously filed exhibit 10t companys annual report form 10k fiscal year ended september 30 1995 commission file 03400 incorporated herein reference 1020 senior executive employment agreement dated november 4445 20 1998 company leland e tollett 1021 senior executive employment agreement dated november 4647 20 1998 company donald e wray 12 ratio earnings fixed charges 48 13 pages 1444 back cover annual report 4988 shareholders fiscal year ended october 3 1998 21 subsidiaries company 8990 23 consent independent auditors 91 27 financial data schedule signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized tyson foods inc steven hankins december 16 1998 steven hankins executive vice president chief financial officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities date indicated wayne britt chief executive officer december 16 1998 director wayne britt neely cassady director december 16 1998 neely cassady james g ennis vice president controller december 16 1998 chief accounting officer james g ennis lloyd v hackley director december 16 1998 lloyd v hackley steven hankins executive vice president december 16 1998 chief financial officer steven hankins gerald johnston director december 16 1998 gerald johnston shelby massey director december 16 1998 shelby massey joe f starr director december 16 1998 joe f starr leland e tollett director december 16 1998 leland e tollett barbara tyson vice president director december 16 1998 barbara tyson senior chairman december 16 1998 board directors tyson john h tyson chairman december 16 1998 board directors john h tyson fred vorsanger director december 16 1998 fred vorsanger donald e wray president chief operating december 16 1998 officer director donald e wray financial statement schedule report independent auditors audited consolidated financial statements tyson foods inc october 3 1998 september 27 1997 three years period ended october 3 1998 issued report thereon dated november 20 1998 audits also included financial statement schedule listed item 14a annual report form 10k schedule responsibility companys management responsibility express opinion based audits opinion financial statement schedule referred considered relation basic financial statements taken whole presents fairly material respects information set forth therein tulsa oklahoma sernst young llp november 20 1998 ernst young llp tyson foods inc schedule viii valuation qualifying accounts reserves three years ended october 3 1998 dollars millions balance charged balance beginning costs additions end description period expenses accounts deductions period allowance doubtful accounts 1998 44 22 0 7871 853 1997 35 20 0 11 44 1996 36 19 0 20 35 1 includes 484 million reserve international currency devaluationitem 14 exhibits financial statements schedules reports form 8k following documents filed part report 1 following consolidated financial statements registrant included pages 38 55 companys annual report fiscal year ended october 2 1999 report independent auditors page 57 annual report incorporated herein reference page references set forth index page numbers exhibit 13 form 10k pages consolidated statements income 136 three years ended october 2 1999 consolidated balance sheets 137 october 2 1999 october 3 1998 consolidated statements shareholders equity 138139 three years ended october 2 1999 consolidated statements cash flows 140 three years ended october 2 1999 notes consolidated financial statements 141157 report independent auditors 159 2 following additional information years 1999 1998 1997 submitted herewith page references consecutively numbered pages report form 10k pages report independent auditors 34 schedule viii valuation qualifying accounts reserves three years ended october 2 1999 35 schedules omitted neither applicable required 3 exhibits filed report listed exhibit index end item 14 4 december 15 1999 company filed current report form 8k related termination negotiations sale pork group smithfield foods inc exhibit index following exhibits filed report incorporated reference previously filed material page references cover page preceding attached exhibit pages 21 agreement plan merger dated september 4 1997 among company hfi acquisition sub inc hudson foods inc previously filed exhibit 21 companys registration statement form s4 filed securities exchange commission december 10 1997 registration 33341887 incorporated herein reference 31 restated certificate incorporation company previously filed exhibit 31 companys annual report form 10k fiscal year ended october 3 1998 commission file 03400 incorporated herein reference 32 amended restated bylaws company previously filed exhibit 32 companys annual report form 10k fiscal year ended september 28 1996 commission file 03400 incorporated herein reference 41 form indenture company chase manhattan bank na trustee relating issuance debt securities previously filed exhibit 4 amendment 1 registration statement form s3 filed commission may 8 1995 registration 3358177 incorporated herein reference 42 form 675 150 million note due june 1 2005 previously filed exhibit 4b companys quarterly report form 10q period ended july 1 1995 commission file 03400 incorporated herein reference 43 form fixed rate mediumterm note previously filed exhibit 42 companys current report form 8k filed commission july 20 1995 commission file 03400 incorporated herein reference 44 form floating rate mediumterm note previously filed exhibit 43 companys current report form 8k filed commission july 20 1995 commission file 03400 incorporated herein reference 45 form calculation agent agreement previously filed exhibit 44 companys current report form 8k filed commission july 20 1995 commission file 03400 incorporated herein reference 46 amended restated note purchase agreement dated june 30 1993 company various purchasers listed purchaser schedule attached said agreement together following documents form series note b form series note previously filed exhibit 4a companys quarterly report form 10q period ended july 3 1993 commission file 03400 incorporated herein reference 47 amendment agreement dated november 1 1994 amended restated note purchase agreements dated june 30 1993 company various purchasers listed purchaser schedule attached said agreement previously filed exhibit 10a companys quarterly report form 10q period ended december 31 1994 commission file 03400 incorporated herein reference 48 second amendment agreement dated june 29 1996 amended restated note purchase agreements dated june 30 1993 company various purchasers listed purchaser schedule attached said agreement previously filed exhibit 48 companys annual report form 10 k fiscal year ended september 28 1996 commission file 03400 incorporated herein reference 49 amended restated note agreement dated june 30 1993 company various purchasers listed purchaser schedule attached said agreement together following related documents form series e note b form series f note c form series g note previously filed exhibit 4b companys quarterly report form 10q period ended july 3 1993 commission file 03400 incorporated herein reference 410 amendment agreement dated november 1 1994 amended restated note agreement dated june 30 1993 company various purchasers listed purchaser schedule attached said agreement previously filed exhibit 10b companys quarterly report form 10q period ended december 31 1994 commission file 03400 incorporated herein reference 411 second amendment agreement dated june 29 1996 amended restated note agreement dated june 30 1993 company purchasers listed purchaser schedule attached said agreement previously filed exhibit 411 companys annual report form 10k fiscal year ended september 28 1996 commission file 03400 incorporated herein reference 412 form 150 million 6 note due january 15 2003 previously filed exhibit 41 companys quarterly report form 10q period ended december 27 1997 commission file 03400 incorporated herein reference 413 form 150 million 7 note due january 15 2028 previously filed exhibit 42 companys quarterly report form 10q period ended december 27 1997 commission file 03400 incorporated herein reference 414 form 100 million 608 mopprs due february 1 2010 previously filed exhibit 43 companys quarterly report form 10q period ended december 27 1997 commission file 03400 incorporated herein reference 415 remarketing agreement dated january 28 1998 company merrill lynch pierce fenner smith incorporated relating 608 mopprs due february 1 2010 previously filed exhibit 41 companys current report form 8k filed securities exchange commission february 4 1998 incorporated herein reference 416 form 50 million floating rate mopprs due february 1 2010 previously filed exhibit 45 companys quarterly report form 10q period ended december 27 1997 commission file 03400 incorporated herein reference 417 remarketing agreement dated january 28 1998 company merrill lynch pierce fenner smith incorporated relating floating rate mopprs due february 1 2010 previously filed exhibit 42 companys current report form 8k filed securities exchange commission february 4 1998 incorporated herein reference 418 form 70 200 million note due may 1 2018 previously filed exhibit 41 companys quarterly report form 10q period ended march 28 1998 commission file 03400 incorporated herein reference 419 form 70 40 million note due may 1 2018 previously filed exhibit 42 companys quarterly report form 10q period ended march 28 1998 commission file 03400 incorporated herein reference 101 fourth amended restated credit agreement including exhibits thereto dated may 26 1995 among company borrower chase manhattan bank na chemical bank cooperative centrale raiffeisenboerenleenbank ba rabobank nederland morgan guaranty trust company new york national westminster bank plc nationsbank texas na societe generale coagents bank america national trust savings association agent previously filed exhibit 4f companys quarterly report form 10q period ended july 1 1995 commission file 03400 incorporated herein reference 102 amendment 1 fourth amended restated credit agreement dated may 24 1996 among company borrower banks party thereto chase manhattan bank na chemical bank cooperative centrale raiffeisenboerenleenbank ba rabobank nederland morgan guaranty trust company new york national westminster bank plc nationsbank texas na societe generale coagents bank america national trust savings association agent previously filed exhibit 4b companys form 10q quarter ended june 29 1996 commission file 03400 incorporated herein reference 103 amendment 2 fourth amended restated credit agreement dated may 23 1997 among company borrower banks party thereto chase manhattan bank na chemical bank cooperative centrale raiffeisenboerenleenbank ba rabobank nederland morgan guaranty trust company new york national westminster bank plc nationsbank texas na societe generale coagents bank america national trust savings association agent previously filed exhibit 4b companys form 10q quarter ended june 28 1997 commission file 03400 incorporated herein reference 104 issuing paying agency agreement dated july 1 1993 company morgan guaranty trust company new york previously filed exhibit 10d companys quarterly report form 10q period ended july 3 1993 commission file 03400 incorporated herein reference 105 commercial paper dealer agreement dated july 1 1993 company merrill lynch money markets inc previously filed exhibit 10e companys quarterly report form 10q period ended july 3 1993 commission file 03400 incorporated herein reference 106 commercial paper dealer agreement dated july 1 1993 company first boston corporation previously filed exhibit 10g companys quarterly report form 10q period ended july 3 1993 commission file 03400 incorporated herein reference 107 commercial paper dealer agreement dated july 1 1993 company jp morgan securities inc previously filed exhibit 10h companys quarterly report form 10q period ended july 3 1993 commission file 03400 incorporated herein reference 108 commercial paper dealer agreement dated july 1 1993 company bank america national trust savings association previously filed exhibit 10i companys quarterly report form 10q period ended july 3 1993 commission file 03400 incorporated herein reference 109 commercial paper dealer agreement dated september 1 1994 company chase securities inc previously filed exhibit 10j companys annual report form 10k fiscal year ended october 1 1994 commission file 03400 incorporated herein reference 1010 tyson foods inc senior executive performance bonus plan adopted november 18 1994 previously filed exhibit 10k companys annual report form 10k fiscal year ended october 1 1994 commission file 03400 incorporated herein reference 1011 tyson foods inc restricted stock bonus plan effective august 21 1989 amended restated april 15 1994 amendment restricted stock bonus plan effective november 18 1994 previously filed exhibit 10l companys annual report form 10k fiscal year ended october 1 1994 commission file 03400 incorporated herein reference 1012 tyson foods inc amended restated employee stock 3647 purchase plan dated december 13 1999 1013 second amended restated employment agreement dated august 1 1997 company tyson senior chairman board directors company previously filed exhibit 1021 companys form 10k fiscal year ended september 27 1997 commission file 03400 incorporated herein reference 1014 amended restated retirement savings plan tyson 4898 foods inc qualified section 401k internal revenue code 1986 dated december 13 1999 1015 amended restated executive savings plan tyson 99118 foods inc effective october 1 1997 first amendment amended restated executive savings plan tyson foods inc effective december 31 1998 1016 tyson foods inc nonstatutory stock option plan amended restated november 18 1994 previously filed exhibit 99 companys registration statement form s8 filed commission january 30 1995 commission file 3354716 incorporated herein reference 1017 form indemnity agreement tyson foods inc directors certain executive officers previously filed exhibit 10t companys annual report form 10k fiscal year ended september 30 1995 commission file 0 3400 incorporated herein reference 1018 senior executive employment agreement dated november 20 1998 company leland e tollett previously filed exhibit 1020 companys annual report form 10k fiscal year ended october 3 1998 commission file 03400 incorporated herein reference 1019 senior executive employment agreement dated november 20 1998 company donald e wray previously filed exhibit 1021 companys annual report form 10k fiscal year ended october 3 1998 commission file 03400 incorporated herein reference 13 pages 2460 inside back cover annual report 119166 shareholders fiscal year ended october 2 1999 21 subsidiaries company 167168 23 consent independent auditors 169 27 financial data schedule signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized tyson foods inc steven hankins december 17 1999 steven hankins executive vice president chief financial officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities date indicated wayne britt chief executive officer december 17 1999 director wayne britt neely cassady director december 17 1999 neely cassady james g ennis vice president controller december 17 1999 chief accounting officer james g ennis lloyd v hackley director december 17 1999 lloyd v hackley steven hankins executive vice president december 17 1999 chief financial officer steven hankins gerald johnston director december 17 1999 gerald johnston jim kever director december 17 1999 jim kever shelby massey director december 17 1999 shelby massey joe f starr director december 17 1999 joe f starr leland e tollett director december 17 1999 leland e tollett barbara tyson vice president director december 17 1999 barbara tyson senior chairman december 17 1999 board directors tyson john h tyson chairman december 17 1999 board directors john h tyson fred vorsanger director december 17 1999 fred vorsanger donald e wray president director december 17 1999 donald e wray financial statement schedule report independent auditors audited consolidated financial statements tyson foods inc october 2 1999 october 3 1998 three years period ended october 2 1999 issued report thereon dated november 18 1999 audits also included financial statement schedule listed item 14a annual report form 10k schedule responsibility companys management responsibility express opinion based audits opinion financial statement schedule referred considered relation basic financial statements taken whole presents fairly material respects information set forth therein tulsa oklahoma sernst young llp november 18 1999 ernst young llp tyson foods inc schedule viii valuation qualifying accounts reserves three years ended october 2 1999 dollars millions balance charged balance beginning costs additions end description period expenses accounts deductions period allowance doubtful accounts 1999 853 1521 0 7872 218 1998 44 22 0 787 3 853 1997 35 20 0 11 44 1 includes 119 million reserve international operations 2 write receivables reserve related 1998 allowance 3 includes 484 million reserve international currency devaluationitem 14 exhibits financial statements schedules reports form 8k following documents filed part report 1 following consolidated financial statements registrant included pages 29 45 companys annual report fiscal year ended september 30 2000 report independent auditors page 47 annual report incorporated herein reference page references set forth index page numbers exhibit 13 form 10k pages consolidated statements income three years ended september 30 2000 58 consolidated balance sheets september 30 2000 october 2 1999 59 consolidated statements shareholders equity three years ended september 30 2000 6061 consolidated statements cash flows three years ended september 30 2000 62 notes consolidated financial statements 6378 report independent auditors 80 2 following additional information years 2000 1999 1998 submitted herewith page references consecutively numbered pages report form 10k pages report independent auditors 28 schedule ii valuation qualifying 29 accounts three years ended september 30 2000 schedules omitted neither applicable required 3 exhibits filed report listed exhibit index end item 14 4 company file current reports form 8k quarter ended september 30 2000 exhibit index following exhibits filed report incorporated reference previously filed material page references cover page preceding attached exhibit pages 31 restated certificate incorporation company previously filed exhibit 31 companys annual report form 10k fiscal year ended october 3 1998 commission file 03400 incorporated herein reference 32 second amended restated bylaws company previously filed exhibit 32 companys quarterly report form 10q period ended january 1 2000 commission file 03400 incorporated herein reference 41 form indenture company chase manhattan bank na trustee relating issuance debt securities previously filed exhibit 4 amendment 1 registration statement form s3 filed commission may 8 1995 registration 3358177 incorporated herein reference 42 form 675 150 million note due june 1 2005 previously filed exhibit 4b companys quarterly report form 10q period ended july 1 1995 commission file 03400 incorporated herein reference 43 form fixed rate mediumterm note previously filed exhibit 42 companys current report form 8k filed commission july 20 1995 commission file 03400 incorporated herein reference 44 form floating rate mediumterm note previously filed exhibit 43 companys current report form 8k filed commission july 20 1995 commission file 03400 incorporated herein reference 45 form calculation agent agreement previously filed exhibit 44 companys current report form 8k filed commission july 20 1995 commission file 03400 incorporated herein reference 46 amended restated note purchase agreement dated june 30 1993 company various purchasers listed purchaser schedule attached said agreement together following documents form series note b form series note previously filed exhibit 4a companys quarterly report form 10q period ended july 3 1993 commission file 03400 incorporated herein reference 47 amendment agreement dated november 1 1994 amended restated note purchase agreements dated june 30 1993 company various purchasers listed purchaser schedule attached said agreement previously filed exhibit 10a companys quarterly report form 10q period ended december 31 1994 commission file 03400 incorporated herein reference 48 second amendment agreement dated june 29 1996 amended restated note purchase agreements dated june 30 1993 company various purchasers listed purchaser schedule attached said agreement previously filed exhibit 48 companys annual report form 10 k fiscal year ended september 28 1996 commission file 03400 incorporated herein reference 49 amended restated note agreement dated june 30 1993 company various purchasers listed purchaser schedule attached said agreement together following related documents form series e note b form series f note c form series g note previously filed exhibit 4b companys quarterly report form 10q period ended july 3 1993 commission file 03400 incorporated herein reference 410 amendment agreement dated november 1 1994 amended restated note agreement dated june 30 1993 company various purchasers listed purchaser schedule attached said agreement previously filed exhibit 10b companys quarterly report form 10q period ended december 31 1994 commission file 03400 incorporated herein reference 411 second amendment agreement dated june 29 1996 amended restated note agreement dated june 30 1993 company purchasers listed purchaser schedule attached said agreement previously filed exhibit 411 companys annual report form 10k fiscal year ended september 28 1996 commission file 03400 incorporated herein reference 412 form 70 200 million note due may 1 2018 previously filed exhibit 41 companys quarterly report form 10q period ended march 28 1998 commission file 03400 incorporated herein reference 413 form 70 40 million note due may 1 2018 previously filed exhibit 42 companys quarterly report form 10q period ended march 28 1998 commission file 03400 incorporated herein reference 101 fourth amended restated credit agreement including exhibits thereto dated may 26 1995 among company borrower chase manhattan bank na chemical bank cooperative centrale raiffeisenboerenleenbank ba rabobank nederland morgan guaranty trust company new york national westminister bank plc nationsbank texas na societe generale coagents bank america national trust savings association agent previously filed exhibit 4f companys quarterly report form 10q period ended july 1 1995 commission file 03400 incorporated herein reference 102 amendment 1 fourth amended restated credit agreement dated may 24 1996 among company borrower banks party thereto chase manhatten bank na chemical bank cooperative centrale raiffeisenboerenleenbank ba rabobank nederland morgan guaranty trust company new york national westminister bank plc nationsbank texas na societe generale coagents bank america national trust savings association agent previously filed exhibit 4b companys form 10q quarter ended june 29 1996 commission file 03400 incorporated herein reference 103 amendment 2 fourth amended restated credit agreement dated may 23 1997 among company borrower banks party thereto chase manhatten bank na chemical bank cooperative centrale raiffeisenboerenleenbank ba rabobank nederland morgan guaranty trust company new york national westminister bank plc nationsbank texas na societe generale coagents bank america national trust savings association agent previously filed exhibit 4b companys form 10q quarter ended june 28 1997 commission file 03400 incorporated herein reference 104 issuing paying agency agreement dated july 1 1993 company morgan guaranty trust company new york previously filed exhibit 10d companys quarterly report form 10q period ended july 3 1993 commission file 03400 incorporated herein reference 105 commercial paper dealer agreement dated july 1 1993 company merrill lynch money markets inc previously filed exhibit 10e companys quarterly report form 10q period ended july 3 1993 commission file 03400 incorporated herein reference 106 commercial paper dealer agreement dated july 1 1993 company first boston corporation previously filed exhibit 10g companys quarterly report form 10q period ended july 3 1993 commission file 03400 incorporated herein reference 107 commercial paper dealer agreement dated july 1 1993 company jp morgan securities inc previously filed exhibit 10h companys quarterly report form 10q period ended july 3 1993 commission file 03400 incorporated herein reference 108 commercial paper dealer agreement dated july 1 1993 company bank america national trust savings association previously filed exhibit 10i companys quarterly report form 10q period ended july 3 1993 commission file 03400 incorporated herein reference 109 commercial paper dealer agreement dated september 1 1994 company chase securities inc previously filed exhibit 10j companys annual report form 10k fiscal year ended october 1 1994 commission file 03400 incorporated herein reference 1010 tyson foods inc senior executive performance bonus plan adopted november 18 1994 previously filed exhibit 10k companys annual report form 10k fiscal year ended october 1 1994 commission file 03400 incorporated herein reference 1011 tyson foods inc restricted stock bonus plan effective august 21 1989 amended restated april 15 1994 amendment restricted stock bonus plan effective november 18 1994 previously filed exhibit 10l companys annual report form 10k fiscal year ended october 1 1994 commission file 03400 incorporated herein reference 1012 tyson foods inc amended restated employee stock purchase plan dated december 13 1999 previously filed exhibit 1012 companys form 10k fiscal year ended october 2 1999 commission file 03400 incorporated herein reference 1013 second amended restated employment agreement dated august 1 1997 company tyson senior chairman board directors company previously filed exhibit 1021 companys form 10k fiscal year ended september 27 1997 commission file 03400 incorporated herein reference 1014 amended restated retirement savings plan tyson foods inc qualified section 401k internal revenue code 1986 dated december 13 1999 previously filed exhibit 1014 companys form 10k fiscal year ended october 2 1999 commission file 03400 incorporated herein reference 1015 amended restated executive savings plan tyson foods inc effective october 1 1997 first amendment amended restated executive savings plan tyson foods inc effective december 31 1998 previously filed exhibit 1015 companys form 10k fiscal year ended october 2 1999 commission file 03400 incorporated herein reference 1016 tyson foods inc nonstatutory stock option plan 1982 amended restated november 18 1994 previously filed exhibit 99 companys registration statement form s8 filed commission january 30 1995 commission file 33 54716 incorporated herein reference 1017 form indemnity agreement tyson foods inc directors certain executive officers previously filed exhibit 10t companys annual report form 10k fiscal year ended september 30 1995 commission file 0 3400 incorporated herein reference 1018 senior executive employment agreement dated april 12 2000 company wayne britt previously filed exhibit 10 companys quarterly report form 10q period ended april 1 2000 commission file 03400 incorporated herein reference 1019 tyson foods inc 2000 stock incentive plan dated august 11 2000 3045 13 pages 20 52 annual report shareholders fiscal year ended september 30 2000 4690 21 subsidiaries company 9192 23 consent independent auditors 93 27 financial data schedule signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized tyson foods inc steven hankins december 8 2000 steven hankins executive vice president chief financial officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities date indicated barbara allen director december 8 2000 barbara allen neely cassady director december 8 2000 neely cassady lloyd v hackley director december 8 2000 lloyd v hackley steven hankins executive vice president december 8 2000 chief financial officer steven hankins gerald johnston director december 8 2000 gerald johnston david jones director december 8 2000 david jones jim kever director december 8 2000 jim kever shelby massey director december 8 2000 shelby massey rodney pless vice president controller december 8 2000 chief accounting officer rodney pless joe f starr director december 8 2000 joe f starr leland e tollett director december 8 2000 leland e tollett barbara tyson vice president director december 8 2000 barbara tyson senior chairman december 8 2000 board directors tyson john h tyson chairman december 8 2000 board directors john h tyson president chief executive officer fred vorsanger director december 8 2000 fred vorsanger donald e wray director december 8 2000 donald e wray report independent auditors audited consolidated financial statements tyson foods inc september 30 2000 october 2 1999 three years period ended september 30 2000 issued report thereon dated november 13 2000 audits also included financial statement schedule listed item 14a annual report form 10k schedule responsibility companys management responsibility express opinion based audits opinion financial statement schedule referred considered relation basic financial statements taken whole presents fairly material respects information set forth therein little rock arkansas sernst young llp november 13 2000 ernst young llp financial statement schedule tyson foods inc schedule ii valuation qualifying accounts three years ended september 30 2000 dollars millions balance charged balance beginning costs additions end description period expenses accounts deductions period allowance doubtful accounts 2000 22 251 0 301 17 1999 85 162 0 793 22 1998 4 2 0 79 4 85 1 includes 24 million reserve related january 31 2000 bankruptcy filing ameriserve food distribution inc 2 includes 12 million reserve international operations 3 write receivables reserve related 1998 allowance 4 includes 48 million reserve international currency devaluationitem 14 exhibits financial statements schedules reports form 8k exhibit index signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized tyson foods inc pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities date indicated report independent auditors audited consolidated financial statements tyson foods inc september 29 2001 september 30 2000 three years period ended september 29 2001 issued report thereon dated november 12 2001 audits also included financial statement schedule listed item 14a annual report form 10k schedule responsibility companys management responsibility express opinion based audits opinion financial statement schedule referred considered relation basic financial statements taken whole presents fairly material respects information set forth therein financial statement schedule tyson foods inc schedule ii valuation qualifying accounts three years ended september 29 2001 dollars millions balance charged balance beginning costs additions end description period expenses accounts deductions period 1 includes 14 million reserve due ibp acquisition 2 includes 24 million reserve related january 31 2000 bankruptcy filing ameriserve food distribution inc 3 includes 12 million reserve international operations 4 write receivables reserve related 1998 allowanceitem 14 controls procedures evaluation disclosure controls procedures within 90 days prior date report company carried evaluation supervision participation companys management including companys chairman chief executive officer executive vice president chief financial officer effectiveness design operation companys disclosure controls procedures defined sec rules controls procedures company designed ensure information required disclosed company reports files exchange act recorded processed summarized reported within required time periods based upon evaluation companys chairman chief executive officer executive vice president chief financial officer concluded companys disclosure controls procedures effective b changes internal controls significant changes companys internal controls factors could significantly affect controls subsequent date evaluation item 15item 14 principle accounting fees services see information included captions audit fees auditrelated fees tax fees preapproval policies proxy statement information incorporated herein reference part iv item 15item 14 principal accounting fees services see information included captions audit fees auditrelated fees tax fees proxy statement information incorporated herein reference ernst young llp ey companys independent public accountant recently informed securities exchange commission sec public company accounting oversight board pcaob company companys audit committee certain nonaudit work performed ey china subsidiary company number companies ey provides audit services raised questions regarding eys independence 2002 june 2004 performance certain tax calculation return preparation services clients china including company subsidiary ey held employment tax related funds de minimis amount made payment funds applicable tax authority respect expatriot foreign employees clients ey also informed company audit committee performance services foreign subsidiary assisted liquidation subsidiary held paid certain de minimis fees appropriate authorities barbados provided storage corporate records custody assets audit client permitted auditor independence rules regulation sx sec companys audit committee ey discussed impact providing services may eys independence respect company audit committee concluded impairment eys independence making determination audit committee considered de minimis amount funds involved services administrative nature associated fees period services provided fiscal year 2001 2004 less 27000 services discontinued part iv item 15item 14 principal accountant fees services see information included captions “audit fees” auditrelated fees” “tax fees” “all fees” proxy statement information incorporated herein reference tyson foods inc part iv item 15item 14 principal accountant fees services see information included captions “audit fees” auditrelated fees” “tax fees” “all fees” proxy statement information incorporated herein reference tyson foods inc part iv item 15item 14 principal accountant fees services see information included captions “audit fees” “auditrelated fees” “tax fees” “all fees” proxy statement information incorporated herein reference part iv item 15item 14 principal accounting fees services see information included captions “audit fees” “auditrelated fees” “tax fees” “all fees” proxy statement information incorporated herein reference part iv item 15item 14 principal accounting fees services see information included captions “audit fees” “auditrelated fees” “tax fees” “all fees” proxy statement information incorporated herein reference part iv item 15item 14 principal accounting fees services see information included captions “audit fees” “auditrelated fees” “tax fees” “all fees” proxy statement information incorporated herein reference part iv item 15item 14 principal accounting fees services see information included captions “audit fees” “auditrelated fees” “tax fees” “all fees” “audit committee preapproval policy” proxy statement information incorporated herein reference part iv item 15item 14 principal accounting fees services see information included captions “audit fees” “auditrelated fees” “tax fees” “all fees” “audit committee preapproval policy” proxy statement information incorporated herein reference part iv item 15item 14 principal accounting fees services see information included captions “audit fees” “auditrelated fees” “tax fees” “all fees” “audit committee preapproval policy” proxy statement information incorporated herein reference part iv item 15item 14 principal accounting fees services see information included captions “audit fees” “auditrelated fees” “tax fees” “all fees” “audit committee preapproval policy” proxy statement information incorporated herein reference part iv item 15item 14 principal accounting fees services see information included captions “audit fees” “auditrelated fees” “tax fees” “all fees” “audit committee preapproval policy” proxy statement information incorporated herein reference part iv item 15item 14 principal accounting fees services see information included captions “audit fees” “auditrelated fees” “tax fees” “all fees” “audit committee preapproval policy” proxy statement information incorporated herein reference part iv item 15item 14 principal accounting fees services see information included captions “audit fees” “auditrelated fees” “tax fees” “all fees” “audit committee preapproval policy” proxy statement information incorporated herein reference part iv item 15item 14 principal accounting fees services see information included captions “audit fees” “auditrelated fees” “tax fees” “all fees” “audit committee preapproval policy” proxy statement information incorporated herein reference part iv item 15item 14 principal accounting fees services see information included captions “audit fees” “auditrelated fees” “tax fees” “all fees” “audit committee preapproval policy” proxy statement information incorporated herein reference part iv item 15item 14 principal accounting fees services see information included captions “audit fees” “auditrelated fees” “tax fees” “all fees” “audit committee preapproval policy” proxy statement information incorporated herein reference part iv item 15 item 7 management discussion analysis financial condition results operations see information reflected caption management discussion analysis pages 2226 annual report information incorporated herein reference item 8item 7 management discussion analysis financial condition results operations see information reflected caption managements discussion analysis pages 2325 27 31 annual report information incorporated herein reference item 8item 7 management discussion analysis financial condition results operations see information reflected caption managements discussion analysis pages 29 30 33 35 annual report information incorporated herein reference item 8item 7 management discussion analysis financial condition results operations see information reflected caption managements discussion analysis pages 28 31 annual report information incorporated herein reference item 7aitem 7 management discussion analysis financial condition results operations see information reflected caption managements discussion analysis pages 16 23 annual report information incorporated herein reference item 7aitem 7 management discussion analysis financial condition results operations see information reflected caption managements discussion analysis pages 26 37 annual report information incorporated herein reference item 7aitem 7 management discussion analysis financial condition results operations see information reflected caption managements discussion analysis pages 20 28 annual report information incorporated herein reference item 7aitem 7 management discussion analysis financial condition results operations see information reflected caption managements discussion analysis pages 22 30 annual report information incorporated herein reference item 7aitem 7 management discussion analysis financial condition results operations results operations earnings fiscal 2002 383 million 108 per diluted share compared 88 million 040 per diluted share fiscal 2001 fiscal 2002 earnings positively affected addition ibp incs ibp beef pork prepared foods operations improved performance chicken segment continued growth valueadded businesses reduced operating costs additionally company recognized gain sale specialty brands subsidiary received partial settlement related ongoing antitrust vitamin litigation earnings adversely affected charges related discontinuation thomas e wilson brand restructuring companys live swine operation increase interest expense decreases international markets influenced import restrictions political pressures august 3 2001 company acquired 501 ownership ibp acquired remaining 499 september 28 2001 accordingly fiscal 2002 earnings include 52 weeks ibps results operations fiscal 2001 fourth quarter 12 months results include 501 ibps results nine weeks ended september 29 2001 information considered comparing previous years results operations companys accounting cycle resulted 52week year fiscal years 2002 2001 2000 accordance provisions issued financial accounting standards board 142 goodwill intangible assets goodwill indefinite lived assets longer amortized effect current year results increase approximately 20 cents per diluted share accordance guidance provided emerging issues task force eitf issue 0014 accounting certain sales incentives eitf issue 0025 vendor income statement characterization consideration paid reseller vendors products beginning first quarter fiscal 2002 company classifies costs associated sales incentives provided retailers payments slotting fees cooperative advertising vendors reduction sales costs previously included selling general administrative expense reclassifications resulted reduction sales selling general administrative expense approximately 188 million 142 million fiscal years 2001 2000 respectively impact reported income taxes minority interest net income earnings per share amounts 2002 vs 2001 certain reclassifications made prior periods conform current presentations sales increased 1212 989 increase volume 112 increase price increase sales volume price primarily due inclusion ibps sales fiscal 2002 despite lower commodity prices sales prices increased due product mix changes company continues grow valueadded businesses cost sales increased 1231 primarily due inclusion ibps cost sales fiscal 2002 percent sales cost sales 922 2002 compared 915 2001 operating expenses increased 584 primarily due inclusion ibps operations fiscal 2002 also included operating expenses 53 million charges related discontinuation thomas e wilson brand restructuring companys live swine operation percent sales operating expenses 40 2002 compared 56 2001 effort integrate restructure reorganize company improved efficiencies lowered plant operating costs also reduced costcontainment efforts improved sales expense management interest expense increased 1118 compared 2001 percent sales interest expense 13 compared 14 2001 companys average indebtedness increased 1097 period last year due debt incurred purchase ibp companys shortterm interest rates decreased 33 fiscal 2002 compared 51 fiscal 2001 net average effective interest rate total debt 70 2002 compared 69 2001 income increased current year due gain 22 million sale specialty brands inc subsidiary effective tax rate 355 2002 compared 354 2001 company adopted sfas 142 goodwill intangible assets fas 142 beginning 2002 fas 142 company longer amortized goodwill resulted decrease effective tax rate 2002 offset primarily reduction foreign sales benefit segment information tyson foods operates five business segments beef chicken pork prepared foods company measures segment profit operating income periods ending september 28 2002 september 29 2001 following information includes 100 ibp results 52 weeks nine weeks respectively information segments follows beef segment primarily involved slaughter live fed cattle fabrication dressed beef carcasses primal subprimal meat cuts caseready products also involves deriving value allied products hides variety meats sale processors others beef segment markets products food retailers distributors wholesalers restaurants hotel chains food processors domestic international markets allied products also marketed manufacturers pharmaceuticals technical products chicken segment includes fresh frozen valueadded chicken products sold domestic food service domestic retail markets athome consumption wholesale club markets targeted small foodservice operations small businesses individuals well specialty commodity distributors deliver restaurants schools international markets throughout world chicken segment also includes sales allied products chicken breeding stock subsidiary pork segment represents companys live swine group hog slaughter fabrication operations caseready products related allied product processing activities pork segment markets products food retailers distributors wholesalers restaurants hotel chains food processors domestic international markets also sells allied products pharmaceutical technical products manufacturers well live swine pork processors producers prepared foods segment includes companys operations manufacture market frozen refrigerated food products include pepperoni beef pork toppings pizza crusts flour corn tortilla products appetizers hors doeuvres desserts prepared meals ethnic foods soups sauces side dishes specialty pasta meat dishes well branded processed meats segment includes logistics group corporate groups identified specific protein groups beef segment sales 105 billion including beef caseready sales 689 million international beef sales 14 billion beef segment operating income totaled 220 million beef segment resulted acquisition ibp fourth quarter fiscal 2001 chicken segment sales increased 165 million 23 period last year 11 increase average sale prices 12 increase volume foodservice chicken sales increased 49 retail chicken sales increased 20 international chicken sales decreased 63 fiscal 2002 companys mexican subsidiary sales increased 361 period last year due acquisition production facility mexico third quarter 2001 increase offset decreases international sales demand markets continue impacted import restrictions political pressures primarily russia china operating income chicken increased 178 million period last year primarily due decreases live production costs along improvements price growth value added product mix additionally prior year costs negatively impacted weather related effects higher grain energy costs pork segment sales including ibps pork processing revenues 25 billion compared 619 million period last year including current year pork caseready sales 212 million international pork sales 248 million pork segment operating income decreased 2 million period last year sales operating income positively affected inclusion ibp pork processing results fiscal 2002 however impacted negative results live swine operation operating income also affected restructuring charge related companys live swine operation approximately 26 million fourth quarter fiscal 2002 prepared foods segment sales increased 23 billion period last year prepared foods segment operating income increased 143 million period last year increase sales operating income primarily due inclusion ibp results operating income also influenced lower stable raw material prices improvement product mix increases partially offset thomas e wilson writedown adjustment 27 million related discontinuation brand segment operating income increased 64 million primarily due partial settlement approximately 30 million received third quarter fiscal 2002 related ongoing vitamin antitrust litigation combined prior year ibp merger related expenses 19 million acquisitions august 2001 company acquired 501 ibp paying approximately 17 billion cash september 2001 company issued approximately 129 million shares class stock fair value approximately 12 billion acquire remaining ibp shares assumed approximately 17 billion ibp debt total acquisition cost approximately 46 billion accounted purchase accordance statement financial accounting standards sfas 141 business combinations accordingly tangible identifiable intangible assets liabilities adjusted fair values remainder purchase price recorded goodwill allocation purchase price completed may 2002 company acquired assets millard processing services bacon processing operation approximately 73 million cash acquisition accounted purchase goodwill approximately 14 million recorded disposition september 2002 company completed sale specialty brands inc subsidiary acquired ibp acquisition results operations included companys prepared foods segment company received cash proceeds approximately 131 million used reduce indebtedness recognized pretax gain 22 million specialty brand incs sales operating income year ended september 28 2002 244 million 2 million respectively 2001 vs 2000 certain reclassifications made prior periods conform current presentations sales increased 453 298 increase volume 120 increase price increase sales primarily due inclusion nine weeks ibps sales 2001 comparable sales increased 34 volume increase 11 breast meat commodity market prices pressured oversupply chicken much fiscal year causing adverse effect average sales prices margins many companys core valueadded products fourth quarter 2001 company experienced improved pricing valueadded products seasonal price increases cost sales increased 497 primarily due added cost sales nine weeks ibps operations percent sales cost sales 915 2001 compared 888 2000 excluding ibp comparable cost sales percent sales 900 increase comparable cost sales percent sales primarily due weatherrelated effects combined higher grain energy costs lower market prices product mix changes operating expenses increased 260 primarily due inclusion nine weeks ibps operations 2001 percent sales operating expenses 56 2001 compared 64 2000 excluding ibp comparable operating expenses percent sales 81 2001 increase primarily due increase sales promotional expenses litigation costs related acquisition ibp ongoing employee practice matters included 2000 operating expenses 24 million bad debt reserve resulting bankruptcy filing ameriserve food distribution inc ameriserve interest expense increased 241 compared 2000 percent sales interest expense 14 compared 16 2000 companys average indebtedness increased 243 2000 amount result ibp acquisition companys shortterm interest rates slightly lower period last year net average effective interest rate total debt 69 2001 2000 effective tax rate 354 2001 compared 356 2000 segment information following information includes nine weeks results period ending september 29 2001 related ibp acquisition stated prior adjustments minority interest beef segment sales include nine weeks ibp results 2 billion including caseready sales 116 million beef segment operating income totaled 32 million beef sales operating income derived solely operations acquired ibp comparative data since company beef group prior ibp acquisition chicken segment sales increased 290 million 43 compared 2000 32 increase average sales prices 10 increase volume foodservice channel sales increased 10 retail channel sales increased 12 international channel sales including tyson de mexico increased 269 operating income chicken decreased 66 million 209 2000 primarily due increased production costs sales promotional expenses offset increases bulk leg quarter prices certain products pork segment sales 619 million compared 157 million last year current year caseready sales 43 million pork segment operating profit increased 4 million period last year increase pork segment sales operating income primarily due inclusion nine weeks results ibp prepared foods segment sales totaled 818 million compared 292 million last year prepared foods segment operating income increased 8 million period last year increase prepared foods segment sales segment operating income primarily due inclusion nine weeks results related ibp liquidity capital resources cash provided operations continues companys primary source funds finance operating requirements capital expenditures 2002 net cash 1174 million provided operating activities increase 663 million 2001 primary sources change increases net income 295 million depreciation amortization 132 million working capital 165 million companys foreseeable cash needs operations capital expenditures expected continue met cash flows provided operating activities additionally september 28 2002 company borrowing capacity 15 billion consisting 806 million available 1 billion unsecured revolving credit agreements 675 million 750 million accounts receivable securitization september 28 2002 company construction projects progress require approximately 137 million complete total debt september 28 2002 3987 million decrease approximately 789 million september 29 2001 company unsecured revolving credit agreements totaling 1 billion support companys commercial paper program 1 billion facilities consist 200 million expires june 2003 300 million expires june 2005 500 million expires september 2006 september 28 2002 borrowings outstanding facilities additional outstanding debt september 28 2002 consisted 36 billion debt securities 75 million issued accounts receivable securitization debt 24 million commercial paper indebtedness 281 million revolving credit agreement senior notes accounts receivable securitization debt contain various covenants restrictive contain maximum allowed leverage ratio minimum required interest coverage ratio company compliance covenants fiscal year end october 2001 company refinanced 23 billion outstanding bridge financing facility issuance 225 billion notes offered three tranches consisting 500 million 6625 notes due october 2004 750 million 725 notes due october 2006 1 billion 825 notes due october 2011 october 2001 company entered receivables purchase agreement three copurchasers sell 750 million trade receivables purchase agreement accounted borrowing interest rate based commercial paper issued copurchasers agreement substantially companys accounts receivable sold special purpose entity tyson receivables corporation trc wholly owned consolidated subsidiary company trc separate creditors entitled satisfied assets trc prior value becoming available trcs equity holders recently issued accounting standards june 2001 financial accounting standards board fasb issued statement financial accounting standards 142 goodwill intangible assets sfas 142 sfas 142 goodwill indefinite lived intangible assets longer amortized reviewed annually frequently impairment indicators arise impairment separable intangible assets finite lives continue amortized useful lives company elected early adopt provisions sfas 142 discontinued amortization goodwill balances intangible assets indefinite useful lives effective september 30 2001 company assessed goodwill impairment upon adoption completed required annual test impairment fourth quarter fiscal 2002 neither impairment test indicated impairment losses provisions sfas 142 effect fiscal years 2001 2000 reduction amortization expense increase net income 30 million 014 per diluted share 29 million 013 per diluted share respectively would recorded accordance guidance provided emerging issues task force eitf issue 0014 accounting certain sales incentives eitf issue 0025 vendor income statement characterization consideration paid reseller vendors products beginning first quarter fiscal 2002 company classifies costs associated sales incentives provided retailers payments slotting fees cooperative advertising vendors reduction sales costs previously included selling general administrative expense reclassifications resulted reduction sales selling general administrative expense approximately 188 million 142 million fiscal years 2001 2000 respectively impact reported income taxes minority interest net income earnings per share amounts august 2001 fasb issued sfas 143 accounting asset retirement obligations statement requires company recognize fair value liability associated cost company would obligated incur order retire asset point future liability would recognized period incurred reasonably estimated standard effective fiscal years beginning june 15 2002 company expects adopt standard beginning fiscal 2003 company believes adoption sfas 143 material impact financial position results operations october 2001 fasb issued sfas 144 accounting impairment disposal longlived assets sfas 144 develops accounting model based upon framework established sfas 121 longlived assets disposed sales accounting model applies longlived assets including discontinued operations replaces provisions abp opinion 30 reporting results operationsreporting effects disposal segment business extraordinary unusual infrequently occurring events transactions disposal segments business sfas 144 requires longlived assets held disposal measured lower carrying amount fair values less costs sell whether reported continuing operations discontinued operations statement effective fiscal years beginning december 15 2001 company intends adopt standard beginning fiscal 2003 company believes adoption sfas 144 material impact financial position results operations july 2002 fasb issued sfas 146 accounting costs associated exit disposal activities sfas 146 addresses financial accounting reporting costs associated exit disposal activities replaces eitf issue 943 liability recognition certain employee termination benefits costs exit activity including certain costs incurred restructuring sfas 146 requires liability cost associated exit disposal activity recognized liability incurred sfas 146 also establishes fair value objective initial measurement liability statement effective exit disposal activities initiated december 31 2002 company believes adoption sfas 146 material impact financial position results operations critical accounting estimates preparation consolidated financial statements requires management make estimates assumptions estimates assumptions affect reported amounts assets liabilities disclosure contingent assets liabilities date consolidated financial statements reported amounts revenues expenses reporting period actual results could differ estimates following summary certain accounting estimates considered critical company financial instruments company uses derivative financial instruments manage exposure various market risks including certain livestock interest rates grain feed costs company may hold positions economic hedges hedge accounting applied see item 7aitem 7 management discussion analysis financial condition results operations results operations earnings fiscal 2003 337 million 096 per diluted share compared 383 million 108 per diluted share fiscal 2002 fiscal 2003 pretax earnings include 167 million received connection vitamin antitrust litigation 76 million costs related closing poultry operations first third fourth quarters fiscal 2003 companys accounting cycle resulted 52week year fiscal years 2003 2002 2001 2003 vs 2002 certain reclassifications made prior periods conform current presentations sales increased 12 billion 51 slight increase volume 50 increase price cost sales increased 13 billion 58 percent sales cost sales 929 2003 compared 922 2002 increase primarily due higher live cattle prices beef segment increases grain costs chicken segment increased accruals related ongoing litigation partially offset 167 million received connection vitamin antitrust litigation selling general administrative expenses decreased 46 million 54 percent sales selling general administrative expenses decreased 38 34 decrease primarily due expense reductions approximately 42 million related sale specialty brands fourth quarter fiscal 2002 approximately 16 million associated ongoing integration tyson ibp inc ibp corporate functions additional decreases due favorable investment returns approximately 18 million company owned life insurance actuarial gains 13 million related changes certain retiree medical benefit plans decreased litigation costs approximately 19 million resulting primarily reversal certain legal accruals longer required due cases closed decreases selling general administrative expenses partially offset increased professional fees approximately 26 million primarily related companys ongoing integration strategic initiatives increased sales promotions marketing costs approximately 45 million primarily due introduction rollout several new products charges include 76 million plant closing costs incurred fiscal 2003 53 million charges incurred fiscal 2002 related discontinuation thomas e wilson brand restructuring companys live swine operations interest expense decreased 9 million 28 compared 2002 primarily resulting 82 decrease companys average indebtedness percent sales interest expense 12 compared 13 2002 overall weighted average borrowing rate increased 74 70 primarily resulting premiums paid bonds repurchased first fourth quarters fiscal 2003 excluding premiums paid interest expense decreased 21 million expense increased 29 million period last year primarily resulting 10 million writedown related impairment equity interest live swine operation recorded fiscal 2003 prior year gain 22 million sale specialty brands inc subsidiary effective tax rate 355 2003 2002 several factors impact effective tax rate including average state income tax rates tax rates international operations extraterritorial income exclusion eti foreign sales taxes international earnings comparable 2003 2002 average state taxes added 22 3 effective tax rate 2003 compared 2002 eti reduced effective rate 19 2003 compared 14 reduction 2002 various legislative bills introduced 2003 would repeal eti exclusion period time replace eti partial tax exclusion certain domestic production activities eti exclusion repealed replacement legislation enacted loss eti tax benefit may adversely impact companys effective tax rate segment information tyson operates five business segments chicken beef pork prepared foods company measures segment profit operating income chicken segment primarily involved processing live chickens fresh frozen valueadded chicken products sold domestic foodservice domestic food retailers wholesale club markets service small foodservice operations small businesses individuals well specialty commodity distributors deliver restaurants schools international markets throughout world chicken segment also includes sales allied products chicken breeding stock subsidiary beef segment primarily involved processing live fed cattle fabrication dressed beef carcasses primal subprimal meat cuts caseready products also involves deriving value allied products hides variety meats sale processors others beef segment markets products food retailers distributors wholesalers restaurants hotel chains food processors domestic international markets allied products also marketed manufacturers pharmaceuticals technical products pork segment primarily involved processing live market hogs fabrication pork carcasses primal subprimal meat cuts caseready products segment also represents companys live swine group related allied product processing activities pork segment markets products food retailers distributors wholesalers restaurants hotel chains food processors domestic international markets also sells allied products pharmaceutical technical products manufacturers well live swine weaned feeder pigs pork producers prepared foods segment includes companys operations manufacture market frozen refrigerated food products include pepperoni beef pork toppings pizza crusts flour corn tortilla products appetizers hors doeuvres desserts prepared meals ethnic foods soups sauces side dishes specialty pasta meat dishes well branded processed meats prepared foods segment markets products food retailers distributors wholesalers restaurants hotel chains segment includes logistics group corporate activities identified specific protein groups chicken segment sales increased 205 million 28 slight decrease average sales prices 33 increase volume foodservice chicken sales dollars increased 42 retail chicken sales dollars increased 23 international chicken sales dollars decreased 36 chicken segment operating income decreased 270 million period last year primarily due increased grain costs plant closing costs beef segment sales increased 14 billion 138 132 increase average sales prices slight increase volume caseready beef sales 957 million increased 204 domestic fresh meat beef sales increased 118 international beef sales increased 194 beef segment operating income increased 100 million beef segment sales operating income increases caused strong demand second half fiscal 2003 caused part us ban canadian beef however increases partially offset increase live cattle prices pork segment sales decreased 33 million 13 29 increase average sales prices 41 decrease volume caseready pork sales 221 million increased 523 domestic fresh meat pork sales decreased 35 international pork sales increased 28 live swine sales decreased 426 pork segment operating income increased 50 million excluding fourth quarter 2002 live swine restructuring charge 26 million operating income increased 24 million decline sales primarily due reduction live swine sales result prior year live swine restructuring lower average selling prices finished product operating income positively affected prior year restructuring live swine operation partially offset higher live hog prices prepared foods segment sales decreased 410 million 134 59 decrease average sales prices 80 decrease volume excluding prior year specialty brands sales 244 million segment sales declined 166 million volume declined slightly segment operating income decreased 101 million period last year excluding prior year thomas e wilson brand writedown 27 million operating income declined 128 million decline results primarily increases year raw material prices lower average selling prices increased costs related introduction 75 new products year temporary operating inefficiencies certain plants segment operating income increased 171 million primarily due settlements received connection vitamin antitrust litigation current year results include 167 million compared 30 million received fiscal 2002 additionally operating income positively affected actuarial gains 13 million resulting changes certain retiree medical benefit plans 2002 vs 2001 august 3 2001 company acquired 501 ownership ibp acquired remaining 499 september 28 2001 accordingly fiscal 2002 earnings include 52 weeks ibps results operations fiscal 2001 fourth quarter 12 months results include 501 ibps results nine weeks ended september 29 2001 information considered comparing fiscal 2001 results operations certain reclassifications made prior periods conform current presentations accordance provisions issued financial accounting standards board 142 goodwill intangible assets company adopted beginning fiscal 2002 goodwill indefinite lived assets longer amortized effect fiscal year 2001 results would increase approximately 014 cents per diluted share accordance guidance provided emerging issues task force eitf issue 0014 accounting certain sales incentives eitf issue 0025 vendor income statement characterization consideration paid reseller vendors products beginning first quarter fiscal 2002 company classifies costs associated sales incentives provided retailers payments slotting fees cooperative advertising vendors reduction sales costs previously included selling general administrative expense reclassifications resulted reduction sales selling general administrative expense approximately 188 million fiscal year 2001 impact reported income taxes minority interest net income earnings per share amounts sales increased 13 billion 1212 989 increase volume 112 increase price increase sales volume price primarily due inclusion ibps sales fiscal 2002 despite lower commodity prices sales prices increased due product mix changes companys valueadded businesses grew cost sales increased 12 billion 1231 primarily due inclusion ibps cost sales fiscal 2002 percent sales cost sales 922 2002 compared 915 2001 selling general administrative expenses increased 290 million 495 primarily due inclusion ibps operations fiscal 2002 percent sales operating expenses 38 2002 compared 56 2001 effort integrate restructure reorganize company improved efficiencies lowered plant operating costs also reduced costcontainment efforts improved sales expense management charges include 27 million related discontinuation thomas e wilson brand 26 million related restructuring companys live swine operation interest expense increased 1118 compared 2001 percent sales interest expense 13 compared 14 2001 companys average indebtedness increased 1097 fiscal 2001 due debt incurred purchase ibp companys shortterm interest rates decreased 33 fiscal 2002 compared 51 fiscal 2001 overall weighted average borrowing rate total debt 70 fiscal 2002 compared 69 fiscal 2001 income increased current year due gain 22 million sale specialty brands inc subsidiary effective tax rate 355 2002 compared 354 2001 company adopted statement financial accounting standards 142 goodwill intangible assets sfas 142 beginning 2002 sfas 142 company longer amortized goodwill resulted decrease effective tax rate 2002 offset primarily reduction foreign sales benefit segment information periods ending september 28 2002 september 29 2001 following information includes 100 ibp results 52 weeks nine weeks respectively information segments follows chicken segment sales increased 165 million 23 compared 2001 11 increase average sale prices 12 increase volume foodservice chicken sales increased 49 retail chicken sales increased 20 international chicken sales decreased 63 fiscal 2002 companys mexican subsidiary sales increased 361 due acquisition production facility mexico third quarter 2001 increase offset decreases international sales demand markets impacted import restrictions political pressures primarily russia china operating income chicken increased 178 million compared 2001 primarily due decreases live production costs along improvements price growth valueadded product mix additionally fiscal 2001 costs negatively impacted weather related effects higher grain energy costs beef segment sales 105 billion including beef caseready sales 795 million international beef sales 14 billion beef segment operating income totaled 220 million beef segment resulted acquisition ibp fourth quarter fiscal 2001 pork segment sales including ibps pork processing revenues 25 billion compared 619 million 2001 including fiscal 2002 pork caseready sales 145 million international pork sales 248 million pork segment operating income decreased 2 million 2001 sales operating income positively affected inclusion ibp pork processing results fiscal 2002 however impacted negative results live swine operation operating income also affected restructuring charge related companys live swine operation approximately 26 million fourth quarter fiscal 2002 prepared foods segment sales increased 23 billion compared 2001 prepared foods segment operating income increased 143 million increase sales operating income primarily due inclusion ibp results operating income also influenced lower stable raw material prices improvement product mix increases partially offset thomas e wilson writedown 27 million related discontinuation brand segment operating income increased 64 million primarily due partial settlement approximately 30 million received third quarter fiscal 2002 related vitamin antitrust litigation combined prior year ibp merger related expenses 19 million acquisitions august 2001 company acquired 501 ibp paying approximately 17 billion cash september 2001 company issued approximately 129 million shares class stock fair value approximately 12 billion acquire remaining ibp shares assumed approximately 17 billion ibp debt total acquisition cost approximately 46 billion accounted purchase accordance sfas 141 business combinations accordingly tangible identifiable intangible assets liabilities adjusted fair values remainder purchase price recorded goodwill allocation purchase price completed may 2002 company acquired assets millard processing services bacon processing operation approximately 73 million cash acquisition accounted purchase goodwill approximately 14 million recorded disposition september 2002 company completed sale specialty brands inc subsidiary acquired ibp acquisition results operations included companys prepared foods segment company received cash proceeds approximately 131 million used reduce indebtedness recognized pretax gain 22 million specialty brands incs sales operating income year ended september 28 2002 244 million 2 million respectively liquidity capital resources cash provided operations continues companys primary source funds finance operating requirements capital expenditures 2003 net cash 820 million provided operating activities 354 million 2002 decrease fiscal 2002 primarily due net change working capital 423 million decrease net income 46 million partially offset increase deferred taxes 91 million change working capital primarily due increased accounts receivable resulting increased sales increased inventory values well timing cash receipts payments related working capital items companys foreseeable cash needs operations capital expenditures expected continue met cash flows provided operating activities additionally september 27 2003 company borrowing capacity 15 billion consisting 705 million available 1 billion unsecured revolving credit facilities 750 million accounts receivable securitization september 27 2003 company construction projects progress require approximately 175 million complete capital spending fiscal 2004 expected range 450 500 million includes spending plant automation well information systems technology improvements additionally december 5 2003 company announced order improve longterm manufacturing efficiencies closing facilities manchester new hampshire augusta maine early 2004 company anticipates recording pretax charges related closings approximately 23 27 million 004 005 per diluted share first half fiscal 2004 total debt september 27 2003 3604 million decrease approximately 383 million september 28 2002 company unsecured revolving credit facilities totaling 1 billion support companys commercial paper program 1 billion facilities consist 200 million expire june 2004 300 million expire june 2005 500 million expire september 2006 september 27 2003 borrowings outstanding facilities additional outstanding debt september 27 2003 consisted 33 billion debt securities 32 million commercial paper indebtedness 256 million revolving credit facilities senior notes accounts receivable securitization contain various covenants restrictive contain maximum allowed leverage ratio minimum required interest coverage ratio company compliance covenants fiscal year end offbalance sheet arrangements company offbalance sheet arrangements material financial position results operations offbalance sheet arrangements company guarantees debt outside third parties involving letters credit lease grower loans residual value guarantees covering certain operating leases various types equipment see note 9 consolidated financial statements discussions guarantees recently issued accounting standards january 2003 financial accounting standards board fasb issued interpretation 46 consolidation variable interest entities interpretation accounting research bulletin 51 interpretation requires consolidation variable interest entities enterprise absorbs majority entitys expected losses receives majority entitys expected residual returns result ownership contractual financial interests entity currently entities generally consolidated enterprise controlling financial interest ownership majority voting interest entity interpretation originally effective immediately variable interest entities created january 31 2003 effective fourth quarter companys fiscal 2003 created prior february 1 2003 however october 2003 fasb deferred effective date variable interest entities created prior february 1 2003 companys first quarter fiscal 2004 company substantially completed process evaluating interpretation believes adoption material impact financial position results operations april 2003 fasb issued statement financial accounting standards 149 amendment statement 133 derivative instruments hedging activities sfas 149 sfas 149 amends sfas 133 provide clarification financial accounting reporting derivative instruments hedging activities requires contracts similar characteristics accounted comparable basis standard effective contracts entered modified june 30 2003 hedging relationships designated june 30 2003 companys adoption sfas 149 material impact financial position results operations may 2003 fasb issued sfas 150 accounting certain instruments characteristics liabilities equity sfas 150 sfas 150 establishes issuer classifies measures certain freestanding financial instruments characteristics liabilities equity requires instruments classified liabilities standard effective financial instruments entered modified may 31 2003 otherwise effective fourth quarter companys fiscal 2003 companys adoption sfas 150 material impact financial position results operations critical accounting estimates preparation consolidated financial statements requires management make estimates assumptions estimates assumptions affect reported amounts assets liabilities disclosure contingent assets liabilities date consolidated financial statements reported amounts revenues expenses reporting period actual results could differ estimates following summary certain accounting estimates considered critical company financial instruments company uses derivative financial instruments manage exposure various market risks including certain livestock natural gas interest rates grain feed costs company may hold positions economic hedges hedge accounting applied see item 7aitem 7 managements discussion analysis financial condition results operations results operations overview tyson foods worlds largest protein company second largest publicly traded food company fortune 500 one recognized brand names food industry tyson produces distributes markets chicken beef pork prepared foods related allied products companys primary operations conducted four segments chicken beef pork prepared foods key factors influence companys business customer demand companys products ability maintain grow relationships customers introduce new innovative products marketplace accessibility international markets market prices companys chicken beef pork products cost live cattle hogs raw materials grain operating efficiencies companys facilities august 2004 company introduced new marketing communication campaign powered tyson largest fully integrated marketing campaign tyson history supported investment 75 million companys annual marketing budget support companys goals building valueadded product portfolio tyson developed 400 new products year additionally company broke ground corporate center construction facilities house expanded product development kitchens new pilot production plant provide space consumer insights group make provisions team member development activities fiscal 2004 company achieved record sales earnings driven largely strong performance companys chicken pork segments company continued generate strong cash flow fiscal 2004 cash flow operations increased 112 million prior year allowed company pay debt 242 million fiscal 2004 exceed debttocapital ratio goal 45 reaching 44 year end earnings fiscal 2004 403 million 113 per diluted share compared 337 million 096 per diluted share fiscal 2003 increase earnings primarily due higher average selling prices improved operating efficiencies chicken segment increased demand chicken pork segments improvements mix valueadded products earnings negatively impacted higher grain costs partially offset companys ongoing commodity risk management activities higher raw material costs continued limited access export markets also fiscal 2004 pretax earnings included 40 million costs 007 per diluted share related plant closings 61 million costs 011 per diluted share bserelated charges 21 million costs 004 per diluted share related fixed asset writedowns 25 million costs 004 per diluted share related impairment various intangible assets fiscal 2003 pretax earnings included 167 million received connection vitamin antitrust litigation 76 million costs related plant closings 10 million charges related impairment equity interest live swine operation companys accounting cycle resulted 53week year fiscal year 2004 52week year fiscal years 2003 2002 outlook companys goals fiscal 2005 reduce debttocapital ratio 40 improve mix valueadded products 40 sales improve return invested capital 14 additionally company anticipates expenses related interest foreign exchange charges approximately 250 million effective tax rate range 36 37 although uncertainty global market conditions continues make difficult predict future product demand company believes chicken pork prepared foods segments strong fiscal 2005 however beef segment operations continue difficult company anticipates stronger export demand chicken fiscal 2005 due recent openings china japan markets liberalization taiwanese market continuing emergence middleeastern african markets canadian border continues closed live cattle however us government recently initiated review process reopen canadian border also framework agreement resumption trade japan appears trade resume several months currently live weights cattle slaughtered considerably higher last year indicating supplies cattle near term abundant however international market access restored live cattle permitted canada margins beef segment negatively impacted 2004 vs 2003 certain reclassifications made prior periods conform current presentations sales increased 19 billion 77 94 increase average price 15 decrease volume increase sales primarily due higher average selling prices volumes declined due reduction international export activity related chicken beef segments resulting import restrictions imposed various countries additionally companys beef segment domestic volumes decreased due tightened supply live cattle effects higher beef pricing significant competing protein supplies marketplace cost sales increased 17 billion 77 percent sales cost sales decreased 929 928 increase cost sales due primarily increases grain costs chicken segment partially offset gains resulting companys ongoing commodity risk management activities related grain purchases beef segment higher live cattle prices bserelated charges also included 2004 cost sales 18 million reduce self insurance reserves actuarially determined range reserves compared actuarial estimates semiannually prior year 6 million reduction self insurance reserves additionally fiscal 2003 cost sales included 167 million received connection vitamin antitrust litigation selling general administrative expenses increased 49 million 59 percent sales selling general administrative expenses decreased 34 33 increase expenses primarily due increase personnel incentivebased compensation approximately 40 million increase approximately 20 million related information system technology improvements increase approximately 21 million employee benefit costs primarily due prior year actuarial gains 13 million related certain retiree medical benefit plans current year increases healthcarerelated costs increases partially offset reduction auditing legal professional fees approximately 27 million included 12 million received fiscal 2004 related legal settlements companys insurance providers charges include plant closing costs 40 million 76 million recorded fiscal years 2004 2003 respectively fiscal 2004 costs related primarily closings companys jackson mississippi manchester new hampshire augusta maine facilities part ongoing plant rationalization efforts company announced february 2004 decision consolidate manufacturing operations jackson mississippi companys carthage mississippi facility company acquired carthage facility purchased choctaw maid farms fourth quarter fiscal 2003 since time performed comprehensive analysis operations area determined consolidation would effectively maintain companys competitiveness mississippi operations december 2003 company announced decision close manchester new hampshire augusta maine prepared foods operations improve longterm manufacturing efficiencies thorough analysis company determined amount capital required bring manchester augusta facilities competitive level maintain appropriate food safety standards would better spent accommodate production newer modern facilities majority manchester augusta production consolidated company facilities prior year costs related closings companys berlin maryland stilwell oklahoma jacksonville florida facilities also included charges fiscal 2004 25 million charges related impairment various intangible assets 21 million related fixed asset writedowns impairment charges apply primarily trademarks acquired acquisition tyson fresh meats inc tfm formerly known ibp inc 2001 impairment charges resulted primarily lower product sales companys regional trademarks products increasingly sold tyson trademark fair value companys trademarks determined using royalty rate method based expected revenues trademark trademarks well intangible assets reviewed least annually impairment fixed asset writedown result company implementing control whereby plant facilities conduct fixed asset inventories recurring basis interest expense decreased 21 million 71 primarily resulting 82 decrease companys average indebtedness company incurred 13 million expenses fiscal year 2004 2003 related ongoing efforts buy back bonds attractive prices available market early redemption tyson de mexico preferred shares overall weighted average borrowing rate increased 77 74 primarily due fiscal 2004 reduction shortterm debt carried lower interest rates expense decreased 3 million period last year primarily resulting 10 million writedown related impairment equity interest live swine operation recorded fiscal 2003 decrease partially offset increased foreign exchange losses approximately 9 million companys canadian operation fiscal 2004 effective tax rate increased 355 fiscal 2003 366 fiscal 2004 estimated extraterritorial income exclusion eti amount reduced 2004 effective tax rate 05 compared 19 fiscal 2003 decrease 2004 estimated eti benefit resulted reduction estimated 2004 profit export sales primarily due effects bse avian influenza along adjustment estimated 2003 benefit 2004 estimated rate also increased due expiration certain general business credits october 22 2004 president signed law american jobs creation act 2004 provides among things repeal eti benefit phased 2004 2006 act also provided domestic production deduction available company beginning 2006 fiscal year company currently process evaluating act segment information tyson operates five business segments chicken beef pork prepared foods company measures segment profit operating income chicken segment involved primarily processing live chickens fresh frozen valueadded chicken products chicken segment markets products domestically food retailers foodservice distributors restaurant operators noncommercial foodservice establishments schools hotel chains healthcare facilities military food processors well international markets throughout world chicken segment also includes sales allied products chicken breeding stock subsidiary beef segment involved primarily processing live fed cattle fabrication dressed beef carcasses primal subprimal meat cuts caseready products also involves deriving value allied products hides variety meats sale processors others beef segment markets products domestically food retailers foodservice distributors restaurant operators noncommercial foodservice establishments schools hotel chains healthcare facilities military food processors well international markets throughout world allied products also marketed manufacturers pharmaceuticals technical products pork segment involved primarily processing live market hogs fabrication pork carcasses primal subprimal meat cuts caseready products segment also represents companys live swine group related allied product processing activities pork segment markets products domestically food retailers foodservice distributors restaurant operators noncommercial foodservice establishments schools hotel chains healthcare facilities military food processors well international markets throughout world also sells allied products pharmaceutical technical products manufacturers well live swine pork producers prepared foods segment includes companys operations manufacture market frozen refrigerated food products include pepperoni beef pork toppings pizza crusts flour corn tortilla products appetizers prepared meals ethnic foods soups sauces side dishes meat dishes well branded processed meats prepared foods segment markets products domestically food retailers foodservice distributors restaurant operators noncommercial foodservice establishments schools hotel chains healthcare facilities military food processors well international markets throughout world segment includes logistics group corporate activities identified specific protein groups chicken segment sales increased 131 fiscal 2004 compared period last year foodservice chicken sales increased 113 retail chicken sales increased 162 international chicken sales increased 145 excluding plant closing related accruals 13 million 76 million recorded fiscal 2004 2003 respectively fixed asset writedowns 13 million recorded fiscal 2004 operating income increased 340 million sales operating income increases primarily due increased average selling prices sales volumes well improvements product mix operating efficiencies operating income negatively impacted approximately 239 million increased grain costs partially offset benefit approximately 127 million companys ongoing commodity risk management activities related grain purchases increase companys domestic chicken segment sales volumes fiscal 2004 partially offset decreased international sales volumes due import restrictions various countries caused avian influenza outbreaks united states beef segment sales increased 01 fiscal 2004 compared period last year domestic fresh meat beef sales increased 60 international beef sales decreased 316 caseready beef sales increased 180 operating income fiscal 2004 includes bserelated charges 61 million 5 million charges related impairment various intangible assets fixed asset writedowns additionally operating income negatively impacted increases live cattle prices production declines decreased capacity utilization decreases partially offset higher average selling prices increased volumes margins companys lakeside operation canada pork segment sales increased 289 fiscal 2004 compared period last year domestic fresh meat pork sales increased 261 international pork sales increased 602 caseready pork sales increased 294 live swine sales company owned hogs decreased 148 increase pork segments operating income primarily due higher average selling prices increased demand pork benefited stronger domestic international markets offsetting increases live hog costs operating income negatively impacted approximately 1 million related fixed asset writedowns recorded fourth quarter fiscal 2004 prepared foods segment sales increased 73 fiscal 2004 compared period last year foodservice prepared foods sales increased 132 international prepared foods sales increased 160 retail prepared foods sales increased 05 fiscal 2004 operating income increased 25 million excluding plant closing costs approximately 27 million impairment various intangible assets 22 million fixed asset writedowns 5 million recorded fiscal 2004 increase prepared foods segments operating income primarily due higher average selling prices increased volumes partially offset increased raw material prices segment operating income decreased 145 million primarily due settlements 167 million received 2003 connection vitamin antitrust litigation additionally 2003 operating income affected positively actuarial gains 13 million resulting certain retiree medical benefit plans 2003 vs 2002 certain reclassifications made prior periods conform current presentations sales increased 12 billion 51 slight increase volume 50 increase price cost sales increased 13 billion 58 percent sales cost sales 929 2003 compared 922 2002 increase primarily due higher live cattle prices beef segment increases grain costs chicken segment increased accruals related ongoing litigation partially offset 167 million received connection vitamin antitrust litigation selling general administrative expenses decreased 46 million 54 percent sales selling general administrative expenses decreased 38 34 decrease primarily due expense reductions approximately 42 million related sale specialty brands inc fourth quarter fiscal 2002 approximately 16 million associated integration tyson fresh meats corporate functions additional decreases due favorable investment returns approximately 18 million company owned life insurance actuarial gains 13 million related certain retiree medical benefit plans decreased litigation costs approximately 19 million resulting primarily reversal certain legal accruals longer required due cases closed decreases selling general administrative expenses partially offset increased professional fees approximately 26 million primarily related companys ongoing integration strategic initiatives increased sales promotions marketing costs approximately 45 million primarily due introduction rollout several new products charges include 76 million plant closing costs incurred fiscal 2003 53 million charges incurred fiscal 2002 related discontinuation thomas e wilson brand restructuring companys live swine operations interest expense decreased 9 million 28 compared 2002 primarily resulting 82 decrease companys average indebtedness percent sales interest expense 12 compared 13 2002 overall weighted average borrowing rate increased 74 70 primarily resulting premiums paid bonds repurchased first fourth quarters fiscal 2003 excluding premiums paid interest expense decreased 21 million expense increased 29 million primarily resulting 10 million writedown related impairment equity interest live swine operation recorded fiscal 2003 gain 22 million sale specialty brands inc subsidiary recorded fiscal 2002 effective tax rate 355 2003 2002 several factors impacted effective tax rate including average state income tax rates tax rates international operations extraterritorial income exclusion eti foreign sales taxes international earnings comparable 2003 2002 average state taxes added 22 30 effective tax rate 2003 compared 2002 eti reduced effective rate 19 2003 compared 14 reduction 2002 chicken segment sales increased 28 compared fiscal 2002 foodservice chicken sales increased 42 retail chicken sales increased 23 international chicken sales decreased 36 excluding plant closing costs 76 million recorded fiscal 2003 operating income decreased 194 million decrease results primarily higher grain costs compared fiscal 2002 beef segment sales increased 138 compared fiscal 2002 domestic fresh meat beef sales increased 118 international beef sales increased 194 caseready beef sales increased 204 beef segment operating income increased 100 million beef segment sales operating income increases caused strong demand second half fiscal 2003 caused part us ban canadian beef however increases partially offset increase live cattle prices pork segment sales decreased 13 compared fiscal 2002 domestic fresh meat pork sales decreased 35 international pork sales increased 28 caseready pork sales increased 523 live swine sales decreased 426 excluding fourth quarter 2002 live swine restructuring charge 26 million operating income increased 24 million decline sales primarily due reduction live swine sales result fiscal 2002 live swine restructuring lower average selling prices finished product operating income positively affected restructuring live swine operation partially offset higher live hog prices prepared foods segment sales decreased 134 compared fiscal 2002 excluding fiscal 2002 specialty brands inc sales 244 million segment sales decreased 166 million 59 volume declined slightly segment operating income decreased 128 million excluding thomas e wilson brand writedown 27 million recorded fiscal 2002 decrease results primarily increases raw material prices lower average selling prices increased costs related introduction 75 new products fiscal 2003 temporary operating inefficiencies certain plants segment operating income increased 171 million primarily due settlements received connection vitamin antitrust litigation fiscal 2003 operating income includes 167 million compared 30 million received fiscal 2002 additionally operating income positively affected actuarial gains recorded fiscal 2003 13 million resulting certain retiree medical benefit plans acquisitions september 2003 company purchased choctaw maid farms inc choctaw integrated poultry processor since 1992 tyson purchasing choctaws production cost plus supply agreement scheduled expire 2007 company previously negotiated purchase option choctaws owners initially became exercisable 2002 company decided exercise purchase option rather continue cost plus arrangement supply agreement acquisition recorded purchase accordance statement financial accounting standards 141 business combinations sfas 141 accordingly assets liabilities adjusted fair values remainder purchase price 18 million recorded goodwill purchase price consisted 1 million cash exercise purchase option tysons supply agreement choctaw settlement 85 million owed tyson choctaw addition company assumed approximately 4 million choctaws debt third party june 2003 company exercised 74 million purchase option acquire assets leased third party company subleased choctaw pro forma operating results reflecting acquisition choctaw would materially different companys actual results operations may 2002 company acquired assets millard processing services bacon processing operation approximately 73 million cash acquisition accounted purchase goodwill approximately 14 million recorded disposition september 2002 company completed sale specialty brands inc subsidiary acquired tfm acquisition results operations included companys prepared foods segment company received cash proceeds approximately 131 million used reduce indebtedness recognized pretax gain 22 million specialty brands incs sales operating income year ended september 28 2002 244 million 2 million respectively liquidity capital resources cash provided operations continues companys primary source funds finance operating requirements capital expenditures 2004 net cash 932 million provided operating activities 112 million 2003 increase fiscal 2003 primarily due increase 98 million net income excluding noncash effect depreciation amortization companys foreseeable cash needs operations growth capital expenditures expected continue met cash flows provided operating activities additionally october 2 2004 company borrowing capacity 11 billion consisting 640 million available 1 billion unsecured revolving credit facilities 450 million accounts receivable securitization october 2 2004 company construction projects progress require approximately 492 million complete capital spending fiscal 2005 expected range 600 680 million reflects additional spending third fully dedicated caseready plant new corporate center variety projects increase automation support valueadded product growth company continues evaluate potential international domestic growth opportunities total debt october 2 2004 34 billion decrease 242 million september 27 2003 company unsecured revolving credit facilities totaling 1 billion support companys commercial paper program letters credit shortterm funding needs third quarter fiscal 2004 company restructured extended revolving credit facilities 1 billion facilities consist 250 million expire september 2006 750 million expire june 2009 october 2 2004 borrowings outstanding facilities outstanding debt october 2 2004 consisted 28 billion debt securities 300 million receivables purchase agreement 86 million commercial paper indebtedness 160 million revolving credit facilities senior notes accounts receivable securitization contain various covenants restrictive contain maximum allowed leverage ratio minimum required interest coverage ratio company compliance covenants fiscal year end offbalance sheet arrangements company offbalance sheet arrangements material financial position results operations offbalance sheet arrangements company guarantees debt outside third parties involving lease grower loans residual value guarantees covering certain operating leases various types equipment see note 10 consolidated financial statements discussions guarantees contractual obligations following table summarizes companys contractual obligations october 2 2004 1 event default payment violation debt covenants acceleration principal payments would occur october 2 2004 company compliance debt covenants 2 interest payments include interest payments fixedrate fixedterm debt based expected payment dates company interest obligations variablerate nonterm debt however obligations excluded timing payments expected interest rates cannot reasonably estimated 3 amounts included guarantees outside third parties involve lease grower loans substantially collateralized underlying assets amounts included maximum potential amount future payments 4 amounts included operating lease obligations minimum lease payments lease agreements well residual guarantee amounts 5 amounts included purchase obligations agreements purchase goods services enforceable legally binding company specifies significant terms including fixed minimum quantities purchased fixed minimum variable price provisions approximate timing transaction included purchase obligations amount future purchase commitments corn soybeans livestock natural gas contracts provide terms meet criteria company excluded future purchase commitments contracts meet criteria purchase orders included table purchase order authorization purchase considered enforceable legally binding contract contracts goods services contain termination clauses without penalty also excluded 6 amounts included capital expenditures estimated amounts complete construction projects progress october 2 2004 7 amounts included longterm liabilities items meet definition purchase obligation recorded companys consolidated balance sheets recently issued accounting standards regulations december 2004 financial accounting standards board fasb issued statement financial accounting standards 151 inventory costs sfas 151 sfas 151 requires abnormal amounts inventory costs related idle facility freight handling wasted material expenses recognized current period charges additionally sfas 151 requires allocation fixed production overheads costs conversion based normal capacity production facilities standard effective fiscal years beginning june 15 2005 company believes adoption sfas 151 material impact consolidated financial statements october 22 2004 president signed law american jobs creation act 2004 bill company currently process evaluating bill march 2004 emerging issues task force eitf reached consensus issue 036 participating securities twoclass method fasb statement 128 earnings per share issue involves computation earnings per share companies multiple classes common stock issued securities common stock participate dividends common stock participating securities eitf concluded companies participating securities required apply twoclass method compute earnings per share twoclass method earnings allocation method earnings per share calculated class common stock participating security considering dividends declared accumulated participation rights undistributed earnings distributed period company adopted eitf issue 036 fourth quarter fiscal 2004 required eitf issue 036 prior period earnings per share restated follows december 2003 fasb revised statement financial accounting standards 132 employers disclosures pensions postretirement benefits sfas 132 revision sfas 132 requires expanded disclosures defined benefit plans standards revisions effective fiscal years ending december 15 2003 interim periods beginning december 15 2003 see note 15 consolidated financial statements pensions postretirement benefits disclosures december 2003 medicare prescription drug improvement modernization act 2003 act signed act allows possible subsidy retirement health plan sponsors help offset costs participant prescription drug benefits march 2004 fasb issued staff position 1062 accounting disclosure requirements related act position effective interim annual periods beginning june 15 2004 position allows plan sponsors recognize defer recognizing effects act financial statements specific accounting guidance federal subsidy pending issued could require company change previously reported information companys accumulated postretirement benefit obligation net periodic pension cost reflect effects act company elected defer accounting act estimated future effect consolidated financial statements material january 2003 fasb issued interpretation 46 consolidation variable interest entities interpretation accounting research bulletin 51 interpretation requires consolidation variable interest entities vie enterprise absorbs majority entitys expected losses receives majority entitys expected residual returns result ownership contractual financial interests entity previously entities generally consolidated enterprise controlling financial interest ownership majority voting interest entity december 2003 fasb issued revision interpretation revised interpretation 46 revised interpretation 46 codifies proposed modifications decisions previously issued certain fasb staff positions supersedes original interpretation include 1 deferring effective date interpretations provisions certain variable interests 2 providing additional scope exceptions certain variable interests 3 clarifying impact troubled debt restructurings requirement reconsider whether entity vie b party primary beneficiary vie 4 revising appendix b original interpretation provide additional guidance constitutes variable interest new guidance application revised interpretation 46 required financial statements public entities interests structures commonly referred specialpurpose entities periods ending december 15 2003 types variable interest entities required financial statements periods ending march 15 2004 companys adoption revised interpretation 46 material impact consolidated financial statements critical accounting estimates preparation consolidated financial statements requires management make estimates assumptions estimates assumptions affect reported amounts assets liabilities disclosure contingent assets liabilities date consolidated financial statements reported amounts revenues expenses reporting period actual results could differ estimates following summary certain accounting estimates considered critical company financial instruments company uses derivative financial instruments manage exposure various market risks including certain livestock interest rates grain feed costs natural gas commodities used normal course operations company may also hold positions hedge accounting defined statement financial accounting standards 133 accounting derivative instruments hedging activities sfas 133 amended applied derivative financial instruments must markedtomarket end quarter positions exist commodities underlying companys derivative financial instruments experience significant price fluctuations requirement marktomarket positions designated qualify hedges sfas 133 could result volatility companys results operations see item 7aitem 7 management’s discussion analysis financial condition results operations results operations overview tyson foods world’s largest protein company second largest publicly traded food company fortune 500 one recognized brand names food industry tyson produces distributes markets chicken beef pork prepared foods related allied products company’s primary operations conducted four segments chicken beef pork prepared foods key factors influence company’s business customer demand company’s products ability maintain grow relationships customers introduce new innovative products marketplace accessibility international markets market prices company’s chicken beef pork products cost live cattle hogs raw materials grain operating efficiencies company’s facilities earnings fiscal 2005 353 million 099 per diluted share compared 403 million 113 per diluted share fiscal 2004 pretax earnings fiscal 2005 included 33 million costs related legal settlement involving company’s live swine operations 14 million costs plant closings 8 million losses related hurricane katrina 12 million received connection vitamin antitrust litigation gain 8 million sale company’s remaining interest specialty brands inc additionally earnings included nonrecurring income tax net benefit 15 million net benefit includes reversal tax reserves partially offset income tax charge related repatriation foreign income combined items decreased fiscal 2005 diluted earnings per share 002 pretax earnings fiscal 2004 included 40 million costs plant closings 61 million bserelated charges 46 million fixed asset writedowns intangible asset impairments combined items decreased fiscal 2004 diluted earnings per share 026 operations fiscal 2005 benefited higher average sales prices company’s chicken pork prepared food segments product mix improvements decreased grain costs company’s chicken segment benefits partially offset losses company’s commodity risk management activities related grain purchases compared prior year gains commodity risk management activities grain positions operating income also negatively impacted higher energy costs higher live hog prices pork segment higher raw material costs prepared foods segment additionally earnings fiscal 2005 negatively impacted company’s beef segment operating loss primarily due lower domestic cattle supplies restrictions imports canadian cattle year resulted lower production volumes raised operating cost per head also beef segment’s operating results negatively impacted limited access export markets fiscal 2005 company continued generate strong cash flow allowed company pay debt 367 million exceed company’s debttocapital ratio goal 40 reaching 39 year end company began construction third fully dedicated caseready plant fiscal 2005 plant scheduled begin operating fiscal 2006 fully operational expected increase caseready capacity onethird additionally fiscal 2005 company continued construction facilities corporate center well variety projects increase automation support valueadded product growth companys accounting cycle resulted 52week year fiscal years 2005 2003 53week year fiscal 2004 outlook company begins fiscal 2006 intent continue focus three primary elements company’s strategy first element strategy continue increase sales mix valueadded products company’s goal fiscal 2006 increase mix valueadded product sales 12 billion increase approximately 900 million compared fiscal 2005 tyson foods inc second element strategy continue improve operating efficiencies fiscal 2006 company anticipates spending approximately 232 million cost savings income producing projects expected result annual tax savings approximately 72 million third element strategy expand company’s presence international markets company’s goal fiscal 2006 increase incountry presence least one foreign market fiscal 2006 company expects chicken segment results remain solid currently grain prices expected favorable fiscal 2006 compared fiscal 2005 company anticipates good demand chicken going start fiscal 2006 company anticipates operating income negatively impacted fiscal 2006 higher energy costs although recent developments beef export market encouraging company believes beef segment continue face difficult operating conditions fiscal 2006 especially first two quarters year company anticipates supply live hogs increase slightly fiscal 2006 generate normal returns pork segment additionally company anticipates improved market share prepared foods segment fiscal 2006 2005 vs 2004 certain reclassifications made prior periods conform current presentations sales decreased 427 million 16 07 increase average sales price 23 decrease volume decrease sales primarily due reduced sales company’s beef segment resulting effects import export restrictions additionally sales negatively impacted decreased sales volumes company’s protein segments primarily due one less week sales fiscal 2005 declines partially offset higher average sales prices company’s chicken pork prepared foods segments cost sales decreased 276 million 11 percent sales cost sales increased 928 933 decrease cost sales primarily due decreased grain costs approximately 312 million fiscal 2005 compared period last year partially offset higher live costs pork segment higher raw material costs prepared foods segment higher energy costs additionally chicken segment recorded losses 27 million fiscal 2005 resulting company’s commodity risk management activities related grain purchases compared gains 127 million fiscal 2004 fiscal 2004 gains due part grain commodity risk management activities designated sfas 133 hedges also lower domestic cattle supplies restrictions imports canadian cattle year caused lower production volumes higher operating cost per head selling general administrative expenses increased 48 million 55 percent sales selling general administrative expenses increased 33 36 increase primarily due increase approximately 28 million corporate advertising expenses primarily related company’s “powered tyson™” campaign addition increases personnelrelated costs contributions donations charges included 33 million related legal settlement involving company’s live swine operations 14 million plant closing costs primarily related closings company’s cleveland street forest mississippi portland maine bentonville arkansas operations july 2005 company announced agreed settle lawsuit resulted restructuring live swine operations settlement resulted company recording additional 33 million costs third quarter fiscal 2005 july 2005 company announced decision make improvements one forest mississippi facilities include product lines enabling plant increase production processed marinated chicken project complete company close cleveland street forest mississippi poultry operation transfer production employees newly upgraded facilities also july 2005 company announced decision close bentonville arkansas facility production facility transferred company’s russellville arkansas poultry plant expansion enabled facility absorb bentonville facility’s production december 2004 company tyson foods inc announced decision close portland maine facility plant ceased operations february 4 2005 production facility transferred locations charges fiscal 2004 included 40 million plant closing costs primarily related closings company’s jackson mississippi manchester new hampshire augusta maine berlin maryland operations also included charges fiscal 2004 25 million charges related intangible asset impairments 21 million related fixed asset writedowns interest expense decreased 48 million 175 primarily resulting 87 decrease company’s average indebtedness addition company incurred 13 million expenses fiscal 2004 related buy back bonds attractive prices early redemption tyson de mexico preferred shares excluding charges overall weighted average borrowing rate decreased 74 71 expense decreased 5 million compared fiscal 2004 primarily resulting improvements foreign exchange gainloss activity approximately 9 million primarily company’s canadian operations 8 million gain recorded fiscal 2005 sale company’s remaining interest specialty brands inc items partially offset increased losses 13 million disposal fixed assets effective tax rate decreased 366 fiscal 2004 331 fiscal 2005 fiscal 2005 effective rate reduced 41 due release income tax reserves management deemed longer required addition rate increased 42 relating repatriation earnings foreign subsidiaries allowed american jobs creation act offset 29 relating reversal certain international tax reserves longer needed due effects repatriation american jobs creation act fourth quarter fiscal 2005 company repatriated 404 million foreign earnings invested outside united states american jobs creation act see note 17 consolidated financial statements discussion issues estimated extraterritorial income exclusion eti amount reduced fiscal 2005 effective tax rate 26 compared 05 fiscal 2004 increase fiscal 2005 estimated eti benefit resulted increase estimated fiscal 2005 profit export sales primarily due increased profit export sales along adjustment estimated fiscal 2004 benefit segment information tyson operates five business segments chicken beef pork prepared foods company measures segment profit operating income chicken segment involved primarily processing live chickens fresh frozen valueadded chicken products chicken segment markets products domestically food retailers foodservice distributors restaurant operators noncommercial foodservice establishments schools hotel chains healthcare facilities military food processors well international markets throughout world chicken segment also includes sales allied products chicken breeding stock subsidiary beef segment involved primarily processing live fed cattle fabrication dressed beef carcasses primal subprimal meat cuts caseready products also involves deriving value allied products hides variety meats sale processors others beef segment markets products domestically food retailers foodservice distributors restaurant operators noncommercial foodservice establishments schools hotel chains healthcare facilities military food processors well international markets throughout world allied products also marketed manufacturers pharmaceuticals technical products pork segment involved primarily processing live market hogs fabrication pork carcasses primal subprimal meat cuts caseready products segment also represents companys live swine group related allied product tyson foods inc processing activities pork segment markets products domestically food retailers foodservice distributors restaurant operators noncommercial foodservice establishments schools hotel chains healthcare facilities military food processors well international markets throughout world also sells allied products pharmaceutical technical products manufacturers well live swine pork producers prepared foods segment includes companys operations manufacture market frozen refrigerated food products include pepperoni beef pork pizza toppings pizza crusts flour corn tortilla products appetizers prepared meals ethnic foods soups sauces side dishes meat dishes processed meats prepared foods segment markets products domestically food retailers foodservice distributors restaurant operators noncommercial foodservice establishments schools hotel chains healthcare facilities military food processors well international markets throughout world segment includes logistics group corporate activities identified specific protein groups chicken segment sales decreased 08 fiscal 2005 compared period last year decline sales primarily due lower volumes caused largely one less week sales partially offset higher average sales prices improved product mix chicken segment operating income increased 34 million fiscal 2005 compared period last year excluding fiscal 2005 charges 12 million related plant closing accruals 8 million hurricane losses fiscal 2004 charges 13 million related fixed asset writedowns 13 million plant closing related accruals operating income increased 28 million fiscal 2005 operating income positively impacted decreased grain costs 312 million however current year benefits decreased grain costs partially offset effect company realizing loss 27 million fiscal 2005 compared gain 127 million fiscal 2004 company’s commodity risk management activities additionally fiscal 2005 operating income negatively impacted higher energy costs tyson foods inc beef segment sales decreased 28 fiscal 2005 compared period last year decline sales primarily resulted effects import export restrictions contributed lower international sales volumes lower average domestic sales prices due part mix products allowed export additionally current year one less week sales fiscal 2005 operating income decreased 215 million compared prior year excluding 10 million received connection vitamin antitrust litigation fiscal 2005 prior year bserelated charges 61 million 5 million charges related intangible asset impairments fixed asset writedowns recorded fiscal 2004 decrease operating income primarily due lower domestic cattle supplies restrictions imports canadian cattle year resulted lower production volumes raised operating cost per head additionally operating income negatively impacted decreased volumes margins company’s lakeside operation canada pork segment sales increased 19 fiscal 2005 compared period last year increase sales resulted primarily higher average sales prices domestically internationally compared period last year higher average sales prices driven primarily higher average live hog prices partially offset decrease volumes caused largely one less week sales fiscal 2005 operating income decreased 63 million compared prior year excluding current year costs 33 million related legal settlement involving company’s live swine operations 2 million received fiscal 2005 connection vitamin antitrust litigation 1 million charges recorded fiscal 2004 related fixed asset writedowns decrease operating income primarily due higher average live hog prices lower volumes increased operating cost per head offset increase average sales prices prepared foods segment sales decreased 31 fiscal 2005 compared period last year decline sales primarily due lower volumes caused largely one less week sales rationalization lower margin product lines partially offset higher average sales prices fiscal 2005 operating income decreased 2 million compared prior year excluding plant closing related accruals 2 million 27 million recorded fiscal years 2005 2004 respectively excluding 27 million fixed asset writedowns intangible asset impairments recorded fiscal 2004 decrease prepared foods segment’s operating income primarily due increased raw material prices 2004 vs 2003 certain reclassifications made prior periods conform current presentations sales increased 19 billion 77 94 increase average sales price 15 decrease volume increase sales primarily due higher average selling prices volumes declined due reduction international export activity related chicken beef segments resulting import restrictions imposed various countries additionally company’s beef segment domestic volumes decreased due tightened supply live cattle effects higher beef pricing significant competing protein supplies marketplace cost sales increased 17 billion 77 percent sales cost sales decreased 929 928 increase cost sales primarily due increases grain costs chicken segment partially offset gains resulting company’s commodity risk management activities related grain purchases beef segment higher live cattle prices bserelated charges also included fiscal 2004 cost sales 18 million reduce selfinsurance reserves actuarially determined range reserves compared actuarial estimates quarterly fiscal 2003 6 million reduction selfinsurance reserves additionally fiscal 2003 cost sales included 167 million received connection vitamin antitrust litigation tyson foods inc selling general administrative expenses increased 49 million 59 percent sales selling general administrative expenses decreased 34 33 increase expenses primarily due increase personnel incentivebased compensation approximately 40 million increase approximately 20 million related information system technology improvements increase approximately 21 million employee benefit costs primarily due fiscal 2003 actuarial gains 13 million related certain retiree medical benefit plans fiscal 2004 increases healthcarerelated costs increases partially offset reduction auditing legal professional fees approximately 27 million included 12 million received fiscal 2004 related legal settlements company’s insurance providers charges included plant closing costs 40 million 76 million recorded fiscal years 2004 2003 respectively fiscal 2004 costs primarily related closings company’s jackson mississippi manchester new hampshire augusta maine berlin maryland facilities part ongoing plant rationalization efforts company announced february 2004 decision consolidate manufacturing operations jackson mississippi company’s carthage mississippi facility company acquired carthage facility purchased choctaw maid farms fourth quarter fiscal 2003 december 2003 company announced decision close manchester new hampshire augusta maine prepared foods operations improve longterm manufacturing efficiencies thorough analysis company determined amount capital required bring manchester augusta facilities competitive level maintain appropriate food safety standards would better spent accommodate production newer modern facilities majority manchester augusta production consolidated company facilities fiscal 2003 costs related closings company’s berlin maryland stilwell oklahoma jacksonville florida facilities also included charges fiscal 2004 25 million charges related impairment various intangible assets 21 million related fixed asset writedowns impairment charges apply primarily trademarks acquired acquisition tyson fresh meats inc tfm 2001 impairment charges primarily resulted lower product sales company’s regional trademarks products increasingly sold tyson trademark fair value company’s trademarks determined using royalty rate method based expected revenues trademark trademarks well intangible assets reviewed least annually impairment fixed asset writedowns result company implementing control whereby plant facilities conduct fixed asset inventories recurring basis interest expense decreased 21 million 71 primarily resulting 82 decrease company’s average indebtedness company incurred 13 million expenses fiscal year 2004 2003 related buy back bonds attractive prices available market early redemption tyson de mexico preferred shares overall weighted average borrowing rate increased 77 74 primarily due fiscal 2004 reduction shortterm debt carried lower interest rates expense decreased 3 million compared fiscal 2003 primarily resulting 10 million writedown related impairment equity interest live swine operation recorded fiscal 2003 decrease partially offset increased foreign exchange losses approximately 9 million company’s canadian operation fiscal 2004 effective tax rate increased 355 fiscal 2003 366 fiscal 2004 estimated eti amount reduced fiscal 2004 effective tax rate 05 compared 19 fiscal 2003 decrease fiscal 2004 estimated eti benefit resulted reduction estimated fiscal 2004 profit export sales primarily due effects bse avian influenza along adjustment estimated fiscal 2003 benefit fiscal 2004 estimated rate also increased due expiration certain general business credits tyson foods inc chicken segment sales increased 132 fiscal 2004 compared fiscal 2003 excluding plant closing related accruals 13 million 76 million recorded fiscal years 2004 2003 respectively fixed asset writedowns 13 million recorded fiscal 2004 operating income increased 342 million sales operating income increased primarily due increased average sales prices sales volumes well improvements product mix operating efficiencies operating income negatively impacted approximately 239 million increased grain costs partially offset benefit approximately 127 million company’s commodity risk management activities related grain purchases increase company’s domestic chicken segment sales volumes fiscal 2004 partially offset decreased international sales volumes due import restrictions various countries caused avian influenza outbreaks united states beef segment sales increased 01 fiscal 2004 compared fiscal 2003 operating income fiscal 2004 included bserelated charges 61 million 5 million charges related intangible asset impairments fixed asset writedowns additionally operating income negatively impacted increases live cattle prices production declines decreased capacity utilization decreases partially offset higher average selling prices increased volumes margins company’s lakeside operation canada pork segment sales increased 289 fiscal 2004 compared fiscal 2003 increase pork segment’s operating income primarily due higher average sales prices increased demand pork benefited stronger domestic international markets offsetting increases average live hog prices operating income negatively impacted approximately 1 million related fixed asset writedowns recorded fiscal 2004 tyson foods inc prepared foods segment sales increased 71 fiscal 2004 compared fiscal 2003 fiscal 2004 operating income increased 23 million excluding plant closing costs approximately 27 million intangible asset impairments 22 million fixed asset writedowns 5 million recorded fiscal 2004 increase prepared foods segment’s operating income primarily due higher average sales prices increased volumes partially offset increased raw material prices segment operating income decreased 145 million primarily due settlements 167 million received fiscal 2003 connection vitamin antitrust litigation additionally fiscal 2003 operating income affected positively actuarial gains 13 million resulting certain retiree medical benefit plans acquisition september 2003 company purchased choctaw maid farms inc choctaw integrated poultry processor since 1992 tyson purchasing choctaw’s production “cost plus” supply agreement scheduled expire 2007 company previously negotiated purchase option choctaw’s owners initially became exercisable 2002 company decided exercise purchase option rather continue “cost plus” arrangement supply agreement acquisition recorded purchase accordance statement financial accounting standards 141 “business combinations” sfas 141 accordingly assets liabilities adjusted fair values remainder purchase price 18 million recorded goodwill purchase price consisted 1 million cash exercise purchase option tyson’s supply agreement choctaw settlement 85 million owed tyson choctaw addition company assumed approximately 4 million choctaw’s debt third party june 2003 company exercised 74 million purchase option acquire assets leased third party company subleased choctaw pro forma operating results reflecting acquisition choctaw would materially different companys actual results operations liquidity capital resources cash provided operations continues company’s primary source funds finance operating requirements capital expenditures fiscal 2005 net cash 999 million provided operating activities 67 million fiscal 2004 increase primarily due cash working capital items 186 million fiscal 2005 compared cash used working capital items 47 million fiscal 2004 partially offset 132 million decrease net income excluding noncash effect deferred income taxes compared prior year positive working capital fiscal 2005 primarily due increase income taxes payable resulting primarily timing payments federal state estimated payments improvements cash cycle around accounts receivable accounts payable inventory company used cash primarily operations reduce debt 367 million fund 571 million property plant equipment additions pay dividends 55 million repurchase 45 million company’s class common stock open market companys foreseeable cash needs operations growth capital expenditures expected continue met cash flows provided operating activities additionally october 1 2005 company borrowing capacity 15 billion consisting 746 million available 10 billion unsecured revolving credit facility 750 million accounts receivable securitization october 1 2005 company construction projects progress require approximately 521 million complete capital spending fiscal 2006 expected range 600 million 650 million tyson foods inc total debt october 1 2005 30 billion decrease 367 million october 2 2004 fourth quarter fiscal 2005 company restructured revolving credit facilities one facility consists 10 billion unsecured revolving credit facility expires september 2010 facility supports companys commercial paper program letters credit shortterm funding needs october 1 2005 borrowings outstanding facility outstanding debt october 1 2005 consisted 25 billion senior notes 345 million term loan indebtedness 121 million revolving credit facility senior notes accounts receivable securitization contain various covenants restrictive contain maximum allowed leverage ratio minimum required interest coverage ratio company compliance covenants fiscal year end offbalance sheet arrangements company offbalance sheet arrangements material financial position results operations offbalance sheet arrangements company guarantees debt outside third parties involving lease grower loans residual value guarantees covering certain operating leases various types equipment see note 9 “commitments” notes consolidated financial statements discussions guarantees contractual obligations following table summarizes company’s contractual obligations october 1 2005 tyson foods inc 1 event default payment violation debt covenants acceleration principal payments could occur october 1 2005 company compliance debt covenants 2 interest payments include interest payments fixedrate fixedterm debt based expected payment dates company interest obligations variablerate nonterm debt however obligations excluded timing payments expected interest rates cannot reasonably estimated 3 amounts included guarantees debt outside third parties involve lease grower loans substantially collateralized underlying assets amounts included maximum potential amount future payments 4 amounts included operating lease obligations minimum lease payments lease agreements well residual value guarantee amounts 5 amounts included purchase obligations agreements purchase goods services enforceable legally binding company specifies significant terms including fixed minimum quantities purchased fixed minimum variable price provisions approximate timing transaction purchase obligations amount includes items future purchase commitments corn soybeans livestock natural gas contracts provide terms meet criteria company excluded future purchase commitments contracts meet criteria purchase orders included table purchase order authorization purchase considered enforceable legally binding contract contracts goods services contain termination clauses without penalty also excluded 6 amounts included capital expenditures estimated amounts complete construction projects progress october 1 2005 7 amounts included longterm liabilities items meet definition purchase obligation recorded company’s consolidated balance sheets recently issued accounting standards regulations march 2005 financial accounting standards board fasb issued interpretation 47 “accounting conditional asset retirement obligations” interpretation fasb statement 143 interpretation statement financial accounting standards 143 “accounting asset retirement obligations” sfas 143 issued june 2001 requires entity recognize fair value liability asset retirement obligation period incurred reasonable estimate fair value made sfas 143 applies legal obligations associated retirement tangible longlived asset resulted acquisition construction development normal operation longlived asset associated asset costs capitalized part carrying amount longlived asset interpretation clarifies term “conditional asset retirement obligation” used sfas 143 refers legal obligation perform asset retirement activity timing method settlement conditional future event may within control entity interpretation requires entity recognize liability fair value conditional asset retirement obligation fair value liability reasonably estimated uncertainty timing method settlement conditional asset retirement obligation factored measurement liability sufficient information exists sfas 143 acknowledges cases sufficient information may available reasonably estimate fair value asset retirement obligation interpretation effective fiscal years ending december 15 2005 company currently process evaluating potential effects interpretation believe adoption material impact consolidated financial statements december 2004 fasb issued statement financial accounting standards 123r “sharebased payment” sfas 123r revision fasb statement 123 “accounting stockbased compensation” sfas 123 sfas 123r supersedes accounting principles board apb opinion 25 “accounting stock issued employees” amends fasb statement 95 “statement cash flows” revision requires companies measure recognize compensation expense sharebased payments employees including grants employee stock options financial statements based tyson foods inc fair value date grant sfas 123r permits companies adopt requirements using either modified prospective method modified retrospective method modified prospective method compensation cost recognized beginning effective date sharebased payments granted effective date awards granted employees prior effective date sfas 123r remain unvested effective date modified retrospective method includes requirements modified prospective method also permits entities restate either prior periods presented prior interim periods year adoption impact adopting standard company apply modified prospective method upon adoption april 2005 securities exchange commission announced would provide phasedin implementation sfas 123r result sfas 123r effective first interim annual reporting period registrant’s first fiscal year beginning june 15 2005 company estimates compensation expense related employee stock options fiscal 2006 expected range 1015 million sfas 123r also requires benefits tax deductions excess recognized compensation costs reported financing cash flow rather operating cash flow required current literature requirement reduce net operating cash flows increase net financing cash flows periods adoption company believes reclass material impact consolidated statements cash flows december 2004 fasb issued statement financial accounting standards 151 inventory costs sfas 151 sfas 151 requires abnormal amounts inventory costs related idle facility freight handling wasted material expenses recognized current period charges additionally sfas 151 requires allocation fixed production overheads costs conversion based normal capacity production facilities standard effective fiscal years beginning june 15 2005 company believes adoption sfas 151 material impact consolidated financial statements october 2004 president signed law american jobs creation act ajc act ajc act provides elimination eti allows federal income tax deduction percentage income earned certain domestic production activities company’s domestic us production activities qualify deduction based effective date provision ajc act company eligible deduction beginning fiscal 2006 provision phased fiscal 2006 fiscal 2011 provides deduction 3 9 qualifying domestic production income period additionally december 21 2004 fasb issued fasb staff position 1091 “application fasb statement 109 accounting income taxes sfas 109 tax deduction qualified production activities provided american jobs creation act 2004” fsp 1091 fsp 1091 effective upon issuance states deduction provision ajc act accounted special deduction accordance sfas 109 company yet quantified impact realized provisions ajc act ajc act also allows 85 dividends received deduction repatriation certain earnings foreign subsidiaries december 21 2004 fasb issued fasb staff position 1092 “accounting disclosure guidance foreign earnings repatriation provision within american jobs creation act 2004” fsp 1092 fsp 1092 effective upon issuance allows companies time beyond financial reporting period enactment evaluate effect ajc act plan reinvestment repatriation foreign earnings purposes applying sfas 109 additionally fsp 1092 provides guidance regarding required disclosures surrounding company’s reinvestment repatriation foreign earnings additionally internal revenue service issued three notices relating repatriation clarify provisions act latest series notices irs notice 200564 issued fourth quarter fiscal 2005 fiscal 2005 company repatriated foreign earnings using provision act discussed note 17 “income taxes” notes consolidated financial statements tyson foods inc december 2003 medicare prescription drug improvement modernization act 2003 act signed act allows possible subsidy retirement health plan sponsors help offset costs participant prescription drug benefits march 2004 fasb issued staff position 1062 “accounting disclosure requirements related act” position effective interim annual periods beginning june 15 2004 position allowed plan sponsors recognize defer recognizing effects act financial statements specific accounting guidance federal subsidy issued fourth quarter fiscal 2005 company concluded prescription drug benefits included postretirement medical plan actuarially equivalent medicare part act accordance fasb staff position 1062 company decreased accumulated postretirement obligation recognized actuarial gain approximately 55 million related present value future subsidies expected received gain offset actuarial losses primarily related increased claims costs resulting net actuarial loss approximately 9 million company’s postretirement health plan company’s policy fully recognize experience gains losses postretirement plans year occur effect service interest cost current period critical accounting estimates preparation consolidated financial statements requires management make estimates assumptions estimates assumptions affect reported amounts assets liabilities disclosure contingent assets liabilities date consolidated financial statements reported amounts revenues expenses reporting period actual results could differ estimates following summary certain accounting estimates considered critical company financial instruments company purchaser certain commodities corn soybeans livestock natural gas course normal operations company uses derivative financial instruments reduce exposure various market risks generally contract terms hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts designated highly effective meeting risk reduction correlation criteria recorded using hedge accounting defined statement financial accounting standards 133 “accounting derivative instruments hedging activities” sfas 133 amended derivative instrument hedge defined sfas 133 depending nature hedge changes fair value instrument either offset change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion instrument’s change fair value immediately recognized earnings component cost sales instruments company holds part risk management activities meet criteria hedge accounting defined sfas 133 amended marked fair value unrealized gains losses reported currently earnings company generally hedge anticipated transactions beyond 12 months contingent liabilities company subject lawsuits investigations claims related wage hourlabor livestock procurement securities environmental product taxing authorities matters required assess likelihood adverse judgments outcomes matters well potential ranges probable losses determination amount reserves disclosures required contingencies made considerable analysis individual issue reserves may change future due changes company’s assumptions effectiveness strategies factors beyond company’s control accrued self insurance expense health welfare workers’ compensation auto liability general liability risks estimated using historical experience actuarial estimates assumptions used arrive periodic expenses reviewed regularly management however actual expenses could differ estimates could result adjustments amounts recorded tyson foods inc impairment longlived assets company required assess potential impairments longlived assets primarily property plant equipment impairment indicators present company must measure fair value assets accordance statement financial accounting standards 144 “accounting impairment disposal longlived assets” determine adjustments recorded goodwill intangible asset impairment assessing recoverability company’s goodwill intangible assets management must make assumptions regarding estimated future cash flows factors determine fair value respective assets estimates related assumptions change future company may required record impairment charges previously recorded company assesses goodwill intangible assets impairment least annually accordance statement financial accounting standards 142 “goodwill intangible assets” marketing advertising costs company incurs advertising retailer incentive consumer incentive costs promote products marketing programs include cooperative advertising volume discounts instore display incentives coupons programs recognition costs related programs requires management judgment estimating potential performance redemption program estimates based many factors including historical experience similar promotional programs actual expenses may differ performance redemption rates vary estimated rates income taxes company estimates total income tax expense based statutory tax rates tax planning opportunities available company various jurisdictions company earns income federal income taxes include estimate taxes earnings foreign subsidiaries expected remitted united states taxable earnings considered permanently invested foreign subsidiary deferred income taxes recognized future tax effects temporary differences financial income tax reporting using tax rates effect years differences expected reverse valuation allowances recorded likely tax benefit realized deferred tax asset nongaap financial measures report public communications issued company time include certain nongaap generally accepted accounting principles financial measures defined numerical measures company’s financial performance financial position cash flows exclude include amounts included excluded directly comparable measures calculated presented accordance gaap company’s financial statements nongaap financial measures utilized company include presentations operating income gaap measures operating performance exclude include effect closings selected operations bserelated charges dispositions assets investments fixed asset writedowns impairment charges related various intangible assets litigation settlements natural disaster related charges nonrecurring income tax adjustments similar events company’s management believes nongaap financial measures provide useful information investors removing effect variances gaap reported results operations indicative fundamental changes company’s earnings management also believes presentation nongaap financial measures consistent past practice well industry practice general enable investors analysts compare current nongaap measures nongaap measures presented prior periods nongaap financial measures used company considered isolation substitute measures performance prepared accordance gaap tyson foods inc item 7aitem 7 management’s discussion analysis financial condition results operations results operations overview tyson foods world’s largest meat protein company second largest food production company fortune 500 one recognized brand names food industry tyson produces distributes markets chicken beef pork prepared foods related allied products company’s operations conducted five segments chicken beef pork prepared foods key factors influence company’s business customer demand company’s products ability maintain grow relationships customers introduce new innovative products marketplace accessibility international markets market prices company’s chicken beef pork products cost live cattle hogs raw materials grain operating efficiencies company’s facilities company faced challenging operating conditions fiscal 2006 demand pressures caused mainly outbreaks avian influenza primarily europe asia hurricane katrina export market disruptions company’s chicken beef segments led oversupply proteins worldwide negatively affected average sales prices operating results company’s protein segments operations also affected negatively higher energy costs significant operating margin reductions company’s operations canada mexico net loss fiscal 2006 196 million 058 per diluted share compared earnings 372 million 104 per diluted share fiscal 2005 pretax loss fiscal 2006 includes 63 million costs related beef prepared foods poultry plant closings 19 million charges related company’s 200 million cost reduction initiative business consolidation efforts charges include severance expenses product rationalization costs related intangible asset impairment expenses additionally company completed review tax account balances result recorded charge fourth quarter fiscal 2006 approximately 15 million also net loss fiscal 2006 includes charge 5 million 002 per diluted share related cumulative effect change accounting principle due company’s adoption financial accounting standards board fasb interpretation 47 “accounting conditional asset retirement obligations” interpretation fasb statement 143 combined items increased fiscal 2006 diluted loss per share 021 pretax earnings fiscal 2005 include 33 million costs related legal settlement involving company’s live swine operations 14 million costs poultry prepared foods plant closings 8 million losses related hurricane katrina 12 million received connection vitamin antitrust litigation gain 8 million sale company’s remaining interest specialty brands inc net income fiscal 2005 includes nonrecurring income tax net benefit 15 million net benefit includes reversal tax reserves partially offset income tax charge related repatriation foreign income effective tax rate company affected federal income tax effect medicare part subsidy fiscal 2005 55 million amount subject federal income tax combined items increased fiscal 2005 diluted earnings per share 003 companys accounting cycle resulted 52week year fiscal years 2006 2005 53week year fiscal 2004 outlook management’s primary goal difficult operating environment return company profitability one measures taken achieve goal manage reduce costs company initiated 200 million cost reduction initiative fourth quarter fiscal 2006 approximately 90 initiative implemented company began realizing savings first quarter fiscal 2007 tyson foods inc although returning company profitability primary shortterm goal management also remains focused following primary elements longterm strategy creating valueadded products improving operational efficiencies expanding internationally year company strongly examined business well various opportunities took necessary steps better position meet longterm goals company’s discovery center nearing completion operational second quarter fiscal 2007 discovery center expected bring new marketleading retail foodservice products customer faster effectively stateoftheart facility includes 19 research centers well usdainspected pilot plant fiscal 2006 company announced rationalization three beef plants two prepared foods plants additionally company completed several major capital projects fiscal 2006 including caseready plant sherman texas expansion dakota city nebraska location company realized certain operational efficiencies fiscal 2006 related rationalization expansion efforts expects continued efficiencies fiscal 2007 november 2006 company announced new business unit tyson renewable energy exploring ways commercialize company’s supply animal fat biofuels new unit also examining potential use poultry litter generate energy products regard company’s international expansion goals company expects close transaction fiscal 2007 would establish joint venture poultry company china additionally company expects complete two joint venture transactions south america 2007 one involving poultry operation brazil involving beef operation argentina company expects operating margin improvements segment fiscal 2007 although company’s chicken segment affected negatively higher grain prices fiscal 2007 compared fiscal 2006 company’s mix valueadded products expected price increases supply insulation company expects live cattle supplies live hog supplies increase fiscal 2007 allow company achieve greater operational efficiencies processing plants additionally company anticipates improved market share prepared foods segment fiscal 2007 based company’s outlook fiscal 2007 diluted earnings per share estimated range 050 080 sales estimated range 26 billion 27 billion company expects reduce capital spending 531 million spent fiscal 2006 approximately 400 million fiscal 2007 additionally company anticipates stronger cash flow lower interest expense fiscal 2007 plans use improved cash flow reduce debt position 2006 vs 2005 certain reclassifications made prior periods conform current presentations sales decreased 455 million 17 39 decrease average sales price 23 increase volume oversupply proteins led decreased average sales prices segments additionally fiscal 2006 sales affected negatively realized unrealized net losses 5 million compared realized unrealized net gains 24 million recorded fiscal 2005 company’s commodity risk management activities related fixed forward boxed beef pork sales cost sales increased 337 million 14 percent sales cost sales increased 934 964 increase cost sales percentage sales primarily due decrease average sales prices average live prices production costs decrease rate energy costs increased segments approximately 167 million compared period last year additionally fiscal 2006 includes 49 million realized unrealized net losses related company’s forward futures contracts live cattle hog purchases compared 33 million realized unrealized net gains recorded fiscal 2005 cost sales impacted positively realized unrealized net gains 6 million fiscal 2006 resulting company’s commodity risk management activities related grain purchases compared realized unrealized net losses 27 million fiscal 2005 selling general administrative expenses increased 7 million 08 percent sales selling general administrative expenses increased 36 37 increase primarily due increase stock compensation expense information system services costs increased sales promotion expenses increases offset partially decreased charitable contributions decreased legal professional fees fiscal 2006 bad debt recovery also insurance proceeds received fiscal 2005 decreased prior year costs tyson foods inc charges include 63 million plant closing related costs 9 million severance accruals related company’s 200 million cost reduction initiative plant closing costs relate primarily closing company’s norfolk west point nebraska independence oelwein iowa operations february 2006 company announced decision close norfolk nebraska beef processing plant west point nebraska beef slaughter plant facilities closed february 2006 production facilities shifted primarily company’s beef complex dakota city nebraska january 2006 company announced decision close two processed meats facilities northeast iowa independence oelwein plants produced chopped ham sliced luncheon meats closed march 2006 august 2006 company announced decision close boise idaho beef slaughter plant scale back processing operations pasco washington complex decision resulted elimination approximately 770 positions closure process change occurred october 2006 result significant charge company july 2006 company announced decision implement approximately 200 million cost reductions part strategy return profitability cost reductions include staffing costs consulting professional fees sales marketing costs expenses virtually cost reduction initiatives expected completed december 2006 savings beginning principally fiscal 2007 charges fiscal 2005 include 33 million relating legal settlement involving company’s live swine operations 14 million plant closing costs primarily relating closings company’s cleveland street forest mississippi portland maine bentonville arkansas operations july 2005 company announced agreed settle lawsuit resulting restructuring live swine operations settlement resulted company recording additional 33 million costs third quarter fiscal 2005 july 2005 company announced decision make improvements one forest mississippi facilities included product lines enabling plant increase production processed marinated chicken improvements made former choctaw maid farms location company acquired fiscal 2003 company’s cleveland street forest mississippi poultry operation ceased operations march 2006 also july 2005 company announced decision close bentonville arkansas facility production facility transferred company’s russellville arkansas poultry plant expansion enabled facility absorb bentonville facility’s production december 2004 company announced decision close portland maine facility plant ceased operations february 4 2005 production facility transferred locations interest income increased 20 million primarily due interest earned 750 million shortterm investment held deposit trustee used repayment 725 notes maturing october 1 2006 interest expense increased 31 million 131 increase primarily due increase average total debt 158 however average total debt increased approximately 32 adjusting total debt 750 million shortterm investment increase offset partially decrease overall weighted average borrowing rate 71 70 income increased 12 million compared fiscal 2005 primarily resulting improvements foreign currency exchange gainloss activity approximately 7 million 7 million gain recorded writeoff capital lease obligation related legal settlement items offset partially 8 million gain recorded fiscal 2005 sale company’s remaining interest specialty brands inc effective tax rate 348 benefit fiscal 2006 compared 295 provision fiscal 2005 fiscal 2006 effective tax rate reduced 51 due expense recorded fiscal 2006 result tax account balance review discussed note 15 notes consolidated financial statements fiscal 2006 effective rate also reduced 18 due federal income tax effect medicare part subsidy loss fiscal 2006 since loss deductible federal income tax purposes fiscal 2005 effective rate reflects reduction 41 due release income tax reserves management deemed longer required reduction 36 related 2005 estimated future medicare part subsidy addition fiscal 2005 effective rate reflected increase 42 relating repatriation earnings foreign subsidiaries allowed american jobs creation act cumulative effect change accounting principle net tax includes transition charge 5 million related company’s adoption fasb interpretation 47 “accounting conditional asset retirement obligations” tyson foods inc segment information tyson operates five business segments chicken beef pork prepared foods company measures segment profit operating income chicken segment involved primarily processing live chickens fresh frozen valueadded chicken products chicken segment markets products domestically food retailers foodservice distributors restaurant operators noncommercial foodservice establishments schools hotel chains healthcare facilities military food processors well international markets throughout world chicken segment also includes sales allied products chicken breeding stock subsidiary beef segment involved primarily processing live fed cattle fabricating dressed beef carcasses primal subprimal meat cuts caseready products also involves deriving value allied products hides variety meats sale processors others beef segment markets products domestically food retailers foodservice distributors restaurant operators noncommercial foodservice establishments schools hotel chains healthcare facilities military food processors well international markets throughout world allied products also marketed manufacturers pharmaceuticals technical products pork segment involved primarily processing live market hogs fabricating pork carcasses primal subprimal meat cuts caseready products segment also represents companys live swine group related allied product processing activities pork segment markets products domestically food retailers foodservice distributors restaurant operators noncommercial foodservice establishments schools hotel chains healthcare facilities military food processors well international markets throughout world also sells allied products pharmaceutical technical products manufacturers well live swine pork producers prepared foods segment includes companys operations manufacture market frozen refrigerated food products include pepperoni beef pork pizza toppings pizza crusts flour corn tortilla products appetizers prepared meals ethnic foods soups sauces side dishes meat dishes processed meats prepared foods segment markets products domestically food retailers foodservice distributors restaurant operators noncommercial foodservice establishments schools hotel chains healthcare facilities military food processors well international markets throughout world segment includes logistics group miscellaneous operations tyson foods inc chicken segment sales decreased 44 operating results decreased 529 million fiscal 2006 compared fiscal 2005 fiscal 2006 operating results include charges 9 million related company’s cost reduction initiative business consolidation efforts plant closing costs fiscal 2005 operating results include 12 million plant closing costs 8 million hurricane related losses decline sales operating results primarily due lower average sales prices predominantly caused oversupply proteins marketplace additionally chicken segment’s operating results affected negatively higher energy costs decreased margins company’s operations mexico fiscal 2006 chicken operating results include realized unrealized net gains 6 million company’s commodity risk management activities related grain purchases compared realized unrealized net losses 27 million recorded fiscal 2005 beef segment sales increased 18 operating results decreased 284 million fiscal 2006 compared fiscal 2005 fiscal 2006 operating results include charges 52 million related plant closing costs company’s cost reduction initiative business consolidation efforts fiscal 2005 operating results include 10 million received connection vitamin antitrust litigation operating results decline primarily due lower average sales prices predominantly caused oversupply proteins marketplace additionally beef segment’s operating results affected negatively significant operating margin reductions company’s lakeside operation canada also fiscal 2006 operating results include realized unrealized net losses 40 million company’s commodity risk management activities related fixed forward boxed beef sales forward live cattle purchases compared realized unrealized net gains 13 million recorded fiscal 2005 pork segment sales decreased 58 operating results remained flat fiscal 2006 compared fiscal 2005 fiscal 2006 operating results include charges 2 million related company’s cost reduction initiative business consolidation efforts fiscal 2005 operating results include 33 million related legal settlement involving company’s live swine operations 2 million received connection vitamin antitrust litigation lower average sales prices predominantly caused oversupply proteins marketplace adversely affected sales operating results lower average sales prices offset partially lower average live prices additionally fiscal 2006 operating results include realized unrealized net losses 15 million company’s commodity risk management activities related fixed forward boxed pork sales forward live hog purchases compared realized unrealized net losses 22 million recorded fiscal 2005 prepared foods segment sales decreased 39 operating results decreased 33 million fiscal 2006 compared fiscal 2005 fiscal 2006 operating results include charges 19 million related plant closing costs business consolidation efforts company’s cost reduction initiative fiscal 2005 operating results include 2 million related plant closing costs decline sales operating income primarily due lower average sales prices 2005 vs 2004 certain reclassifications made prior periods conform current presentations sales decreased 427 million 16 07 increase average sales price 23 decrease volume decrease sales primarily due reduced sales company’s beef segment resulting effects import export restrictions additionally sales affected negatively decreased sales volumes company’s protein segments primarily due one less week sales fiscal 2005 declines offset partially higher average sales prices company’s chicken pork prepared foods segments cost sales decreased 264 million 11 percent sales cost sales increased 929 934 decrease cost sales primarily due decreased grain costs approximately 312 million fiscal 2005 compared fiscal 2004 partially offset higher live costs pork segment higher raw material costs prepared foods segment higher energy costs additionally chicken segment recorded realized unrealized losses 27 million fiscal 2005 resulting company’s commodity risk management activities related grain purchases compared realized unrealized gains 127 million fiscal 2004 fiscal 2004 gains part due grain commodity risk management activities designated sfas 133 hedges also lower domestic cattle supplies restrictions imports canadian cattle fiscal 2005 caused lower production volumes higher operating cost per head tyson foods inc selling general administrative expenses increased 48 million 55 percent sales selling general administrative expenses increased 33 36 increase primarily due increase approximately 28 million corporate advertising expenses primarily related company’s “powered tyson™” campaign addition increases personnelrelated costs contributions donations charges include 33 million related legal settlement involving company’s live swine operations 14 million plant closing costs primarily related closings company’s cleveland street forest mississippi portland maine bentonville arkansas operations july 2005 company announced agreed settle lawsuit resulting restructuring live swine operations settlement resulted company recording additional 33 million costs third quarter fiscal 2005 july 2005 company announced decision make improvements one forest mississippi facilities included product lines enabling plant increase production processed marinated chicken improvements made former choctaw maid farms location company acquired fiscal 2003 company’s cleveland street forest mississippi poultry operation ceased operations march 2006 also july 2005 company announced decision close bentonville arkansas facility production facility transferred company’s russellville arkansas poultry plant expansion enabled facility absorb bentonville facility’s production december 2004 company announced decision close portland maine facility plant ceased operations february 4 2005 production facility transferred locations charges fiscal 2004 include 40 million plant closing costs primarily related closings company’s jackson mississippi manchester new hampshire augusta maine berlin maryland operations also included charges fiscal 2004 25 million charges related intangible asset impairments 21 million related fixed asset writedowns interest expense decreased 43 million 154 primarily resulting 87 decrease company’s average indebtedness addition company incurred 13 million expenses fiscal 2004 related buy back bonds early redemption tyson de mexico preferred shares excluding charges overall weighted average borrowing rate decreased 74 71 expense decreased 17 million compared fiscal 2004 resulting improvements foreign currency exchange gainloss activity approximately 9 million primarily company’s canadian operations 8 million gain recorded fiscal 2005 sale company’s remaining interest specialty brands inc effective tax rate decreased 366 fiscal 2004 295 fiscal 2005 fiscal 2005 effective rate reflects reduction 41 due release income tax reserves management deemed longer required fiscal 2005 effective rate also reflects reduction 36 due federal income tax effect medicare part subsidy fiscal 2005 amount subject federal income tax addition rate reflects increase 42 relating repatriation earnings foreign subsidiaries allowed american jobs creation act offset 29 relating reversal certain international tax reserves longer needed due effects repatriation american jobs creation act fourth quarter fiscal 2005 company repatriated 404 million foreign earnings invested outside united states american jobs creation act see note 15 notes consolidated financial statements discussion issues estimated extraterritorial income exclusion eti amount reduced fiscal 2005 effective tax rate 26 compared 05 fiscal 2004 increase fiscal 2005 estimated eti benefit resulted increase estimated fiscal 2005 profit export sales primarily due increased profit export sales along adjustment estimated fiscal 2004 benefit tyson foods inc chicken segment sales decreased 08 fiscal 2005 compared fiscal 2004 decline sales primarily due lower volumes caused largely one less week sales fiscal 2005 partially offset higher average sales prices improved product mix chicken segment operating income increased 34 million fiscal 2005 compared fiscal 2004 fiscal 2005 operating income includes 12 million plant closing costs 8 million hurricanerelated losses fiscal 2004 operating income includes 13 million plant closing costs 13 million charges related fixed asset writedowns fiscal 2005 operating income affected positively decreased grain costs 312 million however fiscal 2005 benefits decreased grain costs offset partially realized unrealized net losses 27 million company’s commodity risk management activities related grain purchases compared realized unrealized net gains 127 million recorded fiscal 2004 additionally fiscal 2005 operating income affected negatively higher energy costs beef segment sales decreased 28 fiscal 2005 compared fiscal 2004 decline sales primarily resulted effects import export restrictions contributed lower international sales volumes lower average domestic sales prices part due mix products allowed export additionally fiscal 2005 one less week sales compared fiscal 2004 fiscal 2005 operating income decreased 139 million compared fiscal 2004 fiscal 2005 operating income includes 10 million received connection vitamin antitrust litigation fiscal 2004 operating income includes bserelated charges 61 million 5 million charges related intangible asset impairments fixed asset writedowns decrease operating income primarily due lower domestic cattle supplies restrictions imports canadian cattle fiscal 2005 resulted lower production volumes raised operating cost per head additionally fiscal 2005 operating income affected negatively decreased volumes margins company’s lakeside operation canada also fiscal 2005 operating results include realized unrealized net gains 13 million company’s commodity risk management activities related fixed forward boxed beef sales forward live cattle purchases compared realized unrealized net gains 51 million recorded fiscal 2004 pork segment sales increased 19 fiscal 2005 compared fiscal 2004 increase sales resulted primarily higher average sales prices domestically internationally compared fiscal 2004 higher average sales prices driven primarily higher average live hog prices offset partially decrease volumes caused largely one less week sales fiscal 2005 operating income decreased 93 million compared fiscal 2004 fiscal 2005 operating income includes costs 33 million related legal settlement involving company’s live swine operations 2 million received connection vitamin antitrust litigation fiscal 2004 operating income includes 1 million charges related fixed asset writedowns decrease operating income primarily due higher average live hog prices lower volumes increased operating cost per head offset increase average sales prices prepared foods segment sales decreased 31 fiscal 2005 compared fiscal 2004 decline sales primarily due lower volumes caused largely one less week sales rationalization lower margin product lines partially offset higher average sales prices fiscal 2005 operating income increased 50 million compared fiscal 2004 fiscal 2005 operating income includes 2 million plant closing costs fiscal 2004 operating income includes 27 million plant closing costs 27 million charges related fixed asset writedowns intangible asset impairments fiscal 2005 operating income negatively impacted increased raw material prices tyson foods inc liquidity capital resources fiscal 2006 net cash 287 million provided operating activities decrease 712 million fiscal 2005 decrease primarily due decline net income 605 million excluding noncash effect deferred income taxes net change working capital effect 147 million company used cash primarily borrowings operations fund 531 million property plant equipment additions pay dividends 55 million company’s class b stock repurchase 42 million company’s class stock open market purchases made satisfy company’s stock compensation programs expenditures property plant equipment related acquiring new equipment upgrading facilities maintain competitive standing position company future opportunities company’s foreseeable cash needs operations growth capital expenditures expected met cash flows provided operating activities second quarter fiscal 2006 company issued 10 billion new senior unsecured notes mature april 1 2016 notes 2016 notes carried initial 660 interest rate interest payments due semiannually april 1 october 1 fiscal 2007 company used 750 million proceeds repayment outstanding 750 million 725 notes due october 1 2006 remaining proceeds used general corporate purposes company’s shortterm investment september 30 2006 includes 750 million proceeds new issuance earnings 20 million investment july 24 2006 moody’s investors services inc moody’s downgraded company’s credit rating applicable 2016 notes “baa3” “ba1” downgrade increased interest rate 2016 notes 660 685 effective first day interest period rating change required adjustment interest rate ie issuance 2016 notes accordingly fourth quarter company recorded additional 07 million interest period march 22 2006 july 1 2006 downgrade increase annual interest expense related fees approximately 5 million including 25 million related 2016 notes july 31 2006 standard poor’s sp also downgraded company’s credit rating applicable 2016 notes “bbb” “bbb” downgrade result increase interest rate 2016 notes result increase interest expense related fees debt september 18 2006 tyson fresh meats inc tfm whollyowned subsidiary company guaranteed 2016 notes guarantee extend unsecured senior notes company moody’s sp change july 2006 credit ratings applicable 2016 notes however moody’s issued new credit rating “ba2” sp issued new credit rating “bb” related unsecured senior notes guaranteed tfm new ratings impact interest rate applicable 2016 notes however interest expense related fees debt increased less 3 million possible one debt rating agencies may downgrade company’s bond rating applicable 2016 notes sp currently rates longterm debt “bbb” negative outlook moody’s currently rates debt “ba1” negative outlook pretax impact earnings downgrade would approximately 5 million annually per rating agency 25 million would related increased interest expense 2016 notes total debt september 30 2006 approximately 40 billion increase 984 million october 1 2005 however adjusted 750 million proceeds deposit debt would 32 billion increase 234 million october 1 2005 additionally company unsecured revolving credit facility totaling 10 billion supports company’s shortterm funding needs letters credit 10 billion facility expires september 2010 agreement amended july 27 2006 reduced availability unsecured revolving credit facility see description also september 30 2006 company receivables purchase agreement three copurchasers sell 750 million trade receivables tyson foods inc agreements restructured extended fourth quarter fiscal 2006 consist 375 million expiring august 2007 375 million expiring august 2009 september 30 2006 795 million outstanding commitments october 1 2005 amounts drawn receivables purchase agreement outstanding debt september 30 2006 consisted 34 billion debt securities 345 million term loan indebtedness 246 million revolving credit facility senior notes term loan accounts receivable securitization contain various covenants restrictive contain maximum allowed leverage ratio minimum required interest coverage ratio july 27 2006 company entered third amendment fiveyear credit revolving facility threeyear term loan facility subsidiary lakeside farms industries ltd amendments modified minimum required interest coverage ratio temporarily suspended maximum allowed leverage ratios implemented temporary minimum consolidated ebitda requirements company compliance covenants fiscal year end connection amendments company’s availability unsecured revolving credit facility decreased company’s credit rating downgraded prior delivery second quarter fiscal 2007 compliance certificate company required certain subsidiaries guarantee revolving credit facility term loan amended agreement allows maximum availability revolving credit facility 50 inventory reduced letters credit issued amounts outstanding term loan amount available september 30 2006 481 million company’s foreseeable cash needs operations capital expenditures expected met primarily cash flows provided operating activities additionally september 30 2006 company unused borrowing capacity 11 billion consisting 481 million available 10 billion unsecured revolving credit agreement 591 million accounts receivable securitization september 30 2006 company construction projects progress require approximately 182 million complete capital spending fiscal 2007 expected approximately 400 million offbalance sheet arrangements company offbalance sheet arrangements material financial position results operations offbalance sheet arrangements company guarantees debt outside third parties involving lease grower loans residual value guarantees covering certain operating leases various types equipment see note 8 “commitments” notes consolidated financial statements discussions guarantees contractual obligations following table summarizes company’s contractual obligations september 30 2006 tyson foods inc 1 event default payment violation debt covenants acceleration principal payments could occur september 30 2006 company compliance debt covenants 2 interest payments include interest payments fixedrate fixedterm debt based expected payment dates company interest obligations variablerate nonterm debt however obligations excluded timing payments expected interest rates cannot estimated reasonably 3 amounts included guarantees debt outside third parties involve lease grower loans substantially collateralized underlying assets well residual value guarantees covering certain operating leases various types equipment amounts included maximum potential amount future payments 4 amounts included operating lease obligations minimum lease payments lease agreements 5 amounts included purchase obligations agreements purchase goods services enforceable legally binding company specifies significant terms including fixed minimum quantities purchased fixed minimum variable price provisions approximate timing transaction purchase obligations amount includes items future purchase commitments grains livestock natural gas contracts provide terms meet criteria company excluded future purchase commitments contracts meet criteria purchase orders included table purchase order authorization purchase considered enforceable legally binding contract contracts goods services contain termination clauses without penalty also excluded 6 amounts included capital expenditures estimated amounts complete construction projects progress september 30 2006 7 amounts included longterm liabilities items meet definition purchase obligation recorded company’s consolidated balance sheets recently adopted accounting standards regulations december 2004 fasb issued statement financial accounting standards 123r “sharebased payment” sfas 123r pronouncement requires companies measure recognize compensation expense sharebased payments employees including grants employee stock options restricted stock performancebased shares financial statements based fair value date grant first quarter fiscal 2006 company adopted sfas 123r using modified prospective method modified prospective method compensation cost recognized sharebased payments granted adoption sfas 123r awards granted employees prior adoption date sfas 123r unvested adoption date accordingly restatements made prior periods prior adoption sfas 123r company applied accounting principles board opinion 25 “accounting stock issued employees” accounting employee stock compensation plans accordingly compensation expense recognized stock option issuances stock options issued exercise price equal closing price date grant also prior adoption sfas 123r company issued restricted stock recorded fair value awards deferred compensation amortized vesting period fair value option grant established date grant using blackscholes optionpricing model grants awarded prior october 1 2005 binomial lattice method grants awarded subsequent october 1 2005 change binomial lattice method made better reflect exercise behavior top management company recognized compensation expense net tax 9 million 15 million fiscal 2006 related stock options restricted stock respectively september 30 2006 company 38 million total unrecognized compensation cost related stock option plans recognized weighted average period 22 years 42 million total unrecognized compensation cost related restricted stock awards recognized weightedaverage period 15 years march 2005 fasb issued interpretation 47 “accounting conditional asset retirement obligations” interpretation fasb statement 143 fin 47 statement financial accounting standards 143 “accounting asset retirement obligations” sfas 143 issued june 2001 requires entity recognize fair value liability asset retirement obligation period incurred reasonable estimate fair value made sfas 143 applies legal obligations associated retirement tangible longlived asset resulted acquisition construction development andor normal operation longlived asset associated asset costs capitalized part carrying amount longlived asset fin 47 clarifies term “conditional asset retirement obligation” used sfas 143 refers legal obligation perform asset retirement activity timing andor method settlement conditional future tyson foods inc event may within control entity fin 47 requires entity recognize liability fair value conditional asset retirement obligation fair value liability reasonably estimated uncertainty timing andor method settlement conditional asset retirement obligation factored measurement liability sufficient information exists company adopted fin 47 september 30 2006 see note 2 “change accounting principle” notes consolidated financial statements impact adoption fin 47 september 2005 emerging issues task force eitf reached consensus issue 0413 “accounting purchases sales inventory counterparty” issues circumstances two inventory purchase sales transactions counterparty viewed single exchange transaction within scope accounting principles board opinion 29 “accounting nonmonetary transactions” circumstances nonmonetary exchanges inventory within line business recognized fair value company adopted eitf issue 0413 third quarter fiscal 2006 adoption issue material impact company’s consolidated financial statements recently issued accounting standards regulations june 2006 fasb issued interpretation 48 “accounting uncertainty income taxes” interpretation fasb statement 109 fin 48 fin 48 prescribes recognition threshold measurement attribute financial statement recognition measurement tax position taken expected taken tax return fin 48 also provides guidance derecognition classification interest penalties accounting interim periods disclosure transition fin 48 effective fiscal years beginning december 15 2006 therefore company expects adopt fin 48 beginning fiscal 2008 company currently process evaluating potential impact fin 48 september 2006 fasb issued statement financial accounting standards 157 “fair value measurements” sfas 157 sfas 157 provides guidance using fair value measure assets liabilities standard also responds investors requests expanded information extent companies measure assets liabilities fair value information used measure fair value effect fair value measurements earnings sfas 157 applies whenever standards require permit assets liabilities measured fair value standard expand use fair value new circumstances sfas 157 effective financial statements issued fiscal years beginning november 15 2007 interim periods within fiscal years therefore company expects adopt sfas 157 beginning fiscal 2009 company currently process evaluating potential impact sfas 157 september 2006 fasb issued statement financial accounting standards 158 “employers’ accounting defined benefit pension postretirement plans amendment fasb statements 87 88 106 132r” sfas 158 sfas 158 requires companies recognize overfunded underfunded status defined benefit postretirement plan asset liability consolidated balance sheet recognize changes funded status year changes occur comprehensive income standard also requires companies measure funded status plan date annual consolidated balance sheet limited exceptions sfas 158 effective financial statements issued fiscal years ending december 15 2006 therefore company expects adopt sfas 158 end fiscal 2007 based information available september 30 2006 company expects increase assets 6 million increase liabilities 8 million adjustment accumulated comprehensive income 2 million adopts sfas 158 september 2006 securities exchange commission staff published staff accounting bulletin 108 “considering effects prior year misstatements quantifying misstatements current year financial statements” sab 108 sab 108 addresses quantifying financial statement effects misstatements specifically effects prior year uncorrected errors must considered quantifying misstatements current year financial statements sab 108 effective fiscal years ending november 15 2006 therefore company expects adopt sab 108 end fiscal 2007 company currently process evaluating potential impact sab 108 critical accounting estimates preparation consolidated financial statements requires management make estimates assumptions estimates assumptions affect reported amounts assets liabilities disclosure contingent assets liabilities date consolidated financial statements reported amounts revenues expenses reporting period actual results could differ estimates following summary certain accounting estimates considered critical company tyson foods inc financial instruments company purchaser certain commodities grains livestock natural gas course normal operations company uses derivative financial instruments reduce exposure various market risks generally contract terms hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts designated highly effective meeting risk reduction correlation criteria recorded using hedge accounting defined statement financial accounting standards 133 “accounting derivative instruments hedging activities” sfas 133 amended derivative instrument hedge defined sfas 133 depending nature hedge changes fair value instrument offset either change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion instrument’s change fair value recognized immediately earnings component cost sales instruments company holds part risk management activities meet criteria hedge accounting defined sfas 133 amended marked fair value unrealized gains losses reported currently earnings company generally hedge anticipated transactions beyond 12 months contingent liabilities company subject lawsuits investigations claims related wage hourlabor livestock procurement securities environmental product taxing authorities matters required assess likelihood adverse judgments outcomes matters well potential ranges probable losses determination amount reserves disclosures required contingencies made considerable analysis individual issue reserves may change future due changes company’s assumptions effectiveness strategies factors beyond company’s control accrued self insurance expense health welfare workers’ compensation auto liability general liability risks estimated using experience actuarial estimates assumptions used arrive periodic expenses reviewed regularly management however actual expenses could differ estimates could result adjustments amounts recorded pension postretirement benefits company provides range benefits employees retired employees including pensions postretirement healthcare benefits company records annual amounts related plans based calculations specified generally accepted accounting principles include various actuarial assumptions discount rates assumed rates return plan assets compensation increases turnover rates mortality rates retirement rates healthcare cost trends company reviews actuarial assumptions annual basis makes modifications assumptions based current rates trends deemed appropriate company generally recognizes effect modifications immediately earnings rather amortizing effect future periods see note 12 “pension postretirement benefits” notes consolidated financial statements sensitivity discussion assumed healthcare cost trend rates impairment longlived assets company required assess potential impairments longlived assets primarily property plant equipment impairment indicators present company must measure fair value assets accordance statement financial accounting standards 144 “accounting impairment disposal longlived assets” determine adjustments recorded impairment goodwill intangible assets assessing recoverability company’s goodwill intangible assets management relies number factors including operating results business plans economic projections anticipated future cash flow assumed royalty rates marketplace data inherent uncertainties related factors management’s judgment applying factors assessment recoverability company elected make first day fourth quarter annual impairment assessment date goodwill intangible assets goodwill valuations calculated using income approach based present value future cash flows reporting unit intangible asset valuations calculated trademarks using royalty rate method based present value future cash flows patents inprocess technology using cash flow method based present value future cash flows changes economic operating conditions impacting assumptions could result goodwill impairment future periods company could required evaluate recoverability goodwill intangible assets prior required annual assessment company experiences disruptions business end market conditions unexpected significant declines operating results divestiture significant component company market capitalization declines types events resulting analysis could result goodwill impairment charges future company recorded impairments intangible assets 3 million 4 million 25 million fiscal 2006 2005 2004 respectively tyson foods inc marketing advertising costs company incurs advertising retailer incentive consumer incentive costs promote products marketing programs include cooperative advertising volume discounts instore display incentives coupons programs recognition costs related programs requires management’s judgment estimating potential performance redemption program estimates based many factors including experience similar promotional programs actual expenses may differ performance redemption rates vary estimated rates income taxes company estimates total income tax expense based statutory tax rates tax planning opportunities available company various jurisdictions company earns income federal income taxes include estimate taxes earnings foreign subsidiaries expected remitted united states taxable earnings considered indefinitely invested foreign subsidiary deferred income taxes recognized future tax effects temporary differences financial income tax reporting using tax rates effect years differences expected reverse valuation allowances recorded likely tax benefit realized deferred tax asset changes tax laws rates also could affect recorded deferred tax assets liabilities future management aware changes would material effect company’s results operations cash flows financial position addition calculation tax liabilities involves uncertainties application complex tax regulations across tax jurisdictions company operates company records tax liabilities anticipated tax audit issues based estimate whether extent additional taxes due company adjusts reserves light changing facts circumstances however due complexity uncertainties ultimate resolution may result payment materially different current estimate tax liabilities item 7aitem 7 management’s discussion analysis financial condition results operations description company world’s largest meat protein company secondlargest food production company fortune 500 one recognized brand names food industry produce distribute market chicken beef pork prepared foods related allied products operations conducted four segments chicken beef pork prepared foods key factors influence business customer demand products ability maintain grow relationships customers introduce new innovative products marketplace accessibility international markets market prices chicken beef pork products cost live cattle hogs raw materials grain operating efficiencies facilities overview fiscal 2007 significant improvements segments total operating income improved 691 million last year following highlights fiscal 2007 • chicken segment despite increased grain costs fiscal 2007 chicken segment results improved largely due increased average sales prices partially offset decrease sales volumes additionally sold two commodity chicken plants may 2007 rebuild another chicken plant closed due fire late fiscal 2006 • beef segment operating cost efficiencies yield improvements led improved operating margins beef segment operating cost efficiencies benefited closure three beef plants two closed fiscal 2006 another closed early fiscal 2007 • pork segment operating cost efficiencies yield improvements led improved operating margins • prepared foods segment improvements prepared foods segment primarily due increased average sales prices • achieved savings goal related cost management initiative acquisition ibp inc 2001 • 2007 net income includes following item • 17 million tax expense related fixed asset tax cost correction primarily related fixed asset system conversion 1999 • 2006 net loss includes following items • 63 million costs related beef prepared foods poultry plant closings • 19 million charges related cost management initiative business consolidation efforts included severance expense product rationalization costs related intangible asset impairment expenses • 15 million tax expense resulting review tax account balances • 5 million charge related cumulative effect change accounting principle due adoption financial accounting standards board interpretation 47 “accounting conditional asset retirement obligations” interpretation fasb statement 143 fin 47 • 2005 net income includes following items • effective tax rate benefited federal income tax effect medicare part subsidy fiscal 2005 55 million amount subject federal income tax • 15 million nonrecurring income tax net benefit includes reversal tax reserves partially offset income tax charge related repatriation foreign income • 33 million costs related legal settlement involving live swine operations • 14 million costs poultry prepared foods plant closings tyson foods inc outlook following elements comprise longterm strategic plan • create innovative insightdriven food solutions discover sell marketleading products services grow tyson’s brand equity help customers succeed commitment joint value creation • optimize commodity business models emphasize cost focus operations manage margins maximize revenue capitalizing scale yield pricing product mix services • build multinational enterprise accelerate expansion cost competitive regions markets greatest growth potential well increase diversify united states exports • revolutionize conversion raw materials byproducts highmargin initiatives commercialize opportunities outside core business renewable energy technologicallyadvanced platforms fiscal 2007 announced strategic alliance conocophillips produce market renewable diesel fuel alliance plans use poultry beef pork byproduct fat produce onhighway transportation fuel production expected begin first quarter fiscal 2008 expect alliance significant impact earnings fiscal 2008 also fiscal 2007 formed 5050 joint venture syntroleum corporation joint venture dynamic fuels llc produce renewable synthetic fuels targeting renewable diesel jet military fuel markets construction production facilities expected begin fiscal 2008 continue fiscal 2009 production targeted 2010 working potentially close two integrated poultry joint ventures china well integrated poultry deal brazil expect close two transactions end second quarter fiscal 2008 third completed third quarter fiscal 2008 outlook fiscal 2008 includes • diluted earnings per share range 030 070 • sales expected approximately 28 billion • capital spending 425 475 million • net interest expense approximately 200 million outlook segments fiscal 2008 includes • chicken expect participate increase industrywide chicken supplies think 34 fiscal 2007 based current sales projections plan increase production volume meet customers’ needs however anticipate increase grain costs excess 300 million compared fiscal 2007 working mitigate risk management pricing • beef expect continue building operational execution improvements fiscal 2007 however beginning fiscal 2008 difficult volatile environment industry current environment result industry processing much cattle relative supply demand negative impact operating margins historically conditions limited duration • pork expect increase pork supplies 12 lead better results fiscal 2008 compared fiscal 2007 • prepared foods expect improvements fiscal 2008 compared fiscal 2007 sku rationalization project almost complete additionally anticipate lower pork raw material costs fiscal 2008 tyson foods inc summary results • 2007 vs 2006 • improvement sales largely due improved average sales prices accounted increase approximately 15 billion sales improvement due better market conditions segments majority increase attributable chicken beef segments • sales negatively impacted slight decrease sales volumes accounted decrease approximately 181 million decrease driven decreases chicken prepared foods segments offset improvements beef pork segments decrease includes planned production cuts closure production facilities offset improvements beef pork export markets improved domestic pork demand • 2006 vs 2005 • oversupply proteins led decreased average sales prices segments • 2007 vs 2006 • decrease cost sales percentage sales primarily due increase average sales prices average live prices production costs increase rate • cost sales increased 836 million increase cost per pound contributing 982 million increase offset decrease sales volumes reducing cost sales 146 million increase net grain costs 256 million includes 334 million increased grain costs partially offset increased net gains 78 million commodity risk management activities related grain purchases increase average domestic live cattle hog costs well increase domestic pork sales volumes lakeside operation sales volumes increased cost sales approximately 797 million decrease chicken segment sales volumes decreased cost sales approximately 346 million primarily due planned production cuts sale two poultry plants closure poultry plant fiscal 2006 due fire • 2006 vs 2005 • increase cost sales percentage sales primarily due decrease average sales prices average live prices production costs decrease rate • increase approximately 167 million related energy costs tyson foods inc • 2007 vs 2006 • decrease 39 million advertising sales promotion expenses • decrease 27 million due favorable actuarial adjustment related retiree healthcare plan recorded fiscal 2007 compared unfavorable adjustment recorded fiscal 2006 • decrease 15 million professional fees • decrease 18 million due gain recorded fiscal 2007 disposition aircraft well favorable investment returns companyowned life insurance • various savings recognized part cost management initiative savings addition decreases include management salaries travel relocation recruiting personnel awards well various savings • increase 18 million earningsbased incentive compensation • 2006 vs 2005 • increase 10 million stock compensation expense primarily result adoption statement financial accounting standards 123r “sharebased payment” • increase 10 million related insurance proceeds received fiscal 2005 increased information system services costs • decrease 9 million related charitable contributions • 2006 • includes 47 million charges related closing norfolk west point nebraska operations • includes 14 million charges related closing independence oelwein iowa operations • includes 9 million severance accruals related cost management initiative announced july 2006 • 2005 • includes 33 million charges related legal settlement involving live swine operations • includes 14 million charges related closing cleveland street forest mississippi portland maine bentonville arkansas operations • 2006 includes 20 million interest earned 750 million shortterm investment held deposit trustee used repayment 725 notes maturing october 1 2006 tyson foods inc • 2006 increase interest expense primarily due 10 billion senior unsecured notes borrowing end second quarter fiscal 2006 used 750 million proceeds borrowing repayment 725 notes maturing october 1 2006 • 2007 • includes 12 million foreign currency exchange gain • 2006 • includes 7 million gain recorded writeoff capital lease obligation related legal settlement • includes 7 million foreign currency exchange gain • 2005 • includes 8 million gain sale remaining interest specialty brands inc • 2007 • increased effective tax rate 42 due fixed asset tax cost correction primarily related fixed asset system conversion 1999 • increased effective tax rate 32 due federal income tax effect reductions estimated medicare part subsidy fiscal 2007 deductible federal income tax purposes • reduced effective tax rate 46 due reduction income tax reserves based favorable settlement disputed matters • 2006 • reduced effective tax rate 51 due expense recorded fiscal 2006 result tax account balance review • reduced effective tax rate 18 due federal income tax effect reductions estimated medicare part subsidy fiscal 2006 deductible federal income tax purposes • 2005 • reduced effective tax rate 41 due reduction income tax reserves based favorable settlement disputed matters • reduced effective tax rate 36 related fiscal 2005 estimated future medicare part subsidy • increased effective tax rate 42 related repatriation earnings foreign subsidiaries allowed american jobs creation act tyson foods inc • 2006 transition charge related adoption fin 47 segment results operate four segments chicken beef pork prepared foods following table summary sales operating income loss measure segment income loss • 2007 operating income includes 10 million gain sale two poultry plants related support facilities • 2006 operating income includes 9 million charges related cost management initiative business consolidation efforts plant closing costs • 2005 operating income includes 12 million charges related plant closings 8 million hurricanerelated losses • 2007 vs 2006 • sales operating income increase sales operating income due increase average sales prices partially offset decrease sales volumes decrease sales volumes due planned production cuts sale two poultry plants closure poultry plant fiscal 2006 due fire increase average sales prices contributed improved operating income partially offset increase net grain costs 256 million increase net grain costs includes 334 million increased grain costs partially offset increased net gains 78 million commodity risk management activities related grain purchases additionally operating income improved due decrease selling general administrative expenses • 2006 vs 2005 • sales operating income decline sales primarily due lower average sales prices predominantly caused oversupply proteins marketplace addition lower average sales prices operating results affected negatively higher energy costs decreased margins operations mexico fiscal 2006 operating results include realized unrealized net gains 6 million commodity risk management activities related grain purchases compared realized unrealized net losses 27 million recorded fiscal 2005 tyson foods inc • 2006 operating loss includes 52 million charges related plant closings cost management initiative business consolidation efforts • 2005 operating loss includes 10 million income received connection vitamin antitrust litigation • fiscal 2007 vs 2006 • sales operating income loss increase sales operating income due higher average sales prices well higher sales volumes operating results improvement due operating cost efficiencies yield improvements partially offset increase average live prices also operating results improved significantly decrease selling general administrative expenses fiscal 2007 operating results include realized unrealized net losses 2 million commodity risk management activities related forward futures contracts live cattle excluding related impact physical sale purchase transactions compared realized unrealized net losses 40 million recorded fiscal 2006 additionally operating results affected positively significant operating margin improvements lakeside operation canada • fiscal 2006 vs 2005 • sales operating loss increase sales due higher sales volumes partially offset slightly lower average sales prices predominantly caused oversupply proteins marketplace addition lower average sales prices operating results impacted negatively significant operating margin reductions lakeside operation canada also fiscal 2006 operating results include realized unrealized net losses 40 million commodity risk management activities related forward futures contracts live cattle excluding related impact physical sale purchase transactions compared realized unrealized net gains 13 million recorded fiscal 2005 tyson foods inc • 2005 operating income includes 33 million charges related legal settlement involving live swine operations • 2007 vs 2006 • sales operating income increase sales operating income due higher sales volumes increase average sales prices due increased domestic demand strong export markets additionally operating income impacted positively improved operating cost efficiencies yield improvements partially offset higher average live prices fiscal 2007 operating results include realized unrealized net gains 3 million commodity risk management activities related forward futures contracts live hogs excluding related impact physical sale purchase transactions compared realized unrealized net losses 15 million recorded fiscal 2006 • 2006 vs 2005 • sales operating income decline sales primarily due lower average sales prices predominantly caused oversupply proteins marketplace lower average sales prices offset partially lower average live prices additionally fiscal 2006 operating results include realized unrealized net losses 15 million commodity risk management activities related forward futures contracts live hogs excluding related impact physical sale purchase transactions compared realized unrealized net losses 22 million recorded fiscal 2005 • 2007 operating income includes 7 million charges related intangible asset impairments • 2006 operating income includes 19 million charges related plant closings business consolidation efforts cost management initiative • 2007 vs 2006 • sales operating income decline sales primarily due decrease sales volumes includes reduced sales volumes lower margin products partially offset increase average sales prices operating income improved primarily due improvement average sales prices partially offset increase plant costs raw material costs • 2006 vs 2005 • sales operating income decline sales operating income primarily due lower average sales prices tyson foods inc liquidity capital resources cash needs operations growth capital expenditures expected met cash flows provided operating activities well shortterm borrowings reclassification fiscal 2007 reclassified 85 million 27 million respectively fiscal 2006 fiscal 2005 negative book cash balances changes working capital reported operating activities increase decrease negative book cash balances reported financing activities conform current period presentation income changes working capital represents net income loss adjusted noncash income expenses additionally amount represents net cash provided operating activities prior changes assets liabilities associated operations past three years cash provided operating activities approximately 21 billion enabled us fund 14 billion capital expenditures pay debt 593 million changes working capital • 2007 operating cash flows declined due higher inventory accounts receivable balances partially offset higher accounts payable balance • 2006 operating cash flow increased due lower accounts receivable balance higher accounts payable interest payable balances partially offset lower income taxes payablereceivable balance • 2005 operating cash flow increased due higher accounts payable income taxes payablereceivable balances well lower accounts receivable balance • expenditures property plant equipment include acquisition new equipment upgrading facilities maintain competitive standing position us future opportunities fiscal 2007 focused reducing capital spending fiscal 2006 2005 significant capital investing including new discovery center sherman texas caseready facility information system technology improvements complete capital spending fiscal 2008 expected 425 million 475 million joint venture produce renewable synthetic fuels targeting renewable diesel jet military fuel markets anticipate total initial capital spending approximately 75 million construction initial facility 50 estimated cost construct first facility construction expected begin fiscal 2008 continue fiscal 2009 production targeted 2010 • tyson foods inc proceeds sale assets fiscal 2007 include 40 million received related sale two poultry plants related support facilities • shortterm investment purchased fiscal 2006 proceeds 10 billion senior unsecured notes maturing april 1 2016 shortterm investment held interest bearing account trustee fiscal 2007 used proceeds sale shortterm investment repay outstanding 750 million 725 notes due october 1 2006 • continue evaluate additional international domestic growth opportunities working close potentially two integrated poultry joint ventures china well integrated poultry deal brazil expect close two transactions end second quarter fiscal 2008 third completed third quarter fiscal 2008 • net borrowings payments revolving credit facilities primarily include activity related accounts receivable securitization commercial paper • payments debt include 725 notes due october 1 2006 addition used cash operations reduce amount outstanding lakeside term loan 320 million repay outstanding 125 million 745 notes due june 1 2007 reduce borrowings october 17 2005 reduced borrowings • net proceeds borrowings debt include 2016 notes carried initial 660 interest rate carry 685 interest rate interest payments due semiannually april 1 october 1 fiscal 2007 proceeds used repay outstanding 750 million 725 notes due october 1 2006 remaining proceeds used general corporate purposes threeyear term loan agreement principal balance due end term agreement provides interest rates ranging libor plus 04 percent libor plus one percent depending debt rating interest payments made least quarterly lakeside one whollyowned subsidiaries • 137 million debt due fiscal 2008 expect use cash operations shortterm borrowings repay debt tyson foods inc • revolving credit facility supports shortterm funding needs letters credit letters credit issued primarily support workers’ compensation insurance programs derivative activities • receivables purchase agreement three copurchasers allows us sell 750 million trade receivables consisting 375 million expiring august 2008 375 million expiring august 2010 • current ratio september 29 2007 170 1 compared 147 1 162 1 respectively september 30 2006 october 1 2005 • september 30 2006 750 million shortterm investment held deposit trustee proceeds sale shortterm investment used repay 750 million 725 notes due october 1 2006 repayment made fiscal 2007 adjusted 750 million shortterm investment held deposit total debt would 32 billion debt capitalization ratio 421 credit ratings july 24 2006 moody’s investors services inc moody’s downgraded credit rating applicable 2016 notes “baa3” “ba1” downgrade increased interest rate 2016 notes 660 685 effective first day interest period rating change required adjustment interest rate ie issuance 2016 notes downgrade material impact interest expense additionally july 31 2006 standard poor’s sp downgraded credit rating applicable 2016 notes “bbb” “bbb” downgrade result increase interest rate 2016 notes result increase interest expense related fees debt september 18 2006 tyson fresh meats tfm whollyowned subsidiary company guaranteed 2016 notes guarantee extend unsecured senior notes company moody’s sp change july 2006 credit ratings applicable 2016 notes however moody’s issued new credit rating “ba2” sp issued new credit rating “bb” related unsecured senior notes guaranteed tfm new ratings impact interest rate applicable 2016 notes material impact interest expense sp currently rates 2016 notes “bbb” negative outlook moody’s currently rates debt “ba1” negative outlook pretax impact earnings downgrade would material tyson foods inc debt covenants debt agreements contain various covenants restrictive contain maximum allowed leverage ratios minimum required interest coverage ratio compliance covenants september 29 2007 offbalance sheet arrangements offbalance sheet arrangements material financial position results operations offbalance sheet arrangements guarantees debt outside third parties including lease grower loans residual value guarantees covering certain operating leases various types equipment see note 8 “commitments” notes consolidated financial statements discussions guarantees contractual obligations following table summarizes contractual obligations september 29 2007 1 event default payment violation debt covenants acceleration principal payments could occur september 29 2007 compliance debt covenants 2 interest payments include interest outstanding debt payments estimated variable rate variable term debt based effective rates september 29 2007 expected payment dates 3 amounts included guarantees debt outside third parties involve lease grower loans substantially collateralized underlying assets well residual value guarantees covering certain operating leases various types equipment amounts included maximum potential amount future payments 4 amounts included operating lease obligations minimum lease payments lease agreements 5 amounts included purchase obligations agreements purchase goods services enforceable legally binding specify significant terms including fixed minimum quantities purchased fixed minimum variable price provisions approximate timing transaction purchase obligations amount includes items future purchase commitments grains livestock contracts provide terms meet criteria excluded future purchase commitments contracts meet criteria purchase orders included table purchase order authorization purchase may considered enforceable legally binding contract contracts goods services contain termination clauses without penalty also excluded 6 amounts included capital expenditures estimated amounts complete construction projects progress september 29 2007 7 amounts included longterm liabilities items meet definition purchase obligation recorded consolidated balance sheets tyson foods inc recently adopted accounting standards regulations september 2006 financial accounting standards board fasb issued statement financial accounting standards 158 “employers’ accounting defined benefit pension postretirement plans amendment fasb statements 87 88 106 132r” sfas 158 sfas 158 requires companies recognize funded status defined benefit postretirement plan asset liability consolidated balance sheet recognize changes funded status year changes occur comprehensive income adopted sfas 158 end fiscal 2007 standard also requires companies measure funded status plan date annual consolidated balance sheet limited exceptions portion standard delayed effective date adopt fiscal 2009 see note 12 “pensions postretirement benefits” notes consolidated financial statements impact adoption sfas 158 september 2006 securities exchange commission staff published staff accounting bulletin 108 “considering effects prior year misstatements current year financial statements” sab 108 sab 108 addresses quantifying financial statement effects misstatements specifically effects prior year uncorrected errors must considered quantifying misstatements current year financial statements adopted sab 108 end fiscal 2007 impact consolidated financial statements december 2004 fasb issued statement financial accounting standards 123r “sharebased payment” sfas 123r pronouncement requires companies measure recognize compensation expense sharebased payments employees including grants employee stock options restricted stock performancebased shares financial statements based fair value date grant fiscal 2006 adopted sfas 123r using modified prospective method modified prospective method compensation cost recognized sharebased payments granted adoption sfas 123r awards granted employees prior adoption date sfas 123r unvested adoption date accordingly restatements made prior periods prior adoption sfas 123r applied accounting principles board opinion 25 “accounting stock issued employees” accounting employee stock compensation plans accordingly compensation expense recognized stock option issuances stock options issued exercise price equal closing price date grant also prior adoption sfas 123r issued restricted stock recorded fair value awards deferred compensation amortized vesting period fair value option grant established date grant using blackscholes optionpricing model grants awarded prior october 1 2005 binomial lattice method grants awarded subsequent october 1 2005 change binomial lattice method made better reflect exercise behavior top management recognized compensation expense net tax fiscal 2007 fiscal 2006 respectively 11 million 9 million related stock options 14 million 15 million related restricted stock september 29 2007 44 million total unrecognized compensation cost related stock option plans recognized weighted average period 25 years 44 million total unrecognized compensation cost related restricted stock awards recognized weightedaverage period 22 years march 2005 fasb issued interpretation 47 “accounting conditional asset retirement obligations” interpretation fasb statement 143 fin 47 statement financial accounting standards 143 “accounting asset retirement obligations” sfas 143 issued june 2001 requires entity recognize fair value liability asset retirement obligation period incurred reasonable estimate fair value made sfas 143 applies legal obligations associated retirement tangible longlived asset resulted acquisition construction development andor normal operation longlived asset associated asset costs capitalized part carrying amount longlived asset fin 47 clarifies term “conditional asset retirement obligation” used sfas 143 refers legal obligation perform asset retirement activity timing andor method settlement conditional future event may within control entity fin 47 requires entity recognize liability fair value conditional asset retirement obligation fair value liability reasonably estimated uncertainty timing andor method settlement conditional asset retirement obligation factored measurement liability sufficient information exists adopted fin 47 september 30 2006 see note 2 “change accounting principle” notes consolidated financial statements impact adoption fin 47 tyson foods inc recently issued accounting standards regulations june 2006 fasb issued interpretation 48 “accounting uncertainty income taxes” interpretation fasb statement 109 fin 48 fin 48 prescribes recognition threshold measurement attribute financial statement recognition measurement tax position taken expected taken tax return fin 48 also provides guidance derecognition classification interest penalties accounting interim periods disclosure transition fin 48 effective fiscal years beginning december 15 2006 therefore adopt fin 48 beginning fiscal 2008 currently evaluating impact adoption statement consolidated financial position expect adoption fin 48 result cumulative effect adjustment 10 million 25 million adjustment decrease retained earnings increase longterm liabilities september 2006 fasb issued statement financial accounting standards 157 “fair value measurements” sfas 157 sfas 157 provides guidance using fair value measure assets liabilities standard also responds investors’ requests expanded information extent companies measure assets liabilities fair value information used measure fair value effect fair value measurements earnings sfas 157 applies whenever standards require permit assets liabilities measured fair value february 2007 fasb issued statement financial accounting standards 159 “the fair value option financial assets financial liabilities including amendment fasb statement 115” sfas 159 statement provides companies option report selected financial assets liabilities fair value sfas 157 sfas 159 effective financial statements issued fiscal years beginning november 15 2007 interim periods within fiscal years therefore expect adopt sfas 157 sfas 159 beginning fiscal 2009 process evaluating potential impacts sfas 157 sfas 159 tyson foods inc critical accounting estimates preparation consolidated financial statements requires us make estimates assumptions estimates assumptions affect reported amounts assets liabilities disclosure contingent assets liabilities date consolidated financial statements reported amounts revenues expenses reporting period actual results could differ estimates following summary certain accounting estimates consider critical effect actual results differ description judgments uncertainties assumptions contingent liabilities subject lawsuits investigations claims related wage hourlabor livestock procurement securities environmental product taxing authorities matters required assess likelihood adverse judgments outcomes matters well potential ranges probable losses determination amount reserves disclosures required contingencies made considerable analysis individual issue accrue contingent liabilities assessment risk loss probable reasonably estimated disclose contingent liabilities risk loss reasonably possible probable contingent liabilities contain uncertainties eventual outcome result future events determination current reserves requires estimates judgments related future changes facts circumstances differing interpretations law assessments amount damages effectiveness strategies factors beyond control made material changes accounting methodology used establish contingent liabilities past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate contingent liabilities however actual results consistent estimates assumptions may exposed gains losses could material marketing advertising costs incur advertising retailer incentive consumer incentive costs promote products marketing programs include cooperative advertising volume discounts instore display incentives coupons programs marketing advertising costs charged period incurred accrue costs based estimated performance historical utilization redemption program cash consideration given customers considered reduction price products thus recorded reduction sales remainder marketing advertising costs recorded selling general administrative expense recognition costs related programs contains uncertainties due judgment required estimating potential performance redemption program estimates based many factors including experience similar promotional programs made material changes accounting methodology used establish marketing accruals past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate marketing accruals however actual results consistent estimates assumptions may exposed gains losses could material 10 change marketing accruals september 29 2007 would impact pretax earnings approximately 9 million tyson foods inc effect actual results differ description judgments uncertainties assumptions accrued self insurance self insured certain losses related health welfare workers’ compensation auto liability general liability claims use independent thirdparty actuary assist determination selfinsurance liability actuary consider number factors estimating selfinsurance liability including claims experience demographic factors severity factors actuarial assumptions periodically review estimates assumptions thirdparty actuary assist us determining adequacy selfinsurance liability policy maintain accrual within central high point actuarial range selfinsurance liability contains uncertainties due assumptions required judgment used costs settle obligations including legal healthcare costs could increase decrease causing estimates selfinsurance liability change incident rates including frequency severity could increase decrease causing estimates selfinsurance liability change made material changes accounting methodology used establish selfinsurance liability past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate selfinsurance liability however actual results consistent estimates assumptions may exposed gains losses could material 10 increase actuarial range september 29 2007 would impact amount recorded selfinsurance liability 10 decrease actuarial range september 29 2007 would result gain amount recorded selfinsurance liability approximately 23 million impairment longlived assets longlived assets evaluated impairment whenever events changes circumstances indicate carrying value may recoverable examples include significant adverse change extent manner use longlived asset change physical condition evaluating longlived assets impairment compare carrying value asset’s estimated undiscounted future cash flows impairment recorded estimated future cash flows less carrying value asset impairment excess carrying value fair value longlived asset recorded impairment charges related longlived assets 6 million 67 million 33 million respectively fiscal years 2007 2005 impairment analysis contains uncertainties due judgment assumptions estimates surrounding undiscounted future cash flows longlived asset including forecasting useful lives assets selecting discount rate reflects risk inherent future cash flows made material changes accounting methodology used evaluate impairment longlived assets last three years believe reasonable likelihood material change estimates assumptions used calculate impairments longlived assets however actual results consistent estimates assumptions used calculate estimated future cash flows may exposed impairment losses could material tyson foods inc effect actual results differ description judgments uncertainties assumptions impairment goodwill intangible assets goodwill impairment determined using twostep process first step identify potential impairment exists comparing fair value reporting unit carrying amount including goodwill fair value reporting unit exceeds carrying amount goodwill reporting unit considered potential impairment second step impairment test necessary however carrying amount reporting unit exceeds fair value second step performed determine goodwill impaired measure amount impairment loss recognize second step compares implied fair value goodwill carrying amount goodwill implied fair value goodwill exceeds carrying amount goodwill considered impaired however carrying amount goodwill exceeds implied fair value impairment loss recognized amount equal excess implied fair value goodwill determined manner amount goodwill recognized business combination ie fair value reporting unit allocated assets liabilities including unrecognized intangible assets reporting unit acquired business combination fair value reporting unit purchase price paid acquire reporting unit intangible assets carrying value intangible asset exceeds fair value impairment loss recognized amount equal excess elected make first day fourth quarter annual impairment assessment date goodwill intangible assets however could required evaluate recoverability goodwill intangible assets prior required annual assessment experience disruptions business unexpected significant declines operating results divestiture significant component business decline market capitalization estimate fair value reporting units generally operating segments using various valuation techniques primary technique discounted cash flow analysis discounted cash flow analysis requires us make various judgmental assumptions sales operating margins growth rates discount rates assumptions sales operating margins growth rates based budgets business plans economic projections anticipated future cash flows marketplace data assumptions also made varying perpetual growth rates periods beyond longterm business plan period estimating fair value beef segment assumed operating margins future years excess margins realized since export markets restricted due bse issues fair value estimate segment assumes future access export markets similar periods prior bse issues includes operating margin assumptions based longterm expectations margins historically realized beef industry estimate fair value beef segment would excess carrying amount including goodwill sustaining longterm operating margins approximately 25 intangible asset fair values calculated trademarks using royalty rate method using present value future cash flows patents inprocess technology assumptions royalty rates based rates similar brands trademarks licensed marketplace impairment analysis contains uncertainties due uncontrollable events could positively negatively impact anticipated future economic operating conditions made material changes accounting methodology used evaluate impairment goodwill intangible assets last three years september 29 2007 25 billion goodwill 126 million intangible assets goodwill included following segments • 09 billion chicken • 12 billion beef • 03 billion pork • 01 billion prepared foods result first step 2007 goodwill impairment analysis fair value reporting unit exceeded carrying value therefore second step necessary however 13 decline fair value beef segment 7 decline fair value chicken segment would caused carrying values reporting units excess fair values would require second step performed second step could resulted impairment loss goodwill believe made reasonable estimates assumptions calculate fair value reporting units fair value intangible assets possible material change could occur actual results consistent estimates assumptions used calculate fair value reporting units may required perform second step could result material impairment goodwill fiscal 2007 intangible asset impairment analysis result material impairment charge hypothetical 10 decrease fair value intangible assets would result material impairment tyson foods inc effect actual results differ description judgments uncertainties assumptions income taxes estimate total income tax expense based statutory tax rates tax planning opportunities available us various jurisdictions earn income federal income taxes include estimate taxes earnings foreign subsidiaries expected remitted united states taxable earnings considered indefinitely invested foreign subsidiary deferred income taxes recognized future tax effects temporary differences financial income tax reporting using tax rates effect years differences expected reverse valuation allowances recorded likely tax benefit realized deferred tax asset record tax liabilities anticipated tax issues based estimate whether extent additional taxes due changes tax laws rates could affect recorded deferred tax assets liabilities future changes projected future earnings could affect recorded valuation allowances future calculations related income taxes contain uncertainties due judgment used calculate tax liabilities application complex tax regulations across tax jurisdictions operate believe reasonable likelihood material change tax related balances valuation allowances however due complexity uncertainties ultimate resolution may result payment materially different current estimate tax liabilities extent prevail matters reserves established required pay amounts excess recorded reserves effective tax rate given financial statement period could materially affected unfavorable tax settlement would require use cash result increase effective tax rate period resolution favorable tax settlement would recognized reduction effective tax rate period resolution item 7aitem 7 management’s discussion analysis financial condition results operations description company world’s largest meat company secondlargest food production company fortune 500 one recognized brand names food industry produce distribute market chicken beef pork prepared foods related allied products operations conducted four segments chicken beef pork prepared foods key factors influence business customer demand products ability maintain grow relationships customers introduce new innovative products marketplace accessibility international markets market prices chicken beef pork products cost live cattle hogs raw materials grain operating efficiencies facilities overview ● chicken segment fiscal 2008 operating results declined compared fiscal 2007 due largely increased input costs approximately 900 million including increased grain costs feed ingredient costs cooking ingredients increases partially offset increased average sales prices well increased net gains 127 million commodity risk management activities related grain purchases exclude impact related physical purchase transactions impact future period operating results ● beef segment fiscal 2008 operating results improved compared fiscal 2007 operating margins significantly improved latter half year operating margin 28 last six months fiscal 2008 sales volume closure emporia kansas slaughter operation operating margins improved due improved average sales prices operational efficiencies ● pork segment achieved record operating income 280 million increase 135 million compared fiscal 2007 due adequate hog supplies strong domestic export demand ● prepared foods segment declines operating income fiscal 2008 compared fiscal 2007 prepared foods segment primarily due increased raw material costs partially offset increased average sales prices ● acquisitions fiscal 2008 announced following transactions ● december 2007 cobbvantress inc cobb whollyowned poultry breeding subsidiary formed alliance hendrix genetics bv hendrix alliance strengthen cobb’s position broiler breeding industry hendrix’ position egg layer turkey swine genetics enable cobb hendrix explore joint venture opportunities july 2008 cobb acquired hybro poultry breeding genetics business hendrix acquisition included genetic lines facilities time cobb hendrix signed joint development agreement involving respective research development livestock genetics ● february 2008 signed agreement jiangsu jinghai poultry industry group co ltd chinese poultry breeding company build fully integrated poultry operation haimen city near shanghai joint venture jiangsu tyson foods produce fresh packaged chicken products sold tyson name jiangsu tyson become first producer deliver brand name high quality fresh chicken consumers eastern china market 70 percent business production expected begin 2009 ● june 2008 announced acquisition 51 ownership godrej foods ltd poultry processing business india joint venture called godrej tyson foods anticipate annual sales approximately 50 million initially expect operations expand later godrej foods currently sells retail fresh processed chicken ● september 2008 announced joint venture agreement finalized shandong xinchang group vertically integrated poultry operation eastern china agreement receives necessary government approvals expected fiscal 2009 tyson 60 ownership joint venture called shandong tyson xinchang foods company ● september 2008 signed purchase agreements three poultry companies southern brazil vertically integrated companies include macedo agroindustrial avicola itaiopolis frangobras closed transactions subsequent fiscal 2008 ● june 2008 executed letter intent sell lakeside farm industries lakeside canadian beef operation xl foods inc canadianowned beef processing business terms letter intent tyson sell lakeside 104 million retain finished product inventory accounts receivable accounts payable lakeside closing date xl foods pay additional amount cattle inventory fertilizer inventory packaging assets estimated approximate 82 million transaction remains subject government approvals execution definitive agreement parties results lakeside reported discontinued operation ● see liquidity capital resources summary impact recent deterioration credit capital markets business tyson foods inc 2008 net income includes following items ● 33 million charges related asset impairments including packaging equipment intangible assets unimproved real property software ● 17 million charge related restructuring emporia kansas beef operation ● 13 million charge related closing wilkesboro north carolina cooked products poultry plant ● 13 million charges related flood damage jefferson wisconsin plant severance charges related fast initiative ● 18 million nonoperating gain related sale investment 2007 net income includes following item ● 17 million tax expense related fixed asset tax cost correction primarily related fixed asset system conversion 1999 2006 net loss includes following items ● 63 million costs related beef prepared foods poultry plant closings ● 19 million charges related cost management initiative business consolidation efforts included severance expense product rationalization costs related intangible asset impairment expenses ● 15 million tax expense resulting review tax account balances ● 5 million charge related cumulative effect change accounting principle due adoption financial accounting standards board interpretation 47 “accounting conditional asset retirement obligations” interpretation fasb statement 143 fin 47 outlook following elements comprise longterm strategic plan ● create innovative insightdriven food solutions discover sell marketleading products services grow tyson’s brand equity help customers succeed commitment joint value creation ● optimize commodity business models emphasize cost focus operations manage margins maximize revenue capitalizing scale yield pricing product mix services ● build multinational enterprise accelerate expansion cost competitive regions markets greatest growth potential well increase diversify united states exports ● revolutionize conversion raw materials byproducts highmargin initiatives commercialize opportunities outside core business renewable energy fat developing technologicallyadvanced platforms materials feathers viscera blood animal waste outlook segments fiscal 2009 includes ● chicken export markets credit availability recent strengthening dollar negatively impacted leg quarter pricing international leg quarter sales difficult least beginning fiscal 2009 seen grain prices drop significantly alltime highs past summer sustained benefit us long run however grain positions could negatively impact us depending corn soybean meal closing prices end first quarter fiscal 2009 ● beef expect cattle supplies 12 fiscal 2009 ample supply run plants efficiently continue focus operational efficiencies fiscal 2008 expect successful fiscal 2009 ● pork anticipate fewer hog supplies fiscal 2009 expect adequate supply achieve good operating results segment continue well fiscal 2009 likely record amounts fiscal 2008 ● prepared foods high input costs likely continue fiscal 2009 demand products remains strong provide sales volume growth fiscal 2009 tyson foods inc summary results continuing operations 2008 vs 2007 ● improvement sales largely due improved average sales prices accounted increase approximately 15 billion segments improved average sales prices majority increase driven increases chicken beef segments ● sales negatively impacted decrease sales volume accounted decrease approximately 318 million primarily due decrease beef volume sale two poultry production facilities fiscal 2007 partially offset increase pork volume 2007 vs 2006 ● improvement sales largely due improved average sales prices accounted increase approximately 14 billion sales improvement due better market conditions segments majority increase attributable chicken beef segments ● sales negatively impacted slight decrease sales volume accounted decrease approximately 226 million decrease driven decreases chicken prepared foods segments offset improvements beef pork segments decrease included planned production cuts closure production facilities offset improvements beef pork export markets improved domestic pork demand 2008 vs 2007 ● cost sales increased 13 billion cost per pound contributed 16 billion increase offset partially decrease sales volume reducing cost sales 323 million ● increase 10 billion costs chicken segment included increased input costs approximately 900 million including grain costs feed ingredient costs cooking ingredients plant costs including labor logistics increased approximately 200 million increases partially offset increased net gains 127 million commodity risk management activities related grain purchases exclude impact related physical purchase transactions impact future period operating results ● increase average domestic live cattle costs approximately 271 million ● increase operating costs beef pork segments approximately 180 million ● decrease due sales volume included lower beef chicken sales volume partially offset higher pork sales volume ● decrease due net gains 173 million commodity risk management activities related forward futures contracts live cattle hog purchases compared period fiscal 2007 amounts exclude impact related physical purchase transactions impact future period operating results ● decrease average live hog costs approximately 117 million 2007 vs 2006 ● decrease cost sales percentage sales primarily due increase average sales prices average live prices production costs increase rate ● cost sales increased 661 million increase cost per pound contributing 853 million increase offset decrease sales volume reducing cost sales 192 million ● increase net grain costs 256 million included 334 million increased grain costs partially offset increased net gains 78 million commodity risk management activities related grain purchases ● increase average domestic live cattle hog costs well increase domestic pork sales volume increased cost sales approximately 682 million ● decrease chicken segment sales volume decreased cost sales approximately 346 million primarily due planned production cuts sale two poultry plants closure poultry plant fiscal 2006 due fire tyson foods inc 2008 vs 2007 ● increase 29 million related unfavorable investment returns companyowned life insurance used fund nonqualified retirement plans ● increase 16 million related advertising sales promotions ● increase 14 million due favorable actuarial adjustment related retiree healthcare plan recorded fiscal 2007 ● increase 9 million due gain recorded fiscal 2007 disposition aircraft 2007 vs 2006 ● decrease 39 million advertising sales promotion expenses ● decrease 27 million due favorable actuarial adjustment related retiree healthcare plan recorded fiscal 2007 compared unfavorable adjustment recorded fiscal 2006 ● decrease 15 million professional fees ● decrease 18 million due gain recorded fiscal 2007 disposition aircraft well favorable investment returns companyowned life insurance ● various savings recognized part cost management initiative savings addition decreases include management salaries travel relocation recruiting personnel awards well various savings ● increase 18 million earningsbased incentive compensation 2008 ● included 17 million charge related restructuring emporia kansas beef operation ● included 13 million charge related closing wilkesboro north carolina cooked products poultry plant ● included 6 million severance charges related fast initiative 2006 ● included 47 million charges related closing norfolk west point nebraska operations ● included 14 million charges related closing independence oelwein iowa operations ● included 9 million severance accruals related cost management initiative announced july 2006 included 20 million interest earned 750 million shortterm investment held deposit trustee used repayment 725 notes maturing october 1 2006 2007 vs 2006 decrease interest expense primarily due 10 billion senior unsecured notes borrowing end second quarter fiscal 2006 used 750 million proceeds borrowing repayment 725 notes maturing october 1 2006 tyson foods inc 2008 ● increased effective tax rate 50 due increase state valuation allowances ● increased effective tax rate 44 due increase fin 48 unrecognized tax benefits ● increased effective tax rate 38 due net negative returns companyowned life insurance policies deductible federal income tax purposes ● reduced effective tax rate 38 due general business credits 2007 ● increased effective tax rate 42 due fixed asset tax cost correction primarily related fixed asset system conversion 1999 ● increased effective tax rate 32 due federal income tax effect reductions estimated medicare part subsidy fiscal 2007 deductible federal income tax purposes ● reduced effective tax rate 46 due reduction income tax reserves based favorable settlement disputed matters 2006 ● reduced effective tax rate 51 due expense recorded fiscal 2006 result tax account balance review ● reduced effective tax rate 18 due federal income tax effect reductions estimated medicare part subsidy fiscal 2006 deductible federal income tax purposes tyson foods inc segment results operate four segments chicken beef pork prepared foods following table summary sales operating income loss measure segment income loss fourth quarter fiscal 2008 began manage report operating results identifiable assets logistics operations segment product moved relates result operating segments reflect logistics operations previously included prior periods restated reflect change segment results exclude results discontinued operation lakeside 2008 operating loss included 26 million charges related plant closings impairments unimproved real property software severance 2007 operating income included 10 million gain sale two poultry plants related support facilities 2006 operating income included 9 million charges related cost management initiative business consolidation efforts plant closing costs 2008 vs 2007 ● sales operating income loss sales increased result increase average sales prices partially offset decrease sales volume due sale two poultry plants fiscal 2007 operating results adversely impacted increased input costs approximately 900 million including grain costs feed ingredient costs cooking ingredients plant costs including labor logistics increased approximately 200 million partially offset increased net gains 127 million commodity trading risk management activities related grain purchases exclude impact related physical purchase transactions impact future period operating results operating results also negatively impacted increased selling general administrative expenses 43 million 2007 vs 2006 ● sales operating income sales operating income increased due increase average sales prices partially offset decrease sales volume decrease sales volume due planned production cuts sale two poultry plants closure poultry plant fiscal 2006 due fire increase average sales prices contributed improved operating income partially offset increase net grain costs 256 million increase net grain costs includes 334 million increased grain costs partially offset increased net gains 78 million commodity risk management activities related grain purchases additionally operating income improved due decrease selling general administrative expenses tyson foods inc 2008 operating income included 35 million charges related plant restructuring impairments packaging equipment intangible assets severance 2006 operating loss included 52 million charges related plant closings cost management initiative business consolidation efforts 2008 vs 2007 ● sales operating income sales operating income impacted positively higher average sales prices improved operational efficiencies partially offset decreased sales volume due primarily closure emporia kansas slaughter operation operating results also negatively impacted higher operating costs fiscal 2008 operating results include realized unrealized net gains 53 million commodity risk management activities related forward futures contracts live cattle excluding related impact physical sale purchase transactions compared realized unrealized net losses 2 million recorded fiscal 2007 operating results positively impacted increase average sales prices exceeding increase average live prices 2007 vs 2006 ● sales operating income loss sales operating income increased due higher average sales prices well higher sales volume operating results improved due operating cost efficiencies yield improvements partially offset increase average live prices also operating results improved significantly decrease selling general administrative expenses fiscal 2007 operating results included realized unrealized net losses 2 million commodity risk management activities related forward futures contracts live cattle excluding related impact physical sale purchase transactions compared realized unrealized net losses 40 million recorded fiscal 2006 tyson foods inc 2008 operating income included 5 million charges related impairment packaging equipment severance 2008 vs 2007 ● sales operating income operating results impacted positively lower average live prices strong export sales led increased sales volume record year operating margins fiscal 2008 operating results include realized unrealized net gains 95 million commodity risk management activities related forward futures contracts live hogs excluding related impact physical sale purchase transactions compared realized unrealized net gains 3 million recorded fiscal 2006 partially offset higher operating costs well lower average sales prices 2007 vs 2006 ● sales operating income sales operating income increased due higher sales volume increased average sales prices due increased domestic demand strong export markets additionally operating income impacted positively improved operating cost efficiencies yield improvements partially offset higher average live prices fiscal 2007 operating results included realized unrealized net gains 3 million commodity risk management activities related forward futures contracts live hogs excluding related impact physical sale purchase transactions compared realized unrealized net losses 15 million recorded fiscal 2006 2008 operating income included 10 million charges related flood damage intangible asset impairment severance 2007 operating income included 7 million charges related intangible asset impairments 2006 operating income included 19 million charges related plant closings business consolidation efforts cost management initiative 2008 vs 2007 ● sales operating income operating results negatively impacted higher raw material costs include wheat dairy cooking ingredient costs partially offset lower pork costs results positively impacted increase average sales prices 2007 vs 2006 ● sales operating income sales declined primarily due decreased sales volume including reduced sales volume lower margin products partially offset increased average sales prices operating income improved primarily due improvement average sales prices partially offset increase plant costs raw material costs tyson foods inc liquidity capital resources cash needs working capital expenditures international growth expected met cash flows provided operating activities anticipated proceeds lakeside sale shortterm borrowings income changes working capital represents net income loss adjusted noncash income expenses additionally amount represents net cash provided operating activities prior changes assets liabilities associated operations changes working capital ● 2008 operating cash flows declined primarily due higher inventory accounts receivable balances partially offset higher accounts payable balance higher inventory balances driven increase raw material costs inventory volume ● 2007 operating cash flows declined primarily due higher inventory accounts receivable balances partially offset higher accounts payable balance ● 2006 operating cash flows increased primarily due lower accounts receivable balance higher accounts payable interest payable balances partially offset lower income taxes payablereceivable balance tyson foods inc tyson foods inc ● revolving credit facility supports shortterm funding needs letters credit letters credit issued primarily support workers’ compensation insurance programs derivative activities ● accounts receivable securitization facility three copurchasers allows us sell 750 million trade receivables consisting 375 million expiring august 2009 375 million 364day facility additional oneyear option commits funding august 2010 september 27 2008 access full 750 million borrowing capacity borrowing capacity could reduced future eligible receivables balance falls 750 million ● conjunction 100 million gulf opportunity zone taxexempt bond issuance october 2008 agreed issue guarantee full amount bond issuance issued form letter credit exchange eight million syntroleum stock warrants valued 001 issuance letter credit receipt syntroleum warrants occurred subsequent fiscal 2008 letter credit reduce unused borrowing capacity available revolving credit facility ● october 2008 completed acquisition three vertically integrated poultry companies southern brazil purchase price 80 million well additional 15 million contingent purchase price based production volumes payable fiscal 2010 additionally joint venture agreement shandong xinchang group receives necessary government approvals expect spend 110115 million acquire 60 ownership expect finalized fiscal 2009 ● subject receipt applicable government approvals anticipate ready complete sale lakeside end first quarter fiscal 2009 plans use available proceeds pay debt general corporate purposes inclusive working capital lakeside initially retained us closing well consideration received xl foods expect following future cash flows based september 27 2008 currency exchange rate 55 million received closing approximately 136 million calendar 2009 49 million notes receivable plus interest paid two years xl foods 29 million xl foods preferred stock redeemable five years discontinuance lakeside’s operation material effect future operating cash flows ● current ratio september 27 2008 september 29 2007 207 1 174 1 respectively deterioration credit capital markets credit market conditions deteriorated rapidly fourth quarter fiscal 2008 continue first quarter fiscal 2009 several major banks financial institutions failed forced seek assistance distressed sales emergency government measures allinclusive following summarizes impacts business credit facilities cash flows operating activities primary source liquidity funding debt service capital expenditures however rely revolving credit accounts receivable securitization facilities provide additional liquidity working capital needs letters credit source financing international growth revolving credit facility total committed capacity 10 billion september 27 2008 outstanding letters credit totaling 291 million none drawn upon left 709 million available borrowing revolving credit facility funded syndicate 35 banks commitments ranging 5 million 78 million per bank banks syndicate unable perform commitments fund facility liquidity could impaired could reduce ability fund working capital needs finance international growth strategy accounts receivable securitization facility 750 million committed funding entire amount available borrowing september 27 2008 accounts receivable securitization facility funded syndicate three banks commitment 250 million per bank date banks syndicate continued meet commitments despite recent market turmoil banks syndicate unable perform commitments fund facility liquidity could impaired could reduce ability fund working capital needs finance international growth strategy borrowed facility subsequent fiscal 2008 banks syndicate performed obligations fund borrowings tyson foods inc current market conditions also resulted higher credit spreads longterm borrowings significantly reduced demand new corporate debt issuances equity class common stock equity prices including class common stock fallen experienced abnormally high volatility current period conditions persist cost capital increase significantly customerssuppliers financial condition customers suppliers could also impaired current market conditions although experienced material increase customer bad debts nonperformance suppliers current market conditions increase probability could experience losses customer supplier defaults current credit capital market conditions result prolonged economic downturn united states abroad demand protein products could reduced could result reduction sales operating income cash flows investments value investments equity debt securities including marketable debt securities companyowned life insurance pension postretirement plan assets negatively impacted recent market declines instruments recorded fair value september 27 2008 however subsequent september 27 2008 november 1 2008 seen additional reduction fair value approximately 32 million believe reduction fair value temporary current market conditions continue could required recognize 10 million expense first quarter fiscal 2009 remaining change fair value would deferred comprehensive income unless determined permanently impaired currently oversee two domestic one foreign subsidiary noncontributory qualified defined benefit pension plans three pension plans frozen new participants additional benefits accrue participants based 2008 actuarial valuation anticipate contributions approximately 1 million plans fiscal 2009 also one domestic unfunded defined benefit plan based 2008 actuarial valuation anticipate contributions approximately 1 million plan fiscal 2009 financial instruments part commodity risk management activities use derivative financial instruments primarily futures options reduce exposure various market risks related commodity purchases similar capital markets commodities markets seen similar decline past several months grain prices reached alltime high fourth quarter fiscal 2008 falling sharply current levels reduction grain prices benefit us longterm may required record additional losses related financial instruments first quarter fiscal 2009 grain prices remain lower prices end fiscal 2008 insurance rely insurers protection liability claims property damage various risks primary insurers maintain best financial strength rating better nevertheless continue monitor situation insurers expected continue impacted current capital market environment tyson foods inc ● fiscal 2008 issued 458 million 325 convertible senior notes due october 15 2013 net proceeds used net cost convertible note hedge warrant transactions toward repayment borrowings accounts receivable securitization facility general corporate purposes ● fiscal 2008 issued 224 million shares class stock public offering net proceeds used toward repayment borrowings accounts receivable securitization facility general corporate purposes ● september 30 2006 750 million shortterm investment held deposit trustee proceeds sale shortterm investment used repay 750 million 725 notes due october 1 2006 repayment made fiscal 2007 adjusted 750 million shortterm investment held deposit total debt would 32 billion debt capitalization ratio 421 credit ratings 2016 notes july 24 2006 moody’s investors services inc moody’s downgraded credit rating “baa3” “ba1” downgrade increased interest rate 2016 notes 660 685 effective first day interest period rating change required adjustment interest rate ie issuance 2016 notes additionally july 31 2006 standard poor’s sp downgraded credit rating “bbb” “bbb” downgrade change interest rate 2016 notes september 4 2008 sp downgraded credit rating “bbb“ “bb” downgrade increased interest rate 2016 notes 685 735 effective beginning six month interest payment due october 1 2008 november 13 2008 moody’s downgraded credit rating “ba1” “ba3” downgrade increased interest rate 2016 notes 735 785 effective beginning six month interest payment due april 1 2009 sp currently rates 2016 notes “bb” moody’s currently rates debt “ba3” onenotch downgrade either ratings agency would increase interest rates 2016 notes additional 025 per ratings agency revolving credit facility rating upgrade october 1 2008 sp’s credit rating revolving credit facility “bbb” downgrade november 13 2008 moody’s credit rating “ba2” pretax impact earnings another downgrade would material annual interest expense however moody’s downgrade facility “ba3” sp downgrade facility “bb“ banks participating accounts receivable securitization facility could refuse purchase additional receivables us accounts receivable securitization facility could unwind amounts outstanding facility repaid receivables owned tyson receivables company whollyowned consolidated special purpose entity collected debt covenants debt agreements contain various covenants restrictive contain maximum allowed leverage ratios minimum required interest coverage ratio september 10 2008 amended revolving credit facility agreement provide less restrictive maximum allowed leverage ratio takes effect first quarter fiscal 2009 trademarks domestic subsidiaries pledged collateral revolving credit facility additionally certain domestic subsidiaries guaranteed facility pledged inventory collateral compliance covenants september 27 2008 based current industry outlook internal forecasts anticipate compliance debt covenants throughout fiscal 2009 however chicken segment first part fiscal 2009 negatively impacted difficult export markets long grain positions could negatively impact covenant compliance tyson foods inc offbalance sheet arrangements offbalance sheet arrangements material financial position results operations offbalance sheet arrangements guarantees debt outside third parties including lease grower loans residual value guarantees covering certain operating leases various types equipment see note 9 “commitments” notes consolidated financial statements discussion contractual obligations following table summarizes contractual obligations september 27 2008 1 event default payment violation debt covenants acceleration principal payments could occur september 27 2008 compliance debt covenants 2 interest payments included interest outstanding debt payments estimated variable rate variable term debt based effective rates september 27 2008 expected payment dates 3 amounts included guarantees debt outside third parties consist lease grower loans substantially collateralized underlying assets well residual value guarantees covering certain operating leases various types equipment amounts included maximum potential amount future payments 4 amounts included operating lease obligations minimum lease payments lease agreements 5 amounts included purchase obligations agreements purchase goods services enforceable legally binding specify significant terms including fixed minimum quantities purchased fixed minimum variable price provisions approximate timing transaction purchase obligations amount included items future purchase commitments grains livestock contracts fixed grower fees provide terms meet criteria excluded future purchase commitments contracts meet criteria purchase orders included table purchase order authorization purchase may considered enforceable legally binding contract contracts goods services contain termination clauses without penalty also excluded 6 amounts included capital expenditures estimated amounts complete buildings equipment construction september 27 2008 well costs construct dynamic’s facility 7 amounts included longterm liabilities items meet definition purchase obligation recorded consolidated balance sheets addition amounts shown table unrecognized tax benefits 220 million related interest penalties 67 million september 27 2008 recorded liabilities accordance interpretation 48 “accounting uncertainty income taxes” interpretation fasb statement 109 fin 48 fiscal 2009 tax audit resolutions could potentially reduce amounts approximately 38 million either tax positions sustained audit agree disallowance remaining liability due uncertainties related income tax matters unable make reasonably reliable estimate amounts timing potential reductions tyson foods inc recently adopted accounting pronouncements june 2006 fasb issued fin 48 fin 48 prescribes recognition threshold measurement attribute financial statement recognition measurement tax position taken expected taken tax return fin 48 also provides guidance derecognition classification interest penalties accounting interim periods disclosure transition adopted fin 48 beginning fiscal 2008 adoption fin 48 resulted change opening consolidated balance sheet follows 32 million increase current assets 17 million decrease current liabilities 106 million increase liabilities 40 million decrease deferred income taxes 17 million decrease retained earnings included changes recognized 120 million increase liability unrecognized tax benefits 21 million increase related liability interest penalties total 141 million september 2006 fasb issued statement financial accounting standards 158 “employers’ accounting defined benefit pension postretirement plans amendment fasb statements 87 88 106 132r” sfas 158 sfas 158 requires companies recognize funded status defined benefit postretirement plan asset liability consolidated balance sheet recognize changes funded status year changes occur comprehensive income adopted sfas 158 end fiscal 2007 except requirement measure funded status plan date annual consolidated balance sheet adopted fiscal 2008 immaterial impact see note 13 “pensions postretirement benefits” notes consolidated financial statements impact adoption sfas 158 march 2005 fasb issued fin 47 statement financial accounting standards 143 “accounting asset retirement obligations” sfas 143 issued june 2001 requires entity recognize fair value liability asset retirement obligation period incurred reasonable estimate fair value made sfas 143 applies legal obligations associated retirement tangible longlived asset resulted acquisition construction development andor normal operation longlived asset associated asset costs capitalized part carrying amount longlived asset fin 47 clarifies term “conditional asset retirement obligation” used sfas 143 refers legal obligation perform asset retirement activity timing andor method settlement conditional future event may within control entity fin 47 requires entity recognize liability fair value conditional asset retirement obligation fair value liability reasonably estimated uncertainty timing andor method settlement conditional asset retirement obligation factored measurement liability sufficient information exists adopted fin 47 september 30 2006 see note 2 “change accounting principle” notes consolidated financial statements impact adoption fin 47 tyson foods inc recently issued accounting pronouncements september 2006 fasb issued statement financial accounting standards 157 “fair value measurements” sfas 157 sfas 157 provides guidance using fair value measure assets liabilities standard also responds investors’ requests expanded information extent companies measure assets liabilities fair value information used measure fair value effect fair value measurements earnings sfas 157 applies whenever standards require permit assets liabilities measured fair value beginning september 28 2008 partially applied sfas 157 allowed fasb staff position fsp 1572 delayed effective date sfas 157 nonfinancial assets liabilities september 28 2008 applied provisions sfas 157 financial instruments impact material fsp 1572 required apply sfas 157 nonfinancial assets liabilities beginning fiscal 2010 currently reviewing applicability sfas 157 nonfinancial assets liabilities well potential impact consolidated financial statements february 2007 fasb issued statement financial accounting standards 159 “the fair value option financial assets financial liabilities including amendment fasb statement 115” sfas 159 statement provides companies option report selected financial assets liabilities firm commitments nonfinancial warranty insurance contracts fair value contractbycontract basis changes fair value recognized earnings reporting period september 28 2008 elect fair value option sfas 159 therefore impact consolidated financial statements december 2007 fasb issued statement financial accounting standards 160 “noncontrolling interests consolidated financial statements” sfas 160 sfas 160 amends accounting research bulletin 51 “consolidated financial statements” establish accounting reporting standards noncontrolling interest subsidiary deconsolidation subsidiary statement clarifies noncontrolling interest subsidiary ownership interest consolidated entity reported equity consolidated financial statements rather liability mezzanine section liabilities equity sfas 160 also requires consolidated net income reported amounts include amounts attributable parent noncontrolling interest impact sfas 160 material impact current consolidated financial statements sfas 160 effective fiscal years interim periods within fiscal years beginning december 15 2008 therefore expect adopt sfas 160 beginning fiscal 2010 december 2007 fasb issued statement financial accounting standards 141r “business combinations” sfas 141r sfas 141r establishes principles requirements acquirer business combination 1 recognizes measures financial statements identifiable assets acquired liabilities assumed noncontrolling interest acquiree 2 recognizes measures goodwill acquired business combination gain bargain purchase 3 determines information disclose enable users financial statements evaluate nature financial effects business combination sfas 141r effective business combinations acquisition date beginning first annual reporting period beginning december 15 2008 therefore expect adopt sfas 141r business combinations entered beginning fiscal 2010 march 2008 fasb issued statement financial accounting standards 161 “disclosures derivative instruments hedging activities amendment fasb statement 133” sfas 161 sfas 161 establishes enhanced disclosure requirements 1 entity uses derivative instruments 2 derivative instruments related hedged items accounted statement 133 related interpretations 3 derivative instruments related hedged items affect entity’s financial position financial performance cash flows sfas 161 effective financial statements issued fiscal years interim periods beginning november 15 2008 therefore expect adopt sfas 161 second quarter fiscal 2009 may 2008 fasb issued fasb staff position apb 141 “accounting convertible debt instruments may settled cash upon conversion including partial cash settlement” fsp apb 141 fsp apb 141 specifies issuers convertible debt instruments may settled cash upon conversion including partial cash settlement separately account liability equity components manner reflect entity’s nonconvertible debt borrowing rate interest cost recognized subsequent periods amount allocated equity component represents discount debt amortized interest expense using effective interest method life debt fsp apb 141 effective financial statements issued fiscal years beginning december 15 2008 interim periods within fiscal years early adoption permitted therefore expect adopt provisions fsp apb 141 beginning first quarter fiscal 2010 provisions fsp apb 141 required applied retrospectively periods presented upon retrospective adoption anticipate effective interest rate 325 convertible senior notes due 2013 range 80 850 would result recognition approximate 90 million 100 million discount notes offsetting tax amount recorded capital excess par value discount accreted maturity date effective interest rate materially impact fiscal 2008 interest expense result estimated 15 million 20 million increase fiscal 2009 interest expense tyson foods inc critical accounting estimates preparation consolidated financial statements requires us make estimates assumptions estimates assumptions affect reported amounts assets liabilities disclosure contingent assets liabilities date consolidated financial statements reported amounts revenues expenses reporting period actual results could differ estimates following summary certain accounting estimates consider critical effect actual results differ description judgments uncertainties assumptions contingent liabilities subject lawsuits investigations claims related wage hourlabor livestock procurement securities environmental product taxing authorities matters required assess likelihood adverse judgments outcomes matters well potential ranges probable losses determination amount reserves disclosures required contingencies made considerable analysis individual issue accrue contingent liabilities assessment risk loss probable reasonably estimated disclose contingent liabilities risk loss reasonably possible probable contingent liabilities contain uncertainties eventual outcome result future events determination current reserves requires estimates judgments related future changes facts circumstances differing interpretations law assessments amount damages effectiveness strategies factors beyond control made material changes accounting methodology used establish contingent liabilities past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate contingent liabilities however actual results consistent estimates assumptions may exposed gains losses could material marketing advertising costs incur advertising retailer incentive consumer incentive costs promote products marketing programs include cooperative advertising volume discounts instore display incentives coupons programs marketing advertising costs charged period incurred accrue costs based estimated performance historical utilization redemption program cash consideration given customers considered reduction price products thus recorded reduction sales remainder marketing advertising costs recorded selling general administrative expense recognition costs related programs contains uncertainties due judgment required estimating potential performance redemption program estimates based many factors including experience similar promotional programs made material changes accounting methodology used establish marketing accruals past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate marketing accruals however actual results consistent estimates assumptions may exposed gains losses could material 10 change marketing accruals september 27 2008 would impact pretax earnings approximately 10 million tyson foods inc effect actual results differ description judgments uncertainties assumptions accrued self insurance self insured certain losses related health welfare workers’ compensation auto liability general liability claims use independent thirdparty actuary assist determining selfinsurance liability actuary consider number factors estimating selfinsurance liability including claims experience demographic factors severity factors actuarial assumptions periodically review estimates assumptions thirdparty actuary assist us determining adequacy selfinsurance liability policy maintain accrual within central high point actuarial range selfinsurance liability contains uncertainties due assumptions required judgment used costs settle obligations including legal healthcare costs could increase decrease causing estimates selfinsurance liability change incident rates including frequency severity could increase decrease causing estimates selfinsurance liability change made material changes accounting methodology used establish selfinsurance liability past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate selfinsurance liability however actual results consistent estimates assumptions may exposed gains losses could material 10 increase actuarial range september 27 2008 would impact amount recorded selfinsurance liability 10 decrease actuarial range september 27 2008 would result gain amount recorded selfinsurance liability approximately 23 million impairment longlived assets longlived assets evaluated impairment whenever events changes circumstances indicate carrying value may recoverable examples include significant adverse change extent manner use longlived asset change physical condition evaluating longlived assets impairment compare carrying value asset’s estimated undiscounted future cash flows impairment indicated estimated future cash flows less carrying value asset impairment excess carrying value fair value longlived asset recorded impairment charges related longlived assets 52 million 6 million 67 million respectively fiscal years 2008 2007 2006 impairment analysis contains uncertainties due judgment assumptions estimates surrounding undiscounted future cash flows longlived asset including forecasting useful lives assets selecting discount rate reflects risk inherent future cash flows determine fair value made material changes accounting methodology used evaluate impairment longlived assets last three fiscal years believe reasonable likelihood material change estimates assumptions used calculate impairments longlived assets however actual results consistent estimates assumptions used calculate estimated future cash flows may exposed impairment losses could material tyson foods inc effect actual results differ description judgments uncertainties assumptions impairment goodwill intangible assets goodwill impairment determined using twostep process first step identify potential impairment exists comparing fair value reporting unit carrying amount including goodwill fair value reporting unit exceeds carrying amount goodwill reporting unit considered potential impairment second step impairment test necessary however carrying amount reporting unit exceeds fair value second step performed determine goodwill impaired measure amount impairment loss recognize second step compares implied fair value goodwill carrying amount goodwill implied fair value goodwill exceeds carrying amount goodwill considered impaired however carrying amount goodwill exceeds implied fair value impairment loss recognized amount equal excess implied fair value goodwill determined manner amount goodwill recognized business combination ie fair value reporting unit allocated assets liabilities including unrecognized intangible assets reporting unit acquired business combination fair value reporting unit purchase price paid acquire reporting unit intangible assets carrying value intangible asset exceeds fair value impairment loss recognized amount equal excess elected make first day fourth quarter annual impairment assessment date goodwill intangible assets however could required evaluate recoverability goodwill intangible assets prior required annual assessment experience disruptions business unexpected significant declines operating results divestiture significant component business sustained decline market capitalization estimate fair value reporting units generally operating segments using various valuation techniques primary technique discounted cash flow analysis discounted cash flow analysis requires us make various judgmental assumptions sales operating margins growth rates discount rates assumptions sales operating margins growth rates based budgets business plans economic projections anticipated future cash flows marketplace data assumptions also made varying perpetual growth rates periods beyond longterm business plan period estimating fair value beef chicken reporting units assumed operating margins future years excess margins realized current year fair value estimates reporting units assume normalized operating margin assumptions improved operating efficiencies based longterm expectations margins historically realized beef chicken industries estimate fair value beef reporting unit would excess carrying amount including goodwill sustaining longterm operating margins approximately 23 estimate fair value chicken reporting units would excess carrying amount including goodwill sustaining longterm operating margins approximately 51 intangible asset fair values calculated trademarks using royalty rate method using present value future cash flows patents inprocess technology assumptions royalty rates based rates similar brands trademarks licensed marketplace impairment analysis contains uncertainties due uncontrollable events could positively negatively impact anticipated future economic operating conditions made material changes accounting methodology used evaluate impairment goodwill intangible assets last three years result first step 2008 goodwill impairment analysis fair value reporting unit exceeded carrying value therefore second step necessary however 6 decline fair value beef reporting unit 11 decline fair value chicken reporting unit would caused carrying values reporting units excess fair values would require second step performed second step could resulted impairment loss goodwill believe made reasonable estimates assumptions calculate fair value reporting units intangible assets possible material change could occur actual results consistent estimates assumptions used calculate fair value may required perform second step could result material impairment goodwill latter part fourth quarter fiscal 2008 continuing november 2008 market capitalization book value considered market capitalization decline evaluation fair value goodwill determined impact overall goodwill impairment analysis believe decline primarily attributed negative market conditions result credit crisis indications possible recession current issues within poultry industry continue monitor market capitalization potential impairment indicator considering overall market conditions poultry industry events fiscal 2008 intangible asset impairment analysis result material impairment charge hypothetical 10 decrease fair value intangible assets would result material impairment tyson foods inc effect actual results differ description judgments uncertainties assumptions income taxes estimate total income tax expense based statutory tax rates tax planning opportunities available us various jurisdictions earn income federal income taxes include estimate taxes earnings foreign subsidiaries expected remitted united states taxable earnings considered indefinitely invested foreign subsidiary deferred income taxes recognized future tax effects temporary differences financial income tax reporting using tax rates effect years differences expected reverse valuation allowances recorded likely tax benefit realized deferred tax asset record unrecognized tax benefit liabilities known anticipated tax issues based analysis whether extent additional taxes due analysis performed accordance requirements fin 48 adopted beginning fiscal year 2008 changes tax laws rates could affect recorded deferred tax assets liabilities future changes projected future earnings could affect recorded valuation allowances future calculations related income taxes contain uncertainties due judgment used calculate tax liabilities application complex tax regulations across tax jurisdictions operate analysis unrecognized tax benefits contain uncertainties based judgment used apply likely recognition measurement thresholds fin 48 believe reasonable likelihood material change tax related balances valuation allowances however due complexity uncertainties ultimate resolution may result payment materially different current estimate tax liabilities extent prevail matters fin 48 liabilities established required pay amounts excess recorded fin 48 liabilities effective tax rate given financial statement period could materially affected unfavorable tax settlement would require use cash result increase effective tax rate period resolution favorable tax settlement would recognized reduction effective tax rate period resolution item 7aitem 7 management’s discussion analysis financial condition results operations description company world’s largest meat protein company secondlargest food production company fortune 500 one recognized brand names food industry produce distribute market chicken beef pork prepared foods related allied products operations conducted four segments chicken beef pork prepared foods key factors influencing business customer demand products ability maintain grow relationships customers introduce new innovative products marketplace accessibility international markets market prices products cost live cattle hogs raw materials grain operating efficiencies facilities overview ● chicken segment fiscal 2009 operating results negatively impacted first half fiscal 2009 high grain costs net losses commodity risk management activities related grain energy purchases second half fiscal 2009 benefited worked majority long grain positions stable grain prices made several operational improvements operating margins first half fiscal 2009 negative 72 second half improved positive 35 ● beef segment fiscal 2009 operating loss 346 million included 560 million noncash goodwill impairment excluding goodwill impairment charge operating results doubled compared fiscal 2008 sustained operational improvements made fiscal 2008 continue strong performance shows fiscal 2009 operating results ● beef goodwill impairment perform annual goodwill impairment test first day fourth quarter estimate fair value reporting units using discounted cash flow analysis requires us make various judgmental estimates assumptions sales operating margins growth rates discount factors recent disruptions global credit financial markets deterioration economic conditions led increase discount rate discount rate used annual goodwill impairment test increased 101 fiscal 2009 93 fiscal 2008 significant changes key estimates assumptions increased discount rate resulted noncash partial impairment beef reporting units goodwill impairment impact management’s estimates beef segment’s longterm profitability value ● pork segment operating income compared record year fiscal 2008 still solid operating earnings 160 million 47 strong demand products adequate supplies hogs ● prepared foods segment fiscal 2009 improvements sales volumes led operating margins 47 addition made several operational improvements allow us run plants efficiently ● liquidity march 2009 replaced existing 10 billion revolving credit facility set expire fiscal 2010 new 10 billion revolving credit facility expires march 2012 addition issued 810 million senior notes conjunction transactions paid terminated accounts receivable securitization agreement transactions well significant decrease working capital needs helped strengthen liquidity position october 3 2009 nearly 12 billion total cash including restricted cash well 733 million available borrowing revolving credit facility ● acquisitions ● october 2008 completed acquisition three verticallyintegrated poultry companies southern brazil ● august 2009 acquired 60 equity interest joint venture verticallyintegrated poultry operation eastern china ● march 2009 completed sale beef processing cattle feed yard fertilizer assets three alberta canada subsidiaries collectively lakeside xl foods inc canadianowned beef processing business entity affiliated xl foods received total consideration 145 million included cash received closing collateralized notes receivable xl foods preferred stock ● accounting cycle resulted 53week year fiscal 2009 52week year fiscal 2008 2007 fiscal 2010 outlook segments chicken end fiscal 2009 industry pullet placements 56 result weaker demand however expect demand improve get fiscal 2010 expect pricing environment improve aided cold storage inventories relative levels seen last several years also currently expect see grain costs compared fiscal 2009 additionally continue focus making operational improvements help maximize margins beef expect reduction cattle supplies 12 fiscal 2010 expect significant change fundamentals beef business relates fiscal 2009 expect adequate supplies operate plants manage spreads maximizing revenues product mix minimizing operating costs keeping focus quality customer service pork expect see gradual decline hog supplies first half fiscal 2010 accelerate second half fiscal 2010 resulting industry slaughter slightly higher 2007 roughly 4 less fiscal 2009 however still believe adequate supplies regions operate manage spreads continuing control costs maximizing revenues prepared foods raw material costs likely increase fiscal 2010 made changes sales contracts move us away fixed price contracts toward formula pricing better enable us absorb rising raw material costs changes made sales contracts operational efficiencies made fiscal 2009 expect strong results fiscal 2010 summary results continuing operations vs 2008 ● average sales price decline sales largely due reduction average sales prices accounted decrease approximately 12 billion segments reduction average sales prices majority decrease driven beef pork segments ● sales volume sales positively impacted increase sales volume accounted increase approximately 10 billion primarily due extra week fiscal 2009 increased sales volume chicken segment driven inventory reductions sales volume related recent acquisitions 2008 vs 2007 ● average sales price improvement sales largely due improved average sales prices accounted increase approximately 15 billion segments improved average sales prices majority increase driven chicken beef segments ● sales volume sales negatively impacted decrease sales volume accounted decrease approximately 318 million primarily due decrease beef volume sale two poultry production facilities fiscal 2007 partially offset increase pork volume vs 2008 ● cost sales decreased 115 million cost per pound contributed 11 billion decrease offset partially increase sales volume increasing cost sales 987 million ● increase due net losses 257 million fiscal 2009 compared net gains 206 million fiscal 2008 commodity risk management activities related grain energy purchases exclude effect related physical purchase transactions impact current future period operating results ● increase due sales volumes included extra week fiscal 2009 well increased sales volume chicken segment driven inventory reductions sales volume related recent acquisitions ● decrease average domestic live cattle hog costs approximately 12 billion vs 2007 ● cost sales increased 13 billion cost per pound contributed 16 billion increase offset partially decrease sales volume reducing cost sales 323 million ● increase 10 billion costs chicken segment included increased input costs approximately 900 million including grain costs feed ingredient costs cooking ingredients plant costs including labor logistics increased approximately 200 million increases partially offset increased net gains 127 million commodity risk management activities related grain purchases exclude impact related physical purchase transactions impact current future period operating results ● increase average domestic live cattle costs approximately 271 million ● increase operating costs beef pork segments approximately 180 million ● decrease due sales volume included lower beef chicken sales volume partially offset higher pork sales volume ● decrease due net gains 173 million commodity risk management activities related forward futures contracts live cattle hog purchases compared period fiscal 2007 amounts exclude impact related physical purchase transactions impact future period operating results ● decrease average live hog costs approximately 117 million 2009 perform annual goodwill impairment test first day fourth quarter estimate fair value reporting units using discounted cash flow analysis requires us make various judgmental estimates assumptions sales operating margins growth rates discount factors recent disruptions global credit financial markets deterioration economic conditions led increase discount rate discount rate used annual goodwill impairment test increased 101 fiscal 2009 93 fiscal 2008 significant changes key estimates assumptions increased discount rate resulted noncash partial impairment beef reporting units goodwill impairment impact managements estimates beef segment’s longterm profitability value 2009 included 15 million charge related closing ponca city oklahoma processed meats plant ● included 17 million charge related restructuring emporia kansas beef operation ● included 13 million charge related closing wilkesboro north carolina cooked products poultry plant ● included 6 million severance charges related fast initiative 2009 increase due increase cash balance 2009 vs 2008 ● cash interest expense includes interest expense related coupon rates senior notes commitmentletter credit fees incurred revolving credit facilities well miscellaneous recurring cash payments increase due primarily higher average weekly indebtedness approximately 13 also increase overall average borrowing rates ● noncash interest expense primarily includes interest related amortization debt issuance costs discountspremiums note issuances increase primarily due debt issuance costs incurred new credit facility fiscal 2009 105 notes due march 2014 notes issued fiscal 2009 amendment fees paid december 2008 existing credit agreements addition increase due accretion debt discount 2014 notes noncash interest expense also includes unrealized loss interest rate swap gainloss bond buybacks 2008 vs 2007 reduction cash interest expense due lower average borrowing rate well lower average weekly indebtedness approximately 2 2009 included 24 million foreign currency exchange loss 2008 included 18 million nonoperating gain related sale investment 2007 included 14 million foreign currency exchange gain ● reduced effective tax rate 372 due impairment goodwill deductible income tax purposes ● reduced effective tax rate 39 due increase foreign valuation allowances ● increased effective tax rate 23 due general business credits ● increased effective tax rate 18 due tax planning foreign jurisdictions ● increased effective tax rate 50 due increase state valuation allowances ● increased effective tax rate 44 due increase unrecognized tax benefits ● increased effective tax rate 38 due net negative returns companyowned life insurance policies deductible federal income tax purposes ● reduced effective tax rate 38 due general business credits ● increased effective tax rate 42 due fixed asset tax cost correction primarily related fixed asset system conversion 1999 ● increased effective tax rate 32 due federal income tax effect reductions estimated medicare part subsidy fiscal 2007 deductible federal income tax purposes ● reduced effective tax rate 46 due reduction income tax reserves based favorable settlement disputed matters segment results operate four segments chicken beef pork prepared foods following table summary sales operating income loss measure segment income loss segment results exclude results discontinued operation lakeside 2008 operating loss included 26 million charges related plant closings impairments unimproved real property software severance 2007 operating income included 10 million gain sale two poultry plants related support facilities vs 2008 ● sales volume increase sales volume fiscal 2009 due extra week fiscal 2009 well inventory reductions sales volume related recent acquisitions ● average sales price inventory reductions recent acquisitions lowered average sales price inventory reduction related commodity products shipped internationally sales volume recent acquisitions lower priced products ● operating loss ● operational improvements operating results positively impacted operational improvements included yield mix live production performance improvements additional processing flexibility reduced interplant product movement ● derivative activities operating results included following amounts commodity risk management activities related grain energy purchases amounts exclude impact related physical purchase transactions impact current future period operating results loss 257 million income million decline operating results 463 million ● sga expenses reduced selling general administrative expenses fiscal 2009 approximately 37 million ● grain costs operating results positively impacted fiscal 2009 decrease grain costs 28 million vs 2007 ● sales operating income loss sales increased result increase average sales prices partially offset decrease sales volume due sale two poultry plants fiscal 2007 operating results adversely impacted increased input costs approximately 900 million including grain costs feed ingredient costs cooking ingredients plant costs including labor logistics increased approximately 200 million partially offset increased net gains 127 million commodity trading risk management activities related grain purchases exclude impact related physical purchase transactions impact current future period operating results operating results also negatively impacted increased selling general administrative expenses 43 million 2009 operating loss included 560 million noncash charge related partial impairment goodwill 2008 operating income included 35 million charges related plant restructuring impairments packaging equipment intangible assets severance vs 2008 ● sales operating income loss ● average sales prices decreased compared fiscal 2008 still maintained margin average live costs decreased line drop average sales price ● derivative activities operating results included following amounts commodity risk management activities related forward futures contracts live cattle amounts exclude impact related physical sale purchase transactions impact current future period operating results income 102 million income million improvement operating results 49 million vs 2007 ● sales operating income sales operating income impacted positively higher average sales prices improved operational efficiencies partially offset decreased sales volume due primarily closure emporia kansas slaughter operation operating results also negatively impacted higher operating costs fiscal 2008 operating results include realized unrealized net gains 53 million commodity risk management activities related forward futures contracts live cattle excluding related impact physical sale purchase transactions compared realized unrealized net losses 2 million recorded fiscal 2007 operating results positively impacted increase average sales prices exceeding increase average live prices 2008 operating income included 5 million charges related impairment packaging equipment severance vs 2008 ● sales operating income ● operating results fiscal 2009 strong compared record year fiscal 2008 sales volume relatively flat versus fiscal 2008 results negatively impacted decrease average sales prices partially offset decrease average live costs ● derivative activities operating results included following amounts commodity risk management activities related forward futures contracts live hogs amounts exclude impact related physical sale purchase transactions impact current future period operating results income 55 million income million decline operating results 40 million vs 2007 ● sales operating income operating results impacted positively lower average live prices strong export sales led increased sales volume record year operating margins fiscal 2008 operating results include realized unrealized net gains 95 million commodity risk management activities related forward futures contracts live hogs excluding related impact physical sale purchase transactions compared realized unrealized net gains 3 million recorded fiscal 2007 partially offset higher operating costs well lower average sales prices 2009 operating income included 15 million charge related closing ponca city oklahoma processed meats plant 2008 operating income included 10 million charges related flood damage intangible asset impairment severance 2007 operating income included 7 million charges related intangible asset impairments vs 2008 ● sales operating income operating results improved due increase sales volume well reduction raw material costs exceeded decrease average sales prices addition made several operational improvements fiscal 2009 allow us run plants efficiently began realizing majority improvements operating results latter part fiscal 2009 vs 2007 ● sales operating income operating results negatively impacted higher raw material costs include wheat dairy cooking ingredient costs partially offset lower pork costs results positively impacted increase average sales prices liquidity capital resources cash needs working capital expenditures growth opportunities expected met current cash hand cash flows provided operating activities shortterm borrowings based current expectations believe liquidity capital resources sufficient operate business however may take advantage opportunities generate additional liquidity refinance capital market transactions amount nature timing capital market transactions depend operating performance circumstances thencurrent commitments obligations amount nature timing capital requirements limitations imposed current credit arrangements overall market conditions changes working capital ● 2009 increased primarily due reduction inventory accounts receivable balances partially offset reduction accounts payable lower inventory balance primarily due reduction inventory volumes well decrease raw material costs ● 2008 decreased primarily due higher inventory accounts receivable balances partially offset higher accounts payable balance higher inventory balances driven increase raw material costs inventory volume ● 2007 decreased primarily due higher inventory accounts receivable balances partially offset higher accounts payable balance ● additions property plant equipment include acquiring new equipment upgrading facilities maintain competitive standing position us future opportunities fiscal 2009 capital spending included spending improvements made prepared foods operations increase efficiences dynamic fuels llc’s dynamic fuels first facility foreign operations fiscal 2008 capital spending included equipment updates chicken plants well packaging equipment upgrades fresh meats caseready facilities fiscal 2007 focused reducing capital spending ● capital spending fiscal 2010 expected approximately 600 million includes ● approximately 400 million current core business capital spending ● approximately 150 million foreign operations includes postacquisition capital spending related brazil china acquisitions ● approximately 50 million related dynamic fuels relates completion dynamic fuels’ first facility construction first facility expected continue early 2010 production targeted soon thereafter october 3 2009 43 million restricted cash available spending facility ● acquisitions october 2008 acquired three vertically integrated poultry companies southern brazil aggregate purchase price 67 million 4 million mandatory deferred payments remains paid fiscal 2011 addition 15 million contingent purchase price based production volumes anticipated paid fiscal 2011 joint ventures china called shandong tyson xinchang foods received necessary government approvals fiscal 2009 aggregate purchase price 60 equity interest 21 million excludes 93 million cash transferred joint venture future capital needs ● proceeds sale assets fiscal 2007 include 40 million received related sale two poultry plants related support facilities ● shortterm investment purchased fiscal 2006 proceeds 10 billion senior notes maturing april 1 2016 notes shortterm investment held interest bearing account trustee fiscal 2007 used proceeds sale shortterm investment repay outstanding 750 million 725 notes due october 1 2006 ● change restricted cash october 2008 dynamic fuels received 100 million proceeds sale gulf opportunity zone taxexempt bonds made available federal government regions affected hurricanes katrina rita 2005 cash received bonds restricted used towards construction dynamic fuels’ facility ● fiscal 2008 issued 224 million shares class stock public offering net proceeds used toward repayment borrowings accounts receivable securitization facility general corporate purposes ● conjunction entry new credit facility issuance 2014 notes fiscal 2009 paid 48 million debt issuance costs ● 140 million 2010 notes outstanding originally placed 234 million net proceeds 2014 notes blocked cash collateral account used payment prepayment repurchase defeasance 2010 notes october 3 2009 140 million remaining blocked cash collateral account ● october 3 2009 839 million outstanding 2011 notes plan presently use current cash hand cash flows operations payment 2011 notes ● revolving credit facility supports shortterm funding needs letters credit letters credit issued primarily support workers’ compensation insurance programs derivative activities dynamic fuels’ gulf opportunity zone taxexempt bonds ● completed sale lakeside march 2009 inclusive working capital lakeside initially retained us closing well consideration received xl foods expect following future cash flows based october 3 2009 currency exchange rate approximately 10 million fiscal 2010 45 million notes receivable plus interest paid march 2011 xl foods 24 million xl foods preferred stock redeemable march 2014 discontinuance lakeside’s operation material effect future operating cash flows ● current ratio october 3 2009 september 27 2008 220 1 207 1 respectively deterioration credit capital markets credit market conditions deteriorated rapidly fourth quarter fiscal 2008 continued fiscal 2009 several major banks financial institutions failed forced seek assistance distressed sales emergency government measures allinclusive following summarizes impacts business credit facility cash flows operating activities current cash hand primary sources liquidity funding debt service capital expenditures also revolving credit facility committed capacity 10 billion provide additional liquidity working capital needs letters credit source financing growth opportunities october 3 2009 outstanding letters credit revolving credit agreement totaling 267 million none drawn upon left 733 million available borrowing revolving credit facility funded syndicate 19 banks commitments ranging 6 million 115 million per bank banks syndicate unable perform commitments fund facility liquidity could impaired could reduce ability fund working capital needs support letters credit finance growth opportunities customerssuppliers financial condition customers suppliers could also impaired current market conditions although experienced material increase customer bad debts nonperformance suppliers current market conditions increase probability could experience losses customer supplier defaults current credit capital market conditions result prolonged economic downturn united states abroad demand protein products could reduced could result reduction sales operating income cash flows addition rely livestock producers throughout country supply live cattle hogs producers adversely impacted current economic conditions go business livestock supply processing could significantly impacted additionally cash flow assistance programs certain livestock suppliers participate programs pay amount livestock equivalent standard cost grow livestock periods low market sales prices amounts payments excess market sales price recorded receivables accrue interest participating suppliers obligated repay receivables balances market sales prices exceed standard cost upon termination agreement maximum obligation associated programs limited fair value participating livestock supplier’s net tangible assets although believe aggregate maximum obligation program unlikely ever reached potential maximum obligation october 3 2009 approximately 250 million total receivables programs 72 million 7 million october 3 2009 september 27 2008 respectively even though programs limited net tangible assets participating livestock suppliers also manage portion credit risk associated programs obtaining security interests livestock suppliers assets analyzing residual credit risks general market conditions recorded allowance programs estimated uncollectible receivables 20 million 2 million october 3 2009 september 27 2008 respectively investments value investments equity debt securities including marketable debt securities companyowned life insurance pension postretirement plan assets impacted market volatility past year instruments recorded fair value october 3 2009 fiscal 2009 reduction fair value resulting recognition earnings 11 million currently oversee two domestic one foreign subsidiary noncontributory qualified defined benefit pension plans three pension plans frozen new participants additional benefits accrue participants based 2009 actuarial valuation anticipate contributions 2 million plans fiscal 2010 also one domestic unfunded defined benefit plan based 2009 actuarial valuation anticipate contributions 2 million plan fiscal 2010 financial instruments part commodity risk management activities use derivative financial instruments primarily futures options reduce exposure various market risks related commodity purchases similar capital markets commodities markets volatile past year grain energy prices reached alltime high fourth quarter fiscal 2008 falling sharply reduction grain energy prices benefit us longterm recorded losses related financial instruments fiscal 2009 257 million recently implemented policies reduce earnings volatility associated marktomarket derivative activities including use normal physical purchases normal physical sales required marked market insurance rely insurers protection liability claims property damage various risks primary insurers maintain best financial strength rating better nevertheless continue monitor situation insurers expected continue impacted current capital market environment ● fiscal 2009 issued 810 million 2014 notes 2014 notes original issue discount 59 million based issue price 92756 face value used net proceeds towards repayment borrowings accounts receivable securitization facility general corporate purposes addition dynamic fuels received 100 million proceeds sale gulf opportunity zone taxexempt bonds made available federal government regions affected hurricane katrina rita 2005 floating rate bonds due october 1 2033 ● fiscal 2009 bought back 293 million notes included 161 million 2011 notes 94 million 2010 notes 38 million 2016 notes ● october 3 2009 total approximately 12 billion cash equivalents restricted cash credit ratings notes september 4 2008 standard poor’s sp downgraded credit rating “bbb” “bb” downgrade increased interest rate 2016 notes 685 735 effective beginning sixmonth interest payment due october 1 2008 november 13 2008 moody’s investors services inc moody’s downgraded credit rating “ba1” “ba3” downgrade increased interest rate 2016 notes 735 785 effective beginning sixmonth interest payment due april 1 2009 sp currently rates 2016 notes “bb” moody’s currently rates debt “ba3” onenotch downgrade either ratings agency would increase interest rates 2016 notes additional 025 revolving credit facility sp’s corporate credit rating tyson foods inc “bb” moody’s corporate credit rating tyson foods inc “ba3” sp downgrade corporate credit rating “b” lower moody’s downgrade corporate credit rating “b1” lower letter credit fees would increase additional 025 debt covenants revolving credit facility contains affirmative negative covenants among things may limit restrict ability create liens encumbrances incur debt merge dissolve liquidate consolidate make acquisitions investments dispose transfer assets pay dividends make payments respect capital stock amend material documents change nature business make certain payments debt engage certain transactions affiliates enter saleleaseback hedging transactions case subject certain qualifications exceptions availability facility less greater 15 commitments 150 million required maintain minimum fixed charge coverage ratio 2014 notes also contain affirmative negative covenants among things may limit restrict ability incur additional debt issue preferred stock make certain investments restricted payments create liens create restrictions distributions restricted subsidiaries engage specified sales assets subsidiary stock enter transactions affiliates enter new lines business engage consolidation mergers acquisitions engage certain saleleaseback transactions offbalance sheet arrangements offbalance sheet arrangements material financial position results operations offbalance sheet arrangements guarantees debt outside third parties including lease grower loans residual value guarantees covering certain operating leases various types equipment see note 10 “commitments” notes consolidated financial statements discussion contractual obligations following table summarizes contractual obligations october 3 2009 1 event default payment acceleration principal payments could occur 2 interest payments include interest outstanding debt payments estimated variable rate variable term debt based effective rates october 3 2009 expected payment dates 3 amounts include guarantees debt outside third parties consist lease grower loans substantially collateralized underlying assets well residual value guarantees covering certain operating leases various types equipment amounts included maximum potential amount future payments 4 amounts include minimum lease payments lease agreements 5 amounts include agreements purchase goods services enforceable legally binding specify significant terms including fixed minimum quantities purchased fixed minimum variable price provisions approximate timing transaction purchase obligations amount included items future purchase commitments grains livestock contracts fixed grower fees provide terms meet criteria excluded future purchase commitments contracts meet criteria purchase orders included table purchase order authorization purchase may considered enforceable legally binding contract contracts goods services contain termination clauses without penalty also excluded 6 amounts include estimated amounts complete buildings equipment construction october 3 2009 7 amounts include items meet definition purchase obligation recorded consolidated balance sheets addition amounts shown table unrecognized tax benefits 233 million related interest penalties 71 million october 3 2009 recorded liabilities fiscal 2010 tax audit resolutions could potentially reduce amounts approximately 30 million either tax positions sustained audit agree disallowance maximum contractual obligation associated cash flow assistance programs october 3 2009 based estimated fair values livestock supplier’s net tangible assets date aggregated approximately 250 million approximately 178 million remaining maximum commitment netting cash flow assistance related receivables minority partner shandong tyson xinchang foods joint ventures china right exercise put options require us purchase entire 40 equity interest price equal minority partner’s contributed capital plus minus prorata share joint ventures accumulated undistributed net earnings losses put options exercisable fiveyear term commencing later april 2011 ii date upon shareholder minority partner longer general manager joint venture operations october 3 2009 put options exercisable would resulted purchase price approximately 74 million minority partner’s entire equity interest recently issuedadopted accounting pronouncements refer discussion part ii item 8 notes consolidated financial statements note 1 business summary significant accounting policies recently issued accounting pronouncements note 2 change accounting principles recently adopted accounting pronouncements critical accounting estimates preparation consolidated financial statements requires us make estimates assumptions estimates assumptions affect reported amounts assets liabilities disclosure contingent assets liabilities date consolidated financial statements reported amounts revenues expenses reporting period actual results could differ estimates following summary certain accounting estimates consider critical description judgments uncertainties effect actual results differ assumptions contingent liabilities subject lawsuits investigations claims related wage hourlabor environmental product taxing authorities matters required assess likelihood adverse judgments outcomes matters well potential ranges probable losses determination amount reserves disclosures required contingencies made considerable analysis individual issue accrue contingent liabilities assessment risk loss probable reasonably estimated disclose contingent liabilities risk loss reasonably possible probable contingent liabilities contain uncertainties eventual outcome result future events determination current reserves requires estimates judgments related future changes facts circumstances differing interpretations law assessments amount damages effectiveness strategies factors beyond control made material changes accounting methodology used establish contingent liabilities past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate contingent liabilities however actual results consistent estimates assumptions may exposed gains losses could material marketing advertising costs incur advertising retailer incentive consumer incentive costs promote products marketing programs include cooperative advertising volume discounts instore display incentives coupons programs marketing advertising costs charged period incurred accrue costs based estimated performance historical utilization redemption program cash consideration given customers considered reduction price products thus recorded reduction sales remainder marketing advertising costs recorded selling general administrative expense recognition costs related programs contains uncertainties due judgment required estimating potential performance redemption program estimates based many factors including experience similar promotional programs made material changes accounting methodology used establish marketing accruals past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate marketing accruals however actual results consistent estimates assumptions may exposed gains losses could material 10 change marketing accruals october 3 2009 would impact pretax earnings approximately 9 million description judgments uncertainties effect actual results differ assumptions accrued self insurance self insured certain losses related health welfare workers’ compensation auto liability general liability claims use independent thirdparty actuary assist determining selfinsurance liability actuary consider number factors estimating selfinsurance liability including claims experience demographic factors severity factors actuarial assumptions periodically review estimates assumptions thirdparty actuary assist us determining adequacy selfinsurance liability policy maintain accrual within central high point actuarial range selfinsurance liability contains uncertainties due assumptions required judgment used costs settle obligations including legal healthcare costs could increase decrease causing estimates selfinsurance liability change incident rates including frequency severity could increase decrease causing estimates selfinsurance liability change made material changes accounting methodology used establish selfinsurance liability past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate selfinsurance liability however actual results consistent estimates assumptions may exposed gains losses could material 10 increase actuarial range october 3 2009 would result increase amount recorded selfinsurance liability approximately 15 million 10 decrease actuarial range october 3 2009 would result reduction amount recorded selfinsurance liability approximately 3 million impairment longlived assets longlived assets evaluated impairment whenever events changes circumstances indicate carrying value may recoverable examples include significant adverse change extent manner use longlived asset change physical condition evaluating longlived assets impairment compare carrying value asset’s estimated undiscounted future cash flows impairment indicated estimated future cash flows less carrying value asset impairment excess carrying value fair value longlived asset recorded impairment charges related longlived assets 25 million 52 million 6 million respectively fiscal years 2009 2008 2007 impairment analysis contains uncertainties due judgment assumptions estimates surrounding undiscounted future cash flows longlived asset including forecasting useful lives assets selecting discount rate reflects risk inherent future cash flows determine fair value made material changes accounting methodology used evaluate impairment longlived assets last three fiscal years believe reasonable likelihood material change estimates assumptions used calculate impairments longlived assets however actual results consistent estimates assumptions used calculate estimated future cash flows may exposed impairment losses could material description judgments uncertainties effect actual results differ assumptions impairment goodwill intangible assets goodwill impairment determined using twostep process first step identify potential impairment exists comparing fair value reporting unit carrying amount including goodwill fair value reporting unit exceeds carrying amount goodwill reporting unit considered potential impairment second step impairment test necessary however carrying amount reporting unit exceeds fair value second step performed determine goodwill impaired measure amount impairment loss recognize second step compares implied fair value goodwill carrying amount goodwill implied fair value goodwill exceeds carrying amount goodwill considered impaired however carrying amount goodwill exceeds implied fair value impairment loss recognized amount equal excess implied fair value goodwill determined manner amount goodwill recognized business combination ie fair value reporting unit allocated assets liabilities including unrecognized intangible assets reporting unit acquired business combination fair value reporting unit purchase price paid acquire reporting unit intangible assets carrying value intangible asset exceeds fair value impairment loss recognized amount equal excess elected make first day fourth quarter annual impairment assessment date goodwill intangible assets however could required evaluate recoverability goodwill intangible assets prior required annual assessment experience disruptions business unexpected significant declines operating results divestiture significant component business sustained decline market capitalization estimate fair value reporting units generally operating segments using various valuation techniques primary technique discounted cash flow analysis discounted cash flow analysis requires us make various judgmental assumptions sales operating margins growth rates discount rates assumptions sales operating margins growth rates based budgets business plans economic projections anticipated future cash flows marketplace data assumptions also made varying perpetual growth rates periods beyond longterm business plan period estimating fair value chicken beef reporting units assumed operating margins future years excess annualized margins realized current year fair value estimates reporting units assume normalized operating margin assumptions improved operating efficiencies based longterm expectations margins historically realized beef chicken industries estimate fair value chicken reporting unit would excess carrying amount including goodwill sustaining longterm operating margins approximately 50 560 million noncash impairment recognized fiscal 2009 estimate fair value beef reporting unit would excess carrying amount including goodwill sustaining longterm operating margins approximately 20 intangible asset fair values calculated trademarks using royalty rate method assumptions royalty rates based rates similar brands trademarks licensed marketplace impairment analysis contains uncertainties due uncontrollable events could positively negatively impact anticipated future economic operating conditions made material changes accounting methodology used evaluate impairment goodwill intangible assets last three years recent disruptions global credit financial markets deterioration economic conditions led increase discount rate discount rate used annual goodwill impairment test increased 101 fiscal 2009 93 fiscal 2008 significant changes key estimates assumptions result significantly increased discount rate failed first step fiscal 2009 goodwill impairment analysis beef reporting unit performed second step second step resulted 560 million noncash partial impairment beef reporting units goodwill reporting units failed first step annual goodwill impairment analysis fiscal 2009 2008 2007 therefore second step necessary however 10 decline fair value chicken reporting unit would caused carrying value reporting unit excess fair value would require second step performed second step could resulted impairment loss chicken reporting units goodwill 560 million noncash impairment recognized fiscal 2009 17 decline fair value beef reporting unit would caused adjusted carrying value reporting unit excess fair value inherent estimates assumptions used determining fair value reporting units outside control management including interest rates cost capital tax rates credit ratings believe made reasonable estimates assumptions calculate fair value reporting units intangible assets possible material change could occur actual results consistent estimates assumptions used calculate fair value may required perform second step could result additional material impairments goodwill fiscal 2009 intangible asset impairment analysis result material impairment charge hypothetical 10 decrease fair value intangible assets would result material impairment description judgments uncertainties effect actual results differ assumptions income taxes estimate total income tax expense based statutory tax rates tax planning opportunities available us various jurisdictions earn income federal income tax includes estimate taxes earnings foreign subsidiaries expected remitted united states taxable earnings considered indefinitely invested foreign subsidiary deferred income taxes recognized future tax effects temporary differences financial income tax reporting using tax rates effect years differences expected reverse valuation allowances recorded likely tax benefit realized deferred tax asset record unrecognized tax benefit liabilities known anticipated tax issues based analysis whether extent additional taxes due changes tax laws rates could affect recorded deferred tax assets liabilities future changes projected future earnings could affect recorded valuation allowances future calculations related income taxes contain uncertainties due judgment used calculate tax liabilities application complex tax regulations across tax jurisdictions operate analysis unrecognized tax benefits contains uncertainties based judgment used apply likely recognition measurement thresholds believe reasonable likelihood material change tax related balances valuation allowances however due complexity uncertainties ultimate resolution may result payment materially different current estimate tax liabilities extent prevail matters unrecognized tax benefits established required pay amounts excess recorded unrecognized tax benefits effective tax rate given financial statement period could materially affected unfavorable tax settlement would require use cash result increase effective tax rate period resolution favorable tax settlement would recognized reduction effective tax rate period resolution item 7aitem 7 management’s discussion analysis financial condition results operations description company one world’s largest meat protein companies secondlargest food production company fortune 500 one recognized brand names food industry produce distribute market chicken beef pork prepared foods related allied products operations conducted four segments chicken beef pork prepared foods key factors influencing business customer demand products ability maintain grow relationships customers introduce new innovative products marketplace accessibility international markets market prices products cost live cattle hogs raw materials grain operating efficiencies facilities overview general improved operating results fiscal 2010 compared fiscal 2009 result improved internal performance better market environment following key drivers achieved margin management gains operational efficiency improvements key drivers led nearly 12 billion improvement operating income excluding impact 560 million beef segment goodwill impairment charge recorded fiscal 2009 margin management improvements occurred areas mix export sales price optimization valueadded products initiatives operational efficiencies occurred areas yields cost reduction labor management logistics cost optimization capacity live bird operations including livability feed conversion net processing improvements tyson meat industry general benefitted improving domestic market conditions first time 40 years industry forecasters predict reduction available protein two consecutive years 20092010 factor reduced protein production fewer imports increased exports reduced freezer inventories poor industry results 2008 2009 led reduction industry capacity better balance overall meat products’ supply demand recent economic conditions caused decreased demand foodservice establishments lost demand shifted retailers consumers choosing eat home result improving domestic market conditions operational efficiency margin management improvements operating margins 55 fiscal 2010 54 removing 38 million insurance proceeds received year 29 million related goodwill impairment first time since acquisition ibp inc 2001 annual operating margins exceeded 50 following summary operating margins segment chicken 52 51 excluding 38 million insurance proceeds received 29 million related goodwill impairment beef 46 pork 84 prepared foods 41 debt liquidity fiscal 2010 generated 14 billion operating cash flows used cash flows well restricted cash repurchase retire redeem 956 million senior notes result total debt 25 billion lowest level since acquisition ibp inc october 2 2010 18 billion liquidity includes availability credit facility 978 million cash equivalents accounting cycle resulted 52week year fiscal 2010 2008 53week year fiscal 2009 2010 net income included following items 61 million charges related losses notes repurchased fiscal 2010 29 million noncash nontax deductible charge related full goodwill impairment immaterial chicken segment reporting unit 12 million noncash nontax deductible charge related impairment equity method investment 38 million gain insurance proceeds 2009 net loss included following items 560 million noncash nontax deductible charge related goodwill impairment beef segment 15 million charge related closing ponca city oklahoma processed meats plant 2008 net income included following items 33 million charges related asset impairments including packaging equipment intangible assets unimproved real property software 17 million charge related restructuring emporia kansas beef operation 13 million charge related closing wilkesboro north carolina cooked products poultry plant 13 million charges related flood damage jefferson wisconsin plant severance charges related fast initiative 18 million nonoperating gain related sale investment fiscal 2011 outlook 2011 overall protein chicken beef pork turkey production expected increase exports likely grow well forecast total domestic availability protein relatively flat compared 2010 following summary fiscal 2011 outlook segments well outlook capital expenditures net interest expense debt chicken expect chicken production increase domestic availability depend export volumes less expected yields global feed grain crop production current futures prices indicate higher grain costs fiscal 2011 compared fiscal 2010 expect offset impact increased grain costs operational pricing improvements beef expect see gradual reduction cattle supplies 12 fiscal 2011 however expect significant change fundamentals beef business relates previous quarters expect adequate supplies regions operate plants expect beef exports remain strong fiscal 2011 pork expect hog supplies fiscal 2011 comparable fiscal 2010 believe adequate supplies regions operate expect pork exports remain strong fiscal 2011 prepared foods expect operational improvements increased pricing offset likely increase raw material costs fiscal 2011 many sales contracts formula based shorterterm nature typically able absorb rising input costs however lag time price increases take effect difficult absorb rapidly rising raw material costs capital expenditures preliminary capital expenditures plan fiscal 2011 approximately 700 million net interest expense expect fiscal 2011 net interest expense approximately 245 million nearly 90 million compared fiscal 2010 debt continue use available cash repurchase notes available attractive rates significant maturities debt coming due next three fiscal years 825 notes due october 1 2011 notes balance 315 million october 2 2010 plan retire notes current cash hand andor cash flows operations summary results continuing operations 2010 vs 2009 average sales price increase sales largely due increase average sales prices accounted increase approximately 19 billion segments increase average sales prices majority increase driven beef pork segments sales volume sales negatively impacted decrease sales volume accounted decrease approximately 150 million primarily due extra week fiscal 2009 decrease pork segment sales volume partially offset increase fiscal 2009 acquisition chicken segment 2009 vs 2008 average sales price decline sales largely due reduction average sales prices accounted decrease approximately 12 billion segments reduction average sales prices majority decrease driven beef pork segments sales volume sales positively impacted increase sales volume accounted increase approximately 10 billion primarily due extra week fiscal 2009 increased sales volume chicken segment driven inventory reductions sales volume related recent acquisitions 2010 vs 2009 cost sales increased 415 million higher cost per pound increased cost sales 558 million partially offset lower sales volume decreased cost sales 143 million increase average live cattle hog costs approximately 10 billion increase due net losses 78 million fiscal 2010 compared net gains 191 million fiscal 2009 commodity risk management activities related forward futures contracts live cattle hogs excludes impact related physical purchase transactions impact current future period operating results increase raw material costs approximately 218 million prepared foods segment increase incentivebased compensation approximately 97 million decrease due net losses 6 million fiscal 2010 compared net losses 257 million fiscal 2009 commodity risk management activities related grain energy purchases excludes impact related physical purchase transactions impact current future period operating results decrease grain costs chicken segment approximately 158 million decrease chicken segment costs resulting operational improvements 2009 vs 2008 cost sales decreased 115 million cost per pound contributed 11 billion decrease offset partially increase sales volume increasing cost sales 987 million increase due net losses 257 million fiscal 2009 compared net gains 206 million fiscal 2008 commodity risk management activities related grain energy purchases exclude effect related physical purchase transactions impact current future period operating results increase due sales volumes included extra week fiscal 2009 well increased sales volume chicken segment driven inventory reductions sales volume related recent acquisitions decrease average domestic live cattle hog costs approximately 12 billion 2010 vs 2009 increase 118 million related incentivebased compensation reductions include decreases resulting one less week fiscal 2010 compared fiscal 2009 well 16 million reduction professional fees advertising sales promotions 2009 vs 2008 decrease 33 million related advertising sales promotions decrease 11 million related change investment returns companyowned life insurance used fund nonqualified retirement plans reductions include decreases payrollrelated expenses professional fees increase 20 million due newly acquired foreign operations perform annual goodwill impairment test first day fourth quarter estimate fair value reporting units using discounted cash flow analysis requires us make various judgmental estimates assumptions sales operating margins growth rates discount factors 2010 includes full impairment immaterial chicken segment reporting unit 2009 disruptions global credit financial markets deterioration economic conditions led increase discount rate fiscal 2009 compared fiscal 2008 discount rate used annual goodwill impairment test increased 101 fiscal 2009 93 fiscal 2008 significant changes key estimates assumptions increased discount rate resulted noncash partial impairment beef reporting unit’s goodwill impairment impact managements’ estimates beef segment’s longterm profitability value 2009 included 15 million charge related closing ponca city oklahoma processed meats plant 2008 included 17 million charge related restructuring emporia kansas beef operation included 13 million charge related closing wilkesboro north carolina cooked products poultry plant included 6 million severance charges related fast initiative 20102009 fiscal 2010 fiscal 2009 increased compared fiscal 2008 due primarily increase cash balance 2010 vs 2009 cash interest expense includes interest expense related coupon rates senior notes commitmentletter credit fees incurred revolving credit facilities decrease due lower average weekly indebtedness approximately 11 partially offset increase overall average borrowing rates losses notes repurchased fiscal 2010 includes amount paid exceeding carrying value notes repurchased primarily includes repurchases 2011 notes 735 senior notes due april 2016 notes noncash interest expense primarily includes interest related amortization debt issuance costs discountspremiums note issuances includes debt issuance costs incurred new credit facility march 2009 1050 senior notes due 2014 notes issued march 2009 well accretion debt discount 325 convertible senior notes due 2013 notes 2014 notes fiscal 2009 also includes expenses related amendment fees paid december 2008 existing credit agreements 2009 vs 2008 cash interest expense includes interest expense related coupon rates senior notes commitmentletter credit fees incurred revolving credit facilities increase due primarily higher average weekly indebtedness approximately 13 also increase overall average borrowing rates noncash interest expense primarily includes interest related amortization debt issuance costs discountspremiums note issuances increase primarily due debt issuance costs incurred new credit facility fiscal 2009 2014 notes issued fiscal 2009 amendment fees paid december 2008 existing credit agreements addition increase due accretion debt discount 2013 notes 2014 notes noncash interest expense also includes unrealized loss interest rate swap 2010 included 12 million charge related impairment equity method investment 2009 included 24 million foreign currency exchange loss 2008 included 18 million nonoperating gain related sale investment effective tax rate continuing operations impacted number items result difference effective tax rate us statutory rate 35 table reflects significant items impacting rate indicated 2010 domestic production activity deduction reduced rate 20 decrease unrecognized tax benefits reduced rate 14 decrease state valuation allowances reduced rate 10 state income taxes excluding unrecognized tax benefits increased rate 34 impairment goodwill deductible income tax purposes increased rate 09 2009 impairment goodwill deductible income tax purposes reduced rate 361 increase foreign valuation allowances reduced rate 38 general business credits increased rate 22 tax planning foreign jurisdictions increased rate 17 2008 increase state valuation allowances increased rate 50 increase unrecognized tax benefits increased rate 44 net negative return companyowned life insurance policies deductible federal income tax purposes increased rate 38 general business credits reduced rate 38 segment results operate four segments chicken beef pork prepared foods beginning third quarter fiscal 2010 modified presentation segment sales include impact intersegment sales periods presented include impact following table summary sales operating income loss measure segment income loss segment results exclude results discontinued operation lakeside 2010 operating income included 38 million gain insurance proceeds 29 million noncash nontax deductible charge related full goodwill impairment immaterial chicken segment reporting unit 2008 operating loss included 26 million charges related plant closings impairments unimproved real property software severance 2010 vs 2009 sales volume increase sales volume fiscal 2010 due sales volume related fiscal 2009 acquisition partially offset decrease due extra week fiscal 2009 average sales price increase average sales prices primarily due sales mix changes associated reduced sales volume lower price per pound rendered products operating income loss operational improvements operating results positively impacted operational improvements included yield mix live production performance improvements additional processing flexibility reduced interplant product movement derivative activities operating results included following amounts commodity risk management activities related grain energy purchases amounts exclude impact related physical purchase transactions impact current future period operating results grain costs operating results positively impacted fiscal 2010 decrease grain costs 158 million operating results included increase incentivebased compensation 2009 vs 2008 sales volume increase sales volume fiscal 2009 due extra week fiscal 2009 well inventory reductions sales volume related recent acquisitions average sales price inventory reductions recent acquisitions lowered average sales price inventory reduction related commodity products shipped internationally sales volume recent acquisitions lower priced products operating loss operational improvements operating results positively impacted operational improvements included yield mix live production performance improvements additional processing flexibility reduced interplant product movement derivative activities operating results included following amounts commodity risk management activities related grain energy purchases amounts exclude impact related physical purchase transactions impact current future period operating results sga expenses reduced selling general administrative expenses fiscal 2009 approximately 37 million grain costs operating results positively impacted fiscal 2009 decrease grain costs 28 million 2009 operating loss included 560 million noncash charge related partial impairment goodwill operating income included 35 million charges related plant restructuring impairments packaging equipment intangible assets severance 2010 vs 2009 sales operating income loss increased operating margins maximizing revenues relative rising live cattle markets well improved operating costs addition improvement export sales operating results included increase incentivebased compensation derivative activities operating results included following amounts commodity risk management activities related forward futures contracts live cattle amounts exclude impact related physical sale purchase transactions impact current future period operating results 2009 vs 2008 sales operating income loss average sales prices decreased compared fiscal 2008 still maintained margin average live costs decreased line drop average sales price derivative activities operating results included following amounts commodity risk management activities related forward futures contracts live cattle amounts exclude impact related physical sale purchase transactions impact current future period operating results 2008 operating income included 5 million charges related impairment packaging equipment severance 2010 vs 2009 sales operating income increased operating margins maximizing revenues relative rising live hog markets addition improvement export sales operating results included increase incentivebased compensation derivative activities operating results included following amounts commodity risk management activities related forward futures contracts live hogs amounts exclude impact related physical sale purchase transactions impact current future period operating results 2009 vs 2008 sales operating income operating results fiscal 2009 strong compared record year fiscal 2008 sales volume relatively flat versus fiscal 2008 results negatively impacted decrease average sales prices partially offset decrease average live costs derivative activities operating results included following amounts commodity risk management activities related forward futures contracts live hogs amounts exclude impact related physical sale purchase transactions impact current future period operating results 2009 operating income included 15 million charge related closing ponca city oklahoma processed meats plant 2008 operating income included 10 million charges related flood damage intangible asset impairment severance 2010 vs 2009 sales operating income despite increase average sales prices sales volume operating income declined fiscal 2010 compared fiscal 2009 due increase raw material costs however made several operational improvements late fiscal 2009 allow us run plants efficiently also received 8 million insurance proceeds fiscal 2010 related flood damage jefferson wisconsin plant operating results included increase incentivebased compensation 2009 vs 2008 sales operating income operating results improved due increase sales volume well reduction raw material costs exceeded decrease average sales prices addition made several operational improvements fiscal 2009 allow us run plants efficiently began realizing majority improvements operating results latter part fiscal 2009 liquidity capital resources cash needs working capital expenditures growth opportunities repurchaseredemption 2011 notes expected met current cash hand cash flows provided operating activities shortterm borrowings based current expectations believe liquidity capital resources sufficient operate business however may take advantage opportunities generate additional liquidity refinance existing debt capital market transactions amount nature timing capital market transactions depend operating performance circumstances thencurrent commitments obligations amount nature timing capital requirements limitations imposed current credit arrangements overall market conditions cash flows associated changes working capital 2010 increased due increase accrued salaries wages benefits accounts payable balances almost entirely offset increase inventory accounts receivable balances increase accrued salaries wages benefits primarily due accruals incentivebased compensation 2009 increased primarily due reduction inventory accounts receivable balances partially offset reduction accounts payable lower inventory balance primarily due reduction inventory volumes well decrease raw material costs 2008 decreased primarily due higher inventory accounts receivable balances partially offset higher accounts payable balance higher inventory balances driven increase raw material costs inventory volume additions property plant equipment include acquiring new equipment upgrading facilities maintain competitive standing position us future opportunities fiscal 2010 capital spending included production efficiencies operations dynamic fuels llc’s dynamic fuels facility foreign operations fiscal 2009 capital spending included improvements made prepared foods operations increase efficiencies dynamic fuels’ facility foreign operations fiscal 2008 capital spending included equipment updates chicken plants well packaging equipment upgrades fresh meats caseready facilities capital spending fiscal 2011 expected approximately 700 million includes spending operations production labor efficiencies yield improvements sales channel flexibility well expansion foreign operations acquisitions october 2008 acquired three vertically integrated poultry companies southern brazil aggregate purchase price 67 million addition 15 million contingent purchase price based production volumes joint ventures china called shandong tyson xinchang foods received necessary government approvals fiscal 2009 aggregate purchase price 60 equity interest 21 million excludes 93 million cash transferred joint venture future capital needs change restricted cash october 2008 dynamic fuels received 100 million proceeds sale gulf opportunity zone taxexempt bonds made available federal government regions affected hurricanes katrina rita 2005 cash received bonds restricted could used towards construction dynamic fuels’ facility net borrowings payments revolving credit facilities primarily include activity related accounts receivable securitization facility entry new revolving credit facility issuance 2014 notes march 2009 repaid outstanding borrowings accounts receivable securitization facility terminated facility payments debt include 2010 524 million 2011 notes 222 million 2016 notes 140 million 795 notes due february 2010 notes using restricted cash held blocked cash collateral account retirement notes 52 million 70 notes due may 2018 61 million related premiums notes repurchased year 2009 161 million 2011 notes 94 million 2010 notes using restricted cash held blocked cash collateral account repurchase notes 38 million 2016 notes 2008 40 million 2016 notes repaid remaining 25 million outstanding lakeside term loan net proceeds borrowings include fiscal 2009 issued 810 million 2014 notes original issue discount 59 million based issue price 92756 face value received net proceeds 751 million used net proceeds towards repayment borrowings accounts receivable securitization facility general corporate purposes fiscal 2009 dynamic fuels received 100 million proceeds sale gulf opportunity zone taxexempt bonds made available federal government regions affected hurricanes katrina rita 2005 floating rate bonds due october 1 2033 fiscal 2008 issued 458 million 325 convertible senior notes due october 15 2013 net proceeds used net cost related convertible note hedge warrant transactions toward repayment borrowings accounts receivable securitization facility general corporate purposes fiscal 2008 issued 224 million shares class stock public offering net proceeds used toward repayment borrowings accounts receivable securitization facility general corporate purposes conjunction entry new credit facility issuance 2014 notes fiscal 2009 paid 48 million debt issuance costs revolving credit facility supports shortterm funding needs letters credit letters credit issued primarily support workers’ compensation insurance programs derivative activities dynamic fuels’ gulf opportunity zone taxexempt bonds borrowing base adjustment availability facility 10 billion based percentage certain eligible accounts receivable eligible inventory reduced certain reserves october 2 2010 entire 10 billion eligible borrowing issuing letters credit 2013 notes may converted early fiscal quarter event class stock trades 2196 least 20 trading days period 30 consecutive trading days ending last trading day preceding fiscal quarter event note holders may require us pay outstanding principal cash totaled 458 million october 2 2010 conversion premium would paid shares class stock conditions early conversion met fourth fiscal quarter fiscal 2010 thus notes may converted first quarter fiscal 2011 conditions early conversion satisfied future quarters holders exercised early conversion option would use current cash hand cash flow operations principal payments october 2 2010 315 million 2011 notes outstanding plan presently use current cash hand cash flows operations payment remaining 2011 notes due october 1 2011 current ratio 181 1 220 1 october 2 2010 october 3 2009 respectively deterioration credit capital markets credit market conditions deteriorated rapidly fourth quarter fiscal 2008 although improved returned pre2008 levels several major banks financial institutions failed forced seek assistance distressed sales emergency government measures allinclusive following summarizes impacts business credit facility cash flows operating activities current cash hand primary source liquidity funding debt service capital expenditures also revolving credit facility committed maximum capacity 10 billion provide additional liquidity working capital needs letters credit source financing growth opportunities october 2 2010 outstanding letters credit totaling 175 million none drawn upon left 825 million available borrowing revolving credit facility funded syndicate 19 banks commitments ranging 6 million 115 million per bank syndicate includes bank holding companies required adequately capitalized federal bank regulatory agency requirements banks syndicate unable perform commitments fund facility liquidity could impaired could reduce ability fund working capital needs support letters credit finance growth opportunities customerssuppliers financial condition customers suppliers could also impaired current market conditions although experienced material increase customer bad debts nonperformance suppliers current market conditions increase probability could experience losses customer supplier defaults credit capital market conditions result prolonged economic downturn united states abroad demand protein products could reduced could result reduction sales operating income cash flows addition rely livestock producers throughout country supply live cattle hogs producers adversely impacted current economic conditions terminate production livestock supply processing could significantly impacted additionally cash flow assistance programs certain livestock suppliers participate programs pay amount livestock equivalent standard cost grow livestock periods low market sales prices amounts payments excess market sales price recorded receivables accrue interest participating suppliers obligated repay receivables balances market sales prices exceed standard cost upon termination agreement maximum obligation associated programs limited fair value participating livestock supplier’s net tangible assets although believe aggregate maximum obligation program unlikely ever reached potential maximum obligation october 2 2010 approximately 215 million total receivables programs 51 million 72 million october 2 2010 october 3 2009 respectively even though programs limited net tangible assets participating livestock suppliers also manage portion credit risk associated programs obtaining security interests livestock suppliers’ assets analyzing residual credit risks general market conditions recorded allowance programs’ estimated uncollectible receivables 15 million 20 million october 2 2010 october 3 2009 respectively investments value investments equity debt securities including marketable debt securities companyowned life insurance pension postretirement plan assets impacted market volatility instruments recorded fair value october 2 2010 significant change fair value instruments fiscal 2010 currently oversee two domestic one foreign subsidiary noncontributory qualified defined benefit pension plans three pension plans frozen new participants additional benefits accrue participants based 2010 actuarial valuation anticipate contributions 5 million plans fiscal 2011 also one domestic unfunded defined benefit plan based 2010 actuarial valuation anticipate contributions 2 million plan fiscal 2011 financial instruments part commodity risk management activities use derivative financial instruments primarily futures options reduce exposure various market risks related commodity purchases similar capital markets commodities markets volatile past years grain energy prices remain volatile reaching alltime high fourth quarter fiscal 2008 falling sharply reduction grain energy prices benefit us longterm recorded losses related financial instruments fiscal 2009 257 million implemented policies reduce earnings volatility associated marktomarket derivative activities including use normal physical purchases normal physical sales required marked market insurance rely insurers protection liability claims property damage various risks primary insurers maintain best financial strength rating better nevertheless continue monitor situation insurers expected continue impacted current capital market environment credit ratings 2016 notes september 4 2008 standard poor’s sp downgraded credit rating “bbb” “bb” downgrade increased interest rate 2016 notes 685 735 effective beginning sixmonth interest payment due october 1 2008 november 13 2008 moody’s investors services inc moody’s downgraded credit rating “ba1” “ba3” downgrade increased interest rate 2016 notes 735 785 effective beginning sixmonth interest payment due april 1 2009 august 19 2010 sp upgraded credit rating “bb” “bb” september 2 2010 moody’s upgraded credit rating “ba3” “ba2” upgrades decreased interest rate 2016 notes 785 735 effective beginning sixmonth interest payment due october 1 2010 onenotch upgrade either ratings agency would decrease interest rates 2016 notes 025 onenotch downgrade either ratings agency would increase interest rates 2016 notes 025 revolving credit facility sp’s corporate credit rating tyson foods inc “bb” moody’s corporate credit rating tyson foods inc “ba2” moody’s upgrade credit rating “ba1” higher sp credit rating remained “bb” higher letter credit fees would decrease 025 sp downgrade corporate credit rating “b” lower moody’s downgrade corporate credit rating “b1” lower letter credit fees would increase additional 025 debt covenants revolving credit facility contains affirmative negative covenants among things may limit restrict ability create liens encumbrances incur debt merge dissolve liquidate consolidate make acquisitions investments dispose transfer assets pay dividends make payments respect capital stock amend material documents change nature business make certain payments debt engage certain transactions affiliates enter saleleaseback hedging transactions case subject certain qualifications exceptions availability facility less greater 15 commitments 150 million required maintain minimum fixed charge coverage ratio 2014 notes also contain affirmative negative covenants among things may limit restrict ability incur additional debt issue preferred stock make certain investments restricted payments create liens create restrictions distributions subsidiaries engage specified sales assets subsidiary stock enter transactions affiliates enter new lines business engage consolidation mergers acquisitions engage certain saleleaseback transactions compliance covenants october 2 2010 offbalance sheet arrangements offbalance sheet arrangements material financial position results operations offbalance sheet arrangements guarantees debt outside third parties including lease grower loans residual value guarantees covering certain operating leases various types equipment see note 10 commitments notes consolidated financial statements discussion contractual obligations following table summarizes contractual obligations october 2 2010 1 event default payment acceleration principal payments could occur 2 interest payments include interest outstanding debt payments estimated variable rate variable term debt based effective rates october 2 2010 expected payment dates 3 amounts include guarantees debt outside third parties consist lease grower loans substantially collateralized underlying assets well residual value guarantees covering certain operating leases various types equipment amounts included maximum potential amount future payments 4 amounts include minimum lease payments lease agreements 5 amounts include agreements purchase goods services enforceable legally binding specify significant terms including fixed minimum quantities purchased fixed minimum variable price provisions approximate timing transaction purchase obligations amount included items future purchase commitments grains livestock contracts fixed grower fees provide terms meet criteria excluded future purchase commitments contracts meet criteria purchase orders included table purchase order authorization purchase may considered enforceable legally binding contract contracts goods services contain termination clauses without penalty also excluded 6 amounts include estimated amounts complete buildings equipment construction october 2 2010 7 amounts include items meet definition purchase obligation recorded consolidated balance sheets addition amounts shown table unrecognized tax benefits 184 million related interest penalties 64 million october 2 2010 recorded liabilities fiscal 2011 tax audit resolutions could potentially reduce amounts approximately 20 million either tax positions sustained audit agree disallowance maximum contractual obligation associated cash flow assistance programs october 2 2010 based estimated fair values livestock supplier’s net tangible assets date aggregated approximately 215 million approximately 164 million remaining maximum commitment netting cash flow assistance related receivables minority partner shandong tyson xinchang foods joint ventures china right exercise put options require us purchase entire 40 equity interest price equal minority partner’s contributed capital plus minus prorata share joint venture’s accumulated undistributed net earnings losses put options exercisable fiveyear term commencing april 2011 october 2 2010 put options exercisable would resulted purchase price approximately 67 million minority partner’s entire equity interest recently issuedadopted accounting pronouncements refer discussion part ii item 8 notes consolidated financial statements note 1 business summary significant accounting policies recently issued accounting pronouncements note 2 change accounting principles recently adopted accounting pronouncements critical accounting estimates preparation consolidated financial statements requires us make estimates assumptions estimates assumptions affect reported amounts assets liabilities disclosure contingent assets liabilities date consolidated financial statements reported amounts revenues expenses reporting period actual results could differ estimates following summary certain accounting estimates consider critical description judgments uncertainties effect actual results differ assumptions contingent liabilities subject lawsuits investigations claims related wage hourlabor environmental product taxing authorities matters required assess likelihood adverse judgments outcomes matters well potential ranges probable losses determination amount reserves disclosures required contingencies made considerable analysis individual issue accrue contingent liabilities assessment risk loss probable reasonably estimated disclose contingent liabilities risk loss reasonably possible probable contingent liabilities contain uncertainties eventual outcome result future events determination current reserves requires estimates judgments related future changes facts circumstances differing interpretations law assessments amount damages effectiveness strategies factors beyond control made material changes accounting methodology used establish contingent liabilities past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate contingent liabilities however actual results consistent estimates assumptions may exposed gains losses could material marketing advertising costs incur advertising retailer incentive consumer incentive costs promote products marketing programs include cooperative advertising volume discounts instore display incentives coupons programs marketing advertising costs charged period incurred accrue costs based estimated performance historical utilization redemption program cash consideration given customers considered reduction price products thus recorded reduction sales remainder marketing advertising costs recorded selling general administrative expense recognition costs related programs contains uncertainties due judgment required estimating potential performance redemption program estimates based many factors including experience similar promotional programs made material changes accounting methodology used establish marketing accruals past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate marketing accruals however actual results consistent estimates assumptions may exposed gains losses could material 10 change marketing accruals october 2 2010 would impact pretax earnings approximately 11 million description judgments uncertainties effect actual results differ assumptions accrued self insurance self insured certain losses related health welfare workers’ compensation auto liability general liability claims use independent thirdparty actuary assist determining selfinsurance liability actuary consider number factors estimating selfinsurance liability including claims experience demographic factors severity factors actuarial assumptions periodically review estimates assumptions thirdparty actuary assist us determining adequacy selfinsurance liability policy maintain accrual within central high point actuarial range selfinsurance liability contains uncertainties due assumptions required judgment used costs settle obligations including legal healthcare costs could increase decrease causing estimates selfinsurance liability change incident rates including frequency severity could increase decrease causing estimates selfinsurance liability change made material changes accounting methodology used establish selfinsurance liability past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate selfinsurance liability however actual results consistent estimates assumptions may exposed gains losses could material 10 increase actuarial range october 2 2010 would result increase amount recorded selfinsurance liability approximately 24 million 10 decrease actuarial range october 2 2010 would result material change amount recorded selfinsurance liability impairment longlived assets longlived assets evaluated impairment whenever events changes circumstances indicate carrying value may recoverable examples include significant adverse change extent manner use longlived asset change physical condition evaluating longlived assets impairment compare carrying value asset’s estimated undiscounted future cash flows impairment indicated estimated future cash flows less carrying value asset impairment excess carrying value fair value longlived asset recorded impairment charges related longlived assets 19 million 25 million 52 million respectively fiscal years 2010 2009 2008 impairment analysis contains uncertainties due judgment assumptions estimates surrounding undiscounted future cash flows longlived asset including forecasting useful lives assets selecting discount rate reflects risk inherent future cash flows determine fair value made material changes accounting methodology used evaluate impairment longlived assets last three fiscal years believe reasonable likelihood material change estimates assumptions used calculate impairments longlived assets however actual results consistent estimates assumptions used calculate estimated future cash flows may exposed impairment losses could material additionally continue evaluate future international business strategies may expose us future impairment losses description judgments uncertainties effect actual results differ assumptions impairment goodwill intangible assets goodwill impairment determined using twostep process first step identify potential impairment exists comparing fair value reporting unit carrying amount including goodwill fair value reporting unit exceeds carrying amount goodwill reporting unit considered potential impairment second step impairment test necessary however carrying amount reporting unit exceeds fair value second step performed determine goodwill impaired measure amount impairment loss recognize second step compares implied fair value goodwill carrying amount goodwill implied fair value goodwill exceeds carrying amount goodwill considered impaired however carrying amount goodwill exceeds implied fair value impairment loss recognized amount equal excess implied fair value goodwill determined manner amount goodwill recognized business combination ie fair value reporting unit allocated assets liabilities including unrecognized intangible assets reporting unit acquired business combination fair value reporting unit purchase price paid acquire reporting unit intangible assets carrying value intangible asset exceeds fair value impairment loss recognized amount equal excess elected make first day fourth quarter annual impairment assessment date goodwill intangible assets however could required evaluate recoverability goodwill intangible assets prior required annual assessment among things experience disruptions business unexpected significant declines operating results divestiture significant component business sustained decline market capitalization estimate fair value reporting units generally operating segments using various valuation techniques primary technique discounted cash flow analysis uses significant unobservable inputs level 3 inputs defined fair value hierarchy discounted cash flow analysis requires us make various judgmental assumptions sales operating margins growth rates discount rates generally utilize normalized operating margin assumptions based longterm expectations operating margins historically realized reporting units’ industries include assumptions sales operating margins growth rates consider budgets business plans economic projections believed reflect market participant views would exist exit transaction fiscal 2010 impairment test none material reporting units operating margin assumptions excess annual margins realized recent year assumptions also made varying perpetual growth rates periods beyond longterm business plan period intangible asset fair values calculated trademarks using royalty rate method assumptions royalty rates based rates similar brands trademarks licensed marketplace impairment analysis contains uncertainties due uncontrollable events could positively negatively impact anticipated future economic operating conditions made material changes accounting methodology used evaluate impairment goodwill intangible assets last three years discount rate used annual goodwill impairment test decreased average 84 fiscal 2010 101 fiscal 2009 significant changes key estimates assumptions beef reporting unit 2009 material reporting units failed first step annual goodwill impairment analysis fiscal 2010 2009 2008 therefore second step necessary fiscal 2009 recorded 560 million partial impairment beef reporting unit’s goodwill driven increase discount rate used 2009 annual goodwill impairment analysis result disruptions global credit financial markets deterioration economic conditions fiscal 2010 recorded noncash 29 million full impairment immaterial chicken segment reporting unit’s goodwill material reporting units’ estimated fair value exceeded carrying value 20 consequently currently consider material reporting units significant risk failing first step annual goodwill impairment test inherent estimates assumptions used determining fair value reporting units outside control management including interest rates cost capital tax rates credit ratings believe made reasonable estimates assumptions calculate fair value reporting units intangible assets possible material change could occur actual results consistent estimates assumptions used calculate fair value may required perform second step could result additional material impairments goodwill fiscal 2010 intangible asset impairment analysis result material impairment charge hypothetical 10 decrease fair value intangible assets would result material impairment description judgments uncertainties effect actual results differ assumptions income taxes estimate total income tax expense based statutory tax rates tax planning opportunities available us various jurisdictions earn income federal income tax includes estimate taxes earnings foreign subsidiaries expected remitted united states taxable earnings considered indefinitely invested foreign subsidiary deferred income taxes recognized future tax effects temporary differences financial income tax reporting using tax rates effect years differences expected reverse valuation allowances recorded likely tax benefit realized deferred tax asset record unrecognized tax benefit liabilities known anticipated tax issues based analysis whether extent additional taxes due changes tax laws rates could affect recorded deferred tax assets liabilities future changes projected future earnings could affect recorded valuation allowances future calculations related income taxes contain uncertainties due judgment used calculate tax liabilities application complex tax regulations across tax jurisdictions operate analysis unrecognized tax benefits contains uncertainties based judgment used apply likely recognition measurement thresholds believe reasonable likelihood material change tax related balances valuation allowances however due complexity uncertainties ultimate resolution may result payment materially different current estimate tax liabilities extent prevail matters unrecognized tax benefit liabilities established required pay amounts excess recorded unrecognized tax benefit liabilities effective tax rate given financial statement period could materially affected unfavorable tax settlement would require use cash result increase effective tax rate period resolution favorable tax settlement would recognized reduction effective tax rate period resolution item 7aitem 7 management’s discussion analysis financial condition results operations description company one world’s largest meat protein companies secondlargest food production company fortune 500 one recognized brand names food industry produce distribute market chicken beef pork prepared foods related allied products operations conducted four segments chicken beef pork prepared foods key factors influencing business customer demand products ability maintain grow relationships customers introduce new innovative products marketplace accessibility international markets market prices products cost live cattle hogs raw materials grain feed ingredients operating efficiencies facilities overview general result improved internal performance strong exports favorable market conditions beef pork segments operating results remained strong fiscal 2011 despite 37 billion increase input costs following key drivers continued focus maximizing margins margin management operational efficiency improvements margin management improvements occurred areas mix export sales price optimization valueadded products initiatives operational efficiencies occurred areas yields cost reduction labor management logistics cost optimization strong demand exports beef pork segments created favorable pricing environment chicken segment remained profitable fiscal 2011 challenged 675 million increased grain feed ingredients costs well excess industry supplies made difficult pass along increased input costs result balancing supply customer demand cut production customer demand fell short expectations recent usda data indicates decreased egg sets broiler chick placements slaughter pounds however impact production cuts associated impact market prices begin materialize late fourth quarter fiscal 2012 operating margin 40 fiscal 2011 achieved operating margins 40 better consecutive years first time since acquisition ibp inc 2001 following summary operating margins segment chicken 15 beef 35 pork 103 prepared foods 36 debt liquidity fiscal 2011 generated 10 billion operating cash flows total debt declined 350 million fiscal 2011 22 billion lowest level since acquisition ibp inc additionally repurchased part previously announced share repurchase program 97 million shares stock 170 million fiscal 2011 october 1 2011 16 billion liquidity includes availability credit facility 716 million cash equivalents accounting cycle resulted 52week year fiscal 2011 2010 53week year fiscal 2009 2011 net income included following items 11 million gain related sale interests equity method investment 21 million reduction income tax expense related reversal reserves foreign uncertain tax positions 2010 net income included following items 61 million charges related losses notes repurchased fiscal 2010 29 million noncash nontax deductible charge related full goodwill impairment immaterial chicken segment reporting unit 12 million noncash nontax deductible charge related impairment equity method investment 38 million gain insurance proceeds 2009 net loss included following items 560 million noncash nontax deductible charge related goodwill impairment beef segment 15 million charge related closing ponca city oklahoma processed meats plant fiscal 2012 outlook usda data indicates overall domestic protein chicken beef pork turkey production expected decrease fiscal 2012 exports likely remain strong forecast total domestic availability protein 23 compared fiscal 2011 continue support improved pricing following summary fiscal 2012 outlook segments well outlook sales capital expenditures net interest expense debt liquidity share repurchases chicken fiscal 2012 expect industry production decrease approximately 4 fiscal 2011 gradually improve market pricing conditions current futures prices indicate higher grain costs fiscal 2012 compared fiscal 2011 expect offset increased grain costs operational pricing mix improvements chicken segment currently profitable expect strengthen throughout year beef expect see gradual reduction fed cattle supplies 12 fiscal 2012 well exports remain strong compared fiscal 2011 despite reduced domestic availability expect adequate supplies regions operate plants although current weak industry fundamentals challenging beef business expect profitable first quarter anticipate fundamentals strengthen throughout year beef segment normalized range fiscal 2012 pork expect hog supplies fiscal 2012 comparable fiscal 2011 adequate regions operate additionally expect pork exports remain strong fiscal 2012 based factors expect strong fundamentals pork business continue fiscal 2012 prepared foods expect operational improvements increased pricing offset anticipated increase raw material costs many sales contracts formula based shorterterm nature typically able offset rising input costs increased pricing however lag time price increases take effect expect improved prepared foods profitability fiscal 2012 primarily due improvements lunchmeats business sales expect 2012 sales exceed 34 billion mostly resulting price increases related decreases domestic availability protein rising raw material costs capital expenditures preliminary capital expenditures plan fiscal 2012 approximately 800850 million continue make significant investments production facilities high return operational efficiencies profit improvement projects development foreign operations net interest expense expect fiscal 2012 net interest expense approximately 185 million 46 million compared fiscal 2011 debt liquidity significant maturities debt coming due next two fiscal years continue use available cash repurchase notes available attractive rates plan maintain total liquidity excess 12 billion share repurchases expect continue repurchasing shares previously announced share repurchase plan fiscal 2011 repurchased 97 million shares approximately 170 million october 1 2011 128 million shares remain authorized repurchases timing extent repurchase shares depend upon among things market conditions liquidity targets debt obligations regulatory requirements summary results continuing operations 2011 vs 2010 average sales price increase sales largely due increase average sales prices accounted increase approximately 34 billion segments increase average sales prices mostly due price increases associated rising raw material costs majority increase driven beef pork segments sales volume sales positively impacted increase sales volume accounted increase 484 million primarily due increases chicken pork segments partially offset decreases beef prepared foods segments 2010 vs 2009 average sales price increase sales largely due increase average sales prices accounted increase approximately 19 billion segments increase average sales prices majority increase driven beef pork segments sales volume sales negatively impacted decrease sales volume accounted decrease 150 million primarily due extra week fiscal 2009 decrease pork segment sales volume partially offset increase fiscal 2009 acquisition chicken segment 2011 vs 2010 cost sales increased approximately 41 billion higher input cost per pound increased cost sales approximately 37 billion higher sales volume increased cost sales 445 million 37 billion impact higher input costs per pound primarily driven increase average live cattle hog costs approximately 24 billion increase grain feed ingredients 675 million increase growout operating costs 74 million chicken segment partially offset approximately 200 million operational improvements increase raw material costs 273 million prepared foods segment 04 billion impact higher sales volumes primarily driven increases sales volume chicken pork segments partially offset decreases beef prepared foods segments increase 145 million costs sales associated dynamic fuels commenced production activities fiscal 2011 2010 vs 2009 cost sales increased 415 million higher cost per pound increased cost sales 558 million partially offset lower sales volume decreased cost sales 143 million increase average live cattle hog costs approximately 10 billion increase due net losses 78 million fiscal 2010 compared net gains 191 million fiscal 2009 commodity risk management activities related forward futures contracts live cattle hogs excludes impact related physical purchase transactions impact current future period operating results increase raw material costs approximately 218 million prepared foods segment increase incentivebased compensation approximately 97 million decrease due net losses 6 million fiscal 2010 compared net losses 257 million fiscal 2009 commodity risk management activities related grain energy purchases excludes impact related physical purchase transactions impact current future period operating results decrease grain costs chicken segment approximately 158 million decrease chicken segment costs resulting operational improvements 2011 vs 2010 decrease 13 million related incentivebased compensation 2010 vs 2009 increase 118 million related incentivebased compensation reductions include decreases resulting one less week fiscal 2010 compared fiscal 2009 well 16 million reduction professional fees advertising sales promotions perform annual goodwill impairment test first day fourth quarter estimate fair value reporting units using discounted cash flow analysis discussed critical accounting estimates analysis requires us make various judgmental estimates assumptions sales operating margins growth rates discount factors 2010 includes full impairment immaterial chicken segment reporting unit 2009 includes partial impairment beef segment reporting unit 2009 included 15 million charge related closing ponca city oklahoma processed meats plant 201120102009 declines interest income primarily due declines cash balances interest rates declines cash balances primarily due repurchases retirement redemption senior notes repurchases class common stock reactivated share repurchase program additions property plant equipment 2011 vs 2010 cash interest expense included interest expense related coupon rates senior notes commitmentletter credit fees incurred revolving credit facilities decrease due primarily lower average weekly indebtedness approximately 15 losses notes repurchased fiscal 2011 2010 included amount paid exceeding carrying value notes repurchased primarily included repurchases 825 notes due october 2011 notes 685 senior notes due april 2016 notes noncash interest expense primarily included interest related amortization debt issuance costs discountspremiums note issuances included debt issuance costs incurred revolving credit facility 1050 senior notes due 2014 notes issued march 2009 well accretion debt discount 325 convertible senior notes due 2013 notes 2014 notes 2010 vs 2009 cash interest expense included interest expense related coupon rates senior notes commitmentletter credit fees incurred revolving credit facilities decrease due lower average weekly indebtedness approximately 11 partially offset increase overall average borrowing rates losses notes repurchased fiscal 2010 included amount paid exceeding carrying value notes repurchased primarily included repurchases 2011 notes 2016 notes noncash interest expense primarily included interest related amortization debt issuance costs discountspremiums note issuances included debt issuance costs incurred revolving credit facility 2014 notes well accretion debt discount 2013 notes 2014 notes fiscal 2009 also includes expenses related amendment fees paid december 2008 existing credit agreements 2011 included 11 million gain related sale interests equity method investment 2010 included 12 million charge related impairment equity method investment 2009 included 24 million foreign currency exchange loss effective tax rate continuing operations impacted number items result difference effective tax rate us statutory rate 35 table reflects significant items impacting rate indicated 2011 domestic production activity deduction reduced rate 23 net decrease unrecognized tax benefits reduced rate 17 state income taxes increased rate 16 general business credits decreased rate 09 2010 domestic production activity deduction reduced rate 20 decrease unrecognized tax benefits reduced rate 14 decrease state valuation allowances reduced rate 10 state income taxes increased rate 34 2009 impairment goodwill deductible income tax purposes reduced rate 361 increase foreign valuation allowances reduced rate 38 general business credits increased rate 22 tax planning foreign jurisdictions increased rate 17 segment results operate four segments chicken beef pork prepared foods following table summary sales operating income loss measure segment income loss segment results exclude results discontinued operation lakeside 2010 operating income included 38 million gain insurance proceeds 29 million noncash nontax deductible charge related full goodwill impairment immaterial chicken segment reporting unit 2011 vs 2010 sales volume 21 increase slaughter pounds mostly occurred first three quarters fiscal 2011 reduction volumes ending inventory fiscal 2011 compared fiscal 2010 primarily drove 46 increase sales volume fiscal 2011 average sales price increase average sales prices primarily due mix changes price increases associated increased input costs operating income grain feed ingredients growout costs operating results negatively impacted fiscal 2011 increase grain feed ingredients costs 675 million increase growout operating costs 74 million operational improvements operating results positively impacted approximately 200 million operational improvements primarily attributed improvements yield mix processing optimization operational improvements partially offset increase operating costs mostly cooking ingredients employee related costs derivative activities operating results included following amounts commodity risk management activities related grain energy purchases amounts exclude impact related physical purchase transactions impact current future period operating results 2010 vs 2009 sales volume increase sales volume fiscal 2010 due sales volume related fiscal 2009 acquisition partially offset decrease due extra week fiscal 2009 average sales price increase average sales prices primarily due sales mix changes associated reduced sales volume lower price per pound rendered products operating income loss operational improvements operating results positively impacted operational improvements included yield mix live production performance improvements additional processing flexibility reduced interplant product movement derivative activities operating results included following amounts commodity risk management activities related grain energy purchases amounts exclude impact related physical purchase transactions impact current future period operating results grain costs operating results positively impacted fiscal 2010 decrease grain costs 158 million operating results included increase incentivebased compensation 2009 operating loss included 560 million noncash charge related partial impairment goodwill 2011 vs 2010 sales operating income average sales price increased due price increases associated increased livestock costs maintained strong operating income maximizing revenues relative rising live cattle markets partially attributable strong export sales offset increase operating costs primarily attributable employee related costs derivative activities operating results included following amounts commodity risk management activities related forward futures contracts live cattle amounts exclude impact related physical sale purchase transactions impact current future period operating results 2010 vs 2009 sales operating income loss increased operating margins maximizing revenues relative rising live cattle markets well improved operating costs addition improvement export sales operating results included increase incentivebased compensation derivative activities operating results included following amounts commodity risk management activities related forward futures contracts live cattle amounts exclude impact related physical sale purchase transactions impact current future period operating results 2011 vs 2010 sales operating income average sales price increased due price increases associated increased livestock costs maintained strong operating income maximizing revenues relative rising live hog markets partially attributable strong export sales operational mix performance derivative activities operating results included following amounts commodity risk management activities related forward futures contracts live hogs amounts exclude impact related physical sale purchase transactions impact current future period operating results 2010 vs 2009 sales operating income increased operating margins maximizing revenues relative rising live hog markets addition improvement export sales operating results included increase incentivebased compensation derivative activities operating results included following amounts commodity risk management activities related forward futures contracts live hogs amounts exclude impact related physical sale purchase transactions impact current future period operating results 2009 operating income included 15 million charge related closing ponca city oklahoma processed meats plant 2011 vs 2010 sales operating income despite increase average sales prices operating income remained flat excluding 8 million insurance proceeds fiscal 2010 related flood damage jefferson wisconsin plant increase average sales prices offset lower volumes increased raw material costs 273 million increased operational costs 50 million primarily attributable employee related costs plant variances mostly due lower volumes 2010 vs 2009 sales operating income despite increase average sales prices sales volume operating income declined fiscal 2010 compared fiscal 2009 due increase raw material costs however made several operational improvements late fiscal 2009 allow us run plants efficiently operating results included increase incentivebased compensation liquidity capital resources cash needs working capital expenditures growth opportunities repurchases senior notes share repurchases expected met current cash hand cash flows provided operating activities shortterm borrowings based current expectations believe liquidity capital resources sufficient operate business however may take advantage opportunities generate additional liquidity refinance existing debt capital market transactions amount nature timing capital market transactions depend operating performance circumstances thencurrent commitments obligations amount nature timing capital requirements limitations imposed current credit arrangements overall market conditions cash flows associated changes working capital 2011 decreased due increase inventory accounts receivable balances partially offset increase accounts payable higher inventory accounts receivable balances driven significant increases input costs price increases associated increased input costs 2010 increased due increase accrued salaries wages benefits accounts payable balances almost entirely offset increase inventory accounts receivable balances increase accrued salaries wages benefits primarily due accruals incentivebased compensation 2009 increased primarily due reduction inventory accounts receivable balances partially offset reduction accounts payable lower inventory balance primarily due reduction inventory volumes well decrease raw material costs additions property plant equipment include acquiring new equipment upgrading facilities maintain competitive standing position us future opportunities fiscal 2011 capital spending primarily production efficiencies operations ongoing development foreign operations fiscal 2010 capital spending primarily related production efficiencies operations construction dynamic fuels’ facility development foreign operations fiscal 2009 capital spending improvements made prepared foods operations increase efficiencies construction dynamic fuels’ facility development foreign operations capital spending fiscal 2012 expected approximately 800850 million includes spending operations production labor efficiencies yield improvements sales channel flexibility well expansion foreign operations purchases marketable securities included funding deferred compensation plans proceeds notes receivable totaling 51 million fiscal 2011 related collection notes receivable received conjunction sale business operation fiscal 2009 change restricted cash fiscal 2009 dynamic fuels received 100 million proceeds sale gulf opportunity zone taxexempt bonds made available federal government regions affected hurricanes katrina rita 2005 cash received bonds restricted could used towards construction dynamic fuels’ facility acquisitions fiscal 2009 acquired three vertically integrated poultry companies southern brazil aggregate purchase price 67 million addition 15 million contingent purchase price based production volumes joint ventures china called shandong tyson xinchang foods received necessary government approvals fiscal 2009 aggregate purchase price 60 equity interest 21 million excludes 93 million cash transferred joint venture future capital needs net borrowings payments revolving credit facilities primarily include activity related accounts receivable securitization facility entry new revolving credit facility issuance 2014 notes march 2009 repaid outstanding borrowings accounts receivable securitization facility terminated facility payments debt include 2011 315 million 2011 notes 63 million 2016 notes 2 million 70 notes due may 2018 103 million related borrowings foreign operations 2010 524 million 2011 notes 222 million 2016 notes 140 million 795 notes due february 2010 notes using restricted cash held blocked cash collateral account retirement notes 52 million 70 notes due may 2018 61 million related premiums notes repurchased year 2009 161 million 2011 notes 94 million 2010 notes using restricted cash held blocked cash collateral account repurchase notes 38 million 2016 notes net proceeds borrowings include fiscal 2011 foreign operations received proceeds 106 million borrowings total debt related foreign operations 98 million october 1 2011 58 million current 40 million longterm additionally dynamic fuels received 9 million proceeds short term notes fiscal 2011 fiscal 2009 issued 810 million 2014 notes original issue discount 59 million based issue price 92756 face value received net proceeds 751 million used net proceeds towards repayment borrowings accounts receivable securitization facility general corporate purposes fiscal 2009 dynamic fuels received 100 million proceeds sale gulf opportunity zone taxexempt bonds made available federal government regions affected hurricanes katrina rita 2005 floating rate bonds due october 1 2033 conjunction entry credit facility issuance 2014 notes fiscal 2009 paid 48 million debt issuance costs fiscal 2011 minority interest partner 60owned shandong tyson xinchang foods joint ventures china exercised put options requiring us purchase entire 40 equity interest transaction closed fiscal 2011 cash consideration totaling 66 million fiscal 2011 announced board directors reactivated share repurchase program activity since fiscal 2005 repurchase remaining available 225 million shares class common stock program share repurchase program fixed scheduled termination date fiscal 2011 repurchased 97 million shares approximately 170 million plan october 1 2011 128 million shares remain authorized repurchase timing extent repurchase shares depend upon among things market conditions liquidity targets limitations debt obligations regulatory requirements addition share repurchase program purchase shares open market fund certain obligations equity compensation plans repurchases totaled 37 million 48 million 19 million fiscal 2011 2010 2009 respectively revolving credit facility supports shortterm funding needs letters credit letters credit issued primarily support workers’ compensation insurance programs derivative activities dynamic fuels’ gulf opportunity zone taxexempt bonds 2013 notes may converted early fiscal quarter event class stock trades 2196 least 20 trading days period 30 consecutive trading days ending last trading day preceding fiscal quarter event note holders may require us pay outstanding principal cash totaled 458 million october 1 2011 conversion premium would paid shares class stock conditions early conversion met fourth fiscal quarter fiscal 2011 thus notes may converted first quarter fiscal 2012 conditions early conversion satisfied future quarters holders exercise early conversion option would use current cash hand cash flow operations principal payments significant maturities debt coming due next two fiscal years current ratio 201 1 181 1 october 1 2011 october 2 2010 respectively capital resources credit facility cash flows operating activities current cash hand primary source liquidity funding debt service capital expenditures dividends share repurchases also revolving credit facility committed maximum capacity 10 billion provide additional liquidity working capital needs letters credit source financing growth opportunities october 1 2011 outstanding letters credit totaling 158 million none drawn upon left 842 million available borrowing revolving credit facility funded syndicate 38 banks commitments ranging 3 million 90 million per bank syndicate includes bank holding companies required adequately capitalized federal bank regulatory agency requirements capitalization monitor credit ratings capacity longterm financing consider various qualitative quantitative factors monitor ratio debt total capitalization support longterm financing decisions october 1 2011 october 2 2010 ratio debttototal capitalization 277 328 respectively purpose calculation debt defined sum current longterm debt total capitalization defined debt plus total shareholders’ equity ratio debt total capitalization decreased fiscal 2011 primarily resulting reduced debt balances increased retained earnings associated strong earnings fiscal 2011 credit ratings 2016 notes september 4 2008 standard poor’s sp downgraded credit rating “bbb” “bb” downgrade increased interest rate 2016 notes 685 735 effective beginning sixmonth interest payment due october 1 2008 november 13 2008 moody’s investors services inc moody’s downgraded credit rating “ba1” “ba3” downgrade increased interest rate 2016 notes 735 785 effective beginning sixmonth interest payment due april 1 2009 august 19 2010 sp upgraded credit rating “bb” “bb” september 2 2010 moody’s upgraded credit rating “ba3” “ba2” upgrades decreased interest rate 2016 notes 785 735 effective beginning sixmonth interest payment due october 1 2010 february 24 2011 sp upgraded credit rating notes “bb” “bbb” march 29 2011 moody’s upgraded credit rating “ba2” “ba1” upgrades decreased interest rate 2016 notes 735 685 effective beginning sixmonth interest payment due april 1 2011 onenotch upgrade moody’s would decrease interest rates 2016 notes 025 onenotch downgrade either ratings agency would increase interest rates 2016 notes 025 revolving credit facility sp’s corporate credit rating tyson foods inc “bbb” moody’s corporate credit rating tyson foods inc “ba1” moody’s upgrade credit rating “baa2” higher sp credit rating remained “bbb” sp upgrade credit rating “bbb” higher moody’s upgraded credit rating “baa3” higher letter credit fees would decrease 025 fees paid unused portion facility would decrease 0075 sp downgrade corporate credit rating “bb” moody’s downgrade corporate credit rating “ba2” letter credit fees would increase 025 fees paid unused portion facility would increase 0025 debt covenants revolving credit facility contains affirmative negative covenants among things may limit restrict ability create liens encumbrances incur debt merge dissolve liquidate consolidate make acquisitions investments dispose transfer assets pay dividends make payments respect capital stock amend material documents change nature business make certain payments debt engage certain transactions affiliates enter saleleaseback hedging transactions case subject certain qualifications exceptions addition required maintain minimum interest expense coverage maximum leverage ratios 2014 notes also contain affirmative negative covenants among things may limit restrict ability incur additional debt issue preferred stock make certain investments restricted payments create liens create restrictions distributions subsidiaries engage specified sales assets subsidiary stock enter transactions affiliates enter new lines business engage consolidation mergers acquisitions engage certain saleleaseback transactions compliance debt covenants october 1 2011 offbalance sheet arrangements offbalance sheet arrangements material financial position results operations offbalance sheet arrangements guarantees debt outside third parties including lease grower loans residual value guarantees covering certain operating leases various types equipment see note 19 commitments contingencies notes consolidated financial statements discussion contractual obligations following table summarizes contractual obligations october 1 2011 1 event default payment acceleration principal payments could occur 2 interest payments include interest outstanding debt payments estimated variable rate variable term debt based effective rates october 1 2011 expected payment dates 3 amounts include guarantees debt outside third parties consist lease grower loans substantially collateralized underlying assets well residual value guarantees covering certain operating leases various types equipment amounts included maximum potential amount future payments 4 amounts include minimum lease payments lease agreements 5 amounts include agreements purchase goods services enforceable legally binding specify significant terms including fixed minimum quantities purchased fixed minimum variable price provisions approximate timing transaction purchase obligations amount included items future purchase commitments grains livestock contracts fixed grower fees provide terms meet criteria excluded future purchase commitments contracts meet criteria purchase orders included table purchase order authorization purchase may considered enforceable legally binding contract contracts goods services contain termination clauses without penalty also excluded 6 amounts include estimated amounts complete buildings equipment construction october 1 2011 7 amounts include items meet definition purchase obligation recorded consolidated balance sheets addition amounts shown table unrecognized tax benefits 174 million related interest penalties 58 million october 1 2011 recorded liabilities fiscal 2012 tax audit resolutions could potentially reduce amounts approximately 10 million either tax positions sustained audit agree disallowance maximum contractual obligation associated cash flow assistance programs october 1 2011 based estimated fair values livestock supplier’s net tangible assets date aggregated approximately 220 million approximately 192 million remaining maximum commitment netting cash flow assistance related receivables recently issuedadopted accounting pronouncements refer discussion part ii item 8 notes consolidated financial statements note 1 business summary significant accounting policies recently issued accounting pronouncements note 2 change accounting principles recently adopted accounting pronouncements critical accounting estimates preparation consolidated financial statements requires us make estimates assumptions estimates assumptions affect reported amounts assets liabilities disclosure contingent assets liabilities date consolidated financial statements reported amounts revenues expenses reporting period actual results could differ estimates following summary certain accounting estimates consider critical description judgments uncertainties effect actual results differ assumptions contingent liabilities subject lawsuits investigations claims related wage hourlabor environmental product taxing authorities matters required assess likelihood adverse judgments outcomes matters well potential ranges probable losses determination amount reserves disclosures required contingencies made considerable analysis individual issue accrue contingent liabilities assessment risk loss probable reasonably estimated disclose contingent liabilities risk loss reasonably possible probable contingent liabilities contain uncertainties eventual outcome result future events determination current reserves requires estimates judgments related future changes facts circumstances differing interpretations law assessments amount damages effectiveness strategies factors beyond control made material changes accounting methodology used establish contingent liabilities past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate contingent liabilities however actual results consistent estimates assumptions may exposed gains losses could material marketing advertising costs incur advertising retailer incentive consumer incentive costs promote products marketing programs include cooperative advertising volume discounts instore display incentives coupons programs marketing advertising costs charged period incurred accrue costs based estimated performance historical utilization redemption program cash consideration given customers considered reduction price products thus recorded reduction sales remainder marketing advertising costs recorded selling general administrative expense recognition costs related programs contains uncertainties due judgment required estimating potential performance redemption program estimates based many factors including experience similar promotional programs made material changes accounting methodology used establish marketing accruals past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate marketing accruals however actual results consistent estimates assumptions may exposed gains losses could material 10 change marketing accruals october 1 2011 would impact pretax earnings approximately 15 million description judgments uncertainties effect actual results differ assumptions accrued self insurance self insured certain losses related health welfare workers’ compensation auto liability general liability claims use independent thirdparty actuary assist determining selfinsurance liability actuary consider number factors estimating selfinsurance liability including claims experience demographic factors severity factors actuarial assumptions periodically review estimates assumptions thirdparty actuary assist us determining adequacy selfinsurance liability policy maintain accrual within central high point actuarial range selfinsurance liability contains uncertainties due assumptions required judgment used costs settle obligations including legal healthcare costs could increase decrease causing estimates selfinsurance liability change incident rates including frequency severity could increase decrease causing estimates selfinsurance liability change made material changes accounting methodology used establish selfinsurance liability past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate selfinsurance liability however actual results consistent estimates assumptions may exposed gains losses could material 10 increase actuarial estimate october 1 2011 would result material change amount recorded selfinsurance liability 10 decrease actuarial estimate october 1 2011 would result decrease amount recorded selfinsurance liability approximately 23 million impairment longlived assets longlived assets evaluated impairment whenever events changes circumstances indicate carrying value may recoverable examples include significant adverse change extent manner use longlived asset change physical condition evaluating longlived assets impairment compare carrying value asset’s estimated undiscounted future cash flows impairment indicated estimated future cash flows less carrying value asset impairment excess carrying value fair value longlived asset recorded impairment charges related longlived assets 15 million 19 million 25 million respectively fiscal 2011 2010 2009 impairment analysis contains uncertainties due judgment assumptions estimates surrounding undiscounted future cash flows longlived asset including forecasting useful lives assets selecting discount rate reflects risk inherent future cash flows determine fair value made material changes accounting methodology used evaluate impairment longlived assets last three fiscal years believe reasonable likelihood material change estimates assumptions used calculate impairments longlived assets however actual results consistent estimates assumptions used calculate estimated future cash flows may exposed impairment losses could material additionally continue evaluate future international business strategies may expose us future impairment losses description judgments uncertainties effect actual results differ assumptions income taxes estimate total income tax expense based statutory tax rates tax planning opportunities available us various jurisdictions earn income federal income tax includes estimate taxes earnings foreign subsidiaries expected remitted united states taxable earnings considered indefinitely invested foreign subsidiary deferred income taxes recognized future tax effects temporary differences financial income tax reporting using tax rates effect years differences expected reverse valuation allowances recorded likely tax benefit realized deferred tax asset record unrecognized tax benefit liabilities known anticipated tax issues based analysis whether extent additional taxes due changes tax laws rates could affect recorded deferred tax assets liabilities future changes projected future earnings could affect recorded valuation allowances future calculations related income taxes contain uncertainties due judgment used calculate tax liabilities application complex tax regulations across tax jurisdictions operate analysis unrecognized tax benefits contains uncertainties based judgment used apply likely recognition measurement thresholds believe reasonable likelihood material change tax related balances valuation allowances however due complexity uncertainties ultimate resolution may result payment materially different current estimate tax liabilities extent prevail matters unrecognized tax benefit liabilities established required pay amounts excess recorded unrecognized tax benefit liabilities effective tax rate given financial statement period could materially affected unfavorable tax settlement would require use cash generally result increase effective tax rate period resolution favorable tax settlement would generally recognized reduction effective tax rate period resolution impairment goodwill intangible assets description goodwill impairment determined using twostep process first step identify potential impairment exists comparing fair value reporting unit carrying amount including goodwill fair value reporting unit exceeds carrying amount goodwill reporting unit considered potential impairment second step impairment test necessary however carrying amount reporting unit exceeds fair value second step performed determine goodwill impaired measure amount impairment loss recognize second step compares implied fair value goodwill carrying amount goodwill implied fair value goodwill exceeds carrying amount goodwill considered impaired however carrying amount goodwill exceeds implied fair value impairment loss recognized amount equal excess implied fair value goodwill determined manner amount goodwill recognized business combination ie fair value reporting unit allocated assets liabilities including unrecognized intangible assets reporting unit acquired business combination fair value reporting unit determined exit price market participant would pay business indefinite life intangible assets carrying value intangible asset exceeds fair value impairment loss recognized amount equal excess elected make first day fourth quarter annual impairment assessment date goodwill indefinite life intangible assets however could required evaluate recoverability goodwill indefinite life intangible assets prior required annual assessment among things experience disruptions business unexpected significant declines operating results divestiture significant component business sustained decline market capitalization judgments uncertainties estimate fair value reporting units generally operating segments using various valuation techniques primary technique discounted cash flow analysis uses significant unobservable inputs level 3 inputs defined fair value hierarchy discounted cash flow analysis requires us make various judgmental assumptions sales operating margins growth rates discount rates include assumptions sales operating margins growth rates consider budgets business plans economic projections believed reflect market participant views would exist exit transaction assumptions also made varying perpetual growth rates periods beyond longterm business plan period generally utilize normalized operating margin assumptions based future expectations operating margins historically realized reporting units’ industries fiscal 2011 impairment test material reporting units domestic chicken reporting unit utilized operating margins future years excess operating margin realized recent year domestic chicken reporting unit goodwill october 1 2011 totaling 900 million 95 chicken segment’s goodwill assumed operating margins future years would return normalized range 50 70 believe consistent market participant views exit transaction assumed future operating margins consistent realized current fiscal year would failed first step annual impairment test would required second step performed may resulted material goodwill impairment loss current year domestic chicken reporting unit results indicative future market participant expectations exit transaction assessing appropriate operating margins utilized estimating fair value domestic chicken segment considered many factors including following • domestic chicken segment realized significant operational improvements including yield mix live production processing flexibility interplant product movements past three years compared historical results industry • operational improvements offset current year due historically high grain feed ingredient costs coupled excess supplies made difficult pass along increased input costs • recent usda data indicates eggs sets broiler chick placements slaughter pounds significantly strong indicators supply relative demand return normalized levels end fiscal 2012 allowing financial results return normalized ranges indefinite life intangible asset fair values calculated trademarks using royalty rate method assumptions royalty rates based rates similar brands trademarks licensed marketplace impairment analysis contains uncertainties due uncontrollable events could positively negatively impact anticipated future economic operating conditions effect actual results differ assumptions made material changes accounting methodology used evaluate impairment goodwill intangible assets last three years discount rate used annual goodwill impairment test increased average 88 fiscal 2011 84 fiscal 2010 significant changes key estimates assumptions beef reporting unit 2009 material reporting units failed first step annual goodwill impairment analysis fiscal 2011 2010 2009 therefore second step necessary fiscal 2009 recorded 560 million partial impairment beef reporting unit’s goodwill driven increase discount rate used 2009 annual goodwill impairment analysis result disruptions global credit financial markets deterioration economic conditions fiscal 2010 recorded 29 million full impairment immaterial chicken segment reporting unit’s goodwill inherent estimates assumptions used determining fair value reporting units outside control management including interest rates cost capital tax rates credit ratings believe made reasonable estimates assumptions calculate fair value reporting units indefinite life intangible assets possible material change could occur actual results consistent estimates assumptions used calculate fair value may required perform second step could result additional material impairments goodwill domestic chicken reporting unit experienced 15 decline fair value july 1 2011 would caused carrying value reporting unit excess fair value would required second step performed additionally valuing domestic chicken reporting unit utilizing projected operating margins averaging less 40 09 increase discount rate used fiscal 2011 would caused carrying value domestic chicken reporting unit excess fair value would required second step performed second step may resulted material goodwill impairment loss material reporting units’ estimated fair value exceeded carrying value 20 consequently consider material reporting units significant risk failing first step annual goodwill impairment test fiscal 2011 indefinite life intangible asset impairment analysis result material impairment charge hypothetical 20 decrease fair value intangible assets would result material impairment item 7aitem 7 management’s discussion analysis financial condition results operations description company one world’s largest meat protein companies secondlargest food production company fortune 500 one recognized brand names food industry produce distribute market chicken beef pork prepared foods related allied products operations conducted four segments chicken beef pork prepared foods key factors influencing business customer demand products ability maintain grow relationships customers introduce new innovative products marketplace accessibility international markets market prices products cost live cattle hogs raw materials grain feed ingredients operating efficiencies facilities overview • general result improved internal performance strong exports favorable domestic chicken market conditions operating results remained strong fiscal 2012 despite 22 billion increase input costs following key drivers • continued focus maximizing margins margin management operational efficiency improvements margin management improvements occurred areas mix export sales price optimization valueadded products initiatives operational efficiencies occurred areas yields cost reduction labor management • domestic chicken market conditions improved fiscal 2012 driven reduced industry supplies improved domestic chicken market conditions partially offset operating losses foreign startup businesses beef segment experienced periods reduced demand beef products particularly first half fiscal 2012 able remain profitable result improved balance beef demand cattle supply pork segment remained within normalized operating margin range despite periods unfavorable pricing environments due periods increased domestic availability pork products prepared foods segment experienced favorable mix changes lower raw material costs resulting earnings within operating margin range • margins operating margin 38 fiscal 2012 achieved operating income exceeding 12 billion three consecutive years following summary operating margins segment • chicken 38 40 excluding 15 million related impairment noncore assets • beef 16 • pork 76 • prepared foods 56 • debt liquidity fiscal 2012 generated 12 billion operating cash flows additionally issued 10 billion 450 senior notes due 2022 used proceeds retire 1050 senior notes due 2014 result transaction realize approximately 55 million annualized interest savings also repurchased 125 million shares stock 230 million share repurchase program fiscal 2012 september 29 2012 20 billion liquidity includes availability credit facility 11 billion cash equivalents • accounting cycle resulted 52week year fiscal 2012 2011 2010 2012 net income included following items • 15 million noncash charge 004 per diluted share related impairment noncore assets china • 167 million pretax charge 029 per diluted share related early extinguishment debt 2011 net income included following items • 11 million gain 003 per diluted share related sale interests equity method investment • 21 million reduction income tax expense 005 per diluted share related reversal reserves foreign uncertain tax positions 2010 net income included following items • 61 million pretax charges 009 per diluted share related losses notes repurchased fiscal 2010 • 29 million noncash nontax deductible charge 007 per diluted share related full goodwill impairment immaterial chicken segment reporting unit • 12 million noncash nontax deductible charge 003 per diluted share related impairment equity method investment • 38 million pretax gain 006 per diluted share insurance proceeds fiscal 2013 outlook continued capital investment businesses strong liquidity reduced interest expense put us strong position begin challenging fiscal 2013 drought conditions summer 2012 reduced grain supplies result higher input costs well increased costs cattle hog producers usda data indicates fiscal 2013 overall domestic protein production chicken beef pork turkey expected decrease 2 compared fiscal 2012 continue support improved pricing following summary fiscal 2013 outlook segments well outlook sales capital expenditures net interest expense debt liquidity share repurchases dividends • chicken current usda data shows us chicken production slightly fiscal 2013 due reduced crop supply expect higher grain costs fiscal 2013 compared fiscal 2012 approximately 600 million however capital investment significant operational mix pricing improvements made chicken segment better positioned us adapt rising grain prices fiscal 2013 anticipate chicken segment remain profitable could normalized range 5070 • beef expect see reduction industry fed cattle supplies 23 fiscal 2013 compared fiscal 2012 although generally expect adequate supplies regions operate plants may periods imbalance fed cattle supply demand anticipate beef exports remain strong fiscal 2013 believe beef segment remain profitable could normalized range 2545 • pork expect industry hog supplies fiscal 2013 flat compared fiscal 2012 pork exports remain strong fiscal 2013 believe pork segment normalized range 6080 • prepared foods expect operational improvements increased pricing offset increased raw material costs many sales contracts formula based shorterterm nature typically able offset rising input costs increased pricing fiscal 2013 believe prepared foods segment remain normalized range 4060 • sales expect fiscal 2013 sales increase approximately 35 billion mostly resulting price increases related decreases domestic availability protein rising raw material costs • capital expenditures preliminary capital expenditures plan fiscal 2013 approximately 550 million reduction planned capital expenditures fiscal 2012 primarily result anticipated rise working capital needs fiscal 2013 gain visibility working capital needs forecasted conditions change may raise capital expenditures target continue make significant investments production facilities high return operational efficiencies profit improvement projects development foreign operations • net interest expense expect fiscal 2013 net interest expense approximate 140 million • debt liquidity significant maturities debt due october 2013 may use available cash repurchase notes available attractive rates total liquidity september 29 2012 20 billion well goal maintain liquidity excess 12 billion • share repurchases expect continue repurchasing shares share repurchase plan fiscal 2012 repurchased 125 million shares approximately 230 million september 29 2012 352 million shares remain authorized repurchases timing extent repurchase shares depend upon among things working capital needs market conditions liquidity targets debt obligations regulatory requirements • dividends november 15 2012 board directors declared special dividend 010 per share class common stock 009 per share class b common stock additionally board increased quarterly dividend previously declared august 3 2012 005 per share class common stock 0045 per share class b common stock special dividend increased quarterly dividend payable december 14 2012 shareholders record close business november 30 2012 board also declared quarterly dividend 005 per share class common stock 0045 per share class b common stock payable march 31 2013 shareholders record close business march 1 2013 summary results 2012 vs 2011 • average sales price increase sales largely due increase average sales prices accounted increase approximately 27 billion segments exception pork segment increase average sales prices largely due continued tight domestic availability protein increased live raw material costs increases partially offset decrease average sales price pork segment driven lower live hog costs • sales volume sales negatively impacted decrease sales volume accounted decrease 17 billion segments exception pork segment decrease sales volume majority decrease beef segment 2011 vs 2010 • average sales price increase sales largely due increase average sales prices accounted increase approximately 34 billion segments increase average sales prices mostly due price increases associated rising raw material costs majority increase driven beef pork segments • sales volume sales positively impacted increase sales volume accounted increase 484 million primarily due increases chicken pork segments partially offset decreases beef prepared foods segments 2012 vs 2011 • cost sales increased approximately 10 billion higher input cost per pound increased cost sales approximately 22 billion lower sales volume decreased cost sales 12 billion • 22 billion impact higher input costs per pound primarily driven • increase live cattle hog costs approximately 15 billion • increase grain feed ingredients 320 million increase growout operating costs 50 million chicken segment • 12 billion impact lower sales volumes driven decreases chicken beef prepared foods segments partially offset increase sales volume pork segment 2011 vs 2010 • cost sales increased approximately 41 billion higher input cost per pound increased cost sales approximately 37 billion higher sales volume increased cost sales 445 million • 37 billion impact higher input costs per pound primarily driven • increase live cattle hog costs approximately 24 billion • increase grain feed ingredients 675 million increase growout operating costs 74 million chicken segment partially offset approximately 200 million operational improvements • increase raw material costs 273 million prepared foods segment • 04 billion impact higher sales volumes primarily driven • increases sales volume chicken pork segments partially offset decreases beef prepared foods segments • increase 145 million costs sales associated dynamic fuels commenced production activities fiscal 2011 vs 2010 • decrease 13 million related reduced incentivebased compensation awarded fiscal 2011 2010 included full impairment immaterial chicken segment reporting unit 201220112010 interest income remained current level primarily due continued low interest rates 201220112010 • cash interest expense included interest expense related coupon rates senior notes commitmentletter credit fees incurred revolving credit facilities decrease due primarily lower average weekly indebtedness approximately 9 15 fiscal 2012 2011 respectively additionally decrease cash interest expense due lower average coupon rates compared fiscal 2011 2010 • loss early extinguishment debt included amount paid exceeding par value debt unamortized discount unamortized debt issuance costs related full extinguishment 1050 senior notes due 2014 notes • losses notes repurchased fiscal 2011 2010 included amount paid exceeding carrying value notes repurchased primarily included repurchases 825 notes due october 2011 notes 660 senior notes due april 2016 notes • noncash interest expense primarily included interest related amortization debt issuance costs discountspremiums note issuances included debt issuance costs incurred revolving credit facility 2014 notes 450 senior notes due 2022 notes issued june 2012 well accretion debt discount 325 convertible senior notes due 2013 notes 2014 notes 2022 notes 2012 included 16 million equity earnings joint ventures 4 million net foreign currency exchange gains 2011 included 11 million gain related sale interests equity method investment 2010 included 12 million charge related impairment equity method investment effective tax rate continuing operations impacted number items result difference effective tax rate us statutory rate 35 table reflects significant items impacting rate indicated 2012 • domestic production activity deduction reduced rate 19 • general business credits reduced rate 08 • state income taxes increased rate 16 • foreign rate differences valuation allowances increased rate 33 2011 • domestic production activity deduction reduced rate 23 • net decrease unrecognized tax benefits reduced rate 17 • general business credits reduced rate 09 • state income taxes increased rate 16 2010 • domestic production activity deduction reduced rate 20 • decrease unrecognized tax benefits reduced rate 14 • decrease state valuation allowances reduced rate 10 • state income taxes increased rate 34 segment results operate four segments chicken beef pork prepared foods following table summary sales operating income loss measure segment income loss 2012 operating income included 15 million noncash charge related impairment noncore assets china 2010 operating income included 38 million gain insurance proceeds 29 million noncash nontax deductible charge related full goodwill impairment immaterial chicken segment reporting unit 2012 vs 2011 • sales volume decrease sales volumes fiscal 2012 primarily attributable impact domestic production cuts made late fiscal 2011 maintained throughout fiscal 2012 order balance supply forecasted customer demand production cuts reduced total domestic slaughter pounds approximately 4 fiscal 2012 partially offset increases international sales volumes openmarket meat purchases • average sales price increase average sales prices primarily due mix changes price increases associated reduced industry supply increased input costs • operating income increase operating income largely due increase average sales price operational improvements partially offset reduced sales volumes increased grain feed ingredients growout costs losses incurred foreign startup businesses • grain feed ingredients growout costs operating results negatively impacted fiscal 2012 increase grain feed ingredients costs 320 million increase growout operating costs 50 million • operational improvements operating results positively impacted approximately 115 million operational improvements primarily attributed improvements yield mix processing optimization • startup businesses foreign startup businesses brazil china incurred operating losses approximately 105 million fiscal 2012 included 15 million impairment noncore assets • derivative activities operating results included following amounts commodity risk management activities related grain energy purchases amounts exclude impact related physical purchase transactions impact current future period operating results 2011 vs 2010 • sales volume 21 increase slaughter pounds mostly occurred first three quarters fiscal 2011 reduction volumes ending inventory fiscal 2011 compared fiscal 2010 primarily drove 46 increase sales volume fiscal 2011 • average sales price increase average sales prices primarily due mix changes price increases associated increased input costs • operating income • grain feed ingredients growout costs operating results negatively impacted fiscal 2011 increase grain feed ingredients costs 675 million increase growout operating costs 74 million • operational improvements operating results positively impacted approximately 200 million operational improvements primarily attributed improvements yield mix processing optimization operational improvements partially offset increase operating costs mostly cooking ingredients employee related costs • derivative activities operating results included following amounts commodity risk management activities related grain energy purchases amounts exclude impact related physical purchase transactions impact current future period operating results 2012 vs 2011 • sales operating income • average sales price increased due price increases associated increased livestock costs sales volume decreased due reduction live cattle processed outside tallow purchases operating income decreased due higher fed cattle costs periods reduced demand beef products made difficult pass along increased input costs well lower sales volumes increased employee related operating costs • derivative activities operating results included following amounts commodity risk management activities related forward futures contracts live cattle amounts exclude impact related physical sale purchase transactions impact current future period operating results 2011 vs 2010 • sales operating income • average sales price increased due price increases associated increased livestock costs maintained strong operating income maximizing revenues relative rising live cattle markets partially attributable strong export sales offset increase operating costs primarily attributable employee related costs • derivative activities operating results included following amounts commodity risk management activities related forward futures contracts live cattle amounts exclude impact related physical sale purchase transactions impact current future period operating results 2012 vs 2011 • sales operating income • average sales price decreased due increased domestic availability pork products drove lower live hog costs operating income decreased due compressed pork margins caused excess domestic availability pork products able maintain strong operating margins maximizing revenues relative live hog markets partially due strong export sales operational mix performance • derivative activities operating results included following amounts commodity risk management activities related forward futures contracts live hogs amounts exclude impact related physical sale purchase transactions impact current future period operating results 2011 vs 2010 • sales operating income • average sales price increased due price increases associated increased livestock costs maintained strong operating income maximizing revenues relative rising live hog markets partially attributable strong export sales operational mix performance • derivative activities operating results included following amounts commodity risk management activities related forward futures contracts live hogs amounts exclude impact related physical sale purchase transactions impact current future period operating results 2012 vs 2011 • sales operating income operating margins positively impacted lower raw material costs 75 million increased average sales prices partially offset lower volumes increased operational costs approximately 30 million largely due costs related revamping lunchmeat business startup new pepperoni plant many sales contracts formula based shorterterm nature typically offset changing input costs pricing however lag time price changes take effect experienced fiscal 2011 vs 2010 • sales operating income despite increase average sales prices operating income remained flat excluding 8 million insurance proceeds fiscal 2010 related flood damage jefferson wisconsin plant increase average sales prices offset lower volumes increased raw material costs 273 million increased operational costs 50 million primarily attributable employee related costs plant variances mostly due lower volumes liquidity capital resources cash needs working capital expenditures growth opportunities repurchases senior notes share repurchases expected met current cash hand cash flows provided operating activities shortterm borrowings based current expectations believe liquidity capital resources sufficient operate business however may take advantage opportunities generate additional liquidity refinance existing debt capital market transactions amount nature timing capital market transactions depend operating performance circumstances thencurrent commitments obligations amount nature timing capital requirements limitations imposed current credit arrangements overall market conditions • cash flows associated loss early extinguishment debt included amount paid exceeding par value debt unamortized discount unamortized debt issuance costs related full extinguishment 2014 notes • cash flows associated changes working capital • 2012 decreased due increase inventory accounts receivable balances partially offset increase accounts payable higher inventory accounts receivable balances driven significant increases input costs price increases associated increased input costs • 2011 decreased due increase inventory accounts receivable balances partially offset increase accounts payable higher inventory accounts receivable balances driven significant increases input costs price increases associated increased input costs • 2010 increased due increase accrued salaries wages benefits accounts payable balances almost entirely offset increase inventory accounts receivable balances increase accrued salaries wages benefits primarily due accruals incentivebased compensation • additions property plant equipment include acquiring new equipment upgrading facilities maintain competitive standing position us future opportunities fiscal 2012 2011 capital spending primarily production efficiencies operations ongoing development foreign operations fiscal 2010 capital spending primarily related production efficiencies operations construction dynamic fuels’ facility development foreign operations • capital spending fiscal 2013 expected approximate 550 million includes spending operations production labor efficiencies yield improvements sales channel flexibility well expansion foreign operations reduction planned capital expenditures fiscal 2012 primarily result anticipated rise working capital needs fiscal 2013 gain visibility working capital needs forecasted conditions change may raise capital expenditures target • purchases marketable securities included funding deferred compensation plans • proceeds notes receivable totaling 51 million fiscal 2011 related collection notes receivable received conjunction sale business operation fiscal 2009 • change restricted cash fiscal 2009 dynamic fuels received 100 million proceeds sale gulf opportunity zone taxexempt bonds made available federal government regions affected hurricanes katrina rita 2005 cash received bonds restricted could used towards construction dynamic fuels’ facility dynamic fuels facility complete october 2010 • payments debt included • 2012 885 million extinguishment 2014 notes 103 million related borrowings foreign operations • 2011 315 million 2011 notes 63 million 2016 notes 2 million 70 notes due may 2018 notes 103 million related borrowings foreign operations • 2010 524 million 2011 notes 222 million 2016 notes 140 million 795 notes due february 2010 using restricted cash held blocked cash collateral account retirement notes 52 million 2018 notes 61 million related premiums notes repurchased year • net proceeds borrowings included • 2012 received net proceeds 995 million issuance 2022 notes used net proceeds towards extinguishment 2014 notes including payments accrued interest related premiums general corporate purposes additionally foreign operations received proceeds 115 million borrowings total debt related foreign operations 102 million september 29 2012 62 million current 40 million longterm • 2011 foreign operations received proceeds 106 million borrowings total debt related foreign operations 98 million october 1 2011 58 million current 40 million longterm additionally dynamic fuels received 9 million proceeds short term notes fiscal 2011 • fiscal 2011 minority interest partner 60owned shandong tyson xinchang foods currently referred shandong tyson joint ventures china exercised put options requiring us purchase entire 40 equity interest transaction closed fiscal 2011 cash consideration totaling 66 million • purchases tyson class common stock include • 230 million 170 million shares repurchased pursuant share repurchase program fiscal 2012 2011 respectively • 34 million 37 million 48 million shares repurchased fund certain obligations equity compensation plans fiscal 2012 2011 2010 respectively • revolving credit facility supports shortterm funding needs letters credit letters credit issued facility primarily support workers’ compensation insurance programs derivative activities • 2013 notes may converted class stock early fiscal quarter event class stock trades 2196 least 20 trading days period 30 consecutive trading days ending last trading day preceding fiscal quarter event note holders may require us pay outstanding principal cash totaled 458 million september 29 2012 conversion premium would paid shares class stock conditions early conversion met fourth quarter fiscal 2012 thus notes may converted first quarter fiscal 2013 july 15 2013 close business second scheduled trading day immediately preceding maturity date october 15 2013 holders may convert notes time regardless foregoing circumstances due early conversion option regardless conversion conditions beginning july 2013 recorded 2013 notes balance 458 million remaining discount 22 million current debt consolidated balance sheets september 29 2012 holders exercise early conversion option would use current cash hand andor cash flow operations principal payments presently plan use current cash hand andor cash flows operations payment 2013 notes converted early upon maturity • september 29 2012 approximately 29 cash held international accounts foreign subsidiaries generally rely foreign cash source funds support ongoing domestic liquidity needs rather manage worldwide cash requirements reviewing available funds among foreign subsidiaries cost effectiveness funds accessed repatriation cash balances certain subsidiaries could adverse tax consequences subject regulatory capital requirements however balances generally available without legal restrictions fund ordinary business operations us income taxes net applicable foreign tax credits provided undistributed earnings foreign subsidiaries intention reinvest earnings permanently repatriate earnings tax effective • current ratio 191 1 201 1 september 29 2012 october 1 2011 respectively capital resources credit facility cash flows operating activities current cash hand primary sources liquidity funding debt service capital expenditures dividends share repurchases also revolving credit facility committed maximum capacity 10 billion provide additional liquidity working capital needs letters credit source financing growth opportunities september 29 2012 outstanding letters credit totaling 38 million issued facility none drawn upon left 962 million available borrowing revolving credit facility funded syndicate 43 banks commitments ranging 03 million 90 million per bank syndicate includes bank holding companies required adequately capitalized federal bank regulatory agency requirements capitalization monitor credit ratings capacity longterm financing consider various qualitative quantitative factors monitor ratio debt total capitalization support longterm financing decisions september 29 2012 october 1 2011 ratio debttototal capitalization 287 277 respectively purpose calculation debt defined sum current longterm debt total capitalization defined debt plus total shareholders’ equity ratio debt total capitalization increased fiscal 2012 primarily resulting net increase debt balance issuing 10 billion 2022 notes extinguishing 810 million 2014 notes credit ratings 2016 notes november 13 2008 moody’s investors service inc moody’s downgraded credit rating ba1 ba3 downgrade increased interest rate 2016 notes 735 785 effective beginning sixmonth interest payment due april 1 2009 august 19 2010 standard poor’s financial services llc subsidiary mcgrawhill companies inc sp upgraded credit rating bb september 2 2010 moody’s upgraded credit rating ba3 ba2 upgrades decreased interest rate 2016 notes 785 735 effective beginning sixmonth interest payment due october 1 2010 february 24 2011 sp upgraded credit rating notes bb bbb march 29 2011 moody’s upgraded credit rating notes ba2 ba1 upgrades decreased interest rate 2016 notes 735 685 effective beginning sixmonth interest payment due april 1 2011 june 7 2012 moodys upgraded credit rating notes ba1 baa3 upgrade decreased interest rate 2016 notes 685 660 effective beginning sixmonth interest payment due october 1 2012 onenotch downgrade either ratings agency would increase interest rates 2016 notes 025 revolving credit facility sp’s corporate credit rating tyson foods inc bbb moody’s senior unsecured subsidiary guaranteed longterm debt rating tyson foods inc baa3 fitch ratings wholly owned subsidiary fimalac sa fitch issuer default rating tyson foods inc bbb table outlines fees paid unused portion facility fee rate letter credit fees undrawn letter credit fee borrowing spread depending rating levels tyson foods inc sp moodys fitch event rating levels split applicable fees spread based upon rating level effect two rating agencies three rating agencies different rating levels applicable fees spread based upon rating level rating levels two rating agencies debt covenants revolving credit facility contains affirmative negative covenants among things may limit restrict ability create liens encumbrances incur debt merge dissolve liquidate consolidate dispose transfer assets change nature business engage certain transactions affiliates enter saleleaseback hedging transactions case subject certain qualifications exceptions addition required maintain minimum interest expense coverage maximum debt capitalization ratios 2022 notes also contain affirmative negative covenants among things may limit restrict ability create liens engage certain saleleaseback transactions engage certain consolidations mergers sales assets compliance debt covenants september 29 2012 offbalance sheet arrangements offbalance sheet arrangements material financial position results operations offbalance sheet arrangements guarantees debt outside third parties including lease grower loans residual value guarantees covering certain operating leases various types equipment see note 19 commitments contingencies notes consolidated financial statements discussion contractual obligations following table summarizes contractual obligations september 29 2012 1 event default payment acceleration principal payments could occur 2 interest payments include interest outstanding debt payments estimated variable rate variable term debt based effective rates september 29 2012 expected payment dates 3 amounts include guarantees debt outside third parties consist lease grower loans substantially collateralized underlying assets well residual value guarantees covering certain operating leases various types equipment amounts included maximum potential amount future payments 4 amounts include minimum lease payments lease agreements 5 amounts include agreements purchase goods services enforceable legally binding specify significant terms including fixed minimum quantities purchased fixed minimum variable price provisions approximate timing transaction purchase obligations amount included items future purchase commitments grains livestock contracts fixed grower fees provide terms meet criteria excluded future purchase commitments contracts meet criteria purchase orders included table purchase order authorization purchase may considered enforceable legally binding contract contracts goods services contain termination clauses without penalty also excluded 6 amounts include estimated amounts complete buildings equipment construction september 29 2012 7 amounts include items meet definition purchase obligation recorded consolidated balance sheets addition amounts shown table unrecognized tax benefits 168 million related interest penalties 64 million september 29 2012 recorded liabilities fiscal 2013 tax audit resolutions could potentially change amounts approximately 20 million tax positions sustained audit maximum contractual obligation associated cash flow assistance programs september 29 2012 based estimated fair values livestock supplier’s net tangible assets date aggregated approximately 275 million approximately 250 million remaining maximum commitment netting cash flow assistance related receivables recently issuedadopted accounting pronouncements refer discussion part ii item 8 notes consolidated financial statements note 1 business summary significant accounting policies recently issued accounting pronouncements note 2 changes accounting principles recently adopted accounting pronouncements critical accounting estimates preparation consolidated financial statements requires us make estimates assumptions estimates assumptions affect reported amounts assets liabilities disclosure contingent assets liabilities date consolidated financial statements reported amounts revenues expenses reporting period actual results could differ estimates following summary certain accounting estimates consider critical description judgments uncertainties effect actual results differ assumptions contingent liabilities subject lawsuits investigations claims related wage hourlabor environmental product taxing authorities matters required assess likelihood adverse judgments outcomes matters well potential ranges probable losses determination amount reserves disclosures required contingencies made considerable analysis individual issue accrue contingent liabilities assessment risk loss probable reasonably estimated disclose contingent liabilities risk loss reasonably possible probable contingent liabilities contain uncertainties eventual outcome result future events determination current reserves requires estimates judgments related future changes facts circumstances differing interpretations law assessments amount damages effectiveness strategies factors beyond control made material changes accounting methodology used establish contingent liabilities past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate contingent liabilities however actual results consistent estimates assumptions may exposed gains losses could material marketing advertising costs incur advertising retailer incentive consumer incentive costs promote products marketing programs include cooperative advertising volume discounts instore display incentives coupons programs marketing advertising costs charged period incurred accrue costs based estimated performance historical utilization redemption program cash consideration given customers considered reduction price products thus recorded reduction sales remainder marketing advertising costs recorded selling general administrative expense recognition costs related programs contains uncertainties due judgment required estimating potential performance redemption program estimates based many factors including experience similar promotional programs made material changes accounting methodology used establish marketing accruals past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate marketing accruals however actual results consistent estimates assumptions may exposed gains losses could material 10 change marketing accruals september 29 2012 would impact pretax earnings approximately 15 million description judgments uncertainties effect actual results differ assumptions accrued self insurance self insured certain losses related health welfare workers’ compensation auto liability general liability claims use independent thirdparty actuary assist determining selfinsurance liability actuary consider number factors estimating selfinsurance liability including claims experience demographic factors severity factors actuarial assumptions periodically review estimates assumptions thirdparty actuary assist us determining adequacy selfinsurance liability policy maintain accrual within central high point actuarial range selfinsurance liability contains uncertainties due assumptions required judgment used costs settle obligations including legal healthcare costs could increase decrease causing estimates selfinsurance liability change incident rates including frequency severity could increase decrease causing estimates selfinsurance liability change made material changes accounting methodology used establish selfinsurance liability past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate selfinsurance liability however actual results consistent estimates assumptions may exposed gains losses could material 10 increase actuarial estimate september 29 2012 would result increase amount recorded selfinsurance liability approximately 6 million 10 decrease actuarial estimate september 29 2012 would result decrease amount recorded selfinsurance liability approximately 23 million impairment longlived assets longlived assets evaluated impairment whenever events changes circumstances indicate carrying value may recoverable examples include significant adverse change extent manner use longlived asset change physical condition evaluating longlived assets impairment compare carrying value asset’s estimated undiscounted future cash flows impairment indicated estimated future cash flows less carrying value asset impairment excess carrying value fair value longlived asset recorded impairment charges related longlived assets 25 million 15 million 19 million respectively fiscal 2012 2011 2010 impairment analysis contains uncertainties due judgment assumptions estimates surrounding undiscounted future cash flows longlived asset including forecasting useful lives assets selecting discount rate reflects risk inherent future cash flows determine fair value dynamic fuels consolidated joint venture began commercial operations october 2010 incurred net operating losses 14 million 24 million fiscal 2012 2011 respectively plant experienced mechanical difficulties pretreatment system performance issues hydrogen supply disruptions contributed plant time higher expected operational costs upgrades feedstock pretreatment systems improvements mechanical reliability plant currently ongoing plant upgrades improvements fail improve operational performance industry economics make plant uneconomical operate may required assess recoverability dynamic fuels longlived assets determine whether impairment exists additionally continue evaluate international operations strategies may expose us future impairment losses made material changes accounting methodology used evaluate impairment longlived assets last three fiscal years believe reasonable likelihood material change estimates assumptions used calculate impairments longlived assets however actual results consistent estimates assumptions used calculate estimated future cash flows may exposed impairment losses could material description judgments uncertainties effect actual results differ assumptions income taxes estimate total income tax expense based statutory tax rates tax planning opportunities available us various jurisdictions earn income federal income tax includes estimate taxes earnings foreign subsidiaries expected remitted united states taxable earnings considered indefinitely invested foreign subsidiary deferred income taxes recognized future tax effects temporary differences financial income tax reporting using tax rates effect years differences expected reverse valuation allowances recorded likely tax benefit realized deferred tax asset record unrecognized tax benefit liabilities known anticipated tax issues based analysis whether extent additional taxes due changes tax laws rates could affect recorded deferred tax assets liabilities future changes projected future earnings could affect recorded valuation allowances future calculations related income taxes contain uncertainties due judgment used calculate tax liabilities application complex tax regulations across tax jurisdictions operate analysis unrecognized tax benefits contains uncertainties based judgment used apply likely recognition measurement thresholds believe reasonable likelihood material change tax related balances valuation allowances however due complexity uncertainties ultimate resolution may result payment materially different current estimate tax liabilities extent prevail matters unrecognized tax benefit liabilities established required pay amounts excess recorded unrecognized tax benefit liabilities effective tax rate given financial statement period could materially affected unfavorable tax settlement would require use cash generally result increase effective tax rate period resolution favorable tax settlement would generally recognized reduction effective tax rate period resolution impairment goodwill intangible assets description goodwill evaluated impairment first performing qualitative assessment determine whether quantitative goodwill test necessary determined based qualitative factors fair value reporting unit may likely less carrying amount significant changes macroeconomic factors related reporting unit occurred could materially impact fair value quantitative goodwill impairment test would required additionally elect forgo qualitative assessment perform quantitative test quantitative goodwill impairment test performed using twostep process first step identify potential impairment exists comparing fair value reporting unit carrying amount including goodwill fair value reporting unit exceeds carrying amount goodwill reporting unit considered potential impairment second step quantitative impairment test necessary however carrying amount reporting unit exceeds fair value second step performed determine goodwill impaired measure amount impairment loss recognize second step compares implied fair value goodwill carrying amount goodwill implied fair value goodwill exceeds carrying amount goodwill considered impaired however carrying amount goodwill exceeds implied fair value impairment loss recognized amount equal excess implied fair value goodwill determined manner amount goodwill recognized business combination ie fair value reporting unit allocated assets liabilities including unrecognized intangible assets reporting unit acquired business combination fair value reporting unit determined exit price market participant would pay business indefinite life intangible assets qualitative assessment also performed determine whether existence events circumstances indicates likely intangible asset impaired similar goodwill also elect forgo qualitative test indefinite life intangible assets perform quantitative test upon performing quantitative test carrying value intangible asset exceeds fair value impairment loss recognized amount equal excess elected forgo qualitative assessments indefinite life intangible assets fiscal 2012 impairment test elected make first day fourth quarter annual impairment assessment date goodwill indefinite life intangible assets however could required evaluate recoverability goodwill indefinite life intangible assets prior required annual assessment among things experience disruptions business unexpected significant declines operating results divestiture significant component business sustained decline market capitalization judgments uncertainties estimate fair value reporting units generally operating segments using various valuation techniques primary technique discounted cash flow analysis uses significant unobservable inputs level 3 inputs defined fair value hierarchy discounted cash flow analysis requires us make various judgmental assumptions sales operating margins growth rates discount rates include assumptions sales operating margins growth rates consider budgets business plans economic projections believed reflect market participant views would exist exit transaction assumptions also made varying perpetual growth rates periods beyond longterm business plan period generally utilize normalized operating margin assumptions based future expectations operating margins historically realized reporting units industries fiscal 2012 impairment test material reporting units domestic chicken beef reporting units generally utilized operating margins future years excess operating margin realized recent year domestic chicken reporting unit goodwill september 29 2012 totaling 900 million 95 chicken segments goodwill generally assumed operating margins future years would return normalized range 50 70 believe consistent market participant views exit transaction assumed future operating margins consistent realized current fiscal year would still passed first step annual impairment test valuing domestic chicken reporting unit utilizing projected operating margins averaging less 33 breakeven 23 increase discount rate used fiscal 2012 would caused carrying value domestic chicken reporting unit excess fair value would required second step performed although domestic chicken reporting unit realized operating margins fiscal 2012 excess breakeven operating margins required pass first step domestic chicken reporting unit may challenged fiscal 2013 realize level operating margins due expected temporary challenging market conditions fiscal 2013 beef reporting unit beef operating segment goodwill september 29 2012 totaling 563 million generally assumed operating margins future years would return normalized range 25 45 believe consistent market participant views exit transaction assumed future operating margins consistent realized current fiscal year would still passed first step annual impairment test valuing beef reporting unit utilizing projected operating margins averaging less 14 breakeven 36 increase discount rate used fiscal 2012 would caused carrying value beef reporting unit excess fair value would required second step performed although beef reporting unit realized operating margins fiscal 2012 excess breakeven operating margins required pass first step beef reporting unit may challenged fiscal 2013 realize level operating margins due expected temporary challenging market conditions fiscal 2013 indefinite life intangible asset fair values calculated trademarks using royalty rate method assumptions royalty rates based rates similar brands trademarks licensed marketplace impairment analysis contains uncertainties due uncontrollable events could positively negatively impact anticipated future economic operating conditions effect actual results differ assumptions made material changes accounting methodology used evaluate impairment goodwill intangible assets last three years adoption new guidance allowing option first assess qualitative factors determine whether necessary perform twostep quantitative impairment test discount rate used annual goodwill impairment test decreased average 80 fiscal 2012 88 fiscal 2011 significant changes key estimates assumptions fiscal 2012 2011 2010 material reporting units underwent quantitative test passed first step goodwill impairment analysis therefore second step necessary fiscal 2010 recorded 29 million full impairment immaterial chicken segment reporting units goodwill inherent estimates assumptions used determining fair value reporting units outside control management including interest rates cost capital tax rates credit ratings believe made reasonable estimates assumptions calculate fair value reporting units indefinite life intangible assets possible material change could occur actual results consistent estimates assumptions used calculate fair value may required perform second step could result additional material impairments goodwill material reporting units estimated fair value exceeded carrying value 20 date recent estimated fair value determination consequently currently consider material reporting units significant risk failing first step annual goodwill impairment test fiscal 2012 indefinite life intangible asset impairment analysis result material impairment charge hypothetical 20 decrease fair value intangible assets would result material impairment item 7aitem 7 management’s discussion analysis financial condition results operations description company one world’s largest meat protein companies secondlargest food production company fortune 500 one recognized brand names food industry produce distribute market chicken beef pork prepared foods related allied products operations conducted four segments chicken beef pork prepared foods key factors influencing business customer demand products ability maintain grow relationships customers introduce new innovative products marketplace accessibility international markets market prices products cost availability live cattle hogs raw materials feed ingredients operating efficiencies facilities overview • general operating income grew 7 fiscal 2013 fiscal 2012 led record earnings chicken segment improved performance beef segment revenues increased 4 record 344 billion driven price mix improvements able overcome 12 billion increase input costs strong operational execution margin management following key drivers • continued execute strategy accelerating growth domestic valueadded chicken sales prepared food sales international chicken production innovating products services customer insights cultivating talent development support tysons growth future • market environment chicken segment delivered record results fiscal 2013 driven strong demand favorable domestic market conditions chicken segment experienced increased feed costs able offset impact operational mix price improvements beef segment’s operating performance improved despite lower domestic availability fed cattle supplies due better operational execution less volatile live cattle markets stronger export markets pork segment results remained within normalized operating margin range slightly last year due periods increased domestic availability pork products prepared foods segment challenged product mix rapidly increasing raw material prices • discontinued operation conducting assessment fiscal 2013 longterm business strategy china determined weifang operation weifang part chicken segment longer core execution strategy given capital investment required execute future business plan completed sale weifang july 2013 weifangs results reported discontinued operation periods presented • margins total operating margin 40 fiscal 2013 operating margins segment follows • chicken 53 beef 21 pork 61 prepared foods 30 • debt liquidity fiscal 2013 generated 13 billion operating cash flows repurchased 211 million shares stock 550 million share repurchase program fiscal 2013 september 28 2013 21 billion liquidity includes availability credit facility 11 billion cash equivalents • accounting cycle resulted 52week year fiscal 2013 2012 2011 2013 net income included following item • 19 million 005 per diluted share related recognized currency translation adjustment gain 2012 net income included following item • 167 million pretax charge 029 per diluted share related early extinguishment debt 2011 net income included following items • 11 million gain 003 per diluted share related sale interests equity method investment • 21 million reduction income tax expense 005 per diluted share related reversal reserves foreign uncertain tax positions summary results 2013 vs 2012 • sales volume sales negatively impacted slight decrease sales volume accounted decrease 255 million primarily due decreases beef pork segments partially offset increases chicken prepared foods segments • average sales price sales positively impacted higher average sales prices accounted increase approximately 16 billion segments experienced increased average sales prices largely due continued tight domestic availability protein increased pricing associated rising live raw material costs improved mix majority increase driven chicken beef segments 2012 vs 2011 • sales volume sales negatively impacted decrease sales volume accounted decrease 17 billion segments exception pork segment decrease sales volume majority decrease beef segment • average sales price increase sales largely due increase average sales prices accounted increase approximately 27 billion segments exception pork segment increase average sales prices largely due continued tight domestic availability protein increased live raw material costs increases partially offset decrease average sales price pork segment driven lower live hog costs 2013 vs 2012 • cost sales increased approximately 12 billion due higher input cost per pound • 12 billion impact higher input costs primarily driven • increase feed costs 470 million chicken segment • increase live cattle hog costs approximately 395 million • increase raw material input costs prepared foods segment approximately 110 million • increase due net losses 15 million fiscal 2013 compared net gains approximately 66 million fiscal 2012 pork segment commodity risk management activities amounts exclude impact related physical purchase transactions impact future period operating results 2012 vs 2011 • cost sales increased approximately 10 billion higher input cost per pound increased cost sales approximately 22 billion lower sales volume decreased cost sales 12 billion • 22 billion impact higher input costs per pound primarily driven • increase live cattle hog costs approximately 15 billion • increase feed costs 320 million increase growout operating costs 50 million chicken segment • 12 billion impact lower sales volumes driven decreases chicken beef prepared foods segments partially offset increase sales volume pork segment 2013 vs 2012 • increase 79 million selling general administrative primarily driven • increase 44 million related employee costs including payroll stockbased incentivebased compensation • increase 32 million related advertising sales promotions 201320122011 interest income remained relatively flat due continued low interest rates 201320122011 • cash interest expense included interest expense related coupon rates senior notes commitmentletter credit fees incurred revolving credit facilities decrease cash interest expense fiscal 2013 due lower average coupon rates compared fiscal 2012 2011 decrease driven full extinguishment 1050 senior notes due 2014 notes fiscal 2012 partially offset 45 senior notes due 2022 notes issued fiscal 2012 • loss early extinguishment debt included amount paid exceeding par value debt unamortized discount unamortized debt issuance costs related full extinguishment 2014 notes • losses notes repurchased fiscal 2011 included amount paid exceeding carrying value notes repurchased primarily included repurchases 825 notes due october 2011 notes 660 senior notes due april 2016 notes • noncash interest expense primarily included interest related amortization debt issuance costs discountspremiums note issuances includes debt issuance costs incurred revolving credit facility 2014 notes accretion debt discount 325 convertible senior notes due 2013 notes 2013 included 19 million related recognized currency translation adjustment gain 2012 included 16 million equity earnings joint ventures 4 million net foreign currency exchange gains 2011 included 11 million gain related sale interests equity method investment effective tax rate continuing operations impacted number items result difference effective tax rate us statutory rate 35 table reflects significant items impacting rate indicated 2013 • domestic production activity deduction reduced rate 32 • general business credits reduced rate 13 • state income taxes increased rate 24 2012 • domestic production activity deduction reduced rate 18 • general business credits reduced rate 07 • state income taxes increased rate 15 • foreign rate differences valuation allowances increased rate 18 2011 • domestic production activity deduction reduced rate 23 • general business credits reduced rate 09 • state income taxes increased rate 16 segment results operate four segments chicken beef pork prepared foods following table summary sales operating income loss measure segment income loss 2013 vs 2012 • sales volume sales volumes grew due increased domestic international production driven stronger demand chicken products • average sales price increase average sales price primarily due mix changes price increases associated higher input costs since many sales contracts formula based shorterterm nature able offset rising input costs improved pricing mix • operating income operating income positively impacted increased average sales price improved live performance operational execution well improved performance foreignproduced operations increases partially offset increased feed costs 470 million 2012 vs 2011 • sales volume decrease sales volumes fiscal 2012 primarily attributable impact domestic production cuts made late fiscal 2011 maintained throughout fiscal 2012 order balance supply forecasted customer demand production cuts reduced total domestic slaughter pounds approximately 4 fiscal 2012 partially offset increases international sales volumes openmarket meat purchases • average sales price increase average sales prices primarily due mix changes price increases associated reduced industry supply increased input costs • operating income increase operating income largely due increase average sales price operational improvements partially offset reduced sales volumes increased grain feed ingredients growout costs losses incurred foreign startup businesses • feed costs operating results negatively impacted fiscal 2012 increase feed costs 320 million increase growout operating costs 50 million • operational improvements operating results positively impacted approximately 115 million operational improvements primarily attributed improvements yield mix processing optimization • startup businesses foreign startup businesses brazil china incurred operating losses approximately 70 million fiscal 2012 2013 vs 2012 • sales volume sales volume decreased due less outside trim tallow purchases partially offset increased production volumes • average sales price average sales price increased due lower domestic availability fed cattle supplies drove livestock costs • operating income operating income increased due improved operational execution less volatile live cattle markets improved export markets partially offset increased operating costs 2012 vs 2011 • sales operating income • average sales price increased due price increases associated increased livestock costs sales volume decreased due reduction live cattle processed outside tallow purchases operating income decreased due higher fed cattle costs periods reduced demand beef products made difficult pass along increased input costs well lower sales volumes increased employee related operating costs 2013 vs 2012 • sales volume sales volume decreased result balancing supply customer demand reduced exports • average sales price demand pork products improved drove average sales price livestock cost despite slight increase live hog supplies • operating income reduced compared prior year operating income remained strong fiscal 2013 despite brief periods imbalance industry supply customer demand able maintain strong operating margins maximizing revenues relative live hog markets partially due operational mix performance • derivative activities operating results included net losses 15 million fiscal 2013 compared net gains 66 million fiscal 2012 commodity risk management activities related futures contracts amounts exclude impact related physical sale purchase transactions impact current future period operating results 2012 vs 2011 • sales operating income • average sales price decreased due increased domestic availability pork products drove lower live hog costs operating income decreased due compressed pork margins caused excess domestic availability pork products able maintain strong operating margins maximizing revenues relative live hog markets partially due strong export sales operational mix performance • derivative activities operating results included net gains 66 million fiscal 2012 compared net losses 32 million fiscal 2011 commodity risk management activities related futures contracts amounts exclude impact related physical sale purchase transactions impact current future period operating results 2013 vs 2012 • sales volume sales volume increased result improved demand prepared products incremental volumes purchase two businesses fiscal 2013 • average sales price average sales price increased due price increases associated higher input costs • operating income operating income decreased despite increases sales volumes average sales price result increased raw material input costs approximately 110 million additional costs incurred invested lunchmeat business growth platforms many sales contracts formula based shorterterm nature typically able offset rising input costs pricing however lag time price increases take effect 2012 vs 2011 • sales operating income operating margins positively impacted lower raw material costs 75 million increased average sales prices partially offset lower volumes increased operational costs approximately 30 million largely due costs related revamping lunchmeat business startup new pepperoni plant many sales contracts formula based shorterterm nature typically offset changing input costs pricing however lag time price changes take effect experienced fiscal 2011 fiscal 2014 outlook fiscal 2014 expect overall domestic protein production chicken beef pork turkey increase approximately 1 fiscal 2013 levels grain supplies expected increase fiscal 2014 result lower input costs following summary fiscal 2014 outlook segments well outlook sales capital expenditures net interest expense debt liquidity share repurchases dividends • chicken expect domestic chicken production increase 34 fiscal 2014 compared fiscal 2013 based current futures prices expect lower feed costs fiscal 2014 compared fiscal 2013 approximately 500 million many sales contracts formula based shorterterm nature allows us adjust pricing input costs fluctuate however may lag time price changes take effect fiscal 2014 believe chicken segment normalized range 5070 • beef expect see reduction industry fed cattle supplies 23 fiscal 2014 compared fiscal 2013 although generally expect adequate supplies regions operate plants may periods imbalance fed cattle supply demand fiscal 2014 believe beef segments profitability similar fiscal 2013 could normalized range 2545 • pork expect industry hog supplies increase 12 fiscal 2014 exports improve compared fiscal 2013 fiscal 2014 believe pork segment normalized range 6080 • prepared foods expect operational improvements pricing offset increased raw material costs many sales contracts formula based shorterterm nature typically able offset rising input costs increased pricing continue invest heavily growth platforms believe prepared foods segment could slightly normalized range 4060 fiscal 2014 • sales expect fiscal 2014 sales approximate 36 billion continue execute strategy accelerating growth domestic valueadded chicken sales prepared food sales international chicken production • capital expenditures expect fiscal 2014 capital expenditures approximate 700 million • net interest expense expect net interest expense approximate 100 million fiscal 2014 • debt liquidity total liquidity september 28 2013 21 billion well goal maintain liquidity excess 12 billion october 2013 notes principal amount 458 million matured paid using cash hand • share repurchases expect continue repurchasing shares share repurchase program september 28 2013 142 million shares remain authorized repurchases timing extent repurchase shares depend upon among things working capital needs market conditions liquidity targets debt obligations regulatory requirements • dividends november 14 2013 board directors increased quarterly dividend previously declared august 1 2013 0075 per share class common stock 00675 per share class b common stock increased quarterly dividend payable december 13 2013 shareholders record close business november 29 2013 board also declared quarterly dividend 0075 per share class common stock 00675 per share class b common stock payable march 14 2014 shareholders record close business february 28 2014 liquidity capital resources cash needs working capital expenditures growth opportunities repurchases senior notes share repurchases expected met current cash hand cash flows provided operating activities shortterm borrowings based current expectations believe liquidity capital resources sufficient operate business however may take advantage opportunities generate additional liquidity refinance existing debt capital market transactions amount nature timing capital market transactions depend operating performance circumstances thencurrent commitments obligations amount nature timing capital requirements limitations imposed current credit arrangements overall market conditions • cash flows associated loss early extinguishment debt included amount paid exceeding par value debt unamortized discount unamortized debt issuance costs related full extinguishment 2014 notes • cash flows associated changes working capital • 2013 decreased primarily due higher accounts receivable balance partially offset increases accrued salaries wages benefits income tax payable higher accounts receivable balance largely due significant increases input costs price increases associated increased input costs • 2012 decreased due increase inventory accounts receivable balances partially offset increase accounts payable higher inventory accounts receivable balances driven significant increases input costs price increases associated increased input costs • 2011 decreased due increase inventory accounts receivable balances partially offset increase accounts payable higher inventory accounts receivable balances driven significant increases input costs price increases associated increased input costs • additions property plant equipment include acquiring new equipment upgrading facilities maintain competitive standing position us future opportunities fiscal 2013 2012 2011 capital spending primarily production efficiencies operations ongoing development foreign operations • capital spending fiscal 2014 expected approximate 700 million include spending operations production labor efficiencies yield improvements sales channel flexibility well expansion foreign operations • purchases marketable securities included funding deferred compensation plans • proceeds notes receivable totaling 51 million fiscal 2011 related collection notes receivable received conjunction sale business operation fiscal 2009 • acquisitions fiscal 2013 related acquiring two valueadded food businesses part strategic expansion initiative included prepared foods segment • payments debt included • 2013 91 million primarily related borrowings foreign operations • 2012 885 million extinguishment 2014 notes 103 million related borrowings foreign operations • 2011 315 million 2011 notes 63 million 2016 notes 2 million 70 notes due may 2018 notes 103 million related borrowings foreign operations • net proceeds borrowings included • 2013 68 million primarily foreign operations total debt related foreign operations 60 million september 28 2013 40 million current 20 million longterm • 2012 received net proceeds 995 million issuance 2022 notes used net proceeds towards extinguishment 2014 notes including payments accrued interest related premiums general corporate purposes additionally foreign operations received proceeds 115 million borrowings total debt related foreign operations 102 million september 29 2012 62 million current 40 million longterm • 2011 foreign operations received proceeds 106 million borrowings total debt related foreign operations 98 million october 1 2011 58 million current 40 million longterm additionally dynamic fuels received 9 million proceeds shortterm notes fiscal 2011 • fiscal 2011 minority interest partner 60owned shandong tyson xinchang foods joint ventures china exercised put options requiring us purchase entire 40 equity interest transaction closed fiscal 2011 cash consideration totaling 66 million • purchases tyson class common stock include • 550 million 230 million 170 million shares repurchased pursuant share repurchase program fiscal 2013 2012 2011 respectively • 64 million 34 million 37 million shares repurchased fund certain obligations equity compensation plans fiscal 2013 2012 2011 respectively • revolving credit facility supports shortterm funding needs letters credit letters credit issued facility primarily support workers’ compensation insurance programs derivative activities • 2013 notes matured october 2013 upon maturity paid 458 million principal value cash hand settled conversion premium issuing 117 million shares class stock available treasury shares simultaneous settlement conversion premium received 117 million shares class stock call options entered concurrently 2013 note issuance • september 28 2013 approximately 34 cash held international accounts foreign subsidiaries generally rely foreign cash source funds support ongoing domestic liquidity needs rather manage worldwide cash requirements reviewing available funds among foreign subsidiaries cost effectiveness funds accessed repatriation cash balances certain subsidiaries could adverse tax consequences subject regulatory capital requirements however balances generally available without legal restrictions fund ordinary business operations us income taxes net applicable foreign tax credits provided undistributed earnings foreign subsidiaries intention reinvest earnings permanently repatriate earnings tax effective • current ratio 186 1 191 1 september 28 2013 september 29 2012 respectively capital resources credit facility cash flows operating activities current cash hand primary sources liquidity funding debt service capital expenditures dividends share repurchases also revolving credit facility committed maximum capacity 10 billion provide additional liquidity working capital needs letters credit source financing growth opportunities september 28 2013 outstanding letters credit totaling 42 million issued facility none drawn upon left 958 million available borrowing revolving credit facility funded syndicate 44 banks commitments ranging 03 million 90 million per bank syndicate includes bank holding companies required adequately capitalized federal bank regulatory agency requirements capitalization monitor credit ratings capacity longterm financing consider various qualitative quantitative factors monitor ratio debt total capitalization support longterm financing decisions september 28 2013 september 29 2012 ratio debttototal capitalization 279 287 respectively purpose calculation debt defined sum current longterm debt total capitalization defined debt plus total shareholders’ equity warrants september 2008 conjunction issuance convertible bonds sold warrants private transactions total proceeds 44 million warrants permit purchasers acquire approximately 27 million shares class stock current exercise price 2216 per share subject adjustment warrants exercisable various dates january 2014 april 2014 10 increase share price 2216 warrant exercise price would result issuance 25 million incremental shares 2860 closing share price september 28 2013 incremental shares would required issue upon exercise warrants would resulted 61 million shares credit ratings 2016 notes february 24 2011 standard poors ratings services standard poors financial services llc business sp upgraded credit rating notes bb bbb march 29 2011 moodys investors services inc moodys upgraded credit rating notes ba2 ba1 upgrades decreased interest rate 2016 notes 735 685 effective beginning sixmonth interest payment due april 1 2011 june 7 2012 moodys upgraded credit rating notes ba1 baa3 upgrade decreased interest rate 2016 notes 685 660 effective beginning sixmonth interest payment due october 1 2012 february 11 2013 sp upgraded credit rating 2016 notes bbb upgrade impact interest rate 2016 notes onenotch downgrade moodys would increase interest rates 2016 notes 025 twonotch downgrade sp would increase interest rates 2016 notes 025 revolving credit facility sp’s corporate credit rating tyson foods inc bbb moody’s senior unsecured subsidiary guaranteed longterm debt rating tyson foods inc baa3 fitch ratings wholly owned subsidiary fimalac sa fitch issuer default rating tyson foods inc bbb table outlines fees paid unused portion facility fee rate letter credit fees undrawn letter credit fee borrowing spread depending rating levels tyson foods inc sp moodys fitch event rating levels split applicable fees spread based upon rating level effect two rating agencies three rating agencies different rating levels applicable fees spread based upon rating level rating levels two rating agencies debt covenants revolving credit facility contains affirmative negative covenants among things may limit restrict ability create liens encumbrances incur debt merge dissolve liquidate consolidate dispose transfer assets change nature business engage certain transactions affiliates enter saleleaseback hedging transactions case subject certain qualifications exceptions addition required maintain minimum interest expense coverage maximum debt capitalization ratios 2022 notes also contain affirmative negative covenants among things may limit restrict ability create liens engage certain saleleaseback transactions engage certain consolidations mergers sales assets compliance debt covenants september 28 2013 offbalance sheet arrangements offbalance sheet arrangements material financial position results operations offbalance sheet arrangements guarantees debt outside third parties including lease grower loans residual value guarantees covering certain operating leases various types equipment see part ii item 8 notes consolidated financial statements note 20 commitments contingencies discussion contractual obligations following table summarizes contractual obligations september 28 2013 1 event default payment acceleration principal payments could occur 2 interest payments include interest outstanding debt payments estimated variable rate variable term debt based effective rates september 28 2013 expected payment dates 3 amounts include guarantees debt outside third parties consist lease grower loans substantially collateralized underlying assets well residual value guarantees covering certain operating leases various types equipment amounts included maximum potential amount future payments 4 amounts include minimum lease payments lease agreements 5 amounts include agreements purchase goods services enforceable legally binding specify significant terms including fixed minimum quantities purchased fixed minimum variable price provisions approximate timing transaction purchase obligations amount included items future purchase commitments grains livestock contracts fixed grower fees provide terms meet criteria certain grain purchase commitments fixed quantity provision assumed future obligations commitment based available commodity futures prices published observable active markets september 28 2013 excluded future purchase commitments contracts meet criteria purchase orders included table purchase order authorization purchase cancelable contracts goods services contain termination clauses without penalty also excluded 6 amounts include estimated amounts complete buildings equipment construction september 28 2013 7 amounts include items meet definition purchase obligation recorded consolidated balance sheets addition amounts shown table unrecognized tax benefits 175 million related interest penalties 63 million september 28 2013 recorded liabilities maximum contractual obligation associated cash flow assistance programs september 28 2013 based estimated fair values livestock supplier’s net tangible assets date aggregated approximately 340 million approximately 296 million remaining maximum commitment netting cash flow assistance related receivables recently issuedadopted accounting pronouncements refer discussion part ii item 8 notes consolidated financial statements note 1 business summary significant accounting policies recently issued accounting pronouncements note 2 changes accounting principles recently adopted accounting pronouncements critical accounting estimates preparation consolidated financial statements requires us make estimates assumptions estimates assumptions affect reported amounts assets liabilities disclosure contingent assets liabilities date consolidated financial statements reported amounts revenues expenses reporting period actual results could differ estimates following summary certain accounting estimates consider critical description judgments uncertainties effect actual results differ assumptions contingent liabilities subject lawsuits investigations claims related wage hourlabor environmental product taxing authorities matters required assess likelihood adverse judgments outcomes matters well potential ranges probable losses determination amount reserves disclosures required contingencies made considerable analysis individual issue accrue contingent liabilities assessment risk loss probable reasonably estimated disclose contingent liabilities risk loss reasonably possible probable contingent liabilities contain uncertainties eventual outcome result future events determination current reserves requires estimates judgments related future changes facts circumstances differing interpretations law assessments amount damages effectiveness strategies factors beyond control made material changes accounting methodology used establish contingent liabilities past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate contingent liabilities however actual results consistent estimates assumptions may exposed gains losses could material marketing advertising costs incur advertising retailer incentive consumer incentive costs promote products marketing programs include cooperative advertising volume discounts instore display incentives coupons programs marketing advertising costs charged period incurred accrue costs based estimated performance historical utilization redemption program cash consideration given customers considered reduction price products thus recorded reduction sales remainder marketing advertising costs recorded selling general administrative expense recognition costs related programs contains uncertainties due judgment required estimating potential performance redemption program estimates based many factors including experience similar promotional programs made material changes accounting methodology used establish marketing accruals past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate marketing accruals however actual results consistent estimates assumptions may exposed gains losses could material 10 change marketing accruals september 28 2013 would impact pretax earnings approximately 6 million description judgments uncertainties effect actual results differ assumptions accrued selfinsurance self insured certain losses related health welfare workers’ compensation auto liability general liability claims use independent thirdparty actuary assist determining selfinsurance liability actuary consider number factors estimating selfinsurance liability including claims experience demographic factors severity factors actuarial assumptions periodically review estimates assumptions thirdparty actuary assist us determining adequacy selfinsurance liability policy maintain accrual within central high point actuarial range selfinsurance liability contains uncertainties due assumptions required judgment used costs settle obligations including legal healthcare costs could increase decrease causing estimates selfinsurance liability change incident rates including frequency severity could increase decrease causing estimates selfinsurance liability change made material changes accounting methodology used establish selfinsurance liability past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate selfinsurance liability however actual results consistent estimates assumptions may exposed gains losses could material 10 increase actuarial estimate september 28 2013 would result increase amount recorded selfinsurance liability approximately 11 million 10 decrease actuarial estimate september 28 2013 would result decrease amount recorded selfinsurance liability approximately 17 million income taxes estimate total income tax expense based statutory tax rates tax planning opportunities available us various jurisdictions earn income federal income tax includes estimate taxes earnings foreign subsidiaries expected taxable upon remittance united states except earnings considered indefinitely invested foreign subsidiary deferred income taxes recognized future tax effects temporary differences financial income tax reporting using tax rates effect years differences expected reverse valuation allowances recorded likely tax benefit realized deferred tax asset record unrecognized tax benefit liabilities known anticipated tax issues based analysis whether extent additional taxes due changes tax laws rates could affect recorded deferred tax assets liabilities future changes projected future earnings could affect recorded valuation allowances future calculations related income taxes contain uncertainties due judgment used calculate tax liabilities application complex tax regulations across tax jurisdictions operate analysis unrecognized tax benefits contains uncertainties based judgment used apply likely recognition measurement thresholds believe reasonable likelihood material change tax related balances valuation allowances however due complexity uncertainties ultimate resolution may result payment materially different current estimate tax liabilities extent prevail matters unrecognized tax benefit liabilities established required pay amounts excess recorded unrecognized tax benefit liabilities effective tax rate given financial statement period could materially affected unfavorable tax settlement would require use cash generally result increase effective tax rate period resolution favorable tax settlement would generally recognized reduction effective tax rate period resolution description judgments uncertainties effect actual results differ assumptions impairment longlived assets longlived assets evaluated impairment whenever events changes circumstances indicate carrying value may recoverable examples include significant adverse change extent manner use longlived asset change physical condition evaluating longlived assets impairment compare carrying value asset’s estimated undiscounted future cash flows impairment indicated estimated future cash flows less carrying value asset impairment excess carrying value fair value longlived asset recorded impairment charges related longlived assets 74 million 29 million 18 million fiscal 2013 2012 2011 respectively impairment analysis contains uncertainties due judgment assumptions estimates surrounding undiscounted future cash flows longlived asset including forecasting useful lives assets selecting discount rate reflects risk inherent future cash flows determine fair value dynamic fuels consolidated joint venture began commercial operations october 2010 incurred net operating losses approximately 38 million since september 28 2013 dynamic fuels 166 million total assets 142 million net property plant equipment plant experienced mechanical difficulties pretreatment system performance issues hydrogen supply disruptions contributed plant time higher expected operational costs upgrades feedstock pretreatment systems improvements mechanical reliability plant completed fiscal 2013 plant idled october 2012 scheduled maintenance plant upgrades completed december 2012 since plant remained idled assessment recoverability carrying value conducted september 28 2013 determined impairment necessary another assessment recoverability dynamic fuels longlived assets determine whether impairment exists may necessary plant remains idled longer expected plant upgrades fail improve operational performance industry economics make plant uneconomical operate structural integrity concerns discovered adversely impact plant operations made material changes accounting methodology used evaluate impairment longlived assets last three fiscal years believe reasonable likelihood material change estimates assumptions used calculate impairments longlived assets however actual results consistent estimates assumptions used calculate estimated future cash flows may exposed impairment losses could material additionally continue evaluate international operations strategies may expose us future impairment losses impairment goodwill indefinite life intangible assets description goodwill evaluated impairment first performing qualitative assessment determine whether quantitative goodwill test necessary determined based qualitative factors fair value reporting unit may likely less carrying amount significant changes macroeconomic factors related reporting unit occurred could materially impact fair value quantitative goodwill impairment test would required elect forgo qualitative assessment perform quantitative test quantitative goodwill impairment test performed using twostep process first step identify potential impairment exists comparing fair value reporting unit carrying amount including goodwill fair value reporting unit exceeds carrying amount goodwill reporting unit considered potential impairment second step quantitative impairment test necessary however carrying amount reporting unit exceeds fair value second step performed determine goodwill impaired measure amount impairment loss recognize second step compares implied fair value goodwill carrying amount goodwill implied fair value goodwill exceeds carrying amount goodwill considered impaired however carrying amount goodwill exceeds implied fair value impairment loss recognized amount equal excess implied fair value goodwill determined manner amount goodwill recognized business combination ie fair value reporting unit allocated assets liabilities including unrecognized intangible assets reporting unit acquired business combination fair value reporting unit determined exit price market participant would pay business indefinite life intangible assets qualitative assessment also performed determine whether existence events circumstances indicates likely intangible asset impaired similar goodwill also elect forgo qualitative test indefinite life intangible assets perform quantitative test upon performing quantitative test carrying value intangible asset exceeds fair value impairment loss recognized amount equal excess elected forgo qualitative assessments indefinite life intangible assets fiscal 2013 impairment test elected make first day fourth quarter annual impairment assessment date goodwill indefinite life intangible assets however could required evaluate recoverability goodwill indefinite life intangible assets prior required annual assessment among things experience disruptions business unexpected significant declines operating results divestiture significant component business sustained decline market capitalization judgments uncertainties estimate fair value reporting units generally operating segments using various valuation techniques primary technique discounted cash flow analysis uses significant unobservable inputs level 3 inputs defined fair value hierarchy discounted cash flow analysis requires us make various judgmental assumptions sales operating margins growth rates discount rates include assumptions sales operating margins growth rates consider budgets business plans economic projections believed reflect market participant views would exist exit transaction assumptions also made varying perpetual growth rates periods beyond longterm business plan period generally utilize normalized operating margin assumptions based future expectations operating margins historically realized reporting units industries indefinite life intangible asset fair values calculated trademarks using royalty rate method assumptions royalty rates based rates similar brands trademarks licensed marketplace impairment analysis contains uncertainties due uncontrollable events could positively negatively impact anticipated future economic operating conditions effect actual results differ assumptions made material changes accounting methodology used evaluate impairment goodwill intangible assets last three years adoption new guidance allowing option first assess qualitative factors determine whether necessary perform twostep quantitative impairment test discount rate used annual goodwill impairment test increased average 84 fiscal 2013 80 fiscal 2012 significant changes key estimates assumptions fiscal 2013 2012 2011 material reporting units underwent quantitative test passed first step goodwill impairment analysis therefore second step necessary inherent estimates assumptions used determining fair value reporting units outside control management including interest rates cost capital tax rates credit ratings believe made reasonable estimates assumptions calculate fair value reporting units indefinite life intangible assets possible material change could occur actual results consistent estimates assumptions used calculate fair value may required perform second step could result additional material impairments goodwill material reporting units estimated fair value exceeded carrying value 20 date recent estimated fair value determination consequently currently consider material reporting units significant risk failing first step annual goodwill impairment test fiscal indefinite life intangible asset impairment analysis result impairment charge hypothetical 20 decrease fair value intangible assets would result material impairment item 7aitem 7 management’s discussion analysis financial condition results operations description company one worlds largest producers chicken beef pork prepared foods include leading brands tyson® jimmy dean® hillshire farm® sara lee® frozen bakery ball park® wright® aidells® state fair® key factors influencing business customer demand products ability maintain grow relationships customers introduce new innovative products marketplace accessibility international markets market prices products cost availability live cattle hogs raw materials feed ingredients operating efficiencies facilities operations conducted five segments chicken beef pork prepared foods international segment became separate reportable segment second quarter fiscal 2014 result changes internal financial reporting align previously announced executive leadership changes international segment includes foreign operations primarily related raising processing live chickens fresh frozen valueadded chicken products brazil china india mexico periods presented reclassified reflect change beef pork prepared foods results impacted change august 28 2014 acquired consolidated hillshire brands company hillshire brands manufacturer marketer branded convenient foods hillshire brands one month results operations fiscal 2014 included prepared foods segment overview • general operating income grew 4 fiscal 2014 fiscal 2013 led record earnings chicken segment strong performance beef pork segments revenues increased 9 record 376 billion driven price mix improvements able overcome 23 billion increase input costs strong operational execution margin management continued execute strategy accelerating growth domestic valueadded chicken sales prepared food sales innovating products services customer insights cultivating talent development support tysons growth future • market environment chicken segment delivered record results fiscal 2014 driven strong demand favorable domestic market conditions beef segment experienced higher fed cattle costs reduced availability fed cattle supplies delivered strong results maximizing revenues relative rising costs experienced live cattle markets pork segments operating margins remained within normalized range due favorable market conditions associated lower pork supplies prepared foods segment challenged rapidly increasing raw material prices addition costs incurred continue execute prepared foods strategy international segment experienced higher volumes offset lower average sales prices due weak demand chicken foreign operations margins total operating margin 38 fiscal 2014 operating margins segment follows • chicken 79 • beef 21 • pork 72 • prepared foods 15 • international 88 • liquidity fiscal 2014 generated 12 billion operating cash flows repurchased 71 million shares class common stock 250 million share repurchase program fiscal 2014 september 27 2014 16 billion liquidity includes availability credit facility 438 million cash equivalents • accounting cycle resulted 52week year fiscal 2014 2013 2012 2014 net income included following items fiscal 2014 per diluted share adjustments utilized weighted average shares outstanding amount 356 million • 52 million 015 per diluted share related gain previously unrecognized tax benefits • 197 million 037 per diluted share related hillshire brands acquisition integration costs associated prepared foods improvement plan • 42 million 016 per diluted share related impairment brazil operation mexico undistributed earnings tax • 40 million 007 per diluted share related hillshire brands postclosing results purchase price accounting adjustments ongoing costs related legacy hillshire brands plant fire • 27 million 012 per diluted share related hillshire brands acquisition financing incremental interest costs share dilution 2013 net income included following item • 19 million 005 per diluted share related recognized currency translation adjustment gain 2012 net income included following item • 167 million pretax charge 029 per diluted share related early extinguishment debt summary results 2014 vs 2013 • sales volume sales positively impacted increase sales volume accounted increase 679 million segments exception beef segment increase sales volume prepared foods contributed majority increase due acquisition consolidation hillshire brands final month fiscal 2014 • average sales price sales positively impacted higher average sales price accounted increase approximately 25 billion beef pork prepared foods experienced increased average sales price partially offset decreased pricing chicken international increase average sales price largely due continued tight domestic availability protein increased pricing associated rising live raw material costs improved mix majority increase driven beef pork segments 2013 vs 2012 • sales volume sales negatively impacted slight decrease sales volume accounted decrease 255 million primarily due decreases beef pork segments partially offset increases chicken prepared foods international segments • average sales price sales positively impacted higher average sales price accounted increase approximately 16 billion segments experienced increased average sales price largely due continued tight domestic availability protein increased pricing associated rising live raw material costs improved mix majority increase driven chicken beef segments 2014 vs 2013 • cost sales increased approximately 29 billion higher input costs per pound increased cost sales 23 billion higher sales volume increased cost sales 610 million • 23 billion impact higher input costs primarily driven • increase live cattle live hog costs approximately 17 billion 550 million respectively • increase raw material input costs prepared foods segment approximately 210 million • increase due net losses 260 million fiscal 2014 compared net gains approximately 5 million fiscal 2013 beef pork segment commodity risk management activities amounts exclude impact related physical purchase transactions mostly offset losses • decrease feed costs 600 million chicken segment 42 million international segment • 610 million impact higher sales volume driven increases segments exception beef chicken prepared foods contributed majority increase prepared foods increase mainly attributable acquisition consolidation hillshire brands final month fiscal 2014 2013 vs 2012 • cost sales increased approximately 12 billion due higher input cost per pound • 12 billion impact higher input costs primarily driven • increase feed costs 406 million chicken segment 64 million international segment • increase live cattle hog costs approximately 395 million • increase raw material input costs prepared foods segment approximately 110 million • increase due net losses 15 million fiscal 2013 compared net gains approximately 66 million fiscal 2012 pork segment commodity risk management activities amounts exclude impact related physical purchase transactions impact future period operating results 2014 vs 2013 • increase 272 million selling general administrative primarily driven • increase 71 million related employee costs including payroll stockbased incentivebased compensation 19 million related employee severance retention costs associated hillshire brands acquisition implementation prepared foods strategy • increase 32 million related advertising sales promotions • increase 82 million related professional fees 52 million related hillshire brands acquisition integration costs • increases 17 million information technology costs 7 million charitable contributions donations 5 million commissions • increase 50 million related hillshire brands selling general administrative postclosing expenses final month fiscal 2014 2013 vs 2012 • increase 79 million selling general administrative primarily driven • increase 44 million related employee costs including payroll stockbased incentivebased compensation • increase 32 million related advertising sales promotions 201420132012 interest income remained relatively flat due continued low interest rates 201420132012 • cash interest expense primarily included interest expense related coupon rates senior notes term loans commitmentletter credit fees incurred revolving credit facilities increase cash interest expense fiscal 2014 primarily due senior notes term loans issued debt assumed connection completed acquisition hillshire brands august 28 2014 partially offset lower cash interest expense 325 convertible senior notes due 2013 notes matured october 15 2013 decrease cash interest expense fiscal 2013 due lower average coupon rates compared fiscal 2012 decrease driven full extinguishment 1050 senior notes due 2014 notes fiscal 2012 partially offset 45 senior notes due 2022 notes issued fiscal 2012 • loss early extinguishment debt included amount paid exceeding par value debt unamortized discount unamortized debt issuance costs related full extinguishment 2014 notes • noncash interest expense primarily included interest related amortization debt issuance costs discountspremiums note issuances includes debt issuance costs incurred revolving credit facility senior notes term loans issued connection acquisition hillshire brands accretion debt discount 2013 notes decrease noncash interest expense fiscal 2014 due primarily lower noncash interest expense 2013 notes 2014 included 60 million costs associated bridge financing facilities hillshire brands acquisition 6 million temporary impairment related availableforsale security partially offset 14 million equity earnings joint ventures net foreign currency exchange gains 2013 included 19 million related recognized currency translation adjustment gain 2012 included 16 million equity earnings joint ventures 4 million net foreign currency exchange gains effective tax rate continuing operations impacted number items result difference effective tax rate us statutory rate 35 table reflects significant items impacting rate indicated 2014 • domestic production activity deduction reduced rate 40 • net decrease unrecognized tax benefits mostly related expiration statutes limitations settlements taxing authorities reduced rate 47 • state income taxes increased rate 28 • foreign rate differences valuation allowances increased rate 28 2013 • domestic production activity deduction reduced rate 32 • general business credits reduced rate 13 • state income taxes increased rate 24 2012 • domestic production activity deduction reduced rate 18 • general business credits reduced rate 07 • state income taxes increased rate 15 • foreign rate differences valuation allowances increased rate 18 segment results operate five segments chicken beef pork prepared foods international results dynamic fuels included allocate expenses related corporate activities segments except acquisition integration related fees included following table summary sales operating income loss measure segment income loss 2014 vs 2013 • sales volume sales volume grew result stronger demand chicken products mix rendered product sales • average sales price average sales price decreased feed ingredient costs declined partially offset mix changes • operating income operating income increased due higher sales volume lower feed ingredient costs 600 million partially offset decreased average sales price 2013 vs 2012 • sales volume sales volume grew due increased production driven stronger demand chicken products • average sales price increase average sales price primarily due mix changes price increases associated higher input costs since many sales contracts formula based shorterterm nature able offset rising input costs improved pricing mix • operating income operating income positively impacted increased average sales price improved live performance operational execution increases partially offset increased feed costs 406 million 2014 vs 2013 • sales volume sales volume decreased due reduction live cattle processed • average sales price average sales price increased due lower domestic availability beef products • operating income operating income increased due improved operational execution maximizing revenues relative rising live cattle markets partially offset increased operating costs • derivative activities operating results included net losses 72 million fiscal 2014 compared net gains 9 million fiscal 2013 commodity risk management activities related futures contracts amounts exclude impact related physical sale purchase transactions mostly offset commodity risk management gains losses 2013 vs 2012 • sales volume sales volume decreased due less outside trim tallow purchases partially offset increased production volumes • average sales price average sales price increased due lower domestic availability fed cattle supplies drove livestock costs • operating income operating income increased due improved operational execution less volatile live cattle markets improved export markets partially offset increased operating costs 2014 vs 2013 • sales volume sales volume increased due better domestic demand pork products • average sales price average sales price increased due lower total hog supplies resulted higher input costs • operating income operating income increased maximized revenues relative live hog markets partially attributable operational mix performance • derivative activities operating results included net losses 112 million fiscal 2014 compared net losses 15 million fiscal 2013 commodity risk management activities related futures contracts amounts exclude impact related physical sale purchase transactions mostly offset commodity risk management losses 2013 vs 2012 • sales volume sales volume decreased result decreased customer demand reduced exports • average sales price demand pork products improved drove average sales price livestock cost despite slight increase live hog supplies • operating income reduced compared prior year operating income remained strong fiscal 2013 despite brief periods imbalance industry supply customer demand able maintain strong operating margins maximizing revenues relative live hog markets partially due operational mix performance • derivative activities operating results included net losses 15 million fiscal 2013 compared net gains 66 million fiscal 2012 commodity risk management activities related futures contracts amounts exclude impact related physical sale purchase transactions impact current future period operating results 2014 vs 2013 • sales volume sales volume increased result improved demand prepared foods products incremental volumes result acquisition hillshire brands final month fiscal 2014 • average sales price average sales price increased due price increases associated higher input costs along better product mix positively impacted incrementally acquisition hillshire brands final month fiscal 2014 • operating income operating income decreased result higher raw material input costs approximately 210 million many sales contracts formula based shorterterm nature typically able offset rising input costs pricing however lag time price increases take effect additionally operating income reduced 113 million due additional costs associated prepared foods improvement plan hillshire brands postclosing results purchase price accounting adjustments ongoing costs related legacy hillshire brands plant fire 2013 vs 2012 • sales volume sales volume increased result improved demand prepared products incremental volumes purchase two businesses fiscal 2013 • average sales price average sales price increased due price increases associated higher input costs • operating income operating income decreased despite increases sales volumes average sales price result increased raw material input costs approximately 110 million additional costs incurred invested lunchmeat business growth platforms many sales contracts formula based shorterterm nature typically able offset rising input costs pricing however lag time price increases take effect 2014 vs 2013 • sales volume sales volume increased grew businesses brazil china • average sales price average sales price decreased due poor export market conditions brazil supply imbalances associated weak demand china less favorable pricing environment mexico • operating income operating income decreased due poor operational execution brazil challenging market conditions brazil china additional costs incurred grew international operation additionally operating income reduced 42 million related impairment brazil assets costs related pending sale brazil operation 2013 vs 2012 • sales volume sales volume increased continued grow international operation • average sales price average sales price increased due improved market conditions favorable pricing environments brazil mexico • operating loss operating income improved due better performance brazil mexico partially offset increased feed costs 64 million supply imbalances associated weak demand china result avian influenza liquidity capital resources cash needs working capital expenditures growth opportunities repurchases senior notes repayment term loans share repurchases expected met current cash hand cash flows provided operating activities shortterm borrowings based current expectations believe liquidity capital resources sufficient operate business however may take advantage opportunities generate additional liquidity refinance existing debt capital market transactions amount nature timing capital market transactions depend operating performance circumstances thencurrent commitments obligations amount nature timing capital requirements limitations imposed current credit arrangements overall market conditions • operating cash flows associated convertible debt discount relates initial debt discount 92 million 2013 notes matured retired fiscal 2014 • operating cash flows associated loss early extinguishment debt included amount paid exceeding par value debt unamortized discount unamortized debt issuance costs related full extinguishment 2014 notes issued 2009 • cash flows associated changes working capital • 2014 decreased primarily due increase inventory accounts receivable balances decrease income taxes payable partially offset increase accounts payable higher inventory accounts receivable accounts payable balances primarily attributable significant increases input costs price increases associated increased input costs • 2013 decreased primarily due higher accounts receivable balance partially offset increases accrued salaries wages benefits income tax payable higher accounts receivable balance largely due significant increases input costs price increases associated increased input costs • 2012 decreased due increase inventory accounts receivable balances partially offset increase accounts payable higher inventory accounts receivable balances driven significant increases input costs price increases associated increased input costs • additions property plant equipment include acquiring new equipment upgrading facilities maintain competitive standing position us future opportunities • capital spending fiscal 2015 expected approximate 900 million include spending operations production labor efficiencies yield improvements sales channel flexibility • acquisitions fiscal 2014 related acquiring hillshire brands additional valueadded food business part strategy accelerate growth prepared foods sales acquisitions included prepared foods segment description regarding transactions refer part ii item 8 notes consolidated financial statements note 3 acquisitions dispositions • payments debt included • 2014 2013 notes matured fiscal 2014 time paid 458 million principal value cash hand settled conversion premium issuing 117 million shares class stock available treasury shares 2013 notes initially recorded 92 million discount equaled fair value equity conversion premium instrument portion payment notes related initial 92 million discount recorded cash flows operating activities simultaneous settlement conversion premium received 117 million shares class stock call options • 2014 194 million related 5year tranche term loan facility 30 million related 3year tranche term loan facility • 2013 91 million primarily related borrowings foreign subsidiaries • 2012 885 million extinguishment 2014 notes 103 million related borrowings foreign subsidiaries • proceeds issuance longterm debt included • 2014 2300 million term loans 3243 million senior unsecured notes original issue discounts 7 million additionally total debt related foreign subsidiaries 8 million september 27 2014 classified longterm consolidated balance sheets • 2013 68 million primarily foreign subsidiaries total debt related foreign subsidiaries 60 million september 28 2013 40 million current 20 million longterm • 2012 received net proceeds 995 million issuance 2022 notes used net proceeds towards extinguishment 2014 notes including payments accrued interest related premiums general corporate purposes additionally foreign subsidiaries received proceeds 115 million borrowings total debt related foreign subsidiaries 102 million september 29 2012 62 million current 40 million longterm • proceeds issuance debt equity components tangible equity units • 2014 issued 30 million 475 tangible equity units teus total proceeds net underwriting discounts expenses 1454 million teu comprised prepaid stock purchase contract senior amortizing note due july 15 2017 allocated proceeds issuance teus equity debt based relative fair values respective components teu fair value prepaid stock purchase contracts 1295 million recorded capital excess par value net 40 million issuance costs fair value senior amortizing notes 205 million recorded debt 65 million current • proceeds issuance common stock net issuance costs • 2014 issued 238 million shares class common stock total proceeds net underwriting discounts offering related fees expenses 873 million • purchases tyson class common stock include • 250 million 550 million 230 million shares repurchased pursuant share repurchase program fiscal 2014 2013 2012 respectively • 45 million 64 million 34 million shares repurchased fund certain obligations equity compensation plans fiscal 2014 2013 2012 respectively • currently plan repurchase shares fund obligations equity compensation programs • revolving credit facility supports shortterm funding needs letters credit letters credit issued facility primarily support workers’ compensation insurance programs derivative activities • 2013 notes matured october 2013 upon maturity paid 458 million principal value cash hand settled conversion premium issuing 117 million shares class stock available treasury shares simultaneous settlement conversion premium received 117 million shares class stock call options entered concurrently 2013 note issuance • expect net interest expense approximate 290 million fiscal 2015 53weeks • september 27 2014 approximately 380 million cash held international accounts foreign subsidiaries generally rely foreign cash source funds support ongoing domestic liquidity needs rather manage worldwide cash requirements reviewing available funds among foreign subsidiaries cost effectiveness funds accessed repatriation cash balances certain subsidiaries could adverse tax consequences subject regulatory capital requirements however balances generally available without legal restrictions fund ordinary business operations us income taxes net applicable foreign tax credits provided undistributed earnings foreign subsidiaries exception 17 million provided undistributed earnings mexico brazil operations due pending sale operations except cash generated sale mexico brazil operations intention reinvest cash held foreign subsidiaries permanently repatriate cash tax effective • current ratio 164 1 186 1 september 27 2014 september 28 2013 respectively decrease fiscal 2014 due acquisition hillshire brands capital resources credit facility cash flows operating activities current cash hand primary sources liquidity funding debt service capital expenditures dividends share repurchases also revolving credit facility committed capacity 125 billion provide additional liquidity working capital needs letters credit source financing growth opportunities september 27 2014 outstanding letters credit totaling 41 million issued facility none drawn upon left 1209 million available borrowing revolving credit facility funded syndicate 42 banks commitments ranging 03 million 85 million per bank syndicate includes bank holding companies required adequately capitalized federal bank regulatory agency requirements capitalization monitor credit ratings capacity longterm financing consider various qualitative quantitative factors monitor ratio net debt ebitda support longterm financing decisions september 27 2014 september 28 2013 ratio net debt ebitda 41x 07x respectively refer part ii item 6 selected financial data explanation reconciliation comparable gaap measures increase ratio fiscal 2014 due additional debt incurred related hillshire brands acquisition previously described incurred 2300 million term loans 3243 million senior unsecured notes 205 million debt component tangible equity units additionally part transaction assumed 868 million senior notes debt hillshire brands credit ratings 2016 notes february 11 2013 standard poors ratings services sp upgraded credit rating 2016 notes bbb upgrade impact interest rate 2016 notes june 7 2012 moodys investors service inc moodys upgraded credit rating 2016 notes ba1 baa3 upgrade decreased interest rate 2016 notes 685 660 effective beginning sixmonth interest payment due october 1 2012 onenotch downgrade moodys would increase interest rates 2016 notes 025 twonotch downgrade sp would increase interest rates 2016 notes 025 revolving credit facility sp’s corporate credit rating tyson foods inc bbb moody’s senior unsecured subsidiary guaranteed longterm debt rating tyson foods inc baa3 fitch ratings fitch issuer default rating tyson foods inc bbb table outlines fees paid unused portion facility fee rate letter credit fees undrawn letter credit fee borrowing spread depending rating levels tyson foods inc sp moodys fitch event rating levels split applicable fees spread based upon rating level effect two rating agencies three rating agencies different rating levels applicable fees spread based upon rating level rating levels two rating agencies debt covenants revolving credit facility contains affirmative negative covenants among things may limit restrict ability create liens encumbrances incur debt merge dissolve liquidate consolidate make acquisitions investments dispose transfer assets change nature business engage certain transactions affiliates enter hedging transactions case subject certain qualifications exceptions addition required maintain minimum interest expense coverage maximum debt capitalization ratios senior notes term loans also contain affirmative negative covenants among things may limit restrict ability create liens engage certain saleleaseback transactions engage certain consolidations mergers sales assets compliance debt covenants september 27 2014 pension plans described part ii item 8 notes consolidated financial statements note 15 pension postretirement benefits funded status defined benefit pension plans defined amount projected benefit obligation exceeds plan assets funded status plans underfunded position 381 million end fiscal 2014 compared underfunded position 86 million end fiscal 2013 increase underfunded position due acquisition hillshire brands expect contribute approximately 14 million cash pension plans 2015 compared approximately 9 million 2014 8 million 2013 exact amount cash contributions made pension plans year dependent upon number factors including minimum funding requirements result actual funding 2015 may different estimate offbalance sheet arrangements offbalance sheet arrangements material financial position results operations offbalance sheet arrangements guarantees debt outside third parties including leases grower loans residual value guarantees covering certain operating leases various types equipment see part ii item 8 notes consolidated financial statements note 20 commitments contingencies discussion contractual obligations following table summarizes contractual obligations september 27 2014 1 event default payment acceleration principal payments could occur 2 interest payments include interest outstanding debt payments estimated variable rate variable term debt based effective rates september 27 2014 expected payment dates 3 amounts include guarantees debt outside third parties consist leases grower loans substantially collateralized underlying assets well residual value guarantees covering certain operating leases various types equipment amounts included maximum potential amount future payments 4 amounts include minimum lease payments lease agreements 5 amounts include agreements purchase goods services enforceable legally binding specify significant terms including fixed minimum quantities purchased fixed minimum variable price provisions approximate timing transaction purchase obligations amount included items future purchase commitments grains livestock contracts fixed grower fees provide terms meet criteria certain grain purchase commitments fixed quantity provision assumed future obligations commitment based available commodity futures prices published observable active markets september 27 2014 excluded future purchase commitments contracts meet criteria purchase orders included table purchase order authorization purchase cancelable contracts goods services contain termination clauses without penalty also excluded 6 amounts include estimated amounts complete buildings equipment construction september 27 2014 7 longterm liabilities primarily consist deferred compensation deferred income selfinsurance asset retirement obligations unable reliably estimate amount payments beyond fiscal 2015 therefore included total liability table also employee benefit obligations consisting pensions postretirement benefits 532 million excluded table discussion companys pension postretirement plans including funding matters included part ii item 8 notes consolidated financial statements note 15 pensions postretirement benefits addition amounts shown table unrecognized tax benefits 206 million related interest penalties 54 million september 27 2014 recorded liabilities maximum contractual obligation associated cash flow assistance programs september 27 2014 based estimated fair values livestock supplier’s net tangible assets date aggregated approximately 330 million approximately 326 million remaining maximum commitment netting cash flow assistance related receivables recently issuedadopted accounting pronouncements refer discussion part ii item 8 notes consolidated financial statements note 1 business summary significant accounting policies recently issued accounting pronouncements note 2 changes accounting principles recently adopted accounting pronouncements critical accounting estimates preparation consolidated financial statements requires us make estimates assumptions estimates assumptions affect reported amounts assets liabilities disclosure contingent assets liabilities date consolidated financial statements reported amounts revenues expenses reporting period actual results could differ estimates following summary certain accounting estimates consider critical description judgments uncertainties effect actual results differ assumptions contingent liabilities subject lawsuits investigations claims related wage hourlabor environmental product taxing authorities matters required assess likelihood adverse judgments outcomes matters well potential ranges probable losses determination amount reserves disclosures required contingencies made considerable analysis individual issue accrue contingent liabilities assessment risk loss probable reasonably estimated disclose contingent liabilities risk loss reasonably possible probable contingent liabilities contain uncertainties eventual outcome result future events determination current reserves requires estimates judgments related future changes facts circumstances differing interpretations law assessments amount damages effectiveness strategies factors beyond control made material changes accounting methodology used establish contingent liabilities past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate contingent liabilities however actual results consistent estimates assumptions may exposed gains losses could material marketing advertising costs incur advertising retailer incentive consumer incentive costs promote products marketing programs include cooperative advertising volume discounts instore display incentives coupons programs marketing advertising costs charged period incurred accrue costs based estimated performance historical utilization redemption program cash consideration given customers considered reduction price products thus recorded reduction sales remainder marketing advertising costs recorded selling general administrative expense recognition costs related programs contains uncertainties due judgment required estimating potential performance redemption program estimates based many factors including experience similar promotional programs made material changes accounting methodology used establish marketing accruals past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate marketing accruals however actual results consistent estimates assumptions may exposed gains losses could material 10 change marketing accruals september 27 2014 would impact pretax earnings approximately 18 million description judgments uncertainties effect actual results differ assumptions accrued selfinsurance selfinsured certain losses related health welfare workers’ compensation auto liability general liability claims use independent thirdparty actuary assist determining selfinsurance liability actuary consider number factors estimating selfinsurance liability including claims experience demographic factors severity factors actuarial assumptions periodically review estimates assumptions thirdparty actuary assist us determining adequacy selfinsurance liability policy maintain accrual within central high point actuarial range selfinsurance liability contains uncertainties due assumptions required judgment used costs settle obligations including legal healthcare costs could increase decrease causing estimates selfinsurance liability change incident rates including frequency severity could increase decrease causing estimates selfinsurance liability change made material changes accounting methodology used establish selfinsurance liability past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate selfinsurance liability however actual results consistent estimates assumptions may exposed gains losses could material 10 increase actuarial estimate september 27 2014 would result increase amount recorded selfinsurance liability approximately 3 million 10 decrease actuarial estimate september 27 2014 would result decrease amount recorded selfinsurance liability approximately 23 million description judgments uncertainties effect actual results differ assumptions defined benefit pension plans sponsor nine defined benefit pension plans provide retirement benefits certain employees also participate multiemployer plan provides defined benefits certain employees covered collective bargaining agreements plans usually administered board trustees composed management participating companies labor representatives use independent thirdparty actuaries assist us determining pension obligations net periodic benefit cost actuaries review assumptions include estimates present value projected future pension payment plan participants taking consideration likelihood potential future events salary increases demographic experience accumulate amortize effect actuarial gains losses future periods net periodic benefit costs defined benefit pension plans 14 million 2014 projected benefit obligation 2031 million end fiscal 2014 unrecognized actuarial losses 75 million end fiscal 2014 currently expect net periodic benefit cost fiscal 2015 approximately 8 million plan assets currently comprised approximately 81 fixed income securities 12 equity securities fixed income securities include limited direct bond investments pooled indirect bond investments may include limited international domestic equities real estate commodities private equity expect contribute approximately 14 million cash pension plans fiscal 2015 exact amount cash contributions made pension plans year dependent upon number factors including minimum funding requirements defined benefit pension plans contain uncertainties due assumptions required judgments used key assumptions used developing required estimates include factors discount rates expected returns plan assets retirement rates mortality assumptions material impact upon funded status net periodic benefit cost discount rates determined using cash flow matching technique whereby rates yield curve developed highquality debt securities applied benefit obligations determine appropriate discount rate determining longterm rate return plan assets first examined historical rates return various asset classes within plans determined longterm projected rateofreturn based expected returns investment management fees paid plan assets factored determination asset return assumptions retirement rates based primarily actual plan experience standard actuarial tables used estimate mortality reasonably likely changes external factors result changes assumptions used measure pension obligations net periodic benefit cost future periods risks participating multiemployer plans different singleemployer plans net pension cost multiemployer plans equal annual contribution determined accordance provisions negotiated labor contracts assets contributed plans segregated otherwise restricted provide benefits employees future cost plans dependent number factors including funded status plans ability participating companies meet ongoing funding obligations made material changes accounting methodology used establish pension obligations net periodic benefit cost past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate pension obligations net periodic benefit cost however actual results consistent estimates assumptions accumulated amortized future periods therefore generally affect net periodic benefit cost future periods 1 increase discount rate september 27 2014 would result decrease projected benefit obligation net periodic benefit cost approximately 246 million 2 million respectively 1 decrease discount rate september 27 2014 would result increase projected benefit obligation decrease net periodic benefit cost approximately 283 million 1 million respectively 1 change return plan assets september 27 2014 would impact net periodic benefit cost approximately 16 million sensitivities reflect impact changing one assumption time specific based conditions end 2014 economic factors conditions often effect multiple assumption simultaneously effect changes assumptions necessarily linear description judgments uncertainties effect actual results differ assumptions income taxes estimate total income tax expense based statutory tax rates tax planning opportunities available us various jurisdictions earn income federal income tax includes estimate taxes earnings foreign subsidiaries expected taxable upon remittance united states except earnings considered indefinitely invested foreign subsidiary deferred income taxes recognized future tax effects temporary differences financial income tax reporting using tax rates effect years differences expected reverse valuation allowances recorded likely tax benefit realized deferred tax asset record unrecognized tax benefit liabilities known anticipated tax issues based analysis whether extent additional taxes due changes tax laws rates could affect recorded deferred tax assets liabilities future changes projected future earnings could affect recorded valuation allowances future calculations related income taxes contain uncertainties due judgment used calculate tax liabilities application complex tax regulations across tax jurisdictions operate analysis unrecognized tax benefits contains uncertainties based judgment used apply likely recognition measurement thresholds believe reasonable likelihood material change tax related balances valuation allowances however due complexity uncertainties ultimate resolution may result payment materially different current estimate tax liabilities extent prevail matters unrecognized tax benefit liabilities established required pay amounts excess recorded unrecognized tax benefit liabilities effective tax rate given financial statement period could materially affected unfavorable tax settlement would require use cash generally result increase effective tax rate period resolution favorable tax settlement would generally recognized reduction effective tax rate period resolution impairment longlived assets longlived assets evaluated impairment whenever events changes circumstances indicate carrying value may recoverable examples include significant adverse change extent manner use longlived asset change physical condition evaluating longlived assets impairment compare carrying value asset’s estimated undiscounted future cash flows impairment indicated estimated future cash flows less carrying value asset longlived assets held sale compare carrying value disposal group fair value impairment excess carrying value fair value longlived asset recorded impairment charges related longlived assets 107 million 74 million 29 million fiscal 2014 2013 2012 respectively impairment analysis contains uncertainties due judgment assumptions estimates surrounding undiscounted future cash flows longlived asset including forecasting useful lives assets selecting discount rate reflects risk inherent future cash flows determine fair value made material changes accounting methodology used evaluate impairment longlived assets last three fiscal years believe reasonable likelihood material change estimates assumptions used calculate impairments longlived assets however actual results consistent estimates assumptions used calculate estimated future cash flows may exposed impairment losses could material additionally continue evaluate domestic international operations strategies may expose us future impairment losses impairment goodwill indefinite life intangible assets description goodwill evaluated impairment first performing qualitative assessment determine whether quantitative goodwill test necessary determined based qualitative factors fair value reporting unit may likely less carrying amount significant changes macroeconomic factors related reporting unit occurred could materially impact fair value quantitative goodwill impairment test would required elect forgo qualitative assessment perform quantitative test quantitative goodwill impairment test performed using twostep process first step identify potential impairment exists comparing fair value reporting unit carrying amount including goodwill fair value reporting unit exceeds carrying amount goodwill reporting unit considered potential impairment second step quantitative impairment test necessary however carrying amount reporting unit exceeds fair value second step performed determine goodwill impaired measure amount impairment loss recognize second step compares implied fair value goodwill carrying amount goodwill implied fair value goodwill exceeds carrying amount goodwill considered impaired however carrying amount goodwill exceeds implied fair value impairment loss recognized amount equal excess implied fair value goodwill determined manner amount goodwill recognized business combination ie fair value reporting unit allocated assets liabilities including unrecognized intangible assets reporting unit acquired business combination fair value reporting unit determined exit price market participant would pay business indefinite life intangible assets qualitative assessment also performed determine whether existence events circumstances indicates likely intangible asset impaired similar goodwill also elect forgo qualitative test indefinite life intangible assets perform quantitative test upon performing quantitative test carrying value intangible asset exceeds fair value impairment loss recognized amount equal excess elected forgo qualitative assessments indefinite life intangible assets fiscal 2014 impairment test elected make first day fourth quarter annual impairment assessment date goodwill indefinite life intangible assets however could required evaluate recoverability goodwill indefinite life intangible assets prior required annual assessment among things experience disruptions business unexpected significant declines operating results divestiture significant component business sustained decline market capitalization judgments uncertainties estimate fair value reporting units using various valuation techniques primary technique discounted cash flow analysis uses significant unobservable inputs level 3 inputs defined fair value hierarchy discounted cash flow analysis requires us make various judgmental assumptions sales operating margins growth rates discount rates include assumptions sales operating margins growth rates consider budgets business plans economic projections believed reflect market participant views would exist exit transaction assumptions also made varying perpetual growth rates periods beyond longterm business plan period generally utilize normalized operating margin assumptions based future expectations operating margins historically realized reporting units industries indefinite life intangible asset fair values calculated trademarks using royalty rate method assumptions royalty rates based rates similar brands trademarks licensed marketplace impairment analysis contains uncertainties due uncontrollable events could positively negatively impact anticipated future economic operating conditions effect actual results differ assumptions made material changes accounting methodology used evaluate impairment goodwill intangible assets last three years adoption new guidance allowing option first assess qualitative factors determine whether necessary perform twostep quantitative impairment test discount rate used annual goodwill impairment test decreased average 79 fiscal 2014 84 fiscal 2013 significant changes key estimates assumptions fiscal 2014 2013 2012 material reporting units underwent quantitative test passed first step goodwill impairment analysis therefore second step necessary inherent estimates assumptions used determining fair value reporting units outside control management including interest rates cost capital tax rates credit ratings believe made reasonable estimates assumptions calculate fair value reporting units indefinite life intangible assets possible material change could occur actual results consistent estimates assumptions used calculate fair value may required perform second step could result additional material impairments goodwill material reporting units estimated fair value exceeded carrying value 20 date recent estimated fair value determination consequently currently consider material reporting units significant risk failing first step annual goodwill impairment test september 27 2014 48 billion goodwill associated acquisition hillshire brands yet allocated reporting units allocation goodwill reporting units pending finalization expected synergies impact synergies reporting units fiscal 2014 indefinite life intangible asset impairment analysis result impairment charge hypothetical 20 decrease fair value nonhillshire brands intangible assets would result material impairment recorded 41 billion indefinite life intangibles brands trademarks associated acquisition hillshire brands significant decline estimated fair value hillshire brands indefinite life intangibles could result material impairment item 7aitem 7 management’s discussion analysis financial condition results operations description company one worlds largest food companies leading brands tyson® jimmy dean® hillshire farm® sara lee® ball park® wright® aidells® state fair® recognized market leader chicken beef pork well prepared foods including bacon breakfast sausage turkey lunchmeat hot dogs pizza crusts toppings tortillas desserts key factors influencing business customer demand products ability maintain grow relationships customers introduce new innovative products marketplace accessibility international markets market prices products cost availability live cattle hogs raw materials feed ingredients operating efficiencies facilities operate four reportable segments chicken beef pork prepared foods primarily includes foreign chicken production operations china india thirdparty merger integration costs august 28 2014 acquired consolidated hillshire brands company hillshire brands manufacturer marketer branded convenient foods hillshire brands results operations subsequent acquisition closing included prepared foods segment overview • fiscal year accounting cycle resulted 52week year fiscal 2016 2014 53week year fiscal 2015 • general operating income grew 31 fiscal 2016 fiscal 2015 led beef segments 413 million improvement operating income record earnings prepared foods segment well continued strong performance chicken pork segments sales decreased 11 fiscal 2016 fiscal 2015 primarily due declining beef prices impact additional week fiscal 2015 sale brazil mexico chicken production operations continued execute strategy accelerating growth domestic valueadded chicken sales prepared food sales innovating products services customer insights cultivating talent development support tysons growth future • integration continue maintain focus integration hillshire brands synergy capture expect realize synergies around 675 million fiscal 2017 acquisition well profit improvement plan legacy prepared foods business amount expected realized fiscal 2017 reduced previous estimate 700 million incremental synergies expected realized fiscal 2018 majority benefits expected realized prepared foods segment continue invest portion synergies innovation new product launches support growth brands fiscal 2016 captured 258 million incremental synergies 322 million captured fiscal 2015 total 580 million synergies realized fiscal 2016 • market environment domestic protein production chicken beef pork turkey according usda increased approximately 3 fiscal 2016 fiscal 2015 export market conditions experienced improvement fiscal 2015 chicken segment delivered strong results fiscal 2016 driven favorable demand products lower feed costs beef segment earnings improved fiscal 2015 due favorable market conditions associated increase cattle supply resulted lower fed cattle costs pork segments operating margin normalized range domestic market conditions favorable lower livestock cost increased demand pork products prepared foods segment delivered record operating income continued realize synergies lower input costs partially offset higher marketing advertising promotion spend • margins total operating margin 77 fiscal 2016 operating margins segment follows • chicken 119 • beef 24 • pork 108 • prepared foods 100 • liquidity fiscal 2016 generated 27 billion operating cash flows repurchased 308 million shares class common stock 1868 million share repurchase program fiscal 2016 october 1 2016 13 billion liquidity included availability revolving credit facility 349 million cash equivalents 2016 included following items • 53 million 014 per diluted share related recognition previously unrecognized tax benefits audit settlements 2015 included following items • 169 million 041 per diluted share related impairment charge china • 59 million 009 per diluted share related prepared foods network optimization impairment charges • 57 million 009 per diluted share related merger integration costs • 12 million 002 per diluted share related closure impairment charges related ceasing beef operations denison facility • 161 million 024 per diluted share related gain sale mexico operation • 39 million 006 per diluted share related additional week fiscal 2015 • 26 million 006 per diluted share related recognition previously unrecognized tax benefits • 21 million 003 per diluted share related gain sale equity securities • 8 million 002 per diluted share insurance proceeds net costs related legacy hillshire brands plant fire 2014 included following items fiscal 2014 per diluted share adjustments utilized weighted average shares outstanding amount 356 million • 197 million 037 per diluted share related hillshire brands acquisition integration costs associated prepared foods improvement plan • 42 million 016 per diluted share related impairment brazil operation mexico undistributed earnings tax • 40 million 007 per diluted share related hillshire brands postclosing results purchase price accounting adjustments costs related legacy hillshire brands plant fire • 27 million 012 per diluted share related hillshire brands acquisition financing incremental interest costs share dilution • 52 million 015 per diluted share related gain previously unrecognized tax benefits summary results 2016 vs 2015 • sales volume sales negatively impacted lower sales volume accounted decrease 19 billion segment decline sales volume primarily attributed additional week fiscal 2015 decrease sales volume also attributable divestitures mexico brazil chicken production operations fiscal 2015 excluding impacts along divestiture heinold hog markets business first quarter fiscal 2015 total company sales volume increased 01 • average sales price sales negatively impacted lower average sales prices accounted decrease 26 billion segment decrease average sales prices largely due decreased pricing associated lower beef pork chicken prices largest decrease beef segment 2015 vs 2014 • sales volume sales positively impacted higher sales volume accounted increase 24 billion chicken segment increase sales volume primarily due extra week fiscal 2015 prepared foods segment increase sales volume primarily due acquisition consolidation hillshire brands final month fiscal 2014 addition extra week fiscal 2015 increase sales volume partially offset decrease beef pork segments along divestitures mexico brazil chicken operations fiscal 2015 • average sales price sales positively impacted higher average sales prices accounted increase 14 billion beef prepared foods segments increase average sales prices partially offset decrease average sales prices chicken pork segments increase average sales price largely due continued tight domestic availability beef products along change mix prepared foods segment result acquisition consolidation hillshire brands final month fiscal 2014 2016 vs 2015 • cost sales decreased approximately 53 billion lower input costs per pound decreased cost sales approximately 36 billion lower sales volume decreased cost sales approximately 17 billion • approximate 36 billion impact lower input costs primarily driven • decrease live cattle cost approximately 26 billion beef segment • decrease live hog costs approximately 360 million pork segment • decrease raw material input costs approximately 300 million prepared foods segment • decreases feed costs approximately 170 million chicken segment • decrease due net realized derivative gains 96 million fiscal 2016 compared net realized derivative losses 102 million fiscal 2015 due risk management activities amounts exclude offsetting impacts related physical purchase transactions included change live cattle hog costs raw material feed costs described additionally cost sales increased due net unrealized gains 11 million fiscal 2016 compared net unrealized gains 80 million fiscal 2015 primarily due chicken beef pork segment commodity risk management activities • 17 billion impact lower sales volume primarily due sale mexico chicken production operation fiscal 2015 along additional week fiscal 2015 vs 2014 • cost sales increased approximately 26 billion higher input costs per pound increased cost sales approximately 330 million higher sales volume increased cost sales approximately 23 billion • approximate 330 million impact higher input costs primarily driven • increase live cattle cost approximately 11 billion operating costs approximately 90 million beef segment • increase input cost per pound related acquisition hillshire brands august 28 2014 • increase 49 million 12 million related prepared foods network optimization impairment charges denison plant impairment closure costs respectively • decrease live hog costs approximately 500 million pork segment • decrease raw material input costs approximately 290 million prepared foods segment • decreases feed costs approximately 450 million chicken segment • decrease due net unrealized gains 55 million fiscal 2015 compared net unrealized losses 39 million fiscal 2014 beef pork segment commodity risk management activities • 23 billion impact higher sales volume driven increase sales volume chicken prepared foods segments partially offset decreases sales volume beef pork segments prepared foods contributed majority increase due acquisition hillshire brands august 28 2014 addition extra week fiscal 2015 2016 vs 2015 • increase 116 million selling general administrative primarily driven • increase 88 million related marketing advertising promotion expense drive sales growth • increase 71 million employee costs including payroll stockbased incentivebased compensation • increase 11 million related bad debt expense • increase 17 million primarily related professional fees information technology costs rent • decrease 26 million due reduction amortization expense related intangible assets • decrease 25 million related fiscal 2015 sale chicken production operations brazil mexico • decrease 20 million merger integration costs 2015 vs 2014 • increase 493 million selling general administrative primarily driven • increase 487 million related inclusion hillshire brands fiscal 2015 results one month fiscal 2014 results • increase 69 million related incremental amortization associated acquired hillshire brands intangibles • increase 27 million related employee costs including payroll stockbased compensation • decrease 59 million related advertising sales promotions legacy tyson business primarily attributable discontinuing certain programs present fiscal 2014 • decrease 14 million related merger integration costs employee severance retention costs associated hillshire brands acquisition implementation prepared foods strategy • decrease 17 million primarily related professional fees 201620152014 interest income remained relatively flat due continued low interest rates 201620152014 • cash interest expense primarily included interest expense related coupon rates senior notes term loans commitmentletter credit fees incurred revolving credit facilities decrease cash interest expense fiscal 2016 primarily due reduction debt increase cash interest expense fiscal 2015 primarily due senior notes term loans issued debt assumed connection completed acquisition hillshire brands august 28 2014 • noncash interest expense primarily included amounts related amortization debt issuance costs discountspremiums note issuances offset interest capitalized 2016 included 12 million equity earnings joint ventures 4 million net foreign currency exchange losses 2015 included 12 million equity earnings joint ventures 21 million gains sale equity securities 2014 included 60 million costs associated bridge financing facilities hillshire brands acquisition 6 million temporary impairment related availableforsale security partially offset 14 million equity earnings joint ventures net foreign currency exchange gains effective tax rate continuing operations impacted number items result difference effective tax rate united states statutory rate 35 table reflects significant items impacting rate indicated 2016 • domestic production activity deduction reduced rate 26 • unrecognized tax benefits activity mostly related expiration statutes limitations settlements taxing authorities reduced rate 17 • state income taxes increased rate 27 2015 • domestic production activity deduction reduced rate 37 • unrecognized tax benefits activity mostly related expiration statutes limitations reduced rate 18 • state income taxes increased rate 31 • foreign rate differences valuation allowances increased rate 38 2014 • domestic production activity deduction reduced rate 40 • net decrease unrecognized tax benefits mostly related expiration statutes limitations settlements taxing authorities reduced rate 47 • state income taxes increased rate 28 • foreign rate differences valuation allowances increased rate 28 segment results operate four reportable segments chicken beef pork prepared foods primarily includes foreign chicken production operations china india thirdparty merger integration costs additionally results dynamic fuels sold fiscal 2014 also included fiscal 2014 results closing date sale following table summary segment sales operating income loss measure segment income loss 2016 vs 2015 • sales volume sales volume decreased primarily due additional week fiscal 2015 addition planned temporary decrease production fourth quarter fiscal 2016 transitioned mix sell valueadded less commodity products along optimizing mix buy versus grow strategy • average sales price average sales price decreased feed costs declined partially offset mix changes • operating income operating income negatively impacted additional week fiscal 2015 along increases operating costs marketing advertising promotion expenses partially offset lower feed costs 170 million 2015 vs 2014 • sales volume sales volume grew result additional week fiscal 2015 well stronger demand chicken products mix rendered product sales • average sales price average sales price decreased feed ingredient costs declined partially offset mix changes • operating income operating income increased due higher sales volume lower feed ingredient costs 450 million partially offset disruptions caused export bans 2016 vs 2015 • sales volume sales volume decreased due additional week fiscal 2015 excluding additional week fiscal 2015 sales volume increased 08 due increased availability cattle supply better demand beef products despite reduction live cattle processing capacity due closure denison iowa facility fourth quarter fiscal 2015 • average sales price average sales price decreased due higher domestic availability beef supplies lower livestock cost • operating income operating income increased due favorable market conditions maximized revenues relative decline live fed cattle cost addition reduced losses marktomarket open derivative positions lowerofcostor market inventory adjustments incurred fourth quarter fiscal 2015 partially offset higher operating costs 2015 vs 2014 • sales volume sales volume decreased due reduced live cattle supplies available process partially offset additional week fiscal 2015 • average sales price average sales price increased due lower domestic availability beef products • operating income operating income decreased due unfavorable market conditions associated decrease supply drove fed cattle costs export market disruptions relative value competing proteins increased operating costs additionally fiscal 2015 incurred 12 million denison plant impairment closure costs 81 million losses marktomarket open derivative positions lowerofcostormarket inventory adjustments mostly result large rapid decline live cattle futures september fiscal 2015 2016 vs 2015 • sales volume sales volume decreased due divestiture heinold hog markets business first quarter fiscal 2015 additional week fiscal 2015 excluding impacts sales volume grew 12 driven better demand pork products • average sales price average sale price decreased due increased live hog supplies lower livestock cost • operating income operating income increased maximized revenues relative decline live hog markets due better plant utilization associated increased volume processed partially offset higher operating costs losses incurred live hog operation additional week fiscal 2015 vs 2014 • sales volume sales volume decreased due divestiture heinold hog markets business first quarter fiscal 2015 excluding impact divestiture 54 increase sales volume result additional week fiscal 2015 well better demand pork products • average sales price average sales price decreased due increase live hog supplies drove livestock cost average sales price • operating income reduced compared prior year operating income remained strong maximized revenues relative live hog markets partially attributable operational mix performance 2016 vs 2015 • sales volume sales volume decreased due additional week fiscal 2015 lower sales volume first six months fiscal 2016 due changes sales mix carryover effect 2015 turkey avian influenza occurrence first half fiscal 2016 • average sales price average sales price decreased primarily due decline input costs partially offset change product mix • operating income operating income increased due mix changes well lower input costs approximately 300 million partially offset higher marketing advertising promotion spend along additional week fiscal 2015 additionally prepared foods operating income positively impacted 441 million synergies 156 million incremental synergies fiscal 2016 285 million synergies realized fiscal 2015 positive impact synergies operating income partially offset heavy investments innovation new product launches supporting growth brands 2015 vs 2014 • sales volume sales volume increased due incremental volumes acquisition hillshire brands additional week fiscal 2015 • average sales price average sales price increased primarily due better product mix positively impacted acquisition hillshire brands • operating income operating income improved due increase sales volume average sales price mainly attributed hillshire brands well lower raw material costs approximately 290 million fiscal 2015 related legacy prepared foods business profit improvement initiatives hillshire brands synergies positively impacted prepared foods operating income 285 million fiscal 2015 additionally fourth quarter fiscal 2015 incurred 59 million impairment charges associated optimizing prepared foods network 2016 vs 2015 • sales decreased due sale mexico brazil chicken production operations fiscal 2015 • operating loss operating loss improved due better performance china operation reduced thirdparty merger integration costs partially offset results mexico chicken production operation sold fiscal 2015 vs 2014 • sales decreased due sale mexico brazil chicken production operations fiscal 2015 • operating loss operating loss improved 69 million international operations due sale brazil operation better market conditions mexico prior sale fourth quarter fiscal 2015 partially offset challenging market conditions china additionally thirdparty merger integration costs decreased 12 million losses associated dynamic fuels sold fiscal 2014 decreased 15 million liquidity capital resources cash needs working capital expenditures growth opportunities repurchases senior notes repayment term loans share repurchases expected met current cash hand cash flows provided operating activities shortterm borrowings based current expectations believe liquidity capital resources sufficient operate business however may take advantage opportunities generate additional liquidity refinance existing debt capital market transactions amount nature timing capital market transactions depend operating performance circumstances thencurrent commitments obligations amount nature timing capital requirements limitations imposed current credit arrangements overall market conditions • operating cash outflow associated convertible debt discount related initial debt discount 92 million 325 convertible notes issued 2008 matured october 15 2013 retired fiscal 2014 • gain dispositions businesses fiscal 2015 primarily relates sale mexico chicken production operation impairment assets fiscal 2015 included 59 million impairment charges related prepared foods network optimization 169 million impairments related china operation description regarding charges refer part ii item 8 notes consolidated financial statements note 3 acquisitions dispositions note 9 income charges • net increase fiscal 2015 primarily driven noncash pension expense • cash flows associated changes operating assets liabilities • 2016 increased primarily due decreased inventory accounts receivable balances increased accrual incentive compensation partially offset decreased accounts payable increased tax receivable contributions pension plans decreased inventory accounts receivable accounts payable balances largely due decreased raw material costs timing sales payments • 2015 increased primarily due decrease inventory accounts receivable balances increase taxes payable partially offset decrease accounts payable decreased inventory accounts receivable accounts payable balances largely due decreased raw material costs timing sales payments • 2014 decreased primarily due increase inventory accounts receivable balances decrease income taxes payable partially offset increase accounts payable higher inventory accounts receivable accounts payable balances primarily attributable significant increases input costs price increases associated increased input costs • additions property plant equipment included acquiring new equipment upgrading facilities maintain competitive standing position us future opportunities • capital spending fiscal 2017 expected approximate 10 billion include spending production growth safety animal wellbeing infrastructure replacements upgrades operational improvements result production labor efficiencies yield improvements sales channel flexibility • purchases marketable securities included funding deferred compensation plans • proceeds sale businesses primarily included proceeds net cash transferred sale mexico brazil operations • acquisitions fiscal 2014 related acquiring hillshire brands additional valueadded food business part strategy accelerate growth prepared foods sales acquisitions included prepared foods segment description regarding transactions refer part ii item 8 notes consolidated financial statements note 3 acquisitions dispositions • payments debt included • 2016 fully retired 638 million outstanding balance 660 senior notes due april 2016 • 2015 fully retired 401 million outstanding balance 275 senior notes due september 2015 paid 353 million related 5year tranche term loan facility 1172 million related 3year tranche term loan facility • 2014 325 convertible notes issued 2008 matured october 15 2013 time paid 458 million principal value cash hand settled conversion premium issuing 117 million shares class stock available treasury shares notes initially recorded 92 million discount equaled fair value equity conversion premium instrument portion payment notes related initial 92 million discount recorded cash flows operating activities simultaneous settlement conversion premium received 117 million shares class stock call options purchased time issuance notes • 2014 194 million related 5year tranche term loan facility 30 million related 3year tranche term loan facility • proceeds issuance longterm debt borrowingspayments revolving credit facility • 2016 borrowings 1065 million payments 765 million revolving credit facility fiscal 2016 utilized revolving credit facility balance cash position retirement 2016 notes changes working capital additionally total debt foreign subsidiaries 7 million october 1 2016 6 million classified longterm consolidated balance sheets • 2015 500 million term loans full balance used prepay outstanding borrowings 3year tranche term loan facility addition borrowings payments revolver 1345 million fiscal 2015 utilized revolving credit facility balance cash position term loan deleveraging changes working capital additionally total debt foreign subsidiaries 10 million october 3 2015 classified longterm consolidated balance sheets • 2014 2300 million term loans 3243 million senior unsecured notes original issue discounts 7 million additionally total debt related foreign subsidiaries 8 million september 27 2014 classified longterm consolidated balance sheets • proceeds issuance debt equity components tangible equity units • 2014 issued 30 million 475 tangible equity units teus total proceeds net underwriting discounts expenses 1454 million teu comprised prepaid stock purchase contract senior amortizing note due july 15 2017 allocated proceeds issuance teus equity debt based relative fair values respective components teu fair value prepaid stock purchase contracts 1295 million recorded capital excess par value net 40 million issuance costs fair value senior amortizing notes 205 million recorded debt • proceeds issuance common stock net issuance costs • 2014 issued 238 million shares class common stock total proceeds net underwriting discounts offering related fees expenses 873 million • purchases tyson class common stock include • 1868 million 455 million 250 million shares repurchased pursuant share repurchase program fiscal 2016 2015 2014 respectively • 76 million 40 million 45 million shares repurchased fund certain obligations equity compensation plans fiscal 2016 2015 2014 respectively • expect continue repurchasing shares share repurchase program october 1 2016 403 million shares remain authorized repurchases timing extent repurchase shares depend upon among things working capital needs markets industry conditions liquidity targets limitations debt obligations regulatory requirements • subsequent october 1 2016 november 18 2016 repurchased 255 million approximately 36 million shares common stock share repurchase program • dividends paid fiscal 2016 included 50 increase fiscal 2015 quarterly dividend rate • net increase fiscal 2016 primarily driven tax benefits associated stock option exercises • revolving credit facility supports shortterm funding needs letters credit letters credit issued facility primarily support leasing obligations workers’ compensation insurance programs maximum borrowing revolving credit facility fiscal 2016 335 million • expect net interest expense approximate 225 million fiscal 2017 • october 1 2016 approximately 286 million cash held international accounts foreign subsidiaries generally rely foreign cash source funds support ongoing domestic liquidity needs rather manage worldwide cash requirements reviewing available funds among foreign subsidiaries cost effectiveness funds accessed repatriation cash balances certain foreign subsidiaries could adverse tax consequences subject regulatory capital requirements however balances generally available without legal restrictions fund ordinary business operations united states income taxes net applicable foreign tax credits provided undistributed earnings foreign subsidiaries intention reinvest cash held foreign subsidiaries permanently repatriate cash tax efficient • current ratio 177 1 152 1 october 1 2016 october 3 2015 respectively capital resources credit facility cash flows operating activities current cash hand primary sources liquidity funding debt service capital expenditures dividends share repurchases also revolving credit facility committed capacity 125 billion provide additional liquidity working capital needs letters credit source financing growth opportunities october 1 2016 300 million borrowed 7 million outstanding letters credit issued facility none drawn upon left 943 million available borrowing revolving credit facility funded syndicate 42 banks commitments ranging 03 million 85 million per bank syndicate includes bank holding companies required adequately capitalized federal bank regulatory agency requirements capitalization monitor credit ratings capacity longterm financing consider various qualitative quantitative factors monitor ratio net debt ebitda support longterm financing decisions october 1 2016 october 3 2015 ratio net debt ebitda 17x 21x respectively refer part ii item 6 selected financial data explanation reconciliation comparable gaap measures decrease ratio fiscal 2016 primarily due increased ebitda 632 million credit ratings term loans tranche b due april 2019 tranche b due august 2019 sp’s credit rating term loans bbb moody’s investor service inc moodys credit rating term loans baa2 fitch ratings wholly owned subsidiary fimlac sa fitch credit rating term loans bbb table outlines borrowing spread outstanding principal balance depending rating levels term loans sp moodys fitch revolving credit facility sp’s corporate credit rating tyson foods inc bbb moody’s senior unsecured longterm debt rating tyson foods inc baa2 fitchs issuer default rating tyson foods inc bbb table outlines fees paid unused portion facility fee rate letter credit fees undrawn letter credit fee borrowing spread depending rating levels tyson foods inc sp moodys fitch event rating levels split applicable fees spread based upon rating level effect two rating agencies three rating agencies different rating levels applicable fees spread based upon rating level rating levels two rating agencies debt covenants revolving credit term loan facilities contain affirmative negative covenants among things may limit restrict ability create liens encumbrances incur debt merge dissolve liquidate consolidate make acquisitions investments dispose transfer assets change nature business engage certain transactions affiliates enter hedging transactions case subject certain qualifications exceptions addition required maintain minimum interest expense coverage maximum debttocapitalization ratios senior notes also contain affirmative negative covenants among things may limit restrict ability create liens engage certain saleleaseback transactions engage certain consolidations mergers sales assets compliance debt covenants october 1 2016 pension plans described part ii item 8 notes consolidated financial statements note 14 pensions postretirement benefits funded status defined benefit pension plans defined amount projected benefit obligation exceeds plan assets funded status plans underfunded position 336 million end fiscal 2016 compared underfunded position 410 million end fiscal 2015 expect contribute approximately 40 million cash pension plans fiscal 2017 compared approximately 64 million fiscal 2016 14 million fiscal 2015 exact amount cash contributions made pension plans year dependent upon number factors including minimum funding requirements result actual funding fiscal 2017 may different estimate offbalance sheet arrangements offbalance sheet arrangements material financial position results operations offbalance sheet arrangements guarantees debt outside third parties including leases grower loans residual value guarantees covering certain operating leases various types equipment see part ii item 8 notes consolidated financial statements note 19 commitments contingencies discussion contractual obligations following table summarizes contractual obligations october 1 2016 1 event default payment acceleration principal payments could occur 2 interest payments include interest outstanding debt payments estimated variable rate variable term debt based effective interest rates october 1 2016 expected payment dates 3 amounts include guarantees debt outside third parties consist leases grower loans substantially collateralized underlying assets well residual value guarantees covering certain operating leases various types equipment amounts included maximum potential amount future payments 4 amounts include minimum lease payments lease agreements 5 amounts include agreements purchase goods services enforceable legally binding specify significant terms including fixed minimum quantities purchased fixed minimum variable price provisions approximate timing transaction purchase obligations amount included items future purchase commitments grains livestock contracts fixed grower fees provide terms meet criteria certain grain purchase commitments fixed quantity provision assumed future obligations commitment based available commodity futures prices published observable active markets october 1 2016 excluded future purchase commitments contracts meet criteria purchase orders included table purchase order authorization purchase cancelable contracts goods services contain termination clauses without penalty also excluded 6 amounts include estimated amounts complete buildings equipment construction october 1 2016 7 longterm liabilities primarily consist deferred compensation deferred income selfinsurance asset retirement obligations unable reliably estimate amount payments beyond fiscal 2017 therefore included total liability table also employee benefit obligations consisting pensions postretirement benefits 359 million excluded table discussion companys pension postretirement plans including funding matters included part ii item 8 notes consolidated financial statements note 14 pensions postretirement benefits addition amounts shown table unrecognized tax benefits 283 million related interest penalties 52 million october 1 2016 recorded liabilities maximum contractual obligation associated cash flow assistance programs october 1 2016 based estimated fair values livestock supplier’s net tangible assets date aggregated approximately 380 million approximately 378 million remaining maximum commitment netting cash flow assistance related receivables recently issuedadopted accounting pronouncements refer discussion part ii item 8 notes consolidated financial statements note 1 business summary significant accounting policies note 2 changes accounting principles critical accounting estimates preparation consolidated financial statements requires us make estimates assumptions estimates assumptions affect reported amounts assets liabilities disclosure contingent assets liabilities date consolidated financial statements reported amounts revenues expenses reporting period actual results could differ estimates following summary certain accounting estimates consider critical description judgments uncertainties effect actual results differ assumptions contingent liabilities subject lawsuits investigations claims related wage hourlabor environmental product taxing authorities matters required assess likelihood adverse judgments outcomes matters well potential ranges probable losses determination amount reserves disclosures required contingencies made considerable analysis individual issue accrue contingent liabilities assessment risk loss probable reasonably estimated disclose contingent liabilities risk loss reasonably possible probable contingent liabilities contain uncertainties eventual outcome result future events determination current reserves requires estimates judgments related future changes facts circumstances differing interpretations law assessments amount damages effectiveness strategies factors beyond control made material changes accounting methodology used establish contingent liabilities past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate contingent liabilities however actual results consistent estimates assumptions may exposed gains losses could material marketing advertising promotion costs promote products marketing advertising trade promotions consumer incentives programs include limited coupons discounts rebates volumebased incentives cooperative advertising programs marketing advertising promotion costs charged operations period incurred accrue costs based estimated performance historical utilization redemption rates program cash consideration given customers considered reduction price products thus recorded reduction sales remainder marketing advertising promotion costs recorded selling general administrative expense recognition costs related programs contains uncertainties due judgment required estimating potential performance utilization redemption rates program estimates based many factors including experience similar promotional programs made material changes accounting methodology used establish marketing advertising promotion accruals past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate marketing advertising promotion accruals however actual results consistent estimates assumptions may exposed gains losses could material 10 change marketing advertising promotion accruals october 1 2016 would impact pretax earnings approximately 21 million description judgments uncertainties effect actual results differ assumptions accrued selfinsurance selfinsured certain losses related health welfare workers’ compensation auto liability general liability claims use independent thirdparty actuary assist determining selfinsurance liability actuary consider number factors estimating selfinsurance liability including claims experience demographic factors severity factors actuarial assumptions periodically review estimates assumptions thirdparty actuary assist us determining adequacy selfinsurance liability policy maintain accrual within central high point actuarial range selfinsurance liability contains uncertainties due assumptions required judgment used costs settle obligations including legal healthcare costs could increase decrease causing estimates selfinsurance liability change incident rates including frequency severity could increase decrease causing estimates selfinsurance liability change made material changes accounting methodology used establish selfinsurance liability past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate selfinsurance liability however actual results consistent estimates assumptions may exposed gains losses could material 10 increase actuarial estimate october 1 2016 would result increase amount recorded selfinsurance liability approximately 23 million 10 decrease actuarial estimate october 1 2016 would result decrease amount recorded selfinsurance liability approximately 8 million description judgments uncertainties effect actual results differ assumptions defined benefit pension plans sponsor nine defined benefit pension plans provide retirement benefits certain employees also participate multiemployer plan provides defined benefits certain employees covered collective bargaining agreements plans usually administered board trustees composed management participating companies labor representatives use independent thirdparty actuaries assist us determining pension obligations net periodic benefit cost actuaries review assumptions include estimates present value projected future pension payment plan participants taking consideration likelihood potential future events salary increases demographic experience accumulate amortize effect actuarial gains losses future periods net periodic benefit cost defined benefit pension plans 18 million fiscal 2016 projected benefit obligation 1776 million end fiscal 2016 unrecognized actuarial loss 72 million end fiscal 2016 currently expect net periodic benefit cost fiscal 2017 approximately 26 million plan assets currently comprised approximately 85 fixed income securities 10 equity securities fixed income securities include limited direct bond investments pooled indirect bond investments may include limited international domestic equities real estate commodities private equity expect contribute approximately 40 million cash pension plans fiscal 2017 exact amount cash contributions made pension plans year dependent upon number factors including minimum funding requirements defined benefit pension plans contain uncertainties due assumptions required judgments used key assumptions used developing required estimates include factors discount rates expected returns plan assets retirement rates mortality assumptions material impact upon funded status net periodic benefit cost discount rates determined using cash flow matching technique whereby rates yield curve developed highquality debt securities applied benefit obligations determine appropriate discount rate determining longterm rate return plan assets first examined historical rates return various asset classes within plans determined longterm projected rateofreturn based expected returns investment management fees paid plan assets factored determination asset return assumptions retirement rates based primarily actual plan experience standard actuarial tables used estimate mortality reasonably likely changes external factors result changes assumptions used measure pension obligations net periodic benefit cost future periods risks participating multiemployer plans different singleemployer plans net pension cost multiemployer plans equal annual contribution determined accordance provisions negotiated labor contracts assets contributed plans segregated otherwise restricted provide benefits employees future cost plans dependent number factors including funded status plans ability participating companies meet ongoing funding obligations made material changes accounting methodology used establish pension obligations net periodic benefit cost past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate pension obligations net periodic benefit cost however actual results consistent estimates assumptions accumulated amortized future periods therefore generally affect net periodic benefit cost future periods 1 increase discount rate october 1 2016 would result decrease projected benefit obligation net periodic benefit cost approximately 203 million 5 million respectively 1 decrease discount rate october 1 2016 would result increase projected benefit obligation net periodic benefit cost approximately 250 million 12 million respectively 1 change return plan assets october 1 2016 would impact net periodic benefit cost approximately 14 million sensitivities reflect impact changing one assumption time remaining assumptions held constant economic factors conditions often affect multiple assumptions simultaneously effect changes assumptions necessarily linear description judgments uncertainties effect actual results differ assumptions income taxes estimate total income tax expense based statutory tax rates tax planning opportunities available us various jurisdictions earn income federal income tax includes estimate taxes earnings foreign subsidiaries expected taxable upon remittance united states except earnings considered indefinitely invested foreign subsidiary deferred income taxes recognized future tax effects temporary differences financial income tax reporting using tax rates effect years differences expected reverse valuation allowances recorded likely tax benefit realized deferred tax asset record unrecognized tax benefit liabilities known anticipated tax issues based analysis whether extent additional taxes due changes tax laws rates could affect recorded deferred tax assets liabilities future changes projected future earnings could affect recorded valuation allowances future calculations related income taxes contain uncertainties due judgment used calculate tax liabilities application complex tax regulations across tax jurisdictions operate analysis unrecognized tax benefits contains uncertainties based judgment used apply likely recognition measurement thresholds believe reasonable likelihood material change tax related balances valuation allowances however due complexity uncertainties ultimate resolution may result payment materially different current estimate tax liabilities extent prevail matters unrecognized tax benefit liabilities established required pay amounts excess recorded unrecognized tax benefit liabilities effective tax rate given financial statement period could materially affected unfavorable tax settlement would require use cash generally result increase effective tax rate period resolution favorable tax settlement would generally recognized reduction effective tax rate period resolution impairment longlived assets definite life intangibles longlived assets definite life intangibles evaluated impairment whenever events changes circumstances indicate carrying value may recoverable examples include significant adverse change extent manner use asset change physical condition unexpected change financial performance evaluating longlived assets definite life intangibles impairment compare carrying value asset’s estimated undiscounted future cash flows impairment indicated estimated future cash flows less carrying value asset assets held sale compare carrying value disposal group fair value impairment excess carrying value fair value asset recorded impairment charges related longlived assets definite life intangibles 45 million 262 million 107 million fiscal 2016 2015 2014 respectively impairment analysis contains uncertainties due judgment assumptions including useful lives assets forecasted sales operating margins growth rates royalty rates discount rates based budgets business plans economic projections anticipated future cash flows marketplace data reflects risk inherent future cash flows determine fair value made material changes accounting methodology used evaluate impairment longlived assets definite life intangibles last three fiscal years believe reasonable likelihood material change estimates assumptions used calculate impairments longlived assets definite life intangibles however actual results consistent estimates assumptions used calculate estimated future cash flows may exposed impairment losses could material periodically conduct projects strategically evaluate optimization items network capacity manufacturing efficiencies additionally continue evaluate international operations strategies significant change strategies outlook manner plan use assets may exposed future impairments impairment goodwill indefinite life intangible assets description goodwill evaluated impairment first performing qualitative assessment determine whether quantitative goodwill test necessary determined based qualitative factors fair value reporting unit may likely less carrying amount significant changes macroeconomic factors related reporting unit occurred could materially impact fair value quantitative goodwill impairment test would required elect forgo qualitative assessment perform quantitative test quantitative goodwill impairment test performed using twostep process first step identify potential impairment exists comparing fair value reporting unit carrying amount including goodwill fair value reporting unit exceeds carrying amount goodwill reporting unit considered potential impairment second step quantitative impairment test necessary however carrying amount reporting unit exceeds fair value second step performed determine goodwill impaired measure amount impairment loss recognize second step compares implied fair value goodwill carrying amount goodwill implied fair value goodwill exceeds carrying amount goodwill considered impaired however carrying amount goodwill exceeds implied fair value impairment loss recognized amount equal excess implied fair value goodwill determined manner amount goodwill recognized business combination ie fair value reporting unit allocated assets liabilities including unrecognized intangible assets reporting unit acquired business combination fair value reporting unit determined exit price market participant would pay business indefinite life intangible assets qualitative assessment also performed determine whether existence events circumstances indicates likely intangible asset impaired similar goodwill also elect forgo qualitative test indefinite life intangible assets perform quantitative test upon performing quantitative test carrying value intangible asset exceeds fair value impairment loss recognized amount equal excess elected forgo qualitative assessments indefinite life intangible assets fiscal 2016 impairment test elected make first day fourth quarter annual impairment assessment date goodwill indefinite life intangible assets however could required evaluate recoverability goodwill indefinite life intangible assets prior required annual assessment among things experience disruptions business unexpected significant declines operating results divestiture significant component business sustained decline market capitalization judgments uncertainties estimate fair value reporting units using various valuation techniques primary technique discounted cash flow analysis uses significant unobservable inputs level 3 inputs defined fair value hierarchy discounted cash flow analysis requires us make various judgmental assumptions sales operating margins growth rates discount rates include assumptions sales operating margins growth rates consider budgets business plans economic projections believed reflect market participant views would exist exit transaction assumptions also made varying perpetual growth rates periods beyond longterm business plan period generally utilize normalized operating margin assumptions based future expectations operating margins historically realized reporting units industries fair value indefinite life intangible assets calculated principally using relieffromroyalty multiperiod excess earnings valuation approaches uses significant unobservable inputs level 3 inputs defined fair value hierarchy believed reflect market participant views would exist exit transaction valuation approaches required make estimates assumptions sales operating margins growth rates royalty rates discount rates based budgets business plans economic projections anticipated future cash flows marketplace data impairment analysis contains uncertainties due uncontrollable events could positively negatively impact anticipated future economic operating conditions effect actual results differ assumptions made material changes accounting methodology used evaluate impairment goodwill intangible assets last three years fiscal 2016 2015 2014 material reporting units underwent quantitative test passed first step goodwill impairment analysis therefore second step necessary fiscal 2015 recorded 23 million full impairment immaterial reporting unit’s goodwill inherent estimates assumptions used determining fair value reporting units indefinite life intangible assets outside control management including interest rates cost capital tax rates credit ratings believe made reasonable estimates assumptions calculate fair value reporting units indefinite life intangibles possible material change could occur actual results consistent estimates assumptions used calculate fair value may required perform second step could result additional material impairments goodwill material reporting units estimated fair value exceeded carrying value 20 date recent estimated fair value determination consequently currently consider material reporting units significant risk failing first step annual goodwill impairment test discount rate used annual goodwill impairment test decreased 62 fiscal 2016 68 fiscal 2015 discount rates continue low compared historical levels 38 increase discount rate would caused prepared foods reporting unit 4005 million goodwill october 1 2016 fail first step goodwill impairment step may resulted material impairment upon completion second step material indefinite life intangible assets prior acquisition hillshire brands august 2014 fiscal 2016 2015 indefinite life intangible assets impairment analyses result impairment charge indefinite life intangible assets’ estimated fair value exceeded carrying value 20 date recent estimated fair value determination consequently currently consider material indefinite life intangible assets significant risk impairment discount rate used annual indefinite life intangible assets impairment test 79 fiscal 2016 80 fiscal 2015 20 increase discount rate would caused carrying value two intangible assets combined carrying value 2476 million exceed fair value item 7aitem 7 management’s discussion analysis financial condition results operations description company one world’s largest food companies recognized leader protein founded 1935 john w tyson grown three generations family leadership company broad portfolio products brands like tyson® jimmy dean® hillshire farm® ball park® wright® aidells® ibp® state fair® key factors influencing business customer demand products ability maintain grow relationships customers introduce new innovative products marketplace accessibility international markets market prices products cost availability live cattle hogs raw materials feed ingredients operating efficiencies facilities operate four reportable segments beef pork chicken prepared foods primarily includes foreign chicken production operations china thirdparty merger integration costs corporate overhead related tyson new ventures llc fiscal 2017 acquired consolidated advancepierre producer distributor valueadded convenient readytoeat sandwiches sandwich components entrées snacks fiscal 2018 acquired original philly valued added protein business results operations businesses included prepared foods chicken segments fiscal 2018 acquired tecumseh vertically integrated valueadded protein business american proteins poultry rendering blending operation part strategic expansion sustainability initiatives results operations businesses included chicken segment description transactions refer part ii item 8 notes consolidated financial statements note 3 acquisitions dispositions fiscal 2018 completed sale four nonprotein businesses part strategic focus protein brands businesses part prepared foods segment included sara lee® frozen bakery kettle van’s® tnt crust produced items frozen desserts waffles snack bars soups sauces sides pizza crusts sales included chef pierre® bistro collection® kettle collection™ van’s® brands license use sara lee® brand various channels well tarboro north carolina fort worth texas traverse city michigan green bay wisconsin prepared foods facilities description transactions refer part ii item 8 notes consolidated financial statements note 3 acquisitions dispositions overview • fiscal year accounting cycle resulted 52week year fiscal 2018 2017 2016 • general fiscal 2018 operating income increased compared fiscal 2017 record beef prepared foods segment results partially offset decline chicken pork segment margins fiscal 2018 results impacted 109 million onetime cash bonus frontline employees continued make investments talent 68 million impairment net realized gains associated divestitures nonprotein businesses 59 million restructuring related charges sales increased 5 fiscal 2018 fiscal 2017 primarily due increased sales volumes average sales prices beef chicken prepared foods • market environment according united states department agriculture usda domestic protein production beef pork chicken turkey increased approximately 2 fiscal 2018 compared fiscal 2017 continue monitor recent trade tariff activity potential impact exports inputs costs across segments currently experiencing impacts domestic export prices primarily chicken pork resulting uncertainty trade policies increased tariffs additionally segments experienced increased freight labor costs pursue recovery increased costs related tariffs freight labor pricing beef segment experienced strong export demand favorable domestic market conditions associated increase cattle supply excess domestic availability pork products pork segment experienced periods challenging market conditions despite decreased input costs chicken segment also faced challenging market conditions associated increased domestic availability supply sluggish demand reduced export prices higher feed ingredient costs prepared foods segment continued strong performance despite experiencing reduced volumes divested certain nonprotein businesses • margins total operating margin 76 fiscal 2018 operating margins segment follows • beef 65 • pork 74 • chicken 72 • prepared foods 100 • liquidity generated approximately 3 billion operating cash flows fiscal 2018 september 29 2018 14 billion liquidity included 270 million cash equivalents availability revolving credit facility deducting amounts outstanding commercial paper program • strategy sustainably feed world fastest growing protein brands intend achieve strategy grow business differentiated capabilities deliver ongoing financial fitness continuous improvement sustain company world future generations • fiscal 2018 acquired three operations total approximately 15 billion net cash acquired operations consisted american proteins inc poultry rendering blending operation tecumseh poultry llc vertically integrated valuedadded business original philly holdings inc valueadded protein business acquired part growth sustainability initiatives acquisition strategy new brands new capabilities scale synergy new geographies markets description refer part ii item 8 notes consolidated financial statements note 3 acquisition dispositions • fiscal 2017 acquired advancepierre producer distributor valueadded convenient readytoeat sandwiches sandwich components entrées snacks part overall strategy purchase price equal 4025 per share cash advancepierres outstanding common stock approximately 32 billion description refer part ii item 8 notes consolidated financial statements note 3 acquisition dispositions • august 2018 reached definitive agreement buy keystone foods business “keystone” marfrig global foods 216 billion cash anticipated acquisition keystone major supplier growing global foodservice industry latest investment furtherance growth strategy expansion valueadded protein capabilities transaction expected close first quarter early second quarter fiscal 2019 subject customary closing conditions including regulatory approvals however assurance acquisition close time expect majority keystone’s domestic results included chicken segment international results included segment presentation • fiscal 2018 sold four nonprotein operations net proceeds 805 million part strategic focus protein brands operations part prepared foods segment included sara lee® frozen bakery van’s® kettle tnt crust description refer part ii item 8 notes consolidated financial statements note 3 acquisitions dispositions • fourth quarter fiscal 2017 board directors approved multiyear restructuring program “financial fitness program” expected contribute company’s overall strategy financial fitness increased operational effectiveness overhead reduction combination synergies integration business acquisitions additional elimination nonvalued added costs program focused supply chain procurement overhead improvements net savings expected realized prepared foods chicken segments financial fitness program included elimination approximately 550 positions across several areas job levels eliminated positions originating corporate offices springdale arkansas chicago illinois cincinnati ohio result company recognized restructuring related charges 59 million 150 million fiscal 2018 fiscal 2017 respectively fiscal 2018 charges consisted primarily incremental costs implement new technology accelerated depreciation technology assets fiscal 2017 charges consisted 53 million severance employee related costs 72 million technology impairment related costs 25 million contract termination costs company currently anticipates financial fitness program result cumulative pretax charges implemented approximately 253 million consist primarily severance employee related costs impairments accelerated depreciation technology assets incremental costs implement new technology contract termination costs september 29 2018 209 million estimated 253 million total pretax charges recognized majority remaining estimated charges related incremental costs implement new technology following tables set forth pretax impact restructuring related charges consolidated statements income pretax impact reportable segments description refer part ii item 8 notes consolidated financial statements note 6 restructuring related charges 2018 included following items • 1003 million post tax 271 per diluted share tax benefit remeasurement net deferred tax liabilities lower enacted tax rates • 109 million pretax 022 per diluted share related onetime cash bonus frontline employees • 68 million pretax 034 per diluted share impairments net realized gains associated divestitures nonprotein businesses • 59 million pretax 012 per diluted share restructuring related charges 2017 included following items • 103 million pretax 018 per diluted share advancepierre purchase accounting acquisition related costs included 36 million purchase accounting adjustment amortization fair value stepup inventory 49 million acquisition related costs 18 million acquisition bridge financing fees • 150 million pretax 015 per diluted share restructuring related charges • 52 million pretax 009 per diluted share impairment charge related san diego prepared foods operation • 45 million pretax 001 per diluted share impairment net tax benefit related expected sale nonprotein business 2016 included following items • 53 million post tax 014 per diluted share related recognition previously unrecognized tax benefits audit settlements summary results 2018 vs 2017 • sales volume sales positively impacted increase sales volume accounted increase 1041 million beef chicken prepared foods segments increase sales volume driven strong demand beef products incremental volumes business acquisitions chicken prepared foods segments net business divestitures prepared foods segment • average sales price sales positively impacted higher average sales prices accounted increase 751 million segments increase average sales price pork segment beef segment experienced strong demand chicken prepared foods segments positively impacted improved mix business acquisitions net business divestitures prepared foods segment • amounts included incremental impact 1060 million related inclusion advancepierre results post acquisition first anniversary acquisition june 7 2018 2017 vs 2016 • sales volume sales positively impacted increase sales volume accounted increase 477 million segment increase sales volume beef prepared foods segments contributing majority increase driven better demand beef products incremental volumes acquisition advancepierre • average sales price sales positively impacted higher average sales prices accounted increase 902 million segment increase average sales price pork chicken prepared foods segments contributing majority increase due strong demand pork products improved mix higher chicken pricing chicken segment better product mix prepared foods segment positively impacted acquisition advancepierre • amounts include net increase 508 million related inclusion advancepierre results post acquisition 2018 vs 2017 • cost sales increased 1749 million higher input cost per pound increased cost sales 918 million higher sales volume increased cost sales 831 million amounts include incremental impact 797 million related inclusion advancepierre results post acquisition first anniversary acquisition june 7 2018 • 918 million impact higher input cost per pound primarily driven • increase freight approximately 270 million incurred across segments • increase onetime cash bonus frontline employees 108 million • increase due impairment charges 101 million associated divestiture nonprotein business fiscal 2018 partially offset 33 million realized gains related sale nonprotein businesses fiscal 2018 impairment charges 44 million related san diego prepared foods operation fiscal 2017 • increase approximately 52 million chicken segment related net increases feed ingredient costs growout expenses outside meat purchases • decrease live cattle costs approximately 25 million beef segment • decrease live hog costs approximately 90 million pork segment • decrease due net realized derivative losses 30 million fiscal 2018 compared net realized derivative loss 79 million fiscal 2017 due risk management activities amounts exclude offsetting impacts related physical purchase transactions included change live cattle hog costs raw material feed costs described additionally cost sales decreased due net unrealized losses 3 million fiscal 2018 compared net unrealized losses 40 million fiscal 2017 primarily due beef segment commodity risk management activities • remaining net change across segments primarily driven increased operating costs impacts average input cost per pound mix changes well business acquisitions divestitures • 831 million impact higher sales volume driven increases sales volume beef chicken prepared foods segments partially offset decrease sales volume pork segment 2017 vs 2016 • cost sales increased 993 million higher input cost per pound increased cost sales 588 million higher sales volume increased cost sales 405 million amounts include net increase 425 million related inclusion advancepierre results post acquisition included 36 million fair value stepup inventory part purchase accounting • 588 million impact higher input cost per pound primarily driven • increase approximately 170 million chicken segment related increase freight growout expenses outside meat purchases partially offset decrease feed costs 80 million • increase due impairment charges 44 million related san diego prepared foods operation 45 million related expected sale nonprotein business addition increase 17 million related net costs associated fires two chicken plants • increase raw material input costs approximately 50 million prepared foods segment • increase live hog costs approximately 40 million pork segment • increase 35 million related restructuring related charges • increase input cost per pound related acquisition advancepierre june 7 2017 • increase due net realized derivative losses 79 million fiscal 2017 compared net realized derivative gains 96 million fiscal 2016 due risk management activities amounts exclude offsetting impacts related physical purchase transactions included change live cattle hog costs raw material feed costs described additionally cost sales increased due net unrealized losses 40 million fiscal 2017 compared net unrealized gains 11 million fiscal 2016 primarily due beef segment commodity risk management activities • decrease live cattle costs approximately 600 million beef segment • remainder net change mostly due increased cost per pound mix upgrade chicken segment increased sales volume valueadded products well increased operating costs freight plant variances across segments also included 71 million compensation benefit integration expense • 405 million impact higher sales volume driven increases sales volume segments majority increase beef prepared foods segment 2018 vs 2017 • decrease 81 million selling general administrative primarily driven • decrease 92 million employee costs primarily stockbased incentivebased compensation also included reduction 24 million compensation benefit integration expense incurred fiscal 2017 recur fiscal 2018 • decrease 56 million restructuring related charges • decrease 49 million advancepierre acquisition related fees incurred part acquisition fiscal 2017 recur fiscal 2018 • decrease 18 million commission brokerage fees • decrease 14 million nonrestructuring severance related expenses • decrease 10 million marketing advertising promotion expense • increase 153 million related advancepierre acquisition first anniversary acquisition june 7 2018 included 91 million incremental amortization 62 million inclusion advancepierre results postacquisition • increase 15 million technology related costs • remainder net change primarily related reduction professional fees 2017 vs 2016 • increase 288 million selling general administrative primarily driven • increase 124 million related advancepierre acquisition composed 49 million acquisition related costs 37 million incremental amortization 38 million inclusion advancepierre results postacquisition • increase 115 million restructuring related charges • increase 53 million employee costs including 34 million nonrestructuring severance related expenses 24 million compensation benefit integration expense partially offset reduced incentivebased compensation • increase 8 million due impairment related san diego prepared foods operation • remainder net change primarily related professional fees 201820172016 interest income remained relatively flat lower deposit levels offset higher interest rates 201820172016 • cash interest expense primarily included interest expense related senior notes term loans commercial paper increase cash interest expense fiscal 2018 fiscal 2017 primarily due debt issued connection business acquisitions higher interest rates • noncash interest expense primarily included amounts related amortization debt issuance costs discountspremiums note issuances offset interest capitalized 2018 included 21 million equity earnings joint ventures 11 million insurance proceeds 2017 included 28 million legal costs related two former subsidiaries hillshire brands sold hillshire brands 1986 1994 also included 18 million bridge financing fees related advancepierre acquisition 19 million income equity earnings joint ventures 2016 included 12 million equity earnings joint ventures 4 million net foreign currency exchange losses effective income tax rate 103 fiscal 2018 compared 323 fiscal 2017 effective tax rate fiscal 2018 reflects impacts tax cuts jobs act signed law december 22 2017 impacts include 1004 million benefit related remeasurement deferred taxes existing date enactment reduced fiscal year effective tax rate 366 well 245 statutory federal income tax rate fiscal 2018 compared 35 statutory federal income tax rate effective prior year additionally current year favorable timing differences currently deductible 245 blended tax rate reversing future years 21 reduced fiscal 2018 rate 13 nondeductible impairment sale certain assets nonprotein businesses increased fiscal 2018 rate 31 fiscal 2018 effective tax rate also includes 17 benefit related domestic production activity deduction less 31 benefit fiscal 2017 primarily due lower enacted federal tax rate fiscal 2018 effective tax rate includes 33 expense state taxes net federal tax benefit compared 23 fiscal 2017 increase also due part lower enacted federal tax rate fiscal 2017 effective tax rate 323 compared 318 fiscal 2016 change due part 17 benefit unrecognized tax benefits activity fiscal 2016 didn’t recur fiscal 2017 partially offset favorable domestic production activity deduction state income taxes 2017 currently expect annual effective tax rate approximately 235 2019 description drivers rates refer part item 1 notes consolidated condensed financial statements note 9 income taxes segment results operate four reportable segments beef pork chicken prepared foods primarily includes foreign chicken production operations china india thirdparty merger integration costs corporate overhead related tyson new ventures llc fiscal 2017 acquired consolidated advancepierre producer distributor valueadded convenient readytoeat sandwiches sandwich components entrées snacks fiscal 2018 acquired original philly valued added protein business results operations businesses included prepared foods chicken segments fiscal 2018 acquired tecumseh vertically integrated valueadded protein business american proteins poultry rendering blending operation part strategic expansion sustainability initiatives results operations businesses included chicken segment description transactions refer part ii item 8 notes consolidated financial statements note 3 acquisitions dispositions fiscal 2018 completed sale four nonprotein businesses part strategic focus protein brands businesses part prepared foods segment included sara lee® frozen bakery kettle van’s® tnt crust produced items frozen desserts waffles snack bars soups sauces sides pizza crusts sales included chef pierre® bistro collection® kettle collection™ van’s® brands license use sara lee® brand various channels well tarboro north carolina fort worth texas traverse city michigan green bay wisconsin prepared foods facilities description transactions refer part ii item 8 notes consolidated financial statements note 3 acquisitions dispositions following table summary segment sales operating income loss measure segment income loss 2018 vs 2017 • sales volume sales volume increased due improved availability cattle supply stronger demand beef products increased exports • average sales price average sales price increased demand beef products strong exports outpaced increase live cattle supplies • operating income operating income increased continued maximize revenues relative live fed cattle costs partially offset increased labor freight costs onetime cash bonus frontline employees 27 million 2017 vs 2016 • sales volume sales volume increased due improved availability cattle supply stronger domestic demand beef products increased exports • average sales price average sales price increased demand beef products strong exports outpaced increase live cattle supplies • operating income operating income increased due favorable market conditions maximized revenues relative decline live fed cattle costs partially offset higher operating costs 2018 vs 2017 • sales volume sales volume decreased result balancing supply customer demand period margin compression • average sales price average sales price decrease associated lower livestock costs • operating income operating income decreased prior year record results due periods compressed pork margins caused excess domestic availability pork higher labor freight costs onetime cash bonus frontline employees 12 million 2017 vs 2016 • sales volume sales volume increased due strong demand pork products increased exports • average sales price average sales price increased demand pork products strong exports outpaced increase live hog supplies • operating income operating income increased maximized revenues relative live hog markets partially attributable stronger export markets operational mix performance partially offset higher operating costs 2018 vs 2017 • sales volume sales volume increased primarily due incremental volume business acquisitions • average sales price average sales price increased due sales mix changes price increases associated cost inflation • operating income operating income decreased due increased labor freight growout expenses addition 103 million higher feed ingredient costs net realized marktomarket derivative losses onetime cash bonus frontline employees 51 million 2017 vs 2016 • sales volume sales volume due better demand chicken products along incremental volume advancepierre acquisition • average sales price average sales price increased due sales mix changes • operating income operating income fiscal 2017 prior year record results due higher operating costs included increased compensation benefit integration expense 41 million 17 million incremental net costs attributable two plant fires addition restructuring related charges 56 million partially offset lower feed ingredient costs approximately 80 million 2018 vs 2017 • sales volume sales volume increased primarily due incremental volume business acquisitions net business divestitures excluding impact business divestitures sales volumes fiscal 2018 increased 98 • average sales price average sales price increased due product mix positively impacted business acquisitions divestitures • operating income operating income increased due improved mix net incremental results business acquisitions net divestitures partially offset higher input freight costs onetime cash bonus frontline employees 19 million additionally operating income impacted fiscal 2018 68 million impairments net realized gains related divestitures nonprotein businesses fiscal 2017 operating income impacted 34 million advancepierre purchase accounting acquisition related costs 97 million impairments related san diego prepared foods operation expected sale nonprotein business 30 million compensation benefits integration expense 82 million restructuring related charges 2017 vs 2016 • sales volume sales volume increased due improved demand retail products incremental volumes advancepierre acquisition partially offset declines foodservice • average sales price average sales price increased due better product mix positively impacted acquisition advancepierre well higher input costs 50 million • operating income operating income decreased due impairments 52 million related san diego operation 45 million related expected sale nonprotein business 30 million compensation benefit integration expense 34 million related advancepierre purchase accounting acquisition related costs 82 million restructuring related charges addition higher operating costs facilities additionally prepared foods operating income positively impacted 538 million cost savings 97 million incremental savings fiscal 2017 156 million savings realized fiscal 2016 285 million realized fiscal 2015 positive impact savings operating income partially offset investments innovation new product launches supporting growth brands 2018 vs 2017 • sales decreased due decline sales volume foreign chicken production operations • operating loss operating loss improved primarily lower thirdparty merger integration costs 2017 vs 2016 • sales decreased due decline average sales price foreign produced sales volume • operating loss operating loss increased primarily 43 million advancepierre thirdparty acquisition related costs partially offset better performance china operation reduced merger integration costs outside advancepierre liquidity capital resources cash needs working capital expenditures growth opportunities repurchases senior notes repayment term loans share repurchases expected met current cash hand cash flows provided operating activities shortterm borrowings based current expectations believe liquidity capital resources sufficient operate business however may take advantage opportunities generate additional liquidity refinance existing debt capital market transactions amount nature timing capital market transactions depend operating performance circumstances thencurrent commitments obligations amount nature timing capital requirements limitations imposed current credit arrangements overall market conditions • deferred income taxes fiscal 2018 included 1004 million benefit related remeasurement net deferred income tax liabilities newly enacted tax rates • gain dispositions businesses fiscal 2018 primarily relates sale sara lee® frozen bakery kettle van’s® tnt crust businesses • impairment assets included following • 2018 101 million impairment related expected sale nonprotein business description regarding charge refer part ii item 8 notes consolidated financial statements note 3 acquisitions dispositions • 2017 included 73 million impairment assets associated restructuring related charges 45 million impairment related expected sale nonprotein business impairment 51 million related san diego prepared foods operation description regarding charges refer part ii item 8 notes consolidated financial statements note 3 acquisitions dispositions note 6 restructuring related charges note 10 income charges • cash flows associated changes operating assets liabilities • 2018 decreased primarily due increased inventory decreased accrued employee costs partially offset increased income taxes payable increase inventory primarily due livestock inventories decrease accrued salaries wages primarily due reduced restructuring incentivebased compensation accruals increased taxes payable due timing payments related sale nonprotein businesses fourth quarter • 2017 decreased primarily due higher accounts receivable inventory partially offset increased accounts payable increased accrued salaries wages higher accounts receivable inventory accounts payable balances primarily attributable price increases associated higher input costs timing sales payments increase accrued salaries wages primarily attributable restructuring accrual description regarding accrual refer part ii item 8 notes consolidated financial statements note 6 restructuring related charges • 2016 increased primarily due decreased inventory accounts receivable balances increased accrual incentive compensation partially offset decreased accounts payable increased tax receivable contributions pension plans decreased inventory accounts receivable accounts payable balances largely due decreased raw material costs timing sales payments • incremental tax reform cash flow fiscal 2018 274 million invested frontline team members sustainably grow businesses part recognized expense 109 million onetime cash bonuses frontline employees • additions property plant equipment included spending production growth safety animal wellbeing addition acquiring new equipment infrastructure replacements upgrades maintain competitive standing position us future opportunities • capital spending fiscal 2019 expected approximate 15 billion include spending production growth safety animal wellbeing infrastructure replacements upgrades operational improvements result production labor efficiencies yield improvements sales channel flexibility • purchases marketable securities included funding deferred compensation plans • acquisitions net cash acquired included • 2018 acquired three valuedadded protein businesses fiscal 2018 description regarding acquisitions refer part ii item 8 notes consolidated financial statements note 3 acquisitions dispositions • 2017 acquired advancepierre third quarter fiscal 2017 description acquisition refer part ii item 8 notes consolidated financial statements note 3 acquisitions dispositions • proceeds sale businesses related proceeds received sale nonprotein businesses fiscal 2018 description refer part ii item 8 notes consolidated financial statements note 3 acquisitions dispositions • august 2018 company announced reached definitive agreement buy keystone business marfrig global foods 216 billion cash refer description regarding transaction part ii item 8 notes consolidated financial statements note 3 acquisitions dispositions • payments debt included • 2018 extinguished 750 million outstanding balance term loan tranche b due august 2020 increased fiscal 2018 250 million using cash hand proceeds issuance senior notes due 2023 2048 extinguished 427 million outstanding balance term loan tranche b due august 2019 using cash hand proceeds received sale kettle business extinguished 120 million outstanding balance senior notes due may 2018 using cash hand • 2017 extinguished 1146 million advancepierres debt assumed acquisition fully retired 1800 million term loan tranche due june 2020 issued part advancepierre acquisition financing • 2016 fully retired 638 million outstanding balance 660 senior notes due april 2016 • proceeds issuance longterm debt borrowingspayments revolving credit facility • 2018 proceeds issuance longterm debt included 250 million increase term loan tranche b due august 2020 primarily fund acquisition subsequently proceeds issuance longterm debt included 400 million senior notes due 2023 500 million senior notes due 2048 primarily used extinguish term loan tranche b due august 2020 repay commercial paper obligations • 2017 proceeds issuance longterm debt included 1800 million term loan 2743 million senior unsecured notes original issue discounts 7 million fund advancepierre acquisition addition proceeds issuance longterm debt included 899 million senior unsecured notes original issue discounts 1 million used repay amounts outstanding term loan tranche due june 2020 net payments revolving credit facility 300 million fiscal 2017 used general corporate purposes • 2016 borrowings 1065 million payments 765 million revolving credit facility fiscal 2016 utilized revolving credit facility balance cash position retirement 2016 notes changes working capital additionally total debt foreign subsidiaries 7 million october 1 2016 6 million classified longterm consolidated balance sheets • proceeds issuance repayment shortterm debt form commercial paper • 2018 net repayments 173 million unsecured shortterm promissory notes commercial paper pursuant commercial paper program • 2017 net issuances 778 million unsecured shortterm promissory notes pursuant commercial paper program used net proceeds commercial paper program partial financing advancepierre acquisition general corporate purposes • payments tra obligation acquisition advancepierre • 2017 advancepierre tax receivable agreement tra liability 223 million paid former shareholders result assumption obligation acquisition advancepierre • purchases tyson class common stock included • 350 million 797 million 1868 million shares repurchased pursuant share repurchase program fiscal 2018 2017 2016 respectively • 77 million 63 million 76 million shares repurchased fund certain obligations equity compensation plans fiscal 2018 2017 2016 respectively • dividends paid fiscal 2018 included 33 increase fiscal 2017 quarterly dividend rate • net fiscal 2016 includes tax benefits associated stock option exercises • keystone acquisition financing august 2018 company announced reached definitive agreement buy keystone business marfrig global foods 216 billion cash transaction expected close first quarter early second quarter fiscal 2019 subject customary closing conditions including regulatory approvals however assurance acquisition close time permanent financing keystone acquisition expected include mix senior notes term loans commercial paper cash hand • liquidity includes cash equivalents shortterm investments availability revolving credit facility less outstanding commercial paper balance • september 29 2018 current debt 1911 million intend repay cash generated operating activities liquidity sources • revolving credit facility supports shortterm funding needs also serves backstop commercial paper program maximum borrowing revolving credit facility fiscal 2018 325 million • expect net interest expense approximate 350 million fiscal 2019 • september 29 2018 256 million cash held international accounts foreign subsidiaries generally rely foreign cash source funds support ongoing domestic liquidity needs manage worldwide cash requirements reviewing available funds among foreign subsidiaries cost effectiveness funds accessed intend repatriate excess cash net applicable withholding taxes subject regulatory requirements indefinitely reinvest outside united states remainder cash held foreign subsidiaries expect regulatory restrictions taxes repatriation material effect overall liquidity financial condition results operations foreseeable future • ratio shortterm assets shortterm liabilities current ratio 113 1 155 1 september 29 2018 september 30 2017 respectively decrease fiscal 2018 due increased balance current debt capital resources credit facility cash flows operating activities current cash hand primary sources liquidity funding debt service capital expenditures dividends share repurchases also revolving credit facility committed capacity 175 billion provide additional liquidity working capital needs backstop commercial paper program september 29 2018 outstanding borrowings facility left 175 billion available borrowing deducting amounts backstop commercial paper program revolving credit facility funded syndicate 39 banks commitments ranging 03 million 123 million per bank syndicate includes bank holding companies required adequately capitalized federal bank regulatory agency requirements commercial paper program commercial paper program provides lowcost source borrowing fund general corporate purposes including working capital requirements maximum borrowing capacity commercial paper program 1 billion maturities notes may vary may exceed 397 days date issuance september 29 2018 605 million outstanding program maturities less 25 days capitalization monitor credit ratings capacity longterm financing consider various qualitative quantitative factors monitor ratio net debt ebitda support longterm financing decisions september 29 2018 september 30 2017 ratio net debt ebitda 24x 27x respectively refer part ii item 6 selected financial data explanation reconciliation comparable gaap measures decrease ratio fiscal 2018 due decrease net debt 280 million increase ebitda 373 million credit ratings revolving credit facility standard poors rating services standard poors financial services llc business sp corporate credit rating tyson foods inc bbb moody’s investor service incs moodys senior unsecured longterm debt rating tyson foods inc baa2 fitch ratings wholly owned subsidiary fimlac sa fitch issuer default rating tyson foods inc bbb table outlines fees paid unused portion facility fee rate letter credit fees undrawn letter credit fee borrowing spread depending rating levels tyson foods inc sp moodys fitch event rating levels split applicable fees spread based upon rating level effect two rating agencies three rating agencies different rating levels applicable fees spread based upon rating level rating levels two rating agencies debt covenants revolving credit term loan facilities contain affirmative negative covenants among things may limit restrict ability create liens encumbrances incur debt merge dissolve liquidate consolidate make acquisitions investments dispose transfer assets change nature business engage certain transactions affiliates enter hedging transactions case subject certain qualifications exceptions addition required maintain minimum interest expense coverage maximum debttocapitalization ratios senior notes also contain affirmative negative covenants among things may limit restrict ability create liens engage certain saleleaseback transactions engage certain consolidations mergers sales assets compliance debt covenants september 29 2018 pension plans described part ii item 8 notes consolidated financial statements note 15 pensions postretirement benefits funded status defined benefit pension plans defined amount projected benefit obligation exceeds plan assets funded status plans underfunded position 162 million end fiscal 2018 compared underfunded position 195 million end fiscal 2017 expect contribute approximately 15 million cash pension plans fiscal 2019 compared approximately 29 million fiscal 2018 53 million fiscal 2017 exact amount cash contributions made pension plans year dependent upon number factors including minimum funding requirements result actual funding fiscal 2019 may different estimate offbalance sheet arrangements offbalance sheet arrangements material financial position results operations offbalance sheet arrangements guarantees debt outside third parties including leases grower loans residual value guarantees covering certain operating leases various types equipment see part ii item 8 notes consolidated financial statements note 20 commitments contingencies discussion contractual obligations following table summarizes contractual obligations september 29 2018 1 event default payment acceleration principal payments could occur 2 interest payments include interest outstanding debt payments estimated variable rate variable term debt based effective interest rates september 29 2018 expected payment dates 3 amounts include guarantees debt outside third parties consist leases grower loans substantially collateralized underlying assets well residual value guarantees covering certain operating leases various types equipment amounts included maximum potential amount future payments 4 amounts include minimum lease payments lease agreements 5 amounts include agreements purchase goods services enforceable legally binding specify significant terms including fixed minimum quantities purchased fixed minimum variable price provisions approximate timing transaction purchase obligations amount included items future purchase commitments grains livestock contracts grower fees provide terms meet criteria certain grain purchase commitments fixed quantity provision assumed future obligations commitment based available commodity futures prices published observable active markets september 29 2018 excluded future purchase commitments contracts meet criteria purchase orders included table purchase order authorization purchase cancelable contracts goods services contain termination clauses without penalty also excluded 6 amounts include estimated amounts complete buildings equipment construction september 29 2018 7 longterm liabilities primarily consist deferred compensation deferred income selfinsurance asset retirement obligations unable reliably estimate amount payments beyond fiscal 2018 therefore included total liability table also employee benefit obligations consisting pensions postretirement benefits 233 million excluded table discussion companys pension postretirement plans including funding matters included part ii item 8 notes consolidated financial statements note 15 pensions postretirement benefits addition amounts shown table unrecognized tax benefits 288 million related interest penalties 73 million september 29 2018 recorded liabilities potential maximum contractual obligation associated cash flow assistance programs september 29 2018 based estimated fair values livestock supplier’s net tangible assets date aggregated approximately 300 million analyzing residual credit risks general market conditions allowance programs estimated uncollectible receivables september 29 2018 recently issuedadopted accounting pronouncements refer discussion part ii item 8 notes consolidated financial statements note 1 business summary significant accounting policies note 2 changes accounting principles critical accounting estimates preparation consolidated financial statements requires us make estimates assumptions estimates assumptions affect reported amounts assets liabilities disclosure contingent assets liabilities date consolidated financial statements reported amounts revenues expenses reporting period actual results could differ estimates following summary certain accounting estimates consider critical description judgments uncertainties effect actual results differ assumptions contingent liabilities subject lawsuits investigations claims related wage hourlabor environmental product taxing authorities matters required assess likelihood adverse judgments outcomes matters well potential ranges probable losses determination amount reserves disclosures required contingencies made considerable analysis individual issue accrue contingent liabilities assessment risk loss probable reasonably estimated disclose contingent liabilities risk loss reasonably possible probable contingent liabilities contain uncertainties eventual outcome result future events determination current reserves requires estimates judgments related future changes facts circumstances differing interpretations law assessments amount damages effectiveness strategies factors beyond control made material changes accounting methodology used establish contingent liabilities past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate contingent liabilities however actual results consistent estimates assumptions may exposed gains losses could material marketing advertising promotion costs promote products marketing advertising trade promotions consumer incentives programs include limited coupons discounts rebates volumebased incentives cooperative advertising programs marketing advertising promotion costs charged operations period incurred accrue costs based estimated performance historical utilization redemption rates program cash consideration given customers considered reduction price products thus recorded reduction sales remainder marketing advertising promotion costs recorded selling general administrative expense recognition costs related programs contains uncertainties due judgment required estimating potential performance utilization redemption rates program estimates based many factors including experience similar promotional programs made material changes accounting methodology used establish marketing advertising promotion accruals past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate marketing advertising promotion accruals however actual results consistent estimates assumptions may exposed gains losses could material 10 change marketing advertising promotion accruals september 29 2018 would impact pretax earnings approximately 22 million accrued selfinsurance selfinsured certain losses related health welfare workers’ compensation auto liability general liability claims use independent thirdparty actuary assist determining selfinsurance liability actuary consider number factors estimating selfinsurance liability including claims experience demographic factors severity factors actuarial assumptions periodically review estimates assumptions thirdparty actuary assist us determining adequacy selfinsurance liability policy maintain accrual actuarial estimated median selfinsurance liability contains uncertainties due assumptions required judgment used costs settle obligations including legal healthcare costs could increase decrease causing estimates selfinsurance liability change incident rates including frequency severity could increase decrease causing estimates selfinsurance liability change made material changes accounting methodology used establish selfinsurance liability past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate selfinsurance liability however actual results consistent estimates assumptions may exposed gains losses could material 10 change actuarial estimate september 29 2018 would impact selfinsurance liability approximately 30 million description judgments uncertainties effect actual results differ assumptions defined benefit pension plans sponsor nine defined benefit pension plans provide retirement benefits certain employees currently process liquidating five nine defined benefit pension plans also participate multiemployer plan provides defined benefits certain employees covered collective bargaining agreements plans usually administered board trustees composed management participating companies labor representatives use independent thirdparty actuaries assist us determining pension obligations net periodic benefit cost actuaries review assumptions include estimates present value projected future pension payment plan participants taking consideration likelihood potential future events salary increases demographic experience accumulate amortize effect actuarial gains losses future periods net periodic benefit cost defined benefit pension plans 13 million fiscal 2018 projected benefit obligation 1612 million end fiscal 2018 unrecognized actuarial gain 65 million end fiscal 2018 currently expect net periodic benefit cost fiscal 2019 approximately 11 million excluding pending settlement described note 15 pension postretirement benefits plan assets currently comprised approximately 99 fixed income securities fixed income securities include limited direct bond investments pooled indirect bond investments expect contribute approximately 15 million cash pension plans fiscal 2019 exact amount cash contributions made pension plans year dependent upon number factors including minimum funding requirements defined benefit pension plans contain uncertainties due assumptions required judgments used key assumptions used developing required estimates include factors discount rates expected returns plan assets retirement rates mortality assumptions material impact upon funded status net periodic benefit cost expected liquidation certain plans considered along assumptions discount rates determined using cash flow matching technique whereby rates yield curve developed highquality debt securities applied benefit obligations determine appropriate discount rate determining longterm rate return plan assets first examined historical rates return various asset classes within plans determined longterm projected rateofreturn based expected returns investment management fees paid plan assets factored determination asset return assumptions retirement rates based primarily actual plan experience standard actuarial tables used estimate mortality reasonably likely changes external factors result changes assumptions used measure pension obligations net periodic benefit cost future periods risks participating multiemployer plans different singleemployer plans net pension cost multiemployer plans equal annual contribution determined accordance provisions negotiated labor contracts assets contributed plans segregated otherwise restricted provide benefits employees future cost plans dependent number factors including funded status plans ability participating companies meet ongoing funding obligations made material changes accounting methodology used establish pension obligations net periodic benefit cost past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate pension obligations net periodic benefit cost however actual results consistent estimates assumptions accumulated amortized future periods therefore generally affect net periodic benefit cost future periods 1 increase discount rate september 29 2018 would result decrease projected benefit obligation net periodic benefit cost approximately 167 million 19 million respectively 1 decrease discount rate september 29 2018 would result increase projected benefit obligation net periodic benefit cost approximately 204 million 1 million respectively 1 change return plan assets september 29 2018 would impact net periodic benefit cost approximately 14 million sensitivities reflect impact changing one assumption time remaining assumptions held constant economic factors conditions often affect multiple assumptions simultaneously effect changes assumptions necessarily linear description judgments uncertainties effect actual results differ assumptions income taxes estimate total income tax expense based statutory tax rates tax planning opportunities available us various jurisdictions earn income tax includes estimate withholding taxes earnings foreign subsidiaries expected remitted united states include estimate taxes earnings considered indefinitely invested foreign subsidiary deferred income taxes recognized future tax effects temporary differences financial income tax reporting using tax rates effect years differences expected reverse valuation allowances recorded likely tax benefit realized deferred tax asset record unrecognized tax benefit liabilities known anticipated tax issues based analysis whether extent additional taxes due changes tax laws rates could affect recorded deferred tax assets liabilities future changes projected future earnings could affect recorded valuation allowances future calculations related income taxes contain uncertainties due judgment used calculate tax liabilities application complex tax regulations across tax jurisdictions operate analysis unrecognized tax benefits contains uncertainties based judgment used apply likely recognition measurement thresholds believe reasonable likelihood material change tax related balances valuation allowances however due complexity uncertainties ultimate resolution may result payment materially different current estimate tax liabilities extent prevail matters unrecognized tax benefit liabilities established required pay amounts excess recorded unrecognized tax benefit liabilities effective tax rate given financial statement period could materially affected unfavorable tax settlement would require use cash generally result increase effective tax rate period resolution favorable tax settlement would generally recognized reduction effective tax rate period resolution impairment longlived assets definite life intangibles longlived assets definite life intangibles evaluated impairment whenever events changes circumstances indicate carrying value may recoverable examples include significant adverse change extent manner use asset change physical condition unexpected change financial performance evaluating longlived assets definite life intangibles impairment compare carrying value asset’s estimated undiscounted future cash flows impairment indicated estimated future cash flows less carrying value asset assets held sale compare carrying value disposal group fair value impairment excess carrying value fair value asset recorded impairment charges related longlived assets definite life intangibles 175 million 214 million 45 million fiscal 2018 2017 2016 respectively impairment analysis contains uncertainties due judgment assumptions including useful lives intended use assets observable market valuations forecasted sales operating margins growth rates royalty rates discount rates based budgets business plans economic projections anticipated future cash flows marketplace data reflects risk inherent future cash flows determine fair value made material changes accounting methodology used evaluate impairment longlived assets definite life intangibles last three fiscal years believe reasonable likelihood material change estimates assumptions used calculate impairments useful lives longlived assets definite life intangibles however actual results consistent estimates assumptions used calculate estimated future cash flows may exposed impairment losses could material periodically conduct projects strategically evaluate optimization items network capacity manufacturing efficiencies business technology additionally continue evaluate international operations strategies significant change strategies outlook manner plan use assets may exposed future impairments description judgments uncertainties effect actual results differ assumptions impairment goodwill indefinite life intangible assets goodwill evaluated impairment first performing qualitative assessment determine whether quantitative goodwill test necessary determined based qualitative factors fair value reporting unit may likely less carrying amount significant changes macroeconomic factors related reporting unit occurred could materially impact fair value quantitative goodwill impairment test would required quantitative test compares fair value reporting unit carrying amount additionally elect forgo qualitative assessment perform quantitative test upon performing quantitative test carrying value reporting unit exceeds fair value impairment loss recognized amount equal excess exceed carrying amount goodwill indefinite life intangible assets qualitative assessment also performed determine whether existence events circumstances indicates likely intangible asset impaired similar goodwill also elect forgo qualitative test indefinite life intangible assets perform quantitative test upon performing quantitative test carrying value intangible asset exceeds fair value impairment loss recognized amount equal excess elected forgo qualitative assessment indefinite life intangible assets fiscal 2018 impairment test elected make first day fourth quarter annual impairment assessment date goodwill indefinite life intangible assets however could required evaluate recoverability goodwill indefinite life intangible assets prior required annual assessment among things experience disruptions business unexpected significant declines operating results divestiture significant component business sustained decline market capitalization estimate fair value reporting units considering use various valuation techniques primary technique income approach discounted cash flow analysis uses significant unobservable inputs level 3 inputs defined fair value hierarchy requires us make various judgmental assumptions sales operating margins growth rates discount rates include assumptions sales operating margins growth rates consider budgets business plans economic projections believed reflect market participant views would exist exit transaction assumptions also made varying perpetual growth rates periods beyond longterm business plan period generally utilize operating margin assumptions based future expectations operating margins historically realized reporting units industries fair value indefinite life intangible assets calculated principally using relieffromroyalty multiperiod excess earnings valuation approaches uses significant unobservable inputs level 3 inputs defined fair value hierarchy believed reflect market participant views would exist exit transaction valuation approaches required make estimates assumptions sales operating margins growth rates royalty rates discount rates based budgets business plans economic projections anticipated future cash flows marketplace data impairment analysis contains uncertainties due uncontrollable events could positively negatively impact anticipated future economic operating conditions made material changes accounting methodology used evaluate impairment goodwill intangible assets last three years fiscal 2018 2017 2016 material reporting units underwent quantitative test passed goodwill impairment analysis inherent estimates assumptions used determining fair value reporting units indefinite life intangible assets outside control management including interest rates cost capital tax rates market ebitda comparables credit ratings believe made reasonable estimates assumptions calculate fair value reporting units indefinite life intangibles possible material change could occur actual results consistent estimates assumptions used calculate fair value could result additional material impairments goodwill material reporting units estimated fair value exceeded carrying value 20 date recent estimated fair value determination consequently currently consider material reporting units significant risk impairment discount rate used annual goodwill impairment test increased 69 fiscal 2018 67 fiscal 2017 discount rates continue low compared historical levels 40 increase discount rate would caused carrying value one reporting units 6141 million goodwill september 29 2018 least headroom fiscal 2018 test exceed discounted cash flows fair value fiscal 2018 2017 2016 indefinite life intangible assets impairment analysis result impairment charge indefinite life intangible assets’ estimated fair value exceeded carrying value 20 date recent estimated fair value determination consequently currently consider material indefinite life intangible assets significant risk impairment discount rate used annual indefinite life intangible assets impairment test 82 fiscal 2018 20 increase discount rate would caused carrying value one intangible asset carrying value 301 million exceed fair value item 7aitem 7 management’s discussion analysis financial condition results operations description company one world’s largest food companies recognized leader protein founded 1935 john w tyson grown three generations family leadership company broad portfolio products brands including tyson® jimmy dean® hillshire farm® ball park® wright® aidells® ibp® state fair® key factors influencing business customer demand products ability maintain grow relationships customers introduce new innovative products marketplace accessibility international markets market prices products cost availability live cattle hogs raw materials feed ingredients operating efficiencies facilities operate four reportable segments beef pork chicken prepared foods internationalother primarily includes foreign operations australia china south korea malaysia mexico netherlands thailand united kingdom thirdparty merger integration costs corporate overhead related tyson new ventures llc description business refer part item 1 business overview • fiscal year accounting cycle resulted 52week year fiscal 2019 2018 2017 • general sales grew 6 fiscal 2019 fiscal 2018 primarily due acquisitions increased average sales prices beef prepared foods segments fiscal 2019 operating income decreased compared fiscal 2018 record beef segment results offset decline operating income chicken pork segments fiscal 2019 results impacted 41 million impairment associated planned divestiture business 41 million restructuring related charges 37 million related keystone foods purchase accounting acquisition related costs 31 million costs associated fire one beef production facilities fiscal 2018 results impacted 109 million onetime cash bonus frontline employees continued make investments talent 68 million impairment net realized gains associated divestitures nonprotein businesses 59 million restructuring related charges • market environment according united states department agriculture usda domestic protein production beef pork chicken turkey increased approximately 2 fiscal 2019 compared fiscal 2018 currently experiencing impacts domestic export prices across segments resulting uncertainty trade policies increased tariffs additionally segments experienced increased operating labor costs fiscal 2019 pursue recovery increased costs pricing beef segment experienced strong demand offset increased costs associated fire one beef production facilities pork segment experienced increased livestock costs time excess domestic availability pork products due export constraints made market conditions challenging chicken segment also faced challenging pricing conditions associated increased domestic availability supply prepared foods segment continued strong performance due demand despite increased raw material costs reduced volumes divestiture certain nonprotein businesses fiscal 2018 • margins total operating margin 67 fiscal 2019 operating margins segment follows • beef 70 • pork 53 • chicken 47 • prepared foods 100 • liquidity generated approximately 25 billion operating cash flows fiscal 2019 september 28 2019 12 billion liquidity included 484 million cash equivalents availability revolving credit facility deducting amounts outstanding commercial paper program • strategy sustainably feed world fastest growing protein brands intend achieve strategy grow business differentiated capabilities deliver ongoing financial fitness continuous improvement sustain company world future generations • fiscal 2019 acquired two businesses total approximately 25 billion net cash acquired businesses included thai european operations consist vertically integrated chicken furtherprocessing operations keystone foods major supplier growing global foodservice industry acquired furtherance growth strategy expansion valueadded protein capabilities domestic global markets description refer part ii item 8 notes consolidated financial statements note 3 acquisitions dispositions • fiscal 2018 acquired three operations total approximately 15 billion net cash acquired operations consisted american proteins inc poultry rendering blending operation tecumseh poultry llc vertically integrated valuedadded business original philly holdings inc valueadded protein business acquired part growth sustainability initiatives acquisition strategy new brands new capabilities scale synergy new geographies markets description refer part ii item 8 notes consolidated financial statements note 3 acquisitions dispositions • fiscal 2018 sold four nonprotein operations net proceeds 805 million part strategic focus protein brands operations part prepared foods segment included sara lee® frozen bakery van’s® kettle tnt crust description refer part ii item 8 notes consolidated financial statements note 3 acquisitions dispositions • fourth quarter fiscal 2017 board directors approved multiyear restructuring program “financial fitness program” expected contribute company’s overall strategy financial fitness increased operational effectiveness overhead reduction combination synergies integration business acquisitions additional elimination nonvalued added costs program focused supply chain procurement overhead improvements net savings expected realized prepared foods chicken segments liability exists program september 28 2019 description refer part ii item 8 notes consolidated financial statements note 6 restructuring related charges 2019 included following items • 37 million pretax 008 per diluted share keystone foods purchase accounting acquisition related costs included 11 million purchase accounting adjustment amortization fair value stepup inventory 26 million acquisition related costs • 41 million pretax 008 per diluted share restructuring related charges • 55 million pretax 011 per diluted share gain sale investment • 105 million post tax 029 per diluted share recognition previously unrecognized tax benefit • 31 million pretax 006 per diluted share beef production facility fire costs • 41 million pretax 009 per diluted share impairment associated planned divestiture business • 15 million pretax 003 per diluted share due pension plan termination charge 2018 included following items • 1003 million post tax 271 per diluted share tax benefit remeasurement net deferred tax liabilities lower enacted tax rates • 109 million pretax 022 per diluted share related onetime cash bonus frontline employees • 68 million pretax 034 per diluted share impairments net realized gains associated divestitures nonprotein businesses • 59 million pretax 012 per diluted share restructuring related charges summary results 2019 vs 2018 • sales volume sales positively impacted increase sales volume accounted increase 3539 million primarily driven incremental volumes business acquisitions impacted chicken segment internationalother partially offset business divestitures fiscal 2018 prepared foods segment • average sales price sales negatively impacted lower average sales prices accounted decrease 1186 million chicken segment decrease average sales price result decreased pricing associated product mix changes fiscal 2018 acquisitions partially offset increase average sales price beef prepared foods segments attributable strong demand sales beef segment favorable product mix higher raw material costs prepared foods segment • amounts include net increase 2209 million related impact results acquisitions divestitures 2018 vs 2017 • sales volume sales positively impacted increase sales volume accounted increase 1041 million beef chicken prepared foods segments increase sales volume driven strong demand beef products incremental volumes business acquisitions chicken prepared foods segments net business divestitures prepared foods segment • average sales price sales positively impacted higher average sales prices accounted increase 751 million segments increase average sales price pork segment beef segment experienced strong demand chicken prepared foods segments positively impacted improved mix business acquisitions net business divestitures prepared foods segment • amounts included incremental impact 1060 million fiscal 2018 related inclusion advancepierre results post acquisition first anniversary acquisition june 7 2018 2019 vs 2018 • cost sales increased 2427 million included net increase 2120 million primarily related impact results acquisitions divestitures • remaining 307 million increase higher input cost per pound increased cost sales 445 million offset lower sales volume decreased cost sales 138 million • 445 million impact higher input cost per pound impacted • increase live cattle costs approximately 110 million beef segment • increase live hog costs approximately 100 million pork segment • increase raw material input costs approximately 60 million prepared foods segment • increase freight costs approximately 20 million • increase due 31 million incremental costs associated fire one beef production facilities • decrease due onetime cash bonus front line employees 108 million fiscal 2018 • decrease due impairment charges 101 million associated divestiture nonprotein business fiscal 2018 partially offset 41 million impairment related planned divestiture business fiscal 2019 33 million gain related sale nonprotein business fiscal 2018 • decrease due net derivative gains 26 million fiscal 2019 compared net derivative losses 33 million fiscal 2018 due risk management activities amounts exclude offsetting impacts related physical purchase transactions included change live cattle hog costs raw material feed ingredient costs described herein • remaining net change across segments primarily driven increased operating costs impacts average input cost per pound mix changes • 138 million impact lower sales volume excluding impact acquisitions divestitures driven decrease sales volume chicken segment 2018 vs 2017 • cost sales increased 1758 million included net increase 813 million primarily related impact results acquisitions divestitures • remaining 945 million increase higher input cost per pound increased cost sales 948 million lower sales volume decreased cost sales 3 million • 948 million impact higher input cost per pound primarily driven • increase freight approximately 270 million incurred across segments • increase onetime cash bonus frontline employees 108 million • increase due impairment charges 101 million associated divestiture nonprotein business fiscal 2018 partially offset 33 million realized gains related sale nonprotein businesses fiscal 2018 impairment charges 44 million related san diego prepared foods operation fiscal 2017 • increase approximately 52 million chicken segment related net increases feed ingredient costs growout expenses outside meat purchases • decrease live cattle costs approximately 25 million beef segment • decrease live hog costs approximately 90 million pork segment • decrease due net realized derivative losses 30 million fiscal 2018 compared net realized derivative loss 79 million fiscal 2017 due risk management activities amounts exclude offsetting impacts related physical purchase transactions included change live cattle hog costs raw material feed costs described additionally cost sales decreased due net unrealized losses 3 million fiscal 2018 compared net unrealized losses 40 million fiscal 2017 primarily due beef segment commodity risk management activities • remaining net change across segments primarily driven increased operating costs impacts average input cost per pound mix changes 2019 vs 2018 • increase 131 million selling general administrative primarily driven • increase 87 million related keystone foods acquisition • increase 26 million employee costs primarily incentivebased compensation • increase 18 million technology related costs • increase 16 million marketing advertising promotion expenses • decrease 18 million restructuring related charges 2018 vs 2017 • decrease 77 million selling general administrative primarily driven • decrease 92 million employee costs primarily stockbased incentivebased compensation also included reduction 24 million compensation benefit integration expense incurred fiscal 2017 recur fiscal 2018 • decrease 56 million restructuring related charges • decrease 49 million advancepierre acquisition related fees incurred part acquisition fiscal 2017 recur fiscal 2018 • decrease 18 million commission brokerage fees • decrease 14 million nonrestructuring severance related expenses • decrease 10 million marketing advertising promotion expense • increase 153 million related advancepierre acquisition first anniversary acquisition june 7 2018 included 91 million incremental amortization 62 million inclusion advancepierre results postacquisition • increase 15 million technology related costs • remainder net change primarily related reduction professional fees 2019 2018 interest income increased slightly primarily due higher interest rates 2019 2018 • cash interest expense primarily included interest expense related senior notes term loans commercial paper addition commitmentletter credit fees incurred revolving credit facility increase cash interest expense fiscal 2019 primarily due debt issued connection business acquisitions higher interest rates • noncash interest expense primarily included interest capitalized partially offset amortization debt issuance costs discountspremiums note issuances 2019 included 55 million pretax gain sale investment 23 million insurance proceeds income 20 million equity earnings joint ventures partially offset 48 million net periodic pension postretirement benefit costs pension plan settlements 2018 included 21 million equity earnings joint ventures 11 million insurance proceeds also includes 23 million net periodic pension postretirement benefit credit excluding service cost component retrospectively recognized accordance recently adopted accounting guidance effective income tax rate 163 fiscal 2019 compared 103 fiscal 2018 effective tax rates reflect impacts tax cuts jobs act tax act signed law december 22 2017 impacts include statutory federal tax rate 21 fiscal 2019 245 fiscal 2018 impacts also include 379 benefit fiscal 2018 related remeasurement deferred taxes existing date enactment favorable timing differences deductible fiscal 2018 245 blended tax rate reversing future years 21 effective tax rate fiscal 2019 includes 66 benefit due changes tax reserves primarily expirations federal state foreign statutes limitations nondeductible impairment sale certain assets nonprotein businesses increased fiscal 2018 rate 31 fiscal 2018 effective tax rate also includes 17 benefit related domestic production activity deduction repealed tax act beginning fiscal 2019 segment results operate four reportable segments beef pork chicken prepared foods internationalother primarily includes foreign operations australia china south korea malaysia mexico netherlands thailand united kingdom thirdparty merger integration costs corporate overhead related tyson new ventures llc additional information regarding geographic areas foreign operations set forth part ii item 8 notes consolidated financial statements note 17 segment reporting following table summary segment sales operating income loss measure segment income loss 2019 vs 2018 • sales volume sales volume decreased due reduction live cattle processing capacity temporary closure production facility result fire • average sales price average sales price increased demand beef products remained strong • operating income operating income increased continued maximize revenues relative live fed cattle costs partially offset increased operating costs 31 million net incremental costs production facility fire 2018 vs 2017 • sales volume sales volume increased due improved availability cattle supply stronger demand beef products increased exports • average sales price average sales price increased demand beef products strong exports outpaced increase live cattle supplies • operating income operating income increased continued maximize revenues relative live fed cattle costs partially offset increased labor freight costs onetime cash bonus frontline employees 27 million 2019 vs 2018 • sales volume sales volume increased due increased domestic availability live hogs strong demand pork products • average sales price average sales price increased associated higher livestock costs • operating income operating income decreased due periods compressed pork margins caused primarily combination increased livestock supplies excess domestic availability pork export constraints drove livestock costs faster sales prices 2018 vs 2017 • sales volume sales volume decreased result balancing supply customer demand period margin compression • average sales price average sales price decrease associated lower livestock costs • operating income operating income decreased prior year record results due periods compressed pork margins caused excess domestic availability pork higher labor freight costs onetime cash bonus frontline employees 12 million 2019 vs 2018 • sales volume sales volume increased primarily due incremental volume business acquisitions • average sales price average sales price decreased due market conditions sales mix primarily associated acquisition poultry rendering blending business fourth quarter fiscal 2018 • operating income operating income decreased due increased operating costs challenging pricing conditions additionally operating income impacted fiscal 2019 approximately 40 million net feed ingredient costs realized marktomarket derivative losses 2018 vs 2017 • sales volume sales volume increased primarily due incremental volume business acquisitions • average sales price average sales price increased due sales mix changes price increases associated cost inflation • operating income operating income decreased due increased labor freight growout expenses addition 103 million higher feed ingredient costs net realized marktomarket derivative losses onetime cash bonus frontline employees 51 million 2019 vs 2018 • sales volume sales volume decreased primarily business divestitures • average sales price average sales price increased due product mix positively impacted business divestitures well pricing increases ongoing business pass raw material costs • operating income operating income relatively flat fiscal 2019 compared fiscal 2018 strong demand products improved product mix offset increased raw material operating costs additionally operating income fiscal 2019 impacted 41 million impairment planned divestiture business operating income fiscal 2018 impacted 68 million impairment net realized gains associated divestiture nonprotein businesses 2018 vs 2017 • sales volume sales volume increased primarily due incremental volume business acquisitions net business divestitures excluding impact business divestitures sales volumes fiscal 2018 increased 98 • average sales price average sales price increased due product mix positively impacted business acquisitions divestitures • operating income operating income increased due improved mix net incremental results business acquisitions net divestitures partially offset higher input freight costs onetime cash bonus frontline employees 19 million additionally operating income impacted fiscal 2018 68 million impairments net realized gains related divestitures nonprotein businesses fiscal 2017 operating income impacted 34 million advancepierre purchase accounting acquisition related costs 97 million impairments related san diego prepared foods operation expected sale nonprotein business 30 million compensation benefits integration expense 82 million restructuring related charges 2019 vs 2018 • sales increased primarily incremental sales acquisitions keystone foods thai european operations • operating loss operating loss decreased primarily better performance china operations inclusion results keystone foods acquisition partially offset increased thirdparty merger integration costs associated keystone foods acquisition 2018 vs 2017 • sales decreased due decline sales volume foreign chicken production operations • operating loss operating loss improved primarily lower thirdparty merger integration costs liquidity capital resources cash needs working capital expenditures growth opportunities repurchases senior notes share repurchases expected met current cash hand cash flows provided operating activities shortterm borrowings based current expectations believe liquidity capital resources sufficient operate business however may take advantage opportunities generate additional liquidity refinance existing debt capital market transactions amount nature timing capital market transactions depend operating performance circumstances thencurrent commitments obligations amount nature timing capital requirements limitations imposed current credit arrangements overall market conditions • deferred income taxes fiscal 2018 included 1004 million benefit related remeasurement net deferred income tax liabilities newly enacted tax rates • gain dispositions businesses fiscal 2018 primarily related sale sara lee® frozen bakery kettle van’s® tnt crust businesses • impairment assets included following • 2019 included 41 million impairment related planned sale business description regarding charge refer part ii item 8 notes consolidated financial statements note 3 acquisitions dispositions • 2018 included 101 million impairment related expected sale nonprotein business description regarding charge refer part ii item 8 notes consolidated financial statements note 3 acquisitions dispositions • cash flows associated changes operating assets liabilities • 2019 decreased primarily due increased accounts receivable inventory decreased income taxes payable increase accounts receivable primarily due timing sales payments increase inventory primarily due increased volumes costs prepared foods segment decreased income taxes payable primarily due reduced taxable income change federal tax rate timing payments related sale nonprotein businesses fiscal 2018 • 2018 decreased primarily due increased inventory decreased accrued employee costs partially offset increased income taxes payable increase inventory primarily due livestock inventories decrease accrued salaries wages primarily due reduced restructuring incentivebased compensation accruals increased taxes payable due timing payments related sale nonprotein businesses fourth quarter • additions property plant equipment included spending production growth safety animal wellbeing addition acquiring new equipment infrastructure replacements upgrades maintain competitive standing position us future opportunities • capital spending fiscal 2020 expected approximate 13 billion include spending production growth safety animal wellbeing infrastructure replacements upgrades operational improvements expected result production labor efficiencies yield improvements sales channel flexibility • purchases marketable securities included funding deferred compensation plans • acquisitions net cash acquired included • 2019 acquired two valuedadded protein businesses fiscal 2019 description regarding acquisitions refer part ii item 8 notes consolidated financial statements note 3 acquisitions dispositions • 2018 acquired three valuedadded protein businesses fiscal 2018 description regarding acquisitions refer part ii item 8 notes consolidated financial statements note 3 acquisitions dispositions • proceeds sale businesses related proceeds received sale chicken processing facility fiscal 2019 proceeds received sale nonprotein businesses fiscal 2018 description refer part ii item 8 notes consolidated financial statements note 3 acquisitions dispositions • net fiscal 2019 primarily related net proceeds sale investment • proceeds issuance debt borrowingspayments revolving credit facility • 2019 proceeds issuance debt included 1800 million proceeds issuance 364day term loan initial financing keystone foods acquisition subsequent issuance 2800 million senior unsecured notes primarily used extinguish 364day term loan repay commercial paper obligations used fund keystone foods acquisition well fund portion purchase price acquisition thai european operations • 2018 proceeds issuance longterm debt included 250 million increase term loan tranche b due august 2020 primarily fund acquisition subsequently proceeds issuance longterm debt included 400 million senior notes due 2023 500 million senior notes due 2048 primarily used extinguish term loan tranche b due august 2020 repay commercial paper obligations • payments debt included • 2019 extinguished 1800 million outstanding balance 364day term loan 300 million outstanding balance may 2019 notes 1000 million outstanding balance august 2019 notes using proceeds received issuance debt cash hand liquidity sources • 2018 extinguished 750 million outstanding balance term loan tranche b due august 2020 increased fiscal 2018 250 million using cash hand proceeds issuance senior notes due 2023 2048 extinguished 427 million outstanding balance term loan tranche b due august 2019 using cash hand proceeds received sale kettle business extinguished 120 million outstanding balance senior notes due may 2018 using cash hand • proceeds issuance repayment shortterm debt form commercial paper • 2019 net issuances 395 million unsecured shortterm promissory notes commercial paper pursuant commercial paper program • 2018 net repayments 173 million unsecured shortterm promissory notes pursuant commercial paper program • purchases tyson class common stock included • 150 million 350 million shares repurchased pursuant share repurchase program fiscal 2019 2018 respectively • 102 million 77 million shares repurchased fund certain obligations equity compensation plans fiscal 2019 2018 respectively • dividends paid fiscal 2019 included 25 increase fiscal 2018 quarterly dividend rate • liquidity includes cash equivalents shortterm investments availability revolving credit facility less outstanding commercial paper balance • september 28 2019 current debt 2102 million intend repay cash generated operating activities existing new liquidity sources • revolving credit facility supports shortterm funding needs also serves backstop commercial paper program maximum borrowing revolving credit facility fiscal 2019 330 million • expect net interest expense approximate 460 million fiscal 2020 • ratio shortterm assets shortterm liabilities current ratio 130 1 113 1 september 28 2019 september 29 2018 respectively increase fiscal 2019 primarily due increased inventory accounts receivable balances • september 28 2019 467 million cash held international accounts foreign subsidiaries generally rely foreign cash source funds support ongoing domestic liquidity needs manage worldwide cash requirements reviewing available funds among foreign subsidiaries cost effectiveness funds accessed intend repatriate excess cash net applicable withholding taxes subject regulatory requirements indefinitely reinvest outside united states remainder cash held foreign subsidiaries expect regulatory restrictions taxes repatriation material effect overall liquidity financial condition results operations foreseeable future capital resources credit facility cash flows operating activities current cash hand primary sources liquidity funding debt service capital expenditures dividends share repurchases also revolving credit facility committed capacity 175 billion provide additional liquidity working capital needs backstop commercial paper program september 28 2019 70 million borrowings outstanding letters credit issued facility left 168 billion available borrowing deducting amounts backstop commercial paper program revolving credit facility funded syndicate 39 banks commitments ranging 03 million 123 million per bank syndicate includes bank holding companies required adequately capitalized federal bank regulatory agency requirements commercial paper program commercial paper program provides lowcost source borrowing fund general corporate purposes including working capital requirements maximum borrowing capacity commercial paper program 1 billion maturities notes may vary may exceed 397 days date issuance september 28 2019 1 billion outstanding program maturities less 25 days capitalization monitor credit ratings capacity longterm financing consider various qualitative quantitative factors monitor ratio net debt ebitda support longterm financing decisions september 28 2019 september 29 2018 ratio net debt ebitda 29x 24x respectively refer part ii item 6 selected financial data explanation reconciliation comparable gaap measures increase ratio fiscal 2019 due increase net debt 1845 million credit ratings revolving credit facility standard poors rating services standard poors financial services llc business sp corporate credit rating bbb moody’s investor service incs moodys applicable rating baa2 fitch ratings wholly owned subsidiary fimlac sa fitch applicable rating bbb table outlines fees paid unused portion facility fee rate letter credit fees borrowings undrawn letter credit fee borrowing spread corresponds applicable ratings levels sp moodys fitch event rating levels split applicable fees spread based upon rating level effect two rating agencies three rating agencies different rating levels applicable fees spread based upon rating level rating levels two rating agencies debt covenants revolving credit facility contains affirmative negative covenants among things may limit restrict ability create liens encumbrances incur debt merge dissolve liquidate consolidate make acquisitions investments dispose transfer assets change nature business engage certain transactions affiliates enter hedging transactions case subject certain qualifications exceptions addition required maintain minimum interest expense coverage maximum debttocapitalization ratios senior notes also contain affirmative negative covenants among things may limit restrict ability create liens engage certain saleleaseback transactions engage certain consolidations mergers sales assets compliance debt covenants september 28 2019 pension plans described part ii item 8 notes consolidated financial statements note 15 pensions postretirement benefits funded status defined benefit pension plans defined amount projected benefit obligation exceeds plan assets funded status plans underfunded position 240 million end fiscal 2019 compared underfunded position 162 million end fiscal 2018 expect contribute approximately 33 million cash pension plans fiscal 2020 compared approximately 13 million fiscal 2019 exact amount cash contributions made pension plans year dependent upon number factors including minimum funding requirements result actual funding fiscal 2020 may different estimate offbalance sheet arrangements offbalance sheet arrangements material financial position results operations offbalance sheet arrangements guarantees obligations related certain outside third parties including leases debt livestock grower loans residual value guarantees covering certain operating leases various types equipment see part ii item 8 notes consolidated financial statements note 20 commitments contingencies discussion contractual obligations following table summarizes contractual obligations september 28 2019 1 event default payment acceleration principal payments could occur 2 interest payments include interest outstanding debt payments estimated variable rate variable term debt based effective interest rates september 28 2019 expected payment dates 3 amounts include guarantees obligations related certain outside third parties consist leases debt livestock grower loans substantially collateralized underlying assets well residual value guarantees covering certain operating leases various types equipment amounts included maximum potential amount future payments 4 amounts include minimum lease payments lease agreements 5 agreements livestock growers fixed variable payment structures generally cancelable based flocks placed livestock growers amounts include fixed estimable noncancelable commitments related agreements 6 amounts include agreements purchase goods services enforceable legally binding specify significant terms including fixed minimum quantities purchased fixed minimum variable price provisions approximate timing transaction purchase obligations amount included items future purchase commitments grains livestock purchase contracts provide terms meet criteria certain grain purchase commitments fixed quantity provision assumed future obligations commitment based available commodity futures prices published observable active markets september 28 2019 excluded future purchase commitments contracts meet criteria purchase orders included table purchase order authorization purchase cancelable contracts goods services contain termination clauses without penalty also excluded 7 amounts include estimated amounts complete buildings equipment construction september 28 2019 8 longterm liabilities primarily consist deferred compensation deferred income selfinsurance asset retirement obligations unable reliably estimate amount payments beyond fiscal 2019 therefore included total liability table also employee benefit obligations consisting pensions postretirement benefits 332 million excluded table discussion companys pension postretirement plans including funding matters included part ii item 8 notes consolidated financial statements note 15 pensions postretirement benefits addition amounts shown table unrecognized tax benefits 149 million related interest penalties 46 million september 28 2019 recorded liabilities potential maximum contractual obligation associated cash flow assistance programs september 28 2019 based estimated fair values livestock supplier’s net tangible assets date aggregated approximately 300 million analyzing residual credit risks general market conditions allowance programs estimated uncollectible receivables september 28 2019 recently issuedadopted accounting pronouncements refer discussion part ii item 8 notes consolidated financial statements note 1 business summary significant accounting policies note 2 changes accounting principles critical accounting estimates preparation consolidated financial statements requires us make estimates assumptions estimates assumptions affect reported amounts assets liabilities disclosure contingent assets liabilities date consolidated financial statements reported amounts revenues expenses reporting period actual results could differ estimates following summary certain accounting estimates consider critical description judgments uncertainties effect actual results differ assumptions contingent liabilities subject lawsuits investigations claims related wage hourlabor antitrust environmental product taxing authorities matters required assess likelihood adverse judgments outcomes matters well potential ranges probable losses determination amount reserves disclosures required contingencies made considerable analysis individual issue accrue contingent liabilities assessment risk loss probable reasonably estimated disclose contingent liabilities risk loss reasonably possible probable contingent liabilities contain uncertainties eventual outcome result future events determination current reserves requires estimates judgments related future changes facts circumstances differing interpretations law assessments amount damages effectiveness strategies factors beyond control made material changes accounting methodology used establish contingent liabilities past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate contingent liabilities however actual results consistent estimates assumptions may exposed gains losses could material revenue recognition recognize revenue sale product point time performance obligation satisfied control product transferred customer generally occurs upon shipment delivery customer based terms sale revenue measured transaction price defined amount consideration expect receive exchange providing goods customers transaction price adjusted estimates known expected variable consideration includes consumer incentives trade promotions allowances coupons discounts rebates volumebased incentives cooperative advertising programs variable consideration related programs recorded reduction revenue based amounts expect pay transaction price contains estimates known expected variable consideration base estimates current performance historical utilization projected redemption rates program review update estimates regularly incentives product returns realized impact adjustments recognized period adjustments identified believe reasonable likelihood material change estimates assumptions used recognize revenue however actual results consistent estimates assumptions may exposed gains losses could material adopted fasb’s new guidance revenue recognition fiscal 2019 adoption standard material impact consolidated financial statements made material changes accounting methodology used recognize revenue past three fiscal years accrued selfinsurance selfinsured certain losses related health welfare workers’ compensation auto liability general liability claims use independent thirdparty actuary assist determining selfinsurance liability actuary consider number factors estimating selfinsurance liability including claims experience demographic factors severity factors actuarial assumptions periodically review estimates assumptions thirdparty actuary assist us determining adequacy selfinsurance liability policy maintain accrual actuarial estimated median selfinsurance liability contains uncertainties due assumptions required judgment used costs settle obligations including legal healthcare costs could increase decrease causing estimates selfinsurance liability change incident rates including frequency severity could increase decrease causing estimates selfinsurance liability change made material changes accounting methodology used establish selfinsurance liability past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate selfinsurance liability however actual results consistent estimates assumptions may exposed gains losses could material 10 change actuarial estimate september 28 2019 would significant impact liability description judgments uncertainties effect actual results differ assumptions defined benefit pension plans sponsor nine defined benefit pension plans provide retirement benefits certain employees currently process liquidating three nine defined benefit pension plans also participate multiemployer plans provide defined benefits certain employees covered collective bargaining agreements plans usually administered board trustees composed management participating companies labor representatives use independent thirdparty actuaries assist us determining pension obligations net periodic benefit cost actuaries review assumptions include estimates present value projected future pension payment plan participants taking consideration likelihood potential future events salary increases demographic experience accumulate amortize effect actuarial gains losses future periods net periodic benefit cost defined benefit pension plans 30 million fiscal 2019 projected benefit obligation 1717 million end fiscal 2019 unrecognized actuarial gain 7 million end fiscal 2019 currently expect net periodic benefit cost fiscal 2020 approximately 10 million excluding pending settlement described note 15 pension postretirement benefits plan assets currently comprised approximately 73 fixed income securities fixed income securities include limited direct bond investments pooled indirect bond investments expect contribute approximately 33 million cash pension plans fiscal 2020 exact amount cash contributions made pension plans year dependent upon number factors including minimum funding requirements defined benefit pension plans contain uncertainties due assumptions required judgments used key assumptions used developing required estimates include factors discount rates expected returns plan assets retirement rates mortality assumptions material impact upon funded status net periodic benefit cost expected liquidation certain plans considered along assumptions discount rates determined using cash flow matching technique whereby rates yield curve developed highquality debt securities applied benefit obligations determine appropriate discount rate determining longterm rate return plan assets first examined historical rates return various asset classes within plans determined longterm projected rateofreturn based expected returns investment management fees paid plan assets factored determination asset return assumptions retirement rates based primarily actual plan experience standard actuarial tables used estimate mortality reasonably likely changes external factors result changes assumptions used measure pension obligations net periodic benefit cost future periods risks participating multiemployer plans different singleemployer plans net pension cost multiemployer plans equal annual contribution determined accordance provisions negotiated labor contracts assets contributed plans segregated otherwise restricted provide benefits employees future cost plans dependent number factors including funded status plans ability participating companies meet ongoing funding obligations made material changes accounting methodology used establish pension obligations net periodic benefit cost past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate pension obligations net periodic benefit cost however actual results consistent estimates assumptions accumulated amortized future periods therefore generally affect net periodic benefit cost future periods 1 change discount rate september 28 2019 would significant impact projected benefit obligation net periodic benefit cost 1 change return plan assets september 28 2019 would significant impact net periodic benefit cost sensitivities reflect impact changing one assumption time remaining assumptions held constant economic factors conditions often affect multiple assumptions simultaneously effect changes assumptions necessarily linear description judgments uncertainties effect actual results differ assumptions income taxes estimate total income tax expense based statutory tax rates tax planning opportunities available us various jurisdictions earn income tax includes estimate withholding taxes earnings foreign subsidiaries expected remitted united states include estimate taxes earnings considered indefinitely invested foreign subsidiary deferred income taxes recognized future tax effects temporary differences financial income tax reporting using tax rates effect years differences expected reverse valuation allowances recorded likely tax benefit realized deferred tax asset record unrecognized tax benefit liabilities known anticipated tax issues based analysis whether extent additional taxes due changes tax laws rates could affect recorded deferred tax assets liabilities future changes projected future earnings could affect recorded valuation allowances future calculations related income taxes contain uncertainties due judgment used calculate tax liabilities application complex tax regulations across tax jurisdictions operate analysis unrecognized tax benefits contains uncertainties based judgment used apply likely recognition measurement thresholds believe reasonable likelihood material change tax related balances valuation allowances however due complexity uncertainties ultimate resolution may result payment materially different current estimate tax liabilities extent prevail matters unrecognized tax benefit liabilities established required pay amounts excess recorded unrecognized tax benefit liabilities effective tax rate given financial statement period could materially affected unfavorable tax settlement would require use cash generally result increase effective tax rate period resolution favorable tax settlement would generally recognized reduction effective tax rate period resolution business combinations account acquired businesses using acquisition method accounting requires control business obtained 100 assets acquired liabilities assumed including amounts attributed noncontrolling interests recorded date acquisition respective fair values excess purchase price estimated fair values net assets acquired recorded goodwill use various models determine value assets acquired liabilities assumed net realizable value inventory cost method market approach value property relieffromroyalty multiperiod excess earnings value intangibles discounted cash flow value goodwill significant acquisitions may use independent thirdparty valuation specialists assist us determining fair value assets acquired liabilities assumed significant judgment often required estimating fair value assets acquired liabilities assumed particularly intangible assets make estimates assumptions projected future cash flows including sales operating margins attrition rates growth rates discount rates based historical results business plans expected synergies perceived risk marketplace data considering perspective marketplace participants determining useful life intangible asset also requires judgment different types intangible assets different useful lives certain assets may considered indefinite useful lives management believes expectations assumptions reasonable inherently uncertain unanticipated market macroeconomic events circumstances may occur could affect accuracy validity estimates assumptions could result subsequent impairments description judgments uncertainties effect actual results differ assumptions impairment goodwill indefinite life intangible assets goodwill evaluated impairment first performing qualitative assessment determine whether quantitative goodwill test necessary determined based qualitative factors fair value reporting unit may likely less carrying amount significant changes macroeconomic factors related reporting unit occurred could materially impact fair value quantitative goodwill impairment test would required quantitative test compares fair value reporting unit carrying amount additionally elect forgo qualitative assessment perform quantitative test upon performing quantitative test carrying value reporting unit exceeds fair value impairment loss recognized amount equal excess exceed carrying amount goodwill indefinite life intangible assets qualitative assessment also performed determine whether existence events circumstances indicates likely intangible asset impaired similar goodwill also elect forgo qualitative test indefinite life intangible assets perform quantitative test upon performing quantitative test carrying value intangible asset exceeds fair value impairment loss recognized amount equal excess elected make first day fourth quarter annual impairment assessment date goodwill indefinite life intangible assets however could required evaluate recoverability goodwill indefinite life intangible assets outside required annual assessment among things experience disruptions business unexpected significant declines operating results divestiture significant component business sustained decline market capitalization estimate fair value reporting units considering use various valuation techniques primary technique income approach discounted cash flow analysis uses significant unobservable inputs level 3 inputs defined fair value hierarchy requires us make various judgmental assumptions sales operating margins growth rates discount rates include assumptions sales operating margins growth rates consider budgets business plans economic projections believed reflect market participant views would exist exit transaction assumptions also made varying perpetual growth rates periods beyond longterm business plan period generally utilize operating margin assumptions based future expectations operating margins historically realized reporting units industries fair value indefinite life intangible assets calculated principally using relieffromroyalty multiperiod excess earnings valuation approaches uses significant unobservable inputs level 3 inputs defined fair value hierarchy believed reflect market participant views would exist exit transaction valuation approaches required make estimates assumptions sales operating margins growth rates royalty rates discount rates based budgets business plans economic projections anticipated future cash flows marketplace data impairment analysis contains uncertainties due uncontrollable events could positively negatively impact anticipated future economic operating conditions made material changes accounting methodology used evaluate impairment goodwill intangible assets last three years fiscal 2019 2018 2017 material reporting units passed goodwill impairment analysis inherent estimates assumptions used determining fair value reporting units indefinite life intangible assets outside control management including interest rates cost capital tax rates market ebitda comparables credit ratings believe made reasonable estimates assumptions calculate fair value reporting units indefinite life intangibles possible material change could occur actual results consistent estimates assumptions used calculate fair value could result material impairments goodwill material reporting units estimated fair value exceeded carrying value 20 date recent estimated fair value determination consequently currently consider material reporting units significant risk impairment fiscal 2019 2018 2017 indefinite life intangible assets impairment analyses result impairment charge indefinite life intangible assets’ estimated fair value exceeded carrying value 20 date recent estimated fair value determination consequently currently consider material indefinite life intangible assets significant risk impairment discount rate used annual indefinite life intangible assets impairment test 75 fiscal 2019 20 increase discount rate would caused carrying value intangible assets exceed fair value description judgments uncertainties effect actual results differ assumptions impairment longlived assets definite life intangibles longlived assets definite life intangibles evaluated impairment whenever events changes circumstances indicate carrying value may recoverable examples include significant adverse change extent manner use asset change physical condition unexpected change financial performance evaluating longlived assets definite life intangibles impairment compare carrying value asset’s estimated undiscounted future cash flows impairment indicated estimated future cash flows less carrying value asset assets held sale compare carrying value disposal group fair value impairment excess carrying value fair value asset recorded impairment charges related longlived assets definite life intangibles 94 million 175 million 214 million fiscal 2019 2018 2017 respectively impairment analysis contains uncertainties due judgment assumptions including useful lives intended use assets observable market valuations forecasted sales operating margins growth rates royalty rates discount rates based budgets business plans economic projections anticipated future cash flows marketplace data reflects risk inherent future cash flows determine fair value made material changes accounting methodology used evaluate impairment longlived assets definite life intangibles last three fiscal years believe reasonable likelihood material change estimates assumptions used calculate impairments useful lives longlived assets definite life intangibles however actual results consistent estimates assumptions used calculate estimated future cash flows may exposed impairment losses could material periodically conduct projects strategically evaluate optimization items network capacity manufacturing efficiencies business technology significant change strategies outlook manner plan use assets may exposed future impairments item 7aitem 7 management’s discussion analysis financial condition results operations description company one worlds largest food companies leading brands tyson® jimmy dean® hillshire farm® sara lee® ball park® wright® aidells® state fair® recognized market leader chicken beef pork well prepared foods including bacon breakfast sausage turkey lunchmeat hot dogs pizza crusts toppings tortillas desserts key factors influencing business customer demand products ability maintain grow relationships customers introduce new innovative products marketplace accessibility international markets market prices products cost availability live cattle hogs raw materials feed ingredients operating efficiencies facilities operate four reportable segments chicken beef pork prepared foods following sale mexico brazil operations fiscal 2015 began reporting international operation previously reported international segment includes foreign chicken production operations china india thirdparty merger integration costs periods presented reclassified reflect change chicken beef pork prepared foods results impacted change august 28 2014 acquired consolidated hillshire brands company hillshire brands manufacturer marketer branded convenient foods hillshire brands results operations subsequent acquisition closing included prepared foods segment overview • fiscal year accounting cycle resulted 53week year fiscal 2015 52week year 2014 2013 • general operating income grew 52 fiscal 2015 fiscal 2014 led record earnings chicken prepared foods segments sales increased 10 record 414 billion driven price mix improvements incremental impact hillshire brands positive impact 53 weeks fiscal 2015 continued execute strategy accelerating growth domestic valueadded chicken sales prepared food sales innovating products services customer insights cultivating talent development support tysons growth future • hillshire integration continue maintain focus integration hillshire brands synergy capture execute prepared foods strategy estimate impact hillshire brands synergies along profit improvement plan related legacy prepared foods business positive impact 500 million fiscal 2016 700 million fiscal 2017 majority benefits expected realized prepared foods segment invest portion synergies innovation new product launches strengthening brands fiscal 2015 captured 322 million synergies profit improvement initiatives 285 million impacted prepared foods segment • market environment chicken segment delivered record results fiscal 2015 driven strong demand favorable domestic market conditions partially offset disruptions caused export bans pork segment results remained normalized operating margin range last year due unfavorable market conditions decline exports periods increased domestic availability pork products prepared foods segment delivered record operating income operating margins continued execute profit improvement plan integrate hillshire brands beef segment experienced loss driven lower availability fed cattle supplies higher fed cattle costs export market disruptions reduced demand premium beef products due relative value competing proteins • mexico recorded 161 million pretax gain result sale mexico operation fourth quarter fiscal 2015 gain reflected segment reporting included cost sales consolidated statements income • china impairment following sale mexico brazil chicken production operations continued review strategies outlook remaining international businesses operations include chicken production operations china despite belief potential business chinese operations achieved profitability given ongoing losses generated business recent changes strategy management business depressed economic outlook china assessed chinese operations potential impairment fourth quarter fiscal 2015 result evaluation fourth quarter fiscal 2015 recorded 169 million impairment charge impairment comprised 126 million property plant equipment 23 million goodwill 20 million assets china operation included segment reporting impairment included cost sales consolidated statements income • margins total operating margin 52 fiscal 2015 operating margins segment follows • chicken 120 • beef 04 included 12 million closure impairment charges related ceasing beef operations denison facility • pork 72 • prepared foods 75 included 8 million net insurance proceeds related legacy hillshire brands plant fire 10 million merger integration costs 59 million prepared foods network optimization impairment charges • liquidity fiscal 2015 generated 26 billion operating cash flows repurchased 110 million shares class common stock 455 million share repurchase program fiscal 2015 october 3 2015 19 billion liquidity included availability revolving credit facility 688 million cash equivalents 2015 included following items • 169 million 041 per diluted share related impairment charge china • 59 million 009 per diluted share related prepared foods network optimization impairment charges • 57 million 009 per diluted share related merger integration costs • 12 million 002 per diluted share related closure impairment charges related ceasing beef operations denison facility • 161 million 024 per diluted share related gain sale mexico operation • 39 million 006 per diluted share related additional week fiscal 2015 • 26 million 006 per diluted share related recognition previously unrecognized tax benefits • 21 million 003 per diluted share related gain sale equity securities • 8 million 002 per diluted share insurance proceeds net costs related legacy hillshire brands plant fire 2014 included following items fiscal 2014 per diluted share adjustments utilized weighted average shares outstanding amount 356 million • 197 million 037 per diluted share related hillshire brands acquisition integration costs associated prepared foods improvement plan • 42 million 016 per diluted share related impairment brazil operation mexico undistributed earnings tax • 40 million 007 per diluted share related hillshire brands postclosing results purchase price accounting adjustments costs related legacy hillshire brands plant fire • 27 million 012 per diluted share related hillshire brands acquisition financing incremental interest costs share dilution • 52 million 015 per diluted share related gain previously unrecognized tax benefits 2013 included following item • 19 million 005 per diluted share related recognized currency translation adjustment gain summary results 2015 vs 2014 • sales volume sales positively impacted higher sales volume accounted increase 24 billion chicken segment increase sales volume primarily due extra week fiscal 2015 prepared foods segment increase sales volume primarily due acquisition consolidation hillshire brands final month fiscal 2014 addition extra week fiscal 2015 increase sales volume partially offset decrease beef pork segments along divestitures mexico brazil chicken operations fiscal 2015 • average sales price sales positively impacted higher average sales prices accounted increase 14 billion beef prepared foods segments increase average sales prices partially offset decrease average sales prices chicken pork segments increase average sales price largely due continued tight domestic availability beef products along change mix prepared foods segment result acquisition consolidation hillshire brands final month fiscal 2014 vs 2013 • sales volume sales positively impacted increase sales volume accounted increase 679 million segments exception beef segment increase sales volume prepared foods contributed majority increase due acquisition consolidation hillshire brands final month fiscal 2014 • average sales price sales positively impacted higher average sales price accounted increase approximately 25 billion beef pork prepared foods experienced increased average sales price partially offset decreased pricing chicken increase average sales price largely due continued tight domestic availability protein increased pricing associated rising live raw material costs improved mix majority increase driven beef pork segments 2015 vs 2014 • cost sales increased approximately 26 billion higher input costs per pound increased cost sales approximately 330 million higher sales volume increased cost sales approximately 23 billion • approximate 330 million impact higher input costs primarily driven • increase live cattle cost approximately 11 billion operating costs approximately 90 million beef segment • increase input cost per pound related acquisition hillshire brands august 28 2014 • increase 49 million 12 million related prepared foods network optimization impairment charges denison plant impairment closure costs respectively • decrease live hog costs approximately 500 million pork segment • decrease raw material input costs approximately 290 million prepared foods segment • decreases feed costs approximately 450 million chicken segment • decrease due net unrealized gains 55 million fiscal 2015 compared net unrealized losses 39 million fiscal 2014 beef pork segment commodity risk management activities • 23 billion impact higher sales volume driven increase sales volume chicken prepared foods segments partially offset decreases sales volume beef pork segments prepared foods contributed majority increase due acquisition hillshire brands august 28 2014 addition extra week fiscal 2015 2014 vs 2013 • cost sales increased approximately 29 billion higher input costs per pound increased cost sales 23 billion higher sales volume increased cost sales 610 million • 23 billion impact higher input costs primarily driven • increase live cattle live hog costs approximately 17 billion 550 million respectively • increase raw material input costs prepared foods segment approximately 210 million • increase due net losses 260 million fiscal 2014 compared net gains approximately 5 million fiscal 2013 beef pork segment commodity risk management activities amounts exclude impact related physical purchase transactions mostly offset losses • decrease feed costs 600 million chicken segment • 610 million impact higher sales volume driven increases segments exception beef chicken prepared foods contributed majority increase prepared foods increase mainly attributable acquisition consolidation hillshire brands final month fiscal 2014 2015 vs 2014 • increase 493 million selling general administrative primarily driven • increase 487 million related inclusion hillshire brands fiscal 2015 results one month fiscal 2014 results • increase 69 million related incremental amortization associated acquired hillshire brands intangibles • increase 27 million related employee costs including payroll stockbased compensation • decrease 59 million related advertising sales promotions legacy tyson business primarily attributable discontinuing certain programs present fiscal 2014 • decrease 14 million related merger integration costs employee severance retention costs associated hillshire brands acquisition implementation prepared foods strategy • decrease 17 million primarily related professional fees 2014 vs 2013 • increase 272 million selling general administrative primarily driven • increase 71 million related employee costs including payroll stockbased incentivebased compensation 19 million related employee severance retention costs associated hillshire brands acquisition implementation prepared foods strategy • increase 32 million related advertising sales promotions • increase 82 million related professional fees 52 million related hillshire brands acquisition integration costs • increases 17 million information technology costs 7 million charitable contributions donations 5 million commissions • increase 50 million related hillshire brands selling general administrative postclosing expenses final month fiscal 2014 201520142013 interest income remained relatively flat due continued low interest rates 201520142013 • cash interest expense primarily included interest expense related coupon rates senior notes term loans commitmentletter credit fees incurred revolving credit facilities increase cash interest expense fiscal 2015 2014 primarily due senior notes term loans issued debt assumed connection completed acquisition hillshire brands august 28 2014 • noncash interest expense primarily included amounts related amortization debt issuance costs discountspremiums note issuances offset interest capitalized decrease noncash interest expense fiscal 2015 2014 primarily due reduction noncash interest expense 2013 notes retired early fiscal 2014 2015 included 12 million equity earnings joint ventures 21 million gains sale equity securities 2014 included 60 million costs associated bridge financing facilities hillshire brands acquisition 6 million temporary impairment related availableforsale security partially offset 14 million equity earnings joint ventures net foreign currency exchange gains 2013 included 19 million related recognized currency translation adjustment gain effective tax rate continuing operations impacted number items result difference effective tax rate united states statutory rate 35 table reflects significant items impacting rate indicated 2015 • domestic production activity deduction reduced rate 37 • unrecognized tax benefits activity mostly related expiration statutes limitations reduced rate 18 • state income taxes increased rate 31 • foreign rate differences valuation allowances increased rate 38 2014 • domestic production activity deduction reduced rate 40 • net decrease unrecognized tax benefits mostly related expiration statutes limitations settlements taxing authorities reduced rate 47 • state income taxes increased rate 28 • foreign rate differences valuation allowances increased rate 28 2013 • domestic production activity deduction reduced rate 32 • general business credits reduced rate 13 • state income taxes increased rate 24 segment results operate four reportable segments chicken beef pork prepared foods following sale mexico brazil operations fiscal 2015 began reporting international operation previously reported international segment includes foreign chicken production operations china india addition thirdparty merger integration costs chicken beef pork prepared foods results impacted change periods presented reclassified reflect change additionally results dynamic fuels sold fiscal 2014 also included comparative periods following table summary sales operating income loss measure segment income loss 2015 vs 2014 • sales volume sales volume grew result additional week fiscal 2015 well stronger demand chicken products mix rendered product sales • average sales price average sales price decreased feed ingredient costs declined partially offset mix changes • operating income operating income increased due higher sales volume lower feed ingredient costs 450 million partially offset disruptions caused export bans 2014 vs 2013 • sales volume sales volume grew result stronger demand chicken products mix rendered product sales • average sales price average sales price decreased feed ingredient costs declined partially offset mix changes • operating income operating income increased due higher sales volume lower feed ingredient costs 600 million partially offset decreased average sales price 2015 vs 2014 • sales volume sales volume decreased due reduced live cattle supplies available process partially offset additional week fiscal 2015 • average sales price average sales price increased due lower domestic availability beef products • operating income operating income decreased due unfavorable market conditions associated decrease supply drove fed cattle costs export market disruptions relative value competing proteins increased operating costs additionally fiscal 2015 incurred 12 million denison plant impairment closure costs 81 million losses marktomarket open derivative positions lowerofcostormarket inventory adjustments mostly result large rapid decline live cattle futures september fiscal 2015 2014 vs 2013 • sales volume sales volume decreased due reduction live cattle processed • average sales price average sales price increased due lower domestic availability beef products • operating income operating income increased due improved operational execution maximizing revenues relative rising live cattle markets partially offset increased operating costs • derivative activities operating results included net losses 72 million fiscal 2014 compared net gains 9 million fiscal 2013 commodity risk management activities related futures contracts amounts exclude impact related physical sale purchase transactions mostly offset commodity risk management gains losses 2015 vs 2014 • sales volume sales volume decreased due divestiture heinold hog markets business first quarter fiscal 2015 excluding impact divestiture 54 increase sales volume result additional week fiscal 2015 well better demand pork products • average sales price average sales price decreased due increase live hog supplies drove livestock cost average sales price • operating income reduced compared prior year operating income remained strong maximized revenues relative live hog markets partially attributable operational mix performance 2014 vs 2013 • sales volume sales volume increased due better domestic demand pork products • average sales price average sales price increased due lower total hog supplies resulted higher input costs • operating income operating income increased maximized revenues relative live hog markets partially attributable operational mix performance • derivative activities operating results included net losses 112 million fiscal 2014 compared net losses 15 million fiscal 2013 commodity risk management activities related futures contracts amounts exclude impact related physical sale purchase transactions mostly offset commodity risk management losses 2015 vs 2014 • sales volume sales volume increased due incremental volumes acquisition hillshire brands additional week fiscal 2015 • average sales price average sales price increased primarily due better product mix positively impacted acquisition hillshire brands • operating income operating income improved due increase sales volume average sales price mainly attributed hillshire brands well lower raw material costs approximately 290 million fiscal 2015 related legacy prepared foods business profit improvement initiatives hillshire brands synergies positively impacted prepared foods operating income 285 million fiscal 2015 additionally fourth quarter fiscal 2015 incurred 59 million impairment charges associated optimizing prepared foods network 2014 vs 2013 • sales volume sales volume increased result improved demand prepared foods products incremental volumes result acquisition hillshire brands final month fiscal 2014 • average sales price average sales price increased due price increases associated higher input costs along better product mix positively impacted incrementally acquisition hillshire brands final month fiscal 2014 • operating income operating income decreased result higher raw material input costs approximately 210 million many sales contracts formula based shorterterm nature typically able offset rising input costs pricing however lag time price increases take effect additionally operating income reduced 113 million due additional costs associated prepared foods improvement plan hillshire brands postclosing results purchase price accounting adjustments ongoing costs related legacy hillshire brands plant fire 2015 vs 2014 • sales decreased due sale mexico brazil chicken production operations fiscal 2015 • operating loss operating loss improved 69 million international operations due sale brazil operation better market conditions mexico prior sale fourth quarter fiscal 2015 partially offset challenging market conditions china additionally thirdparty merger integration costs decreased 12 million losses associated dynamic fuels sold fiscal 2014 decreased 15 million 2014 vs 2013 • operating loss operating loss increased 84 million international operations due poor operational execution brazil charges 42 million impairment brazil assets costs related sale brazil operation challenging market conditions brazil china additional costs incurred grew international operation additionally thirdparty merger integration costs increased 59 million fiscal 2014 losses associated dynamic fuels sold fiscal 2014 increased 15 million liquidity capital resources cash needs working capital expenditures growth opportunities repurchases senior notes repayment term loans share repurchases expected met current cash hand cash flows provided operating activities shortterm borrowings based current expectations believe liquidity capital resources sufficient operate business however may take advantage opportunities generate additional liquidity refinance existing debt capital market transactions amount nature timing capital market transactions depend operating performance circumstances thencurrent commitments obligations amount nature timing capital requirements limitations imposed current credit arrangements overall market conditions • operating cash outflow associated convertible debt discount related initial debt discount 92 million 325 convertible notes issued 2008 matured october 15 2013 retired fiscal 2014 • impairment assets fiscal 2015 included 59 million impairment charges related prepared foods network optimization 169 million impairments related china operation description regarding charges refer part ii item 8 notes consolidated financial statements note 3 acquisitions dispositions note 10 income charges • net increase fiscal 2015 primarily driven noncash pension expense • cash flows associated changes operating assets liabilities • 2015 increased primarily due decrease inventory accounts receivable balances increase taxes payable partially offset decrease accounts payable decreased inventory accounts receivable accounts payable balances largely due decreased raw material costs timing sales payments • 2014 decreased primarily due increase inventory accounts receivable balances decrease income taxes payable partially offset increase accounts payable higher inventory accounts receivable accounts payable balances primarily attributable significant increases input costs price increases associated increased input costs • 2013 decreased primarily due higher accounts receivable balance partially offset increases accrued salaries wages benefits income tax payable higher accounts receivable balance largely due significant increases input costs price increases associated increased input costs • additions property plant equipment included acquiring new equipment upgrading facilities maintain competitive standing position us future opportunities • capital spending fiscal 2016 expected approximate 900 million include spending operations production labor efficiencies yield improvements sales channel flexibility • purchases marketable securities included funding deferred compensation plans • proceeds sale businesses primarily included proceeds net cash transferred sale mexico brazil operations • acquisitions fiscal 2014 related acquiring hillshire brands additional valueadded food business part strategy accelerate growth prepared foods sales acquisitions included prepared foods segment description regarding transactions refer part ii item 8 notes consolidated financial statements note 3 acquisitions dispositions • payments debt included • 2015 353 million related 5year tranche term loan facility 1172 million related 3year tranche term loan facility • 2015 fourth quarter fiscal 2015 fully retired 401 million outstanding balance 275 senior notes due september 2015 • 2014 325 convertible notes issued 2008 matured october 15 2013 time paid 458 million principal value cash hand settled conversion premium issuing 117 million shares class stock available treasury shares notes initially recorded 92 million discount equaled fair value equity conversion premium instrument portion payment notes related initial 92 million discount recorded cash flows operating activities simultaneous settlement conversion premium received 117 million shares class stock call options purchased time issuance notes • 2014 194 million related 5year tranche term loan facility 30 million related 3year tranche term loan facility • 2013 91 million primarily related borrowings foreign subsidiaries • proceeds issuance longterm debt borrowingspayments revolving credit facility • 2015 500 million term loans full balance used prepay outstanding borrowings 3year tranche term loan facility addition borrowings payments revolver 1345 million fiscal 2015 utilized revolving credit facility balance cash position term loan deleveraging changes working capital additionally total debt foreign subsidiaries 10 million october 3 2015 classified longterm consolidated balance sheets • 2014 2300 million term loans 3243 million senior unsecured notes original issue discounts 7 million additionally total debt related foreign subsidiaries 8 million september 27 2014 classified longterm consolidated balance sheets • 2013 68 million primarily foreign subsidiaries total debt foreign subsidiaries 60 million september 28 2013 40 million current 20 million longterm • proceeds issuance debt equity components tangible equity units • 2014 issued 30 million 475 tangible equity units teus total proceeds net underwriting discounts expenses 1454 million teu comprised prepaid stock purchase contract senior amortizing note due july 15 2017 allocated proceeds issuance teus equity debt based relative fair values respective components teu fair value prepaid stock purchase contracts 1295 million recorded capital excess par value net 40 million issuance costs fair value senior amortizing notes 205 million recorded debt 65 million current • proceeds issuance common stock net issuance costs • 2014 issued 238 million shares class common stock total proceeds net underwriting discounts offering related fees expenses 873 million • purchases tyson class common stock include • 455 million 250 million 550 million shares repurchased pursuant share repurchase program fiscal 2015 2014 2013 respectively • 40 million 45 million 64 million shares repurchased fund certain obligations equity compensation plans fiscal 2015 2014 2013 respectively • expect continue repurchasing shares share repurchase program october 3 2015 211 million shares remain authorized repurchases timing extent repurchase shares depend upon among things working capital needs market conditions liquidity targets debt obligations regulatory requirements • subsequent october 3 2015 repurchased 257 million approximately 57 million shares common stock share repurchase program • revolving credit facility supports shortterm funding needs letters credit letters credit issued facility primarily support leasing obligations workers’ compensation insurance programs maximum borrowing revolving credit facility fiscal 2015 450 million • october 3 2015 current debt 715 million intend repay cash generated operating activities liquidity sources • expect net interest expense approximate 255 million fiscal 2016 • october 3 2015 approximately 270 million cash held international accounts foreign subsidiaries generally rely foreign cash source funds support ongoing domestic liquidity needs rather manage worldwide cash requirements reviewing available funds among foreign subsidiaries cost effectiveness funds accessed repatriation cash balances certain foreign subsidiaries could adverse tax consequences subject regulatory capital requirements however balances generally available without legal restrictions fund ordinary business operations united states income taxes net applicable foreign tax credits provided undistributed earnings foreign subsidiaries intention reinvest cash held foreign subsidiaries permanently repatriate cash tax efficient • current ratio 152 1 164 1 october 3 2015 september 27 2014 respectively capital resources credit facility cash flows operating activities current cash hand primary sources liquidity funding debt service capital expenditures dividends share repurchases also revolving credit facility committed capacity 125 billion provide additional liquidity working capital needs letters credit source financing growth opportunities october 3 2015 outstanding letters credit totaling 6 million issued facility none drawn upon left 1244 million available borrowing revolving credit facility funded syndicate 42 banks commitments ranging 03 million 85 million per bank syndicate includes bank holding companies required adequately capitalized federal bank regulatory agency requirements capitalization monitor credit ratings capacity longterm financing consider various qualitative quantitative factors monitor ratio net debt ebitda support longterm financing decisions october 3 2015 september 27 2014 ratio net debt ebitda 21x 41x respectively refer part ii item 6 selected financial data explanation reconciliation comparable gaap measures decrease ratio fiscal 2015 due increased ebitda approximate 17 billion net debt reduction fiscal 2015 credit ratings 2016 notes february 11 2013 standard poors ratings services sp upgraded credit rating 2016 notes bbb upgrade impact interest rate 2016 notes june 7 2012 moodys investors service inc moodys upgraded credit rating 2016 notes ba1 baa3 upgrade decreased interest rate 2016 notes 685 660 effective beginning sixmonth interest payment due october 1 2012 onenotch downgrade moodys would increase interest rates 2016 notes 025 twonotch downgrade sp would increase interest rates 2016 notes 025 revolving credit facility sp’s corporate credit rating tyson foods inc bbb moody’s senior unsecured subsidiary guaranteed longterm debt rating tyson foods inc baa3 fitch ratings fitch issuer default rating tyson foods inc bbb table outlines fees paid unused portion facility fee rate letter credit fees undrawn letter credit fee borrowing spread depending rating levels tyson foods inc sp moodys fitch event rating levels split applicable fees spread based upon rating level effect two rating agencies three rating agencies different rating levels applicable fees spread based upon rating level rating levels two rating agencies debt covenants revolving credit term loan facilities contain affirmative negative covenants among things may limit restrict ability create liens encumbrances incur debt merge dissolve liquidate consolidate make acquisitions investments dispose transfer assets change nature business engage certain transactions affiliates enter hedging transactions case subject certain qualifications exceptions addition required maintain minimum interest expense coverage maximum debttocapitalization ratios senior notes also contain affirmative negative covenants among things may limit restrict ability create liens engage certain saleleaseback transactions engage certain consolidations mergers sales assets compliance debt covenants october 3 2015 pension plans described part ii item 8 notes consolidated financial statements note 15 pension postretirement benefits funded status defined benefit pension plans defined amount projected benefit obligation exceeds plan assets funded status plans underfunded position 410 million end fiscal 2015 compared underfunded position 381 million end fiscal 2014 expect contribute approximately 63 million cash pension plans fiscal 2016 compared approximately 14 million fiscal 2015 9 million fiscal 2014 exact amount cash contributions made pension plans year dependent upon number factors including minimum funding requirements result actual funding fiscal 2016 may different estimate offbalance sheet arrangements offbalance sheet arrangements material financial position results operations offbalance sheet arrangements guarantees debt outside third parties including leases grower loans residual value guarantees covering certain operating leases various types equipment see part ii item 8 notes consolidated financial statements note 20 commitments contingencies discussion contractual obligations following table summarizes contractual obligations october 3 2015 1 event default payment acceleration principal payments could occur 2 interest payments include interest outstanding debt payments estimated variable rate variable term debt based effective interest rates october 3 2015 expected payment dates 3 amounts include guarantees debt outside third parties consist leases grower loans substantially collateralized underlying assets well residual value guarantees covering certain operating leases various types equipment amounts included maximum potential amount future payments 4 amounts include minimum lease payments lease agreements 5 amounts include agreements purchase goods services enforceable legally binding specify significant terms including fixed minimum quantities purchased fixed minimum variable price provisions approximate timing transaction purchase obligations amount included items future purchase commitments grains livestock contracts fixed grower fees provide terms meet criteria certain grain purchase commitments fixed quantity provision assumed future obligations commitment based available commodity futures prices published observable active markets october 3 2015 excluded future purchase commitments contracts meet criteria purchase orders included table purchase order authorization purchase cancelable contracts goods services contain termination clauses without penalty also excluded 6 amounts include estimated amounts complete buildings equipment construction october 3 2015 7 longterm liabilities primarily consist deferred compensation deferred income selfinsurance asset retirement obligations unable reliably estimate amount payments beyond fiscal 2016 therefore included total liability table also employee benefit obligations consisting pensions postretirement benefits 495 million excluded table discussion companys pension postretirement plans including funding matters included part ii item 8 notes consolidated financial statements note 15 pensions postretirement benefits addition amounts shown table unrecognized tax benefits 284 million related interest penalties 46 million october 3 2015 recorded liabilities maximum contractual obligation associated cash flow assistance programs october 3 2015 based estimated fair values livestock supplier’s net tangible assets date aggregated approximately 310 million receivables programs october 3 2015 recently issuedadopted accounting pronouncements refer discussion part ii item 8 notes consolidated financial statements note 2 recently issued accounting pronouncements recently issued accounting pronouncements critical accounting estimates preparation consolidated financial statements requires us make estimates assumptions estimates assumptions affect reported amounts assets liabilities disclosure contingent assets liabilities date consolidated financial statements reported amounts revenues expenses reporting period actual results could differ estimates following summary certain accounting estimates consider critical description judgments uncertainties effect actual results differ assumptions contingent liabilities subject lawsuits investigations claims related wage hourlabor environmental product taxing authorities matters required assess likelihood adverse judgments outcomes matters well potential ranges probable losses determination amount reserves disclosures required contingencies made considerable analysis individual issue accrue contingent liabilities assessment risk loss probable reasonably estimated disclose contingent liabilities risk loss reasonably possible probable contingent liabilities contain uncertainties eventual outcome result future events determination current reserves requires estimates judgments related future changes facts circumstances differing interpretations law assessments amount damages effectiveness strategies factors beyond control made material changes accounting methodology used establish contingent liabilities past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate contingent liabilities however actual results consistent estimates assumptions may exposed gains losses could material marketing advertising costs incur advertising retailer incentive consumer incentive costs promote products marketing programs include cooperative advertising volume discounts instore display incentives coupons programs marketing advertising costs charged period incurred accrue costs based estimated performance historical utilization redemption program cash consideration given customers considered reduction price products thus recorded reduction sales remainder marketing advertising costs recorded selling general administrative expense recognition costs related programs contains uncertainties due judgment required estimating potential performance redemption program estimates based many factors including experience similar promotional programs made material changes accounting methodology used establish marketing accruals past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate marketing accruals however actual results consistent estimates assumptions may exposed gains losses could material 10 change marketing accruals october 3 2015 would impact pretax earnings approximately 19 million description judgments uncertainties effect actual results differ assumptions accrued selfinsurance selfinsured certain losses related health welfare workers’ compensation auto liability general liability claims use independent thirdparty actuary assist determining selfinsurance liability actuary consider number factors estimating selfinsurance liability including claims experience demographic factors severity factors actuarial assumptions periodically review estimates assumptions thirdparty actuary assist us determining adequacy selfinsurance liability policy maintain accrual within central high point actuarial range selfinsurance liability contains uncertainties due assumptions required judgment used costs settle obligations including legal healthcare costs could increase decrease causing estimates selfinsurance liability change incident rates including frequency severity could increase decrease causing estimates selfinsurance liability change made material changes accounting methodology used establish selfinsurance liability past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate selfinsurance liability however actual results consistent estimates assumptions may exposed gains losses could material 10 increase actuarial estimate october 3 2015 would result increase amount recorded selfinsurance liability approximately 27 million 10 decrease actuarial estimate october 3 2015 would result decrease amount recorded selfinsurance liability approximately 3 million description judgments uncertainties effect actual results differ assumptions defined benefit pension plans sponsor nine defined benefit pension plans provide retirement benefits certain employees also participate multiemployer plan provides defined benefits certain employees covered collective bargaining agreements plans usually administered board trustees composed management participating companies labor representatives use independent thirdparty actuaries assist us determining pension obligations net periodic benefit cost actuaries review assumptions include estimates present value projected future pension payment plan participants taking consideration likelihood potential future events salary increases demographic experience accumulate amortize effect actuarial gains losses future periods net periodic benefit costs defined benefit pension plans 16 million fiscal 2015 projected benefit obligation 1986 million end fiscal 2015 unrecognized actuarial losses 100 million end fiscal 2015 currently expect net periodic benefit cost fiscal 2016 approximately 35 million plan assets currently comprised approximately 85 fixed income securities 11 equity securities fixed income securities include limited direct bond investments pooled indirect bond investments may include limited international domestic equities real estate commodities private equity expect contribute approximately 63 million cash pension plans fiscal 2016 exact amount cash contributions made pension plans year dependent upon number factors including minimum funding requirements defined benefit pension plans contain uncertainties due assumptions required judgments used key assumptions used developing required estimates include factors discount rates expected returns plan assets retirement rates mortality assumptions material impact upon funded status net periodic benefit cost discount rates determined using cash flow matching technique whereby rates yield curve developed highquality debt securities applied benefit obligations determine appropriate discount rate determining longterm rate return plan assets first examined historical rates return various asset classes within plans determined longterm projected rateofreturn based expected returns investment management fees paid plan assets factored determination asset return assumptions retirement rates based primarily actual plan experience standard actuarial tables used estimate mortality reasonably likely changes external factors result changes assumptions used measure pension obligations net periodic benefit cost future periods risks participating multiemployer plans different singleemployer plans net pension cost multiemployer plans equal annual contribution determined accordance provisions negotiated labor contracts assets contributed plans segregated otherwise restricted provide benefits employees future cost plans dependent number factors including funded status plans ability participating companies meet ongoing funding obligations made material changes accounting methodology used establish pension obligations net periodic benefit cost past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate pension obligations net periodic benefit cost however actual results consistent estimates assumptions accumulated amortized future periods therefore generally affect net periodic benefit cost future periods 1 increase discount rate october 3 2015 would result decrease projected benefit obligation net periodic benefit cost approximately 240 million 5 million respectively 1 decrease discount rate october 3 2015 would result increase projected benefit obligation net periodic benefit cost approximately 298 million 11 million respectively 1 change return plan assets october 3 2015 would impact net periodic benefit cost approximately 16 million sensitivities reflect impact changing one assumption time remaining assumptions held constant economic factors conditions often affect multiple assumptions simultaneously effect changes assumptions necessarily linear description judgments uncertainties effect actual results differ assumptions income taxes estimate total income tax expense based statutory tax rates tax planning opportunities available us various jurisdictions earn income federal income tax includes estimate taxes earnings foreign subsidiaries expected taxable upon remittance united states except earnings considered indefinitely invested foreign subsidiary deferred income taxes recognized future tax effects temporary differences financial income tax reporting using tax rates effect years differences expected reverse valuation allowances recorded likely tax benefit realized deferred tax asset record unrecognized tax benefit liabilities known anticipated tax issues based analysis whether extent additional taxes due changes tax laws rates could affect recorded deferred tax assets liabilities future changes projected future earnings could affect recorded valuation allowances future calculations related income taxes contain uncertainties due judgment used calculate tax liabilities application complex tax regulations across tax jurisdictions operate analysis unrecognized tax benefits contains uncertainties based judgment used apply likely recognition measurement thresholds believe reasonable likelihood material change tax related balances valuation allowances however due complexity uncertainties ultimate resolution may result payment materially different current estimate tax liabilities extent prevail matters unrecognized tax benefit liabilities established required pay amounts excess recorded unrecognized tax benefit liabilities effective tax rate given financial statement period could materially affected unfavorable tax settlement would require use cash generally result increase effective tax rate period resolution favorable tax settlement would generally recognized reduction effective tax rate period resolution impairment longlived assets definite life intangibles longlived assets definite life intangibles evaluated impairment whenever events changes circumstances indicate carrying value may recoverable examples include significant adverse change extent manner use asset change physical condition unexpected change financial performance evaluating longlived assets definite life intangibles impairment compare carrying value asset’s estimated undiscounted future cash flows impairment indicated estimated future cash flows less carrying value asset assets held sale compare carrying value disposal group fair value impairment excess carrying value fair value asset recorded impairment charges related longlived assets definite life intangibles 262 million 107 million 74 million fiscal 2015 2014 2013 respectively impairment analysis contains uncertainties due judgment assumptions including useful lives assets forecasted sales operating margins growth rates royalty rates discount rates based budgets business plans economic projections anticipated future cash flows marketplace data reflects risk inherent future cash flows determine fair value made material changes accounting methodology used evaluate impairment longlived assets definite life intangibles last three fiscal years believe reasonable likelihood material change estimates assumptions used calculate impairments longlived assets definite life intangibles however actual results consistent estimates assumptions used calculate estimated future cash flows may exposed impairment losses could material conducting project designed optimize network capacity enhance manufacturing efficiencies future additionally continue evaluate international operations strategies significant change strategies outlook manner plan use assets may exposed future impairments impairment goodwill indefinite life intangible assets description goodwill evaluated impairment first performing qualitative assessment determine whether quantitative goodwill test necessary determined based qualitative factors fair value reporting unit may likely less carrying amount significant changes macroeconomic factors related reporting unit occurred could materially impact fair value quantitative goodwill impairment test would required elect forgo qualitative assessment perform quantitative test quantitative goodwill impairment test performed using twostep process first step identify potential impairment exists comparing fair value reporting unit carrying amount including goodwill fair value reporting unit exceeds carrying amount goodwill reporting unit considered potential impairment second step quantitative impairment test necessary however carrying amount reporting unit exceeds fair value second step performed determine goodwill impaired measure amount impairment loss recognize second step compares implied fair value goodwill carrying amount goodwill implied fair value goodwill exceeds carrying amount goodwill considered impaired however carrying amount goodwill exceeds implied fair value impairment loss recognized amount equal excess implied fair value goodwill determined manner amount goodwill recognized business combination ie fair value reporting unit allocated assets liabilities including unrecognized intangible assets reporting unit acquired business combination fair value reporting unit determined exit price market participant would pay business indefinite life intangible assets qualitative assessment also performed determine whether existence events circumstances indicates likely intangible asset impaired similar goodwill also elect forgo qualitative test indefinite life intangible assets perform quantitative test upon performing quantitative test carrying value intangible asset exceeds fair value impairment loss recognized amount equal excess elected forgo qualitative assessments indefinite life intangible assets fiscal 2015 impairment test elected make first day fourth quarter annual impairment assessment date goodwill indefinite life intangible assets however could required evaluate recoverability goodwill indefinite life intangible assets prior required annual assessment among things experience disruptions business unexpected significant declines operating results divestiture significant component business sustained decline market capitalization judgments uncertainties estimate fair value reporting units using various valuation techniques primary technique discounted cash flow analysis uses significant unobservable inputs level 3 inputs defined fair value hierarchy discounted cash flow analysis requires us make various judgmental assumptions sales operating margins growth rates discount rates include assumptions sales operating margins growth rates consider budgets business plans economic projections believed reflect market participant views would exist exit transaction assumptions also made varying perpetual growth rates periods beyond longterm business plan period generally utilize normalized operating margin assumptions based future expectations operating margins historically realized reporting units industries fiscal 2015 impairment test material reporting units beef prepared foods reporting units utilized operating margins future years excess operating margin realized recent year beef reporting unit beef operating segment goodwill october 3 2015 totaling 676 million generally assumed operating margins future years would normalized range 15 3 believe consistent market participant views exit transaction assumed future operating margins consistent realized current fiscal year would failed first step annual impairment test would required second step performed may resulted material goodwill impairment loss current year beef reporting unit results indicative future market participant expectations exit transaction primarily due unusual items fiscal 2015 including unfavorable market conditions associated temporary decline supply drove live cattle prices export market disruptions losses marktomarket open derivative positions lowerofcostormarket inventory adjustments due large rapid decline live cattle futures september fiscal 2015 pass first step annual impairment test fiscal 2015 beef reporting unit’s projected operating margins average 12 breakeven although beef reporting unit’s actual performance fiscal 2015 amount performed 12 breakeven operating margin level previous six years expected perform level fiscal 2016 valuing beef reporting unit utilizing projected operating margins averaging less 12 breakeven 62 increase discount rate used fiscal 2015 would caused carrying value beef reporting unit excess fair value would required second step performed prepared foods reporting unit prepared foods operating segment goodwill october 3 2015 totaling 4005 million generally assumed operating margins future years would expected range 10 12 believe consistent market participant views exit transaction assumed future operating margins consistent realized current fiscal year would failed first step annual impairment test would required second step performed may resulted material goodwill impairment loss current year prepared foods reporting unit results indicative future market participant expectations exit transaction still integrating hillshire brands reporting unit including capturing full benefit expected synergies proceed integration hillshire brands realized synergies 322 million fiscal 2015 expect realize 500 million fiscal 2016 700 million fiscal 2017 majority benefits realized prepared foods segment pass first step annual impairment test fiscal 2015 prepared foods reporting unit’s projected operating margins average 77 breakeven exceeded breakeven operating margin level second half fiscal 2015 expect exceed fiscal 2016 fair value indefinite life intangible assets calculated principally using relieffromroyalty multiperiod excess earnings valuation approaches uses significant unobservable inputs level 3 inputs defined fair value hierarchy believed reflect market participant views would exist exit transaction valuation approaches required make estimates assumptions sales operating margins growth rates royalty rates discount rates based budgets business plans economic projections anticipated future cash flows marketplace data impairment analysis contains uncertainties due uncontrollable events could positively negatively impact anticipated future economic operating conditions effect actual results differ assumptions made material changes accounting methodology used evaluate impairment goodwill intangible assets last three years fiscal 2015 2014 2013 material reporting units underwent quantitative test passed first step goodwill impairment analysis therefore second step necessary fiscal 2015 recorded 23 million full impairment immaterial reporting unit’s goodwill inherent estimates assumptions used determining fair value reporting units indefinite life intangible assets outside control management including interest rates cost capital tax rates credit ratings believe made reasonable estimates assumptions calculate fair value reporting units indefinite life intangibles possible material change could occur actual results consistent estimates assumptions used calculate fair value may required perform second step could result additional material impairments goodwill material reporting units estimated fair value exceeded carrying value 20 date recent estimated fair value determination consequently currently consider material reporting units significant risk failing first step annual goodwill impairment test discount rate used annual goodwill impairment test decreased 68 fiscal 2015 79 fiscal 2014 discount rates continue low compared historical levels 35 increase discount rate would caused prepared foods reporting unit 4005 million goodwill october 3 2015 fail first step goodwill impairment step may resulted material impairment upon completion second step material indefinite life intangible assets prior acquisition hillshire brands august 2014 fiscal 2015 indefinite life intangible assets impairment analysis result impairment charge 35 decrease fair value indefinite life intangible carrying value 301 million 165 decrease fair value indefinite life intangible carrying value 2175 million would caused carrying value exceed fair value indefinite life intangible assets’ estimated fair value exceeded carrying value 20 discount rate used annual indefinite life intangible assets impairment test 80 fiscal 2015 20 increase discount rate would caused carrying value three intangible assets combined carrying value 3008 million exceed fair value item 7aitem 7 management’s discussion analysis financial condition results operations description company one world’s largest food companies recognized leader protein founded 1935 john w tyson grown three generations family leadership company broad portfolio products brands like tyson® jimmy dean® hillshire farm® ball park® wright® aidells® ibp® state fair® key factors influencing business customer demand products ability maintain grow relationships customers introduce new innovative products marketplace accessibility international markets market prices products cost availability live cattle hogs raw materials feed ingredients operating efficiencies facilities operate four reportable segments beef pork chicken prepared foods primarily includes foreign chicken production operations china india thirdparty merger integration costs corporate overhead related tyson new ventures llc june 7 2017 acquired consolidated advancepierre foods holdings inc advancepierre producer distributor valueadded convenient readytoeat sandwiches sandwich components entrées snacks advancepierres results operations subsequent acquisition closing included prepared foods chicken segments overview • fiscal year accounting cycle resulted 52week year fiscal 2017 2016 53week year fiscal 2015 • general fiscal 2017 operating income grew 3 compared fiscal 2016 record 2931 million led record earnings beef pork segments beef segments operating income improved 530 million pork segment improved 117 million fiscal 2017 due favorable market conditions strong operational execution chicken segments lower operating income impacted increased operating costs 56 million restructuring related charges prepared foods segments lower operating income impacted increased operating costs impairments 52 million related san diego prepared foods operation 45 million related expected sale nonprotein business 82 million restructuring related charges addition incurred incremental 95 million compensation benefit integration expense fiscal 2017 continued integrate make investments talent incurred 85 million advancepierre purchase accounting acquisition related operating costs sales increased 4 fiscal 2017 fiscal 2016 primarily due increased sales volumes increased beef pork chicken prices well net incremental impact advancepierres sales 508 million • market environment according united states department agriculture usda domestic protein production beef pork chicken turkey increased approximately 3 fiscal 2017 compared fiscal 2016 beef segment experienced strong export demand favorable domestic market conditions associated increase cattle supply pork segment favorable market conditions associated strong demand pork products improved export markets stronger demand chicken products reduced feed ingredient costs 80 million benefited chicken segment prepared foods segment improved demand retail products experienced decline foodservice higher input costs 50 million • margins total operating margin 77 fiscal 2017 operating margins segment follows • beef 59 • pork 123 • chicken 92 included 56 million restructuring related charges • prepared foods 59 included 52 million impairment related san diego prepared foods operation 45 million impairment related expected sale nonprotein business 82 million restructuring related charges 34 million purchase accounting acquisition related costs acquisition advancepierre • hillshire integration impact hillshire brands company hillshire brands synergies along profit improvement plan related legacy prepared foods business positive incremental impact approximately 90 million fiscal 2017 258 million captured fiscal 2016 322 million captured fiscal 2015 total 670 million synergies realized majority benefits realized prepared foods segment partially used invest innovation new product launches supporting growth brands • liquidity fiscal 2017 generated 26 billion operating cash flows september 30 2017 10 billion liquidity included 318 million cash equivalents availability revolving credit facility deducting amounts outstanding commercial paper program • strategy fiscal 2017 announced strategy sustainably feed world fastest growing portfolio proteinpacked brands intend accomplish growing portfolio proteinpacked brands delivering food scale enabled driving profitable growth customers differentiated capabilities creating fuel reinvestment disciplined financial fitness model • june 7 2017 acquired outstanding stock advancepierre part overall strategy purchase price equal 4025 per share cash advancepierres outstanding common stock approximately 32 billion funded acquisition existing cash hand net proceeds issuance new senior notes well borrowings commercial paper program new term loan facility advancepierre’s results operations subsequent acquisition closing included prepared foods chicken segments description refer part ii item 8 notes consolidated financial statements note 3 acquisition dispositions • april 24 2017 announced intent sell three nonprotein businesses sara lee® frozen bakery kettle van’s® included prepared foods segment part strategic focus proteinpacked brands reclassified assets liabilities related businesses assets liabilities held sale consolidated balance sheet september 30 2017 fourth quarter 2017 recorded impairment charge totaling 45 million related one businesses due revised estimate business’ fair value based current expected net sales proceeds impairment charge recorded cost sales consolidated statement income fiscal 2017 consisted goodwill intangible assets previously classified within assets held sale anticipate close transactions end calendar 2017 early calendar 2018 expect record net pretax gain result sale businesses description refer part ii item 8 notes consolidated financial statements note 3 acquisition dispositions • fourth quarter fiscal 2017 board directors approved multiyear restructuring program “financial fitness program” expected contribute company’s overall strategy financial fitness increased operational effectiveness overhead reduction combination synergies integration advancepierre additional elimination nonvalued added costs financial fitness program estimated result cumulative net savings 200 million fiscal 2018 400 million fiscal 2019 including new savings 200 million 600 million fiscal 2020 including additional savings 200 million approximately 5060 net savings focused supply chain procurement overhead improvements expected realized prepared foods segment majority remaining net savings impacting chicken segment additionally estimate approximately 75 net savings reflected cost sales consolidated statement income remaining selling general administrative part financial fitness program anticipate eliminating approximately 500 positions across several areas job levels eliminated positions originating corporate offices springdale arkansas chicago illinois cincinnati ohio result fourth quarter fiscal 2017 company recognized restructuring related charges 150 million consisted 53 million severance employee related costs 72 million technology impairment related costs 25 million contract termination costs company currently anticipates financial fitness program result cumulative pretax charges implemented approximately 215 million consist primarily severance employee related costs asset impairments accelerated depreciation incremental costs implement new technology contract termination costs following tables set forth pretax impact restructuring related charges incurred fiscal 2017 consolidated statements income pretax impact reportable segments description refer part ii item 8 notes consolidated financial statements note 6 restructuring related charges 2017 included following items • 103 million pretax 018 per diluted share advancepierre purchase accounting acquisition related costs included 36 million purchase accounting adjustment amortization fair value stepup inventory 49 million acquisition related costs 18 million acquisition bridge financing fees • 150 million pretax 015 per diluted share restructuring related charges • 52 million pretax 009 per diluted share impairment charge related san diego prepared foods operation • 45 million pretax 001 per diluted share impairment net tax benefit related expected sale nonprotein business 2016 included following items • 53 million post tax 014 per diluted share related recognition previously unrecognized tax benefits audit settlements 2015 included following items • 169 million pretax 041 per diluted share related impairment charge china • 59 million pretax 009 per diluted share related prepared foods network optimization impairment charges • 57 million pretax 009 per diluted share related merger integration costs • 12 million pretax 002 per diluted share related closure impairment charges related ceasing beef operations denison facility • 161 million pretax 024 per diluted share related gain sale mexico operation • 39 million pretax 006 per diluted share related additional week fiscal 2015 • 26 million post tax 006 per diluted share related recognition previously unrecognized tax benefits • 21 million pretax 003 per diluted share related gain sale equity securities • 8 million pretax 002 per diluted share insurance proceeds net costs related legacy hillshire brands plant fire summary results 2017 vs 2016 • sales volume sales positively impacted increase sales volume accounted increase 477 million segment increase sales volume beef prepared foods segments contributing majority increase driven better demand beef products incremental volumes acquisition advancepierre • average sales price sales positively impacted higher average sales prices accounted increase 902 million segment increase average sales price pork chicken prepared foods segments contributing majority increase due strong demand pork products improved mix higher chicken pricing chicken segment better product mix prepared foods segment positively impacted acquisition advancepierre • amounts include net increase 508 million related inclusion advancepierre results post acquisition 2016 vs 2015 • sales volume sales negatively impacted lower sales volume accounted decrease 19 billion segment decline sales volume primarily attributed additional week fiscal 2015 decrease sales volume also attributable divestitures mexico brazil chicken production operations fiscal 2015 excluding impacts along divestiture heinold hog markets business first quarter fiscal 2015 total company sales volume increased 01 • average sales price sales negatively impacted lower average sales prices accounted decrease 26 billion segment decrease average sales prices largely due decreased pricing associated lower beef pork chicken prices largest decrease beef segment 2017 vs 2016 • cost sales increased 993 million higher input cost per pound increased cost sales 588 million higher sales volume increased cost sales 405 million amounts include net increase 425 million related inclusion advancepierre results post acquisition included 36 million fair value stepup inventory part purchase accounting • 588 million impact higher input cost per pound primarily driven • increase approximately 170 million chicken segment related increase freight growout expenses outside meat purchases partially offset decrease feed costs 80 million • increase due impairment charges 44 million related san diego prepared foods operation 45 million related expected sale nonprotein business addition increase 17 million related net costs associated fires two chicken plants • increase raw material input costs approximately 50 million prepared foods segment • increase live hog costs approximately 40 million pork segment • increase 35 million related restructuring related charges • increase input cost per pound related acquisition advancepierre june 7 2017 • increase due net realized derivative losses 79 million fiscal 2017 compared net realized derivative gains 96 million fiscal 2016 due risk management activities amounts exclude offsetting impacts related physical purchase transactions included change live cattle hog costs raw material feed costs described additionally cost sales increased due net unrealized losses 40 million fiscal 2017 compared net unrealized gains 11 million fiscal 2016 primarily due beef segment commodity risk management activities • decrease live cattle costs approximately 600 million beef segment • remainder net change mostly due increased cost per pound mix upgrade chicken segment increased sales volume valueadded products well increased operating costs freight plant variances across segments also included 71 million compensation benefit integration expense • 405 million impact higher sales volume driven increases sales volume segments majority increase beef prepared foods segment 2016 vs 2015 • cost sales decreased approximately 53 billion lower input costs per pound decreased cost sales approximately 36 billion lower sales volume decreased cost sales approximately 17 billion • approximate 36 billion impact lower input costs primarily driven • decrease live cattle cost approximately 26 billion beef segment • decrease live hog costs approximately 360 million pork segment • decrease raw material input costs approximately 300 million prepared foods segment • decreases feed costs approximately 170 million chicken segment • decrease due net realized derivative gains 96 million fiscal 2016 compared net realized derivative losses 102 million fiscal 2015 due risk management activities amounts exclude offsetting impacts related physical purchase transactions included change live cattle hog costs raw material feed costs described additionally cost sales increased due net unrealized gains 11 million fiscal 2016 compared net unrealized gains 80 million fiscal 2015 primarily due beef pork chicken segment commodity risk management activities • 17 billion impact lower sales volume primarily due sale mexico chicken production operation fiscal 2015 along additional week fiscal 2015 2017 vs 2016 • increase 288 million selling general administrative primarily driven • increase 124 million related advancepierre acquisition composed 49 million acquisition related costs 37 million incremental amortization 38 million inclusion advancepierre results postacquisition • increase 115 million restructuring related charges • increase 53 million employee costs including 34 million nonrestructuring severance related expenses 24 million compensation benefit integration expense partially offset reduced incentivebased compensation • increase 8 million due impairment related san diego prepared foods operation • remainder net change primarily related professional fees 2016 vs 2015 • increase 116 million selling general administrative primarily driven • increase 88 million related marketing advertising promotion expense drive sales growth • increase 71 million employee costs including payroll stockbased incentivebased compensation • increase 11 million related bad debt expense • increase 17 million primarily related professional fees information technology costs rent • decrease 26 million due reduction amortization expense related intangible assets • decrease 25 million related fiscal 2015 sale chicken production operations brazil mexico • decrease 20 million merger integration costs 201720162015 interest income remained relatively flat due continued low interest rates 201720162015 • cash interest expense primarily included interest expense related coupon rates senior notes term loans commitmentletter credit fees incurred revolving credit facilities increase cash interest expense fiscal 2017 primarily due debt issued connection advancepierre acquisition decrease cash interest expense fiscal 2016 primarily due reduction debt • noncash interest expense primarily included amounts related amortization debt issuance costs discountspremiums note issuances offset interest capitalized 2017 included 28 million legal costs related two former subsidiaries hillshire brands sold hillshire brands 1986 1994 also included 18 million bridge financing fees related advancepierre acquisition 19 million income equity earnings joint ventures 2016 included 12 million equity earnings joint ventures 4 million net foreign currency exchange losses 2015 included 12 million equity earnings joint ventures 21 million gains sale equity securities effective tax rate continuing operations impacted number items result difference effective tax rate united states statutory rate 35 table reflects significant items impacting rate indicated 2017 • domestic production activity deduction reduced rate 31 • state income taxes increased rate 23 2016 • domestic production activity deduction reduced rate 26 • unrecognized tax benefits activity mostly related expiration statutes limitations settlements taxing authorities reduced rate 17 • state income taxes increased rate 27 2015 • domestic production activity deduction reduced rate 37 • unrecognized tax benefits activity mostly related expiration statutes limitations reduced rate 18 • state income taxes increased rate 31 • foreign rate differences valuation allowances increased rate 38 segment results operate four reportable segments beef pork chicken prepared foods primarily includes foreign chicken production operations china india thirdparty merger integration costs corporate overhead related tyson new ventures llc june 7 2017 acquired advancepierre producer distributor valueadded convenient readytoeat sandwiches sandwich components entrées snacks advancepierres results operations subsequent acquisition closing included prepared foods chicken segments following table summary segment sales operating income loss measure segment income loss 2017 vs 2016 • sales volume sales volume increased due improved availability cattle supply stronger domestic demand beef products increased exports • average sales price average sales price increased demand beef products strong exports outpaced increase live cattle supplies • operating income operating income increased due favorable market conditions maximized revenues relative decline live fed cattle costs partially offset higher operating costs 2016 vs 2015 • sales volume sales volume decreased due additional week fiscal 2015 excluding additional week fiscal 2015 sales volume increased 08 due increased availability cattle supply better demand beef products despite reduction live cattle processing capacity due closure denison iowa facility fourth quarter fiscal 2015 • average sales price average sales price decreased due higher domestic availability beef supplies lower livestock cost • operating income operating income increased due favorable market conditions maximized revenues relative decline live fed cattle cost addition reduced losses marktomarket open derivative positions lowerofcostor market inventory adjustments incurred fourth quarter fiscal 2015 partially offset higher operating costs 2017 vs 2016 • sales volume sales volume increased due strong demand pork products increased exports • average sales price average sales price increased demand pork products strong exports outpaced increase live hog supplies • operating income operating income increased maximized revenues relative live hog markets partially attributable stronger export markets operational mix performance partially offset higher operating costs 2016 vs 2015 • sales volume sales volume decreased due divestiture heinold hog markets business first quarter fiscal 2015 additional week fiscal 2015 excluding impacts sales volume grew 12 driven better demand pork products • average sales price average sale price decreased due increased live hog supplies lower livestock cost • operating income operating income increased maximized revenues relative decline live hog markets due better plant utilization associated increased volume processed partially offset higher operating costs losses incurred live hog operation additional week fiscal 2015 2017 vs 2016 • sales volume sales volume due better demand chicken products along incremental volume advancepierre acquisition • average sales price average sales price increased due sales mix changes • operating income operating income fiscal 2017 prior year record results due higher operating costs included increased compensation benefit integration expense 41 million 17 million incremental net costs attributable two plant fires addition restructuring related charges 56 million partially offset lower feed ingredient costs approximately 80 million 2016 vs 2015 • sales volume sales volume decreased primarily due additional week fiscal 2015 addition planned temporary decrease production fourth quarter fiscal 2016 transitioned mix sell valueadded less commodity products along optimizing mix buy versus grow strategy • average sales price average sales price decreased feed costs declined partially offset mix changes • operating income operating income negatively impacted additional week fiscal 2015 along increases operating costs marketing advertising promotion expenses partially offset lower feed costs 170 million 2017 vs 2016 • sales volume sales volume increased due improved demand retail products incremental volumes advancepierre acquisition partially offset declines foodservice • average sales price average sales price increased due better product mix positively impacted acquisition advancepierre well higher input costs 50 million • operating income operating income decreased due impairments 52 million related san diego operation 45 million related expected sale nonprotein business 30 million compensation benefit integration expense 34 million related advancepierre purchase accounting acquisition related costs 82 million restructuring related charges addition higher operating costs facilities additionally prepared foods operating income positively impacted 538 million synergies 97 million incremental synergies fiscal 2017 156 million synergies realized fiscal 2016 285 million realized fiscal 2015 positive impact synergies operating income partially offset investments innovation new product launches supporting growth brands 2016 vs 2015 • sales volume sales volume decreased due additional week fiscal 2015 lower sales volume first six months fiscal 2016 due changes sales mix carryover effect 2015 turkey avian influenza occurrence first half fiscal 2016 • average sales price average sales price decreased primarily due decline input costs partially offset change product mix • operating income operating income increased due mix changes well lower input costs approximately 300 million partially offset higher marketing advertising promotion spend along additional week fiscal 2015 additionally prepared foods operating income positively impacted 441 million synergies 156 million incremental synergies fiscal 2016 285 million synergies realized fiscal 2015 positive impact synergies operating income partially offset heavy investments innovation new product launches supporting growth brands 2017 vs 2016 • sales decreased due decline average sales price foreign produced sales volume • operating loss operating loss increased primarily 43 million advancepierre thirdparty acquisition related costs partially offset better performance china operation reduced merger integration costs outside advancepierre 2016 vs 2015 • sales decreased due sale mexico brazil chicken production operations fiscal 2015 • operating loss operating loss improved due better performance china operation reduced thirdparty merger integration costs partially offset results mexico chicken production operation sold fiscal 2015 liquidity capital resources cash needs working capital expenditures growth opportunities repurchases senior notes repayment term loans share repurchases expected met current cash hand cash flows provided operating activities shortterm borrowings based current expectations believe liquidity capital resources sufficient operate business however may take advantage opportunities generate additional liquidity refinance existing debt capital market transactions amount nature timing capital market transactions depend operating performance circumstances thencurrent commitments obligations amount nature timing capital requirements limitations imposed current credit arrangements overall market conditions • gain dispositions businesses fiscal 2015 primarily relates sale mexico chicken production operation • impairment assets included following • 2017 included 73 million impairment assets associated restructuring related charges 45 million impairment related expected sale nonprotein business impairment 51 million related san diego prepared foods operation description regarding charges refer part ii item 8 notes consolidated financial statements note 3 acquisitions dispositions note 6 restructuring related charges note 10 income charges • 2015 included 59 million impairment charges related prepared foods network optimization 169 million impairments related china operation description regarding charges refer part ii item 8 notes consolidated financial statements note 3 acquisitions dispositions note 10 income charges • net increase fiscal 2015 primarily driven noncash pension expense • cash flows associated changes operating assets liabilities • 2017 decreased primarily due higher accounts receivable inventory partially offset increased accounts payable increased accrued salaries wages higher accounts receivable inventory accounts payable balances primarily attributable price increases associated higher input costs timing sales payments increase accrued salaries wages primarily attributable restructuring accrual description regarding accrual refer part ii item 8 notes consolidated financial statements note 6 restructuring related charges • 2016 increased primarily due decreased inventory accounts receivable balances increased accrual incentive compensation partially offset decreased accounts payable increased tax receivable contributions pension plans decreased inventory accounts receivable accounts payable balances largely due decreased raw material costs timing sales payments • 2015 increased primarily due decrease inventory accounts receivable balances increase taxes payable partially offset decrease accounts payable decreased inventory accounts receivable accounts payable balances largely due decreased raw material costs timing sales payments • additions property plant equipment included spending production growth safety animal wellbeing addition acquiring new equipment infrastructure replacements upgrades maintain competitive standing position us future opportunities • capital spending fiscal 2018 expected approximate 14 billion include spending production growth safety animal wellbeing infrastructure replacements upgrades operational improvements result production labor efficiencies yield improvements sales channel flexibility • purchases marketable securities included funding deferred compensation plans • proceeds sale businesses primarily included proceeds net cash transferred sale mexico brazil operations • acquisition net cash acquired fiscal 2017 related acquiring advancepierre part strategy sustainably feed world fastest growing portfolio proteinpacked brands advancepierres results operations subsequent acquisition closing included prepared foods chicken segments description regarding transaction refer part ii item 8 notes consolidated financial statements note 3 acquisition dispositions • payments debt included • 2017 extinguished 1146 million advancepierres debt assumed acquisition fully retired 1800 million term loan tranche due june 2020 issued part advancepierre acquisition financing • 2016 fully retired 638 million outstanding balance 660 senior notes due april 2016 • 2015 fully retired 401 million outstanding balance 275 senior notes due september 2015 paid 353 million related 5year tranche term loan facility 1172 million related 3year tranche term loan facility • proceeds issuance longterm debt borrowingspayments revolving credit facility • 2017 proceeds issuance longterm debt included 1800 million term loan 2743 million senior unsecured notes original issue discounts 7 million fund advancepierre acquisition addition proceeds issuance longterm debt included 899 million senior unsecured notes original issue discounts 1 million used repay amounts outstanding term loan tranche due june 2020 net payments revolving credit facility 300 million fiscal 2017 used general corporate purposes • 2016 borrowings 1065 million payments 765 million revolving credit facility fiscal 2016 utilized revolving credit facility balance cash position retirement 2016 notes changes working capital additionally total debt foreign subsidiaries 7 million october 1 2016 6 million classified longterm consolidated balance sheets • 2015 500 million term loans full balance used prepay outstanding borrowings 3year tranche term loan facility addition borrowings payments revolver 1345 million fiscal 2015 utilized revolving credit facility balance cash position term loan deleveraging changes working capital additionally total debt foreign subsidiaries 10 million october 3 2015 classified longterm consolidated balance sheets • proceeds issuance repayment shortterm debt form commercial paper • 2017 net issuances 778 million unsecured shortterm promissory notes commercial paper pursuant commercial paper program used net proceeds commercial paper program partial financing advancepierre acquisition general corporate purposes • payments tra obligation acquisition advancepierre • 2017 advancepierre tax receivable agreement tra liability 223 million paid former shareholders result assumption obligation acquisition advancepierre • purchases tyson class common stock include • 797 million 1868 million 455 million shares repurchased pursuant share repurchase program fiscal 2017 2016 2015 respectively • 63 million 76 million 40 million shares repurchased fund certain obligations equity compensation plans fiscal 2017 2016 2015 respectively • currently plan repurchase shares fund obligations equity compensation programs reach net debt ebitda target around 2x currently anticipate reaching goal third quarter fiscal 2018 • dividends paid fiscal 2017 included 50 increase fiscal 2016 quarterly dividend rate • net increase fiscal 2016 primarily driven tax benefits associated stock option exercises • liquidity includes cash equivalents shortterm investments availability revolving credit facility less outstanding commercial paper balance • september 30 2017 current debt 906 million intend repay cash generated operating activities liquidity sources • revolving credit facility supports shortterm funding needs letters credit also serves backstop commercial paper program letters credit issued facility primarily support leasing obligations workers’ compensation insurance programs maximum borrowing revolving credit facility fiscal 2017 590 million • expect net interest expense approximate 325 million fiscal 2018 • september 30 2017 approximately 308 million cash held accounts foreign subsidiaries generally rely foreign cash source funds support ongoing domestic liquidity needs rather manage worldwide cash requirements reviewing available funds among foreign subsidiaries cost effectiveness funds accessed repatriation cash balances certain foreign subsidiaries could adverse tax consequences subject regulatory capital requirements however balances generally available without legal restrictions fund ordinary business operations united states income taxes net applicable foreign tax credits provided undistributed earnings foreign subsidiaries intention reinvest cash held foreign subsidiaries permanently repatriate cash tax efficient • ratio shortterm assets shortterm liabilities current ratio 155 1 177 1 september 30 2017 october 1 2016 respectively capital resources credit facility cash flows operating activities current cash hand primary sources liquidity funding debt service capital expenditures dividends share repurchases also revolving credit facility committed capacity 15 billion provide additional liquidity working capital needs letters credit backstop commercial paper program september 30 2017 outstanding borrowings 8 million outstanding letters credit issued facility none drawn upon left 1492 million available borrowing revolving credit facility funded syndicate 41 banks commitments ranging 03 million 106 million per bank syndicate includes bank holding companies required adequately capitalized federal bank regulatory agency requirements commercial paper program commercial paper program provides lowcost source borrowing fund general corporate purposes including working capital requirements maximum borrowing capacity commercial paper program 800 million maturities notes may vary may exceed 397 days date issuance september 30 2017 778 million outstanding program maturities less 45 days capitalization monitor credit ratings capacity longterm financing consider various qualitative quantitative factors monitor ratio net debt ebitda support longterm financing decisions september 30 2017 october 1 2016 ratio net debt ebitda 27x 17x respectively refer part ii item 6 selected financial data explanation reconciliation comparable gaap measures increase ratio fiscal 2017 primarily result incremental debt advancepierre acquisition credit ratings term loans tranche b due august 2019 tranche b due august 2020 standard poors rating services standard poors financial services llc business sp credit rating term loans bbb moody’s investor service inc moodys credit rating term loans baa2 fitch ratings wholly owned subsidiary fimlac sa fitch credit rating term loans bbb table outlines borrowing spread outstanding principal balances term loans correspond ratings levels sp moodys fitch revolving credit facility sp’s corporate credit rating tyson foods inc bbb moody’s senior unsecured longterm debt rating tyson foods inc baa2 fitchs issuer default rating tyson foods inc bbb table outlines fees paid unused portion facility fee rate letter credit fees undrawn letter credit fee borrowing spread depending rating levels tyson foods inc sp moodys fitch event rating levels split applicable fees spread based upon rating level effect two rating agencies three rating agencies different rating levels applicable fees spread based upon rating level rating levels two rating agencies debt covenants revolving credit term loan facilities contain affirmative negative covenants among things may limit restrict ability create liens encumbrances incur debt merge dissolve liquidate consolidate make acquisitions investments dispose transfer assets change nature business engage certain transactions affiliates enter hedging transactions case subject certain qualifications exceptions addition required maintain minimum interest expense coverage maximum debttocapitalization ratios senior notes also contain affirmative negative covenants among things may limit restrict ability create liens engage certain saleleaseback transactions engage certain consolidations mergers sales assets compliance debt covenants september 30 2017 pension plans described part ii item 8 notes consolidated financial statements note 15 pensions postretirement benefits funded status defined benefit pension plans defined amount projected benefit obligation exceeds plan assets funded status plans underfunded position 195 million end fiscal 2017 compared underfunded position 336 million end fiscal 2016 expect contribute approximately 38 million cash pension plans fiscal 2018 compared approximately 53 million fiscal 2017 64 million fiscal 2016 exact amount cash contributions made pension plans year dependent upon number factors including minimum funding requirements result actual funding fiscal 2018 may different estimate offbalance sheet arrangements offbalance sheet arrangements material financial position results operations offbalance sheet arrangements guarantees debt outside third parties including leases grower loans residual value guarantees covering certain operating leases various types equipment see part ii item 8 notes consolidated financial statements note 20 commitments contingencies discussion contractual obligations following table summarizes contractual obligations september 30 2017 1 event default payment acceleration principal payments could occur 2 interest payments include interest outstanding debt payments estimated variable rate variable term debt based effective interest rates september 30 2017 expected payment dates 3 amounts include guarantees debt outside third parties consist leases grower loans substantially collateralized underlying assets well residual value guarantees covering certain operating leases various types equipment amounts included maximum potential amount future payments 4 amounts include minimum lease payments lease agreements 5 amounts include agreements purchase goods services enforceable legally binding specify significant terms including fixed minimum quantities purchased fixed minimum variable price provisions approximate timing transaction purchase obligations amount included items future purchase commitments grains livestock contracts fixed grower fees provide terms meet criteria certain grain purchase commitments fixed quantity provision assumed future obligations commitment based available commodity futures prices published observable active markets september 30 2017 excluded future purchase commitments contracts meet criteria purchase orders included table purchase order authorization purchase cancelable contracts goods services contain termination clauses without penalty also excluded 6 amounts include estimated amounts complete buildings equipment construction september 30 2017 7 longterm liabilities primarily consist deferred compensation deferred income selfinsurance asset retirement obligations unable reliably estimate amount payments beyond fiscal 2018 therefore included total liability table also employee benefit obligations consisting pensions postretirement benefits 258 million excluded table discussion companys pension postretirement plans including funding matters included part ii item 8 notes consolidated financial statements note 15 pensions postretirement benefits addition amounts shown table unrecognized tax benefits 296 million related interest penalties 63 million september 30 2017 recorded liabilities potential maximum contractual obligation associated cash flow assistance programs september 30 2017 based estimated fair values livestock supplier’s net tangible assets date aggregated approximately 380 million receivables programs september 30 2017 recently issuedadopted accounting pronouncements refer discussion part ii item 8 notes consolidated financial statements note 1 business summary significant accounting policies note 2 changes accounting principles critical accounting estimates preparation consolidated financial statements requires us make estimates assumptions estimates assumptions affect reported amounts assets liabilities disclosure contingent assets liabilities date consolidated financial statements reported amounts revenues expenses reporting period actual results could differ estimates following summary certain accounting estimates consider critical description judgments uncertainties effect actual results differ assumptions contingent liabilities subject lawsuits investigations claims related wage hourlabor environmental product taxing authorities matters required assess likelihood adverse judgments outcomes matters well potential ranges probable losses determination amount reserves disclosures required contingencies made considerable analysis individual issue accrue contingent liabilities assessment risk loss probable reasonably estimated disclose contingent liabilities risk loss reasonably possible probable contingent liabilities contain uncertainties eventual outcome result future events determination current reserves requires estimates judgments related future changes facts circumstances differing interpretations law assessments amount damages effectiveness strategies factors beyond control made material changes accounting methodology used establish contingent liabilities past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate contingent liabilities however actual results consistent estimates assumptions may exposed gains losses could material marketing advertising promotion costs promote products marketing advertising trade promotions consumer incentives programs include limited coupons discounts rebates volumebased incentives cooperative advertising programs marketing advertising promotion costs charged operations period incurred accrue costs based estimated performance historical utilization redemption rates program cash consideration given customers considered reduction price products thus recorded reduction sales remainder marketing advertising promotion costs recorded selling general administrative expense recognition costs related programs contains uncertainties due judgment required estimating potential performance utilization redemption rates program estimates based many factors including experience similar promotional programs made material changes accounting methodology used establish marketing advertising promotion accruals past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate marketing advertising promotion accruals however actual results consistent estimates assumptions may exposed gains losses could material 10 change marketing advertising promotion accruals september 30 2017 would impact pretax earnings approximately 15 million description judgments uncertainties effect actual results differ assumptions accrued selfinsurance selfinsured certain losses related health welfare workers’ compensation auto liability general liability claims use independent thirdparty actuary assist determining selfinsurance liability actuary consider number factors estimating selfinsurance liability including claims experience demographic factors severity factors actuarial assumptions periodically review estimates assumptions thirdparty actuary assist us determining adequacy selfinsurance liability policy maintain accrual within central high point actuarial range selfinsurance liability contains uncertainties due assumptions required judgment used costs settle obligations including legal healthcare costs could increase decrease causing estimates selfinsurance liability change incident rates including frequency severity could increase decrease causing estimates selfinsurance liability change made material changes accounting methodology used establish selfinsurance liability past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate selfinsurance liability however actual results consistent estimates assumptions may exposed gains losses could material 10 increase actuarial estimate september 30 2017 would result increase amount recorded selfinsurance liability approximately 27 million 10 decrease actuarial estimate september 30 2017 would result decrease amount recorded selfinsurance liability approximately 11 million description judgments uncertainties effect actual results differ assumptions defined benefit pension plans sponsor nine defined benefit pension plans provide retirement benefits certain employees also participate multiemployer plan provides defined benefits certain employees covered collective bargaining agreements plans usually administered board trustees composed management participating companies labor representatives use independent thirdparty actuaries assist us determining pension obligations net periodic benefit cost actuaries review assumptions include estimates present value projected future pension payment plan participants taking consideration likelihood potential future events salary increases demographic experience accumulate amortize effect actuarial gains losses future periods net periodic benefit cost defined benefit pension plans 28 million fiscal 2017 projected benefit obligation 1707 million end fiscal 2017 unrecognized actuarial gain 44 million end fiscal 2017 currently expect net periodic benefit cost fiscal 2018 approximately 15 million excluding pending settlement described note 15 pension postretirement benefits plan assets currently comprised approximately 87 fixed income securities 9 equity securities fixed income securities include limited direct bond investments pooled indirect bond investments may include limited international domestic equities real estate commodities private equity expect contribute approximately 38 million cash pension plans fiscal 2018 exact amount cash contributions made pension plans year dependent upon number factors including minimum funding requirements defined benefit pension plans contain uncertainties due assumptions required judgments used key assumptions used developing required estimates include factors discount rates expected returns plan assets retirement rates mortality assumptions material impact upon funded status net periodic benefit cost discount rates determined using cash flow matching technique whereby rates yield curve developed highquality debt securities applied benefit obligations determine appropriate discount rate determining longterm rate return plan assets first examined historical rates return various asset classes within plans determined longterm projected rateofreturn based expected returns investment management fees paid plan assets factored determination asset return assumptions retirement rates based primarily actual plan experience standard actuarial tables used estimate mortality reasonably likely changes external factors result changes assumptions used measure pension obligations net periodic benefit cost future periods risks participating multiemployer plans different singleemployer plans net pension cost multiemployer plans equal annual contribution determined accordance provisions negotiated labor contracts assets contributed plans segregated otherwise restricted provide benefits employees future cost plans dependent number factors including funded status plans ability participating companies meet ongoing funding obligations made material changes accounting methodology used establish pension obligations net periodic benefit cost past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate pension obligations net periodic benefit cost however actual results consistent estimates assumptions accumulated amortized future periods therefore generally affect net periodic benefit cost future periods 1 increase discount rate september 30 2017 would result decrease projected benefit obligation net periodic benefit cost approximately 187 million 19 million respectively 1 decrease discount rate september 30 2017 would result increase projected benefit obligation net periodic benefit cost approximately 229 million 14 million respectively 1 change return plan assets september 30 2017 would impact net periodic benefit cost approximately 15 million sensitivities reflect impact changing one assumption time remaining assumptions held constant economic factors conditions often affect multiple assumptions simultaneously effect changes assumptions necessarily linear description judgments uncertainties effect actual results differ assumptions income taxes estimate total income tax expense based statutory tax rates tax planning opportunities available us various jurisdictions earn income federal income tax includes estimate taxes earnings foreign subsidiaries expected taxable upon remittance united states except earnings considered indefinitely invested foreign subsidiary deferred income taxes recognized future tax effects temporary differences financial income tax reporting using tax rates effect years differences expected reverse valuation allowances recorded likely tax benefit realized deferred tax asset record unrecognized tax benefit liabilities known anticipated tax issues based analysis whether extent additional taxes due changes tax laws rates could affect recorded deferred tax assets liabilities future changes projected future earnings could affect recorded valuation allowances future calculations related income taxes contain uncertainties due judgment used calculate tax liabilities application complex tax regulations across tax jurisdictions operate analysis unrecognized tax benefits contains uncertainties based judgment used apply likely recognition measurement thresholds believe reasonable likelihood material change tax related balances valuation allowances however due complexity uncertainties ultimate resolution may result payment materially different current estimate tax liabilities extent prevail matters unrecognized tax benefit liabilities established required pay amounts excess recorded unrecognized tax benefit liabilities effective tax rate given financial statement period could materially affected unfavorable tax settlement would require use cash generally result increase effective tax rate period resolution favorable tax settlement would generally recognized reduction effective tax rate period resolution impairment longlived assets definite life intangibles longlived assets definite life intangibles evaluated impairment whenever events changes circumstances indicate carrying value may recoverable examples include significant adverse change extent manner use asset change physical condition unexpected change financial performance evaluating longlived assets definite life intangibles impairment compare carrying value asset’s estimated undiscounted future cash flows impairment indicated estimated future cash flows less carrying value asset assets held sale compare carrying value disposal group fair value impairment excess carrying value fair value asset recorded impairment charges related longlived assets definite life intangibles 214 million 45 million 262 million fiscal 2017 2016 2015 respectively impairment analysis contains uncertainties due judgment assumptions including useful lives intended use assets observable market valuations forecasted sales operating margins growth rates royalty rates discount rates based budgets business plans economic projections anticipated future cash flows marketplace data reflects risk inherent future cash flows determine fair value made material changes accounting methodology used evaluate impairment longlived assets definite life intangibles last three fiscal years believe reasonable likelihood material change estimates assumptions used calculate impairments useful lives longlived assets definite life intangibles however actual results consistent estimates assumptions used calculate estimated future cash flows may exposed impairment losses could material periodically conduct projects strategically evaluate optimization items network capacity manufacturing efficiencies business technology additionally continue evaluate international operations strategies significant change strategies outlook manner plan use assets may exposed future impairments impairment goodwill indefinite life intangible assets description goodwill evaluated impairment first performing qualitative assessment determine whether quantitative goodwill test necessary determined based qualitative factors fair value reporting unit may likely less carrying amount significant changes macroeconomic factors related reporting unit occurred could materially impact fair value quantitative goodwill impairment test would required quantitative test compares fair value reporting unit carrying amount elect forgo qualitative assessment perform quantitative test january 2017 fasb issued updated guidance simplifying accounting goodwill impairment guidance removes step 2 goodwill impairment test required hypothetical purchase price allocation goodwill impairment amount reporting units carrying value exceeds fair value exceed carrying amount goodwill early adopted guidance third quarter fiscal 2017 however adoption impact fiscal 2017 goodwill impairment assessment description new guidance refer part ii item 8 notes consolidated financial statements note 2 changes accounting principles indefinite life intangible assets qualitative assessment also performed determine whether existence events circumstances indicates likely intangible asset impaired similar goodwill also elect forgo qualitative test indefinite life intangible assets perform quantitative test upon performing quantitative test carrying value intangible asset exceeds fair value impairment loss recognized amount equal excess elected forgo qualitative assessment indefinite life intangible assets fiscal 2017 impairment test elected make first day fourth quarter annual impairment assessment date goodwill indefinite life intangible assets however could required evaluate recoverability goodwill indefinite life intangible assets prior required annual assessment among things experience disruptions business unexpected significant declines operating results divestiture significant component business sustained decline market capitalization judgments uncertainties estimate fair value reporting units using combination various valuation techniques including income approach discounted cash flow analysis market approaches ebitda multiples comparable publiclytraded companies precedent transactions primary technique discounted cash flow analysis approaches use significant unobservable inputs level 3 inputs defined fair value hierarchy requires us make various judgmental assumptions sales operating margins growth rates discount rates include assumptions sales operating margins growth rates consider budgets business plans economic projections believed reflect market participant views would exist exit transaction assumptions also made varying perpetual growth rates periods beyond longterm business plan period generally utilize normalized operating margin assumptions based future expectations operating margins historically realized reporting units industries prepared foods reporting unit prepared foods operating segment goodwill september 30 2017 totaling 3678 million generally assumed operating margins future years would normalized range 10 12 believe consistent market participant views exit transaction assumed future operating margins consistent realized current fiscal year would failed quantitative step annual impairment test may resulted material goodwill impairment loss current year prepared foods reporting unit results indicative future market participant expectations exit transaction primarily due unusual items fiscal 2017 including 213 million charges related acquisition impairment san diego operation impairment associated expected sale nonprotein business restructuring related charges additionally process divesting three nonprotein businesses integrating advancepierre’s prepared operations prepared foods reporting unit well executing financial fitness program collectively improve operating results future periods pass first step annual impairment test fiscal 2017 prepared foods reporting unit’s projected operating margins utilizing discounted cash flow valuation technique average 66 breakeven exceeded breakeven operating margin level first nine months fiscal 2017 well previous two fiscal years expect well exceed fiscal 2018 future years fair value indefinite life intangible assets calculated principally using relieffromroyalty multiperiod excess earnings valuation approaches uses significant unobservable inputs level 3 inputs defined fair value hierarchy believed reflect market participant views would exist exit transaction valuation approaches required make estimates assumptions sales operating margins growth rates royalty rates discount rates based budgets business plans economic projections anticipated future cash flows marketplace data impairment analysis contains uncertainties due uncontrollable events could positively negatively impact anticipated future economic operating conditions effect actual results differ assumptions made material changes accounting methodology used evaluate impairment goodwill intangible assets last three years fiscal 2017 2016 2015 material reporting units underwent quantitative test passed goodwill impairment analysis fiscal 2015 recorded 23 million full impairment immaterial reporting unit’s goodwill inherent estimates assumptions used determining fair value reporting units indefinite life intangible assets outside control management including interest rates cost capital tax rates market ebitda comparables credit ratings believe made reasonable estimates assumptions calculate fair value reporting units indefinite life intangibles possible material change could occur actual results consistent estimates assumptions used calculate fair value could result additional material impairments goodwill material reporting units estimated fair value exceeded carrying value 20 date recent estimated fair value determination consequently currently consider material reporting units significant risk impairment discount rate used annual goodwill impairment test increased 67 fiscal 2017 62 fiscal 2016 discount rates continue low compared historical levels 54 increase discount rate would caused carrying value prepared foods reporting unit 3678 million goodwill september 30 2017 exceed discounted cash flows fair value fiscal 2017 2016 2015 indefinite life intangible assets impairment analysis result impairment charge indefinite life intangible assets’ estimated fair value exceeded carrying value 20 date recent estimated fair value determination consequently currently consider material indefinite life intangible assets significant risk impairment discount rate used annual indefinite life intangible assets impairment test 79 fiscal 2017 fiscal 2016 20 increase discount rate would caused carrying value one intangible asset carrying value 533 million exceed fair value item 7aitem 7 management’s discussion analysis financial condition results operations description company one world’s largest food companies recognized leader protein founded 1935 john w tyson grown three generations family leadership company broad portfolio products brands including tyson® jimmy dean® hillshire farm® ball park® wright® aidells® ibp® state fair® operate four reportable segments beef pork chicken prepared foods internationalother primarily includes foreign operations australia china malaysia mexico netherlands south korea thailand thirdparty merger integration costs corporate overhead related tyson new ventures llc description business refer part item 1 business overview covid19 continue monitor respond evolving nature covid19 impact global business formed internal covid19 task force primary purposes maintaining health safety team members ensuring ability operate processing facilities maintaining liquidity business experienced continue experience multiple challenges related pandemic challenges increased operating costs negatively impacted sales volumes back half fiscal 2020 anticipated continue fiscal 2021 operationally experienced slowdowns temporary idling production facilities due team member absenteeism choices made ensure team member health safety result experienced lower levels productivity higher costs production likely continue short term effects covid19 diminish segments also experienced shift demand foodservice retail 2020 however volume increases retail sufficient offset decreases foodservice current trends including combination operational challenges volume impacts likely continue fiscal 2021 negative impact overall earnings ultimate impact covid19 remains uncertain depend future developments including duration spread pandemic related actions taken federal state local government officials prevent manage disease spread uncertain cannot predicted • team members health safety team members top priority protect team members implemented continue implement safety measures recommended centers disease control prevention cdc occupational safety health administration osha facilities coordinate health officials appropriate including limited checking temperature team members enter company facilities restricting visitor access increasing efforts deep clean sanitize facilities requiring use protective face coverings making protective face coverings protective equipment available team members encouraging team members feel sick stay home relaxed attendance policies enhanced benefits implemented additional ways promote social distancing production facilities creating additional breakroom space allowing extra time shifts reduce interaction team members well erecting dividers workstations increasing space workers production floor officebased team members encouraged team members capable working home prioritizing team member safety begin reintegrate offices time paid 1000 bonuses approximately 106000 domestic frontline team members support company’s operations pandemic additionally experienced positive covid19 cases worker absenteeism throughout production network back half fiscal 2020 led temporary idling production facilities currently compensating team members sick time covid19 related idling shift cancellations • customers production significant impacts covid19 relate channel shifts lower production committed best ensure continuity business availability products customers seen shift demand foodservice retail sales channels schools indining restaurants remain closed continue operate reduced capacity across country production capabilities including large scale geographic proximities allow us adapt facilities changing demand shifting certain amounts production foodservice retail facilities adapted result experienced net negative impact volumes addition production facilities experienced varying levels production impacts including reduced volumes due implementation additional worker health precautions worker absenteeism temporary covid19 related idling production facilities additionally temporarily idled certain facilities shifts lines service foodservice channel balanced shifting demand foodservice retail sales channels april 28 2020 president issued executive order stating importance continued operation meat poultry processing facilities directing secretary agriculture issue rules orders ensure continued supply meat poultry consistent guidance operations meat poultry processing facilities jointly issued cdc osha order provides clarity standards apply meat poultry processing facilities anticipate continuing work united states department agriculture usda government officials efforts ensure able operate facilities safely • supply chain supply chain stayed largely intact built contingency plans redundant supply production facilities well external suppliers able leverage extensive distribution network large private transportation fleet help mitigate impacts covid19 experienced expect continue experience volatility commodity inputs impacted input costs part due impacts caused covid19 production facility downtime back half fiscal 2020 impacted segments supply chains prepared foods segment depends adequate supplies raw materials necessary production high levels industry pork facility idling back half fiscal 2020 impacted availability certain raw materials temporarily limited production capability increased formulation costs various prepared foods products additionally chicken segment divert live production rendering suboptimal product mixes beef pork segments delay deliveries live cattle hogs also dealt impact heavier harvest weights since also export globally container availability port capacities among challenges meeting global demand products • insurance cares act although maintain insurance policies various risks believe covid19 impacts covered policies march 27 2020 president signed law coronavirus aid relief economic security act “cares act” cares act among things includes provisions relating refundable payroll tax credits deferral employer portion social security payments number income tax provisions related income tax significant impact financial statements began implementing deferral employer portion social security payments back half fiscal year favorable impact liquidity resulted deferral approximately 185 million payroll taxes fiscal 2020 recognized benefit approximately 30 million related refundable payroll tax credit provision • liquidity generated approximately 39 billion operating cash flows fiscal 2020 october 3 2020 32 billion liquidity included availability revolving credit facility 1420 million cash equivalents 548 million current debt combined cash expected generated company’s operations anticipate maintain sufficient liquidity operate business make capital expenditures pay dividends address needs including ability meet maturing debt obligations however continue monitor impact covid19 liquidity necessary take action preserve liquidity ensure business operate uncertain times may include temporarily suspending share repurchases suspending reducing dividend payments cash preservation actions necessary • overall financial condition continue proactively manage company operations pandemic major challenge face availability team members operate production facilities production facilities experiencing varying levels absenteeism continue operate production facilities team member health safety top priority covid19related slowdowns temporary idling drive higher labor production costs expect continue return normal conditions however higher labor costs may become permanent nature also experienced covid19related demand shifts away foodservice retail responded demand shifts adjusting parts production capacity accordingly despite adjusting parts operational footprint higher retail volumes fully offset reduced volumes foodservice additionally price mix volume shifts resulted lower margin realization portions year prepared foods chicken segments idling pork facilities could downstream impacts availability raw material parts prepared foods business could subsequently impact ability produce normal levels consequently challenges created absenteeism proactive temporary idling production facilities due covid19 adversely affects operating costs reduces would otherwise stronger margin environment however cannot predict ultimate impact covid19 short longterm demand time depend among things severity duration covid19 pandemic liquidity expected adequate continue run operations meet obligations become due fiscal year accounting cycle resulted 53week year fiscal 2020 52week year fiscal 2019 2018 general sales grew 2 fiscal 2020 fiscal 2019 432 billion primarily due impact additional week increased average sales prices beef pork prepared foods segments fiscal 2020 operating income increased compared fiscal 2019 strong beef pork segment results partially offset decline operating income chicken prepared foods segments fiscal 2020 results impacted 77 million restructuring related charges offset positive impact additional week fiscal 2019 results impacted 41 million impairment associated planned divestiture business 41 million restructuring related charges 37 million related keystone foods purchase accounting acquisition related costs 31 million costs associated fire one beef production facilities fiscal 2020 incurred direct incremental expenses related covid19 totaling approximately 540 million approximately 500 million 40 million recorded cost sales selling general administrative respectively consolidated statements income covid19 direct incremental expenses primarily included team member costs associated worker health availability production facility downtime including direct costs personal protection equipment production facility sanitization covid19 testing donations product downgrades rendered product certain professional fees 114 million thank bonuses frontline team members partially offset cares act credits due nature direct incremental covid19 expenses segments primarily impacted based relative number team members absenteeism degree production disruptions experienced thus beef chicken segments incurred greater proportion total costs direct incremental covid19 related costs exclude market related impacts may driven part covid19 including items derivatives deferred compensation investments market driven impacts margin demand indirect costs associated covid19 reflected amounts including costs associated raw materials distribution transportation plant underutilization reconfiguration premiums paid cattle producers pricing discounts market environment according usda domestic protein production beef pork chicken turkey increased approximately 2 fiscal 2020 compared fiscal 2019 continue monitor recent trade tariff activity well covid19 potential impacts exports input costs across segments additionally segments experienced increased operating costs fiscal 2020 pursue recovery increased costs pricing beef pork segments experienced strong demand lower production throughput associated impacts covid19 also experienced lower livestock costs chicken segment experienced volatile market conditions associated increased domestic availability supply lower production throughput associated covid19 prepared foods segment continued experience growth retail channel faced increased raw material costs lower production throughput associated covid19 margins total operating margin 72 fiscal 2020 operating margins segment follows • beef 107 • pork 110 • chicken 09 • prepared foods 87 strategy sustainably feed world fastest growing protein brands intend achieve strategy grow business differentiated capabilities deliver ongoing financial fitness continuous improvement sustain company world future generations • fiscal 2019 acquired two businesses total approximately 25 billion net cash acquired businesses included thai european operations consist vertically integrated chicken furtherprocessing operations keystone foods major supplier growing global foodservice industry acquired furtherance growth strategy expansion valueadded protein capabilities domestic global markets description refer part ii item 8 notes consolidated financial statements note 3 acquisitions dispositions • first quarter fiscal 2020 company approved restructuring program 2020 program expected contribute company’s overall strategy financial fitness elimination overhead consolidation certain enterprise functions fourth quarter fiscal 2020 company extended 2020 program identified additional opportunities eliminate overhead optimizing organizational structures activities result restructuring program expect realize savings approximately 140 million 160 million fiscal 2021 fiscal 2022 respectively recognized 60 million cumulative pretax charges fiscal 2020 associated 2020 program consisting severance employee related costs part 2020 program eliminating positions across several areas job levels eliminated positions originating corporate offices springdale arkansas chicago illinois well certain production facility supply chain administrative positions majority positions already expected eliminated end fiscal 2021 description refer part ii item 8 notes consolidated financial statements note 7 restructuring related charges 2020 included following items • 75 million pretax 016 per diluted share restructuring related charges • 65 million pretax 014 per diluted share related additional week fiscal 2020 • 116 million pretax 024 per diluted share due gain pension plan terminations 2019 included following items • 37 million pretax 008 per diluted share keystone foods purchase accounting acquisition related costs included 11 million purchase accounting adjustment amortization fair value stepup inventory 26 million acquisition related costs • 41 million pretax 008 per diluted share restructuring related charges • 55 million pretax 011 per diluted share gain sale investment • 105 million post tax 029 per diluted share recognition previously unrecognized tax benefit • 31 million pretax 006 per diluted share beef production facility fire costs • 41 million pretax 009 per diluted share impairment associated planned divestiture business • 15 million pretax 003 per diluted share due pension plan termination charge summary results 2020 vs 2019 • sales volume sales positively impacted increase sales volume accounted increase 278 million primarily due incremental volumes business acquisitions well impact additional week fiscal 2020 partially offset decreased volumes segments fiscal 2020 due lower production throughput associated impact covid19 • average sales price sales positively impacted higher average sales prices accounted increase 502 million increase average sales price primarily attributable favorable product mix related robust demand retail channel across segments beef pork demand remaining strong amid supply disruptions related covid19 partially offset approximately 45 million incremental discounted sales prepared foods segment 2019 vs 2018 • sales volume sales positively impacted increase sales volume accounted increase 3539 million primarily driven incremental volumes business acquisitions impacted chicken segment internationalother partially offset business divestitures fiscal 2018 prepared foods segment • average sales price sales negatively impacted lower average sales prices accounted decrease 1186 million chicken segment decrease average sales price result decreased pricing associated product mix changes fiscal 2018 acquisitions partially offset increase average sales price beef prepared foods segments attributable strong demand sales beef segment favorable product mix higher raw material costs prepared foods segment • amounts include net increase 2209 million related impact results acquisitions divestitures 2020 vs 2019 • cost sales increased 418 million included net increase 667 million primarily related impact results acquisitions divestitures • remaining 249 million decrease higher input cost per pound increased cost sales 393 million offset lower sales volume decreased cost sales 642 million • 393 million impact higher input cost per pound impacted • increase across segments primarily driven net impacts average cost per pound mix changes well production inefficiencies due part impact covid19 fiscal 2020 • increase approximately 500 million direct incremental expenses related covid19 • increase approximately 80 million chicken segment related net increases feed ingredient costs growout expenses outside meat purchases • increase raw material input costs approximately 90 million well increase inventory write downs approximately 15 million prepared foods segment • increase incentivebased compensation approximately 70 million • decrease live cattle costs approximately 530 million beef segment • decrease live hog costs approximately 255 million pork segment • 642 million impact lower sales volume excluding impact acquisitions primarily driven decreased sales volume segments due lower production throughput associated impact covid19 back half fiscal 2020 well reduction live cattle processing capacity temporary closure production facility first quarter fiscal 2020 result fire partially offset impact additional week fiscal 2020 2019 vs 2018 • cost sales increased 2427 million included net increase 2120 million primarily related impact results acquisitions divestitures • remaining 307 million increase higher input cost per pound increased cost sales 445 million offset lower sales volume decreased cost sales 138 million • 445 million impact higher input cost per pound impacted • increase live cattle costs approximately 110 million beef segment • increase live hog costs approximately 100 million pork segment • increase raw material input costs approximately 60 million prepared foods segment • increase freight costs approximately 20 million • increase due 31 million incremental costs associated fire one beef production facilities • decrease due onetime cash bonus front line team members 108 million fiscal 2018 • decrease due impairment charges 101 million associated divestiture nonprotein business fiscal 2018 partially offset 41 million impairment related planned divestiture business fiscal 2019 33 million gain related sale nonprotein business fiscal 2018 • decrease due net derivative gains 26 million fiscal 2019 compared net derivative losses 33 million fiscal 2018 due risk management activities amounts exclude offsetting impacts related physical purchase transactions included change live cattle hog costs raw material feed ingredient costs described herein • remaining net change across segments primarily driven increased operating costs impacts average input cost per pound mix changes • 138 million impact lower sales volume excluding impact acquisitions divestitures driven decrease sales volume chicken segment 2020 vs 2019 • increase 75 million selling general administrative primarily driven • increase 83 million employee costs primarily incentivebased compensation impact extra week fiscal 2020 • increase 56 million fiscal 2019 acquisitions owned us fiscal 2019 • increase 40 million direct incremental expenses associated covid19 • increase 35 million technology related costs • decrease 55 million professional fees merger integration costs • decrease 49 million marketing advertising promotion expenses • decrease 26 million travel entertainment expenses 2019 vs 2018 • increase 131 million selling general administrative primarily driven • increase 87 million related keystone foods acquisition • increase 26 million team member costs primarily incentivebased compensation • increase 18 million technology related costs • increase 16 million marketing advertising promotion expenses • decrease 18 million restructuring related charges 2020 2019 • cash interest expense primarily included interest expense related senior notes term loans commercial paper addition commitment fees incurred revolving credit facility increase cash interest expense fiscal 2020 primarily due debt issued fiscal 2019 connection business acquisitions higher interest rates partially offset term loans extinguished fiscal 2020 • noncash interest expense primarily included interest capitalized partially offset amortization debt issuance costs discountspremiums note issuances 2020 included 116 million gains related pension plan terminations 2019 included 55 million pretax gain sale investment 23 million insurance proceeds income 20 million equity earnings joint ventures partially offset 48 million net periodic pension postretirement benefit costs pension plan settlements effective income tax rate 224 fiscal 2020 compared 163 fiscal 2019 state taxes increased effective tax rate 30 29 fiscal 2020 2019 respectively effective tax rate fiscal 2019 includes 66 benefit due changes tax reserves primarily expirations federal state foreign statutes limitations segment results operate four reportable segments beef pork chicken prepared foods internationalother primarily includes foreign operations australia china malaysia mexico netherlands south korea thailand thirdparty merger integration costs corporate overhead related tyson new ventures llc additional information regarding geographic areas foreign operations set forth part ii item 8 notes consolidated financial statements note 18 segment reporting following table summary segment sales operating income loss measure segment income loss 2020 vs 2019 • sales volume sales volume decreased primarily due lower production throughput associated impact covid19 portions fiscal 2020 reduction live cattle harvest capacity result fire caused temporary closure production facility majority first quarter fiscal 2020 partially offset impact additional week fiscal 2020 • average sales price average sales price increased beef demand remained strong amid supply disruptions related impact covid19 • operating income operating income increased primarily due market conditions including covid19 disruptions increased spread preexisting contractual agreements cost fed cattle partially offset price reductions offered customers well production inefficiencies direct incremental expenses related covid19 2019 vs 2018 • sales volume sales volume decreased due reduction live cattle processing capacity temporary closure production facility result fire • average sales price average sales price increased demand beef products remained strong • operating income operating income increased continued maximize revenues relative live fed cattle costs partially offset increased operating costs 31 million net incremental costs production facility fire 2020 vs 2019 • sales volume sales volume increased primarily due impact additional week partially offset lower production throughput associated covid19 portions fiscal 2020 despite strong demand pork products increased domestic availability live hogs • average sales price average sales price increased pork demand remained strong amid supply disruptions related impact covid19 • operating income operating income increased primarily due market conditions including covid19 disruptions increased spread preexisting contractual agreements cost live hogs partially offset production inefficiencies direct incremental expenses related covid19 2019 vs 2018 • sales volume sales volume increased due increased domestic availability live hogs strong demand pork products • average sales price average sales price increased associated higher livestock costs • operating income operating income decreased due periods compressed pork margins caused primarily combination increased livestock supplies excess domestic availability pork export constraints drove livestock costs faster sales prices 2020 vs 2019 • sales volume sales volume relatively flat fiscal 2020 impact additional week increased volumes retail offset lower production throughput associated impact covid19 lower foodservice demand • average sales price average sales price decreased fiscal 2020 primarily due weaker chicken pricing result market conditions • operating income operating income decreased fiscal 2020 primarily market conditions unfavorable product mix well production inefficiencies direct incremental expenses related covid19 operating income also impacted 34 million restructuring costs incurred fiscal 2020 2019 vs 2018 • sales volume sales volume increased primarily due incremental volume business acquisitions • average sales price average sales price decreased due market conditions sales mix primarily associated acquisition poultry rendering blending business fourth quarter fiscal 2018 • operating income operating income decreased due increased operating costs challenging pricing conditions additionally operating income impacted fiscal 2019 approximately 40 million net feed ingredient costs realized marktomarket derivative losses 2020 vs 2019 • sales volume sales volume decreased growth volume across retail channel offset reduction foodservice channel related reduced demand lower production throughput due impact covid19 partially offset impact additional week fiscal 2020 • average sales price average sales price increased due favorable product mix associated surge retail demand well pass increased raw material costs • operating income operating income decreased primarily due increased operating costs including 105 million increase net raw material costs derivative losses well production inefficiencies direct incremental expenses related covid19 additionally operating income impacted 28 million restructuring costs 2019 vs 2018 • sales volume sales volume decreased primarily business divestitures • average sales price average sales price increased due product mix positively impacted business divestitures well pricing increases ongoing business pass raw material costs • operating income operating income relatively flat fiscal 2019 compared fiscal 2018 strong demand products improved product mix offset increased raw material operating costs additionally operating income fiscal 2019 impacted 41 million impairment planned divestiture business operating income fiscal 2018 impacted 68 million impairment net realized gains associated divestiture nonprotein businesses 2020 vs 2019 • sales increased primarily incremental sales first full year results acquisitions keystone foods thai european operations • operating loss operating results improved due lower thirdparty merger integration costs partially offset reduced profitability international operations primarily impacts covid19 2019 vs 2018 • sales increased primarily incremental sales acquisitions keystone foods thai european operations • operating loss operating loss decreased primarily better performance china operations inclusion results keystone foods acquisition partially offset increased thirdparty merger integration costs associated keystone foods acquisition liquidity capital resources cash needs working capital expenditures growth opportunities repurchases senior notes repayment maturing debt payment dividends share repurchases expected met current cash hand cash flows provided operating activities shortterm borrowings based current expectations believe liquidity capital resources sufficient operate business however may take advantage opportunities generate additional liquidity refinance existing debt capital market transactions amount nature timing capital market transactions depend operating performance circumstances thencurrent commitments obligations amount nature timing capital requirements limitations imposed current credit arrangements overall market conditions addition continue monitor impact covid19 liquidity necessary take action preserve liquidity ensure business operate uncertain times may include temporarily suspending share repurchases suspending reducing dividend payments taking cash preservation actions necessary • impairment assets fiscal 2019 included 41 million impairment related planned sale business • net fiscal 2020 included 112 million gain related pension plan terminations • cash flows associated changes operating assets liabilities • 2020 increased primarily due decreased accounts receivable increased accrued salaries wages benefits increased taxes payable partially offset decreased accounts payable changes accounts receivable accounts payable largely due timing payments sales increase accrued salaries wages benefits primarily due increased incentivebased compensation increase taxes payable primarily related timing payments large part due payroll tax deferrals associated cares act • 2019 decreased primarily due increased accounts receivable inventory decreased income taxes payable increase accounts receivable primarily due timing sales payments increase inventory primarily due increased volumes costs prepared foods segment decreased income taxes payable primarily due reduced taxable income change federal tax rate timing payments related sale nonprotein businesses fiscal 2018 • additions property plant equipment included spending production growth safety animal wellbeing addition acquiring new equipment infrastructure replacements upgrades maintain competitive standing position us future opportunities • capital spending fiscal 2021 expected approximate 12 billion 14 billion include spending capacity expansion growth safety animal wellbeing infrastructure replacements upgrades operational improvements expected result production labor efficiencies yield improvements sales channel flexibility • purchases marketable securities included funding deferred compensation plans • acquisitions net cash acquired included acquisition two valuedadded protein businesses fiscal 2019 description regarding acquisitions refer part ii item 8 notes consolidated financial statements note 3 acquisitions dispositions • acquisition equity investments fiscal 2020 related purchases 40 interest vertically integrated brazilian poultry producer 50 interest joint venture serving worldwide fats oils market • proceeds sale businesses related proceeds received sale prepared foods business fiscal 2020 chicken processing facility fiscal 2019 description refer part ii item 8 notes consolidated financial statements note 3 acquisitions dispositions • net primarily included deposits capital expenditures fiscal 2020 primarily related net proceeds sale investment fiscal 2019 • proceeds issuance debt borrowingspayments revolving credit facility • 2020 march 27 2020 executed new 15 billion term loan facility repay commercial paper repay outstanding balances revolving credit facility general liquidity purposes • 2019 proceeds issuance debt included 1800 million proceeds issuance 364day term loan initial financing keystone foods acquisition subsequent issuance 2800 million senior unsecured notes primarily used extinguish 364day term loan repay commercial paper obligations used fund keystone foods acquisition well fund portion purchase price acquisition thai european operations • payments debt included • 2020 extinguished 350 million outstanding balance senior notes due june 2020 400 million outstanding balance senior notes due august 2020 278 million outstanding balance senior notes due september 2020 using cash hand • 2019 extinguished 1800 million outstanding balance 364day term loan 300 million outstanding balance may 2019 notes 1000 million outstanding balance august 2019 notes using proceeds received issuance debt cash hand liquidity sources • proceeds issuance repayment shortterm debt form commercial paper • 2020 net repayments 999 million unsecured shortterm promissory notes commercial paper pursuant commercial paper program • 2019 net issuances 395 million commercial paper pursuant commercial paper program • purchases tyson class common stock included • 150 million shares repurchased pursuant share repurchase program fiscal 2020 fiscal 2019 • 57 million 102 million shares repurchased fund certain obligations equity compensation plans fiscal 2020 2019 respectively • dividends paid fiscal 2020 included 12 increase fiscal 2019 quarterly dividend rate • liquidity includes cash equivalents shortterm investments availability revolving credit term loan facilities less outstanding commercial paper balance • october 3 2020 current debt 548 million intend repay cash generated operating activities existing new liquidity sources • revolving credit facility supports shortterm funding needs also serves backstop commercial paper program maximum borrowing revolving credit facility fiscal 2020 390 million • expect net interest expense approximate 440 million fiscal 2021 • ratio shortterm assets shortterm liabilities current ratio 19 1 13 1 october 3 2020 september 28 2019 respectively increase fiscal 2020 primarily due increased cash reduced current debt • october 3 2020 466 million cash held international accounts foreign subsidiaries generally rely foreign cash source funds support ongoing domestic liquidity needs manage worldwide cash requirements reviewing available funds among foreign subsidiaries cost effectiveness funds accessed intend repatriate excess cash net applicable withholding taxes subject regulatory requirements indefinitely reinvest outside united states remainder cash held foreign subsidiaries expect regulatory restrictions taxes repatriation material effect overall liquidity financial condition results operations foreseeable future capital resources credit term loan facilities cash flows operating activities cash hand primary sources liquidity funding debt service capital expenditures dividends share repurchases also revolving credit facility committed capacity 175 billion provide additional liquidity working capital needs backstop commercial paper program additionally 15 billion committed term loan facility fully drawn october 3 2020 october 3 2020 amounts available borrowing revolving credit term loan facilities totaled 175 billion revolving credit facility funded syndicate 39 banks commitments ranging 03 million 123 million per bank term loan facility funded syndicate 5 banks commitments ranging 200 million 350 million per bank syndicates include bank holding companies required adequately capitalized federal bank regulatory agency requirements commercial paper program commercial paper program provides lowcost source borrowing fund general corporate purposes including working capital requirements maximum borrowing capacity commercial paper program 1 billion maturities notes may vary may exceed 397 days date issuance october 3 2020 commercial paper outstanding program ability access commercial paper future may limited costs increased due current market environment impacted part covid19 capitalization monitor credit ratings capacity longterm financing consider various qualitative quantitative factors monitor ratio net debt ebitda support longterm financing decisions october 3 2020 september 28 2019 ratio net debt ebitda 22x 29x respectively refer part ii item 6 selected financial data explanation reconciliation comparable gaap measures decrease ratio fiscal 2020 due decrease net debt 1528 million increase ebitda credit ratings term loan facility due march 2022 standard poors rating services standard poors financial services llc business sp applicable rating bbb moody’s investor service incs moodys applicable rating baa2 fitch ratings wholly owned subsidiary fimlac sa fitch applicable rating bbb table outlines borrowing spread outstanding principal balance term loan corresponds applicable ratings levels sp moodys fitch revolving credit facility sps applicable rating bbb moodys applicable rating baa2 fitchs applicable rating bbb table outlines fees paid unused portion facility fee rate letter credit fees borrowings allin borrowing spread corresponds applicable ratings levels sp moodys fitch event rating levels split either facility applicable fees spread based upon rating level effect two rating agencies three rating agencies different rating levels applicable fees spread based upon rating level rating levels two rating agencies debt covenants revolving credit term loan facilities contain affirmative negative covenants among things may limit restrict ability create liens encumbrances incur debt merge dissolve liquidate consolidate make acquisitions investments dispose transfer assets change nature business engage certain transactions affiliates enter hedging transactions case subject certain qualifications exceptions addition required maintain minimum interest expense coverage maximum debttocapitalization ratios senior notes also contain affirmative negative covenants among things may limit restrict ability create liens engage certain saleleaseback transactions engage certain consolidations mergers sales assets compliance debt covenants october 3 2020 expect maintain compliance pension plans described part ii item 8 notes consolidated financial statements note 16 pensions postretirement benefits funded status defined benefit pension plans defined amount projected benefit obligation exceeds plan assets funded status plans underfunded position 234 million end fiscal 2020 compared underfunded position 240 million end fiscal 2019 expect contribute approximately 13 million cash pension plans fiscal 2021 compared approximately 19 million fiscal 2020 exact amount cash contributions made pension plans year dependent upon number factors including minimum funding requirements result actual funding fiscal 2021 may different estimate offbalance sheet arrangements offbalance sheet arrangements material financial position results operations offbalance sheet arrangements guarantees obligations related certain outside third parties including leases debt livestock grower loans residual value guarantees covering certain operating leases various types equipment see part ii item 8 notes consolidated financial statements note 21 commitments contingencies discussion contractual obligations following table summarizes contractual obligations october 3 2020 millions 1 event default payment acceleration principal payments could occur 2 interest payments include interest outstanding debt payments estimated variable rate variable term debt based effective interest rates october 3 2020 expected payment dates 3 amounts include guarantees obligations related certain outside third parties consist leases debt livestock grower loans substantially collateralized underlying assets well residual value guarantees covering certain operating leases various types equipment amounts included maximum potential amount future payments 4 additional information regarding operating leases refer part ii item 8 notes consolidated financial statements note 6 leases 5 amounts include agreements purchase goods services enforceable legally binding specify significant terms including fixed minimum quantities purchased fixed minimum variable price provisions approximate timing transaction purchase obligations amount included items future purchase commitments grains livestock purchase contracts provide terms meet criteria certain grain purchase commitments fixed quantity provision assumed future obligations commitment based available commodity futures prices published observable active markets october 3 2020 excluded future purchase commitments contracts meet criteria purchase orders included table purchase order authorization purchase cancelable contracts goods services contain termination clauses without penalty also excluded 6 amounts include estimated amounts complete buildings equipment construction october 3 2020 7 longterm liabilities primarily consist deferred compensation deferred income selfinsurance asset retirement obligations amount also consists 185 million payroll tax deferrals associated cares act expect paid fiscal 2022 fiscal 2023 unable reliably estimate amount timing remaining payments beyond fiscal 2020 therefore included total liability table also employee benefit obligations consisting pensions postretirement benefits 297 million excluded table discussion companys pension postretirement plans including funding matters included part ii item 8 notes consolidated financial statements note 16 pensions postretirement benefits addition amounts shown table unrecognized tax benefits 146 million related interest penalties 51 million october 3 2020 recorded liabilities potential maximum contractual obligation associated cash flow assistance programs october 3 2020 based estimated fair values livestock supplier’s net tangible assets date aggregated approximately 320 million analyzing residual credit risks general market conditions allowance programs estimated uncollectible receivables october 3 2020 recently issuedadopted accounting pronouncements refer discussion part ii item 8 notes consolidated financial statements note 1 business summary significant accounting policies note 2 changes accounting principles critical accounting estimates preparation consolidated financial statements requires us make estimates assumptions estimates assumptions affect reported amounts assets liabilities disclosure contingent assets liabilities date consolidated financial statements reported amounts revenues expenses reporting period actual results could differ estimates considered impact global covid19 pandemic consolidated financial statements addition covid19 impacts already experienced continue experience likely future impacts ultimate extent uncertain largely subject whether severity worsens duration lengthens impacts could include may limited risks uncertainty related worker availability ability operate production facilities demanddriven production facility closures shifts demand sales channels market volatility supply chain consequently may subject us future risk material goodwill intangible longlived asset impairments increased reserves uncollectible accounts adjustments inventory market volatility items subject fair value measurements derivatives investments following summary certain accounting estimates consider critical contingent liabilities description subject lawsuits investigations claims related wage hourlabor antitrust environmental product taxing authorities matters required assess likelihood adverse judgments outcomes matters well potential ranges probable losses determination amount reserves disclosures required contingencies made considerable analysis individual issue accrue contingent liabilities assessment risk loss probable reasonably estimated disclose contingent liabilities risk loss reasonably possible probable judgments uncertainties contingent liabilities contain uncertainties eventual outcome result future events determination current reserves requires estimates judgments related future changes facts circumstances differing interpretations law assessments amount damages effectiveness strategies factors beyond control effect actual results differ assumptions made material changes accounting methodology used establish contingent liabilities past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate contingent liabilities however actual results consistent estimates assumptions may exposed gains losses could material revenue recognition description recognize revenue sale product point time performance obligation satisfied control product transferred customer generally occurs upon shipment delivery customer based terms sale revenue measured transaction price defined amount consideration expect receive exchange providing goods customers transaction price adjusted estimates known expected variable consideration includes consumer incentives trade promotions allowances coupons discounts rebates volumebased incentives cooperative advertising programs variable consideration related programs recorded reduction revenue based amounts expect pay judgments uncertainties transaction price contains estimates known expected variable consideration base estimates current performance historical utilization projected redemption rates program review update estimates regularly incentives product returns realized impact adjustments recognized period adjustments identified effect actual results differ assumptions believe reasonable likelihood material change estimates assumptions used recognize revenue however actual results consistent estimates assumptions may exposed gains losses could material adopted fasb’s new guidance revenue recognition fiscal 2019 adoption standard material impact consolidated financial statements made material changes accounting methodology used recognize revenue past three fiscal years accrued selfinsurance description selfinsured certain losses related health welfare workers’ compensation auto liability general liability claims use independent thirdparty actuary assist determining selfinsurance liability actuary consider number factors estimating selfinsurance liability including claims experience demographic factors severity factors actuarial assumptions periodically review estimates assumptions thirdparty actuary assist us determining adequacy selfinsurance liability policy maintain accrual actuarial estimated median judgments uncertainties selfinsurance liability contains uncertainties due assumptions required judgment used costs settle obligations including legal healthcare costs could increase decrease causing estimates selfinsurance liability change incident rates including frequency severity could increase decrease causing estimates selfinsurance liability change effect actual results differ assumptions made material changes accounting methodology used establish selfinsurance liability past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate selfinsurance liability however actual results consistent estimates assumptions may exposed gains losses could material 10 change actuarial estimate october 3 2020 would significant impact liability income taxes description estimate total income tax expense based statutory tax rates tax planning opportunities available us various jurisdictions earn income tax includes estimate withholding taxes earnings foreign subsidiaries expected remitted united states include estimate taxes earnings considered indefinitely invested foreign subsidiary deferred income taxes recognized future tax effects temporary differences financial income tax reporting using tax rates effect years differences expected reverse valuation allowances recorded likely tax benefit realized deferred tax asset record unrecognized tax benefit liabilities known anticipated tax issues based analysis whether extent additional taxes due judgments uncertainties changes tax laws rates could affect recorded deferred tax assets liabilities future changes projected future earnings could affect recorded valuation allowances future calculations related income taxes contain uncertainties due judgment used calculate tax liabilities application complex tax regulations across tax jurisdictions operate analysis unrecognized tax benefits contains uncertainties based judgment used apply likely recognition measurement thresholds effect actual results differ assumptions believe reasonable likelihood material change tax related balances valuation allowances however due complexity uncertainties ultimate resolution may result payment materially different current estimate tax liabilities extent prevail matters unrecognized tax benefit liabilities established required pay amounts excess recorded unrecognized tax benefit liabilities effective tax rate given financial statement period could materially affected unfavorable tax settlement would require use cash generally result increase effective tax rate period resolution favorable tax settlement would generally recognized reduction effective tax rate period resolution defined benefit pension plans description sponsor six defined benefit pension plans provide retirement benefits certain team members also participate multiemployer plans provide defined benefits certain team members covered collective bargaining agreements plans usually administered board trustees composed management participating companies labor representatives use independent thirdparty actuaries assist us determining pension obligations net periodic benefit cost actuaries review assumptions include estimates present value projected future pension payment plan participants taking consideration likelihood potential future events salary increases demographic experience accumulate amortize effect actuarial gains losses future periods net periodic benefit credit defined benefit pension plans 103 million fiscal 2020 primarily due termination two defined benefit pension plans fiscal 2020 projected benefit obligation 269 million end fiscal 2020 unrecognized actuarial loss 49 million end fiscal 2020 currently expect net periodic benefit cost fiscal 2021 approximately 11 million expect contribute approximately 13 million cash pension plans fiscal 2021 exact amount cash contributions made pension plans year dependent upon number factors including minimum funding requirements judgments uncertainties defined benefit pension plans contain uncertainties due assumptions required judgments used key assumptions used developing required estimates include factors discount rates expected returns plan assets retirement rates mortality assumptions material impact upon funded status net periodic benefit cost expected liquidation certain plans considered along assumptions discount rates determined using cash flow matching technique whereby rates yield curve developed highquality debt securities applied benefit obligations determine appropriate discount rate determining longterm rate return plan assets first examined historical rates return various asset classes within plans determined longterm projected rateofreturn based expected returns investment management fees paid plan assets factored determination asset return assumptions retirement rates based primarily actual plan experience standard actuarial tables used estimate mortality reasonably likely changes external factors result changes assumptions used measure pension obligations net periodic benefit cost future periods risks participating multiemployer plans different singleemployer plans net pension cost multiemployer plans equal annual contribution determined accordance provisions negotiated labor contracts assets contributed plans segregated otherwise restricted provide benefits team members future cost plans dependent number factors including funded status plans ability participating companies meet ongoing funding obligations effect actual results differ assumptions made material changes accounting methodology used establish pension obligations net periodic benefit cost past three fiscal years believe reasonable likelihood material change estimates assumptions used calculate pension obligations net periodic benefit cost however actual results consistent estimates assumptions accumulated amortized future periods therefore generally affect net periodic benefit cost future periods 1 change discount rate october 3 2020 would significant impact projected benefit obligation net periodic benefit cost 1 change return plan assets october 3 2020 would significant impact net periodic benefit cost sensitivities reflect impact changing one assumption time remaining assumptions held constant economic factors conditions often affect multiple assumptions simultaneously effect changes assumptions necessarily linear impairment goodwill indefinite life intangible assets description goodwill evaluated impairment first performing qualitative assessment determine whether quantitative goodwill test necessary determined based qualitative factors fair value reporting unit may likely less carrying amount significant changes macroeconomic factors related reporting unit occurred could materially impact fair value quantitative goodwill impairment test would required quantitative test compares fair value reporting unit carrying amount additionally elect forgo qualitative assessment perform quantitative test upon performing quantitative test carrying value reporting unit exceeds fair value impairment loss recognized amount equal excess exceed carrying amount goodwill indefinite life intangible assets qualitative assessment also performed determine whether existence events circumstances indicates likely intangible asset impaired similar goodwill also elect forgo qualitative test indefinite life intangible assets perform quantitative test upon performing quantitative test carrying value intangible asset exceeds fair value impairment loss recognized amount equal excess elected make first day fourth quarter annual impairment assessment date goodwill indefinite life intangible assets however could required evaluate recoverability goodwill indefinite life intangible assets outside required annual assessment among things experience disruptions business unexpected significant declines operating results divestiture significant component business sustained decline market capitalization judgments uncertainties estimate fair value reporting units considering use various valuation techniques primary technique income approach discounted cash flow method another technique market approach guideline public company method use significant unobservable inputs level 3 inputs defined fair value hierarchy include assumptions sales operating margins growth rates discount rates valuation multiples consider budgets business plans economic projections marketplace data believed reflect market participant views would exist exit transaction assumptions also made varying perpetual growth rates periods beyond longterm business plan period generally utilize operating margin assumptions based future expectations operating margins historically realized reporting units’ industries industry marketplace valuation multiples domestic chicken reporting unit goodwill october 3 2020 3266 million generally assumed operating margins future years would normalize time believe consistent market participant views exit transaction assumed future operating margins consistent realized current fiscal year would failed quantitative step annual impairment test may resulted material goodwill impairment loss current year domestic chicken reporting unit results indicative future market participant expectations exit transaction primarily due unprecedented market disruptions incremental costs associated covid19 impacts expect mostly temporary nature pass first step annual impairment test fiscal 2020 domestic chicken reporting unit’s projected longterm operating margins utilizing discounted cash flow method exceed 4 achieved previous eight fiscal years increase discount rate approximately 50 basis points would caused carrying value domestic chicken reporting unit exceed discounted cash flows fair value international reporting unit presented internationalother segment presentation goodwill october 3 2020 392 million generally assumed operating margins future years would increase continue integrate recent acquisitions implement international growth strategy believe consistent market participant views exit transaction assumed future operating margins consistent realized current fiscal year would failed quantitative step annual impairment test may resulted material goodwill impairment loss majority international reporting unit including goodwill originated acquisitions fiscal 2019 fiscal 2018 still integrating recent acquisitions executing international global business strategy addition managing temporary impacts covid19 pass first step annual impairment test fiscal 2020 international reporting unit projected longterm operating margins utilizing discounted cash flow method exceed 4 increase discount rate approximately 150 basis points would caused carrying value international reporting unit exceed discounted cash flows fair value fair value indefinite life intangible assets calculated principally using multiperiod excess earnings relieffromroyalty valuation approaches uses significant unobservable inputs level 3 inputs defined fair value hierarchy believed reflect market participant views would exist exit transaction valuation approaches required make estimates assumptions sales operating margins growth rates royalty rates discount rates based budgets business plans economic projections anticipated future cash flows marketplace data impairment analysis contains uncertainties due uncontrollable events could positively negatively impact anticipated future economic operating conditions effect actual results differ assumptions made material changes accounting methodology used evaluate impairment goodwill intangible assets last three years fiscal 2020 2019 2018 material reporting units indefinite life intangible assets passed impairment analysis inherent estimates assumptions used determining fair value reporting units indefinite life intangible assets outside control management including interest rates cost capital tax rates market ebitda comparables credit ratings believe made reasonable estimates assumptions calculate fair value reporting units indefinite life intangibles possible material change could occur actual results consistent estimates assumptions used calculate fair value could result material impairments goodwill material reporting units’ estimated fair value exceeded carrying value 20 date recent estimated fair value determination domestic chicken reporting unit consequently domestic chicken reporting unit currently consider material reporting units significant risk impairment fiscal 2020 2019 2018 indefinite life intangible assets impairment analyses result impairment charge indefinite life intangible assets’ estimated fair value exceeded carrying value 20 date recent estimated fair value determination consequently currently consider material indefinite life intangible assets significant risk impairment longlived assets definite life intangibles description longlived assets definite life intangibles evaluated impairment whenever events changes circumstances indicate carrying value may recoverable examples include significant adverse change extent manner use asset change physical condition unexpected change financial performance evaluating longlived assets definite life intangibles impairment compare carrying value asset’s estimated undiscounted future cash flows impairment indicated estimated future cash flows less carrying value asset assets held sale compare carrying value disposal group fair value impairment excess carrying value fair value asset recorded impairment charges related longlived assets definite life intangibles 48 million 94 million 175 million fiscal 2020 2019 2018 respectively judgments uncertainties impairment analysis contains uncertainties due judgment assumptions including useful lives intended use assets observable market valuations forecasted sales operating margins growth rates royalty rates discount rates based budgets business plans economic projections anticipated future cash flows marketplace data reflects risk inherent future cash flows determine fair value effect actual results differ assumptions made material changes accounting methodology used evaluate impairment longlived assets definite life intangibles last three fiscal years believe reasonable likelihood material change estimates assumptions used calculate impairments useful lives longlived assets definite life intangibles however actual results consistent estimates assumptions used calculate estimated future cash flows may exposed impairment losses could material periodically conduct projects strategically evaluate optimization items network capacity manufacturing efficiencies business technology significant change strategies outlook manner plan use assets may exposed future impairments business combinations description account acquired businesses using acquisition method accounting requires control business obtained 100 assets acquired liabilities assumed including amounts attributed noncontrolling interests recorded date acquisition respective fair values excess purchase price estimated fair values net assets acquired recorded goodwill use various models determine value assets acquired liabilities assumed net realizable value inventory cost method market approach value property relieffromroyalty multiperiod excess earnings value intangibles discounted cash flow value goodwill significant acquisitions may use independent thirdparty valuation specialists assist us determining fair value assets acquired liabilities assumed judgments uncertainties significant judgment often required estimating fair value assets acquired liabilities assumed particularly intangible assets make estimates assumptions projected future cash flows including sales operating margins attrition rates growth rates discount rates based historical results business plans expected synergies perceived risk marketplace data considering perspective marketplace participants determining useful life intangible asset also requires judgment different types intangible assets different useful lives certain assets may considered indefinite useful lives effect actual results differ assumptions management believes expectations assumptions reasonable inherently uncertain unanticipated market macroeconomic events circumstances may occur could affect accuracy validity estimates assumptions could result subsequent impairments material business combinations fiscal 2020 item 7a nannannanitem 7a quantitative qualitative disclosure market risks market risks relating companys operations result primarily changes interest rates foreign exchange rates commodity prices well credit risk concentrations address risks company enters various hedging transactions described company use financial instruments trading purposes party leveraged derivatives foreign currency interest rate risks company periodically enters foreign exchange forward contracts option contracts hedge foreign currency exposure company uses contracts hedge exposure changes foreign currency foreign currency exchange rates primarily japanese yen associated sales denominated foreign currency gains losses contracts deferred recognized adjustment subsequent transaction occurs forward option contracts generally maturities exceeding twelve months company also hedges exposure changes interest rates certain financial instruments terms various leveraged equipment loans company enters interest rate swap agreements effectively lock fixed interest rate borrowings maturity dates leveraged equipment loans range 2005 2008 interest rates ranging 49 60 september 27 1997 september 28 1996 stated notional amounts companys outstanding foreign currency interest rate derivative financial instruments follows millions 1997 1996 interest rate swaps 1477 1137 foreign currency options 425 foreign forward exchange contracts 05 credit risks companys financial instruments exposed concentrations credit risk consist primarily cash equivalents trade receivables companys cash equivalents high quality securities placed major banks financial institutions concentrations credit risk respect receivables limited due large number customers dispersion across geographic areas company performs periodic credit evaluations customers financial condition generally require collateral one customer located russia accounts approximately 11 total accounts receivable single group customer represents greater 10 total accounts receivable following table provides information companys derivative financial instruments financial instruments sensitive changes interest rates table presents companys debt obligations principal cash flows related weightedaverage interest rates expected maturity dates interest rate swaps table presents notional amounts weightedaverage interest rates strike rates contractual maturity dates notional amounts used calculate contractual cash flows exchanged contract interest rate sensitivity principal notional amount expected maturity average interest swap rate dollars millions 1998 1999 2000 2001 2002 total fair value 92797 liabilities longterm debt including current portion fixed rate 946 726 774 1245 314 4546 8551 average interest rate 942 946 948 827 797 670 776 variable rate 7687 290 7977 average interest rate 568 425 563 interest rate derivative financial instruments related debt interest rate swaps pay fixed 136 247 158 169 180 587 1477 1464 average pay rate 675 687 676 673 677 669 average receive rate usd 6 month libor following table summarizes information instruments transactions sensitive foreign currency exchange rates including foreign currency forward exchange agreements foreign currency forward exchange agreements table presents notional amounts weightedaverage exchange rates expected contractual maturity dates notional amounts generally used calculate contractual payments exchanged contract exposures related derivative contracts united states dollar functional currency principal notional amount expected maturity average forward foreign currency exchange rate usdforeign currency dollars millions 1998 1999 2000 2001 2002 total fair value 92797 related forward contracts sell foreign currencies us japanese yen notional amount average contract rate purchased option contracts sell foreign currencies us japanese yen notional amount 360 65 425 388 weighted average strike price 11387 10948 commodities risk company purchaser certain commodities primarily corn soybeans company uses commodity futures purchased options hedging purposes reduce effect changing commodity prices portion commodity purchases contracts effectively meet risk reductions correlation criteria recorded using hedge accounting gains losses hedge transactions recorded component underlying inventory purchase following table provides information companys corn soybean meal feed ingredient inventory futures contracts sensitive changes commodity prices inventory table presents carrying amount fair value september 27 1997 futures contracts table presents notional amounts bushels weighted average contract prices total dollar contract amount expected maturity dates latest occurs one year reporting date contract amounts used calculate contractual payments quantity corn soybean meal exchanged futures contracts millions carrying amount fair value balance sheet commodity position related derivatives corn soybean meal feed ingredient inventory 284 corn futures contracts contract volumes bushels 3810000 weighted average price per bushel 265 contract amount us millions 101 99 soybean meal futures contracts contract volumes tons 32900 weighted average price per ton 2150 contract amount us millions 71 65 item 8item 7a quantitative qualitative disclosure market risks market risks relating companys operations result primarily changes interest rates foreign exchange rates commodity prices well credit risk concentrations address risks company enters various hedging transactions described company use financial instruments trading purposes party leveraged derivatives commodities risk company purchaser certain commodities primarily corn soybeans company periodically uses commodity futures purchased options hedging purposes reduce effect changing commodity prices mechanism procure grains contracts effectively meet risk reductions correlation criteria recorded using hedge accounting gains losses closed hedge transactions recorded component underlying inventory purchase following table provides information companys corn soybean oil feed ingredient inventory futures contracts sensitive changes commodity prices table presents carrying amounts fair values october 3 1998 additionally futures contracts latest matures 15 months reporting date table presents notional amounts units purchase weighted average contract prices total dollar contract amounts contract amounts used calculate contractual payments quantity corn soybean oil exchanged futures contracts dollars volume millions except per unit amounts volume contract weighted fair weighted book value average price value average per unit price per unit commodity inventory 360 corn futures contracts volume bushels long buy positions 75 174 233 170 227 short sell positions 97 205 211 202 208 soybean oil futures contracts volume cwt long buy positions 01 21 2424 21 2405 short sell positions 01 15 2440 15 2406 foreign currency interest rate risks company periodically enters foreign exchange forward contracts option contracts hedge foreign currency exposure company uses contracts hedge exposure changes foreign currency exchange rates primarily japanese yen associated sales denominatedin foreign currency gains losses contracts recognized adjustment subsequent transaction occurs forward option contracts generally maturities exceeding 12 months company also hedges exposure changes interest rates certain financial instruments terms various leveraged equipment loans company enters interest rate swap agreements effectively lock fixed interest rate borrowings maturity dates leveraged equipment loans range 2005 2008 interest rates ranging 47 6 following table provides information companys derivative financial instruments financial instruments sensitive changes interest rates table presents companys debt obligations principal cash flows related weightedaverage interest rates expected maturity dates fair values interest rate swaps table presents notional amounts weightedaverage interest rates strike rates contractual maturity dates fair values notional amounts used calculate contractual cash flows exchanged contract interest rate sensitivity principal notional amount expected maturity average interest swap rate dollars millions1999 2000 2001 2002 2003 total fair value 10398 liabilities longterm debt including current portion fixed rate 736 2267 1252 314 1785 8233 14587 15337 average interest rate 937 639 825 788 620 679 693 variable rate 40 246 5069 500 5855 average interest rate 415 767 557 373 549 interest rate derivative financial instruments related debt interest rate swaps pay fixed 161 172 184 196 202 502 1417 81 average pay rate 671 669 673 674 659 667 average receive rate usd 6 month libor following table summarizes information instruments transactions sensitive foreign currency exchange rates table presents notional amounts weightedaverage exchange rates expected contractual maturity dates fair values notional amounts generally used calculate contractual payments exchanged contract exposures related derivative contracts united states dollar functional currency principal notional amount expected maturity average forward foreign currency exchange rate usdforeign currency dollars millions 1999 2000 2003 total fair value 10398 sold option contracts sell foreign currencies us japanese yen notional amount 65 weighted average strike price y10948 purchased option contracts sell foreign currencies us japanese yen notional amount 56 04 weighted average strike price y12669 credit risks companys financial instruments exposed concentrations credit risk consist primarily cash equivalents trade receivables companys cash equivalents high quality securities placed major banks financial institutions concentrations credit risk respect receivables limited due large number customers dispersion across geographic areas company performs periodic credit evaluations customers financial condition generally require collateral single group customer represents greater 10 total accounts receivable item 8item 7a quantitative qualitative disclosure market risks market risks relating companys operations result primarily changes commodity prices interest rates foreign exchange rates well credit risk concentrations address risks company enters various hedging transactions described company seldom uses financial instruments qualify hedge accounting situations instruments qualify hedge accounting company marks instruments fair value recognizes gains losses currently earnings commodities risk company purchaser certain commodities primarily corn soybeans company periodically uses commodity futures options hedging purposes reduce effect changing commodity prices mechanism procure grains contracts effectively meet risk reductions correlation criteria recorded using hedge accounting gains losses closed hedge transactions recorded component underlying inventory purchase following table provides information companys corn soybean feed ingredient inventory financial instruments sensitive changes commodity prices table presents carrying amounts fair values october 2 1999 october 3 1998 additionally puts futures contracts latest expires matures 15 months reporting date table presents notional amounts units purchase weighted average contract prices volume dollars millions except per unit amounts volume weighted fair average strike value price per unit october 2 1999 recorded balance sheet commodity position commodity inventory book value 338 hedging positions corn futures contracts volume bushels long buy positions 844 221 77 short sell positions 14 232 03 soybean meal futures contracts volume tons long buy positions 01 14314 04 trading positions corn puts sold volume bushels 275 210 25 october 3 1998 recorded balance sheet commodity position commodity inventory book value 360 hedging positions corn futures contracts volume bushels long buy positions 75 233 04 short sell positions 97 211 03 soybean oil futures contracts volume cwt long buy positions 01 2424 short sell positions 01 2440 interest rate foreign currency risks company also hedges exposure changes interest rates certain financial instruments terms various leveraged equipment loans company enters interest rate swap agreements effectively lock fixed interest rate borrowings maturity dates leveraged equipment loans range 2005 2008 interest rates ranging 47 6 company also periodically enters foreign exchange forward contracts option contracts hedge foreign currency exposure 1999 company used contracts hedge exposure changes foreign currency exchange rates primarily mexican peso associated debt denominated us dollars held tyson de mexico 1998 company used contracts hedge exposure changes foreign currency exchange rates primarily japanese yen associated sales denominated foreign currency gains losses contracts recognized adjustment subsequent transaction occurs forward option contracts generally maturities expirations exceeding 12 months following table provides information companys derivative financial instruments financial instruments sensitive changes interest rates table presents companys debt obligations principal cash flows related weightedaverage interest rates expected maturity dates fair values interest rate swaps table presents notional amounts weightedaverage interest rates strike rates contractual maturity dates fair values notional amounts used calculate contractual cash flows exchanged contract dollars millions 2000 2001 2002 2003 2004 total fair value 10299 october 2 1999 liabilities longterm debt including current portion fixed rate 1725 1257 305 1778 292 7943 13300 12991 average interest rate 682 818 783 618 708 678 687 variable rate 502 172 2905 500 4079 average interest rate 551 767 585 390 565 interest rate derivative financial instruments related debt interest rate swaps pay fixed 172 184 196 216 211 292 1271 07 average pay rate 671 669 673 671 650 666 average receive rate usd 6 month libor dollars millions 1999 2000 2001 2002 2003 total fair value 10398 october 3 1998 liabilities longterm debt including current portion fixed rate 736 2267 1252 314 1785 8233 14587 15337 average interest rate 937 639 825 788 620 679 693 variable rate 40 246 5069 500 5855 average interest rate 415 767 557 373 549 interest rate derivative financial instruments related debt interest rate swaps pay fixed 161 172 184 196 202 502 1417 81 average pay rate 671 669 673 674 659 667 average receive rate usd 6 month libor following table summarizes information instruments transactions sensitive foreign currency exchange rates table presents notional amounts weightedaverage exchange rates expected contractual maturity dates fair values notional amounts generally used calculate contractual payments exchanged contract dollars millions 2000 20012004 total fair value 10299 october 2 1999 forward exchange contracts sell foreign currencies us mexican peso notional amount 73 06 weighted average strike price 1013 dollars millions 1999 20002003 total fair value 10398 october 3 1998 sold option contracts sell foreign currencies us japanese yen notional amount 65 weighted average strike price 10948 purchased option contracts sell foreign currencies us japanese yen notional amount 56 04 weighted average strike price 12669 credit risks companys financial instruments exposed concentrations credit risk consist primarily cash equivalents trade receivables companys cash equivalents high quality securities placed major banks financial institutions concentrations credit risk respect receivables limited due large number customers dispersion across geographic areas company performs periodic credit evaluations customers financial condition generally require collateral single group customer represents greater 10 total accounts receivable item 8item 7a quantitative qualitative disclosure market risks see information reflected caption market risk pages 25 27 annual report information incorporated herein reference item 8item 7a quantitative qualitative disclosure market risks see information reflected caption market risk pages 27 29 annual report information incorporated herein reference item 8item 7a quantitative qualitative disclosure market risks market risk market risks relating companys operations result primarily changes commodity prices interest rates foreign exchange rates well credit risk concentrations address certain risks company enters various derivative transactions described derivative instrument hedge depending nature hedge changes fair value instrument either offset change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion instruments change fair value immediately recognized earnings instruments meet criteria hedge accounting marked fair value unrealized gains losses reported currently earnings additionally company held certain positions primarily grain livestock futures options apply hedge accounting instead marks positions fair value earnings reporting date fiscal 2002 company changed market risk disclosure type tabular presentation sensitivity analysis presentation due acquisition ibp companys commodity market risk became diverse result complex risk profile company believes sensitivity analysis provides clearer understanding risks associated companys positions sensitivity analyses presented measures potential losses fair value resulting hypothetical changes market prices related commodities hypothetical changes exchange rates related interest rates sensitivity analyses consider actions management may take mitigate companys exposure changes consider effects hypothetical adverse changes may overall economic activity actual changes market prices may differ hypothetical changes commodities risk company purchaser certain commodities primarily corn soybeans livestock company periodically uses commodity futures options hedging purposes reduce effect changing commodity prices mechanism procure grains livestock generally contract terms hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts highly effective meeting risk reduction correlation criteria recorded using hedge accounting following table presents sensitivity analysis resulting hypothetical change 10 market prices september 28 2002 september 29 2001 respectively fair value open positions fair value position summation fair values calculated commodity valuing net position quoted futures prices market risk exposure analysis includes hedge nonhedge positions underlying commodities hedged high inverse correlation price changes derivative positions interest rate risk company exposure changes interest rates companys fixedrate longterm debt market risk fixedrate longterm debt estimated potential increase fair value resulting hypothetical 10 decrease interest rates amounts approximately 75 million september 28 2002 fair values companys longterm debt estimated using discounted future cash flows based companys incremental borrowing rates similar types borrowing arrangements company hedges exposure changes interest rates certain financial instruments terms various leveraged equipment loans company enters interest rate swap agreements effectively lock fixed interest rate borrowings maturity dates leveraged equipment loans range 2005 2008 interest rates ranging 47 60 positions taken respect swap agreements increase interest rates would minimal effect fair value fiscal years 2002 2001 foreign currency risk company also periodically enters foreign exchange forward contracts hedge foreign currency exposure company enters forward contracts hedge exposure united states currency fluctuations inherent receivables purchase commitments fair value contracts significant september 28 2002 september 29 2001 foreign forward contracts generally maturities expirations exceeding 12 months 10 change exchange rate currencies hedged would change fair value contracts 4 million september 28 2002 september 29 2001 concentrations credit risk companys financial instruments exposed concentrations credit risk consist primarily cash equivalents trade receivables companys cash equivalents high quality securities placed major banks financial institutions concentrations credit risk respect receivables limited due large number customers dispersion across geographic areas company performs periodic credit evaluations customers financial condition generally require collateral september 28 2002 approximately 108 companys total accounts receivable balance due one customer single customer group represents greater 10 total accounts receivable item 8item 7a quantitative qualitative disclosure market risks market risk market risks relating companys operations result primarily changes commodity prices interest rates foreign exchange rates well credit risk concentrations address certain risks company enters various derivative transactions described derivative instrument hedge defined sfas 133 accounting derivative instruments hedging activities sfas 133 amended depending nature hedge changes fair value instrument either offset change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion instruments change fair value defined sfas 133 amended immediately recognized earnings component cost sales instruments meet criteria hedge accounting marked fair value unrealized gains losses reported currently earnings additionally company holds certain positions primarily grain livestock futures options apply hedge accounting instead marks positions fair value earnings reporting date sensitivity analyses presented measures potential losses fair value resulting hypothetical changes market prices related commodities hypothetical changes exchange rates related interest rates sensitivity analyses consider actions management may take mitigate companys exposure changes consider effects hypothetical adverse changes may overall economic activity actual changes market prices may differ hypothetical changes commodities risk company purchaser certain commodities corn soybeans livestock natural gas course normal operations company uses commodity futures options hedging purposes reduce effect changing prices mechanism procure underlying commodity generally contract terms hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts highly effective meeting risk reduction correlation criteria recorded using hedge accounting following table presents sensitivity analysis resulting hypothetical change 10 market prices september 27 2003 september 28 2002 respectively fair value open positions fair value positions summation fair values calculated commodity valuing net position quoted futures prices market risk exposure analysis includes hedge nonhedge positions underlying commodities hedged correlation price changes derivative positions values commodities hedged based differences commitment prices market prices value derivative positions used hedge commodity obligations inversely correlated following sensitivity analysis reflects inverse impact earnings changes fair value open positions livestock natural gas direct impact earnings changes fair value open positions grain interest rate risk company exposure changes interest rates fixedrate longterm debt market risk fixedrate longterm debt estimated potential increase fair value resulting hypothetical 10 decrease interest rates amounts approximately 62 million september 27 2003 fair values companys longterm debt estimated based upon quoted market prices published interest rates company hedges exposure changes interest rates certain financial instruments terms various leveraged equipment loans company enters interest rate swap agreements effectively lock fixed interest rate borrowings maturity dates leveraged equipment loans range 2005 2008 interest rates ranging 47 60 positions taken respect swap agreements increase interest rates would minimal effect fair value fiscal years 2003 2002 foreign currency risk company also periodically enters foreign exchange forward contracts hedge foreign currency exposure company enters forward contracts hedge exposure us currency fluctuations inherent receivables purchase commitments contracts outstanding september 27 2003 fair value forward contracts september 28 2002 significant foreign forward contracts generally maturities expirations exceeding 12 months 10 change exchange rate currencies hedged september 28 2002 would changed fair value contracts 4 million concentrations credit risk companys financial instruments exposed concentrations credit risk consist primarily cash equivalents trade receivables companys cash equivalents high quality securities placed major banks financial institutions concentrations credit risk respect receivables limited due large number customers dispersion across geographic areas company performs periodic credit evaluations customers financial condition generally require collateral september 27 2003 approximately 103 companys net accounts receivable balance due one customer single customer group represents greater 10 net accounts receivable item 8item 7a quantitative qualitative disclosure market risks market risks market risks relating companys operations result primarily changes commodity prices interest rates foreign exchange rates well credit risk concentrations address certain risks company enters various derivative transactions described derivative instrument hedge defined sfas 133 amended depending nature hedge changes fair value instrument either offset change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion instruments change fair value defined sfas 133 amended immediately recognized earnings component cost sales additionally company holds certain positions primarily grain livestock futures meet criteria sfas 133 hedge accounting positions marked fair value unrealized gains losses reported earnings reporting date changes market value derivatives used companys risk management activities surrounding inventories hand anticipated purchases inventories recorded cost sales changes market value derivatives used companys risk management activities surrounding forward sales contracts recorded sales sensitivity analyses presented measures potential losses fair value resulting hypothetical changes market prices related commodities sensitivity analyses consider actions management may take mitigate companys exposure changes consider effects hypothetical adverse changes may overall economic activity actual changes market prices may differ hypothetical changes commodities risk company purchaser certain commodities corn soybeans livestock natural gas course normal operations company uses commodity futures reduce effect changing prices mechanism procure underlying commodity however commodities underlying companys derivative financial instruments experience significant price fluctuations requirement marktomarket positions designated qualify hedges sfas 133 could result volatility companys results operations generally contract terms hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts designated highly effective meeting risk reduction correlation criteria recorded using hedge accounting following table presents sensitivity analysis resulting hypothetical change 10 market prices october 2 2004 september 27 2003 respectively fair value open positions fair value positions summation fair values calculated commodity valuing net position quoted futures prices market risk exposure analysis includes hedge nonhedge positions underlying commodities hedged correlation price changes derivative positions values commodities hedged based differences commitment prices market prices value derivative positions used hedge commodity obligations inversely correlated following sensitivity analysis reflects inverse impact earnings changes fair value open positions livestock natural gas direct impact earnings changes fair value open positions grain interest rate risk company exposure changes interest rates fixedrate longterm debt market risk fixedrate longterm debt estimated potential increase fair value resulting hypothetical 10 decrease interest rates amounts approximately 51 million october 2 2004 62 million september 27 2003 fair values companys longterm debt estimated based upon quoted market prices andor published interest rates company hedges exposure changes interest rates certain financial instruments terms various leveraged equipment loans company enters interest rate swap agreements effectively lock fixed interest rate borrowings maturity dates leveraged equipment loans range 2005 2008 interest rates ranging 47 60 positions taken respect swap agreements increase interest rates would minimal effect fair value fiscal years 2004 2003 foreign currency risk company noncash foreign exchange gainloss exposure fluctuations foreign currency exchange rates result certain receivables payable balances primary currency exchanges company exposure canadian dollar mexican peso european euro british pound sterling brazilian real company periodically enters foreign exchange forward contracts hedge foreign currency exposure contracts outstanding october 2 2004 september 27 2003 concentrations credit risk companys financial instruments exposed concentrations credit risk consist primarily cash equivalents trade receivables companys cash equivalents high quality securities placed major banks financial institutions concentrations credit risk respect receivables limited due large number customers dispersion across geographic areas company performs periodic credit evaluations customers financial condition generally require collateral october 2 2004 september 27 2003 approximately 150 103 respectively companys net accounts receivable balance due one customer single customer group represents greater 10 net accounts receivable item 8item 7a quantitative qualitative disclosure market risks market risks market risks relating companys operations result primarily changes commodity prices interest rates foreign exchange rates well credit risk concentrations address certain risks company enters various derivative transactions described derivative instrument hedge defined sfas 133 amended depending nature hedge changes fair value instrument either offset change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion instruments change fair value defined sfas 133 amended immediately recognized earnings component cost sales additionally company holds certain positions primarily grain livestock futures meet criteria sfas 133 hedge accounting positions marked fair value unrealized gains losses reported earnings reporting date changes market value derivatives used company’s risk management activities surrounding inventories hand anticipated purchases inventories recorded cost sales changes market value derivatives used company’s risk management activities surrounding forward sales contracts recorded sales sensitivity analyses presented measures potential losses fair value resulting hypothetical changes market prices related commodities sensitivity analyses consider actions management may take mitigate company’s exposure changes consider effects hypothetical adverse changes may overall economic activity actual changes market prices may differ hypothetical changes commodities risk company purchaser certain commodities corn soybeans livestock natural gas course normal operations company uses commodity futures reduce effect changing prices mechanism procure underlying commodity however commodities underlying company’s derivative financial instruments experience significant price fluctuations requirement marktomarket positions designated qualify hedges sfas 133 could result volatility company’s results operations generally contract terms hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts designated highly effective meeting risk reduction correlation criteria recorded using hedge accounting following table presents sensitivity analysis resulting hypothetical change 10 market prices october 1 2005 october 2 2004 respectively fair value open positions fair value positions summation fair values calculated commodity valuing net position quoted futures prices market risk exposure analysis includes hedge nonhedge positions underlying commodities hedged correlation price changes derivative positions values commodities hedged based differences commitment prices market prices value derivative positions used hedge commodity obligations inversely correlated following sensitivity analysis reflects impact earnings changes fair value open positions tyson foods inc interest rate risk company exposure changes interest rates fixedrate longterm debt market risk fixedrate longterm debt estimated potential increase fair value resulting hypothetical 10 decrease interest rates amounts approximately 47 million october 1 2005 51 million october 2 2004 fair values company’s longterm debt estimated based upon quoted market prices andor published interest rates company hedges exposure changes interest rates certain financial instruments terms various leveraged equipment loans company enters interest rate swap agreements effectively lock fixed interest rate borrowings maturity dates leveraged equipment loans range fiscal years 2006 2009 interest rates ranging 47 60 positions taken respect swap agreements increase interest rates would minimal effect fair value fiscal years 2005 2004 foreign currency risk company noncash foreign exchange gainloss exposure fluctuations foreign currency exchange rates result certain receivables payable balances primary currency exchanges company exposure canadian dollar mexican peso european euro british pound sterling brazilian real company periodically enters foreign exchange forward contracts hedge foreign currency exposure significant contracts outstanding october 1 2005 october 2 2004 concentrations credit risk companys financial instruments exposed concentrations credit risk consist primarily cash equivalents trade receivables companys cash equivalents high quality securities placed major banks financial institutions concentrations credit risk respect receivables limited due large number customers dispersion across geographic areas company performs periodic credit evaluations customers financial condition generally require collateral october 1 2005 october 2 2004 approximately 130 150 respectively company’s net accounts receivable balance due one customer single customer group represents greater 10 net accounts receivable tyson foods inc item 8item 7a quantitative qualitative disclosure market risk market risk market risks relating company’s operations result primarily changes commodity prices interest rates foreign exchange rates well credit risk concentrations address certain risks company enters various derivative transactions described derivative instrument hedge defined sfas 133 amended depending nature hedge changes fair value instrument offset either change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion instrument’s change fair value defined sfas 133 amended recognized immediately earnings component cost sales additionally company holds certain positions primarily grain livestock futures meet criteria sfas 133 hedge accounting positions marked market unrealized gains losses reported earnings reporting date changes market value derivatives used company’s risk management activities surrounding inventories hand anticipated purchases inventories recorded cost sales changes market value derivatives used company’s risk management activities surrounding forward sales contracts recorded sales sensitivity analyses presented measures potential losses fair value resulting hypothetical changes market prices related commodities sensitivity analyses consider actions management may take mitigate company’s exposure changes consider effects hypothetical adverse changes may overall economic activity actual changes market prices may differ hypothetical changes commodities risk company purchaser certain commodities grains livestock natural gas course normal operations company uses commodity futures reduce effect changing prices mechanism procure underlying commodity however commodities underlying company’s derivative financial instruments experience significant price fluctuations requirement marktomarket positions designated qualify hedges sfas 133 could result volatility company’s results operations generally contract terms hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts designated highly effective meeting risk reduction correlation criteria recorded using hedge accounting following table presents sensitivity analysis resulting hypothetical change 10 market prices september 30 2006 fair tyson foods inc value open positions fair value positions summation fair values calculated commodity valuing net position quoted futures prices market risk exposure analysis includes hedge nonhedge positions underlying commodities hedged correlation price changes derivative positions values commodities hedged based differences commitment prices market prices value derivative positions used hedge commodity obligations inversely correlated following sensitivity analysis reflects impact earnings changes fair value open positions interest rate risk september 30 2006 company fixedrate longterm debt 34 billion weighted average interest rate 74 company exposure changes interest rates fixedrate longterm debt market risk fixedrate longterm debt estimated potential increase fair value resulting hypothetical 10 decrease interest rates hypothetical 10 decrease interest rates would increased fair value company’s fixedrate longterm debt approximately 87 million september 30 2006 47 million october 1 2005 fair values company’s longterm debt estimated based quoted market prices andor published interest rates september 30 2006 company variable rate longterm debt 545 million weighted average interest rate september 30 2006 61 company hedges exposure changes interest rates certain financial instruments terms various leveraged equipment loans company enters interest rate swap agreements effectively lock fixed interest rate borrowings maturity dates leveraged equipment loans range fiscal years 2007 2009 interest rates ranging 47 54 positions taken respect swap agreements increase interest rates would minimal effect interest expense fiscal years 2006 2005 foreign currency risk company noncash foreign exchange gainloss exposure fluctuations foreign currency exchange rates result certain receivables payable balances primary currency exchanges company exposure canadian dollar mexican peso european euro british pound sterling brazilian real company periodically enters foreign exchange forward contracts hedge foreign currency exposure hypothetical 10 change foreign exchange rates amounts approximately 4 million september 30 2006 5 million october 1 2005 concentrations credit risk companys financial instruments exposed concentrations credit risk consist primarily cash equivalents shortterm investments trade receivables companys cash equivalents shortterm investments high quality securities placed major banks financial institutions concentrations credit risk respect receivables limited due large number customers dispersion across geographic areas company performs periodic credit evaluations customers financial condition generally require collateral september 30 2006 october 1 2005 approximately 130 company’s net accounts receivable balance due one customer single customer group represents greater 10 net accounts receivable tyson foods inc item 8item 7a quantitative qualitative disclosure market risk market risk market risks relating operations result primarily changes commodity prices interest rates foreign exchange rates well credit risk concentrations address certain risks enter various derivative transactions described derivative instrument accounted hedge defined sfas 133 amended depending nature hedge changes fair value instrument either offset change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion instrument’s change fair value defined statement financial accounting standards 133 “accounting derivative instruments hedging activities” sfas 133 amended recognized immediately additionally hold certain positions primarily grain livestock futures either meet criteria hedge accounting designated hedges positions marked market unrealized gains losses reported earnings reporting date changes market value derivatives used risk management activities surrounding inventories hand anticipated purchases inventories recorded cost sales changes market value derivatives used risk management activities surrounding forward sales contracts recorded sales sensitivity analyses presented measures potential losses fair value resulting hypothetical changes market prices related commodities sensitivity analyses consider actions may take mitigate exposure changes consider effects hypothetical adverse changes may overall economic activity actual changes market prices may differ hypothetical changes tyson foods inc commodities risk purchase certain commodities grains livestock natural gas course normal operations part commodity risk management activities use derivative financial instruments primarily futures options reduce effect changing prices mechanism procure underlying commodity however commodities underlying derivative financial instruments experience significant price fluctuations requirement marktomarket positions designated qualify hedges sfas 133 could result volatility results operations contract terms hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts designated highly effective meeting risk reduction correlation criteria recorded using hedge accounting following table presents sensitivity analysis resulting hypothetical change 10 market prices september 29 2007 september 30 2006 fair value open positions fair value positions summation fair values calculated commodity valuing net position quoted futures prices market risk exposure analysis includes hedge nonhedge positions following sensitivity analysis reflects impact earnings changes fair value open positions interest rate risk september 29 2007 fixedrate debt 25 billion weighted average interest rate 75 exposure changes interest rates fixedrate debt market risk fixedrate debt estimated potential increase fair value resulting hypothetical 10 decrease interest rates hypothetical 10 decrease interest rates would increased fair value fixedrate debt approximately 58 million september 29 2007 87 million september 30 2006 fair values debt estimated based quoted market prices andor published interest rates september 29 2007 variable rate debt 275 million weighted average interest rate 59 hypothetical 10 increase interest rates effective september 29 2007 september 30 2006 would minimal effect interest expense foreign currency risk noncash foreign exchange gainloss exposure fluctuations foreign currency exchange rates result certain receivable payable balances primary currency exchanges exposure canadian dollar mexican peso european euro british pound sterling brazilian real periodically enter foreign exchange forward contracts hedge portion foreign currency exposure hypothetical 10 change foreign exchange rates effective september 29 2007 september 30 2006 would minimal effect pretax income concentrations credit risk financial instruments exposed concentrations credit risk consist primarily cash equivalents trade receivables cash equivalents high quality securities placed major banks financial institutions concentrations credit risk respect receivables limited due large number customers dispersion across geographic areas perform periodic credit evaluations customers’ financial condition generally require collateral september 29 2007 september 30 2006 approximately 121 130 respectively net accounts receivable balance due one customer single customer group represents greater 10 net accounts receivable tyson foods inc item 8item 7a quantitative qualitative disclosure market risk market risk market risk relating operations results primarily changes commodity prices interest rates foreign exchange rates well credit risk concentrations address certain risks enter various derivative transactions described derivative instrument accounted hedge defined statement financial accounting standards 133 “accounting derivative instruments hedging activities” sfas 133 amended depending nature hedge changes fair value instrument either offset change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion instrument’s change fair value defined sfas 133 recognized immediately additionally hold certain positions primarily grain livestock futures either meet criteria hedge accounting designated hedges positions marked market unrealized gains losses reported earnings reporting date changes market value derivatives used risk management activities relating forward sales contracts recorded sales changes market value derivatives used risk management activities surrounding inventories hand anticipated purchases inventories recorded cost sales sensitivity analyses presented measures potential losses fair value resulting hypothetical changes market prices related commodities sensitivity analyses consider actions may take mitigate exposure changes consider effects hypothetical adverse changes may overall economic activity actual changes market prices may differ hypothetical changes commodities risk purchase certain commodities grains livestock course normal operations part commodity risk management activities use derivative financial instruments primarily futures options reduce effect changing prices mechanism procure underlying commodity however commodities underlying derivative tyson foods inc financial instruments experience significant price fluctuations requirement marktomarket positions designated qualify hedges sfas 133 could result volatility results operations contract terms hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts designated highly effective meeting risk reduction correlation criteria recorded using hedge accounting following table presents sensitivity analysis resulting hypothetical change 10 market prices september 27 2008 september 29 2007 fair value open positions fair value positions summation fair values calculated commodity valuing net position quoted futures prices market risk exposure analysis includes hedge nonhedge derivative financial instruments interest rate risk september 27 2008 fixedrate debt 29 billion weighted average interest rate 70 exposure changes interest rates fixedrate debt market risk fixedrate debt estimated potential increase fair value resulting hypothetical 10 decrease interest rates hypothetical 10 decrease interest rates would increased fair value fixedrate debt approximately 45 million september 27 2008 58 million september 29 2007 fair values debt estimated based quoted market prices andor published interest rates september 27 2008 variable rate debt 19 million weighted average interest rate 46 hypothetical 10 increase interest rates effective september 27 2008 september 29 2007 would minimal effect interest expense foreign currency risk foreign exchange gainloss exposure fluctuations foreign currency exchange rates primarily result certain receivable payable balances primary currency exchanges exposure canadian dollar mexican peso european euro british pound sterling brazilian real periodically enter foreign exchange forward contracts hedge portion foreign currency exposure hypothetical 10 change foreign exchange rates effective september 27 2008 september 29 2007 related foreign exchange forward contracts would 11 million 3 million respectively impact pretax income future may enter foreign exchange forward contracts result international growth strategy concentrations credit risk financial instruments exposed concentrations credit risk consist primarily cash equivalents trade receivables cash equivalents high quality securities placed major banks financial institutions concentrations credit risk respect receivables limited due large number customers dispersion across geographic areas perform periodic credit evaluations customers’ financial condition generally require collateral september 27 2008 september 29 2007 122 121 respectively net accounts receivable balance due walmart stores inc single customer group represents greater 10 net accounts receivable tyson foods inc item 8item 7a quantitative qualitative disclosures market risk market risk market risk relating operations results primarily changes commodity prices interest rates foreign exchange rates well credit risk concentrations address certain risks enter various derivative transactions described derivative instrument accounted hedge depending nature hedge changes fair value instrument either offset change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion instrument’s change fair value recognized immediately additionally hold certain positions primarily grain livestock futures either meet criteria hedge accounting designated hedges exception normal purchases normal sales expected result physical delivery record positions fair value unrealized gains losses reported earnings reporting date changes market value derivatives used risk management activities relating forward sales contracts recorded sales changes market value derivatives used risk management activities surrounding inventories hand anticipated purchases inventories recorded cost sales sensitivity analyses presented measures potential losses fair value resulting hypothetical changes market prices related commodities sensitivity analyses consider actions may take mitigate exposure changes consider effects hypothetical adverse changes may overall economic activity actual changes market prices may differ hypothetical changes commodities risk purchase certain commodities grains livestock course normal operations part commodity risk management activities use derivative financial instruments primarily futures options reduce effect changing prices mechanism procure underlying commodity however commodities underlying derivative financial instruments experience significant price fluctuations requirement marktomarket positions designated qualify hedges could result volatility results operations contract terms hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts designated highly effective meeting risk reduction correlation criteria recorded using hedge accounting following table presents sensitivity analysis resulting hypothetical change 10 market prices october 3 2009 september 27 2008 fair value open positions fair value positions summation fair values calculated commodity valuing net position quoted futures prices market risk exposure analysis includes hedge nonhedge derivative financial instruments interest rate risk october 3 2009 fixedrate debt 33 billion weighted average interest rate 79 exposure changes interest rates fixedrate debt market risk fixedrate debt estimated potential increase fair value resulting hypothetical 10 decrease interest rates hypothetical 10 decrease interest rates would increased fair value fixedrate debt approximately 32 million october 3 2009 45 million september 27 2008 fair values debt estimated based quoted market prices andor published interest rates october 3 2009 variable rate debt 218 million weighted average interest rate 43 hypothetical 10 increase interest rates effective october 3 2009 september 27 2008 would minimal effect interest expense foreign currency risk foreign exchange gainloss exposure fluctuations foreign currency exchange rates primarily result certain receivable payable balances primary currency exchanges exposure canadian dollar chinese renminbi mexican peso european euro british pound sterling brazilian real periodically enter foreign exchange forward contracts hedge portion foreign currency exposure hypothetical 10 change foreign exchange rates effective october 3 2009 september 27 2008 related foreign exchange forward contracts would 15 million 11 million respectively impact pretax income future may enter foreign exchange forward contracts result international growth strategy concentrations credit risk financial instruments exposed concentrations credit risk consist primarily cash equivalents trade receivables cash equivalents high quality securities placed major banks financial institutions concentrations credit risk respect receivables limited due large number customers dispersion across geographic areas perform periodic credit evaluations customers’ financial condition generally require collateral october 3 2009 september 27 2008 130 122 respectively net accounts receivable balance due walmart stores inc single customer group represents greater 10 net accounts receivable item 8item 7a quantitative qualitative disclosures market risk market risk market risk relating operations results primarily changes commodity prices interest rates foreign exchange rates well credit risk concentrations address certain risks enter various derivative transactions described derivative instrument accounted hedge depending nature hedge changes fair value instrument either offset change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion instrument’s change fair value recognized immediately additionally hold certain positions primarily grain livestock futures either meet criteria hedge accounting designated hedges exception normal purchases normal sales expected result physical delivery record positions fair value unrealized gains losses reported earnings reporting date changes market value derivatives used risk management activities relating forward sales contracts recorded sales changes market value derivatives used risk management activities surrounding inventories hand anticipated purchases inventories recorded cost sales sensitivity analyses presented measures potential losses fair value resulting hypothetical changes market prices related commodities sensitivity analyses consider actions may take mitigate exposure changes consider effects hypothetical adverse changes may overall economic activity actual changes market prices may differ hypothetical changes commodities risk purchase certain commodities grains livestock course normal operations part commodity risk management activities use derivative financial instruments primarily futures options reduce effect changing prices mechanism procure underlying commodity however commodities underlying derivative financial instruments experience significant price fluctuations requirement marktomarket positions designated qualify hedges could result volatility results operations contract terms hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts designated highly effective meeting risk reduction correlation criteria recorded using hedge accounting following table presents sensitivity analysis resulting hypothetical change 10 market prices october 2 2010 october 3 2009 fair value open positions fair value positions summation fair values calculated commodity valuing net position quoted futures prices market risk exposure analysis includes hedge nonhedge derivative financial instruments interest rate risk october 2 2010 variable rate debt 212 million weighted average interest rate 45 hypothetical 10 increase interest rates effective october 2 2010 october 3 2009 would minimal effect interest expense additionally changes interest rates impact fair value fixedrate debt october 2 2010 fixedrate debt 23 billion weighted average interest rate 92 market risk fixedrate debt estimated potential increase fair value resulting hypothetical 10 decrease interest rates hypothetical 10 decrease interest rates would increased fair value fixedrate debt approximately 9 million october 2 2010 32 million october 3 2009 fair values debt estimated based quoted market prices andor published interest rates foreign currency risk foreign exchange gainloss exposure fluctuations foreign currency exchange rates primarily result certain receivable payable balances primary currency exchanges exposure canadian dollar chinese renminbi mexican peso european euro british pound sterling brazilian real periodically enter foreign exchange forward contracts hedge portion foreign currency exposure hypothetical 10 change foreign exchange rates effective october 2 2010 october 3 2009 related foreign exchange forward contracts would 17 million 15 million respectively impact pretax income future may enter foreign exchange forward contracts result international growth strategy concentrations credit risk financial instruments exposed concentrations credit risk consist primarily cash equivalents trade receivables cash equivalents high quality securities placed major banks financial institutions concentrations credit risk respect receivables limited due large number customers dispersion across geographic areas perform periodic credit evaluations customers’ financial condition generally require collateral october 2 2010 october 3 2009 153 130 respectively net accounts receivable balance due walmart stores inc single customer group represents greater 10 net accounts receivable item 8item 7a quantitative qualitative disclosures market risk market risk market risk relating operations results primarily changes commodity prices interest rates foreign exchange rates well credit risk concentrations address certain risks enter various derivative transactions described derivative instrument accounted hedge depending nature hedge changes fair value instrument either offset change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion instrument’s change fair value recognized immediately additionally hold certain positions primarily grain livestock futures either meet criteria hedge accounting designated hedges exception normal purchases normal sales expected result physical delivery record positions fair value unrealized gains losses reported earnings reporting date changes market value derivatives used risk management activities relating forward sales contracts recorded sales changes market value derivatives used risk management activities surrounding inventories hand anticipated purchases inventories recorded cost sales sensitivity analyses presented measures potential losses fair value resulting hypothetical changes market prices related commodities sensitivity analyses consider actions may take mitigate exposure changes consider effects hypothetical adverse changes may overall economic activity actual changes market prices may differ hypothetical changes commodities risk purchase certain commodities grains livestock course normal operations part commodity risk management activities use derivative financial instruments primarily futures options reduce effect changing prices mechanism procure underlying commodity however commodities underlying derivative financial instruments experience significant price fluctuations requirement marktomarket positions designated qualify hedges could result volatility results operations contract terms hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts designated highly effective meeting risk reduction correlation criteria recorded using hedge accounting following table presents sensitivity analysis resulting hypothetical change 10 market prices october 1 2011 october 2 2010 fair value open positions fair value positions summation fair values calculated commodity valuing net position quoted futures prices market risk exposure analysis includes hedge nonhedge derivative financial instruments interest rate risk october 1 2011 variable rate debt 211 million weighted average interest rate 41 hypothetical 10 increase interest rates effective october 1 2011 october 2 2010 would minimal effect interest expense additionally changes interest rates impact fair value fixedrate debt october 1 2011 fixedrate debt 20 billion weighted average interest rate 92 market risk fixedrate debt estimated potential increase fair value resulting hypothetical 10 decrease interest rates hypothetical 10 decrease interest rates would increased fair value fixedrate debt approximately 5 million october 1 2011 9 million october 2 2010 fair values debt estimated based quoted market prices andor published interest rates foreign currency risk foreign exchange gainloss exposure fluctuations foreign currency exchange rates primarily result certain receivable payable balances primary currency exchanges exposure brazilian real british pound sterling canadian dollar chinese renminbi european euro mexican peso periodically enter foreign exchange forward option contracts hedge portion foreign currency exposure hypothetical 10 change foreign exchange rates effective october 1 2011 october 2 2010 related foreign exchange forward option contracts would 18 million 17 million impact respectively pretax income future may enter foreign exchange forward option contracts result international growth strategy concentrations credit risk financial instruments exposed concentrations credit risk consist primarily cash equivalents trade receivables cash equivalents high quality securities placed major banks financial institutions concentrations credit risk respect receivables limited due large number customers dispersion across geographic areas perform periodic credit evaluations customers’ financial condition generally require collateral october 1 2011 october 2 2010 165 153 respectively net accounts receivable balance due walmart stores inc single customer group represented greater 10 net accounts receivable item 8item 7a quantitative qualitative disclosures market risk market risk relating operations results primarily changes commodity prices interest rates foreign exchange rates well credit risk concentrations address certain risks enter various derivative transactions described derivative instrument accounted hedge depending nature hedge changes fair value instrument either offset change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion instrument’s change fair value recognized immediately additionally hold certain positions primarily grain livestock futures either meet criteria hedge accounting designated hedges exception normal purchases normal sales expected result physical delivery record positions fair value unrealized gains losses reported earnings reporting date changes market value derivatives used risk management activities relating forward sales contracts recorded sales changes market value derivatives used risk management activities surrounding inventories hand anticipated purchases inventories recorded cost sales sensitivity analyses presented measures potential losses fair value resulting hypothetical changes market prices related commodities sensitivity analyses consider actions may take mitigate exposure changes consider effects hypothetical adverse changes may overall economic activity actual changes market prices may differ hypothetical changes commodities risk purchase certain commodities grains livestock course normal operations part commodity risk management activities use derivative financial instruments primarily futures options reduce effect changing prices mechanism procure underlying commodity however commodities underlying derivative financial instruments experience significant price fluctuations requirement marktomarket positions designated qualify hedges could result volatility results operations contract terms hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts designated highly effective meeting risk reduction correlation criteria recorded using hedge accounting following table presents sensitivity analysis resulting hypothetical change 10 market prices september 29 2012 october 1 2011 fair value open positions fair value positions summation fair values calculated commodity valuing net position quoted futures prices market risk exposure analysis includes hedge nonhedge derivative financial instruments interest rate risk september 29 2012 variable rate debt 219 million weighted average interest rate 39 hypothetical 10 increase interest rates effective september 29 2012 october 1 2011 would minimal effect interest expense additionally changes interest rates impact fair value fixedrate debt september 29 2012 fixedrate debt 22 billion weighted average interest rate 59 market risk fixedrate debt estimated potential increase fair value resulting hypothetical 10 decrease interest rates hypothetical 10 decrease interest rates would increased fair value fixedrate debt approximately 16 million september 29 2012 5 million october 1 2011 fair values debt estimated based quoted market prices andor published interest rates foreign currency risk foreign exchange exposure fluctuations foreign currency exchange rates primarily result certain receivable payable balances primary currencies exposure brazilian real british pound sterling canadian dollar chinese renminbi european euro mexican peso periodically enter foreign exchange forward option contracts hedge portion foreign currency exposure hypothetical 10 change foreign exchange rates effective september 29 2012 october 1 2011 related foreign exchange forward option contracts would 21 million 18 million impact respectively pretax income future may enter foreign exchange forward option contracts result international growth strategy concentrations credit risk financial instruments exposed concentrations credit risk consist primarily cash equivalents trade receivables cash equivalents high quality securities placed major banks financial institutions concentrations credit risk respect receivables limited due large number customers dispersion across geographic areas perform periodic credit evaluations customers’ financial condition generally require collateral september 29 2012 october 1 2011 171 165 respectively net accounts receivable balance due walmart stores inc single customer group represented greater 10 net accounts receivable item 8item 7a quantitative qualitative disclosures market risk market risk relating operations results primarily changes commodity prices interest rates foreign exchange rates well credit risk concentrations address certain risks enter various derivative transactions described derivative instrument accounted hedge depending nature hedge changes fair value instrument either offset change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion instrument’s change fair value recognized immediately additionally hold certain positions primarily grain livestock futures either meet criteria hedge accounting designated hedges exception normal purchases normal sales expected result physical delivery record positions fair value unrealized gains losses reported earnings reporting date changes market value derivatives used risk management activities relating forward sales contracts recorded sales changes market value derivatives used risk management activities surrounding inventories hand anticipated purchases inventories recorded cost sales sensitivity analyses presented measures potential losses fair value resulting hypothetical changes market prices related commodities sensitivity analyses consider actions may take mitigate exposure changes consider effects hypothetical adverse changes may overall economic activity actual changes market prices may differ hypothetical changes commodities risk purchase certain commodities grains livestock course normal operations part commodity risk management activities use derivative financial instruments primarily futures options reduce effect changing prices mechanism procure underlying commodity however commodities underlying derivative financial instruments experience significant price fluctuations requirement marktomarket positions designated qualify hedges could result volatility results operations contract terms hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts designated highly effective meeting risk reduction correlation criteria recorded using hedge accounting following table presents sensitivity analysis resulting hypothetical change 10 market prices september 28 2013 september 29 2012 fair value open positions fair value positions summation fair values calculated commodity valuing net position quoted futures prices market risk exposure analysis includes hedge nonhedge derivative financial instruments interest rate risk september 28 2013 variable rate debt 173 million weighted average interest rate 34 hypothetical 10 increase interest rates effective september 28 2013 september 29 2012 would minimal effect interest expense additionally changes interest rates impact fair value fixedrate debt september 28 2013 fixedrate debt 22 billion weighted average interest rate 60 market risk fixedrate debt estimated potential increase fair value resulting hypothetical 10 decrease interest rates hypothetical 10 decrease interest rates would increased fair value fixedrate debt approximately 22 million september 28 2013 16 million september 29 2012 fair values debt estimated based quoted market prices andor published interest rates foreign currency risk foreign exchange exposure fluctuations foreign currency exchange rates primarily result certain receivable payable balances primary currencies exposure brazilian real british pound sterling canadian dollar chinese renminbi european euro indian rupee mexican peso periodically enter foreign exchange forward option contracts hedge portion foreign currency exposure hypothetical 10 change foreign exchange rates effective september 28 2013 september 29 2012 related foreign exchange forward option contracts would 11 million 21 million impact respectively pretax income future may enter foreign exchange forward option contracts result international growth strategy concentrations credit risk financial instruments exposed concentrations credit risk consist primarily cash equivalents trade receivables cash equivalents high quality securities placed major banks financial institutions concentrations credit risk respect receivables limited due large number customers dispersion across geographic areas perform periodic credit evaluations customers’ financial condition generally require collateral september 28 2013 september 29 2012 175 171 respectively net accounts receivable balance due walmart stores inc single customer group represented greater 10 net accounts receivable item 8item 7a quantitative qualitative disclosures market risk market risk relating operations results primarily changes commodity prices interest rates foreign exchange rates well credit risk concentrations address certain risks enter various derivative transactions described derivative instrument accounted hedge depending nature hedge changes fair value instrument either offset change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion instrument’s change fair value recognized immediately additionally hold certain positions primarily grain livestock futures either meet criteria hedge accounting designated hedges exception normal purchases normal sales expected result physical delivery record positions fair value unrealized gains losses reported earnings reporting date changes market value derivatives used risk management activities relating forward sales contracts recorded sales changes market value derivatives used risk management activities surrounding inventories hand anticipated purchases inventories recorded cost sales sensitivity analyses presented measures potential losses fair value resulting hypothetical changes market prices related commodities sensitivity analyses consider actions may take mitigate exposure changes consider effects hypothetical adverse changes may overall economic activity actual changes market prices may differ hypothetical changes commodities risk purchase certain commodities grains livestock course normal operations part commodity risk management activities use derivative financial instruments primarily futures options reduce effect changing prices mechanism procure underlying commodity however commodities underlying derivative financial instruments experience significant price fluctuations requirement marktomarket positions designated qualify hedges could result volatility results operations contract terms hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts designated highly effective meeting risk reduction correlation criteria recorded using hedge accounting following table presents sensitivity analysis resulting hypothetical change 10 market prices september 27 2014 september 28 2013 fair value open positions fair value positions summation fair values calculated commodity valuing net position quoted futures prices market risk exposure analysis includes hedge nonhedge derivative financial instruments interest rate risk september 27 2014 variable rate debt 21 billion weighted average interest rate 16 hypothetical 10 increase interest rates effective september 27 2014 september 28 2013 would minimal effect interest expense additionally changes interest rates impact fair value fixedrate debt september 27 2014 fixedrate debt 61 billion weighted average interest rate 43 market risk fixedrate debt estimated potential increase fair value resulting hypothetical 10 decrease interest rates hypothetical 10 decrease interest rates would increased fair value fixedrate debt approximately 109 million september 27 2014 22 million september 28 2013 fair values debt estimated based quoted market prices andor published interest rates interest rate risk associated pension postretirement benefit obligations changes interest rates impact liabilities associated benefit plans well amount income expense recognized plans declines value plan assets could diminish funded status pension plans potentially increase requirements make cash contributions plans see part ii item 8 notes consolidated financial statements note 15 pensions postretirement benefits additional information foreign currency risk foreign exchange exposure fluctuations foreign currency exchange rates primarily result certain receivable payable balances primary currencies exposure brazilian real british pound sterling canadian dollar chinese renminbi european euro indian rupee mexican peso periodically enter foreign exchange forward option contracts hedge portion foreign currency exposure hypothetical 10 change foreign exchange rates effective september 27 2014 september 28 2013 related foreign exchange forward option contracts would 9 million 11 million impact respectively pretax income concentrations credit risk financial instruments exposed concentrations credit risk consist primarily cash equivalents trade receivables cash equivalents high quality securities placed major banks financial institutions concentrations credit risk respect receivables limited due large number customers dispersion across geographic areas perform periodic credit evaluations customers’ financial condition generally require collateral september 27 2014 september 28 2013 186 175 respectively net accounts receivable balance due walmart stores inc single customer group represented greater 10 net accounts receivable item 8item 7a quantitative qualitative disclosures market risk market risk relating operations results primarily changes commodity prices interest rates foreign exchange rates well credit risk concentrations address certain risks enter various derivative transactions described derivative instrument accounted hedge depending nature hedge changes fair value instrument either offset change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion instrument’s change fair value recognized immediately additionally hold certain positions primarily grain livestock futures either meet criteria hedge accounting designated hedges exception normal purchases normal sales expected result physical delivery record positions fair value unrealized gains losses reported earnings reporting date changes market value derivatives used risk management activities relating forward sales contracts recorded sales changes market value derivatives used risk management activities surrounding inventories hand anticipated purchases inventories recorded cost sales sensitivity analyses presented measures potential losses fair value resulting hypothetical changes market prices related commodities sensitivity analyses consider actions may take mitigate exposure changes consider effects hypothetical adverse changes may overall economic activity actual changes market prices may differ hypothetical changes commodities risk purchase certain commodities grains livestock course normal operations part commodity risk management activities use derivative financial instruments primarily futures options reduce effect changing prices mechanism procure underlying commodity however commodities underlying derivative financial instruments experience significant price fluctuations requirement marktomarket positions designated qualify hedges could result volatility results operations contract terms hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts designated highly effective meeting risk reduction correlation criteria recorded using hedge accounting following table presents sensitivity analysis resulting hypothetical change 10 market prices october 1 2016 october 3 2015 fair value open positions fair value positions summation fair values calculated commodity valuing net position quoted futures prices market risk exposure analysis included hedge nonhedge derivative financial instruments interest rate risk october 1 2016 variable rate debt 1357 million weighted average interest rate 18 hypothetical 10 increase interest rates effective october 1 2016 october 3 2015 would minimal effect interest expense additionally changes interest rates impact fair value fixedrate debt october 1 2016 fixedrate debt 4922 million weighted average interest rate 43 market risk fixedrate debt estimated potential increase fair value resulting hypothetical 10 decrease interest rates hypothetical 10 decrease interest rates would increased fair value fixedrate debt approximately 71 million october 1 2016 87 million october 3 2015 fair values debt estimated based quoted market prices andor published interest rates interest rate risk associated pension postretirement benefit obligations changes interest rates impact liabilities associated benefit plans well amount income expense recognized plans declines value plan assets could diminish funded status pension plans potentially increase requirements make cash contributions plans see part ii item 8 notes consolidated financial statements note 14 pensions postretirement benefits additional information foreign currency risk foreign exchange exposure fluctuations foreign currency exchange rates primarily result certain receivable payable balances primary currencies exposure brazilian real british pound sterling canadian dollar chinese renminbi european euro japanese yen mexican peso periodically enter foreign exchange forward option contracts hedge portion foreign currency exposure hypothetical 10 change foreign exchange rates effective october 1 2016 october 3 2015 related foreign exchange forward option contracts would 3 million impact pretax income concentrations credit risk financial instruments exposed concentrations credit risk consist primarily cash equivalents trade receivables cash equivalents high quality securities placed major banks financial institutions concentrations credit risk respect receivables limited due large number customers dispersion across geographic areas perform periodic credit evaluations customers’ financial condition generally require collateral october 1 2016 october 3 2015 189 200 respectively net accounts receivable balance due walmart stores inc single customer group represented greater 10 net accounts receivable item 8item 7a quantitative qualitative disclosures market risk market risk relating operations results primarily changes commodity prices interest rates foreign exchange rates well credit risk concentrations address certain risks enter various derivative transactions described derivative instrument accounted hedge depending nature hedge changes fair value instrument either offset change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion instrument’s change fair value recognized immediately additionally hold certain positions primarily grain livestock futures either meet criteria hedge accounting designated hedges exception normal purchases normal sales expected result physical delivery record positions fair value unrealized gains losses reported earnings reporting date changes market value derivatives used risk management activities relating forward sales contracts recorded sales changes market value derivatives used risk management activities surrounding inventories hand anticipated purchases inventories recorded cost sales changes market value derivatives used risk management activities related interest rates recorded interest expense sensitivity analyses presented measures potential losses fair value resulting hypothetical changes market prices related commodities sensitivity analyses consider actions may take mitigate exposure changes consider effects hypothetical adverse changes may overall economic activity actual changes market prices may differ hypothetical changes commodities risk purchase certain commodities grains livestock course normal operations part commodity risk management activities use derivative financial instruments primarily futures options reduce effect changing prices mechanism procure underlying commodity however commodities underlying derivative financial instruments experience significant price fluctuations requirement marktomarket positions designated qualify hedges could result volatility results operations contract terms hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts designated highly effective meeting risk reduction correlation criteria recorded using hedge accounting following table presents sensitivity analysis resulting hypothetical change 10 market prices september 29 2018 september 30 2017 fair value open positions fair value positions summation fair values calculated commodity valuing net position quoted futures prices market risk exposure analysis included hedge nonhedge derivative financial instruments interest rate risk september 29 2018 variable rate debt 1655 million weighted average interest rate 26 hypothetical 10 increase interest rates effective september 29 2018 september 30 2017 would minimal effect interest expense additionally changes interest rates impact fair value fixedrate debt september 29 2018 fixedrate debt 8218 million weighted average interest rate 41 market risk fixedrate debt estimated potential increase fair value resulting hypothetical 10 decrease interest rates hypothetical 10 decrease interest rates would increased fair value fixedrate debt approximately 207 million september 29 2018 150 million september 30 2017 fair values debt estimated based quoted market prices andor published interest rates fiscal 2018 part risk management activities executed derivative financial instruments form interest rate swaps hedge portion exposure changes interest rates september 29 2018 total notional amount interest rate swaps remaining outstanding 400 million hypothetical 10 decrease interest rates would minimal effect interest expense subject interest rate risk associated pension postretirement benefit obligations changes interest rates impact liabilities associated benefit plans well amount income expense recognized plans declines value plan assets could diminish funded status pension plans potentially increase requirements make cash contributions plans see part ii item 8 notes consolidated financial statements note 15 pensions postretirement benefits additional information foreign currency risk foreign exchange exposure fluctuations foreign currency exchange rates primarily result certain receivable payable balances primary currencies exposure brazilian real british pound sterling canadian dollar chinese renminbi european euro japanese yen mexican peso periodically enter foreign exchange forward option contracts hedge portion foreign currency exposure hypothetical 10 change foreign exchange rates effective september 29 2018 september 30 2017 related foreign exchange forward option contracts would 9 million 7 million impact respectively pretax income concentrations credit risk financial instruments exposed concentrations credit risk consist primarily cash equivalents trade receivables cash equivalents high quality securities placed major banks financial institutions concentrations credit risk respect receivables limited due large number customers dispersion across geographic areas perform periodic credit evaluations customers’ financial condition generally require collateral september 29 2018 september 30 2017 186 net accounts receivable balance due walmart inc single customer group represented greater 10 net accounts receivable item 8item 7a quantitative qualitative disclosures market risk market risk relating operations results primarily changes commodity prices interest rates foreign exchange rates well credit risk concentrations address certain risks enter various derivative transactions described derivative instrument accounted hedge depending nature hedge changes fair value instrument offset either change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion instrument’s change fair value immediately recognized earnings component cost sales additionally hold certain positions primarily grain livestock futures either meet criteria hedge accounting designated hedges exception normal purchases normal sales expected result physical delivery record positions fair value unrealized gains losses reported earnings reporting date changes market value derivatives used risk management activities relating forward sales contracts recorded sales changes market value derivatives used risk management activities surrounding inventories hand anticipated purchases inventories recorded cost sales changes market value derivatives used risk management activities related interest rates recorded interest expense changes market value derivatives used risk management activities related foreign exchange contracts recorded net sensitivity analyses presented measures potential losses fair value resulting hypothetical changes market prices related commodities sensitivity analyses consider actions may take mitigate exposure changes consider effects hypothetical adverse changes may overall economic activity actual changes market prices may differ hypothetical changes commodities risk purchase certain commodities grains livestock course normal operations part commodity risk management activities use derivative financial instruments primarily futures options reduce effect changing prices mechanism procure underlying commodity however commodities underlying derivative financial instruments experience significant price fluctuations requirement marktomarket positions designated qualify hedges could result volatility results operations contract terms hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts designated highly effective meeting risk reduction correlation criteria recorded using hedge accounting following table presents sensitivity analysis resulting hypothetical change 10 market prices september 28 2019 september 29 2018 fair value open positions fair value positions summation fair values calculated commodity valuing net position quoted futures prices market risk exposure analysis included hedge nonhedge derivative financial instruments interest rate risk september 28 2019 variable rate debt 1875 million weighted average interest rate 25 hypothetical 10 increase interest rates effective september 28 2019 september 29 2018 would minimal effect interest expense additionally changes interest rates impact fair value fixedrate debt september 28 2019 fixedrate debt 10057 million weighted average interest rate 442 market risk fixedrate debt estimated potential increase fair value resulting hypothetical 10 decrease interest rates hypothetical 10 decrease interest rates would increased fair value fixedrate debt approximately 184 million september 28 2019 207 million september 29 2018 fair values debt estimated based quoted market prices andor published interest rates 400 million total notional amount interest rate swaps september 28 2019 part risk management activities hedge portion exposure changes interest rates hypothetical 10 decrease interest rates would minimal effect interest expense subject interest rate risk associated pension postretirement benefit obligations changes interest rates impact liabilities associated benefit plans well amount income expense recognized plans declines value plan assets could diminish funded status pension plans potentially increase requirements make cash contributions plans see part ii item 8 notes consolidated financial statements note 15 pensions postretirement benefits additional information foreign currency risk foreign exchange exposure fluctuations foreign currency exchange rates primarily result certain receivable payable balances well revenues expenses primary currencies exposure brazilian real british pound sterling canadian dollar chinese renminbi thai baht malaysian ringgit european euro japanese yen new zealand dollar australian dollar mexican peso periodically enter foreign exchange forward option contracts hedge portion foreign currency exposure hypothetical 10 change foreign exchange rates effective september 28 2019 september 29 2018 related foreign exchange forward option contracts would 15 million 9 million impact respectively pretax income concentrations credit risk financial instruments exposed concentrations credit risk consist primarily cash equivalents trade receivables cash equivalents high quality securities placed major banks financial institutions concentrations credit risk respect receivables limited due large number customers dispersion across geographic areas perform periodic credit evaluations customers’ financial condition generally require collateral september 28 2019 september 29 2018 162 186 respectively net accounts receivable balance due walmart inc single customer group represented 10 greater net accounts receivable item 8item 7a quantitative qualitative disclosures market risk market risk relating operations results primarily changes commodity prices interest rates foreign exchange rates well credit risk concentrations address certain risks enter various derivative transactions described derivative instrument accounted hedge depending nature hedge changes fair value instrument either offset change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion instrument’s change fair value recognized immediately additionally hold certain positions primarily grain livestock futures either meet criteria hedge accounting designated hedges exception normal purchases normal sales expected result physical delivery record positions fair value unrealized gains losses reported earnings reporting date changes market value derivatives used risk management activities relating forward sales contracts recorded sales changes market value derivatives used risk management activities surrounding inventories hand anticipated purchases inventories recorded cost sales sensitivity analyses presented measures potential losses fair value resulting hypothetical changes market prices related commodities sensitivity analyses consider actions may take mitigate exposure changes consider effects hypothetical adverse changes may overall economic activity actual changes market prices may differ hypothetical changes commodities risk purchase certain commodities grains livestock course normal operations part commodity risk management activities use derivative financial instruments primarily futures options reduce effect changing prices mechanism procure underlying commodity however commodities underlying derivative financial instruments experience significant price fluctuations requirement marktomarket positions designated qualify hedges could result volatility results operations contract terms hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts designated highly effective meeting risk reduction correlation criteria recorded using hedge accounting following table presents sensitivity analysis resulting hypothetical change 10 market prices october 3 2015 september 27 2014 fair value open positions fair value positions summation fair values calculated commodity valuing net position quoted futures prices market risk exposure analysis included hedge nonhedge derivative financial instruments interest rate risk october 3 2015 variable rate debt 1057 million weighted average interest rate 15 hypothetical 10 increase interest rates effective october 3 2015 september 27 2014 would minimal effect interest expense additionally changes interest rates impact fair value fixedrate debt october 3 2015 fixedrate debt 5668 million weighted average interest rate 44 market risk fixedrate debt estimated potential increase fair value resulting hypothetical 10 decrease interest rates hypothetical 10 decrease interest rates would increased fair value fixedrate debt approximately 87 million october 3 2015 109 million september 27 2014 fair values debt estimated based quoted market prices andor published interest rates interest rate risk associated pension postretirement benefit obligations changes interest rates impact liabilities associated benefit plans well amount income expense recognized plans declines value plan assets could diminish funded status pension plans potentially increase requirements make cash contributions plans see part ii item 8 notes consolidated financial statements note 15 pensions postretirement benefits additional information foreign currency risk foreign exchange exposure fluctuations foreign currency exchange rates primarily result certain receivable payable balances primary currencies exposure brazilian real british pound sterling canadian dollar chinese renminbi european euro japanese yen mexican peso periodically enter foreign exchange forward option contracts hedge portion foreign currency exposure hypothetical 10 change foreign exchange rates effective october 3 2015 september 27 2014 related foreign exchange forward option contracts would 3 million 9 million impact respectively pretax income concentrations credit risk financial instruments exposed concentrations credit risk consist primarily cash equivalents trade receivables cash equivalents high quality securities placed major banks financial institutions concentrations credit risk respect receivables limited due large number customers dispersion across geographic areas perform periodic credit evaluations customers’ financial condition generally require collateral october 3 2015 september 27 2014 200 186 respectively net accounts receivable balance due walmart stores inc single customer group represented greater 10 net accounts receivable item 8item 7a quantitative qualitative disclosures market risk market risk relating operations results primarily changes commodity prices interest rates foreign exchange rates well credit risk concentrations address certain risks enter various derivative transactions described derivative instrument accounted hedge depending nature hedge changes fair value instrument either offset change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion instrument’s change fair value recognized immediately additionally hold certain positions primarily grain livestock futures either meet criteria hedge accounting designated hedges exception normal purchases normal sales expected result physical delivery record positions fair value unrealized gains losses reported earnings reporting date changes market value derivatives used risk management activities relating forward sales contracts recorded sales changes market value derivatives used risk management activities surrounding inventories hand anticipated purchases inventories recorded cost sales sensitivity analyses presented measures potential losses fair value resulting hypothetical changes market prices related commodities sensitivity analyses consider actions may take mitigate exposure changes consider effects hypothetical adverse changes may overall economic activity actual changes market prices may differ hypothetical changes commodities risk purchase certain commodities grains livestock course normal operations part commodity risk management activities use derivative financial instruments primarily futures options reduce effect changing prices mechanism procure underlying commodity however commodities underlying derivative financial instruments experience significant price fluctuations requirement marktomarket positions designated qualify hedges could result volatility results operations contract terms hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts designated highly effective meeting risk reduction correlation criteria recorded using hedge accounting following table presents sensitivity analysis resulting hypothetical change 10 market prices september 30 2017 october 1 2016 fair value open positions fair value positions summation fair values calculated commodity valuing net position quoted futures prices market risk exposure analysis included hedge nonhedge derivative financial instruments interest rate risk september 30 2017 variable rate debt 2756 million weighted average interest rate 19 hypothetical 10 increase interest rates effective september 30 2017 october 1 2016 would minimal effect interest expense additionally changes interest rates impact fair value fixedrate debt september 30 2017 fixedrate debt 7447 million weighted average interest rate 41 market risk fixedrate debt estimated potential increase fair value resulting hypothetical 10 decrease interest rates hypothetical 10 decrease interest rates would increased fair value fixedrate debt approximately 150 million september 30 2017 71 million october 1 2016 fair values debt estimated based quoted market prices andor published interest rates interest rate risk associated pension postretirement benefit obligations changes interest rates impact liabilities associated benefit plans well amount income expense recognized plans declines value plan assets could diminish funded status pension plans potentially increase requirements make cash contributions plans see part ii item 8 notes consolidated financial statements note 15 pensions postretirement benefits additional information foreign currency risk foreign exchange exposure fluctuations foreign currency exchange rates primarily result certain receivable payable balances primary currencies exposure brazilian real british pound sterling canadian dollar chinese renminbi european euro japanese yen mexican peso periodically enter foreign exchange forward option contracts hedge portion foreign currency exposure hypothetical 10 change foreign exchange rates effective september 30 2017 october 1 2016 related foreign exchange forward option contracts would 7 million 3 million impact respectively pretax income concentrations credit risk financial instruments exposed concentrations credit risk consist primarily cash equivalents trade receivables cash equivalents high quality securities placed major banks financial institutions concentrations credit risk respect receivables limited due large number customers dispersion across geographic areas perform periodic credit evaluations customers’ financial condition generally require collateral september 30 2017 october 1 2016 186 189 respectively net accounts receivable balance due walmart stores inc single customer group represented greater 10 net accounts receivable item 8item 7a quantitative qualitative disclosures market risk market risk relating operations results primarily changes commodity prices interest rates foreign exchange rates well credit risk concentrations address certain risks enter various derivative transactions described derivative instrument accounted hedge depending nature hedge changes fair value instrument either offset change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion instrument’s change fair value recognized immediately hold certain positions primarily grain livestock futures either meet criteria hedge accounting designated hedges exception normal purchases normal sales expected result physical delivery record positions fair value unrealized gains losses reported earnings reporting date sensitivity analyses presented measures potential losses fair value resulting hypothetical changes market prices related commodities sensitivity analyses consider actions may take mitigate exposure changes consider effects hypothetical adverse changes may overall economic activity actual changes market prices may differ hypothetical changes commodities risk purchase certain commodities grains livestock course normal operations part commodity risk management activities use derivative financial instruments primarily forwards options reduce effect changing prices mechanism procure underlying commodity however commodities underlying derivative financial instruments experience significant price fluctuations requirement marktomarket positions designated qualify hedges could result volatility results operations contract terms hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts designated highly effective meeting risk reduction correlation criteria recorded using hedge accounting generally hedge anticipated transactions beyond 18 months following table presents sensitivity analysis resulting hypothetical change 10 market prices october 3 2020 september 28 2019 fair value open positions fair value positions summation fair values calculated commodity valuing net position quoted forward option prices market risk exposure analysis included derivatives designated hedge instruments derivatives designated hedge instruments interest rate risk october 3 2020 variable rate debt 1521 million weighted average interest rate 18 hypothetical 10 increase interest rates effective october 3 2020 september 28 2019 would minimal effect interest expense additionally changes interest rates impact fair value fixedrate debt october 3 2020 fixedrate debt 9818 million weighted average interest rate 442 market risk fixedrate debt estimated potential increase fair value resulting hypothetical 10 decrease interest rates hypothetical 10 decrease interest rates would increased fair value fixedrate debt approximately 108 million october 3 2020 184 million september 28 2019 fair values debt estimated based quoted market prices andor published interest rates subject interest rate risk associated pension postretirement benefit obligations changes interest rates impact liabilities associated benefit plans well amount income expense recognized plans declines value plan assets could diminish funded status pension plans potentially increase requirements make cash contributions plans see part ii item 8 notes consolidated financial statements note 16 pensions postretirement benefits additional information foreign currency risk foreign exchange exposure fluctuations foreign currency exchange rates primarily result certain receivable payable balances primary currencies exposure australian dollar brazilian real british pound sterling canadian dollar chinese renminbi european euro malaysian ringgit mexican peso thai baht periodically enter foreign exchange forward option contracts hedge portion foreign currency exposure hypothetical 10 change foreign exchange rates related foreign exchange forward option contracts would 54 million 15 million impact pretax income october 3 2020 september 28 2019 respectively concentrations credit risk financial instruments exposed concentrations credit risk consist primarily cash equivalents trade receivables cash equivalents high quality securities placed major banks financial institutions concentrations credit risk respect receivables limited due large number customers dispersion across geographic areas perform periodic credit evaluations customers’ financial condition generally require collateral october 3 2020 september 28 2019 165 162 respectively net accounts receivable balance due walmart inc single customer group represented 10 greater net accounts receivable item 8 item 8 financial statements supplementary data see information pages 2744 annual report caption consolidated statements operations consolidated balance sheets consolidated statements shareholders equity consolidated statements cash flows notes consolidated financial statements report independent auditors information incorporated herein reference financial information filed item 14 part iv report item 9item 8 financial statements supplementary data see information pages 22 26 2830 3241 43 annual report caption consolidated statements operations consolidated balance sheets consolidated statements shareholders equity consolidated statements cash flows notes consolidated financial statements report independent auditors information incorporated herein reference financial information filed item 14 part iv report item 9item 8 financial statements supplementary data see information pages 28 31 32 34 3644 46 annual report caption consolidated statements operations consolidated statements shareholders equity consolidated balance sheets consolidated statements cash flows notes consolidated financial statements report independent auditors information incorporated herein reference financial information filed item 14 part iv report item 9item 8 financial statements supplementary data see information pages 32 46 annual report caption consolidated statements income consolidated balance sheets consolidated statements shareholders equity consolidated statements cash flows notes consolidated financial statements report independent auditors information incorporated herein reference financial information filed item 14 part iv report item 9item 8 financial statements supplementary data see information pages 24 41 annual report caption consolidated statements income consolidated balance sheets consolidated statements shareholders equity consolidated statements cash flows notes consolidated financial statements report independent auditors information incorporated herein reference financial information filed item 14 part iv report item 9item 8 financial statements supplementary data see information pages 38 57 annual report caption consolidated statements income consolidated balance sheets consolidated statements shareholders equity consolidated statements cash flows notes consolidated financial statements report independent auditors information incorporated herein reference financial information filed item 14 part iv report item 9item 8 financial statements supplementary data see information pages 29 45 47 annual report caption consolidated statements income consolidated balance sheets consolidated statements shareholders equity consolidated statements cash flows notes consolidated financial statements report independent auditors information incorporated herein reference financial information filed item 14 part iv report item 9item 8 financial statements supplementary data see information pages 31 55 annual report caption consolidated statements income consolidated balance sheets consolidated statements shareholders equity consolidated statements cash flows notes consolidated financial statements report independent auditors information incorporated herein reference financial information filed item 14 part iv report item 9item 8 financial statements supplementary data tyson foods inc consolidated statements income tyson foods inc consolidated balance sheets tyson foods inc consolidated statements shareholders equity tyson foods inc consolidated statements shareholders equity tyson foods inc consolidated statements cash flows notes consolidated financial statements note 1 business summary significant accounting policies description business tyson foods inc founded 1935 headquarters springdale arkansas worlds largest processor marketer beef chicken pork tyson foods produces wide variety brand name proteinbased prepared food products marketed united states 80 countries around world tyson foods recognized market leader retail foodservice markets serves company approximately 120000 team members 300 facilities offices 29 states 22 countries consolidation consolidated financial statements include accounts whollyowned subsidiaries significant intercompany accounts transactions eliminated consolidation fiscal year company utilizes 52 53week accounting period ends saturday closest september 30 reclassifications certain reclassifications made prior periods conform current presentations cash equivalents cash equivalents consist investments shortterm highly liquid securities original maturities three months less made part companys cash management activity carrying values assets approximate fair market values result companys cash management system checks issued presented banks payment may create negative cash balances checks outstanding excess related cash balances totaling approximately 292 million september 28 2002 265 million september 29 2001 included trade accounts payable accrued salaries wages benefits inventories processed products livestock excluding breeders supplies valued lower cost firstin firstout market breeders stated cost less amortization livestock includes live cattle live chicken live swine live chicken consists broilers breeders depreciation provided primarily straightline method using estimated lives buildings leasehold improvements 10 39 years machinery equipment three 12 years three 20 years longlived assets company reviews carrying value longlived assets balance sheet date indication impairment exists recoverability assessed using undiscounted cash flows based upon historical results current projections earnings interest taxes company measures impairment using discounted cash flows future operating results based upon rate corresponds companys cost capital impairments recognized operating results extent carrying value exceeds discounted cash flows future operations goodwill indefinite lived intangible assets recorded fair values amortized reviewed impairment least annually frequently impairment indicators arise fiscal years 2001 2000 goodwill arising prior ibp transaction amortized straightline basis periods ranging 15 40 years september 28 2002 september 29 2001 accumulated amortization goodwill 286 million amount goodwill segment september 28 2002 september 29 2001 follows increase goodwill prepared foods segment results acquisition assets millard processing services goodwill allocated reporting units based fair value identifiable assets goodwill deductible income tax purposes accrued self insurance expense casualty claims employeerelated health care benefits estimated using historical experience actuarial estimates capital stock holders class b common stock class b stock may convert stock class common stock class stock shareforshare basis holders class b stock entitled 10 votes per share holders class stock entitled one vote per share matters submitted shareholders approval cash dividends cannot paid holders class b stock unless simultaneously paid holders class stock per share amount cash dividend paid holders class b stock cannot exceed 90 cash dividend simultaneously paid holders class stock company pays quarterly cash dividends class b shareholders company paid class dividends per share 016 class b dividends per share 0144 fiscal years 2002 2001 2000 stockbased compensation stockbased compensation recognized using intrinsic value method disclosure purposes pro forma net income earnings per share impacts provided fair value method applied financial instruments periodically company uses derivative financial instruments reduce exposure various market risks company regularly engage speculative transactions company regularly hold issue financial instruments trading purposes however company periodically hold positions economic hedges hedge accounting applied generally contract terms hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts highly effective meeting risk reduction correlation criteria recorded using hedge accounting derivative instrument hedge depending nature hedge changes fair value instrument either offset change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income hedged item recognized earnings ineffective portion instruments change fair value immediately recognized earnings instruments meet criteria hedge accounting marked fair value unrealized gains losses reported currently earnings company generally hedge anticipated transactions beyond 12 months revenue recognition company recognizes revenue product sales upon delivery customers freight expense freight expense associated products shipped customers recognized cost products sold advertising promotion expenses advertising promotion expenses charged operations period incurred advertising promotion expenses fiscal 2002 2001 2000 396 million 337 million 280 million respectively minority interest results operations ibp nine weeks ended september 29 2001 included companys consolidated results operations minority interest primarily consists 499 ibp acquired september 28 2001 use estimates consolidated financial statements prepared conformity accounting principles generally accepted united states require management make estimates assumptions affect amounts reported consolidated financial statements accompanying notes actual results could differ estimates recently issued accounting standards june 2001 financial accounting standards board fasb issued statement financial accounting standards 142 goodwill intangible assets sfas 142 sfas 142 goodwill indefinite lived intangible assets longer amortized reviewed annually frequently impairment indicators arise impairment separable intangible assets finite lives continue amortized useful lives company elected early adopt provisions sfas 142 discontinued amortization goodwill balances intangible assets indefinite useful lives effective september 30 2001 company assessed goodwill impairment upon adoption completed required annual test impairment fourth quarter fiscal 2002 neither impairment test indicated impairment losses provisions sfas 142 effect fiscal years 2001 2000 reduction amortization expense increase net income 30 million 014 per diluted share 29 million 013 per diluted share respectively would recorded accordance guidance provided emerging issues task force eitf issue 0014 accounting certain sales incentives eitf issue 0025 vendor income statement characterization consideration paid reseller vendors products beginning first quarter fiscal 2002 company classifies costs associated sales incentives provided retailers payments slotting fees cooperative advertising vendors reduction sales costs previously included selling general administrative expense reclassifications resulted reduction sales selling general administrative expense approximately 188 million 142 million fiscal years 2001 2000 respectively impact reported income taxes minority interest net income earnings per share amounts august 2001 fasb issued sfas 143 accounting asset retirement obligations statement requires company recognize fair value liability associated cost company would obligated incur order retire asset point future liability would recognized period incurred reasonably estimated standard effective fiscal years beginning june 15 2002 company expects adopt standard beginning fiscal 2003 company believes adoption sfas 143 material impact financial position results operations october 2001 fasb issued sfas 144 accounting impairment disposal longlived assets sfas 144 develops accounting model based upon framework established sfas 121 longlived assets disposed sales accounting model applies longlived assets including discontinued operations replaces provisions abp opinion 30 reporting results operationsreporting effects disposal segment business extraordinary unusual infrequently occurring events transactions disposal segments business sfas 144 requires longlived assets held disposal measured lower carrying amount fair values less costs sell whether reported continuing operations discontinued operations statement effective fiscal years beginning december 15 2001 company intends adopt standard beginning fiscal 2003 company believes adoption sfas 144 material impact financial position results operations july 2002 fasb issued sfas 146 accounting costs associated exit disposal activities sfas 146 addresses financial accounting reporting costs associated exit disposal activities replaces eitf issue 943 liability recognition certain employee termination benefits costs exit activity including certain costs incurred restructuring sfas 146 requires liability cost associated exit disposal activity recognized liability incurred sfas 146 also establishes fair value objective initial measurement liability statement effective exit disposal activities initiated december 31 2002 company believes adoption sfas 146 material impact financial position results operations note 2 acquisition august 2001 company acquired 501 ibp paying 17 billion cash september 2001 company issued 129 million shares class common stock fair value 12 billion acquire remaining ibp shares assumed 17 billion ibp debt total acquisition cost 46 billion accounted purchase accordance statement financial accounting standards sfas 141 business combinations accordingly tangible identifiable intangible assets liabilities adjusted fair values remainder purchase price recorded goodwill transaction accounted using purchase method accounting required sfas 141 goodwill identifiable intangible assets recorded acquisition tested periodically impairment required sfas 142 allocation purchase price specific assets liabilities based part upon outside appraisal ibps longlived assets allocation purchase price completed fair value assets acquired liabilities assumed august 3 2001 identifiable intangible assets 242 million consist trademarks 138 million patents 87 million 17 million supply contracts included assets amounts associated trademarks subject amortization management believes useful lives indefinite amounts associated patents supply contracts amortized 15 five years respectively august 2001 company completed financing acquisition ibp entering two bridge revolving credit facilities consisting senior unsecured bridge credit agreement provided aggregate borrowings 25 billion bridge facility senior unsecured receivables bridge credit agreement provided aggregate borrowings 350 million receivables bridge facility subsequent september 29 2001 company refinanced facilities pro forma unaudited results operations years ended september 29 2001 september 30 2000 assuming purchase ibp consummated october 1 1999 follows pro forma adjustments made reflect additional interest debt associated acquisition additional common shares issued unaudited pro forma results necessarily indicative actual results operations would occurred purchase actually made beginning fiscal 2000 results may occur future may 2001 company increased ownership tyson de mexico sa de cv tdm acquiring common shares tdm existing minority shareholders cash noncash transaction whereby tdm exchanged minority shareholders common stock 45 million tdm redeemable preferred stock 8 coupon september 2001 company acquired remaining common shares tdm held minority shareholders upon completion transactions company owns 100 common shares tdm company entered call agreement holders converted tdm redeemable preferred stock allows company purchase converted redeemable preferred stock 5 years additionally may 2001 tdm purchased poultry assets nochistongo spr de rl fully integrated broiler production operation markets products kory brand purchase price transactions allocated based upon estimated fair market values date purchase september 28 2002 company purchased 11 million convertible redeemable preferred stock may 2002 company acquired millard processing services bacon processing operation approximately 73 million cash acquisition accounted purchase goodwill approximately 14 million recorded note 3 disposition september 2002 company completed sale specialty brands inc subsidiary acquired ibp acquisition results operations included companys prepared foods segment company received cash proceeds approximately 131 million used reduce indebtedness recognized pretax gain 22 million included income consolidated statement income note 4 charges august 2002 company announced decision restructure live swine operation restructuring result closure companyowned leased feeder pig finishing farms arkansas eastern oklahoma company retain limited number breeding operations oklahoma northwest arkansas well feeder pig finishing operations north central missouri result decision company recorded live swine restructuring accrual 26 million fourth quarter fiscal 2002 amount reflected pork segment reduction operating income included consolidated statement income charges august 2002 company made decision capitalize strong recognition tyson brand expanding tyson brand beef pork thus fourth quarter fiscal 2002 company recorded writedown 27 million related discontinuation thomas e wilson brand amount reflected prepared foods segment reduction operating income included consolidated statement income charges note 5 allowance doubtful accounts september 28 2002 september 29 2001 allowance doubtful accounts 26 million 27 million respectively fiscal 2000 ameriserve food distribution inc ameriserve significant distributor products fast food casual dining restaurant chains filed reorganization delaware chapter 11 federal bankruptcy code company major supplier several ameriserve customers second quarter fiscal 2000 company recorded 24 million bad debt reserve fully reserve ameriserve receivable note 6 financial instruments october 2000 company adopted sfas 133 accounting derivative instruments hedging activities sfas 133 amended statement requires company recognize derivatives balance sheet fair value derivatives hedges must adjusted fair value earnings derivative hedge depending nature hedge changes fair value derivatives either offset change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion derivatives change fair value recognized earnings adoption sfas 133 october 2000 resulted cumulative effect approximately 6 million aftertax 9 million pretax charged comprehensive income loss september 28 2002 september 29 2001 company derivative related balances totaling 1 million 5 million recorded current assets 19 million 20 million recorded current liabilities respectively cash flow hedges company uses derivatives moderate financial commodity market risks business operations derivative products futures option contracts considered hedge changes amount future cash flows related commodities procurement company also enters interest rate swap agreements adjust proportion total longterm debt leveraged equipment loans subject variable interest rates interest rate swaps company agrees pay fixed rate interest times notional principal amount receive return amount equal specified variable rate interest times notional principal amount interest rate swaps considered hedge changes amount future cash flows associated companys variable rate interest payments effective portion cumulative gain loss derivative instrument reported component comprehensive income loss shareholders equity recognized earnings period periods hedged transaction affects earnings commodity hedges chickens consumed hedged grain sold remaining cumulative gain loss derivative instrument excess cumulative change present value future cash flows hedged item recognized earnings period change ineffectiveness recognized cash flow hedges fiscal 2002 2001 company expects tax losses net gains totaling approximately 2 million recorded comprehensive income loss september 28 2002 related cash flow hedges recognized within next 12 months company generally hedge cash flows related commodities beyond 12 months fair value hedges company designates certain futures contracts fair value hedges firm commitments purchase livestock slaughter company also enters foreign currency forward contracts hedge changes fair value receivables purchase commitments arising changes exchange rates foreign currencies changes fair value derivative highly effective designated qualifies fair value hedge along loss gain hedged asset liability attributable hedged risk including losses gains firm commitments recorded current period earnings ineffectiveness results change fair value hedge instrument differs change fair value hedged item ineffectiveness recorded related companys fair value hedges significant fiscal 2002 2001 undesignated positions company holds certain commodity futures contracts regular course business manage exposure commodity price fluctuations anticipated purchases raw materials anticipated sales finished inventories contracts generally short durations less one year although instruments economic hedges company designate contracts hedges accounting purposes result company marks contracts market recognizes change earnings september 28 2002 september 29 2001 contracts fair value liability 11 million recorded consolidated balance sheet fair values based quoted market prices published forward interest rate curves financial instruments fair values approximate recorded values september 28 2002 september 29 2001 concentrations credit risk companys financial instruments exposed concentrations credit risk consist primarily cash equivalents trade receivables companys cash equivalents high quality securities placed major banks financial institutions concentrations credit risk respect receivables limited due large number customers dispersion across geographic areas company performs periodic credit evaluations customers financial condition generally require collateral september 28 2002 approximately 108 companys total accounts receivable balance due one customer group represents greater 10 total accounts receivable note 7 property plant equipment major categories property plant equipment accumulated depreciation cost follows company capitalized interest costs 9 million 2002 3 million 2001 2 million 2000 part cost major asset construction projects approximately 137 million required complete construction projects progress september 28 2002 note 8 current liabilities current liabilities september 28 2002 september 29 2001 include note 9 commitments company leases certain farms properties equipment total rentals thereon approximated 105 million 2002 76 million 2001 66 million 2000 farm leases terms ranging one 10 years various renewal periods significant obligations assumed terms leases upkeep facilities payments insurance property taxes minimum lease commitments noncancelable leases september 28 2002 total 197 million composed 72 million 2003 41 million 2004 31 million 2005 25 million 2006 17 million 2007 11 million later years future commitments expected offset future minimum lease payments received subleases approximately 5 million company assists certain swine chicken growers obtaining financing growout facilities providing growers extended growout contracts conditional operation facilities grower default growout loan agreement company also guarantees debt outside third parties 66 million company enters various future purchase commitments finished live cattle hogs purchase commitments marketderived price time delivery fully hedged price determined earlier date commitments deliverable year less operating requirements year note 10 longterm debt company unsecured revolving credit agreements totaling 1 billion support companys commercial paper program letters credit shortterm funding needs facilities restructured third quarter fiscal 2002 500 million 364 day facility restructured 300 million 3 year facility 200 million 364 day facility 1 billion facilities consist 200 million expires june 2003 300 million expires june 2005 500 million expires september 2006 september 28 2002 amounts outstanding facilities october 2001 company refinanced 23 billion outstanding bridge financing facility issuance 225 billion notes offered three tranches consisting 500 million 6625 notes due october 2004 750 million 725 notes due october 2006 1 billion 825 notes due october 2011 october 2001 company entered receivables purchase agreement three copurchasers sell 750 million trade receivables purchase agreement accounted borrowing interest rate based commercial paper issued copurchasers agreement substantially companys accounts receivable sold special purpose entity tyson receivables corporation trc wholly owned consolidated subsidiary company trc separate creditors entitled satisfied assets trc prior value becoming available trcs equity holders september 28 2002 company outstanding letters credit totaling approximately 287 million issued primarily support workers compensation insurance programs industrial revenue bonds leveraged equipment loans draw downs letters credit september 28 2002 terms leveraged equipment loans company restricted cash totaling approximately 52 million included assets september 28 2002 leveraged loan agreements company entered interest rate swap agreements effectively lock fixed interest rate borrowings annual maturities longterm debt five years subsequent september 28 2002 2003254 million 200442 million 2005719 million 2006286 million 2007909 million revolving credit agreements senior notes accounts receivable securitization debt contain various covenants restrictive contain maximum allowed leverage ratio minimum required interest coverage ratio company compliance covenants fiscal year end industrial revenue bonds secured facilities net book value 64 million september 28 2002 weighted average interest rate outstanding shortterm borrowing 33 september 28 2002 51 september 29 2001 included current debt shortterm notes payable totaling 37 million 18 million september 28 2002 september 29 2001 respectively company fully unconditionally guaranteed 541 million senior notes issued ibp whollyowned subsidiary company following condensed consolidating financial information provided company guarantor ibp issuer alternative providing separate financial statements issuer financial results live swine operations well interest expense related ibp acquisition included tyson amounts note 11 comprehensive income loss components accumulated comprehensive income loss included foreign currency translation adjustment 23 million 16 million 5 million 2002 2001 2000 respectively unrealized hedging gains losses net taxes 18 million 21 million 0 2002 2001 2000 respectively unrealized gain loss investments net taxes 0 2 million 0 2002 2001 2000 respectively minimum pension liability adjustment net taxes 8 million 2002 note 12 stock options restricted stock shareholders approved 2000 stock incentive plan incentive plan january 2001 incentive plan administered compensation subcommittee board directors permits awards shares class stock awards derivative securities related value class stock tax reimbursement payments eligible persons incentive plan provides award variety equitybased incentives incentive stock options nonqualified stock options stock appreciation rights dividend equivalent rights performance unit awards phantom shares incentive plan provides granting incentive stock options shares class stock price less fair market value date grant nonqualified stock options may granted price equal less fair market value class stock date option granted stock options incentive plan generally become exercisable ratably three eight years date grant must exercised within 10 years date grant may 2000 company cancelled approximately four million option shares granted approximately one million restricted shares class stock restriction expires periods december 1 2003 september 28 2002 company outstanding approximately six million restricted shares class stock restrictions expiring periods july 1 2020 unearned portion restricted stock classified consolidated balance sheets deferred compensation shareholders equity summary companys stock option activity follows number options exercisable follows september 28 20029373360 september 29 20019644323 september 30 20002926980 remainder options outstanding september 28 2002 exercisable ratably october 2006 number shares available future grants 10536763 2742800 september 28 2002 september 29 2001 respectively following table summarizes information stock options outstanding september 28 2002 weighted average fair value options granted 2002 approximately 331 fair value option grant established date grant using blackscholes optionpricing model assumptions include expected life six years riskfree interest rate ranging 373 380 expected volatility 375 dividend yield ranging 164 172 2002 company applies accounting principles board opinion 25 related interpretations accounting employee stock option plans accordingly compensation expense recognized stock option plans compensation cost employee stock option plans determined based fair value method accounting companys stock option plans taxeffected impact would follows pro forma net income reflects options granted fiscal 1995 additionally pro forma disclosures likely representative effects net income future years note 13 benefit plans company defined contribution retirement incentive benefit programs various groups company personnel company contributions totaled 50 million 35 million 32 million 2002 2001 2000 respectively note 14 transactions related parties company operating leases farms equipment facilities former senior chairman board directors company certain members family well trust controlled rentals 9 million 2002 9 million 2001 7 million 2000 facilities leased officers directors rentals totaling 2 million 2002 2 million 2001 3 million 2000 certain officers directors engaged chicken swine growout operations company whereby individuals purchase animals feed housing items raise animals market weight total value transactions amounted 10 million 2002 10 million 2001 11 million 2000 note 15 income taxes detail provision income taxes consists reasons difference effective income tax rate statutory us federal income tax rate follows company follows liability method accounting deferred income taxes provides deferred tax liabilities recorded current tax rates based difference tax basis assets liabilities carrying amounts financial reporting purposes referred temporary differences tax effects major items recorded deferred tax assets liabilities net deferred tax liabilities included current liabilities deferred income taxes consolidated balance sheets suspended taxes conversion accrual method represents 1987 change cash accrual method accounting paid 2017 valuation allowance totaling 49 million consists 13 million state tax carryforwards fully reserved 36 million net operating loss carryforwards state tax credit carryforwards expire years 2004 2008 september 28 2002 considering utilization restrictions companys acquired tax loss carryforwards approximated 173 million net operating loss carryforwards subject utilization limitations due ownership changes may utilized offset future taxable income carryforwards expire years 2003 2021 note 16 earnings per share weighted average common shares used computation basic diluted earnings per share follows approximately 6 million shares companys option shares outstanding september 28 2002 antidilutive included dilutive earnings per share calculation year ended september 28 2002 september 28 2001 company issued approximately 129 million shares remaining ibp shares excluded fiscal 2001 weighted average share calculation along dilutive effect acquired stock options restricted shares note 17 segment reporting company operates five business segments beef chicken pork prepared foods company measures segment profit operating income following information includes 52 weeks nine weeks ibps operating results periods ending september 28 2002 september 29 2001 respectively beef segment primarily involved slaughter live fed cattle fabrication dressed beef carcasses primal subprimal meat cuts caseready products also involves deriving value allied products hides variety meats sale processors others beef segment markets products food retailers distributors wholesalers restaurants hotel chains food processors domestic international markets allied products also marketed manufacturers pharmaceuticals technical products chicken segment includes fresh frozen valueadded chicken products sold domestic food service domestic retail markets athome consumption wholesale club markets targeted small foodservice operations small businesses individuals well specialty commodity distributors deliver restaurants schools international markets throughout world chicken segment also includes sales allied products companys chicken breeding stock subsidiary pork segment represents companys live swine group hog slaughter fabrication operations caseready products related allied product processing activities pork segment markets products food retailers distributors wholesalers restaurants hotel chains food processors domestic international markets also sells allied products pharmaceutical technical products manufacturers well live swine pork processors prepared foods segment includes companys operations manufacture market frozen refrigerated food products include pepperoni beef pork toppings pizza crusts flour corn tortilla products appetizers hors doeuvres desserts prepared meals ethnic foods soups sauces side dishes specialty pasta meat dishes well branded processed meats segment includes logistics group corporate groups identified specific protein groups majority companys operations domiciled united states approximately 940 sales external customers fiscal 2002 sourced united states 97 sourced united states fiscal years ending 2001 2000 approximately 65 billion 66 billion 30 billion longlived assets located united states fiscal years ended 2002 2001 2000 respectively approximately 193 million 204 million 74 million longlived assets located foreign countries primarily mexico canada fiscal years ended 2002 2001 2000 respectively company sells certain products foreign markets primarily canada china european union japan mexico puerto rico russia taiwan south korea companys export sales 2002 2001 2000 totaled 20 billion 12 billion 550 million respectively substantially companys export sales transacted unaffiliated brokers marketing associations foreign sales staffs foreign sales less 10 total consolidated sales 2002 2001 2000 respectively note 18 supplemental information note 19 quarterly financial data unaudited quarterly financial data reclassified applications eitf 0014 eitf 0025 fiscal 2001 third quarter 2002 gross profit includes 30 million received partial settlement ongoing vitamin antitrust litigation fourth quarter 2002 operating income includes 22 million gain related sale specialty brands charges 27 million 26 million related thomas e wilson brand writedown live swine restructuring respectively note 20 contingencies wage hour labor matters 2000 wage hour division us department labor dol conducted industrywide investigation poultry producers including company ascertain compliance various wage hour issues part investigation dol inspected 14 companys processing facilities may 9 2002 secretary labor filed civil complaint company us district court northern district alabama complaint alleges company violated overtime provisions federal fair labor standards act companys chickenprocessing facility blountsville alabama complaint contain definite statement acts constituted alleged violations statute secretary seeks back wages employees blountsville facility period two years prior date filing complaint additional amount liquidated damages injunction future violations facility facilities operated company filed initial answer discovery commenced company believes substantial defenses claims made case intends vigorously defend case however neither likelihood unfavorable outcome amount ultimate liability respect case determined time june 22 1999 11 current former employees company filed case mh fox et al v tyson foods inc fox v tyson us district court northern district alabama claiming company violated requirements fair labor standards act suit alleges company failed pay employees hours worked andor improperly paid overtime hours suit specifically alleges 1 employees paid time taken put take certain working supplies beginning end shifts breaks 2 use mastercard line time fails pay employees time actually worked plaintiffs seek represent similarly situated current former employees company filing 159 current andor former employees consented join lawsuit date approximately 5000 consents filed court discovery case ongoing hearing held march 6 2000 consider plaintiffs request collective action certification courtsupervised notice decision rendered company believes substantial defenses claims made intends vigorously defend case however neither likelihood unfavorable outcome amount ultimate liability respect case determined time substantially similar suits filed several integrated poultry companies addition organizing activity conducted representatives affiliates united food commercial workers union poultry industry encouraged worker participation fox v tyson lawsuits august 22 2000 seven employees company filed case de asencio v tyson foods inc us district court eastern district pennsylvania lawsuit similar fox v tyson employees claim violations fair labor standards act allegedly failing pay time taken put take sanitize certain working supplies violations pennsylvania wage payment collection law plaintiffs seek represent similarly situated current former employees poultry processing plants new holland pennsylvania currently approximately 500 additional current former employees filed consents join lawsuit court january 30 2001 ordered notice lawsuit issued potential plaintiffs new holland facilities july 17 2002 court granted plaintiffs motion certify state law claims company believes substantial defenses claims made intends defend case vigorously however neither likelihood unfavorable outcome amount ultimate liability respect case determined time november 5 2001 lawsuit entitled maria chavez et al vs ibp lasso acquisition corporation tyson foods inc filed us district court eastern district washington ibp tyson several employees ibps pasco washington beef slaughter processing facility alleging various violations fair labor standards act 29 usc sections 201 219 flsa well violations washington state minimum wage act rcw chapter 4946 industrial welfare act rcw chapter 4912 wage deductionscontributionrebates act rcw chapter 4952 lawsuit alleges ibp andor tyson required employees perform unpaid work related donning doffing certain personal protective clothing prior shifts well meal periods plaintiffs allege similar prior litigation entitled alvarez et al vs ibp resulted 31 million final judgment ibp supports claim collateral estoppel andor res judicata issues raised new litigation ibp filed timely notice appeal vigorously pursue reversal alvarez judgment ninth circuit court appeals chavez initially pursued optin collective action 29 usc 216b may 24 2002 plaintiffs filed motion seeking certification class optout state law plaintiffs federal rule civil procedure 23 october 28 2002 us district court eastern district washington granted plaintiffs motion rule 23 order asserting supplemental jurisdiction state law wage hour claims certifying class november 6 2002 ibp tyson timely filed motion ninth circuit court appeals seeking leave appeal district courts rule 23 order environmental matters january 15 1997 illinois epa brought suit circuit court 14th judicial circuit rock island illinois chancery division ibp alleging ibps operations joslin illinois facility violating odor nuisance regulations enacted state illinois ibp already completed additional improvements joslin facility reduce odors operation denies illinois epas contention operations time amounted nuisance ibp attempting discuss issues state illinois effort reach settlement company advised us attorneys office western district missouri government intends seek indictment company alleged violations clean water act related activities sedalia missouri facility company presently negotiations possible resolution matter although amount ultimate liability respect matter cannot determined time company expect material adverse effect consolidated financial position results operations october 23 2001 putative class action lawsuit filed district court mayes county oklahoma company r lynn thompson deborah thompson behalf owners grand lake cherokees littoral lake front property suit alleges company entities operational control conduct operations way interfere putative class action plaintiffs use enjoyment property allegedly caused diminished water quality lake company believes complaint allegations unfounded intends vigorously defend case december 10 2001 city tulsa oklahoma tulsa metropolitan utility authority filed us district court northern district oklahoma case styled city tulsa municipal utility authority v tyson foods inc et al company cobbvantress inc wholly owned subsidiary company four fully integrated poultry companies city decatur arkansas respect company cobbvantress inc suit alleges degradation tulsa water supply attributable whole part nonpoint source runoff land application poultry litter watershed feeding lakes act city tulsas water supply company cobbvantress inc together defendants named lawsuit jointly severally responsible alleged application poultry litter watershed company believes allegations complaint unfounded intends vigorously defend case securities matters january march 2001 number lawsuits filed certain stockholders us district court district south dakota one suit filed us district court southern district new york seeking certify class persons purchased ibp stock february 7 2000 january 25 2001 plaintiff new york action voluntarily dismissed refiled complaint south dakota suits consolidated name ibp inc securities litigation complaints seeking unspecified damages allege ibp certain members management violated sections 10b 20a securities exchange act 1934 rule 10b5 thereunder claims ibp issued materially false statements ibps financial results order inflate stock price ibp filed motion dismiss december 21 2001 fully briefed pending court ibp intends vigorously contest claims june 6 2001 ibp advised sec commenced formal investigation related restatement earnings made ibp march 2001 including matters relating certain improprieties financial statements dfg whollyowned subsidiary company informed three former employees dfg received socalled wells notice advising sec determined recommend initiation enforcement action providing opportunity provide arguments enforcement action ibp cooperating investigation ibp stockholder merger agreement related litigation october 2 november 1 2000 14 class actions filed delaware court chancery delaware court ibp inc members ibp board directors november 13 2000 actions consolidated ibp inc shareholders litigation ca 18373 consolidated action march 29 2001 company filed action chancery court washington county arkansas entitled tyson foods inc et al v ibp inc case e 20017494 alleging company inappropriately induced enter merger agreement ibp dated january 1 2001 merger agreement ibp breach various representations warranties made merger agreement march 30 2001 ibp filed answer amended consolidated complaint crossclaim amended april 2 2001 company consolidated action amended ibps crossclaim sought declaration company could rescind terminate merger agreement specific enforcement merger agreement damages breach confidentiality agreement following expedited discovery delaware court conducted nine day trial beginning may 14 2001 ibps plaintiffs claims specific performance respect terminated cash tender offer merger agreement companys counterclaims june 15 2001 following expedited posttrial briefing delaware court issued memorandum opinion issued revised form june 18 2001 posttrial opinion delaware court concluded among things 1 merger agreement valid enforceable contract induced material misrepresentation omission 2 company breach merger agreement duty ibps stockholders failing close terminated cash tender offer 3 company basis terminate merger agreement terms 4 specific performance merger agreement method adequately redress harm threatened ibp stockholders negotiations accordance posttrial opinion company ibp presented order judgment decree delaware court entered june 27 2001 requiring company affiliates specifically perform merger agreement modified subject conditions contained stipulation company ibp including making cash tender offer 501 ibps shares effecting merger ibp august 3 2001 delaware court entered order approving settlement consolidated action extinguished claims could asserted ibp stockholders consolidated action exchange among things acceleration closing new cash tender offer august 3 2001 january 7 2002 company filed motion delaware court asking court vacate posttrial opinion grounds mootness alternative enter final judgment appeal could taken delaware court denied motion february 11 2002 company appealed decision well posttrial opinion certain earlier rulings delaware court delaware supreme court certain plaintiffs delaware federal actions discussed filed motion dismiss companys appeal untimely matters except delaware courts denial motion vacate posttrial opinion july 24 2002 delaware supreme court granted partial motion dismiss directed balance appeal go forward oral argument balance appeal scheduled december 12 2002 june 19 2001 purported company stockholder commenced derivative action delaware court entitled alan shapiro v barbara r allen et al ca 18967nc seeking monetary damages behalf company nominal defendant members companys board directors complaint alleges directors violated fiduciary duties attempting terminate merger agreement july 17 2001 defendants moved dismiss complaint august 16 2002 plaintiff filed amended complaint september 3 2002 defendants renewed motion dismiss hearing defendants motion dismiss scheduled december 17 2002 defendants intend vigorously defend claims june 22 july 20 2001 various plaintiffs commenced actions delaware federal actions company tyson john tyson les baledge us district court district delaware seeking monetary damages behalf purported class sold ibp stock traded certain ibp options march 29 2001 company announced intention terminate merger agreement ibp june 15 2001 delaware court rendered posttrial opinion consolidated action actions entitled meyer v tyson foods inc et al ca 01425 slr banyan equity mgt v tyson foods inc et al ca 01426 gms steiner v tyson foods inc et al ca 01462 gms aetos corp et al v tyson et al ca 01463 gms meyers et al v tyson foods inc et al ca 01480 binsky v tyson foods inc et al ca 01495 management risk trading lp v tyson foods inc et al ca 01496 stark investments lp et al v tyson et al ca 01565 allege defendants violated federal securities laws making causing made false misleading statements connection companys attempted termination merger agreement various actions subsequently consolidated caption tyson foods inc securities litigation december 4 2001 plaintiffs consolidated action filed consolidated class action complaint plaintiffs allege result defendants alleged conduct purported class members harmed january 22 2002 defendants filed motion dismiss consolidated complaint memorandum order dated october 23 2002 court granted part denied part defendants motion dismiss defendants intend vigorously defend remaining claims december 2001 stockholder derivative lawsuit filed court chancery state delaware companys board directors nominally company complaint concerns alleged violations immigration laws subject indictment us department justice see general complaint alleges members companys board failed exercise reasonable control supervision companys employees processes implement adequate internal controls adequately inform take adequate good faith remedial actions respect companys immigration practices matters giving rise indictment complaint seeks unspecified damages individual board members relief sought company members board filed motion dismiss chancery court delaware intend vigorously defend claims general matters around february 15 2002 company learned processing facility owned zemco industries inc subsidiary ibp subject investigation us attorneys office bangor maine allegedly improper testing recording practices company acquired zemco part companys acquisition ibp september 28 2001 zemco responded grand jury subpoenas cooperating fully us attorneys office neither likelihood unfavorable outcome amount ultimate liability respect matter determined time december 2001 company two current employees four former employees indicted u district court eastern district tennessee indictment alleges six employees conspired violate immigration laws involving approximately 15 named individuals one companys poultry processing facilities indictment also alleges company utilized services temporary employment agencies furtherance alleged conspiracy indictment seeks fines forfeiture amounts specified trial matter expected february 2003 company intends vigorously defend indictment believes meritorious defenses governments theories recovery however neither likelihood unfavorable outcome amount ultimate liability respect case determined time consistent forfeiture theory advanced indictment referred private plaintiffs filed following three lawsuits april 10 2002 plaintiffs filed trollinger et al vs tyson foods inc 402cv23 ed tenn us district court eastern district tennessee winchester division purported classaction lawsuit tyson behalf current former employees 15 named tyson facilities legally authorized work united states complaint action asserts claim tyson racketeer influence corrupt organizations rico statute complaint alleges tyson engaged scheme depress employees wages hiring illegal aliens seeks unspecified trebleddamages company moved dismiss complaint july 17 2002 court granted companys motion dismiss case failure state claim upon relief could granted plaintiffs filed notice appeal company intends vigorously defend claims however neither likelihood unfavorable outcome amount ultimate liability respect case determined time march 6 2002 plaintiffs filed baker et al vs ibp inc ca 024019 cd ill us district court central district illinois rock island division purported classaction lawsuit behalf current former employees ibps joslin illinois facility legally authorized work united states complaint asserts claim ibp rico statute complaint alleges ibp engaged scheme depress employees wages hiring illegal aliens seeks unspecified trebleddamages company moved dismiss complaint october 21 2002 court granted companys motion dismiss case failure state claim upon relief could granted plaintiffs filed notice appeal company intends vigorously defend claims however neither likelihood unfavorable outcome amount ultimate liability respect case determined time april 17 2002 plaintiff cynthia cruz filed cruz vs tyson foods inc ca 02 c 2761 nd ill purported classaction lawsuit tyson others behalf persons hispanic surnames whose identities social security numbers allegedly stolen misused named defendants complaint asserts claim rico statute claim violation federal civil rights statute commonlaw claims defamation violation privacy property rights fraud tortious interference contract date company moved dismiss action briefing completed december 2002 company intends vigorously defend claims however neither likelihood unfavorable outcome amount ultimate liability respect case determined time july 1996 lawsuit filed ibp certain cattle producers us district court middle district alabama seeking certification class cattle producers complaint alleges ibp used market power alleged captive supply agreements reduce prices paid producers cattle plaintiffs disclosed addition declaratory relief seek actual punitive damages original motion class certification denied court plaintiffs amended motion defining narrower class consisting cattle producers sold cattle directly ibp 1994 date certification court approved narrower class april 1999 11th circuit court appeals reversed district court decision certify class basis inherent conflicts amongst class members preventing named plaintiffs providing adequate representation class plaintiffs filed pleadings seeking certify amended class court denied plaintiffs motion october 17 2000 plaintiffs motion reconsideration judges decision denied plaintiffs asked court certify class cattle producers sold exclusively ibp cash market basis court granted december 2001 january 2002 ibp filed petition 11th circuit court appeals seeking permission appeal class certification decision circuit court appeals denied march 5 2002 district court set schedule completing format class notice mailing trial date set ibp filed motions summary judgment liability damages filed district court pending plaintiffs claimed damages case excess 500000000 management believes ibp acted properly lawfully dealings cattle producers intends vigorously defend case however neither likelihood unfavorable outcome amount ultimate liability respect case determined time august 8 2000 company served complaint filed us district court district arizona styled lemelson medical education research foundation limited partnership v alcon laboratories et al civ000661 phx pgr plaintiff sued company along approximately 100 defendants food beverage drug cosmetic tobacco industries claiming defendants infringed various patents held foundation alleged patent infringement based defendants alleged use foundations automatic identification patents relate use bar coding andor foundations patents relate machine vision foundation seeks treble damages defendants alleged infringement case currently stayed pending resolution related litigation neither likelihood unfavorable outcome amount ultimate liability respect case determined time september 12 2002 82 individual plaintiffs filed michael archer et al v tyson foods inc pork group inc civ 2002497 circuit court pope county arkansas august 18 2002 company announced restructuring live swine operations among things result discontinuance relationships 132 contract hog producers including plaintiffs complaint plaintiffs allege company committed fraud promissorily estopped terminating parties relationship plaintiffs seek compensatory punitive damages unspecified amount company filed motion stay proceedings compel arbitration plaintiffs responded motion compel discovery begun company intends vigorously defend claims however neither likelihood unfavorable outcome amount ultimate liability respect case determined time company pursuing various antitrust claims relating vitamins methionine choline third quarter 2002 company received approximately 30 million partial settlement claims company received expects receive signed settlement arrangements settlements approximately 26 million first quarter 2003 additional settlements anticipated amounts received claims recorded income upon receipt settlement proceeds matters company subject lawsuits investigations claims involve substantial amounts arising conduct business ultimate results matters cannot determined expected material adverse effect companys consolidated results operations financial position item 9item 8 financial statements supplementary data tyson foods inc consolidated statements income tyson foods inc consolidated balance sheets tyson foods inc consolidated statements shareholders equity tyson food inc consolidated statements shareholders equity tyson foods inc consolidated statements cash flows notes consolidated financial statements note 1 business summary significant accounting policies description business tyson foods inc collectively company tyson founded 1935 world headquarters springdale arkansas worlds largest processor marketer chicken beef pork second largest food company fortune 500 tyson foods produces wide variety brand name proteinbased prepared food products marketed united states 80 countries around world tyson recognized market leader retail foodservice markets serves company approximately 120000 team members 300 facilities offices 27 states 22 countries consolidation consolidated financial statements include accounts majorityowned whollyowned subsidiaries significant intercompany accounts transactions eliminated consolidation fiscal year company utilizes 52 53week accounting period ends saturday closest september 30 reclassifications certain reclassifications made prior periods conform current presentations cash equivalents cash equivalents consist investments shortterm highly liquid securities original maturities three months less made part companys cash management activity carrying values assets approximate fair market values company primarily utilizes cash management system series separate accounts consisting lockbox accounts receiving cash concentration accounts funds moved several zerobalance disbursement accounts funding payroll accounts payable grower payments result companys cash management system checks issued presented banks payment may create negative book cash balances checks outstanding excess related book cash balances totaling approximately 313 million september 27 2003 292 million september 28 2002 included trade accounts payable accrued salaries wages benefits inventories processed products livestock excluding breeders supplies valued lower cost firstin firstout market livestock includes live cattle live chicken live swine cost includes purchased raw materials live purchase costs growout costs primarily feed contract grower pay catch haul costs labor manufacturing production overhead related purchase production inventories live chicken consists broilers breeders stated cost less amortization costs associated breeders including breeder chicks feed medicine accumulated production stage amortized broiler inventory productive life flock using standard unit production depreciation provided primarily straightline method using estimated lives buildings leasehold improvements 10 39 years machinery equipment three 12 years three 20 years longlived assets company reviews carrying value longlived assets balance sheet date indication impairment exists recoverability assessed using undiscounted cash flows based upon historical results current projections earnings interest taxes company measures impairment using discounted cash flows future operating results based upon rate corresponds companys cost capital impairments recognized operating results extent carrying value exceeds discounted cash flows future operations goodwill intangible assets goodwill indefinite life intangible assets recorded fair value amortized reviewed impairment least annually frequently impairment indicators arise required sfas 142 goodwill allocated tested impairment reporting unit based fair value identifiable assets goodwill deductible income tax purposes fiscal year 2001 goodwill arising prior ibp transaction amortized straightline basis periods ranging 15 40 years provisions sfas 142 effect fiscal year 2001 reduction amortization expense increase net income 30 million 014 per diluted share would recorded september 27 2003 september 28 2002 accumulated amortization goodwill 286 million amount goodwill segment september 27 2003 september 28 2002 follows september 27 2003 gross carrying value intangible assets consisted 100 million trademarks 87 million patents 13 million supply contracts accumulated amortization 12 million 6 million patents supply contracts respectively september 28 2002 gross carrying value intangible assets consisted 100 million trademarks 87 million patents 13 million supply contracts accumulated amortization 6 million 4 million patents supply contracts respectively amortization expense combined patents supply contracts 8 million 9 million recognized 2003 2002 respectively amortization expense intangible assets estimated 8 million 2004 2005 2006 6 million 2007 2008 patents supply contracts amortized using straightline method estimated period benefit 15 years five years respectively investments company investments joint ventures entities company uses cost method accounting voting interests less 20 percent equity method accounting voting interests excess 20 percent greater 50 percent companys underlying share entitys equity reported consolidated balance sheet line item assets accrued self insurance expense casualty claims employeerelated health care benefits estimated using historical experience actuarial estimates capital stock holders class b common stock class b stock may convert stock class common stock class stock shareforshare basis holders class b stock entitled 10 votes per share holders class stock entitled one vote per share matters submitted shareholders approval cash dividends cannot paid holders class b stock unless simultaneously paid holders class stock per share amount cash dividend paid holders class b stock cannot exceed 90 cash dividend simultaneously paid holders class stock company pays quarterly cash dividends class b shareholders company paid class dividends per share 016 class b dividends per share 0144 fiscal years 2003 2002 2001 stock options december 29 2002 company adopted financial accounting standards 148 accounting stockbased compensation transition disclosure sfas 148 sfas 148 amended fasb statement 123 accounting stockbased compensation require use fair value method accounting stockbased employee compensation company applies accounting principles board opinion 25 related interpretations accounting employee stock option plans accordingly compensation expense recognized stock option plans compensation cost employee stock option plans determined based fair value method accounting companys stock option plans taxeffected impact would follows pro forma net income reflects options granted fiscal 1995 additionally pro forma disclosures likely representative effects net income future years financial instruments company purchaser certain commodities corn soybeans livestock natural gas course normal operations company uses derivative financial instruments reduce exposure various market risks generally contract terms hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts highly effective meeting risk reduction correlation criteria recorded using hedge accounting defined sfas 133 accounting derivative instruments hedging activities sfas 133 amended derivative instrument hedge depending nature hedge changes fair value instrument either offset change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion instruments change fair value immediately recognized earnings component cost sales instruments company holds economic hedges meet criteria hedge accounting defined sfas 133 amended marked fair value unrealized gains losses reported currently earnings company generally hedge anticipated transactions beyond 12 months revenue recognition company recognizes revenue title risk loss transferred customers generally upon delivery based upon terms sale revenue recognized net amount estimated received deducting estimated amounts discounts trade allowances product terms litigation reserves variety legal proceedings pending threatened company accruals recorded probable liability incurred amount liability reasonably estimated based current law progress case opinions views legal counsel advisers companys experience similar matters managements intended response litigation amounts discounted exclusive claims third parties adjusted periodically assessment efforts progress legal information becomes available accruals legal proceedings included current liabilities accompanying balance sheets freight expense freight expense associated products shipped customers recognized cost products sold advertising promotion expenses advertising promotion expenses charged operations period incurred advertising promotion expenses fiscal 2003 2002 2001 504 million 396 million 337 million respectively minority interest results operations ibp nine weeks ended september 29 2001 included companys consolidated results operations minority interest fiscal 2001 primarily consisted 499 ibp acquired september 28 2001 use estimates consolidated financial statements prepared conformity accounting principles generally accepted united states require management make estimates assumptions affect amounts reported consolidated financial statements accompanying notes actual results could differ estimates recently issued accounting standards january 2003 financial accounting standards board fasb issued interpretation 46 consolidation variable interest entities interpretation accounting research bulletin 51 interpretation requires consolidation variable interest entities enterprise absorbs majority entitys expected losses receives majority entitys expected residual returns result ownership contractual financial interests entity currently entities generally consolidated enterprise controlling financial interest ownership majority voting interest entity interpretation originally immediately effective variable interest entities created january 31 2003 effective fourth quarter companys fiscal 2003 created prior february 1 2003 however october 2003 fasb deferred effective date variable interest entities created prior february 1 2003 companys first quarter fiscal 2004 company substantially completed process evaluating interpretation believes adoption material impact financial position results operations april 2003 fasb issued statement financial accounting standards 149 amendment statement 133 derivative instruments hedging activities sfas 149 sfas 149 amends sfas 133 provide clarification financial accounting reporting derivative instruments hedging activities requires contracts similar characteristics accounted comparable basis standard effective contracts entered modified june 30 2003 hedging relationships designated june 30 2003 companys adoption sfas 149 material impact financial position results operations may 2003 fasb issued sfas 150 accounting certain instruments characteristics liabilities equity sfas 150 sfas 150 establishes issuer classifies measures certain freestanding financial instruments characteristics liabilities equity requires instruments classified liabilities standard effective financial instruments entered modified may 31 2003 otherwise effective fourth quarter companys fiscal 2003 companys adoption sfas 150 material impact financial position results operations note 2 acquisitions september 2003 company purchased choctaw maid farms inc choctaw integrated poultry processor since 1992 tyson purchasing choctaws production cost plus supply agreement scheduled expire 2007 company previously negotiated purchase option choctaws owners initially became exercisable 2002 company decided exercise purchase option rather continue cost plus arrangement supply agreement acquisition recorded purchase accordance sfas 141 business combinations accordingly assets liabilities adjusted fair values remainder purchase price 18 million recorded goodwill purchase price consisted 1 million cash exercise purchase option tysons supply agreement choctaw settlement 85 million owed tyson choctaw addition company assumed approximately 4 million choctaws debt third party june 2003 company exercised 74 million purchase option acquire assets leased third party company subleased choctaw pro forma operating results reflecting acquisition choctaw would materially different companys actual results operations may 2002 company acquired assets millard processing services bacon processing operation approximately 73 million cash acquisition accounted purchase goodwill approximately 14 million recorded august 2001 company acquired 501 ibp paying approximately 17 billion cash september 2001 company issued approximately 129 million shares class stock fair value approximately 12 billion acquire remaining ibp shares assumed approximately 17 billion ibp debt total acquisition cost approximately 46 billion accounted purchase accordance sfas 141 business combinations accordingly tangible identifiable intangible assets liabilities adjusted fair values remainder purchase price recorded goodwill allocation purchase price completed note 3 disposition september 2002 company completed sale specialty brands inc subsidiary acquired ibp acquisition results operations included companys prepared foods segment company received cash proceeds approximately 131 million used reduce indebtedness recognized pretax gain 22 million included income consolidated statement income fiscal 2002 note 4 charges april 2003 company announced decision close berlin maryland poultry operation part ongoing plant rationalization efforts berlin poultry operation employed approximately 650 people included hatchery feed mill live production processing facility ceased processing chickens november 12 2003 result decision company anticipating total costs 29 million include 14 million costs related closing plant 15 million estimated impairment charges assets disposed costs related closing plant include 9 million estimated liabilities resolution companys obligations 209 grower contracts 5 million related costs associated closing plant including plant cleanup costs employee termination benefits company accounting closing berlin operations accordance sfas 146 accounting costs associated exit disposal activities fiscal 2003 company recorded accruals 25 million 19 million third quarter 6 million fourth quarter included 10 million costs related closing plant 15 million estimated impairment charges assets disposed amount reflected chicken segment reduction operating income included consolidated statements income charges costs related closing plant accrued september 27 2003 include 7 million estimated liabilities resolution companys obligations grower contracts 3 million related costs associated closing plant including plant cleanup costs employee termination benefits september 27 2003 accrual balance 16 million 4 million obligations grower contracts 3 million closing costs paid losses related disposal assets 2 million realized company anticipates recording additional costs approximately 4 million first quarter fiscal 2004 related closing plant first quarter fiscal 2003 company recorded 47 million accrual costs related closing stilwell oklahoma jacksonville florida plants includes 26 million costs related closing plants 21 million estimated impairment charges assets disposed costs related closing plants include 17 million estimated liabilities resolution companys obligations grower contracts 9 million related costs associated closing plants including plant cleanup costs employee termination benefits costs reflected chicken segment reduction operating income included consolidated statements income charges september 27 2003 remaining accrual balance closing two poultry operations 2 million 16 million obligations grower contracts 12 million closing costs paid losses related disposal assets 17 million realized material adjustments total accrual anticipated time fourth quarter fiscal 2002 company recorded 26 million accrual restructuring live swine operations consists 21 million estimated liabilities resolution company obligations producer contracts 5 million related costs associated restructuring including lagoon pit closure costs employee termination benefits september 27 2003 remaining accrual balance 16 million 6 million obligations grower contracts 4 million related costs paid material adjustments total accrual anticipated time august 2002 company made decision capitalize strong recognition tyson brand expanding tyson brand beef pork thus fourth quarter fiscal 2002 company recorded writedown 27 million related discontinuation thomas e wilson brand amount reflected prepared foods segment reduction operating income included consolidated statement income charges note 5 allowance doubtful accounts september 27 2003 september 28 2002 allowance doubtful accounts 16 million 26 million respectively note 6 financial instruments company recognizes derivatives balance sheet fair value required sfas 133 accounting derivative instruments hedging activities amended derivatives hedges must adjusted fair value earnings derivative hedge depending nature hedge changes fair value derivatives either offset change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion derivatives change fair value recognized earnings company derivative related balances totaling 20 million 1 million recorded current assets september 27 2003 september 28 2002 respectively 37 million 19 million recorded current liabilities september 27 2003 september 28 2002 respectively cash flow hedges company uses derivatives moderate financial commodity market risks business operations derivative products futures option contracts considered hedge changes amount future cash flows related commodities procurement company also enters interest rate swap agreements adjust proportion total longterm debt leveraged equipment loans subject variable interest rates interest rate swaps company agrees pay fixed rate interest times notional principal amount receive return amount equal specified variable rate interest times notional principal amount interest rate swaps considered hedge changes amount future cash flows associated companys variable rate interest payments effective portion cumulative gain loss derivative instrument reported component comprehensive income loss shareholders equity recognized earnings period periods hedged transaction affects earnings commodity hedges chickens consumed hedged grain sold remaining cumulative gain loss derivative instrument excess cumulative change present value future cash flows hedged item recognized earnings period change ineffectiveness recognized cash flow hedges fiscal 2003 2002 2001 company expects tax losses net gains totaling approximately 6 million recorded comprehensive income loss september 27 2003 related cash flow hedges recognized within next 12 months company generally hedge cash flows related commodities beyond 12 months fair value hedges company designates certain futures contracts fair value hedges firm commitments purchase livestock slaughter natural gas operation plants time company also enters foreign currency forward contracts hedge changes fair value receivables purchase commitments arising changes exchange rates foreign currencies however company entered contracts fiscal years 2003 2002 changes fair value derivative highly effective designated qualifies fair value hedge along loss gain hedged asset liability attributable hedged risk including losses gains firm commitments recorded current period earnings ineffectiveness results change fair value hedge instrument differs change fair value hedged item ineffectiveness recorded related companys fair value hedges significant fiscal 2003 2002 2001 undesignated positions company holds certain commodity futures contracts regular course business manage exposure commodity price fluctuations anticipated purchases raw materials anticipated sales finished inventories contracts generally short durations less one year although instruments economic hedges company designate contracts hedges accounting purposes result company marks contracts market recognizes change earnings september 27 2003 contracts fair value 14 million recorded assets consolidated balance sheet september 28 2002 contracts fair value liability 11 million recorded consolidated balance sheet fair values based quoted market prices published forward interest rate natural gas curves financial instruments fair values approximate recorded values september 27 2003 september 28 2002 concentrations credit risk companys financial instruments exposed concentrations credit risk consist primarily cash equivalents trade receivables companys cash equivalents high quality securities placed major banks financial institutions concentrations credit risk respect receivables limited due large number customers dispersion across geographic areas company performs periodic credit evaluations customers financial condition generally require collateral september 27 2003 approximately 103 companys net accounts receivable balance due one customer group represents greater 10 net accounts receivable note 7 property plant equipment major categories property plant equipment accumulated depreciation cost september 27 2003 september 28 2002 follows company capitalized interest costs 3 million 2003 9 million 2002 3 million 2001 part cost major asset construction projects approximately 175 million required complete construction projects progress september 27 2003 note 8 current liabilities current liabilities september 27 2003 september 28 2002 include note 9 commitments company leases certain farms properties equipment total rentals thereon approximated 104 million 2003 105 million 2002 76 million 2001 farm leases terms ranging one 10 years varying renewal periods significant obligations assumed terms leases upkeep facilities payments insurance property taxes minimum lease commitments noncancelable leases september 27 2003 total 164 million composed 61 million fiscal 2004 36 million fiscal 2005 30 million fiscal 2006 21 million fiscal 2007 11 million fiscal 2008 5 million later years company guarantees debt outside third parties involve letters credit lease grower loans substantially collateralized underlying assets terms underlying debt range one 12 years maximum potential amount future payments september 27 2003 68 million company also maintains operating leases various types equipment contain residual value guarantees market value assets end term lease terms lease maturities range one six years maximum potential amount residual value guarantees approximately 104 million approximately 31 million would recoverable various recourse provisions undeterminable recoverable amount based fair market value underlying leased assets likelihood payments guarantees considered probable company enters various future purchase commitments finished live cattle hogs marketderived price future purchase commitments include risk sharing procurement arrangements certain producers help secure supply livestock commitments deliverable year less operating requirements year note 10 longterm debt company unsecured revolving credit facilities totaling 1 billion support companys commercial paper program letters credit shortterm funding needs facilities consist 200 million expires june 2004 300 million expires june 2005 500 million expires september 2006 september 27 2003 september 28 2002 amounts drawn revolving credit facilities company receivables purchase agreement three copurchasers sell 750 million trade receivables consists 375 million expiring august 2004 375 million expiring august 2005 receivables purchase agreement accounted borrowing interest rate based commercial paper issued copurchasers agreement substantially companys accounts receivable sold special purpose entity tyson receivables corporation trc whollyowned consolidated subsidiary company trc separate creditors entitled satisfied assets trc prior value becoming available company trcs equity holder september 29 2003 september 28 2002 0 75 million outstanding receivables purchase agreement respectively september 27 2003 company outstanding letters credit totaling approximately 294 million issued primarily support workers compensation insurance programs industrial revenue bonds leveraged equipment loans draw downs letters credit september 27 2003 terms leveraged equipment loans company cash deposits totaling approximately 54 million included assets september 27 2003 leveraged loan agreements company entered interest rate swap agreements effectively lock fixed interest rate borrowings annual maturities longterm debt five fiscal years subsequent september 27 2003 2004490 million 2005185 million 2006295 million 2007899 million 200816 million revolving credit facilities senior notes accounts receivable securitization contain various covenants restrictive contain maximum allowed leverage ratio minimum required interest coverage ratio company compliance covenants fiscal year end industrial revenue bonds secured facilities net book value 159 million september 27 2003 weighted average interest rate outstanding shortterm borrowing 15 september 27 2003 33 september 28 2002 included current debt shortterm notes payable totaling 23 million 37 million september 27 2003 september 28 2002 respectively companys cash payments interest 269 million 208 million 140 million fiscal years 2003 2002 2001 respectively company fully unconditionally guaranteed 498 million senior notes issued ibp known tyson fresh meats inc whollyowned subsidiary company following condensed consolidating financial information provided company guarantor ibp issuer alternative providing separate financial statements issuer financial results live swine operations well interest expense related ibp acquisition included tyson amounts note 11 comprehensive income loss components accumulated comprehensive income loss include foreign currency translation adjustment 2 million 23 million 16 million 2003 2002 2001 respectively unrealized hedging gains losses net taxes 9 million 18 million 21 2003 2002 2001 respectively unrealized gain loss investments net taxes 1 0 2 million 2003 2002 2001 respectively minimum pension liability adjustment net taxes 5 million 8 million 2003 2002 respectively note 12 stock options restricted stock shareholders approved tyson foods inc 2000 stock incentive plan incentive plan january 2001 incentive plan administered compensation committee board directors permits awards shares class stock awards derivative securities related value class stock tax reimbursement payments eligible persons incentive plan provides award variety equitybased incentives incentive stock options nonqualified stock options stock appreciation rights dividend equivalent rights performance unit awards phantom shares incentive plan provides granting incentive stock options shares class stock price less fair market value date grant nonqualified stock options may granted price equal less fair market value class stock date option granted stock options incentive plan generally become exercisable ratably three eight years date grant must exercised within 10 years date grant may 2000 company cancelled approximately four million option shares granted approximately one million restricted shares class stock restriction expires periods december 1 2003 september 27 2003 company outstanding approximately nine million restricted shares class stock restrictions expiring periods july 1 2020 unearned portion restricted stock classified consolidated balance sheets unamortized deferred compensation shareholders equity company issues restricted stock market value date grant weighted average fair value restricted stock granted 1120 per share 2003 952 per share 2002 summary companys stock option activity follows number options exercisable follows september 27 20039135306 september 28 20029373360 september 29 20019644323 remainder options outstanding september 27 2003 exercisable ratably september 2008 number shares available future grants 21327929 10536763 september 27 2003 september 28 2002 respectively following table summarizes information stock options outstanding september 27 2003 weighted average fair value options granted 2003 approximately 432 fair value option grant established date grant using blackscholes optionpricing model assumptions include expected life six years riskfree interest rate ranging 256 330 expected volatility ranging 382 401 dividend yield ranging 120 172 2003 note 13 benefit plans company defined contribution retirement incentive benefit programs various groups company personnel company contributions totaled 48 million 50 million 35 million 2003 2002 2001 respectively note 14 transactions related parties company operating leases farms equipment facilities former senior chairman board directors company certain members family well trust controlled rentals 8 million 2003 9 million 2002 9 million 2001 facilities leased officers directors rentals totaling 2 million fiscal years 2003 2002 2001 entity owned former director resigned board directors 2003 received sale cattle subsidiary company 10 million 2003 10 million 2002 5 million 2001 certain officers directors engaged chicken swine growout operations company whereby individuals purchase animals feed housing items raise animals market weight total value transactions discontinued fiscal 2003 amounted 10 million fiscal years 2003 2002 2001 note 15 income taxes detail provision income taxes consists reasons difference effective income tax rate statutory us federal income tax rate follows 1 extraterritorial income exclusion 2003 2002 foreign sales corporation benefit 2001 company follows liability method accounting deferred income taxes provides deferred tax liabilities recorded current tax rates based difference tax basis assets liabilities carrying amounts financial reporting purposes referred temporary differences tax effects major items recorded deferred tax assets liabilities net deferred tax liabilities included current liabilities deferred income taxes consolidated balance sheets deferred tax liability suspended taxes conversion accrual method represents 1987 change cash accrual method accounting paid 2017 subject income limitations valuation allowance totaling 49 million consists 13 million state tax carryforwards fully reserved 36 million net operating loss carryforwards state tax credit carryforwards expire years 2004 2008 september 27 2003 considering utilization restrictions companys acquired tax loss carryforwards approximated 192 million net operating loss carryforwards subject utilization limitations due ownership changes may utilized offset future taxable income subject limitations carryforwards expire years 2004 2022 companys cash payments income taxes 36 million 90 million 54 million fiscal years 2003 2002 2001 respectively note 16 earnings per share weighted average common shares used computation basic diluted earnings per share follows approximately 8 million 6 million 10 million companys option shares outstanding september 27 2003 september 28 2002 september 29 2001 respectively antidilutive included dilutive earnings per share calculation september 28 2001 company issued approximately 129 million shares remaining ibp shares excluded fiscal 2001 weighted average share calculation along dilutive effect acquired stock options restricted shares note 17 segment reporting company operates five business segments chicken beef pork prepared foods company measures segment profit operating income following information includes 52 weeks ibps operating results periods ending september 27 2003 september 28 2002 nine weeks period ending september 29 2001 chicken segment primarily involved processing live chickens fresh frozen valueadded chicken products sold domestic foodservice domestic food retailers wholesale club markets service small foodservice operations small businesses individuals well specialty commodity distributors deliver restaurants schools international markets throughout world chicken segment also includes sales allied products chicken breeding stock subsidiary beef segment primarily involved processing live fed cattle fabrication dressed beef carcasses primal subprimal meat cuts caseready products also involves deriving value allied products hides variety meats sale processors others beef segment markets products food retailers distributors wholesalers restaurants hotel chains food processors domestic international markets allied products also marketed manufacturers pharmaceuticals technical products pork segment primarily involved processing live market hogs fabrication pork carcasses primal subprimal cuts caseready products segment also represents companys live swine group related allied product processing activities pork segment markets products food retailers distributors wholesalers restaurants hotel chains food processors domestic international markets also sells allied products pharmaceutical technical products manufacturers well live swine pork processors prepared foods segment includes companys operations manufacture market frozen refrigerated food products include pepperoni beef pork toppings pizza crusts flour corn tortilla products appetizers hors doeuvres desserts prepared meals ethnic foods soups sauces side dishes specialty pasta meat dishes well branded processed meats prepared foods segment markets products food retailers distributors wholesalers restaurants hotel chains segment includes logistics group corporate activities identified specific protein groups segment also includes proceeds 167 million received fiscal 2003 related settlement vitamin antitrust litigation compared 30 million received fiscal 2002 majority companys operations domiciled united states approximately 95 94 97 sales external customers fiscal years ending 2003 2002 2001 respectively sourced united states approximately 65 billion longlived assets located united states fiscal years ending 2003 2002 66 billion fiscal year ending 2001 approximately 185 million 193 million 204 million longlived assets located foreign countries primarily mexico canada fiscal years ended 2003 2002 2001 respectively company sells certain products foreign markets primarily canada china european union japan mexico puerto rico russia taiwan south korea companys export sales 2003 2002 2001 totaled 26 billion 20 billion 12 billion respectively substantially companys export sales facilitated unaffiliated brokers marketing associations foreign sales staffs foreign sales products produced country united states less 10 total consolidated sales 2003 2002 2001 respectively approximately 15 11 15 2003 2002 2001 respectively income taxes foreign operations note 18 quarterly financial data unaudited first quarter 2003 gross profit includes 28 million received connection vitamin antitrust litigation operating income includes charges 47 million related closing poultry operations second quarter 2003 gross profit includes 94 million received connection vitamin antitrust litigation third quarter 2003 gross profit includes 42 million received connection vitamin antitrust litigation operating income includes charges 19 million related closing poultry operations additionally net income includes pretax charge 10 million related writedown equity interest live swine operation fourth quarter 2003 gross profit includes 3 million received connection vitamin antitrust litigation operating income includes 10 million charges related closing poultry operations third quarter 2002 gross profit includes 30 million received connection vitamin antitrust litigation fourth quarter 2002 operating income includes 22 million gain related sale specialty brands charges 27 million 26 million related thomas e wilson brand writedown live swine restructuring respectively note 19 contingencies listed certain claims made company subsidiaries companys opinion made appropriate adequate reserves accruals necessary company believes probability material loss beyond amounts accrued remote however ultimate liability matters uncertain accruals reserves adequate adverse outcome could material effect consolidated financial condition results operations company believes substantial defenses claims made intends vigorously defend cases wage hour labor matters 2000 wage hour division us department labor dol conducted industrywide investigation poultry producers including company ascertain compliance various wage hour issues part investigation dol inspected 14 companys processing facilities may 9 2002 secretary labor filed civil complaint company us district court northern district alabama complaint alleges company violated overtime provisions federal fair labor standards act flsa companys chickenprocessing facility blountsville alabama complaint contain definite statement acts constituted alleged violations statute secretary labor seeks unspecified back wages employees blountsville facility period two years prior date filing complaint additional amount unspecified liquidated damages injunction future violations facility facilities operated company filed initial answer discovery commenced june 22 1999 11 current former employees company filed case mh fox et al v tyson foods inc fox v tyson us district court northern district alabama claiming company violated requirements flsa suit alleges company failed pay employees hours worked andor improperly paid overtime hours suit specifically alleges 1 employees paid time taken put take certain working supplies beginning end shifts breaks 2 use mastercard line time fails pay employees time actually worked plaintiffs seek represent similarly situated current former employees company plaintiffs seek reimbursement unspecified amount unpaid wages liquidated damages attorney fees costs filing 159 current andor former employees consented join lawsuit date approximately 5000 consents filed court discovery case ongoing hearing held march 6 2000 consider plaintiffs request collective action certification courtsupervised notice decision rendered august 22 2000 seven employees company filed case de asencio v tyson foods inc us district court eastern district pennsylvania lawsuit similar fox v tyson employees claim violations flsa allegedly failing pay time taken put take sanitize certain working supplies violations pennsylvania wage payment collection law plaintiffs seek represent similarly situated current former employees poultry processing plant new holland pennsylvania plaintiffs seek reimbursement unspecified amount unpaid wages liquidated damages attorney fees costs currently approximately 500 additional current former employees filed consents join lawsuit court january 30 2001 ordered notice lawsuit issued potential plaintiffs new holland facilities july 17 2002 court granted plaintiffs motion certify state law claims september 23 2002 third circuit court appeals agreed hear companys petition review courts decision certify state law claims september 8 2003 court appeals reversed district courts certification class pennsylvania wage payment collection law ruling claims could pursued federal court appellate court ruled company must reissue notice potential flsa claims approximately 1500 employees previously receive notice court appeals remanded matter district court proceed accordingly september 30 2003 substantially similar suits filed several integrated poultry companies addition organizing activity conducted representatives affiliates united food commercial workers union poultry industry encouraged worker participation fox v tyson lawsuits november 5 2001 lawsuit entitled maria chavez et al vs ibp lasso acquisition corporation tyson foods inc chavez filed us district court eastern district washington ibp inc ibp known tyson fresh meats inc company several employees ibps pasco washington beef slaughter processing facility alleging various violations flsa 29 usc sections 201 219 well violations washington state minimum wage act rcw chapter 4946 industrial welfare act rcw chapter 4912 wage deductionscontributionrebates act rcw chapter 4952 chavez lawsuit alleges ibp andor company required employees perform unpaid work related donning doffing certain personal protective clothing prior shifts well meal periods plaintiffs allege similar prior litigation entitled alvarez et al vs ibp alvarez resulted 31 million final judgment ibp supports claim collateral estoppel andor res judicata issues raised new litigation plaintiffs seeking reimbursement unspecified amount damages exemplary damages liquidated damages prejudgment interest attorney fees costs ibp filed timely notice appeal alvarez plaintiffs filed timely notice crossappeal august 5 2003 ninth circuit court appeals affirmed lower courts decision part reversed lower courts decision part remanded case lower court recalculation damages ruling ninth circuit court appeals upheld entirety ibp additional exposure alvarez approximately 5 million ibp filed petition rehearing panel ninth circuit court appeals heard alvarez alternative rehearing en banc also filed petition certify state law claims washington supreme court september 23 2003 court denied petition certification petition rehearing en banc pending court chavez initially pursued optin collective action 29 usc 216b us district court eastern district washington granted plaintiffs motion seeking certification class optout state law plaintiffs federal rule civil procedure 23 notice sent potential state law claim class members trial date september 7 2004 chavez set court november 21 2002 lawsuit entitled emily jordan et al v ibp inc tyson foods inc filed us district court middle district tennessee ten current former hourly employees ibps caseready facility goodlettsville tennessee filed complaint behalf unspecified allegedly similarly situated employees claiming defendants violated overtime provisions flsa suit alleges defendants failed pay employees hours worked plants commencement operations ibps control april 2001 company acquired plant part acquisition ibp particular suit alleges employees paid time takes collect assemble put take wash health safety production gear beginning end shifts meal period suit also alleges defendants deduct 30 minutes per day employees paycheck regardless whether employees obtain full 30minute period meal plaintiffs seeking declaration defendants comply flsa award unspecified amount back pay compensation benefits unpaid entitlements liquidated damages prejudgment postjudgment interest attorney fees costs january 10 2003 another 31 employees tennessee filed consents join lawsuit plaintiffs january 15 2003 defendants filed answer complaint denying liability january 14 2003 named plaintiffs filed motion expedited courtsupervised notice prospective class members motion sought conditionally certify class similarly situated employees ibps nonunionized facilities subject flsa litigation plaintiffs withdrew request conditional certification similarly situated employees ibps nonunionized facilities rather sought include nonexempt employees worked goodlettsville facility since opening april 1 2001 november 17 2003 district court conditionally certified collective action composed similarly situated current former employees goodlettsville facility based upon clothes changing washing activities unpaid production work meal periods since plant operations began april 2001 parties supervision court specifying terms conditions notice initial case management conference scheduled january 8 2004 environmental matters october 23 2001 putative class action lawsuit filed district court mayes county oklahoma company r lynn thompson deborah thompson behalf owners grand lake cherokees littoral lake front property suit alleges company entities operational control conduct operations way interfere putative class action plaintiffs use enjoyment property allegedly caused diminished water quality lake plaintiffs seeking injunctive relief unspecified amount compensatory damages punitive damages attorney fees costs simmons foods inc simmons peterson farms inc joined defendants company simmons seeking leave file third party complaint entities contribute wastes wastewater grand lake class certification hearing held october 2003 two classes certified december 11 2003 defendants process filing interlocutory appeal class certification securities matters january march 2001 number lawsuits filed certain stockholders us district court district south dakota one suit filed us district court southern district new york seeking certify class persons purchased ibp stock february 7 2000 january 25 2001 plaintiff new york action voluntarily dismissed refiled complaint south dakota suits consolidated name ibp inc securities litigation single consolidated amended complaint filed complaint seeking unspecified compensatory damages alleges ibp certain members management violated sections 10b 20a securities exchange act 1934 rule 10b5 thereunder claims ibp issued materially false statements ibps financial results order inflate stock price ibp filed motion dismiss december 21 2001 fully briefed motion awaiting decision ibp plaintiffs reached tentative settlement claims reflected memorandum understanding mou executed march 19 2003 mou set forth essential terms settlement reflected final settlement documents prepared submitted court approval including among terms conditions dismissal prejudice claims defendants releases class members payment ibp total amount 8 million july 2003 finalized stipulation settlement consistent mou executed submitted court preliminary approval tentative settlement subject various conditions including among things execution definitive documentation receiving preliminary final court approvals light tentative settlement ibp permitted court withdraw pending motion dismiss without prejudice july 31 2003 court issued order preliminarily approving settlement preliminarily certifying settlement class persons purchased ibp common stock period february 7 2000 january 25 2001 approving proposed notice settlement class members court also set december 8 2003 date hearing whether settlement receive final court approval company anticipate effectuation tentative settlement material impact financial condition especially view ibps insurance coverage matter june 22 july 20 2001 various plaintiffs commenced actions delaware federal actions company tyson john tyson les baledge us district court district delaware seeking monetary damages behalf purported class sold ibp stock traded certain ibp options march 29 2001 company announced intention terminate merger agreement ibp june 15 2001 delaware court rendered posttrial opinion consolidated action actions entitled meyer v tyson foods inc et al ca 01425 slr banyan equity mgt v tyson foods inc et al ca 01426 gms steiner v tyson foods inc et al ca 01462 gms aetos corp et al v tyson et al ca 01463 gms meyers et al v tyson foods inc et al ca 01480 binsky v tyson foods inc et al ca 01495 management risk trading lp v tyson foods inc et al ca 01496 stark investments lp et al v tyson et al ca 01565 alleged defendants violated federal securities laws making causing made certain false misleading statements connection companys attempted termination merger agreement plaintiffs seeking unspecified amount compensatory damages interest attorney fees costs various actions subsequently consolidated caption tyson foods inc securities litigation december 4 2001 plaintiffs consolidated action filed consolidated class action complaint plaintiffs allege result defendants alleged conduct purported class members harmed january 22 2002 defendants filed motion dismiss consolidated complaint memorandum order dated october 23 2002 court granted part denied part defendants motion dismiss october 6 2003 court certified class proposed plaintiffs factual discovery case process concluding general matters july 1996 certain cattle producers filed henry lee pickett et al vs ibp inc us district court middle district alabama seeking certification class cattle producers complaint alleged ibp used market power alleged captive supply agreements reduce prices paid ibp purchases cattle cash market alleged violation packers stockyards act psa plaintiffs seeking injunctive declaratory relief well actual punitive damages plaintiffs failed number times get class certified district court december 2001 certified class cattle producers sold ibp exclusively cash market basis approximately 1994 2002 ibp sought permission appeal class certification 11th circuit court appeals court appeals denied appeal march 5 2002 ibps motions summary judgment liability damages denied april 29 2003 november 19 2003 district court judge upheld admissibility amended plaintiffs expert report calculates total class damages exclusive prejudgment interest excess 21 billion management believes ibps use marketing agreements contracts purchase cattle violate psa ibp acted properly lawfully dealings cattle producers case set trial january 12 2004 september 12 2002 82 individual plaintiffs filed michael archer et al v tyson foods inc pork group inc civ 2002497 circuit court pope county arkansas august 18 2002 company announced restructuring live swine operations among things result discontinuance relationships 132 contract hog producers including plaintiffs complaint plaintiffs allege company committed fraud promissorily estopped terminating parties relationship plaintiffs seek unspecified amount compensatory damages punitive damages attorney fees costs company filed motion stay proceedings compel arbitration denied briefing begun arkansas court appeals oral argument yet set company pursuing various antitrust claims relating vitamins methionine choline partial settlement claims company received approximately 167 million 2003 additional settlements much lesser amounts anticipated fiscal 2004 amounts received claims recorded income upon receipt settlement proceeds report independent auditors audited accompanying consolidated balance sheets tyson foods inc september 27 2003 september 28 2002 related consolidated statements income shareholders equity cash flows three years period ended september 27 2003 audits also included financial statement schedule listed index item 15a financial statements schedule responsibility companys management responsibility express opinion financial statements schedule based audits conducted audits accordance auditing standards generally accepted united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion financial statements referred present fairly material respects consolidated financial position tyson foods inc september 27 2003 september 28 2002 consolidated results operations cash flows three years period ended september 27 2003 conformity accounting principles generally accepted united states also opinion related financial statement schedule considered relation basic financial statements taken whole presents fairly material respects information set forth therein little rock arkansas november 19 2003 sernst young llp ernst young llp item 9item 8 financial statements supplementary data consolidated statements income consolidated balance sheets consolidated statements shareholders equity consolidated statements shareholders equity consolidated statements cash flows notes consolidated financial statements note 1 business summary significant accounting policies description business tyson foods inc collectively company tyson founded 1935 world headquarters springdale arkansas worlds largest processor marketer chicken beef pork second largest food company fortune 500 tyson produces wide variety brand name proteinbased prepared food products marketed united states 80 countries around world tyson recognized market leader retail foodservice markets serves company approximately 114000 team members 300 facilities offices 27 states 20 countries consolidation consolidated financial statements include accounts majorityowned whollyowned subsidiaries significant intercompany accounts transactions eliminated consolidation fiscal year company utilizes 52 53week accounting period ends saturday closest september 30 companys accounting cycle resulted 53week year fiscal year 2004 52week year fiscal years 2003 2002 reclassifications certain reclassifications made prior periods conform current presentations cash equivalents cash equivalents consist investments shortterm highly liquid securities original maturities three months less made part companys cash management activity carrying values assets approximate fair market values company primarily utilizes cash management system series separate accounts consisting lockbox accounts receiving cash concentration accounts funds moved several zerobalance disbursement accounts funding payroll accounts payable grower payments result companys cash management system checks issued presented banks payment may create negative book cash balances checks outstanding excess related book cash balances totaling approximately 359 million october 2 2004 313 million september 27 2003 included trade accounts payable accrued salaries wages benefits accounts receivable company records trade accounts receivable net realizable value includes appropriate allowance estimated uncollectible accounts reflect loss anticipated trade accounts receivable balances charged provision doubtful accounts company calculates allowance based history writeoffs level past due accounts relationships economic status customers inventories processed products livestock excluding breeders supplies valued lower cost firstin firstout market livestock includes live cattle live chicken live swine cost includes purchased raw materials live purchase costs growout costs primarily feed contract grower pay catch haul costs labor manufacturing production overhead related purchase production inventories live chicken consists broilers breeders stated cost less amortization costs associated breeders including breeder chicks feed medicine accumulated production stage amortized broiler inventory productive life flock using standard unit production depreciation provided primarily straightline method using estimated lives buildings leasehold improvements 10 39 years machinery equipment three 12 years three 20 years longlived assets company reviews carrying value longlived assets balance sheet date indication impairment exists recoverability assessed using undiscounted cash flows based upon historical results current projections earnings interest taxes company measures impairment using discounted cash flows future operating results based upon discount rate corresponds companys cost capital impairments recognized operating results extent carrying value exceeds discounted cash flows future operations goodwill intangible assets goodwill indefinite life intangible assets recorded fair value amortized reviewed impairment least annually frequently impairment indicators arise required statement financial accounting standards 142 goodwill intangible assets sfas 142 companys assessment goodwill management makes assumptions segment regarding estimated future cash flows factors determine fair value respective assets fair value companys trademarks determined using royalty rate method based expected revenues trademark goodwill allocated tested impairment reporting unit based fair value identifiable assets goodwill deductible income tax purposes october 2 2004 september 27 2003 accumulated amortization goodwill 286 million amount goodwill segment october 2 2004 september 27 2003 follows change goodwill balance due primarily 91 million adjustment preacquisition tax liabilities assumed part tyson fresh meats inc tfm formerly known ibp inc acquisition company received formal approval fiscal 2004 joint committee taxation us congress issues relating certain preacquisition years result approval accrual 91 million preacquisition tax liability longer needed fourth quarter fiscal 2004 company recorded charges approximately 25 million related impairment various intangible assets 22 million recorded prepared foods segment 3 million recorded beef segment impairment charges apply primarily trademarks acquired acquisition tfm 2001 impairment charges included charges companys consolidated statements income resulted primarily lower product sales companys regional trademarks products increasingly sold tyson trademark october 2 2004 gross carrying value intangible assets consisted 80 million trademarks 85 million patents 11 million supply contracts accumulated amortization 19 million 8 million patents supply contracts respectively september 27 2003 gross carrying value intangible assets consisted 100 million trademarks 87 million patents 13 million supply contracts accumulated amortization 12 million 6 million patents supply contracts respectively reductions carrying value intangible assets fiscal 2004 compared prior year resulted impairments recorded fiscal 2004 trademarks patents supply contracts impaired 20 million 3 million 2 million respectively amortization expense combined patents supply contracts 8 million recognized 2004 2003 9 million recognized 2002 amortization expense intangible assets estimated 7 million 2005 2006 6 million 2007 2008 2009 patents supply contracts amortized using straightline method estimated period benefit 15 years five years respectively investments company investments joint ventures entities company uses cost method accounting voting interests less 20 percent equity method accounting voting interests excess 20 percent greater 50 percent companys underlying share entitys equity reported consolidated balance sheets line item assets fiscal 2004 company purchased 99 million marketable debt securities amount 63 million due one year less classified current assets consolidated balance sheets 36 million due two years classified assets consolidated balance sheets company applied statement financial accounting standards 115 accounting certain investments debt equity securities sfas 115 determined marketable debt securities availableforsale investments reported fair value based quoted market prices balance sheet date unrealized gains losses net tax recorded comprehensive income amortized cost debt securities adjusted amortization premiums accretion discounts maturity amortization recorded interest income cost securities sold based specific identification method realized gains losses sale debt securities declines value judged temporary recorded income net interest dividends securities classified availableforsale recorded interest income accrued self insurance company uses combination insurance selfinsurance mechanisms provide potential liabilities health welfare workers compensation auto liability general liability risks liabilities associated risks retained company estimated part considering historical claims experience demographic factors severity factors actuarial assumptions capital stock company two classes capital stock class common stock class stock class b common stock class b stock holders class b stock may convert stock class stock shareforshare basis holders class b stock entitled 10 votes per share holders class stock entitled one vote per share matters submitted shareholders approval cash dividends cannot paid holders class b stock unless simultaneously paid holders class stock per share amount cash dividend paid holders class b stock cannot exceed 90 cash dividend simultaneously paid holders class stock company pays quarterly cash dividends class b shareholders company paid class dividends per share 016 class b dividends per share 0144 fiscal years 2004 2003 2002 according emerging issues task force issue 036 participating securities twoclass method fasb statement 128 earnings per share eitf issue 036 class b stock considered participating security requiring use twoclass method computation basic earnings per share rather ifconverted method previously used twoclass computation method period reflects cash dividends paid per share class stock plus amount allocated undistributed earnings per share computed using participation percentage reflects dividend rights class stock basic earnings per share reflect application eitf issue 036 computed using twoclass method periods presented shares class b stock considered participating convertible securities since shares class b stock convertible shareforshare basis shares class stock diluted earnings per share computed assuming conversion class b shares class shares beginning period stock compensation december 29 2002 company adopted statement financial accounting standards 148 accounting stockbased compensation transition disclosure sfas 148 sfas 148 amended financial accounting standards board fasb statement 123 accounting stockbased compensation require use fair value method accounting stockbased employee compensation company applies accounting principles board opinion 25 related interpretations accounting employee stock compensation plans accordingly compensation expense recognized stock option issuances stock options issued exercise price equal closing price date grant company issue restricted stock records fair value awards deferred compensation amortized vesting period compensation expense employee stock compensation plans determined based fair value method accounting companys stock compensation plans taxeffected impact would follows pro forma disclosures may representative effects net income future years financial instruments company purchaser certain commodities corn soybeans livestock natural gas course normal operations company uses derivative financial instruments reduce exposure various market risks generally contract terms hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts designated highly effective meeting risk reduction correlation criteria recorded using hedge accounting defined statement financial accounting standards 133 accounting derivative instruments hedging activities sfas 133 amended derivative instrument hedge defined sfas 133 depending nature hedge changes fair value instrument either offset change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion instruments change fair value immediately recognized earnings component cost sales instruments company holds part risk management activities meet criteria hedge accounting defined sfas 133 amended marked fair value unrealized gains losses reported currently earnings company generally hedge anticipated transactions beyond 12 months revenue recognition company recognizes revenue title risk loss transferred customers generally upon delivery based upon terms sale revenue recognized net amount estimated received deducting estimated amounts discounts trade allowances product terms litigation reserves variety legal proceedings pending threatened company accruals recorded probable liability incurred amount liability reasonably estimated based current law progress case opinions views legal counsel advisers companys experience similar matters managements intended response litigation amounts discounted exclusive claims third parties adjusted periodically assessment efforts progress additional information becomes available company expenses amounts administering litigating claims incurred accruals legal proceedings included current liabilities accompanying balance sheets freight expense freight expense associated products shipped customers recognized cost products sold advertising promotion expenses advertising promotion expenses charged operations period incurred advertising promotion expenses fiscal 2004 2003 2002 465 million 504 million 396 million respectively use estimates consolidated financial statements prepared conformity accounting principles generally accepted united states require management make estimates assumptions affect amounts reported consolidated financial statements accompanying notes actual results could differ estimates recently issued accounting standards regulations december 2004 fasb issued statement financial accounting standards 151 inventory costs sfas 151 sfas 151 requires abnormal amounts inventory costs related idle facility freight handling wasted material expenses recognized current period charges additionally sfas 151 requires allocation fixed production overheads costs conversion based normal capacity production facilities standard effective fiscal years beginning june 15 2005 company believes adoption sfas 151 material impact consolidated financial statements october 22 2004 president signed law american jobs creation act 2004 bill company currently process evaluating bill march 2004 emerging issues task force eitf reached consensus issue 036 participating securities twoclass method fasb statement 128 earnings per share issue involves computation earnings per share companies multiple classes common stock issued securities common stock participate dividends common stock participating securities eitf concluded companies participating securities required apply twoclass method compute earnings per share twoclass method earnings allocation method earnings per share calculated class common stock participating security considering dividends declared accumulated participation rights undistributed earnings distributed period company adopted eitf issue 036 fourth quarter fiscal 2004 required eitf issue 036 prior period earnings per share restated follows december 2003 fasb revised statement financial accounting standards 132 employers disclosures pensions postretirement benefits sfas 132 revision sfas 132 requires expanded disclosures defined benefit plans standards revisions effective fiscal years ending december 15 2003 interim periods beginning december 15 2003 see note 15 consolidated financial statements pensions postretirement benefits disclosures december 2003 medicare prescription drug improvement modernization act 2003 act signed act allows possible subsidy retirement health plan sponsors help offset costs participant prescription drug benefits march 2004 fasb issued staff position 1062 accounting disclosure requirements related act position effective interim annual periods beginning june 15 2004 position allows plan sponsors recognize defer recognizing effects act financial statements specific accounting guidance federal subsidy pending issued could require company change previously reported information companys accumulated postretirement benefit obligation net periodic pension cost reflect effects act company elected defer accounting act estimated future effect consolidated financial statements material january 2003 fasb issued interpretation 46 consolidation variable interest entities interpretation accounting research bulletin 51 interpretation requires consolidation variable interest entities vie enterprise absorbs majority entitys expected losses receives majority entitys expected residual returns result ownership contractual financial interests entity previously entities generally consolidated enterprise controlling financial interest ownership majority voting interest entity december 2003 fasb issued revision interpretation revised interpretation 46 revised interpretation 46 codifies proposed modifications decisions previously issued certain fasb staff positions supersedes original interpretation include 1 deferring effective date interpretations provisions certain variable interests 2 providing additional scope exceptions certain variable interests 3 clarifying impact troubled debt restructurings requirement reconsider whether entity vie b party primary beneficiary vie 4 revising appendix b original interpretation provide additional guidance constitutes variable interest new guidance application revised interpretation 46 required financial statements public entities interests structures commonly referred specialpurpose entities periods ending december 15 2003 types variable interest entities required financial statements periods ending march 15 2004 companys adoption revised interpretation 46 material impact consolidated financial statements note 2 acquisitions september 2003 company purchased choctaw maid farms inc choctaw integrated poultry processor since 1992 tyson purchasing choctaws production cost plus supply agreement scheduled expire 2007 company previously negotiated purchase option choctaws owners initially became exercisable 2002 company decided exercise purchase option rather continue cost plus arrangement supply agreement acquisition recorded purchase accordance statement financial accounting standards 141 business combinations accordingly assets liabilities adjusted fair values remainder purchase price 18 million recorded goodwill purchase price consisted 1 million cash exercise purchase option tysons supply agreement choctaw settlement 85 million owed tyson choctaw addition company assumed approximately 4 million choctaws debt third party june 2003 company exercised 74 million purchase option acquire assets leased third party company subleased choctaw pro forma operating results reflecting acquisition choctaw would materially different companys actual results operations 2004 goodwill reduced 3 million due adjustment preacquisition liabilities assumed part choctaw acquisition may 2002 company acquired assets millard processing services bacon processing operation approximately 73 million cash acquisition accounted purchase goodwill approximately 14 million recorded note 3 disposition september 2002 company completed sale specialty brands inc subsidiary acquired tfm acquisition results operations included companys prepared foods segment company received cash proceeds approximately 131 million used reduce indebtedness recognized pretax gain 22 million included income consolidated statement income fiscal 2002 note 4 charges fourth quarter fiscal 2004 company implemented control whereby plant facilities conduct fixed asset inventories recurring basis result company recorded fixed asset writedown charges approximately 21 million fourth quarter fiscal 2004 approximately 13 million recorded chicken segment 5 million prepared foods segment 2 million beef segment 1 million pork segment additionally discussed note 1 business summary significant accounting policies company recorded 25 million related impairment various intangible assets february 2004 company announced decision consolidate manufacturing operations jackson mississippi companys carthage mississippi facility company acquired carthage facility purchased choctaw maid farms fourth quarter fiscal 2003 since time performed comprehensive analysis operations area determined consolidation would effectively maintain companys competitiveness mississippi operations jackson location employed approximately 800 people poultry processing facility including processing deboning operations result decision company recorded total costs approximately 9 million 8 million second quarter fiscal 2004 1 million third quarter fiscal 2004 includes approximately 8 million estimated impairment charges assets disposed 1 million employee termination benefits company accounting closing jackson operation accordance statement financial accounting standards 146 accounting costs associated exit disposal activities sfas 146 statement financial accounting standards 144 accounting impairment disposal longlived assets sfas 144 amount reflected chicken segment reduction operating income included consolidated statements income charges jackson location ceased operations august 2004 october 2 2004 company fully paid estimated termination benefits 1 million december 2003 company announced decision close manchester new hampshire augusta maine prepared foods operations improve longterm manufacturing efficiencies manchester operation employed approximately 550 people primarily produced sandwich meat foodservice customers augusta facility employed approximately 170 people produced hot dogs sausages boneless hams deli turkey products locations ceased operations second quarter fiscal 2004 result decision company recorded total costs 24 million 21 million first quarter fiscal 2004 3 million second quarter fiscal 2004 included 4 million costs related closing plants 20 million estimated impairment charges assets disposed amounts reflected prepared foods segment reduction operating income included consolidated statements income charges costs related closing plants include 2 million employee termination benefits 2 million plant closing related costs company accounting closing manchester augusta operations accordance sfas 146 sfas 144 october 2 2004 2 million related employee termination benefits paid 2 million plant closing related costs paid april 2003 company announced decision close berlin maryland poultry operation berlin poultry operation employed approximately 650 people included hatchery feed mill live production processing facility ceased processing chickens november 12 2003 result decision company recorded total costs 29 million 4 million first quarter fiscal 2004 25 million fiscal 2003 included 14 million related closing plant 15 million estimated impairment charges assets disposed amounts reflected chicken segment reduction operating income included consolidated statements income charges costs related closing plant include 9 million estimated liabilities resolution companys obligations 209 grower contracts 5 million related costs associated closing operation including plant cleanup costs employee termination benefits company accounting closing berlin operation accordance sfas 146 sfas 144 october 2 2004 9 million obligations grower contracts 3 million closing costs paid additionally 2 million decrease original accrual recorded fourth quarter fiscal 2004 first quarter fiscal 2003 company recorded 47 million costs related closing stilwell oklahoma jacksonville florida plants included 26 million costs related closing plants 21 million estimated impairment charges assets disposed costs related closing plants include 17 million estimated liabilities resolution companys obligations grower contracts 9 million related costs associated closing plants including plant cleanup costs employee termination benefits company accounted closing stilwell oklahoma jacksonville florida operations accordance emerging issues task force 943 liability recognition certain employee termination benefits costs exit activity eitf 943 sfas 144 costs reflected chicken segment reduction operating income included consolidated statements income charges october 2 2004 remaining accrual balance 1 million 16 million obligations grower contracts 13 million closing costs paid additionally 4 million increase original accrual amount recorded fourth quarter fiscal 2004 material adjustments total accrual anticipated time fourth quarter fiscal 2002 company recorded 26 million costs related restructuring live swine operations consists 21 million estimated liabilities resolution company obligations producer contracts 5 million related costs associated restructuring including lagoon pit closure costs employee termination benefits fourth quarter 2004 company recorded additional reserve 6 million related lagoon pit closures costs october 2 2004 remaining accrual balance 18 million 6 million obligations grower contracts 8 million related costs paid company accounting restructuring live swine operations accordance eitf 943 sfas 144 material adjustments total accrual anticipated time august 2002 company made decision capitalize strong recognition tyson brand expanding tyson brand beef pork thus fourth quarter fiscal 2002 company recorded writedown 27 million related discontinuation thomas e wilson brand amount reflected prepared foods segment reduction operating income included consolidated statements income charges note 5 bserelated charges december 23 2003 us department agriculture usda announced single case bse diagnosed washington state dairy cow effect companys beef segment caused announcement along decision various countries restrict imports us beef products resulted company recording bserelated pretax charges approximately 61 million fiscal 2004 charges included cost sales primarily related decline value finished product inventory destined international markets whether intransit located shipping ports located within domestic storage well live cattle inventory open futures positions material adjustments made subsequent initial bserelated accruals recorded first quarter fiscal 2004 none anticipated future note 6 allowance doubtful accounts october 2 2004 september 27 2003 allowance doubtful accounts 11 million 16 million respectively note 7 financial instruments company purchases certain commodities course normal operations corn soybeans livestock natural gas part companys ongoing commodity risk management activities company uses derivative financial instruments primarily futures swaps reduce exposure various market risks related purchases generally contract terms financial instrument qualifying hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts designated highly effective meeting risk reduction correlation criteria recorded using hedge accounting defined statement financial accounting standards 133 accounting derivative instruments hedging activities sfas 133 amended derivative instrument hedge defined sfas 133 changes fair value instrument either offset change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion instruments change fair value immediately recognized earnings component cost sales company derivative related balances 87 million 20 million recorded current assets october 2 2004 september 27 2003 respectively 83 million 37 million current liabilities october 2 2004 september 27 2003 respectively cash flow hedges company uses derivatives moderate financial commodity market risks business operations derivative products futures option contracts considered hedge changes amount future cash flows related commodities procurement company also enters interest rate swap agreements adjust proportion total longterm debt leveraged equipment loans subject variable interest rates interest rate swaps company agrees pay fixed rate interest times notional principal amount receive return amount equal specified variable rate interest times notional principal amount interest rate swaps considered hedge changes amount future cash flows associated companys variable rate interest payments effective portion cumulative gain loss derivative instrument reported component comprehensive income loss shareholders equity recognized earnings period periods hedged transaction affects earnings grain commodity hedges chickens consumed hedged grain sold remaining cumulative gain loss derivative instrument excess cumulative change present value future cash flows hedged item recognized earnings period change ineffectiveness recognized cash flow hedges fiscal 2004 2003 2002 derivative products related grain procurement futures option contracts meet criteria sfas 133 hedge accounting considered cash flow hedges hedge changes amount future cash flows related commodities procurement company applies sfas 133 hedge accounting derivative products related grain procurement hedging physical grain contracts previously purchased company purchase derivative products related grain procurement excess physical grain consumption requirements company expects tax losses net gains totaling approximately 22 million recorded comprehensive income loss october 2 2004 related cash flow hedges recognized within next 12 months company generally hedge cash flows related commodities beyond 12 months companys open marktomarket sfas 133 hedge positions significant october 2 2004 fair value hedges company designates certain futures contracts fair value hedges firm commitments purchase livestock slaughter natural gas operation plants time company also enters foreign currency forward contracts hedge changes fair value receivables purchase commitments arising changes exchange rates foreign currencies however company entered contracts fiscal years 2004 2003 changes fair value derivative highly effective designated qualifies fair value hedge along loss gain hedged asset liability attributable hedged risk including losses gains firm commitments recorded current period earnings ineffectiveness results change fair value hedge instrument differs change fair value hedged item ineffectiveness recorded related companys fair value hedges significant fiscal 2004 2003 2002 undesignated positions company holds positions part risk management activities primarily certain grain livestock futures apply sfas 133 hedge accounting instead marks positions fair value earnings reporting date changes market value derivatives used companys risk management activities surrounding inventories hand anticipated purchases inventories recorded cost sales changes market value derivatives used companys risk management activities surrounding forward sales contracts recorded sales company generally enter undesignated positions beyond 12 months based companys evaluation grain markets company times entered portion derivative products related grain procurement prior purchasing physical grain contracts company applied sfas 133 hedge accounting treatment derivative positions connection risk management activities company recognized pretax net gains approximately 58 million pretax net losses approximately 4 million cost sales fiscal years ended october 2 2004 september 27 2003 respectively current year derivative gains due primarily increase grain futures prices second fiscal quarter company higher number derivative positions place time compared period prior year additionally company enters certain forward sales boxed beef pork fixed prices positions livestock futures mitigate market risk associated fixed price forward sales fixed price sales contract locks proceeds sale future although cost livestock related boxed beef pork market prices time sale vary fixed price creating market risk therefore fixed forward sales entered company also enters appropriate number livestock futures positions company believes effective economic hedge however correlation qualify sfas 133 hedge accounting consequently changes market value open livestock futures positions marked market reported earnings reporting date even though economic impact companys fixed sales price market price realized time sale connection livestock futures company unrealized pretax gains open marktomarket futures positions approximately 15 million october 2 2004 16 million september 27 2003 fair values based quoted market prices published forward interest rate natural gas curves carrying values derivative positions equal fair values october 2 2004 september 27 2003 carrying values total debt 34 billion 36 billion respectively financial instruments fair values approximate recorded values october 2 2004 september 27 2003 concentrations credit risk companys financial instruments exposed concentrations credit risk consist primarily cash equivalents trade receivables companys cash equivalents high quality securities placed major banks financial institutions concentrations credit risk respect receivables limited due large number customers dispersion across geographic areas company performs periodic credit evaluations customers financial condition generally require collateral october 2 2004 september 27 2003 approximately 150 103 respectively companys net accounts receivable balance due one customer single customer group represents greater 10 net accounts receivable note 8 property plant equipment major categories property plant equipment accumulated depreciation cost october 2 2004 september 27 2003 follows companys total depreciation expense 458 million 427 million 431 million fiscal years 2004 2003 2002 respectively company capitalized interest costs 3 million 2004 2003 9 million 2002 part cost major asset construction projects approximately 492 million required complete construction projects progress october 2 2004 note 9 current liabilities current liabilities october 2 2004 september 27 2003 include note 10 commitments company leases certain farms properties equipment total rentals thereon approximated 111 million 2004 104 million 2003 105 million 2002 leases terms ranging one seven years varying renewal periods significant obligations assumed terms leases upkeep facilities payments insurance property taxes minimum lease commitments noncancelable leases october 2 2004 totaled 158 million composed 63 million fiscal 2005 39 million fiscal 2006 29 million fiscal 2007 16 million fiscal 2008 9 million fiscal 2009 2 million later years company guarantees debt outside third parties involve lease grower loans substantially collateralized underlying assets terms underlying debt range seven 11 years maximum potential amount future payments october 2 2004 55 million company also maintains operating leases various types equipment contain residual value guarantees market value assets end term lease terms lease maturities range one seven years maximum potential amount residual value guarantees approximately 110 million approximately 28 million would recoverable various recourse provisions undeterminable recoverable amount based fair market value underlying leased assets likelihood payments guarantees considered probable october 2 2004 september 27 2003 liabilities guarantees recorded additionally company also enters future purchase commitments various items corn soybeans livestock natural gas contracts october 2 2004 commitments totaled 287 million composed 220 million fiscal 2005 50 million fiscal 2006 8 million fiscal 2007 2 million fiscal 2008 2 million fiscal 2009 5 million later years note 11 longterm debt company unsecured revolving credit facilities totaling 1 billion support companys commercial paper program letters credit shortterm funding needs third quarter fiscal 2004 company restructured extended revolving credit facilities consist 250 million expire september 2006 750 million expire june 2009 october 2 2004 company outstanding letters credit totaling approximately 274 million issued primarily support workers compensation insurance programs derivative activities leveraged equipment loans draw downs letters credit october 2 2004 october 2 2004 september 27 2003 amounts drawn revolving credit facilities however outstanding letters credit reduce amount available revolving credit facilities company receivables purchase agreement three copurchasers sell 750 million trade receivables agreements restructured extended fourth quarter fiscal 2004 consist 375 million expiring august 2005 375 million expiring august 2007 receivables purchase agreement accounted borrowing interest rate based commercial paper issued copurchasers agreement substantially companys accounts receivable sold special purpose entity tyson receivables corporation trc whollyowned consolidated subsidiary company trc separate creditors entitled satisfied assets trc prior value becoming available company trcs equity holder october 2 2004 150 million outstanding receivables purchase agreement expiring august 2005 150 million agreement expiring august 2007 september 27 2003 outstanding balance terms leveraged equipment loans company cash deposits totaling approximately 57 million included assets october 2 2004 leveraged loan agreements company entered interest rate swap agreements effectively lock fixed interest rate borrowings annual maturities longterm debt five fiscal years subsequent october 2 2004 2005338 million 2006261 million 20071048 million 200814 million 200991 million revolving credit facilities senior notes accounts receivable securitization contain various covenants restrictive contain maximum allowed leverage ratio minimum required interest coverage ratio company compliance covenants fiscal year end industrial revenue bonds secured facilities net book value 41 million 159 million october 2 2004 september 27 2003 respectively three industrial revenue bonds paid fiscal 2004 shortterm notes payable october 2 2004 included current debt september 27 2003 shortterm notes payable totaling 23 million carried weighted average interest rate 15 company fully unconditionally guaranteed 476 million senior notes issued tyson fresh meats inc tfm formerly known ibp inc whollyowned subsidiary company following condensed consolidating financial information provided company guarantor tfm issuer alternative providing separate financial statements issuer note 12 comprehensive income loss components accumulated comprehensive income loss follows note 13 stock options restricted stock shareholders approved tyson foods inc 2000 stock incentive plan incentive plan january 2001 incentive plan administered compensation committee board directors permits awards shares class stock awards derivative securities related value class stock tax reimbursement payments eligible persons incentive plan provides award variety equitybased incentives incentive stock options nonqualified stock options stock appreciation rights dividend equivalent rights performance unit awards phantom shares incentive plan provides granting incentive stock options shares class stock price less fair market value date grant nonqualified stock options may granted price equal less fair market value class stock date option granted stock options incentive plan generally become exercisable ratably three eight years date grant must exercised within 10 years date grant summary companys stock option activity follows number options exercisable follows october 2 20047921321 september 27 20039135306 september 28 20029373360 remainder options outstanding october 2 2004 exercisable ratably september 2009 number shares available future grants 17703157 21327929 october 2 2004 september 27 2003 respectively following table summarizes information stock options outstanding october 2 2004 weighted average fair value options granted 2004 approximately 599 fair value option grant established date grant using blackscholes optionpricing model assumptions include expected life ranging five six years riskfree interest rate ranging 309 327 expected volatility ranging 377 401 dividend yield 100 october 2 2004 company outstanding approximately eight million restricted shares class stock restrictions expiring periods july 1 2020 unearned portion restricted stock classified consolidated balance sheets unamortized deferred compensation shareholders equity company issues restricted stock market value date grant weighted average fair value restricted stock granted 1569 per share 2004 1120 per share 2003 note 14 deferred compensation july 2003 compensation committee authorized company award performancebased shares companys class stock certain senior executive officers first business day companys 2004 2005 2006 fiscal years initial maximum aggregate value 44 million date award vesting performancebased shares 2004 2005 awards three years vesting 2006 award two onehalf years vesting period award subject attainment company goals determined compensation committee prior date award quarter vesting period company reviews progress toward attainment company goals determines appropriate record adjustment deferred compensation liability anticipated vesting shares attainment company goals finally determined end vesting period shares vest ultimate expense company recognized vesting period equal class stock price date shares vest times number shares awarded note 15 pensions postretirement benefits company funded unfunded noncontributory defined benefit pension plans covering specific groups employees two plans provide benefits based formula using years service specified benefit rate effective january 1 2004 company implemented new defined benefit plan certain contracted officers uses formula based years service final average salary company also postretirement benefit plans substantially employees may receive benefits satisfy applicable eligibility criteria postretirement healthcare plans contributory participants contributions adjusted deemed necessary company defined contribution retirement incentive benefit programs various groups company personnel company contributions totaled 55 million 48 million 50 million 2004 2003 2002 respectively company uses september 30 measurement date defined benefit plans one postretirement medical plan july 31 measurement date remaining postretirement medical plans postretirement benefits include postretirement medical costs life insurance benefit obligations funded status following table provides reconciliation changes plans benefit obligations assets funded status fiscal year ends october 2 2004 september 27 2003 amounts recognized consolidated balance sheets consist increase decrease pretax minimum liability related companys pension plans included comprehensive income 2 million 6 million 14 million fiscal years 2004 2003 2002 respectively october 2 2004 september 27 2003 pension plans accumulated benefit obligation excess plan assets information related plans follows net periodic benefit cost components net periodic benefit cost plans recognized consolidated statements income follows assumptions weighted average assumptions used follows determine rateofreturn assets assumption company first examined actual historical rates return various asset classes company determined longterm projected rateofreturn based expected returns next five 10 years prior fiscal year 2004 company defined benefit plans provided retirement benefit based number years service multiplied benefit rate 2004 plan added 4 compensation increase inherent benefit obligation calculation company four postretirement health plans two consist fixed annual payments company account 36 million companys postretirement medical obligation october 2 2004 healthcare cost trend required determine obligation third plan negotiated annual maximum payment company accounts 12 million companys postretirement medical obligation october 2 2004 claims excess companys negotiated annual maximum payment paid plan participants since current medical claims exceed annual maximum cap plan liability calculated assuming annual claims equal total annual maximum cap future years healthcare cost trend required determine obligation fourth plan accounts 18 million companys postretirement medical obligation year end uses healthcare cost trend 9 current year grades 5 fiscal year 2009 assumed healthcare cost trend rates significant effect amounts reported healthcare plan onepercentagepoint change assumed healthcare cost trend rates would following effects plan assets fair value plan assets companys pension benefit plans 59 million 50 million october 2 2004 september 27 2003 respectively following table sets forth actual target asset allocation companys pension plan assets plan trustees established set investment objectives related assets pension plans regularly monitor performance funds portfolio managers objectives pension assets 1 provide growth capital income 2 achieve target weighted average annual rate return competitive funds similar investment objectives 3 diversify order reduce risk investment objectives target asset allocation updated january 2004 contributions companys policy fund least minimum contribution required meet applicable federal employee benefit local tax laws sole discretion company may time fund additional amounts expected contributions companys pension plans fiscal year 2005 approximately 9 million fiscal years ended 2004 2003 2002 company funded 9 million 4 million 5 million respectively defined benefit plans estimated future benefit payments following benefit payments expected paid note 16 supplemental cash flow information following noncash transaction excluded consolidated statements cash flows fiscal year 2004 91 million change goodwill fiscal 2004 september 27 2003 balance corresponding change current liabilities due adjustment preacquisition tax liabilities assumed part tfm acquisition company received formal approval fiscal 2004 joint committee taxation us congress issues relating certain preacquisition years result approval accrual 91 million preacquisition tax liability longer needed following table summarizes cash payments interest income taxes cash payments interest fiscal year 2004 increased despite lower debt levels due timing interest payments made related senior notes caused fiscal 2004 ending october rather september increase income taxes paid 2003 2004 due primarily refund received fiscal 2003 note 17 transactions related parties company operating leases farms equipment facilities tyson director company certain members family randal w tyson testamentary trust total payments 8 million 2004 2003 9 million 2002 paid entities parties ownership interest additionally facilities leased officers directors rentals paid entities parties ownership interest totaled 1 million 2004 2 million 2003 2002 former director resigned board directors 2003 received sale cattle subsidiary company 10 million fiscal years 2003 2002 certain officers directors engaged chicken swine growout operations company whereby individuals purchased animals feed housing items raise animals market weight total value transactions discontinued fiscal 2003 amounted 11 million fiscal year 2003 2002 may 21 2004 company purchased parcel land adjacent companys corporate center approximately 356000 jht llc limited liability company tyson director company randal w tyson testamentary trust members purchase approved governance committee board directors april 29 2004 land used construction facilities house expanded product development kitchens new pilot production plant provide space consumer insights group make provisions team member development activities second quarter fiscal 2004 company purchased 1028577 shares class stock private transaction tyson director managing partner tyson limited partnership principal shareholder company purchase shares mr tyson approved governance committee board directors january 29 2004 based closing price class stock new york stock exchange date approval fiscal 2004 company received cash payments tyson director company totaling 15 million reimbursement certain perquisites personal benefits received fiscal years 1997 2003 note 18 income taxes detail provision income taxes consists reasons difference effective income tax rate statutory us federal income tax rate follows fourth quarter fiscal 2004 company adjusted tax rates used record deferred taxes one mexican subsidiaries resulting reduction deferred tax liabilities 16 million adjustment included table fiscal 2004 items included miscellaneous nondeductible expenses general business credits amounts relating ongoing examinations taxing authorities deferred income taxes recognized future tax consequences attributable differences financial statement carrying amounts existing assets liabilities respective tax basis deferred tax assets liabilities measured using tax rates expected apply taxable income years temporary differences expected recovered settled tax effects major items recorded deferred tax assets liabilities net deferred tax liabilities included current liabilities deferred income taxes consolidated balance sheets deferred tax liability suspended taxes conversion accrual method represents 1987 change cash accrual method accounting paid 2017 subject income limitations company accumulated undistributed earnings foreign subsidiaries aggregating approximately 387 million october 2 2004 expected permanently reinvested business earnings distributed form dividends otherwise company would subject us income taxes subject adjustment foreign tax credits state income taxes withholding taxes payable various foreign countries currently practicable estimate tax liability might payable repatriation foreign earnings valuation allowance totaling 66 million consists 15 million state tax credit carryforwards fully reserved 36 million us federal net operating loss carryforwards 15 million international net operating loss carryforwards state tax credit carryforwards expire years 2005 2009 october 2 2004 considering utilization restrictions companys federal tax loss carryforwards approximated 209 million net operating loss carryforwards subject utilization limitations due ownership changes may utilized offset future taxable income subject limitations carryforwards expire years 2005 2023 note 19 earnings per share weighted average common shares used computation basic diluted earnings per share follows approximately two million 11 million seven million companys option shares antidilutive included dilutive earnings per share calculation fiscal years 2004 2003 2002 respectively note 20 segment reporting company operates five business segments chicken beef pork prepared foods company measures segment profit operating income chicken segment involved primarily processing live chickens fresh frozen valueadded chicken products chicken segment markets products domestically food retailers foodservice distributors restaurant operators noncommercial foodservice establishments schools hotel chains healthcare facilities military food processors well international markets throughout world chicken segment also includes sales allied products chicken breeding stock subsidiary beef segment involved primarily processing live fed cattle fabrication dressed beef carcasses primal subprimal meat cuts caseready products also involves deriving value allied products hides variety meats sale processors others beef segment markets products domestically food retailers foodservice distributors restaurant operators noncommercial foodservice establishments schools hotel chains healthcare facilities military food processors well international markets throughout world allied products also marketed manufacturers pharmaceuticals technical products pork segment involved primarily processing live market hogs fabrication pork carcasses primal subprimal cuts caseready products segment also represents companys live swine group related allied product processing activities pork segment markets products domestically food retailers foodservice distributors restaurant operators noncommercial foodservice establishments schools hotel chains healthcare facilities military food processors well international markets throughout world also sells allied products pharmaceutical technical products manufacturers well live swine pork processors prepared foods segment includes companys operations manufacture market frozen refrigerated food products include pepperoni beef pork toppings pizza crusts flour corn tortilla products appetizers prepared meals ethnic foods soups sauces side dishes meat dishes well branded processed meats prepared foods segment markets products domestically food retailers foodservice distributors restaurant operators noncommercial foodservice establishments schools hotel chains healthcare facilities military food processors well international markets throughout world segment includes logistics group corporate activities identified specific protein groups segment also includes proceeds 167 million received fiscal 2003 related settlement vitamin antitrust litigation pork segment sales 473 million 365 million 369 million fiscal years 2004 2003 2002 respectively transactions operating segments company beef segment sales 75 million 77 million 63 million fiscal years 2004 2003 2002 respectively transactions operating segments company aforementioned sales intersegment transactions sold market prices excluded segment sales table companys largest customer walmart stores inc accounted approximately 116 96 82 consolidated sales 2004 2003 2002 respectively sales walmart stores inc included chicken beef pork prepared foods segments extended discontinuance sales customer could replaced material impact companys operations however company anticipate occurrences due demand products majority companys operations domiciled united states approximately 94 95 94 sales external customers fiscal years ending 2004 2003 2002 respectively sourced united states approximately 64 billion longlived assets located united states fiscal year ending 2004 65 billion fiscal years ending 2003 2002 approximately 171 million 185 million 193 million longlived assets located foreign countries primarily canada mexico fiscal years ended 2004 2003 2002 respectively company sells certain products foreign markets primarily canada china european union japan mexico puerto rico russia taiwan south korea companys export sales 2004 2003 2002 totaled 21 billion 26 billion 20 billion respectively substantially companys export sales facilitated unaffiliated brokers marketing associations foreign sales staffs foreign sales products produced country united states less 10 total consolidated sales 2004 2003 2002 approximately 28 15 11 2004 2003 2002 respectively income taxes foreign operations increase fiscal 2004 primarily due increased volumes margins companys lakeside operation canada note 21 quarterly financial data unaudited fourth quarter 2004 14week period remaining quarters table 13week periods first quarter 2004 gross profit includes 61 million bserelated charges operating income includes 21 million 4 million charges related closing prepared foods facilities poultry operations respectively second quarter 2004 operating income includes charges 6 million 8 million related closing prepared foods facilities poultry operations respectively third quarter 2004 operating income includes charges 1 million related closing poultry operation fourth quarter 2004 gross profit includes 18 million reduce self insurance reserves actuarially determined range reserves compared actuarial estimates semiannually fourth quarter 2004 operating income includes charges 25 million related impairment various intangible assets 21 million related fixed asset writedowns first quarter 2003 gross profit includes 28 million received connection vitamin antitrust litigation operating income includes charges 47 million related closing poultry operations second quarter 2003 gross profit includes 94 million received connection vitamin antitrust litigation third quarter 2003 gross profit includes 42 million received connection vitamin antitrust litigation operating income includes charges 19 million related closing poultry operations additionally net income includes pretax charge 10 million related writedown equity interest live swine operation fourth quarter 2003 gross profit includes 3 million received connection vitamin antitrust litigation operating income includes 10 million charges related closing poultry operations note 22 contingencies listed certain claims made company subsidiaries companys opinion made appropriate adequate reserves accruals necessary company believes probability material loss beyond amounts accrued remote however ultimate liability matters uncertain accruals reserves adequate adverse outcome could material effect consolidated financial condition results operations company believes substantial defenses claims made intends vigorously defend cases wage hour labor matters 2000 wage hour division us department labor dol conducted industrywide investigation poultry producers including company ascertain compliance various wage hour issues part investigation dol inspected 14 companys processing facilities may 9 2002 secretary labor filed civil complaint company us district court northern district alabama complaint alleges company violated overtime provisions federal fair labor standards act flsa companys chickenprocessing facility blountsville alabama complaint contain definite statement acts constituted alleged violations statute although secretary labor indicated discovery case seeks require company compensate hourly chicken processing workers pre postshift clothes changing washing related activities one two unpaid 30minute meal periods secretary labor seeks unspecified back wages employees blountsville facility period two years prior date filing complaint additional amount unspecified liquidated damages injunction future violations facility chicken processing facilities operated company parties process concluding discovery secretary labors motion extend certain case deadlines pending court june 22 1999 11 current former employees company filed case mh fox et al v tyson foods inc fox us district court northern district alabama claiming company violated requirements flsa suit alleges company failed pay employees hours worked andor improperly paid overtime hours suit specifically alleges 1 employees paid time taken put take certain working supplies beginning end shifts breaks 2 use mastercard line time fails pay employees time actually worked plaintiffs seek represent similarly situated current former employees company plaintiffs seek reimbursement unspecified amount unpaid wages liquidated damages attorney fees costs filing 159 current andor former employees consented join lawsuit date approximately 5100 consents filed court plaintiffs motion conditional collective treatment courtsupervised notice additional putative class members denied february 27 2004 plaintiffs refiled motion conditional collective treatment courtsupervised notice additional putative class members april 2 2004 discovery case largely completed trial date set august 22 2000 seven employees company filed case de asencio v tyson foods inc us district court eastern district pennsylvania lawsuit similar fox employees claim violations flsa allegedly failing pay time taken put take sanitize certain working supplies violations pennsylvania wage payment collection law plaintiffs seek represent similarly situated current former employees poultry processing plant new holland pennsylvania plaintiffs seek reimbursement unspecified amount unpaid wages liquidated damages attorney fees costs currently approximately 560 additional current former employees filed consents join lawsuit court january 30 2001 ordered notice lawsuit issued potential plaintiffs new holland facilities july 17 2002 court granted plaintiffs motion certify state law claims september 23 2002 third circuit court appeals agreed hear companys petition review courts decision certify state law claims september 8 2003 court appeals reversed district courts certification class pennsylvania wage payment collection law ruling claims could pursued federal court appellate court ruled company must reissue notice potential flsa claims approximately 2170 employees previously receive notice court appeals remanded matter district court proceed accordingly september 30 2003 notice reissued proceedings district court pending trial date set substantially similar suits filed several integrated poultry companies addition organizing activity conducted representatives affiliates united food commercial workers union poultry industry encouraged worker participation fox v tyson lawsuits november 5 2001 lawsuit entitled maria chavez et al v ibp lasso acquisition corporation tyson foods inc chavez filed us district court eastern district washington tfm company several employees tfms pasco washington beef slaughter processing facility alleging various violations flsa 29 usc sections 201 219 well violations washington state minimum wage act rcw chapter 4946 industrial welfare act rcw chapter 4912 wage deductionscontributionrebates act rcw chapter 4952 chavez lawsuit alleges tfm andor company required employees perform unpaid work related donning doffing certain personal protective clothing equipment prior shifts well meal periods plaintiffs allege similar prior litigation entitled alvarez et al v ibp alvarez resulted 31 million final judgment tfm supports claim collateral estoppel andor res judicata issues raised new litigation plaintiffs seeking reimbursement unspecified amount damages exemplary damages liquidated damages prejudgment interest attorney fees costs tfm filed timely notice appeal alvarez plaintiffs filed timely notice crossappeal august 5 2003 ninth circuit court appeals affirmed lower courts decision part reversed lower courts decision part remanded case lower court recalculation damages ruling ninth circuit court appeals upheld entirety tfm additional exposure alvarez approximately 5 million tfm filed petition rehearing panel ninth circuit court appeals heard alvarez alternative rehearing en banc denied december 2 2003 also filed petition certify state law claims washington supreme court denied september 23 2003 december 5 2003 tfm filed petition stay mandate indicating would file petition certiorari us supreme court seeking courts review ninth circuits adverse opinion stay mandate ordered ninth circuit december 10 2003 petition certiorari filed us supreme court february 26 2004 briefing petition complete may 3 2004 court invited us solicitor general express views pending petition october 25 2004 solicitor filed response acknowledged issues warranted review advised first circuit case would better suited courts consideration issues chavez initially pursued optin collective action 29 usc 216b us district court eastern district washington granted plaintiffs motion seeking certification class optout state law plaintiffs federal rule civil procedure 23 notice sent potential state law claim class members statelaw class closed contains approximately 3900 class members including approximately 1200 federal claim trial held september 7 2004 october 4 2004 district court issued proposed findings fact conclusions law december 8 2004 district court informed parties january 13 2005 provide district court briefs proposed findings fact conclusions law january 28 2005 file reply briefs district court intends hear oral arguments february 24 2005 issuing final order damages phase trial commence judgment entered november 21 2002 lawsuit entitled emily jordan et al v ibp inc tyson foods inc filed us district court middle district tennessee ten current former hourly employees tfms caseready facility goodlettsville tennessee filed complaint behalf unspecified allegedly similarly situated employees claiming defendants violated overtime provisions flsa suit alleges company failed pay employees hours worked plants commencement operations tfms control april 2001 company acquired plant part acquisition tfm particular suit alleges employees paid time takes collect assemble put take wash health safety production gear beginning end shifts meal period suit also alleges company deducts 30 minutes per day employees paychecks regardless whether employees obtain full 30minute period meal plaintiffs seeking declaration defendants comply flsa award unspecified amount back pay compensation benefits unpaid entitlements liquidated damages prejudgment postjudgment interest attorney fees costs january 10 2003 another 31 employees tennessee filed consents join lawsuit plaintiffs january 15 2003 company filed answer complaint denying liability january 14 2003 named plaintiffs filed motion expedited courtsupervised notice prospective class members motion sought conditionally certify class similarly situated employees tfms nonunion facilities subject flsa litigation plaintiffs withdrew request conditional certification similarly situated employees tfms nonunion facilities rather sought include nonexempt employees worked goodlettsville facility since opening april 1 2001 june 9 2003 company filed motion summary judgment seeking applicability injunction entered us district court district kansas affirmed us court appeals tenth circuit metzler v ibp inc 127 f 3rd 959 10th cir 1997 company contends preclusive effect plaintiffs claims based pre postshift activities plaintiffs conducted discovery limited issue responded said motion june 18 2004 company filed reply july 2 2004 october 12 2004 district court denied companys motion summary judgment november 17 2003 district court conditionally certified collective action composed similarly situated current former employees goodlettsville facility based upon clothes changing washing activities unpaid production work meal periods since plant operations began april 2001 class notices approximately 4500 prospective class members mailed january 21 2004 presently approximately 525 current former employees opted class district court stayed discovery november 8 2004 pending supreme courts decision certiorari alvarez environmental matters october 23 2001 putative class action lawsuit filed district court mayes county oklahoma company r lynn thompson deborah thompson behalf owners grand lake cherokees littoral lakefront property suit alleges company entities operational control conduct operations way interfere putative class action plaintiffs use enjoyment property allegedly caused diminished water quality lake plaintiffs seeking injunctive relief unspecified amount compensatory damages punitive damages attorney fees costs simmons foods inc simmons peterson farms inc peterson joined defendants company simmons seeking leave file third party complaint entities contribute wastes wastewater grand lake class certification hearing held october 2003 december 11 2003 trial court entered order granted class certification january 12 2004 company simmons peterson filed petition error petition oklahoma supreme court challenges seeks appellate level review trial courts certification order oklahoma supreme court yet scheduled proceedings petition securities matters june 22 july 20 2001 various plaintiffs commenced actions delaware federal actions company tyson john tyson les baledge us district court district delaware seeking monetary damages behalf purported class sold ibp inc ibp stock march 29 2001 company announced intention terminate merger agreement ibp june 15 2001 delaware state court rendered posttrial opinion ordering merger proceed plaintiffs various actions alleged defendants violated federal securities laws making causing allowing made certain allegedly false misleading statements march 29 2001 press release issued connection companys attempted termination merger agreement plaintiffs alleged result defendants alleged conduct purported class members harmed alleged artificial deflation price ibps stock proposed class period various actions subsequently consolidated caption tyson foods inc securities litigation december 4 2001 plaintiffs consolidated action filed consolidated class action complaint january 22 2002 defendants filed motion dismiss consolidated complaint memorandum order dated october 23 2002 court granted part denied part defendants motion dismiss october 6 2003 court certified class consisting purchased ibp securities march 29 2001 subsequently sold securities march 30 june 15 2001 inclusive sustained damages result transaction following conclusion discovery case plaintiffs defendants filed motions summary judgment june 17 2004 court rendered opinion favor defendants plaintiffs claims entered order effect june 28 2004 defendants filed motion requesting court modify order include judgment defendants favor class july 30 2004 court entered order august 6 2004 plaintiffs filed notice appeal hearing date appeal set general matters july 1996 certain cattle producers filed henry lee pickett et al v ibp inc us district court middle district alabama seeking certification class cattle producers complaint alleged tfm used market power alleged captive supply agreements reduce prices paid tfm purchases cattle cash market alleged violation packers stockyards act psa plaintiffs sought injunctive declaratory relief well actual punitive damages plaintiffs submitted amended expert report november 19 2003 showing alleged damages cash market purchases tfm approximately 21 billion trial matter began january 12 2004 concluded february 10 2004 february 17 2004 jury returned verdict tfm liability gave advisory verdict damages estimated impact cash market ie group larger class 128 billion february 25 2004 tfm filed renewed motion requesting court enter judgment matter law jmol tfm march 1 2004 plaintiffs filed motions asking court enter 128 billion advisory verdict award damages plaintiffs requesting prejudgment interest march 22 2004 court denied plaintiffs motions entry damages award april 23 2004 court granted tfms jmol motion held tfm legitimate business reasons using captive supplies ii evidence court suggest tfms conduct illegal iii plaintiffs failed present evidence trial sustain burden respect liability damages plaintiffs appealed courts entry judgment favor tfm 11th circuit court appeals oral arguments scheduled heard circuit court december 17 2004 september 12 2002 82 individual plaintiffs filed michael archer et al v tyson foods inc pork group inc civ 2002497 circuit court pope county arkansas august 18 2002 company announced restructuring live swine operations among things resulted discontinuance relationships approximately 130 contract hog producers including plaintiffs complaint plaintiffs allege company committed fraud promissorily estopped terminating parties relationship plaintiffs seek unspecified amount compensatory damages punitive damages attorney fees costs company filed motion stay proceedings compel arbitration denied decision appealed arkansas supreme court company affirmed case remanded circuit court discovery proceeding trial currently scheduled begin march 25 2005 report independent registered public accounting firm board directors shareholders tyson foods inc audited accompanying consolidated balance sheets tyson foods inc october 2 2004 september 27 2003 related consolidated statements income shareholders equity cash flows three years period ended october 2 2004 audits also included financial statement schedule listed index item 15a financial statements schedule responsibility companys management responsibility express opinion financial statements schedule based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion financial statements referred present fairly material respects consolidated financial position tyson foods inc october 2 2004 september 27 2003 consolidated results operations cash flows three years period ended october 2 2004 conformity us generally accepted accounting principles also opinion related financial statement schedule considered relation basic financial statements taken whole presents fairly material respects information set forth therein discussed note 1 financial statements 2004 company adopted emerging issues task force issue 036 participating securities twoclass method fasb statement 128 earnings per share ernst young llp ernst young llp rogers arkansas december 8 2004 item 9item 8 financial statements supplementary data consolidated statements income tyson foods inc consolidated balance sheets see accompanying notes tyson foods inc consolidated statements shareholders equity tyson foods inc consolidated statements shareholders equity tyson foods inc consolidated statements cash flows tyson foods inc notes consolidated financial statements note 1 business summary significant accounting policies description business tyson foods inc collectively “the company” “tyson” founded 1935 world headquarters springdale arkansas world’s largest processor marketer chicken beef pork second largest food company fortune 500 tyson produces wide variety brand name proteinbased prepared food products marketed united states 80 countries around world tyson recognized market leader retail foodservice markets serves company approximately 114000 team members 300 facilities offices 29 states 19 countries consolidation consolidated financial statements include accounts majorityowned whollyowned subsidiaries significant intercompany accounts transactions eliminated consolidation fiscal year company utilizes 52 53week accounting period ends saturday closest september 30 companys accounting cycle resulted 52week year fiscal years 2005 2003 53week year fiscal year 2004 reclassifications certain reclassifications related segment reporting made prior periods conform current presentations effect reclassifications material company’s consolidated financial statements cash equivalents cash equivalents consist investments shortterm highly liquid securities original maturities three months less made part companys cash management activity carrying values assets approximate fair market values company primarily utilizes cash management system series separate accounts consisting lockbox accounts receiving cash concentration accounts funds moved several “zerobalance” disbursement accounts funding payroll accounts payable grower payments result companys cash management system checks issued presented banks payment may create negative book cash balances checks outstanding excess related book cash balances totaling approximately 332 million october 1 2005 359 million october 2 2004 included trade accounts payable accrued salaries wages benefits accounts receivable company records trade accounts receivable net realizable value includes appropriate allowance estimated uncollectible accounts reflect loss anticipated trade accounts receivable balances charged provision doubtful accounts company calculates allowance based history writeoffs level past due accounts relationships economic status customers inventories processed products livestock excluding breeders supplies valued lower cost firstin firstout market livestock includes live cattle live chicken live swine cost includes purchased raw materials live purchase costs growout costs primarily feed contract grower pay catch haul costs labor manufacturing production overhead related purchase production inventories live chicken consists broilers breeders stated cost less amortization costs associated breeders including breeder chicks feed medicine accumulated production stage amortized broiler inventory productive life flock using standard unit production tyson foods inc depreciation provided primarily straightline method using estimated lives buildings leasehold improvements 10 39 years machinery equipment three 12 years three 20 years longlived assets company reviews carrying value longlived assets balance sheet date indication impairment exists recoverability assessed using undiscounted cash flows based upon historical results current projections earnings interest taxes company measures impairment excess carrying cost fair value asset fair value asset measured using discounted cash flows future operating results based upon discount rate corresponds companys cost capital goodwill intangible assets goodwill indefinite life intangible assets initially recorded fair value amortized reviewed impairment least annually frequently impairment indicators arise required statement financial accounting standards 142 “goodwill intangible assets” sfas 142 company’s assessment goodwill management makes assumptions segment regarding estimated future cash flows factors determine fair value respective assets fair value company’s trademarks determined using royalty rate method based expected revenues trademark goodwill allocated tested impairment reporting unit based fair value identifiable assets goodwill deductible income tax purposes october 1 2005 october 2 2004 accumulated amortization goodwill 286 million amount goodwill segment october 1 2005 october 2 2004 follows reduction goodwill balance primarily due adjustments 53 million related preacquisition tax liability accruals longer necessary due closing irs examination evaluation certain preacquisition deferred tax liabilities adjustments include 46 million 7 million deferred tax asset liability adjustments related acquisitions previous years tyson fresh meats inc tfm formerly known ibp inc hudson foods inc respectively october 1 2005 gross carrying value intangible assets consisted 76 million trademarks 85 million patents 11 million supply contracts accumulated amortization 20 million 10 million patents supply contracts respectively october 2 2004 gross carrying value intangible assets consisted 80 million trademarks 85 million patents 11 million supply contracts accumulated amortization 19 million 8 million patents supply contracts respectively reduction carrying value intangible assets fiscal 2005 compared prior year resulted 4 million impairment trademarks amortization expense combined patents supply contracts 3 million recognized fiscal 2005 8 million recognized fiscal years 2004 2003 amortization expense intangible assets estimated 3 million fiscal years 2006 2007 4 million fiscal year 2008 5 million fiscal year 2009 6 million fiscal year 2010 patents supply contracts amortized using straightline method estimated period benefit five 15 years beginning date benefits intangible items realized fiscal 2004 company recorded charges approximately 25 million related impairment various intangible assets 22 million recorded prepared foods segment 3 million recorded beef segment impairment tyson foods inc charges apply primarily trademarks acquired acquisition tfm 2001 impairment charges included charges company’s consolidated statements income resulted primarily lower product sales company’s regional trademarks products increasingly sold tyson trademark investments company investments joint ventures entities company typically uses cost method accounting voting interests less 20 percent equity method accounting voting interests excess 20 percent greater 50 percent company’s underlying share entity’s equity reported consolidated balance sheets line item assets october 1 2005 company 138 million marketable debt securities amount 5 million due one year less classified current assets consolidated balance sheets 133 million classified assets consolidated balance sheets maturities ranging one 30 years company applied statement financial accounting standards 115 “accounting certain investments debt equity securities” sfas 115 determined marketable debt securities availableforsale investments reported fair value based quoted market prices balance sheet date unrealized gains losses net tax recorded comprehensive income amortized cost debt securities adjusted amortization premiums accretion discounts maturity amortization recorded interest income cost securities sold based specific identification method realized gains losses sale debt securities declines value judged temporary recorded net basis income interest dividends securities classified availableforsale recorded interest income accrued self insurance company uses combination insurance selfinsurance mechanisms provide potential liabilities health welfare workers’ compensation auto liability general liability risks liabilities associated risks retained company estimated part considering historical claims experience demographic factors severity factors actuarial assumptions capital stock company two classes capital stock class common stock class stock class b common stock class b stock holders class b stock may convert stock class stock shareforshare basis holders class b stock entitled 10 votes per share holders class stock entitled one vote per share matters submitted shareholders approval cash dividends cannot paid holders class b stock unless simultaneously paid holders class stock per share amount cash dividend paid holders class b stock cannot exceed 90 cash dividend simultaneously paid holders class stock company pays quarterly cash dividends class b shareholders company paid class dividends per share 016 class b dividends per share 0144 fiscal years 2005 2004 2003 according emerging issues task force issue 036 “participating securities twoclass method fasb statement 128 earnings per share” eitf issue 036 class b stock considered participating security requiring use twoclass method computation basic earnings per share twoclass computation method period reflects cash dividends paid per share class stock plus amount allocated undistributed earnings per share computed using participation percentage reflects dividend rights class stock basic earnings per share reflect application eitf issue 036 computed using twoclass method periods presented shares class b stock considered participating convertible securities since shares class b stock convertible shareforshare basis shares class stock diluted earnings per share computed assuming conversion class b shares class shares beginning period tyson foods inc stock compensation december 29 2002 company adopted statement financial accounting standards 148 accounting stockbased compensation transition disclosure sfas 148 sfas 148 amended financial accounting standards board fasb statement 123 accounting stockbased compensation require use fair value method accounting stockbased employee compensation company applies accounting principles board opinion 25 related interpretations accounting employee stock compensation plans accordingly compensation expense recognized stock option issuances stock options issued exercise price equal closing price date grant company issue restricted stock records fair value awards deferred compensation amortized vesting period compensation expense employee stock compensation plans determined based fair value method accounting company’s stock compensation plans taxeffected impact would follows pro forma disclosures may representative effects net income future years financial instruments company purchaser certain commodities corn soybeans livestock natural gas course normal operations company uses derivative financial instruments reduce exposure various market risks generally contract terms hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts designated highly effective meeting risk reduction correlation criteria recorded using hedge accounting defined statement financial accounting standards 133 “accounting derivative instruments hedging activities” sfas 133 amended derivative instrument hedge defined sfas 133 depending nature hedge changes fair value instrument either offset change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings effect derivatives hedged items accounted hedge defined sfas 133 recorded cost sales ineffective portion instrument’s change fair value immediately recognized earnings component cost sales instruments company holds part risk management activities meet criteria hedge accounting defined sfas 133 amended marked fair value unrealized gains losses reported currently earnings changes market value derivatives used company’s risk management activities surrounding inventories hand anticipated purchases inventories supplies recorded cost sales changes market value derivatives used company’s risk management activities surrounding forward sales contracts recorded sales company generally hedge anticipated transactions beyond 12 months tyson foods inc revenue recognition company recognizes revenue title risk loss transferred customers generally upon delivery based upon terms sale revenue recognized net amount estimated received deducting estimated amounts discounts trade allowances product terms litigation reserves variety legal proceedings pending threatened company accruals recorded probable liability incurred amount liability estimated reasonably based current law progress case opinions views legal counsel advisers company’s experience similar matters management’s intended response litigation amounts discounted exclusive claims third parties adjusted periodically assessment efforts progress additional information becomes available company expenses amounts administering litigating claims incurred accruals legal proceedings included current liabilities consolidated balance sheets freight expense freight expense associated products shipped customers recognized cost products sold advertising promotion expenses advertising promotion expenses charged operations period incurred advertising promotion expenses fiscal years 2005 2004 2003 456 million 465 million 504 million respectively use estimates consolidated financial statements prepared conformity accounting principles generally accepted united states require management make estimates assumptions affect amounts reported consolidated financial statements accompanying notes actual results could differ estimates recently issued accounting standards regulations march 2005 financial accounting standards board fasb issued interpretation 47 “accounting conditional asset retirement obligations” interpretation fasb statement 143 interpretation statement financial accounting standards 143 “accounting asset retirement obligations” sfas 143 issued june 2001 requires entity recognize fair value liability asset retirement obligation period incurred reasonable estimate fair value made sfas 143 applies legal obligations associated retirement tangible longlived asset resulted acquisition construction development normal operation longlived asset associated asset costs capitalized part carrying amount longlived asset interpretation clarifies term “conditional asset retirement obligation” used sfas 143 refers legal obligation perform asset retirement activity timing method settlement conditional future event may within control entity interpretation requires entity recognize liability fair value conditional asset retirement obligation fair value liability reasonably estimated uncertainty timing method settlement conditional asset retirement obligation factored measurement liability sufficient information exists sfas 143 acknowledges cases sufficient information may available reasonably estimate fair value asset retirement obligation interpretation effective fiscal years ending december 15 2005 company currently process evaluating potential effects interpretation believe adoption material impact consolidated financial statements december 2004 fasb issued statement financial accounting standards 123r “sharebased payment” sfas 123r revision fasb statement 123 “accounting stockbased compensation” sfas 123 sfas 123r supersedes accounting principles board apb opinion 25 “accounting stock issued employees” amends fasb statement 95 “statement cash flows” revision requires companies measure recognize compensation tyson foods inc expense sharebased payments employees including grants employee stock options financial statements based fair value date grant sfas 123r permits companies adopt requirements using either modified prospective method modified retrospective method modified prospective method compensation cost recognized beginning effective date sharebased payments granted effective date awards granted employees prior effective date sfas 123r remain unvested effective date modified retrospective method includes requirements modified prospective method also permits entities restate either prior periods presented prior interim periods year adoption impact adopting standard company apply modified prospective method upon adoption april 2005 securities exchange commission announced would provide phasedin implementation sfas 123r result sfas 123r effective first interim annual reporting period registrant’s first fiscal year beginning june 15 2005 company estimates compensation expense related employee stock options fiscal 2006 expected range 1015 million sfas 123r also requires benefits tax deductions excess recognized compensation costs reported financing cash flow rather operating cash flow required current literature requirement reduce net operating cash flows increase net financing cash flows periods adoption company believes reclass material impact consolidated statements cash flows december 2004 fasb issued statement financial accounting standards 151 inventory costs sfas 151 sfas 151 requires abnormal amounts inventory costs related idle facility freight handling wasted material expenses recognized current period charges additionally sfas 151 requires allocation fixed production overheads costs conversion based normal capacity production facilities standard effective fiscal years beginning june 15 2005 company believes adoption sfas 151 material impact consolidated financial statements october 2004 president signed law american jobs creation act ajc act ajc act provides elimination extraterritorial income exclusion eti allows federal income tax deduction percentage income earned certain domestic production activities company’s domestic us production activities qualify deduction based effective date provision ajc act company eligible deduction beginning fiscal 2006 provision phased fiscal 2006 fiscal 2011 provides deduction 3 9 qualifying domestic production income period additionally december 21 2004 fasb issued fasb staff position 1091 “application fasb statement 109 accounting income taxes sfas 109 tax deduction qualified production activities provided american jobs creation act 2004” fsp 1091 fsp 1091 effective upon issuance states deduction provision ajc act accounted special deduction accordance sfas 109 company yet quantified impact realized provisions ajc act ajc act also allows 85 dividends received deduction repatriation certain earnings foreign subsidiaries december 21 2004 fasb issued fasb staff position 1092 “accounting disclosure guidance foreign earnings repatriation provision within american jobs creation act 2004” fsp 1092 fsp 1092 effective upon issuance allows companies time beyond financial reporting period enactment evaluate effect ajc act plan reinvestment repatriation foreign earnings purposes applying sfas 109 additionally fsp 1092 provides guidance regarding required disclosures surrounding company’s reinvestment repatriation foreign earnings additionally internal revenue service issued three notices relating repatriation clarify provisions act latest series notices irs notice 200564 issued fourth quarter fiscal 2005 fiscal 2005 company repatriated foreign earnings using provision act discussed note 17 “income taxes” notes consolidated financial statements tyson foods inc december 2003 medicare prescription drug improvement modernization act 2003 act signed act allows possible subsidy retirement health plan sponsors help offset costs participant prescription drug benefits march 2004 fasb issued staff position 1062 “accounting disclosure requirements related act” position effective interim annual periods beginning june 15 2004 position allowed plan sponsors recognize defer recognizing effects act financial statements specific accounting guidance federal subsidy issued fourth quarter fiscal 2005 company concluded prescription drug benefits included postretirement medical plan actuarially equivalent medicare part act accordance fasb staff position 1062 company decreased accumulated postretirement obligation recognized actuarial gain approximately 55 million related present value future subsidies expected received gain offset actuarial losses primarily related increased claims costs resulting net actuarial loss approximately 9 million company’s postretirement health plan company’s policy fully recognize experience gains losses postretirement plans year occur effect service interest cost current period note 2 acquisition september 2003 company purchased choctaw maid farms inc choctaw integrated poultry processor since 1992 tyson purchasing choctaw’s production “cost plus” supply agreement scheduled expire 2007 company previously negotiated purchase option choctaw’s owners initially became exercisable 2002 company decided exercise purchase option rather continue “cost plus” arrangement supply agreement acquisition recorded purchase accordance statement financial accounting standards 141 “business combinations” accordingly assets liabilities adjusted fair values remainder purchase price 18 million recorded goodwill purchase price consisted 1 million cash exercise purchase option tyson’s supply agreement choctaw settlement 85 million owed tyson choctaw addition company assumed approximately 4 million choctaw’s debt third party june 2003 company exercised 74 million purchase option acquire assets leased third party company subleased choctaw pro forma operating results reflecting acquisition choctaw would materially different companys actual results operations fiscal 2004 goodwill reduced 3 million due adjustment preacquisition liabilities assumed part choctaw acquisition note 3 charges fourth quarter fiscal 2002 company recorded 26 million costs related restructuring live swine operations consisted 21 million estimated liabilities resolution company obligations producer contracts 5 million related costs associated restructuring including lagoon pit closure costs employee termination benefits fourth quarter 2004 company recorded additional reserve 6 million related lagoon pit closure costs amounts reflected company’s pork segment reduction operating income included consolidated statements income charges company accounting restructuring live swine operations accordance emerging issues task force 943 “liability recognition certain employee termination benefits costs exit activity” statement financial accounting standards 144 “accounting impairment disposal longlived assets” sfas 144 july 2005 company announced agreed settle lawsuit resulted restructuring live swine operations settlement resulted company recording additional 33 million costs third quarter fiscal 2005 october 1 2005 48 million payments former producers 13 million related costs paid material adjustments total accrual anticipated time tyson foods inc july 2005 company announced decision make improvements one forest mississippi facilities include product lines enabling plant increase production processed marinated chicken company also improve plant’s roofing flooring refrigeration systems improvements made former choctaw maid farms location company acquired fourth quarter fiscal 2003 complete company close cleveland street forest mississippi poultry operation transfer production employees newly upgraded facilities company expects complete project end second quarter fiscal 2006 cleveland street forest operation currently employs approximately 900 people result decision company recorded total costs 9 million estimated impairment charges fiscal 2005 amount reflected chicken segment reduction operating income included consolidated statements income charges company accounting closing cleveland street forest operation accordance sfas 144 statement financial accounting standards 146 “accounting costs associated exit disposal activities” sfas 146 material adjustments total accrual anticipated time july 2005 company announced decision close bentonville arkansas facility bentonville operation employed approximately 320 people produced raw partially fried breaded chicken tenders fillets livers gizzards plant ceased operations november 2005 production facility transferred company’s russellville arkansas poultry plant expansion enabled facility absorb bentonville facility’s production result decision company recorded total costs 1 million estimated impairment charges 1 million employee termination benefits fiscal 2005 amounts reflected chicken segment reduction operating income included consolidated statements income charges company accounting closing bentonville operation accordance sfas 144 sfas 146 october 1 2005 employee termination benefits paid material adjustments total accrual anticipated time december 2004 company announced decision close portland maine facility portland operation employed approximately 285 people produced sliced meats cooked roast beef plant ceased operations february 4 2005 production facility transferred locations result decision company recorded total costs 4 million 3 million 1 million first second quarters respectively fiscal 2005 included 2 million estimated impairment charges assets disposed 2 million employee termination benefits fourth quarter fiscal 2005 company reversed approximately 1 million closing related liabilities amounts reflected prepared foods segment reduction operating income included consolidated statements income charges company accounted closing portland operation accordance sfas 146 sfas 144 october 1 2005 1 million employee termination benefits paid material adjustments total accrual anticipated time fourth quarter fiscal 2004 company implemented control whereby plant facilities conduct fixed asset inventories recurring basis result company recorded fixed asset writedown charges approximately 21 million fourth quarter fiscal 2004 approximately 13 million recorded chicken segment 5 million prepared foods segment 2 million beef segment 1 million pork segment additionally discussed note 1 “business summary significant accounting policies” notes consolidated financial statements company recorded 25 million related impairment various intangible assets fourth quarter fiscal 2004 february 2004 company announced decision consolidate manufacturing operations jackson mississippi former choctaw maid farms carthage mississippi facility company acquired fourth quarter fiscal 2003 jackson location employed approximately 800 people poultry facility including processing deboning operations result decision company recorded total costs approximately 9 million fiscal 2004 included approximately 8 million estimated impairment charges assets disposed 1 million employee termination benefits company accounted closing jackson operation accordance sfas 146 sfas 144 amount reflected tyson foods inc chicken segment reduction operating income included consolidated statements income charges jackson location ceased operations august 2004 company fully paid estimated termination benefits 1 million material adjustments made accrual fiscal 2005 none anticipated april 2003 company announced decision close berlin maryland poultry operation berlin poultry operation employed approximately 650 people included hatchery feed mill live production processing facility ceased processing chickens november 12 2003 result decision company recorded total costs 29 million 4 million fiscal 2004 25 million fiscal 2003 included 14 million related closing plant 15 million estimated impairment charges assets disposed amounts reflected chicken segment reduction operating income included consolidated statements income charges costs related closing plant include 9 million estimated liabilities resolution company’s obligations 209 grower contracts 5 million related costs associated closing operation including plant cleanup costs employee termination benefits company accounted closing berlin operation accordance sfas 146 sfas 144 october 1 2005 9 million obligations grower contracts 3 million closing costs paid additionally 2 million decrease original accrual recorded fiscal 2004 material adjustments made accrual fiscal 2005 company fully paid employee termination benefits plant closing related costs december 2003 company announced decision close manchester new hampshire augusta maine prepared foods operations improve longterm manufacturing efficiencies production facilities transferred locations manchester operation employed approximately 550 people primarily produced sandwich meat foodservice customers augusta facility employed approximately 170 people produced hot dogs sausages boneless hams deli turkey products locations ceased operations second quarter fiscal 2004 result decision company recorded total costs 24 million fiscal 2004 included 4 million costs related closing plants 20 million estimated impairment charges assets disposed amounts reflected prepared foods segment reduction operating income included consolidated statements income charges fiscal 2004 costs related closing plants included 2 million employee termination benefits 2 million plant closing related costs company accounted closing manchester augusta operations accordance sfas 146 sfas 144 company fully paid employee termination benefits 2 million plant closing related costs 2 million first quarter fiscal 2003 company recorded 47 million costs related closing stilwell oklahoma jacksonville florida plants included 26 million costs related closing plants 21 million estimated impairment charges assets disposed costs related closing plants include 17 million estimated liabilities resolution company’s obligations grower contracts 9 million related costs associated closing plants including plant cleanup costs employee termination benefits company accounted closing stilwell oklahoma jacksonville florida operations accordance emerging issues task force 943 “liability recognition certain employee termination benefits costs exit activity” eitf 943 sfas 144 costs reflected chicken segment reduction operating income included consolidated statements income charges company recorded 4 million increase original accrual fiscal 2004 1 million decrease original accrual recorded fiscal 2005 october 1 2005 company fully paid obligations grower contracts 16 million closing costs 13 million paid note 4 bserelated charges december 23 2003 us department agriculture usda announced single case bse diagnosed washington state dairy cow effect company’s beef segment caused announcement along decision various countries restrict imports us beef products resulted company recording bserelated pretax charges tyson foods inc approximately 61 million fiscal 2004 charges included cost sales primarily related decline value finished product inventory destined international markets whether intransit located shipping ports located within domestic storage well live cattle inventory open futures positions material adjustments made subsequent initial bserelated accruals recorded first quarter fiscal 2004 note 5 allowance doubtful accounts october 1 2005 october 2 2004 allowance doubtful accounts 9 million 11 million respectively note 6 financial instruments company purchases certain commodities corn soybeans livestock natural gas course normal operations part company’s commodity risk management activities company uses derivative financial instruments primarily futures swaps reduce exposure various market risks related purchases generally contract terms financial instrument qualifying hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts designated highly effective meeting risk reduction correlation criteria recorded using hedge accounting defined statement financial accounting standards 133 “accounting derivative instruments hedging activities” sfas 133 amended derivative instrument hedge defined sfas 133 changes fair value instrument either offset change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion instrument’s change fair value immediately recognized earnings component cost sales company derivative related balances 117 million 87 million recorded current assets october 1 2005 october 2 2004 respectively 125 million 83 million current liabilities october 1 2005 october 2 2004 respectively cash flow hedges company uses derivatives moderate financial commodity market risks business operations derivative products futures option contracts considered hedge changes amount future cash flows related commodities procurement company also enters interest rate swap agreements adjust proportion total longterm debt leveraged equipment loans subject variable interest rates interest rate swaps company agrees pay fixed rate interest times notional principal amount receive return amount equal specified variable rate interest times notional principal amount interest rate swaps considered hedge changes amount future cash flows associated company’s variable rate interest payments effective portion cumulative gain loss derivative instrument reported component comprehensive income loss shareholders’ equity recognized earnings period periods hedged transaction affects earnings grain commodity hedges chickens consumed hedged grain sold remaining cumulative gain loss derivative instrument excess cumulative change present value future cash flows hedged item recognized earnings period change ineffectiveness recorded related company’s cash flow hedges significant fiscal years 2005 2004 2003 derivative products related grain procurement futures option contracts meet criteria sfas 133 hedge accounting considered cash flow hedges hedge changes amount future cash flows related commodities procurement company applies sfas 133 hedge accounting derivative products related grain procurement hedging physical grain contracts previously purchased company purchase derivative products related grain procurement excess physical grain consumption requirements company’s grain procurement hedging activities tyson foods inc grain commodity purchase price hedge components grain cost basis differential freight costs tax losses recorded comprehensive income loss october 1 2005 related cash flow hedges 5 million losses recognized within next 12 months company generally hedge cash flows related commodities beyond 12 months amount portion resulting company’s open marktomarket sfas 133 hedge positions significant october 1 2005 fair value hedges company designates certain futures contracts fair value hedges firm commitments purchase livestock slaughter natural gas operation plants time company also enters foreign currency forward contracts hedge changes fair value receivables purchase commitments arising changes exchange rates foreign currencies however company entered material contracts fiscal years 2005 2004 changes fair value derivative highly effective designated qualifies fair value hedge along loss gain hedged asset liability attributable hedged risk including losses gains firm commitments recorded current period earnings ineffectiveness results change fair value hedge instrument differs change fair value hedged item ineffectiveness recorded related company’s fair value hedges significant fiscal 2005 2004 2003 undesignated positions company holds positions part risk management activities primarily certain grain livestock natural gas futures apply sfas 133 hedge accounting instead marks positions fair value earnings reporting date changes market value derivatives used company’s risk management activities surrounding inventories hand anticipated purchases inventories supplies recorded cost sales changes market value derivatives used company’s risk management activities surrounding forward sales contracts recorded sales company generally enter undesignated positions beyond 12 months based company’s evaluation grain markets company times entered portion derivative products related grain procurement prior purchasing physical grain contracts company applied sfas 133 hedge accounting treatment derivative positions connection risk management activities company recognized pretax net gains approximately 2 million 58 million cost sales fiscal years ended october 1 2005 october 2 2004 respectively prior year derivative gains primarily due increase grain futures prices second quarter fiscal 2004 company higher number derivative positions place time compared current year additionally company enters certain forward sales boxed beef pork fixed prices positions livestock futures mitigate market risk associated fixed price forward sales fixed price sales contract locks proceeds sale future although cost livestock related boxed beef pork market prices time sale vary fixed price creating market risk therefore fixed forward sales entered company also enters appropriate number livestock futures positions company believes effective economic hedge however correlation qualify sfas 133 hedge accounting consequently changes market value open livestock futures positions marked market reported earnings reporting date even though economic impact company’s fixed sales price market price realized time sale connection livestock futures company recorded net losses 4 million fiscal year ended october 1 2005 included unrealized pretax gain open marktomarket futures positions approximately 17 million company recorded net gains 5 million fiscal year ended october 2 2004 tyson foods inc fair values based quoted market prices published forward interest rate natural gas curves carrying values derivative positions equal fair values october 1 2005 october 2 2004 carrying values total debt 30 billion 34 billion respectively financial instruments’ fair values approximate recorded values october 1 2005 october 2 2004 concentrations credit risk companys financial instruments exposed concentrations credit risk consist primarily cash equivalents trade receivables companys cash equivalents high quality securities placed major banks financial institutions concentrations credit risk respect receivables limited due large number customers dispersion across geographic areas company performs periodic credit evaluations customers financial condition generally require collateral october 1 2005 october 2 2004 approximately 130 150 respectively company’s net accounts receivable balance due one customer single customer group represents greater 10 net accounts receivable note 7 property plant equipment major categories property plant equipment accumulated depreciation cost october 1 2005 october 2 2004 follows company’s total depreciation expense 465 million 458 million 427 million fiscal years 2005 2004 2003 respectively company capitalized interest costs 6 million fiscal 2005 3 million fiscal years 2004 2003 part cost major asset construction projects approximately 521 million required complete construction projects progress october 1 2005 tyson foods inc note 8 current liabilities current liabilities october 1 2005 october 2 2004 include note 9 commitments company leases equipment properties certain farms total rentals thereon approximated 116 million fiscal 2005 111 million fiscal 2004 104 million fiscal 2003 leases terms ranging one seven years varying renewal periods significant obligations assumed terms leases upkeep facilities payments insurance property taxes minimum lease commitments noncancelable leases october 1 2005 totaled 187 million composed 82 million fiscal 2006 48 million fiscal 2007 30 million fiscal 2008 16 million fiscal 2009 5 million fiscal 2010 6 million later years company guarantees debt outside third parties involve lease grower loans substantially collateralized underlying assets terms underlying debt range three 10 years maximum potential amount future payments october 1 2005 87 million company also maintains operating leases various types equipment contain residual value guarantees market value assets end term lease terms lease maturities range one seven years maximum potential amount residual value guarantees approximately 106 million approximately 22 million would recoverable various recourse provisions undeterminable recoverable amount based fair market value underlying leased assets likelihood payments guarantees considered probable october 1 2005 october 2 2004 liabilities guarantees recorded additionally company also enters future purchase commitments various items corn soybeans livestock natural gas contracts october 1 2005 commitments totaled 338 million composed 313 million fiscal 2006 15 million fiscal 2007 2 million fiscal 2008 2 million fiscal 2009 2 million fiscal 2010 4 million later years note 10 longterm debt company unsecured revolving credit facility totaling 10 billion support companys commercial paper program letters credit shortterm funding needs fourth quarter fiscal 2005 company restructured revolving credit facilities one facility consists 10 billion expires september 2010 october 1 2005 company outstanding letters credit totaling approximately 254 million issued primarily support workers compensation insurance programs derivative activities draw downs letters credit october 1 2005 october 1 2005 october 2 2004 amounts drawn revolving credit facilities however outstanding letters credit reduce amount available revolving credit facilities tyson foods inc company receivables purchase agreement three copurchasers sell 750 million trade receivables agreements restructured extended fourth quarter fiscal 2005 consist 375 million expiring august 2006 375 million expiring august 2008 receivables purchase agreement accounted borrowing interest rate based commercial paper issued copurchasers agreement substantially company’s accounts receivable sold special purpose entity tyson receivables corporation trc whollyowned consolidated subsidiary company trc separate creditors entitled satisfied assets trc prior value becoming available company trc’s equity holder october 1 2005 amounts drawn receivables purchase agreement october 2 2004 150 million outstanding receivables purchase agreement expiring august 2005 150 million agreement expiring august 2007 september 2005 lakeside farm industries ltd lakeside borrowed 353 million us dollars new unsecured threeyear term agreement principal balance due end term agreement provides interest rates ranging libor plus 04 percent libor plus one percent depending company’s debt rating interest payments made least quarterly lakeside whollyowned subsidiary company terms leveraged equipment loans company cash deposits totaling approximately 52 million 57 million included consolidated balance sheets assets october 1 2005 october 2 2004 leveraged loan agreements company entered interest rate swap agreements effectively lock fixed interest rate borrowings annual maturities longterm debt five fiscal years subsequent october 1 2005 2006126 million 2007898 million 200814 million 2009358 million 2010237 million revolving credit facility senior notes accounts receivable securitization contain various covenants restrictive contain maximum allowed leverage ratio minimum required interest coverage ratio company compliance covenants fiscal year end longterm debt consists following company fully unconditionally guaranteed 476 million senior notes issued tyson fresh meats inc tfm formerly known ibp inc whollyowned subsidiary company additionally company fully unconditionally guaranteed 345 million related term loan facility borrowed lakeside tyson foods inc note 11 comprehensive income loss components accumulated comprehensive income loss follows note 12 stock options restricted stock shareholders approved tyson foods inc 2000 stock incentive plan incentive plan january 2001 incentive plan administered compensation committee board directors permits awards shares class stock awards derivative securities related value class stock tax reimbursement payments eligible persons incentive plan provides award variety equitybased incentives incentive stock options nonqualified stock options stock appreciation rights dividend equivalent rights performance unit awards phantom shares incentive plan provides granting incentive stock options shares class stock price less fair market value date grant nonqualified stock options may granted price equal less fair market value class stock date option granted stock options incentive plan generally become exercisable ratably three eight years date grant must exercised within 10 years date grant summary companys stock option activity follows number options exercisable follows october 1 20058989689 october 2 20047921321 september 27 20039135306 remainder options outstanding october 1 2005 exercisable ratably september 2014 number shares available future grants 16228525 17703157 october 1 2005 october 2 2004 respectively tyson foods inc following table summarizes information stock options outstanding october 1 2005 options granted year ended october 1 2005 october 1 2005 company outstanding approximately nine million restricted shares class stock restrictions expiring periods july 1 2020 unearned portion restricted stock classified consolidated balance sheets unamortized deferred compensation shareholders equity unearned compensation amortized vesting period particular grant using straightline method company issues restricted stock market value date grant total number shares restricted stock issued fiscal years 2005 2004 2003 2049629 462738 3269832 respectively weighted average fair value restricted stock granted 1668 1569 1120 per share fiscal years 2005 2004 2003 respectively note 13 deferred compensation july 2003 compensation committee authorized company award performancebased shares company’s class stock certain senior executive officers first business day company’s 2004 2005 2006 fiscal years initial maximum aggregate value 4 million date award august 2005 september 2004 compensation committee authorized expansion fiscal 2006 fiscal 2005 awards include additional senior officers expansions increased initial maximum aggregate value 3 million 2 million 2006 2005 grants respectively vesting performancebased shares 2004 2005 awards three years vesting 2006 award two onehalf three years vesting period award subject attainment company goals determined compensation committee prior date award company reviews progress towards attainment company goals quarter vesting period determine appropriate adjustment deferred compensation liability anticipated vesting shares attainment company goals finally determined end vesting period shares vest ultimate cost company equal class stock price date shares vest times number shares awarded note 14 pensions postretirement benefits company funded unfunded noncontributory defined benefit pension plans covering specific groups employees two plans provide benefits based formula using years service specified benefit rate effective january 1 2004 company implemented new defined benefit plan certain contracted officers uses formula based years service final average salary additionally one company’s subsidiaries plan frozen whereby new participants added future benefits earned company also postretirement benefit plans substantially employees may receive benefits satisfy applicable eligibility criteria postretirement healthcare plans contributory participants contributions adjusted deemed necessary tyson foods inc company defined contribution retirement incentive benefit programs various groups company personnel company contributions totaled 56 million 55 million 48 million fiscal years 2005 2004 2003 respectively company uses september 30 measurement date defined benefit plans two postretirement medical plans july 31 measurement date remaining postretirement medical plans postretirement benefits include postretirement medical costs life insurance benefit obligations funded status following table provides reconciliation changes plans’ benefit obligations assets funded status fiscal year ends october 1 2005 october 2 2004 tyson foods inc amounts recognized consolidated balance sheets consist increase decrease pretax liability related company’s pension plans included comprehensive income 1 million 2 million 6 million fiscal years 2005 2004 2003 respectively october 1 2005 two pension plans accumulated benefit obligation excess plan assets two pension plans assets excess accumulated benefit obligation october 2 2004 pension plans accumulated benefit obligation excess plan assets accumulated benefit obligation pension plans 98 million 76 million october 1 2005 october 2 2004 respectively plans accumulated benefit obligations excess plan assets follows net periodic benefit cost components net periodic benefit cost company’s pension postretirement benefit plans recognized consolidated statements income follows tyson foods inc assumptions weighted average assumptions used follows determine rate return assets assumption company first examined actual historical rates return various asset classes company determined longterm projected rate return based expected returns next five 10 years prior fiscal 2004 company defined benefit plans provided retirement benefit based number years service multiplied benefit rate fiscal 2004 plan added 4 compensation increase inherent benefit obligation calculation company four postretirement health plans two consist fixed annual payments company account 39 million company’s postretirement obligation october 1 2005 healthcare cost trend required determine obligation remaining two plans premedicare post medicare account 21 million company’s postretirement medical obligation year end premedicare plan covers retirees yet qualify medicare uses healthcare cost trend 11 current year grading 6 fiscal 2011 post medicare plan provides secondary coverage retirees covered medicare healthcare cost trend 8 grades 5 fiscal 2009 assumed healthcare cost trend rates would following effects plan assets fair value plan assets company’s domestic union pension benefit plans 70 million 59 million october 1 2005 october 2 2004 respectively following table sets forth actual target asset allocation company’s pension plan assets tyson foods inc fiscal 2005 company recorded assets benefit obligation related foreign subsidiary pension plan 12 million plan assets october 1 2005 plan’s assets held annuity contracts consistent target asset allocation plan trustees established set investment objectives related assets pension plans regularly monitor performance funds portfolio managers objectives pension assets 1 provide growth capital income 2 achieve target weighted average annual rate return competitive funds similar investment objectives 3 diversify order reduce risk investment objectives target asset allocation updated january 2004 contributions companys policy fund least minimum contribution required meet applicable federal employee benefit local tax laws sole discretion company may time fund additional amounts expected contributions companys pension plans fiscal 2006 approximately 10 million fiscal years 2005 2004 2003 company funded 10 million 9 million 4 million respectively defined benefit plans estimated future benefit payments following benefit payments expected paid tyson foods inc note 15 supplemental cash flow information following noncash transactions excluded consolidated statements cash flows fiscal 2005 adjustments 53 million made remove preacquisition tax liability accruals longer necessary due closing irs examination evaluation certain preacquisition deferred tax liabilities adjustments include 46 million 7 million adjustments preacquisition deferred tax assets liabilities related acquisitions previous years tyson fresh meats inc tfm formerly known ibp inc hudson foods inc respectively fiscal 2004 similar noncash transaction excluded consolidated statements cash flows fiscal 2004 91 million change goodwill fiscal 2004 september 27 2003 balance corresponding change current liabilities due adjustment preacquisition tax liabilities assumed part tfm acquisition company received formal approval fiscal 2004 joint committee taxation us congress issues relating certain preacquisition years result approval accrual 91 million preacquisition tax liability longer needed following table summarizes cash payments interest income taxes cash payments interest fiscal 2005 decreased compared fiscal 2004 primarily due lower debt levels timing interest payments made related senior notes decrease income taxes paid fiscal 2004 fiscal 2005 primarily due lower current taxable income well benefit overpayments carried fiscal 2004 increase income taxes paid fiscal 2003 fiscal 2004 due primarily refund received fiscal 2003 note 16 transactions related parties company operating leases farms equipment facilities tyson director company certain members family randal w tyson testamentary trust total payments 8 million fiscal years 2005 2004 2003 paid entities parties ownership interest additionally facilities leased officers directors rentals paid entities parties ownership interest totaled 1 million fiscal years 2005 2004 2 million fiscal 2003 fourth quarter fiscal 2005 company purchased parcel land adjacent company’s corporate center approximately 600000 jht llc limited liability company tyson director company randal w tyson testamentary trust members land used expansion corporate offices fourth quarter fiscal 2005 company received approximately 4 million entities owned tyson director company john tyson chairman ceo company payment purchase certain properties owned company third quarter fiscal 2004 company purchased parcel land adjacent company’s corporate center approximately 356000 jht llc limited liability company tyson director company randal w tyson testamentary trust members land used expansion corporate offices tyson foods inc second quarter fiscal 2004 company purchased 1028577 shares class stock private transaction tyson director managing partner tyson limited partnership principal shareholder company purchase shares mr tyson based closing price class stock new york stock exchange date purchase fiscal 2004 company received cash payments tyson director company totaling 15 million reimbursement certain perquisites personal benefits received fiscal years 1997 2003 certain officers directors engaged chicken swine growout operations company whereby individuals purchased animals feed housing items raise animals market weight total value transactions discontinued fiscal 2003 amounted 11 million fiscal 2003 former director resigned board directors 2003 received 10 million fiscal 2003 sale cattle subsidiary company note 17 income taxes detail provision income taxes consists reasons difference effective income tax rate statutory us federal income tax rate follows fourth quarter fiscal 2005 company repatriated 404 million foreign earnings invested outside united states provisions american jobs creations act total tax expense relating repatriation 22 million offset 15 million relating reversal certain international tax reserves longer required due effects repatriation american jobs creation act items included miscellaneous nondeductible expenses general business credits amounts relating ongoing examinations taxing authorities tyson foods inc fiscal 2005 effective rate reduced 41 due reduction income tax reserves management deemed longer required company recorded reduction current income tax expense 22 million relating change estimate reserves years examinations internal revenue service completed additional adjustments resulted reduction goodwill 27 million increase capital excess par value 25 million deferred income taxes recognized future tax consequences attributable differences financial statement carrying amounts existing assets liabilities respective tax basis deferred tax assets liabilities measured using tax rates expected apply taxable income years temporary differences expected recovered settled tax effects major items recorded deferred tax assets liabilities net deferred tax liabilities included current liabilities deferred income taxes consolidated balance sheets deferred tax liability suspended taxes conversion accrual method represents 1987 change cash accrual method accounting paid 2017 subject certain limitations company accumulated undistributed earnings foreign subsidiaries aggregating approximately 161 million october 1 2005 expected indefinitely reinvested business earnings distributed form dividends otherwise company would subject us income taxes subject adjustment foreign tax credits state income taxes withholding taxes payable various foreign countries currently practicable estimate tax liability might payable repatriation foreign earnings valuation allowance totaling 102 million consists 16 million state tax credit carryforwards fully reserved 78 million us federal net operating loss miscellaneous carryforwards 8 million international net operating loss carryforwards state tax credit carryforwards expire fiscal years 2006 2009 october 1 2005 considering utilization restrictions companys federal tax loss carryforwards include net operating losses capital losses charitable contribution carryforwards approximated 241 million net operating loss carryforwards total 217 million subject utilization limitations due ownership changes may utilized offset future taxable income subject tyson foods inc limitations carryforwards expire fiscal years 2006 2023 78 million valuation allowance discussed includes 27 million subsequently recognized allocated reduce goodwill recorded time acquisition tfm accordance sfas 109 “accounting income taxes” sfas 5 “accounting contingencies” company provides tax reserves federal state local international exposures relating audit results tax planning initiatives compliance responsibilities development reserves requires judgments tax issues potential outcomes timing subjective critical estimate although outcome tax items uncertain management’s opinion adequate provisions income taxes made potential liabilities relating exposures note 18 earnings per share weighted average common shares used computation basic diluted earnings per share follows approximately two million fiscal years 2005 2004 11 million fiscal 2003 company’s option shares antidilutive included dilutive earnings per share calculation tyson foods inc note 19 segment reporting company operates five business segments chicken beef pork prepared foods company measures segment profit operating income chicken segment involved primarily processing live chickens fresh frozen valueadded chicken products chicken segment markets products domestically food retailers foodservice distributors restaurant operators noncommercial foodservice establishments schools hotel chains healthcare facilities military food processors well international markets throughout world chicken segment also includes sales allied products company’s chicken breeding stock subsidiary beef segment involved primarily processing live fed cattle fabrication dressed beef carcasses primal subprimal meat cuts caseready products also involves deriving value allied products hides variety meats sale processors others beef segment markets products domestically food retailers foodservice distributors restaurant operators noncommercial foodservice establishments schools hotel chains healthcare facilities military food processors well international markets throughout world allied products also marketed manufacturers pharmaceuticals technical products pork segment involved primarily processing live market hogs fabrication pork carcasses primal subprimal cuts caseready products segment also represents companys live swine group related allied product processing activities pork segment markets products domestically food retailers foodservice distributors restaurant operators noncommercial foodservice establishments schools hotel chains healthcare facilities military food processors well international markets throughout world also sells allied products pharmaceutical technical products manufacturers well live swine pork processors prepared foods segment includes companys operations manufacture market frozen refrigerated food products include pepperoni beef pork pizza toppings pizza crusts flour corn tortilla products appetizers prepared meals ethnic foods soups sauces side dishes meat dishes processed meats prepared foods segment markets products domestically food retailers foodservice distributors restaurant operators noncommercial foodservice establishments schools hotel chains healthcare facilities military food processors well international markets throughout world segment includes logistics group corporate activities identified specific protein groups segment also includes proceeds 167 million received fiscal 2003 related settlement vitamin antitrust litigation tyson foods inc pork segment sales 505 million 473 million 365 million fiscal years 2005 2004 2003 respectively transactions operating segments company beef segment sales 85 million 75 million 77 million fiscal years 2005 2004 2003 respectively transactions operating segments company aforementioned sales intersegment transactions sold market prices excluded segment sales table company’s largest customer walmart stores inc accounted approximately 130 116 96 consolidated sales fiscal years 2005 2004 2003 respectively sales walmart stores inc included chicken beef pork prepared foods segments extended discontinuance sales customer could replaced material impact companys operations however company anticipate occurrences due demand products majority companys operations domiciled united states approximately 94 95 sales external customers fiscal years 2005 2004 2003 respectively sourced united states approximately 63 billion longlived assets located united states october 1 2005 64 billion october 2 2004 65 billion september 27 2003 approximately 202 million 171 million 185 million longlived assets located foreign countries primarily canada mexico fiscal years ended 2005 2004 2003 respectively tyson foods inc company sells certain products foreign markets primarily canada china european union japan mexico puerto rico russia taiwan south korea companys export sales fiscal years 2005 2004 2003 totaled 21 billion 21 billion 26 billion respectively substantially companys export sales facilitated unaffiliated brokers marketing associations foreign sales staffs foreign sales products produced country united states less 10 total consolidated sales fiscal years 2005 2004 2003 approximately 21 28 15 2005 2004 2003 respectively income taxes foreign operations decrease fiscal 2005 primarily due decreased volumes margins company’s lakeside operation canada note 20 quarterly financial data unaudited fourth quarter 2004 14week period remaining quarters table 13week periods first quarter fiscal 2005 gross profit included 12 million received connection vitamin antitrust litigation operating income included charges 3 million related closing prepared foods facility additionally net income included gain 8 million related sale company’s remaining interest specialty brands inc second quarter fiscal 2005 operating income included charges 2 million related closings poultry prepared foods facilities third quarter fiscal 2005 operating income included charges 33 million related legal settlement involving company’s live swine operations 10 million related closings poultry operations fourth quarter fiscal 2005 gross profit included 8 million related hurricane losses operating income includes 1 million gains related plant closings additionally net income includes nonrecurring income tax net benefit 15 million net benefit includes reversal tax reserves partially offset income tax charge related repatriation foreign income tyson foods inc first quarter fiscal 2004 gross profit included 61 million bserelated charges operating income included 21 million 4 million charges related closing prepared foods facilities poultry operations respectively second quarter fiscal 2004 operating income included charges 6 million 8 million related closings prepared foods facilities poultry operations respectively third quarter fiscal 2004 operating income included charges 1 million related closing poultry operation fourth quarter fiscal 2004 gross profit included 18 million reduce selfinsurance reserves actuarially determined range reserves compared actuarial estimates quarterly fourth quarter fiscal 2004 operating income included charges 25 million related impairment various intangible assets 21 million related fixed asset writedowns note 21 contingencies listed certain claims made company subsidiaries company’s opinion made appropriate adequate reserves accruals disclosures necessary company believes probability material loss beyond amounts accrued remote however ultimate liability matters uncertain accruals reserves adequate adverse outcome could material effect consolidated financial condition results operations company believes substantial defenses claims made intends vigorously defend cases wage hour labor matters 2000 wage hour division us department labor dol conducted industrywide investigation poultry producers including company ascertain compliance various wage hour issues part investigation dol inspected 14 companys processing facilities may 9 2002 civil complaint filed company us district court northern district alabama elaine l chao secretary labor united states department labor v tyson foods inc complaint alleges company violated overtime provisions federal fair labor standards act flsa companys chickenprocessing facility blountsville alabama complaint contain definite statement acts constituted alleged violations statute although secretary labor indicated discovery case seeks require company compensate hourly chicken processing workers pre postshift clothes changing washing related activities one two unpaid 30minute meal periods secretary labor seeks unspecified back wages employees blountsville facility period two years prior date filing complaint additional amount unspecified liquidated damages injunction future violations facility chicken processing facilities operated company discovery process trial date set matter stayed pending outcome two similar matters involving donning doffing certain personal protective clothing equipment us supreme court alvarez et al v ibp alvarez see tum et al v barber foods inc tum november 8 2005 us supreme court affirmed ninth circuit decision alvarez affirmed part reversed part first circuit decision tum november 18 2005 secretary labor filed motion lift stay set status conference company filed response opposing motion june 22 1999 11 current former employees company filed case mh fox et al v tyson foods inc fox us district court northern district alabama claiming company violated requirements flsa suit alleges company failed pay employees hours worked andor improperly paid overtime hours suit specifically alleges 1 employees paid time taken put take certain working supplies beginning end shifts breaks 2 use mastercard line time fails pay employees time actually worked plaintiffs seek represent similarly situated current former employees company plaintiffs seek reimbursement unspecified amount unpaid wages liquidated damages attorney fees costs date approximately 5100 consents filed district court plaintiff’s motion conditional collective treatment courtsupervised notice additional putative class members denied february 27 2004 plaintiffs refiled motion conditional collective treatment courtsupervised notice additional putative class members april 2 2004 district court ruled tyson foods inc motion discovery process trial date set matter stayed pending outcome alvarez tum november 8 2005 us supreme court affirmed ninth circuit decision alvarez affirmed part reversed part first circuit decision tum november 11 2005 plaintiffs filed motion lift stay set status conference district court status conference scheduled december 14 2005 august 22 2000 seven employees company filed case de asencio v tyson foods inc us district court eastern district pennsylvania lawsuit similar fox employees claim violations flsa allegedly failing pay time taken put take sanitize certain working supplies violations pennsylvania wage payment collection law plaintiffs seek represent similarly situated current former employees poultry processing plant new holland pennsylvania plaintiffs seek reimbursement unspecified amount unpaid wages liquidated damages attorney fees costs approximately 560 additional current former employees filed consents join lawsuit district court january 30 2001 ordered notice lawsuit issued potential plaintiffs new holland facilities july 17 2002 district court granted plaintiffs motion certify state law claims september 23 2002 third circuit court appeals agreed hear companys petition review district courts decision certify state law claims september 8 2003 court appeals reversed district court’s certification class pennsylvania wage payment collection law ruling claims could pursued federal court appeals ruled company must reissue notice potential flsa claims approximately 2170 employees previously receive notice court appeals remanded matter district court proceed accordingly september 30 2003 notice reissued proceedings district court pending trial date set district court stayed proceedings matter pending outcome alvarez tum presently us supreme court november 8 2005 us supreme court affirmed ninth circuit decision alvarez affirmed part reversed part first circuit decision tum november 9 2005 plaintiffs requested stay lifted set status conference status conference held december 2 2005 parties engage pretrial proceedings 1998 lawsuit entitled alvarez et al v ibp alvarez filed us district court eastern district washington ibp nka tyson fresh meats inc tfm employees pasco washington beef slaughter processing facility plaintiffs brought action behalf tfm’s pasco employees alleging violations fair labor standards act 29 usc sections 201219 washington minimum wage act revised code washington “rcw” chapter 4946 industrial welfare act rcw chapter 4912 wagesreductionscontributions rebates act rcw chapter 4952 related regulations eight hundred fifteen plaintiffs sought additional compensation principally time required 1 doff protective clothing beginning end workday meal periods 2 walk lockers locations protective clothing stored distributed workstations 3 wash protective clothing equipment items end work shift trial held september 27 2000 october 27 2000 september 14 2001 district court entered findings fact conclusions law resulted 31 million judgment tfm comprising back wages exemplary damages liquidated damages yet specified amount prejudgment interest december 14 2001 district court awarded additional 2 million attorney fees costs tfm filed timely notice appeal plaintiffs filed timely notice crossappeal august 5 2003 ninth circuit court appeals affirmed district court’s decision part reversed part remanded case district court recalculation damages ruling court appeals upheld entirety tfm additional exposure alvarez approximately 5 million tfm filed petition rehearing panel court appeals alternative rehearing en banc denied december 2 2003 also filed petition certify state law claims washington supreme court denied september 23 2003 december 5 2003 tfm filed petition stay mandate stating would file petition certiorari us supreme court seeking court’s review ninth circuit’s adverse opinion stay mandate ordered ninth circuit december 10 2003 petition certiorari filed us supreme court february 26 2004 parties completed briefing tyson foods inc petition may 3 2004 court invited us solicitor general express views pending petition october 25 2004 solicitor filed response acknowledging issues warranted review advising first circuit case tum would better suited court’s consideration issues february 22 2005 us supreme court granted certiorari alvarez tum petitions oral argument held us supreme court october 3 2005 november 8 2005 us supreme court affirmed ninth circuit decision case returned district court entry judgment consistent ninth circuit’s opinion november 5 2001 followon lawsuit alvarez entitled maria chavez et al v ibp lasso acquisition corporation tyson foods inc chavez filed us district court eastern district washington employees tfm’s pasco washington beef slaughter processing hides facilities alleging violations flsa 29 usc sections 201 219 well violations washington state minimum wage act rcw chapter 4946 industrial welfare act rcw chapter 4912 wage deductionscontributionrebates act rcw chapter 4952 chavez lawsuit similarly alleges tfm andor company required employees perform unpaid work related donning doffing certain personal protective clothing equipment prior shifts well meal periods plaintiffs allege holdings alvarez support claim collateral estoppel andor res judicata many issues raised litigation chavez initially pursued optin collective action 29 usc 216b district court granted plaintiff’s motion seeking certification class optout state law plaintiffs federal rule civil procedure 23 notice sent potential state law claim class members statelaw class contains approximately 3900 class members including approximately 1200 federal claim trial held september 7 2004 october 4 2004 district court issued proposed findings fact conclusions law december 8 2004 parties provided district court objections proposed findings fact conclusions law submitted trial briefs damages district court heard oral arguments based upon party’s objections damages briefings march 29 2005 district court filed final findings facts conclusions law liability phase trial may 18 2005 damages june 28 2005 july 14 2005 july 20 2005 judgment entered 114 million exclusive costs attorney fees attorneys chavez plaintiffs indicated company intention file followon suit chavez different potential claimants alleging similar violations raised chavez hearing award attorney’s fees held october 31 2005 company presently awaiting decision district court entry amended judgment november 28 2005 district court awarded attorneys chavez plaintiffs approximately 19 million fees expenses company awaiting entry amended judgment november 21 2002 lawsuit entitled emily jordan et al v ibp inc tyson foods inc filed us district court middle district tennessee ten current former hourly employees tfms caseready facility goodlettsville tennessee filed complaint behalf unspecified allegedly similarly situated employees claiming defendants violated overtime provisions flsa suit alleges defendants failed pay employees hours worked plants commencement operations april 2001 particular suit alleges employees paid time takes collect assemble put take wash health safety production gear beginning end shifts meal period suit also alleges company deducts 30 minutes per day employees paychecks regardless whether employees obtain full 30minute period meal plaintiffs seeking declaration defendants comply flsa award unspecified amount back pay compensation benefits unpaid entitlements liquidated damages prejudgment postjudgment interest attorney fees costs january 15 2003 company filed answer complaint denying liability january 14 2003 named plaintiffs filed motion expedited courtsupervised notice prospective class members motion sought conditionally certify class similarly situated employees tfms nonunion facilities previously made subject flsa litigation plaintiffs withdrew request conditional certification similarly situated employees tfm’s nonunion facilities rather sought include nonexempt employees worked goodlettsville facility since opening june 9 2003 company filed motion summary judgment seeking applicability injunction entered us district court district kansas affirmed us court appeals tenth circuit metzler v ibp inc 127 f 3rd 959 10th cir 1997 company tyson foods inc contends preclusive effect plaintiffs’ claims based pre postshift activities plaintiffs conducted discovery limited issue responded said motion june 18 2004 company filed reply july 2 2004 october 12 2004 district court denied company’s motion summary judgment november 17 2003 district court conditionally certified collective action composed similarly situated current former employees goodlettsville facility based upon clothes changing washing activities unpaid production work meal periods since plant operations began april 2001 class notices approximately 4500 prospective class members mailed january 21 2004 approximately 525 current former employees opted class district court stayed discovery november 8 2004 administratively closed action january 21 2005 pending us supreme court’s determinations alvarez tum november 8 2005 us supreme court affirmed ninth circuit decision alvarez affirmed part reversed part first circuit decision tum district court vacated stay reopened case november 16 2005 case management conference set december 21 2005 securities matters june 22 july 20 2001 various plaintiffs commenced actions delaware federal actions company tyson john tyson les baledge us district court district delaware seeking monetary damages behalf purported class sold ibp inc ibp stock march 29 2001 company announced intention terminate merger agreement ibp june 15 2001 delaware state court rendered posttrial opinion ordering merger proceed plaintiffs various actions alleged defendants violated federal securities laws making causing allowing made certain allegedly false misleading statements march 29 2001 press release issued connection companys attempted termination merger agreement plaintiffs alleged result defendants alleged conduct purported class members harmed alleged artificial deflation price ibp’s stock proposed class period various actions subsequently consolidated caption tyson foods inc securities litigation december 4 2001 plaintiffs consolidated action filed consolidated class action complaint january 22 2002 defendants filed motion dismiss consolidated complaint memorandum order dated october 23 2002 district court granted part denied part defendants motion dismiss october 6 2003 district court certified class consisting purchased ibp securities march 29 2001 subsequently sold securities march 30 june 15 2001 inclusive sustained damages result transaction following conclusion discovery case plaintiffs defendants filed motions summary judgment june 17 2004 district court rendered opinion favor defendants plaintiffs’ claims entered order effect june 28 2004 defendants filed motion requesting district court modify order include judgment defendants’ favor class july 30 2004 district court entered order august 6 2004 plaintiffs filed notice appeal plaintiffs filed brief appeal december 8 2004 defendants filed response january 24 2005 plaintiffs filed reply brief february 24 2005 oral arguments appeal heard court appeals september 13 2005 november 9 2005 court appeals affirmed decision district court november 23 2005 plaintiffs filed petition rehearing court appeals company permitted file response petition unless requested court appeals tyson foods inc general matters july 1996 certain cattle producers filed henry lee pickett et al v ibp inc us district court middle district alabama seeking certification class cattle producers complaint alleged tfm used market power alleged captive supply agreements reduce prices paid tfm purchases cattle cash market alleged violation packers stockyards act psa plaintiffs sought injunctive declaratory relief well actual punitive damages plaintiffs submitted amended expert report november 19 2003 showing alleged damages cash market purchases tfm approximately 21 billion trial matter began january 12 2004 concluded february 10 2004 february 17 2004 jury returned verdict tfm liability gave “advisory” verdict damages estimated impact cash market ie group larger class 128 billion february 25 2004 tfm filed renewed motion requesting district court enter judgment matter law jmol tfm march 1 2004 plaintiffs filed motions asking district court enter 128 billion advisory verdict award damages plaintiffs requesting prejudgment interest march 22 2004 district court denied plaintiff’s motions entry damages award april 23 2004 district court granted tfm’s jmol motion held tfm legitimate business reasons using “captive supplies” ii “no evidence court suggest tfm’s conduct illegal” iii “plaintiffs failed present evidence trial sustain burden respect liability damages” plaintiffs appealed district court’s entry judgment favor tfm 11th circuit court appeals circuit court issued opinion august 16 2005 affirming district court’s judgment plaintiffs requested en banc hearing front entire 11th circuit court appeals request denied plaintiffs indicated seek appeal united states supreme court petition yet filed tyson foods inc report independent registered public accounting firm board directors shareholders tyson foods inc audited accompanying consolidated balance sheets tyson foods inc october 1 2005 october 2 2004 related consolidated statements income shareholders equity cash flows three years period ended october 1 2005 audits also included financial statement schedule listed index item 15a financial statements responsibility companys management responsibility express opinion financial statements based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion financial statements referred present fairly material respects consolidated financial position tyson foods inc october 1 2005 october 2 2004 consolidated results operations cash flows three years period ended october 1 2005 conformity us generally accepted accounting principles also opinion related financial statement schedule considered relation basic financial statements taken whole presents fairly material respects information set forth therein also audited accordance standards public company accounting oversight board united states effectiveness tyson foods inc’s internal control financial reporting october 1 2005 based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission report dated december 7 2005 expressed unqualified opinion thereon ernst young llp ernst young llp rogers arkansas december 7 2005 tyson foods inc report independent registered public accounting firm internal control financial reporting board directors shareholders tyson foods inc audited management’s assessment included accompanying management’s report internal control financial reporting tyson foods inc maintained effective internal control financial reporting october 1 2005 based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission coso criteria tyson foods inc’s management responsible maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting responsibility express opinion management’s assessment opinion effectiveness company’s internal control financial reporting based audit conducted audit accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether effective internal control financial reporting maintained material respects audit included obtaining understanding internal control financial reporting evaluating management’s assessment testing evaluating design operating effectiveness internal control performing procedures considered necessary circumstances believe audit provides reasonable basis opinion company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles company’s internal control financial reporting includes policies procedures 1 pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company 2 provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company 3 provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate opinion management’s assessment tyson foods inc maintained effective internal control financial reporting october 1 2005 fairly stated material respects based coso criteria also opinion tyson foods inc maintained material respects effective internal control financial reporting october 1 2005 based coso criteria also audited accordance standards public company accounting oversight board united states consolidated balance sheets tyson foods inc october 1 2005 october 2 2004 related consolidated statements income shareholders’ equity cash flows three years period ended october 1 2005 tyson foods inc report dated december 7 2005 expressed unqualified opinion thereon rogers arkansas december 7 2005 tyson foods inc item 9item 8 financial statements supplementary data consolidated statements operations tyson foods inc consolidated balance sheets see accompanying notes tyson foods inc consolidated statements shareholders equity tyson foods inc consolidated statements cash flows tyson foods inc notes consolidated financial statements note 1 business summary significant accounting policies description business tyson foods inc collectively company tyson founded 1935 world headquarters springdale arkansas world’s largest processor marketer chicken beef pork second largest food production company fortune 500 tyson produces wide variety brand name proteinbased prepared food products marketed united states 80 countries around world tyson recognized market leader retail foodservice markets serves company approximately 107000 employees 300 facilities offices 28 states 20 countries consolidation consolidated financial statements include accounts majorityowned whollyowned subsidiaries significant intercompany accounts transactions eliminated consolidation fiscal year company utilizes 52 53week accounting period ending saturday closest september 30 companys accounting cycle resulted 52week year years 2006 2005 53week year 2004 reclassifications certain reclassifications related items consolidated statements operations made conform current year presentations effect reclassifications material company’s consolidated financial statements cash equivalents cash equivalents consist investments shortterm highly liquid securities original maturities three months less made part companys cash management activity carrying values assets approximate fair market values company primarily utilizes cash management system series separate accounts consisting lockbox accounts receiving cash concentration accounts funds moved several “zerobalance” disbursement accounts funding payroll accounts payable grower payments result companys cash management system checks issued presented banks payment may create negative book cash balances negative book cash balances included trade accounts payable current liabilities checks outstanding excess related book cash balances totaled approximately 246 million september 30 2006 332 million october 1 2005 accounts receivable company records trade accounts receivable net realizable value includes appropriate allowance estimated uncollectible accounts reflect loss anticipated trade accounts receivable balances charged provision doubtful accounts company calculates allowance based history writeoffs level past due accounts relationships economic status customers september 30 2006 october 1 2005 allowance doubtful accounts 8 million 9 million respectively inventories processed products livestock excluding breeders supplies valued lower cost firstin firstout market livestock includes live cattle live chicken live swine cost includes purchased raw materials live purchase costs growout costs primarily feed contract grower pay catch haul costs labor manufacturing production overhead related purchase production inventories live chicken consists broilers breeders stated cost less amortization costs associated breeders including breeder chicks feed medicine accumulated production stage amortized broiler inventory productive life flock using standard unit production depreciation provided primarily straightline method using estimated lives buildings leasehold improvements 10 39 years machinery equipment three 12 years three 20 years tyson foods inc longlived assets company reviews carrying value longlived assets balance sheet date indication impairment exists recoverability assessed using undiscounted cash flows based historical results current projections earnings interest taxes company measures impairment excess carrying cost fair value asset fair value asset measured using discounted cash flows future operating results based discount rate corresponds companys cost capital goodwill intangible assets goodwill indefinite life intangible assets initially recorded fair value amortized reviewed impairment least annually frequently impairment indicators arise company’s assessment goodwill management makes assumptions segment regarding estimated future cash flows factors determine fair value respective assets fair value trademarks determined using royalty rate method based expected revenues trademark goodwill allocated tested impairment reporting unit based fair value identifiable assets september 30 2006 october 1 2005 accumulated amortization goodwill 286 million amount goodwill segment september 30 2006 october 1 2005 follows increase goodwill balance primarily due deferred tax asset liability adjustments 12 million related acquisitions previous years tyson fresh meats inc tfm formerly known ibp inc assets millard processing services september 30 2006 gross carrying value intangible assets consisted 73 million trademarks 85 million patents 11 million supply contracts accumulated amortization 22 million 11 million patents supply contracts respectively october 1 2005 gross carrying value intangible assets consisted 76 million trademarks 85 million patents 11 million supply contracts accumulated amortization 20 million 10 million patents supply contracts respectively reduction carrying value intangible assets fiscal 2006 compared prior year resulted 3 million impairment trademarks impairment recorded cost sales consolidated statements operations included prepared foods segment amortization expense combined patents supply contracts 3 million recognized fiscal 2006 fiscal 2005 8 million recognized fiscal 2004 amortization expense intangible assets estimated 2 million year 2007 3 million years 2008 2009 4 million year 2010 5 million year 2011 patents supply contracts amortized using straightline method estimated period benefit five 15 years beginning date benefits intangible items realized investments company investments joint ventures entities company typically uses cost method accounting voting interests less 20 percent equity method accounting voting interests excess 20 percent greater 50 percent company’s underlying share entity’s equity reported consolidated balance sheets assets company investments marketable debt securities september 30 2006 october 1 2005 0 5 million respectively due one year less classified current assets consolidated balance sheets 115 million 133 million respectively classified assets consolidated balance sheets maturities ranging one 30 years company determined marketable debt securities availableforsale investments reported fair value based quoted market prices balance sheet date unrealized gains losses net tax recorded comprehensive income amortized cost debt securities adjusted amortization premiums accretion discounts maturity amortization recorded interest income cost securities sold based specific identification method realized gains losses sale debt securities declines value judged temporary recorded net basis income interest dividends securities classified availableforsale recorded interest income tyson foods inc second quarter fiscal 2006 company issued 10 billion new 660 senior unsecured notes mature april 1 2016 fiscal 2007 company used 750 million proceeds repayment outstanding 750 million 725 notes due october 1 2006 remaining proceeds used general corporate purposes company’s shortterm investment september 30 2006 includes 750 million proceeds new issuance earnings 20 million investment funds deposit interest bearing account trustee asset retirement obligations fourth quarter fiscal 2006 company adopted financial accounting standards board fasb interpretation 47 “accounting conditional asset retirement obligations” interpretation fasb statement 143 fin 47 “accounting asset retirement obligations” sfas 143 requires fair value liability asset retirement obligation recognized period incurred reasonable estimate fair value made associated asset retirement costs capitalized part carrying amount longlived asset see note 2 “change accounting principles” notes consolidated financial statements impact adoption fin 47 accrued self insurance company uses combination insurance selfinsurance mechanisms provide potential liabilities health welfare workers’ compensation auto liability general liability risks liabilities associated risks retained company estimated part considering claims experience demographic factors severity factors actuarial assumptions capital stock company two classes capital stock class common stock 010 par value class stock class b common stock 010 par value class b stock holders class b stock may convert stock class stock shareforshare basis holders class b stock entitled 10 votes per share holders class stock entitled one vote per share matters submitted shareholders approval cash dividends cannot paid holders class b stock unless simultaneously paid holders class stock per share amount cash dividend paid holders class b stock cannot exceed 90 cash dividend simultaneously paid holders class stock company pays quarterly cash dividends class b shareholders company paid class dividends per share 016 class b dividends per share 0144 fiscal years 2006 2005 2004 class b stock considered participating security requiring use twoclass method computation basic earnings per share twoclass computation method period reflects cash dividends paid class stock plus amount allocated undistributed earnings computed using participation percentage reflects dividend rights class stock basic earnings per share computed using twoclass method periods presented shares class b stock considered participating convertible securities since shares class b stock convertible shareforshare basis shares class stock diluted earnings per share computed assuming conversion class b shares class shares beginning period financial instruments company purchaser certain commodities grains livestock natural gas course normal operations company uses derivative financial instruments reduce exposure various market risks generally contract terms hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts designated highly effective meeting risk reduction correlation criteria recorded using hedge accounting defined statement financial accounting standards 133 “accounting derivative instruments hedging activities” sfas 133 amended derivative instrument hedge depending nature hedge changes fair value instrument either offset change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings effect derivatives hedged items accounted hedge recorded cost sales ineffective portion instrument’s change fair value immediately recognized earnings component cost sales instruments company holds part risk management activities meet criteria hedge accounting marked fair value unrealized gains losses reported currently earnings changes market value derivatives used company’s risk management activities surrounding inventories hand anticipated purchases inventories supplies recorded cost sales changes market value derivatives used company’s risk management activities surrounding forward sales contracts recorded sales company generally hedge anticipated transactions beyond 12 months tyson foods inc revenue recognition company recognizes revenue title risk loss transferred customers generally delivery based terms sale revenue recognized net amount estimated received deducting estimated amounts discounts trade allowances product terms litigation reserves variety legal proceedings pending threatened company accruals recorded probable liability incurred amount liability reasonably estimated based current law progress case opinions views legal counsel advisers company’s experience similar matters management’s intended response litigation amounts discounted exclusive claims third parties adjusted periodically assessment efforts progress additional information becomes available company expenses amounts administering litigating claims incurred accruals legal proceedings included current liabilities consolidated balance sheets freight expense freight expense associated products shipped customers recognized cost sales advertising promotion expenses advertising promotion expenses charged operations period incurred advertising promotion expenses fiscal years 2006 2005 2004 493 million 456 million 465 million respectively use estimates consolidated financial statements prepared conformity accounting principles generally accepted united states require management make estimates assumptions affect amounts reported consolidated financial statements accompanying notes actual results could differ estimates recently issued accounting standards regulations march 2005 fasb issued fin 47 see note 2 “change accounting principles” notes consolidated financial statements discussion september 2005 emerging issues task force eitf reached consensus issue 0413 “accounting purchases sales inventory counterparty” issues circumstances two inventory purchase sales transactions counterparty viewed single exchange transaction within scope accounting principles board opinion 29 “accounting nonmonetary transactions” circumstances nonmonetary exchanges inventory within line business recognized fair value company adopted eitf issue 0413 third quarter fiscal 2006 adoption issue material impact company’s consolidated financial statements june 2006 fasb issued interpretation 48 “accounting uncertainty income taxes” interpretation fasb statement 109 fin 48 fin 48 prescribes recognition threshold measurement attribute financial statement recognition measurement tax position taken expected taken tax return fin 48 also provides guidance derecognition classification interest penalties accounting interim periods disclosure transition fin 48 effective fiscal years beginning december 15 2006 therefore company expects adopt fin 48 beginning fiscal 2008 company currently process evaluating potential impact fin 48 september 2006 fasb issued statement financial accounting standards 157 “fair value measurements” sfas 157 sfas 157 provides guidance using fair value measure assets liabilities standard also responds investors requests expanded information extent companies measure assets liabilities fair value information used measure fair value effect fair value measurements earnings sfas 157 applies whenever standards require permit assets liabilities measured fair value standard expand use fair value new circumstances sfas 157 effective financial statements issued fiscal years beginning november 15 2007 interim periods within fiscal years therefore company expects adopt sfas 157 beginning fiscal 2009 company currently process evaluating potential impact sfas 157 september 2006 fasb issued statement financial accounting standards 158 “employers’ accounting defined benefit pension postretirement plans amendment fasb statements 87 88 106 132r” sfas 158 sfas 158 requires companies recognize overfunded underfunded status defined benefit postretirement plan tyson foods inc asset liability consolidated balance sheet recognize changes funded status year changes occur comprehensive income standard also requires companies measure funded status plan date annual consolidated balance sheet limited exceptions sfas 158 effective financial statements issued fiscal years ending december 15 2006 therefore company expects adopt sfas 158 end fiscal 2007 based information available september 30 2006 company expects increase assets 6 million increase liabilities 8 million adjustment accumulated comprehensive income 2 million adopts sfas 158 september 2006 securities exchange commission staff published staff accounting bulletin 108 “considering effects prior year misstatements current year financial statements” sab 108 sab 108 addresses quantifying financial statement effects misstatements specifically effects prior year uncorrected errors must considered quantifying misstatements current year financial statements sab 108 effective fiscal years ending november 15 2006 therefore company expects adopt sab 108 end fiscal 2007 company currently process evaluating potential impact sab 108 note 2 change accounting principles december 2004 fasb issued statement financial accounting standards 123r “sharebased payment” sfas 123r pronouncement requires companies measure recognize compensation expense sharebased payments employees including grants employee stock options restricted stock performancebased shares financial statements based fair value date grant first quarter fiscal 2006 company adopted sfas 123r using modified prospective method modified prospective method compensation cost recognized sharebased payments granted adoption sfas 123r awards granted employees prior adoption date sfas 123r unvested adoption date accordingly restatements made prior periods prior adoption sfas 123r company applied accounting principles board opinion 25 “accounting stock issued employees” accounting employee stock compensation plans accordingly compensation expense recognized stock option issuances stock options issued exercise price equal closing price date grant also prior adoption sfas 123r company issued restricted stock recorded fair value awards deferred compensation amortized vesting period march 2005 fasb issued fin 47 interpretation sfas 143 sfas 143 issued june 2001 requires entity recognize fair value liability asset retirement obligation period incurred reasonable estimate fair value made sfas 143 applies legal obligations associated retirement tangible longlived asset resulted acquisition construction development andor normal operation longlived asset associated asset costs capitalized part carrying amount longlived asset fin 47 clarifies term “conditional asset retirement obligation” used sfas 143 refers legal obligation perform asset retirement activity timing andor method settlement conditional future event may within control entity fin 47 requires entity recognize liability fair value conditional asset retirement obligation fair value liability estimated reasonably uncertainty timing andor method settlement conditional asset retirement obligation factored measurement liability sufficient information exists sfas 143 acknowledges cases sufficient information may available reasonably estimate fair value asset retirement obligation aro company adopted fin 47 fourth quarter fiscal 2006 connection adoption aro liability 12 million related aro asset 3 million cumulative adjustment due change accounting principle net tax 5 million recorded aro liability included liabilities aro asset included property plant equipment consolidated balance sheets september 30 2006 company’s principal conditional asset retirement obligations relate potential future closure sale disposal certain production facilities connection activity company legally obligated various federal state local laws properly retire related wastewater treatment facility pro forma impact earnings cumulative effect change accounting principle related earnings per share amounts asset retirement obligation fin 47 applied fiscal 2005 2004 material tyson foods inc note 3 charges july 2006 company announced decision implement approximately 200 million cost reductions part strategy return profitability cost reductions include staffing costs consulting professional fees sales marketing costs expenses virtually cost reduction initiatives expected completed december 2006 savings beginning principally fiscal 2007 fiscal 2006 company recorded charges approximately 9 million employee termination benefits resulting termination approximately 400 employees charges 4 million 3 million 1 million 1 million included respectively chicken beef pork prepared foods segments’ operating income loss included consolidated statements operations charges september 30 2006 approximately 3 million employee termination benefits paid employee termination benefits expected paid september 2007 material adjustments accrual anticipated time february 2006 company announced decision close norfolk nebraska beef processing plant west point nebraska beef slaughter plant facilities closed february 2006 production facilities shifted primarily company’s beef complex dakota city nebraska combined two facilities employed approximately 1665 employees fiscal 2006 company recorded charges 38 million estimated impairment charges 9 million closing costs closing costs include 5 million employee termination benefits 4 million plant closing related liabilities amounts reflected beef segment’s operating income loss included consolidated statements operations charges september 30 2006 approximately 5 million employee termination benefits 4 million plant closing related costs paid material adjustments total accrual anticipated time august 2006 company announced decision close boise idaho beef slaughter plant scale back processing operations pasco washington complex decision resulted elimination approximately 770 positions closure processing change occurred october 2006 result significant charge company january 2006 company announced decision close two processed meats facilities northeast iowa independence oelwein plants produced chopped ham sliced luncheon meats closed march 2006 combined two facilities employed approximately 400 employees equipment facilities removed either sold used tyson locations plants related property currently offered sale fiscal 2006 company recorded charges 12 million estimated impairment charges 1 million employee termination benefits amounts reflected prepared foods segment’s operating income loss included consolidated statements operations charges september 30 2006 employee termination benefits paid material adjustments total accrual anticipated time fiscal 2002 company recorded 26 million costs restructuring live swine operations consisted 21 million estimated liabilities resolution company obligations producer contracts 5 million related costs associated restructuring including lagoon pit closure costs employee termination benefits fiscal 2004 company recorded additional reserve 6 million lagoon pit closure costs amounts reflected pork segment’s operating income loss included consolidated statements operations charges fiscal 2005 company announced agreed settle lawsuit resulted restructuring live swine operations settlement resulted company recording additional 33 million costs third quarter fiscal 2005 additional costs reflected pork segment’s operating income loss included consolidated statements operations charges september 30 2006 49 million payments former producers 14 million related costs paid material adjustments total accrual anticipated time july 2005 company announced decision make improvements one forest mississippi facilities included product lines enabling plant increase production processed marinated chicken improvements made former choctaw maid farms location company acquired fiscal 2003 company’s cleveland street forest mississippi poultry operation ceased operations march 2006 company transferred production employees newly upgraded facilities cleveland street forest operation employed approximately 900 employees result decision company recorded total costs 9 million estimated impairment charges fiscal 2005 fiscal 2006 company recorded additional 2 million estimated impairment charges amounts reflected chicken segment’s operating income loss included consolidated statements operations charges material adjustments total accrual anticipated time tyson foods inc july 2005 company announced decision close bentonville arkansas facility bentonville facility employed approximately 320 employees produced raw partially fried breaded chicken tenders fillets livers gizzards plant ceased operations november 2005 production facility transferred company’s russellville arkansas poultry plant expansion enabled facility absorb bentonville facility’s production result decision company recorded total costs 1 million estimated impairment charges 1 million employee termination benefits fiscal 2005 amounts reflected chicken segment’s operating income loss included consolidated statements operations charges september 30 2006 employee termination benefits paid material adjustments total accrual anticipated time december 2004 company announced decision close portland maine facility portland operation employed approximately 285 employees produced sliced meats cooked roast beef plant ceased operations february 4 2005 production facility transferred locations result decision company recorded total costs 4 million included 2 million estimated impairment charges 2 million employee termination benefits fiscal 2005 company reversed approximately 1 million closing related liabilities fiscal 2006 company reversed approximately 1 million related employee termination benefits amounts reflected prepared foods segment’s operating income loss included consolidated statements operations charges september 30 2006 employee termination benefits paid material adjustments total accrual anticipated time fiscal 2004 company implemented control whereby plant facilities conduct fixed asset inventories recurring basis result company recorded fixed asset writedown charges approximately 21 million fiscal 2004 approximately 13 million recorded chicken segment 5 million prepared foods segment 2 million beef segment 1 million pork segment additionally company recorded charges approximately 25 million related impairment various intangible assets 22 million recorded prepared foods segment 3 million recorded beef segment impairment charges apply primarily trademarks acquired acquisition tfm 2001 impairment charges included charges company’s consolidated statements operations resulted primarily lower product sales company’s regional trademarks products increasingly sold tyson trademark fiscal 2004 company announced decision consolidate manufacturing operations jackson mississippi former choctaw maid farms carthage mississippi facility company acquired fourth quarter fiscal 2003 jackson location employed approximately 800 employees poultry facility including processing deboning operations result decision company recorded total costs approximately 9 million fiscal 2004 included approximately 8 million estimated impairment charges 1 million employee termination benefits amounts reflected chicken segment’s operating income loss included consolidated statements operations charges jackson location ceased operations august 2004 company fully paid estimated termination benefits material adjustments total accrual anticipated time fiscal 2003 company announced decision close manchester new hampshire augusta maine prepared foods operations improve longterm manufacturing efficiencies production facilities transferred locations manchester operation employed approximately 550 employees primarily produced sandwich meat foodservice customers augusta facility employed approximately 170 employees produced hot dogs sausages boneless hams deli turkey products locations ceased operations fiscal 2004 result decision company recorded total costs 24 million fiscal 2004 included 4 million costs related closing plants 20 million estimated impairment charges costs closing plants included 2 million employee termination benefits 2 million plant closing related costs amounts reflected prepared foods segment’s operating income loss included consolidated statements operations charges company fully paid employee termination benefits plant closing costs material adjustments total accrual anticipated time tyson foods inc note 4 bserelated charges december 23 2003 usda announced single case bse diagnosed washington state dairy cow effect company’s beef segment caused announcement along decision various countries restrict imports us beef products resulted company recording bserelated pretax charges approximately 61 million fiscal 2004 charges included cost sales primarily related decline value finished product inventory destined international markets whether intransit located shipping ports located within domestic storage well live cattle inventory open futures positions material adjustments made subsequent initial bserelated accruals recorded fiscal 2004 note 5 financial instruments company purchases certain commodities grains livestock natural gas course normal operations part company’s commodity risk management activities company uses derivative financial instruments primarily futures swaps reduce exposure various market risks related purchases generally contract terms financial instrument qualifying hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts designated highly effective meeting risk reduction correlation criteria recorded using hedge accounting derivative instrument hedge changes fair value instrument offset either change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion instrument’s change fair value immediately recognized earnings component cost sales company derivative related balances 11 million 117 million recorded current assets september 30 2006 october 1 2005 respectively 23 million 125 million current liabilities september 30 2006 october 1 2005 respectively cash flow hedges company uses derivatives moderate financial commodity market risks business operations derivative products futures option contracts considered hedge changes amount future cash flows related commodities procurement company also enters interest rate swap agreements adjust proportion total longterm debt leveraged equipment loans subject variable interest rates interest rate swaps company agrees pay fixed rate interest notional principal amount receive return amount equal specified variable rate interest notional principal amount interest rate swaps considered hedge changes amount future cash flows associated company’s variable rate interest payments effective portion cumulative gain loss derivative instrument reported component accumulated comprehensive income loss shareholders’ equity recognized earnings period periods hedged transaction affects earnings grain commodity hedges chickens consumed hedged grain sold remaining cumulative gain loss derivative instrument excess cumulative change present value future cash flows hedged item recognized earnings period change ineffectiveness related company’s cash flow hedges significant fiscal 2006 2005 2004 derivative products related grain procurement futures option contracts meet criteria hedge accounting considered cash flow hedges hedge changes amount future cash flows related commodities procurement company purchase derivative products related grain procurement excess physical grain consumption requirements company’s grain procurement hedging activities grain commodity purchase price hedge components grain cost basis differential freight costs tax losses net gains recorded accumulated comprehensive loss september 30 2006 related cash flow hedges 3 million losses recognized within next 12 months losses portion resulting company’s open marktomarket hedge positions significant september 30 2006 company generally hedge cash flows related commodities beyond 12 months fair value hedges company designates certain futures contracts fair value hedges firm commitments purchase market hogs slaughter natural gas operation plants time company also enters foreign currency forward contracts hedge changes fair value receivables purchase commitments arising changes exchange rates tyson foods inc foreign currencies however fair value foreign exchange contracts material september 30 2006 october 1 2005 changes fair value derivative highly effective designated qualifies fair value hedge along gain loss hedged asset liability attributable hedged risk including gains losses firm commitments recorded current period earnings ineffectiveness results change fair value hedge instrument differs change fair value hedged item ineffectiveness related company’s fair value hedges significant fiscal 2006 2005 2004 fiscal 2006 company discontinued use hedge accounting certain financial instruments place hedge forward cattle purchases hedge accounting discontinued provide natural offset gains losses resulting company’s derivatives tied forward fixed price sales boxed beef activity qualify sfas 133 hedge accounting contracts hedge accounting discontinued fair value approximately 28 million date hedge accounting discontinued 28 million primarily recognized component cost sales second quarter fiscal 2006 undesignated positions company holds positions part risk management activities primarily certain grains livestock natural gas futures apply hedge accounting instead marks positions fair value earnings reporting date changes market value derivatives used company’s risk management activities surrounding inventories hand anticipated purchases inventories supplies recorded cost sales changes market value derivatives used company’s risk management activities surrounding forward sales contracts recorded sales company generally enter undesignated positions beyond 12 months company recognized pretax net gains approximately 8 million 2 million 58 million cost sales fiscal 2006 2005 2004 respectively related grain positions apply hedge accounting company enters certain forward sales boxed beef boxed pork forward purchases cattle fixed prices fixed price sales contracts lock proceeds sale future fixed cattle purchases lock cost raw material future although cost livestock related boxed beef pork market prices time sale purchase vary fixed price therefore fixed forward sales forward purchases cattle entered company also enters appropriate number livestock futures positions changes market value open livestock futures positions marked market reported earnings reporting date even though economic impact company’s fixed prices market price realized time sale purchase connection livestock futures company recorded realized unrealized net losses 54 million fiscal 2006 included unrealized pretax loss open marktomarket futures positions approximately 12 million september 30 2006 included net losses fiscal 2006 net gains 28 million recorded subsequent removal certain fair value designations described company recorded realized unrealized net losses 9 million realized unrealized net gains 33 million fiscal 2005 2004 respectively related livestock futures positions fair values based quoted market prices published forward interest rate natural gas curves carrying values derivative positions equal fair values september 30 2006 october 1 2005 carrying values total debt 40 billion 30 billion respectively financial instruments’ fair values approximate recorded values september 30 2006 october 1 2005 tyson foods inc concentrations credit risk companys financial instruments exposed concentrations credit risk consist primarily cash equivalents shortterm investments trade receivables companys cash equivalents shortterm investments high quality securities placed major banks financial institutions concentrations credit risk respect receivables limited due large number customers dispersion across geographic areas company performs periodic credit evaluations customers financial condition generally require collateral september 30 2006 october 1 2005 approximately 130 company’s net accounts receivable balance due one customer single customer group represents greater 10 net accounts receivable note 6 property plant equipment major categories property plant equipment accumulated depreciation cost september 30 2006 october 1 2005 follows company’s total depreciation expense 481 million 465 million 458 million fiscal 2006 2005 2004 respectively company capitalized interest costs 8 million 6 million 3 million fiscal 2006 2005 2004 respectively part cost major asset construction projects approximately 182 million required complete construction projects progress september 30 2006 note 7 current liabilities current liabilities september 30 2006 october 1 2005 include note 8 commitments company leases equipment properties certain farms total rentals approximated 146 million fiscal 2006 116 million fiscal 2005 111 million fiscal 2004 leases terms ranging one seven years varying renewal periods significant obligations assumed terms leases upkeep facilities payments insurance property taxes minimum lease commitments noncancelable leases september 30 2006 totaled 239 million composed 87 million fiscal 2007 59 million fiscal 2008 39 million fiscal 2009 23 million fiscal 2010 14 million fiscal 2011 17 million later years tyson foods inc company guarantees debt outside third parties involve lease grower loans substantially collateralized underlying assets terms underlying debt range two nine years maximum potential amount future payments september 30 2006 79 million company also maintains operating leases various types equipment contain residual value guarantees market value assets end term lease terms lease maturities range one seven years maximum potential amount residual value guarantees approximately 110 million approximately 26 million would recoverable various recourse provisions undeterminable recoverable amount based fair market value underlying leased assets likelihood material payments guarantees considered probable september 30 2006 october 1 2005 liabilities guarantees recorded additionally company enters future purchase commitments various items grains livestock natural gas contracts september 30 2006 commitments totaled 339 million composed 319 million fiscal 2007 6 million fiscal 2008 5 million fiscal 2009 5 million fiscal 2010 2 million fiscal 2011 2 million later years note 9 longterm debt company unsecured revolving credit facility totaling 10 billion supports companys shortterm funding needs letters credit facility expires september 2010 agreement amended july 27 2006 reduced availability unsecured revolving credit facility see description september 30 2006 company outstanding letters credit totaling approximately 203 million issued primarily support workers compensation insurance programs derivative activities draw downs letters credit september 30 2006 september 30 2006 october 1 2005 amounts drawn revolving credit facility amended agreement allows maximum availability revolving credit facility 50 inventory reduced letters credit issued amounts outstanding term loan amount available september 30 2006 481 million company receivables purchase agreement three copurchasers sell 750 million trade receivables agreements restructured extended fourth quarter fiscal 2006 consist 375 million expiring august 2007 375 million expiring august 2009 receivables purchase agreement accounted borrowing interest rate based commercial paper issued copurchasers agreement substantially company’s accounts receivable sold special purpose entity tyson receivables corporation trc whollyowned consolidated subsidiary company trc separate creditors entitled satisfied assets trc prior value becoming available company trc’s equity holder september 30 2006 795 million outstanding receivables purchase agreement expiring august 2007 795 million agreement expiring august 2009 october 1 2005 amounts drawn receivables purchase agreement second quarter fiscal 2006 company issued 10 billion new senior unsecured notes mature april 1 2016 notes 2016 notes carried initial 660 interest rate interest payments due semiannually april 1 october 1 fiscal 2007 company used 750 million proceeds repayment outstanding 750 million 725 notes due october 1 2006 remaining proceeds used general corporate purposes company’s shortterm investment september 30 2006 included 750 million proceeds new issuance earnings 20 million investment 750 million deposited interest bearing account trustee classified shortterm investment september 30 2006 consolidated balance sheets july 24 2006 moody’s investors services inc moody’s downgraded company’s credit rating applicable 2016 notes “baa3” “ba1” downgrade increased interest rate 2016 notes 660 685 effective first day interest period rating change required adjustment interest rate ie issuance 2016 notes downgrade increase annual interest expense related fees approximately 5 million including 25 million related 2016 notes july 31 2006 standard poor’s sp also downgraded company’s credit rating applicable 2016 notes “bbb” “bbb” downgrade result increase interest rate 2016 notes result increase interest expense related fees debt tyson foods inc september 18 2006 tfm whollyowned subsidiary company guaranteed 2016 notes guarantee extend unsecured senior notes company moody’s sp change july 2006 credit ratings applicable 2016 notes however moody’s issued new credit rating “ba2” sp issued new credit rating “bb” related unsecured senior notes guaranteed tfm new ratings impact interest rate applicable 2016 notes however interest expense related fees debt increased less 3 million revolving credit facility senior notes term loan accounts receivable securitization contain various covenants restrictive contain maximum allowed leverage ratios minimum required interest coverage ratio july 27 2006 company entered third amendment fiveyear credit revolving facility threeyear term loan facility subsidiary lakeside farm industries ltd amendments modified minimum required interest coverage ratio temporarily suspended maximum allowed leverage ratios implemented temporary minimum consolidated ebitda requirements company compliance covenants fiscal year end connection amendments company’s availability unsecured revolving credit facility decreased company’s credit rating downgraded prior delivery second quarter fiscal 2007 compliance certificate company required certain subsidiaries guarantee revolving credit facility term loan longterm debt consists following terms leveraged equipment loans company cash deposits totaling approximately 35 million 52 million included consolidated balance sheets assets september 30 2006 october 1 2005 leveraged loan agreements company entered interest rate swap agreements effectively lock fixed interest rate borrowings annual maturities longterm debt five fiscal years subsequent september 30 2006 2007992 million 200819 million 2009435 million 2010236 million 20111 million company fully unconditionally guaranteed 375 million senior notes issued tfm whollyowned subsidiary company additionally company fully unconditionally guaranteed 345 million related term loan facility borrowed lakeside farm industries ltd whollyowned subsidiary company tfm whollyowned subsidiary company fully unconditionally guaranteed company’s 2016 notes following condensed consolidating financial information provided company issuer tfm guarantor alternative providing separate financial statements guarantor following financial information presents condensed consolidating financial statements include tyson foods inc tfi parent tyson fresh meats inc tfm parent nonguarantor subsidiaries combined basis elimination entries necessary consolidate tfi parent tfm parent nonguarantor subsidiaries tyson foods inc consolidated basis tyson foods inc tyson foods inc tyson foods inc tyson foods inc tyson foods inc tyson foods inc tyson foods inc tyson foods inc note 10 comprehensive income loss components accumulated comprehensive income follows components comprehensive income loss follows tyson foods inc note 11 stockbased compensation first quarter fiscal 2006 company adopted sfas 123r using modified prospective method modified prospective method compensation cost recognized sharebased payments granted adoption sfas 123r awards granted employees prior adoption date sfas 123r unvested adoption date accordingly restatements made prior periods prior adoption sfas 123r company applied accounting principles board opinion 25 “accounting stock issued employees” accounting employee stock compensation plans accordingly compensation expense recognized stock option issuances stock options issued exercise price equal closing price date grant also prior adoption sfas 123r company issued restricted stock recorded fair value awards deferred compensation amortized vesting period compensation expense employee stock compensation plans determined based fair value method accounting company’s stock compensation plans according fasb statement 123 “accounting stockbased compensation” taxeffected impact would follows company issues shares stockbased compensation plans issuing class stock treasury total number shares available future grant tyson foods inc 2000 stock incentive plan incentive plan 11609585 september 30 2006 however board directors submitted proposal shareholders voted 2007 annual meeting increase authorized shares stock incentive plan 20 million stock options shareholders approved incentive plan january 2001 incentive plan administered compensation committee board directors compensation committee incentive plan includes provisions granting incentive stock options shares class stock price less fair market value date grant nonqualified stock options may granted price equal less fair market value class stock date option granted stock options incentive plan generally become exercisable ratably two five years date grant must exercised within 10 years date grant company’s policy recognize compensation expense straightline basis requisite service period entire award tyson foods inc weightedaverage grantdate fair value options granted first quarter fiscal 2006 686 options granted second third fourth quarters fiscal 2006 fair value option grant established date grant using blackscholes optionpricing model grants awarded prior october 1 2005 binomial lattice method grants awarded subsequent october 1 2005 change binomial lattice method made better reflect exercise behavior top management company uses historical volatility period time comparable expected life option determine volatility assumptions riskfree interest rates based fiveyear treasury bond rate weighted average assumptions september 30 2006 used fair value calculation outlined following table company recognized stockbased compensation expense related stock options net income taxes 9 million fiscal 2006 5 million related tax benefit company 33 million options vest fiscal 2006 fair value 16 million fiscal 2006 company received cash 28 million exercise stock options related tax benefit realized stock options exercised year ended september 30 2006 4 million total intrinsic value options exercised fiscal 2006 10 million prior adoption sfas 123r company classified tax benefits deductions resulting exercise stock options cash flows operating activities consolidated statements cash flows sfas 123r requires cash flows resulting tax deductions excess compensation cost options excess tax deductions classified financing cash flows company realized 4 million excess tax deductions fiscal 2006 september 30 2006 company 38 million total unrecognized compensation cost related stock option plans recognized weighted average period 22 years restricted stock company issues restricted stock market value date grant restrictions expiring periods july 1 2020 unearned compensation recognized vesting period particular grant using straightline method tyson foods inc september 30 2006 company 42 million total unrecognized compensation cost related restricted stock awards recognized weighted average period 15 years company recognized stockbased compensation expense related restricted stock net income taxes 15 million 15 million 10 million years 2006 2005 2004 respectively related tax benefit years 2006 2005 2004 9 million 9 million 6 million respectively performancebased shares july 2003 compensation committee authorized company award performancebased shares company’s class stock initial maximum aggregate value 4 million date award certain senior executive officers first business day company’s 2004 2005 2006 fiscal years august 2005 september 2004 compensation committee authorized expansion fiscal 2006 fiscal 2005 awards include additional senior officers expansions increased initial maximum aggregate value 3 million 2 million 2006 2005 grants respectively vesting performancebased shares 2004 2005 awards three years vesting 2006 award two onehalf three years vesting period award subject attainment company goals determined compensation committee prior date award company reviews progress toward attainment company goals quarter vesting period attainment company goals determined end vesting period shares vest ultimate cost company equal class stock price date shares vest times number shares awarded performance grants market criteria grants market performance criteria ultimate cost fair value probable shares vest regardless shares actually vest total expense recorded sfas 123r related performancebased shares approximately 1 million fiscal 2006 note 12 pensions postretirement benefits company funded unfunded noncontributory defined benefit pension plans covering specific groups employees two plans provide benefits based formula using years service specified benefit rate effective january 1 2004 company implemented new defined benefit plan certain contracted officers uses formula based years service final average salary additionally two company’s subsidiaries frozen plans whereby new participants added future benefits earned company also postretirement benefit plans substantially employees may receive benefits satisfy applicable eligibility criteria postretirement healthcare plans contributory participants contributions adjusted deemed necessary company defined contribution retirement incentive benefit programs various groups company personnel company contributions totaled 55 million 56 million 55 million fiscal 2006 2005 2004 respectively tyson foods inc company uses september 30 measurement date defined benefit plans one postretirement medical plan july 31 measurement date remaining postretirement medical plans company generally recognizes effect actuarial gains losses earnings immediately rather amortizing effect future periods postretirement benefits include postretirement medical costs life insurance benefit obligations funded status following table provides reconciliation changes plans benefit obligations assets funded status fiscal year ends september 30 2006 october 1 2005 amounts recognized consolidated balance sheets consist tyson foods inc increase decrease pretax minimum liability related companys pension plans included comprehensive income loss 16 million 2 million 2 million fiscal 2006 2005 2004 respectively september 30 2006 pension plans accumulated benefit obligation excess plan assets october 1 2005 two pension plans accumulated benefit obligation excess plan assets two pension plans assets excess accumulated benefit obligation accumulated benefit obligation pension plans 122 million 98 million september 30 2006 october 1 2005 respectively plans accumulated benefit obligations excess plan assets follows net periodic benefit cost components net periodic benefit cost company’s pension postretirement benefit plans recognized consolidated statements operations follows assumptions weighted average assumptions follows determine rateofreturn assets assumption company first examined historical rates return various asset classes company determined longterm projected rateofreturn based expected returns next five 10 years prior fiscal 2004 company defined benefit plans provided retirement benefit based number years service multiplied benefit rate 2004 plan added 4 compensation increase inherent benefit obligation calculation tyson foods inc company four postretirement health plans two consist fixed annual payments company account 38 million companys postretirement medical obligation september 30 2006 healthcare cost trend required determine obligation remaining two plans premedicare postmedicare account 23 million company’s postretirement medical obligation year end premedicare plan covers retirees yet qualify medicare uses healthcare cost trend 11 current year grading 6 fiscal 2012 postmedicare plan provides secondary coverage retirees covered medicare healthcare cost trend 8 grading 5 fiscal 2010 claims excess companys negotiated annual maximum payment paid plan participants assumed healthcare cost trend rates would following effects plan assets fair value plan assets company’s domestic union pension benefit plans 71 million 70 million september 30 2006 october 1 2005 respectively following table sets forth actual target asset allocation company’s pension plan assets fiscal 2005 company recorded assets benefit obligation related foreign subsidiary pension plan 14 million 12 million plan assets september 30 2006 october 1 2005 respectively plan’s assets held annuity contracts consistent target asset allocation plan trustees established set investment objectives related assets pension plans regularly monitor performance funds portfolio managers objectives pension assets 1 provide growth capital income 2 achieve target weighted average annual rate return competitive funds similar investment objectives 3 diversify reduce risk investment objectives target asset allocation updated january 2004 contributions companys policy fund least minimum contribution required meet applicable federal employee benefit local tax laws sole discretion company may time fund additional amounts expected contributions companys pension plans fiscal 2007 approximately 5 million fiscal 2006 2005 2004 company funded 0 10 million 9 million respectively defined benefit plans estimated future benefit payments following benefit payments expected paid tyson foods inc benefit payments postretirement benefit plans expected offset medicare part subsidies follows 1 million 2007 1 million 2008 1 million 2009 2 million 2010 2 million 2011 12 million 2012 2016 note 13 supplemental cash flow information certain noncash transactions excluded consolidated statements cash flows fiscal 2006 adjustments 12 million made increased balance goodwill adjustments primarily related deferred tax asset liability adjustments related acquisitions previous years tfm assets millard processing services fiscal 2005 adjustments 53 million made remove preacquisition tax liability accruals longer necessary due closing irs examination evaluation certain preacquisition deferred tax liabilities adjustments include 46 million 7 million adjustments preacquisition deferred tax assets liabilities related acquisitions previous years tfm hudson foods inc respectively following table summarizes cash payments interest income taxes note 14 transactions related parties company operating leases farms equipment facilities tyson director company certain members family randal w tyson testamentary trust total payments 7 million fiscal 2006 8 million fiscal 2005 2004 paid entities parties ownership interest additionally facilities leased officers directors rentals paid entities parties ownership interest totaled 1 million fiscal years 2006 2005 2004 fiscal 2006 2005 2004 company paid approximately 13 million 13 million 15 million respectively alltel corporation cellular phone services scott ford became director company november 2005 president chief executive officer alltel corporation fiscal 2005 company purchased parcel land adjacent company’s corporate center approximately 600000 jht llc limited liability company tyson randal w tyson testamentary trust members land used expansion corporate offices tyson foods inc fiscal 2005 company received approximately 4 million entities owned tyson john tyson chairman company payment purchase certain properties owned company fiscal 2004 company purchased parcel land adjacent company’s corporate center approximately 356000 jht llc land used expansion corporate offices fiscal 2004 company purchased 1028577 shares class stock private transaction tyson director managing partner tyson limited partnership principal shareholder company purchase shares mr tyson based closing price class stock new york stock exchange date purchase fiscal 2004 company received cash payments tyson totaling 15 million reimbursement certain perquisites personal benefits received fiscal 1997 2003 note 15 income taxes detail provision benefit income taxes consists reasons difference statutory us federal income tax rate effective income tax rate follows 2006 company completed review tax account balances result reduced income tax benefit 15 million 12 million related additional tax reserves company’s foreign operations 3 million related cumulative adjustment recorded tax balances attributable book tax differences associated property plant equipment including synthetic leases certain acquired deferred tax liabilities additional adjustments resulted increase goodwill 12 million deferred tax liabilities 3 million reduction property plant equipment 9 million tyson foods inc deferred income taxes recognized future tax consequences attributable differences financial statement carrying amounts existing assets liabilities respective tax bases deferred tax assets liabilities measured using tax rates expected apply taxable income years temporary differences expected recovered settled tax effects major items recorded deferred tax assets liabilities net deferred tax liabilities included current assets current liabilities deferred income taxes consolidated balance sheets deferred tax liability suspended taxes conversion accrual method represents 1987 change cash accrual method accounting recognized 2017 company accumulated undistributed earnings foreign subsidiaries aggregating approximately 153 million september 30 2006 expected indefinitely reinvested outside united states earnings distributed form dividends otherwise company would subject us income taxes subject adjustment foreign tax credits state income taxes withholding taxes payable various foreign countries currently practicable estimate tax liability might payable repatriation foreign earnings valuation allowance totaling 66 million consists 26 million state tax credit net operating loss carryforwards 35 million us federal net operating loss miscellaneous carryforwards 5 million international net operating loss carryforwards state tax credit net operating loss carryforwards expire fiscal years 2007 2025 september 30 2006 considering utilization restrictions companys federal tax loss carryforwards include net operating losses capital losses charitable contribution carryforwards approximated 259 million federal net operating loss carryforwards totaling 120 million subject utilization limitations due ownership changes may utilized offset future taxable income subject limitations carryforwards expire fiscal years 2007 2025 66 million valuation allowance discussed includes 30 million subsequently recognized allocated reduce goodwill recorded time acquisition tfm company provides tax reserves federal state local international exposures relating audit results tax planning initiatives compliance responsibilities evaluation reserves requires judgments tax issues potential outcomes timing inherently subjective estimate although outcome tax items uncertain management’s opinion adequate provisions income taxes made potential liabilities relating exposures tyson foods inc note 16 earnings loss per share weighted average common shares used computation basic diluted earnings loss per share follows approximately 28 million fiscal 2006 two million fiscal 2005 2004 company’s option shares antidilutive included dilutive earnings per share calculation tyson foods inc note 17 segment reporting company operates five business segments chicken beef pork prepared foods company measures segment profit operating income chicken segment involved primarily processing live chickens fresh frozen valueadded chicken products chicken segment markets products domestically food retailers foodservice distributors restaurant operators noncommercial foodservice establishments schools hotel chains healthcare facilities military food processors well international markets throughout world chicken segment also includes sales allied products company’s chicken breeding stock subsidiary beef segment involved primarily processing live fed cattle fabricating dressed beef carcasses primal subprimal meat cuts caseready products also involves deriving value allied products hides variety meats sale processors others beef segment markets products domestically food retailers foodservice distributors restaurant operators noncommercial foodservice establishments schools hotel chains healthcare facilities military food processors well international markets throughout world allied products also marketed manufacturers pharmaceuticals technical products pork segment involved primarily processing live market hogs fabricating pork carcasses primal subprimal cuts caseready products segment also represents companys live swine group related allied product processing activities pork segment markets products domestically food retailers foodservice distributors restaurant operators noncommercial foodservice establishments schools hotel chains healthcare facilities military food processors well international markets throughout world also sells allied products pharmaceutical technical products manufacturers well live swine pork processors prepared foods segment includes companys operations manufacture market frozen refrigerated food products include pepperoni beef pork pizza toppings pizza crusts flour corn tortilla products appetizers prepared meals ethnic foods soups sauces side dishes meat dishes processed meats prepared foods segment markets products domestically food retailers foodservice distributors restaurant operators noncommercial foodservice establishments schools hotel chains healthcare facilities military food processors well international markets throughout world segment includes logistics group miscellaneous operations tyson foods inc pork segment sales 467 million 505 million 473 million fiscal years 2006 2005 2004 respectively transactions operating segments company beef segment sales 104 million 85 million 75 million fiscal years 2006 2005 2004 respectively transactions operating segments company sales intersegment transactions sold market prices excluded segment sales table company’s largest customer walmart stores inc accounted approximately 125 130 116 consolidated sales fiscal years 2006 2005 2004 respectively sales walmart stores inc included chicken beef pork prepared foods segments extended discontinuance sales customer could replaced material impact companys operations however company anticipate occurrences majority companys operations domiciled united states approximately 95 94 sales external customers fiscal years 2006 2005 2004 respectively sourced united states approximately 63 billion longlived assets located united states september 30 2006 october 1 2005 64 billion october 2 2004 approximately 197 million 202 million 171 million longlived assets located foreign countries primarily canada mexico fiscal years ended 2006 2005 2004 respectively tyson foods inc company sells certain products foreign markets primarily canada central america china european union japan mexico russia south korea taiwan companys export sales totaled 21 billion fiscal 2006 2005 2004 substantially companys export sales facilitated unaffiliated brokers marketing associations foreign sales staffs foreign sales products produced country united states less 10 total consolidated sales fiscal 2006 2005 2004 fiscal 2006 company incurred loss foreign operations 36 million taxes cumulative effect change accounting principle approximately 21 28 income taxes fiscal 2005 2004 respectively foreign operations decline fiscal 2006 primarily due decreased margins tyson de mexico company’s lakeside operation canada note 18 quarterly financial data unaudited tyson foods inc second quarter fiscal 2006 operating income includes 45 million costs related beef plant closings 14 million related prepared foods plant closings fourth quarter fiscal 2006 operating income includes 2 million costs related poultry plant closings 2 million costs related beef plant closings 19 million charges related company’s previously announced 200 million cost reduction initiative business consolidation efforts charges include severance expenses product rationalization costs related intangible asset impairment expenses additionally fourth quarter fiscal 2006 company recorded charge 5 million net tax related cumulative effect change accounting principle adoption fin 47 first quarter fiscal 2005 gross profit includes 12 million received connection vitamin antitrust litigation operating income includes charges 3 million related closing prepared foods facility additionally net income includes gain 8 million related sale company’s remaining interest specialty brands inc second quarter fiscal 2005 operating income includes charges 2 million related closing poultry prepared foods facilities third quarter fiscal 2005 operating income includes charges 33 million related legal settlement involving company’s live swine operations 10 million related closing poultry operations fourth quarter fiscal 2005 gross profit includes 8 million related hurricane losses operating income includes 1 million gains related plant closings additionally net income includes nonrecurring income tax net benefit 15 million includes reversal tax reserves partially offset income tax charge related repatriation foreign income net income also affected 19 million related tax exempt actuarial gain 55 million second quarter fiscal 2006 company reclassified amounts related loss disposals assets expense cost sales reclassification reduced gross profit operating income loss 4 million first quarter fiscal 2006 3 million 8 million 7 million 2 million first second third fourth quarters fiscal 2005 respectively table reflects reclassification fiscal 2006 tyson limited partnership converted 15 million shares class b stock class stock one basis additionally tyson director company converted 750000 shares class b stock class stock one basis listed certain claims made company subsidiaries company’s opinion made appropriate adequate reserves accruals disclosures necessary company believes probability material loss beyond amounts accrued remote however ultimate liability matters uncertain accruals reserves adequate adverse outcome could material effect consolidated financial condition results operations company believes substantial defenses claims made intends vigorously defend cases wage hour labor matters 2000 wage hour division us department labor dol conducted industrywide investigation poultry producers including company ascertain compliance various wage hour issues part investigation dol inspected 14 companys processing facilities may 9 2002 civil complaint filed company us district court northern district alabama elaine l chao secretary labor united states department labor v tyson foods inc complaint alleges company violated overtime provisions federal fair labor standards act flsa companys chickenprocessing facility blountsville alabama complaint contain definite statement acts constituted alleged violations statute although secretary labor indicated discovery case seeks require company compensate hourly chicken processing workers pre postshift clothes changing washing related activities one two unpaid 30minute meal periods secretary labor seeks unspecified back wages employees blountsville facility period two years prior date filing complaint additional amount unspecified liquidated damages injunction future violations facility chicken processing facilities operated company trial date set tyson foods inc june 22 1999 11 current former employees company filed case mh fox et al v tyson foods inc fox us district court northern district alabama claiming company violated requirements flsa suit alleges company failed pay employees hours worked andor improperly paid overtime hours suit specifically alleges 1 employees paid time taken put take certain working supplies beginning end shifts breaks 2 use mastercard line time fails pay employees time actually worked plaintiffs seek represent similarly situated current former employees company plaintiffs seek reimbursement unspecified amount unpaid wages liquidated damages attorney fees costs date approximately 5100 consents filed district court plaintiffs filed renewed motion court supervised notice potential collective action members april 18 2006 company filed response june 27 2006 hearing motion held october 24 2006 november 16 2006 court denied plaintiffs’ motion trial date set august 22 2000 seven employees company filed case de asencio v tyson foods inc us district court eastern district pennsylvania lawsuit similar fox employees claim violations flsa allegedly failing pay time taken put take sanitize certain working supplies violations pennsylvania wage payment collection law plaintiffs sought represent similarly situated current former employees poultry processing plant new holland pennsylvania plaintiffs sought reimbursement unspecified amount unpaid wages liquidated damages attorney fees costs approximately 560 additional current former employees filed consents join lawsuit twoweek jury trial beginning june 5 2006 ended verdict tyson’s favor final judgment entered june 22 2006 plaintiffs filed notice appeal july 21 2006 appeal matter pending u court appeals third circuit appellants filed opening brief october 30 2006 company’s appellee brief filed november 29 2006 november 5 2001 maria chavez et al v ibp lasso acquisition corporation tyson foods inc chavez filed us district court eastern district washington employees tyson fresh meat’s tfm pasco washington beef slaughter processing hides facilities alleging violations flsa 29 usc sections 201 219 well violations washington state minimum wage act rcw chapter 4946 industrial welfare act rcw chapter 4912 wage deductionscontributionrebates act rcw chapter 4952 chavez lawsuit alleges tfm andor company required employees perform unpaid work related donning doffing certain personal protective clothing equipment prior shifts well meal periods plaintiffs allege holdings alvarez et al v ibp support claim collateral estoppel andor res judicata many issues raised litigation july 20 2005 judgment entered 114 million exclusive costs attorney fees attorneys chavez plaintiffs indicated company intention file followon suit chavez different potential claimants alleging similar violations raised chavez november 28 2005 district court awarded attorneys chavez plaintiffs approximately 19 million fees expenses december 12 2005 district court awarded additional costs 19651 december 8 2005 company filed notice appeal ninth circuit court appeals parties later met reached agreement resolve chavez certain postchavez claims 102 million may 19 2006 settlement agreement joint motion approve class action settlement filed parties district court held final approval hearing september 26 2006 time considered terms settlement approved district court september 28 2006 distribution settlement amounts scheduled occur first second quarters fiscal 2007 november 21 2002 lawsuit titled emily jordan et al v ibp inc tyson foods inc filed us district court middle district tennessee ten current former hourly employees tfms caseready facility goodlettsville tennessee filed complaint behalf unspecified allegedly similarly situated employees claiming defendants violated overtime provisions flsa suit alleges defendants failed pay employees hours worked plants commencement operations april 2001 particular suit alleges employees paid time takes collect assemble put take wash health safety production gear beginning end shifts meal period suit also alleges company deducts 30 minutes per day employees paychecks regardless whether employees obtain full 30minute period meal plaintiffs seeking declaration defendants comply flsa award unspecified amount back pay compensation benefits unpaid entitlements liquidated damages prejudgment postjudgment interest attorney fees costs november 17 2003 district court conditionally certified collective action composed similarly situated current former employees goodlettsville facility based clothes changing washing activities unpaid production work meal periods since plant operations began april 2001 tyson foods inc class notices approximately 4500 prospective class members mailed january 21 2004 approximately 525 current former employees opted class second optin class notice mailed 1996 current former employees hired december 16 2003 march 2006 plaintiffs reported total 48 additional persons opted class discovery scheduled conclude december 31 2006 district court hold status conference discuss need dispositive motions trial november 2006 tyson limited partnership converted approximately five million shares class b stock class stock one basis tyson foods inc report independent registered public accounting firm board directors shareholders tyson foods inc audited accompanying consolidated balance sheets tyson foods inc september 30 2006 october 1 2005 related consolidated statements operations shareholders equity cash flows three years period ended september 30 2006 audits also included financial statement schedule listed index item 15a financial statements schedule responsibility companys management responsibility express opinion financial statements schedule based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion financial statements referred present fairly material respects consolidated financial position tyson foods inc september 30 2006 october 1 2005 consolidated results operations cash flows three years period ended september 30 2006 conformity us generally accepted accounting principles also opinion related financial statement schedule considered relation basic financial statements taken whole presents fairly material respects information set forth therein described note 2 consolidated financial statements 2006 company adopted statement financial accounting standards 123r “sharebased payments” also audited accordance standards public company accounting oversight board united states effectiveness tyson foods inc’s internal control financial reporting september 30 2006 based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission report dated december 11 2006 expressed unqualified opinion thereon ernst young llp ernst young llp rogers arkansas december 11 2006 tyson foods inc report independent registered public accounting firm board directors shareholders tyson foods inc audited management’s assessment included accompanying report management caption “management’s report internal control financial reporting” tyson foods inc maintained effective internal control financial reporting september 30 2006 based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission coso criteria tyson foods inc’s management responsible maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting responsibility express opinion management’s assessment opinion effectiveness company’s internal control financial reporting based audit conducted audit accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether effective internal control financial reporting maintained material respects audit included obtaining understanding internal control financial reporting evaluating management’s assessment testing evaluating design operating effectiveness internal control performing procedures considered necessary circumstances believe audit provides reasonable basis opinion company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles company’s internal control financial reporting includes policies procedures 1 pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company 2 provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company 3 provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate opinion management’s assessment tyson foods inc maintained effective internal control financial reporting september 30 2006 fairly stated material respects based coso criteria also opinion tyson foods inc maintained material respects effective internal control financial reporting september 30 2006 based coso criteria also audited accordance standards public company accounting oversight board united states consolidated balance sheets tyson foods inc september 30 2006 october 1 2005 related consolidated statements operations shareholders’ equity cash flows three years period ended september 30 2006 report dated december 11 2006 expressed unqualified opinion thereon ernst young llp ernst young llp rogers arkansas december 11 2006 tyson foods inc item 9item 8 financial statements supplementary data consolidated statements operations tyson foods inc consolidated balance sheets see accompanying notes tyson foods inc consolidated statements shareholders equity tyson foods inc consolidated statements cash flows tyson foods inc notes consolidated financial statements note 1 business summary significant accounting policies description business tyson foods inc collectively “company” “we” “us” “our” founded 1935 world headquarters springdale arkansas world’s largest processor marketer chicken beef pork secondlargest food production company fortune 500 produce wide variety brand name proteinbased prepared food products marketed united states 80 countries around world recognized market leader retail foodservice markets serve approximately 104000 employees 300 facilities offices 28 states 19 countries consolidation consolidated financial statements include accounts whollyowned subsidiaries well majorityowned subsidiaries controlling interest significant intercompany accounts transactions eliminated consolidation fiscal year utilize 52 53week accounting period ending saturday closest september 30 reclassifications fiscal 2007 reclassified 85 million 27 million respectively fiscal 2006 fiscal 2005 negative book cash balances increase trade accounts payable net change current assets liabilities reported operating activities increase decrease negative book cash balances reported financing activities consolidated statements cash flows conform current period presentation cash equivalents cash equivalents consist investments shortterm highly liquid securities original maturities three months less made part cash management activity carrying values assets approximate fair market values primarily utilize cash management system series separate accounts consisting lockbox accounts receiving cash concentration accounts funds moved several “zerobalance” disbursement accounts funding payroll accounts payable livestock procurement grower payments etc result cash management system checks issued presented banks payment may result negative book cash balances negative book cash balances included trade accounts payable current liabilities checks outstanding excess related book cash balances totaled approximately 255 million september 29 2007 246 million september 30 2006 accounts receivable record trade accounts receivable net realizable value includes appropriate allowance estimated uncollectible accounts reflect loss anticipated trade accounts receivable balances charged provision doubtful accounts calculate allowance based history writeoffs level past due accounts relationships economic status customers inventories processed products livestock supplies valued lower cost market cost includes purchased raw materials live purchase costs growout costs primarily feed contract grower pay catch haul costs labor manufacturing production overhead related purchase production inventories depreciation primarily use straightline method calculate depreciation using estimated lives buildings leasehold improvements 10 39 years machinery equipment three 12 years land improvements three 20 years longlived assets review carrying value longlived assets balance sheet date indication impairment exists recoverability assessed using undiscounted cash flows based historical results current projections earnings interest taxes measure impairment excess carrying cost fair value asset fair value asset measured using discounted cash flows future operating results based discount rate corresponds cost capital tyson foods inc goodwill intangible assets goodwill indefinite life intangible assets initially recorded fair value amortized reviewed impairment least annually frequently impairment indicators arise goodwill allocated reporting unit follow two step process evaluate potential impairment exists estimated fair value reporting units using discounted cash flow analysis requires us make various judgmental estimates assumptions sales operating margins growth rates discount factors estimating fair value beef segment assumed operating margins future years excess margins realized since export markets restricted due bse issues fair value estimate segment assumes future access export markets similar periods prior bse issues includes operating margin assumptions based longterm expectations margins historically realized beef industry result first step goodwill impairment review potential impairment exist therefore second step considered necessary believe made reasonable estimates assumptions determine fair value reporting units possible material change could occur actual results consistent estimates assumptions used calculate fair value reporting units may required perform second step could result material impairment goodwill fair value trademarks determined using royalty rate method based expected revenues trademark fair value inprocess patents determined using present value future cash flows investments joint ventures entities use cost method accounting voting interests less 20 percent equity method accounting voting interests excess 20 percent controlling interest underlying share entity’s equity reported consolidated balance sheets assets investments marketable debt securities september 29 2007 september 30 2006 94 million 115 million respectively classified assets consolidated balance sheets maturities ranging 49 years determined marketable debt securities availableforsale investments reported fair value based quoted market prices balance sheet date unrealized gains losses net tax recorded comprehensive income amortized cost debt securities adjusted amortization premiums accretion discounts maturity amortization recorded interest income cost securities sold based specific identification method realized gains losses sale debt securities declines value judged temporary recorded net basis income interest dividends securities classified availableforsale recorded interest income fiscal 2006 issued 10 billion senior unsecured notes interest rate 660 mature april 1 2016 fiscal 2007 used 750 million proceeds repayment outstanding 750 million 725 notes due october 1 2006 remaining proceeds used general corporate purposes shortterm investment september 30 2006 included 750 million proceeds new issuance earnings 20 million investment funds deposit interest bearing account trustee accrued self insurance use combination insurance selfinsurance mechanisms provide potential liabilities health welfare workers’ compensation auto liability general liability risks liabilities associated risks retained estimated part considering claims experience demographic factors severity factors actuarial assumptions capital stock two classes capital stock class common stock 010 par value class stock class b common stock 010 par value class b stock holders class b stock may convert stock class stock shareforshare basis holders class b stock entitled 10 votes per share holders class stock entitled one vote per share matters submitted shareholders approval september 29 2007 members tyson family beneficially aggregate 9997 outstanding shares class b stock 127 outstanding shares class stock giving tyson family control approximately 71 total voting power outstanding voting stock cash dividends cannot paid holders class b stock unless simultaneously paid holders class stock per share amount cash dividend paid holders class b stock cannot exceed 90 cash dividend simultaneously paid holders class stock pay quarterly cash dividends class b shareholders paid class dividends per share 016 class b dividends per share 0144 fiscal years 2007 2006 2005 class b stock considered participating security requiring use twoclass method computation basic earnings per share twoclass computation method period reflects cash dividends paid class stock plus amount allocated undistributed earnings losses computed using participation percentage reflects dividend rights class stock basic earnings per share computed using twoclass method periods presented shares class b stock considered participating convertible securities since shares class b stock convertible shareforshare basis shares class stock diluted earnings per share computed assuming conversion class b shares class shares beginning period tyson foods inc financial instruments purchase certain commodities grains livestock natural gas course normal operations part commodity risk management activities use derivative financial instruments primarily futures options reduce exposure various market risks related purchases contract terms financial instrument qualifying hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts designated highly effective meeting risk reduction correlation criteria recorded using hedge accounting derivative instrument accounted hedge changes fair value instrument offset either change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion instrument’s change fair value immediately recognized earnings component cost sales instruments hold part risk management activities meet criteria hedge accounting marked fair value unrealized gains losses reported currently earnings changes market value derivatives used risk management activities surrounding inventories hand anticipated purchases inventories supplies recorded cost sales changes market value derivatives used risk management activities surrounding forward sales contracts recorded sales generally hedge anticipated transactions beyond 12 months revenue recognition recognize revenue title risk loss transferred customers generally delivery based terms sale revenue recognized net amount estimated received deducting estimated amounts discounts trade allowances product terms litigation reserves variety legal proceedings pending threatened us accruals recorded probable liability incurred amount liability reasonably estimated based current law progress case opinions views legal counsel advisers experience similar matters intended response litigation amounts discounted exclusive claims third parties adjusted periodically assessment efforts progress additional information becomes available expense amounts administering litigating claims incurred accruals legal proceedings included current liabilities consolidated balance sheets freight expense freight expense associated products shipped customers recognized cost sales advertising promotion expenses advertising promotion expenses charged operations period incurred customer incentive trade promotion activities recorded reduction sales based amounts estimated due customers based primarily historical utilization redemption rates advertising promotional activities recorded selling general administrative expenses advertising promotion expenses fiscal years 2007 2006 2005 467 million 493 million 456 million respectively use estimates consolidated financial statements prepared conformity accounting principles generally accepted united states require us make estimates assumptions affect amounts reported consolidated financial statements accompanying notes actual results could differ estimates recently issued accounting standards regulations june 2006 financial accounting standards board fasb issued interpretation 48 “accounting uncertainty income taxes” interpretation fasb statement 109 fin 48 fin 48 prescribes recognition threshold measurement attribute financial statement recognition measurement tax position taken expected taken tax return fin 48 also provides guidance derecognition classification interest penalties accounting interim periods disclosure transition fin 48 effective fiscal years beginning december 15 2006 therefore adopt fin 48 beginning fiscal 2008 currently evaluating impact adoption statement consolidated financial position expect adoption fin 48 result cumulative effect adjustment 10 million 25 million adjustment decrease retained earnings increase longterm liabilities september 2006 fasb issued statement financial accounting standards 157 “fair value measurements” sfas 157 sfas 157 provides guidance using fair value measure assets liabilities standard also responds investors” requests expanded information extent companies measure assets liabilities fair value information used measure fair value effect fair value measurements earnings sfas 157 applies whenever standards require permit assets liabilities measured fair value february 2007 fasb issued statement financial accounting standards 159 “the fair value option financial assets financial liabilities including amendment fasb statement 115” sfas 159 statement provides companies option report selected financial assets liabilities fair value sfas 157 sfas 159 effective financial statements issued fiscal years beginning november 15 2007 interim periods within fiscal years therefore expect adopt sfas 157 sfas 159 beginning fiscal 2009 process evaluating potential impacts sfas 157 sfas 159 tyson foods inc note 2 change accounting principles september 2006 fasb issued statement financial accounting standards 158 “employers’ accounting defined benefit pension postretirement plans amendment fasb statements 87 88 106 132r” sfas 158 sfas 158 requires companies recognize funded status defined benefit postretirement plan asset liability consolidated balance sheet recognize changes funded status year changes occur comprehensive income adopted sfas 158 end fiscal 2007 standard also requires companies measure funded status plan date annual consolidated balance sheet limited exceptions portion standard delayed effective date adopt fiscal 2009 see note 12 “pensions postretirement benefits” notes consolidated financial statements impact adoption sfas 158 september 2006 securities exchange commission staff published staff accounting bulletin 108 “considering effects prior year misstatements current year financial statements” sab 108 sab 108 addresses quantifying financial statement effects misstatements specifically effects prior year uncorrected errors must considered quantifying misstatements current year financial statements adopted sab 108 end fiscal 2007 impact consolidated financial statements december 2004 fasb issued statement financial accounting standards 123r “sharebased payment” sfas 123r pronouncement requires companies measure recognize compensation expense sharebased payments employees including grants employee stock options restricted stock performancebased shares financial statements based fair value date grant fiscal 2006 adopted sfas 123r using modified prospective method modified prospective method compensation cost recognized sharebased payments granted adoption sfas 123r awards granted employees prior adoption date sfas 123r unvested adoption date accordingly restatements made prior periods prior adoption sfas 123r applied accounting principles board opinion 25 “accounting stock issued employees” accounting employee stock compensation plans accordingly compensation expense recognized stock option issuances stock options issued exercise price equal closing price date grant also prior adoption sfas 123r issued restricted stock recorded fair value awards deferred compensation amortized vesting period march 2005 fasb issued fin 47 interpretation sfas 143 sfas 143 issued june 2001 requires entity recognize fair value liability asset retirement obligation period incurred reasonable estimate fair value made sfas 143 applies legal obligations associated retirement tangible longlived asset resulted acquisition construction development andor normal operation longlived asset associated asset costs capitalized part carrying amount longlived asset fin 47 clarifies term “conditional asset retirement obligation” used sfas 143 refers legal obligation perform asset retirement activity timing andor method settlement conditional future event may within control entity fin 47 requires entity recognize liability fair value conditional asset retirement obligation fair value liability estimated reasonably uncertainty timing andor method settlement conditional asset retirement obligation factored measurement liability sufficient information exists sfas 143 acknowledges cases sufficient information may available reasonably estimate fair value asset retirement obligation aro adopted fin 47 fourth quarter fiscal 2006 connection adoption aro liability 12 million related aro asset 3 million cumulative adjustment due change accounting principle net tax 5 million recorded aro liability included liabilities aro asset included property plant equipment consolidated balance sheets principal conditional asset retirement obligations relate potential future closure sale disposal certain production facilities connection activity legally obligated various federal state local laws properly retire related wastewater treatment facility pro forma impact earnings cumulative effect change accounting principle related earnings per share amounts asset retirement obligation fin 47 applied fiscal 2005 material tyson foods inc note 3 dispositions charges may 2007 announced completion sale two alabama poultry plants related support facilities part strategic efforts reduce production commodity chicken sold processing plants ashland gadsden also included nearby feed mill two hatcheries facilities employed approximately 1200 employees approximately 800 hired acquiring company remaining employees offered opportunity transfer operations alabama recorded gain 10 million sale fiscal 2007 gain recorded chicken segment’s operating income loss included consolidated statements operations cost sales july 2006 announced decision implement cost management initiative part strategy return profitability cost reductions include staffing costs consulting professional fees sales marketing costs expenses fiscal 2006 recorded charges approximately 9 million employee termination benefits resulting termination approximately 400 employees charges 4 million 3 million 1 million 1 million respectively included chicken beef pork prepared foods segments’ operating income loss included consolidated statements operations charges period ending september 30 2006 fiscal 2007 material adjustments amounts accrued fully paid estimated employee termination benefits material adjustments accrual anticipated august 2006 announced decision close boise idaho beef slaughter plant scale back processing operations pasco washington complex decision resulted elimination approximately 770 positions closure processing change occurred october 2006 result significant charge february 2006 announced decision close norfolk nebraska beef processing plant west point nebraska beef slaughter plant facilities closed february 2006 production facilities shifted primarily beef complex dakota city nebraska combined two facilities employed approximately 1665 employees sold west point plant fiscal 2007 norfolk plant related property currently offered sale fiscal 2006 recorded charges 38 million estimated impairment charges 9 million closing costs consisting 5 million employee termination benefits 4 million plant closing related liabilities amounts reflected beef segment’s operating income loss included consolidated statements operations charges fully paid estimated employee termination benefits plant closing related liabilities material adjustments accrual anticipated january 2006 announced decision close two processed meats facilities northeast iowa independence oelwein plants produced chopped ham sliced luncheon meats closed march 2006 combined two facilities employed approximately 400 employees equipment facilities removed either sold transferred locations plants related property currently offered sale fiscal 2006 recorded charges 12 million estimated impairment charges 1 million employee termination benefits amounts reflected prepared foods segment’s operating income loss included consolidated statements operations charges fully paid estimated employee termination benefits material adjustments accrual anticipated fiscal 2005 announced agreement settle lawsuit resulted 2002 restructuring live swine operations settlement resulted recording additional 33 million costs fiscal 2005 additional costs reflected pork segment’s operating income loss included consolidated statements operations charges material adjustments accrual anticipated note 4 financial instruments derivative related balances 16 million 11 million recorded current assets september 29 2007 september 30 2006 respectively 48 million 23 million current liabilities september 29 2007 september 30 2006 respectively cash flow hedges use derivatives moderate financial commodity market risks business operations derivative products futures options designated hedge changes amount future cash flows related commodities procurement effective portion cumulative gain loss derivative instrument reported component accumulated comprehensive income shareholders’ equity recognized earnings period periods hedged transaction affects earnings grain commodity hedges chickens consumed hedged grain sold remaining cumulative gain loss derivative instrument excess cumulative change present value future cash flows hedged item recognized earnings period change ineffectiveness related cash flow hedges significant fiscal 2007 2006 2005 tyson foods inc derivative products related grain procurement meet criteria hedge accounting designated considered cash flow hedges hedge changes amount future cash flows related commodities procurement purchase derivative products related grain procurement excess physical grain consumption requirements 4 million net tax losses recorded accumulated comprehensive income september 29 2007 related cash flow hedges losses recognized within next 12 months losses portion resulting open hedge positions tax gain 1 million september 29 2007 generally hedge cash flows related commodities beyond 12 months fair value hedges designate certain futures contracts fair value hedges firm commitments purchase market hogs slaughter natural gas operation plants time also enter foreign currency forward contracts hedge changes fair value receivables purchase commitments arising changes exchange rates foreign currencies however fair value foreign exchange contracts significant september 29 2007 september 30 2006 changes fair value derivative designated qualifies fair value hedge along gain loss hedged asset liability attributable hedged risk including gains losses firm commitments recorded current period earnings ineffectiveness results change fair value hedge instrument differs change fair value hedged item ineffectiveness related fair value hedges significant fiscal 2007 2006 2005 fiscal 2006 discontinued use hedge accounting certain financial instruments place hedge forward cattle purchases hedge accounting discontinued provide natural offset gains losses resulting derivatives tied forward fixed price sales boxed beef activity qualify hedge accounting contracts hedge accounting discontinued fair value approximately 28 million discontinued date 28 million primarily recognized component cost sales fiscal 2006 undesignated positions hold positions part risk management activities primarily futures options grains livestock natural gas apply hedge accounting instead mark positions fair value earnings reporting date changes market value derivatives used risk management activities surrounding inventories hand anticipated purchases inventories supplies recorded cost sales changes market value derivatives used risk management activities surrounding forward sales contracts recorded sales generally enter undesignated positions beyond 18 months recognized pretax net gains approximately 50 million 8 million 2 million cost sales fiscal 2007 2006 2005 respectively related grain positions apply hedge accounting enter certain forward sales boxed beef boxed pork forward purchases cattle fixed prices fixed price sales contracts lock proceeds sale future fixed cattle purchases lock cost however cost livestock related boxed beef pork market prices time sale purchase could vary fixed price order mitigate portion risk fixed forward sales boxed beef pork forward purchases cattle entered also enter appropriate number livestock futures positions changes market value open livestock futures positions marked market reported earnings reporting date even though economic impact fixed prices market price realized time sale purchase connection livestock futures recorded realized unrealized net gains 14 million fiscal 2007 included unrealized pretax loss open marktomarket futures positions approximately 14 million september 29 2007 recorded realized unrealized net losses 39 million realized unrealized net gains 26 million fiscal 2006 2005 respectively related livestock futures positions fair values based quoted market prices published forward interest rate curves carrying values derivative positions equal fair values september 29 2007 september 30 2006 carrying values total debt 28 billion 40 billion respectively financial instruments’ fair values approximate recorded values september 29 2007 september 30 2006 concentrations credit risk financial instruments exposed concentrations credit risk consist primarily cash equivalents trade receivables cash equivalents high quality securities placed major banks financial institutions concentrations credit risk respect receivables limited due large number customers dispersion across geographic areas perform periodic credit evaluations customers’ financial condition generally require collateral september 29 2007 september 30 2006 approximately 121 130 respectively net accounts receivable balance due one customer single customer group represents greater 10 net accounts receivable tyson foods inc note 5 property plant equipment major categories property plant equipment accumulated depreciation cost september 29 2007 september 30 2006 follows capitalized interest costs 2 million 8 million 6 million fiscal 2007 2006 2005 respectively part cost major asset construction projects approximately 194 million required complete construction projects progress september 29 2007 note 6 goodwill intangible assets amount goodwill segment net 286 million accumulated amortization september 29 2007 september 30 2006 follows adjustments 28 million primarily related reevaluation certain tax liability accruals deferred tax assets liabilities related 2001 acquisition tyson fresh meats tfm formerly known ibp inc decreased goodwill amount intangible assets type september 29 2007 september 30 2006 follows reduction carrying value intangible assets fiscal 2007 compared fiscal 2006 resulted 7 million impairment trademarks impairment recorded cost sales consolidated statements operations included prepared foods segment amortization expense patents 3 million recognized fiscal 2007 2006 2005 patents amortized using straightline method estimated period benefit five 15 years beginning date benefits intangible items realized tyson foods inc note 7 current liabilities current liabilities september 29 2007 september 30 2006 include note 8 commitments lease equipment properties certain farms total rentals approximated 133 million fiscal 2007 146 million fiscal 2006 116 million fiscal 2005 leases terms ranging one seven years varying renewal periods significant obligations assumed terms leases upkeep facilities payments insurance property taxes guarantee debt outside third parties involve lease grower loans substantially collateralized underlying assets terms underlying debt cover periods nine years maximum potential amount future payments september 29 2007 73 million also maintain operating leases various types equipment contain residual value guarantees market value assets end term lease terms lease maturities cover periods seven years maximum potential amount residual value guarantees approximately 58 million approximately 25 million would recoverable various recourse provisions undeterminable recoverable amount based fair market value underlying leased assets likelihood material payments guarantees considered probable september 29 2007 september 30 2006 liabilities guarantees recorded additionally enter future purchase commitments various items grains livestock contracts september 29 2007 commitments totaled tyson foods inc note 9 longterm debt unsecured revolving credit facility totaling 10 billion supports shortterm funding needs letters credit facility expires september 2010 september 29 2007 outstanding letters credit totaling approximately 252 million none drawn upon issued primarily support workers’ compensation insurance programs derivative activities amount available september 29 2007 748 million receivables purchase agreement three copurchasers sell 750 million trade receivables agreements extended fourth quarter fiscal 2007 consist 375 million expiring august 2008 375 million expiring august 2010 receivables purchase agreement accounted borrowing interest rate based commercial paper issued copurchasers agreement substantially accounts receivable sold special purpose entity tyson receivables corporation trc whollyowned consolidated subsidiary company trc creditors entitled satisfied assets trc prior value becoming available company trc’s equity holder september 29 2007 1065 million outstanding receivables purchase agreement expiring august 2008 1065 million agreement expiring august 2010 second quarter fiscal 2006 issued 10 billion senior unsecured notes mature april 1 2016 notes 2016 notes carried initial 660 interest rate interest payments due semiannually april 1 october 1 fiscal 2007 used 750 million proceeds repay outstanding 750 million 725 notes due october 1 2006 july 24 2006 moody’s investors services inc moody’s downgraded credit rating applicable 2016 notes “baa3” “ba1” downgrade increased interest rate 2016 notes 660 685 effective first day interest period rating change required adjustment interest rate ie issuance 2016 notes downgrade material impact interest expense additionally july 31 2006 standard poor’s sp downgraded credit rating applicable 2016 notes “bbb” “bbb” downgrade result increase interest rate 2016 notes result increase interest expense related fees debt september 18 2006 tfm whollyowned subsidiary company guaranteed 2016 notes guarantee extend unsecured senior notes company moody’s sp change july 2006 credit ratings applicable 2016 notes however moody’s issued new credit rating “ba2” sp issued new credit rating “bb” related unsecured senior notes guaranteed tfm new ratings impact interest rate applicable 2016 notes material impact interest expense debt agreements contain various covenants restrictive contain maximum allowed leverage ratios minimum required interest coverage ratio compliance covenants september 29 2007 longterm debt consists following annual maturities longterm debt five fiscal years subsequent september 29 2007 2008137 million 200935 million 2010347 million 201110 billion 20121 million tfm whollyowned subsidiary company fully unconditionally guaranteed 2016 notes following condensed consolidating financial information provided company issuer tfm guarantor alternative providing separate financial statements guarantor tyson foods inc following financial information presents condensed consolidating financial statements include tyson foods inc tfi parent tyson fresh meats inc tfm parent nonguarantor subsidiaries combined basis elimination entries necessary consolidate tfi parent tfm parent nonguarantor subsidiaries tyson foods inc tyson foods inc tyson foods inc tyson foods inc tyson foods inc note 10 comprehensive income loss components accumulated comprehensive income follows 1 includes adjustment 3 million net tax relating initial adoption sfas 158 refer note 12 “pensions postretirement benefits” components comprehensive income loss follows note 11 stockbased compensation prior adoption sfas 123r fiscal 2006 applied accounting principles board opinion 25 “accounting stock issued employees” accounting employee stock compensation plans accordingly compensation expense recognized stock option issuances stock options issued exercise price equal closing price date grant also prior adoption sfas 123r issued restricted stock recorded fair value awards deferred compensation amortized vesting period compensation expense employee stock compensation plans determined based fair value method accounting stock compensation plans according fasb statement 123 “accounting stockbased compensation” fiscal 2005 taxeffected impact would follows tyson foods inc issue shares stockbased compensation plans issuing class stock treasury total number shares available future grant tyson foods inc 2000 stock incentive plan incentive plan 27431170 september 29 2007 stock options shareholders approved incentive plan january 2001 incentive plan administered compensation committee board directors compensation committee incentive plan includes provisions granting incentive stock options shares class stock price less fair market value date grant nonqualified stock options may granted price equal less fair market value class stock date option granted stock options incentive plan generally become exercisable ratably two five years date grant must exercised within 10 years date grant policy recognize compensation expense straightline basis requisite service period entire award weightedaverage grantdate fair value options granted fiscal years 2007 2006 respectively 585 686 options granted fiscal 2005 fair value option grant established date grant using binomial lattice method grants awarded october 1 2005 blackscholes optionpricing model grants awarded october 1 2005 change binomial lattice method made better reflect exercise behavior top management use historical volatility period time comparable expected life option determine volatility assumptions expected life calculated based contractual term grant takes account historical exercise termination behavior participants riskfree interest rates based fiveyear treasury bond rate weighted average assumptions used fair value calculation outlined following table tyson foods inc recognized stockbased compensation expense related stock options net income taxes 11 million 9 million 0 respectively fiscal years 2007 2006 2005 6 million 5 million 0 related tax benefit 33 million 33 million 24 million respectively options vest fiscal years 2007 2006 2005 fair value 18 million 16 million 10 million fiscal years 2007 2006 2005 received cash 59 million 28 million 31 million respectively exercise stock options related tax benefit realized stock options exercised fiscal years 2007 2006 2005 12 million 4 million 6 million total intrinsic value options exercised fiscal years 2007 2006 2005 31 million 10 million 15 million respectively prior adoption sfas 123r classified tax benefits deductions resulting exercise stock options cash flows operating activities consolidated statements cash flows sfas 123r requires cash flows resulting tax deductions excess compensation cost options excess tax deductions classified financing cash flows realized 9 million 4 million 6 million respectively excess tax deductions fiscal years 2007 2006 2005 september 29 2007 44 million total unrecognized compensation cost related stock option plans recognized weighted average period 25 years restricted stock issue restricted stock market value date grant restrictions expiring periods july 1 2020 unearned compensation recognized vesting period particular grant using straightline method september 29 2007 44 million total unrecognized compensation cost related restricted stock awards recognized weighted average period 22 years recognized stockbased compensation expense related restricted stock net income taxes 14 million 15 million 15 million years 2007 2006 2005 respectively related tax benefit fiscal years 2007 2006 2005 9 million year 34 million 04 million 01 million respectively restricted stock awards vest fiscal years 2007 2006 2005 grant date fair value 37 million 5 million 1 million tyson foods inc performancebased shares july 2003 compensation committee authorized us award performancebased shares class stock initial maximum aggregate value 4 million date award certain senior executive officers first business day company’s 2004 2005 2006 fiscal years august 2005 september 2004 compensation committee authorized expansion fiscal 2006 fiscal 2005 awards include additional senior officers expansions increased initial maximum aggregate value 3 million 2 million 2006 2005 grants respectively vesting performancebased shares 2004 2005 awards three years vesting 2006 award two onehalf three years vesting period award subject attainment goals determined compensation committee prior date award review progress toward attainment goals quarter vesting period however attainment goals determined end vesting period shares vest ultimate cost equal class stock price date shares vest times number shares awarded performance grants market criteria grants market performance criteria ultimate cost fair value probable shares vest regardless shares actually vest total expense recorded related performancebased shares approximately 1 million fiscal years 2007 2006 2005 note 12 pensions postretirement benefits effective september 29 2007 adopted sfas 158 requires recognition pension obligations accumulated comprehensive income actuarial gains losses prior service costs credits transition assets obligations previously deferred reporting requirements sfas 87 sfas 106 sfas 132r following table reflects effects adoption sfas 158 consolidated balance sheet september 29 2007 funded unfunded noncontributory defined benefit pension plans covering specific groups employees two plans provide benefits based formula using years service specified benefit rate effective january 1 2004 implemented defined benefit plan certain contracted officers uses formula based years service final average salary additionally two subsidiaries frozen plans whereby new participants added future benefits earned also postretirement benefit plans substantially employees may receive benefits satisfy applicable eligibility criteria postretirement healthcare plans contributory participants’ contributions adjusted deemed necessary defined contribution retirement incentive benefit programs various groups employees recognized expenses 46 million 55 million 56 million fiscal 2007 2006 2005 respectively use september 30 measurement date defined benefit plans one postretirement medical plan july 31 measurement date remaining postretirement medical plans generally recognize effect actuarial gains losses earnings immediately postretirement plans rather amortizing effect future periods postretirement benefits include postretirement medical costs life insurance tyson foods inc benefit obligations funded status following table provides reconciliation changes plans’ benefit obligations assets funded status september 29 2007 september 30 2006 amounts recognized consolidated balance sheets consist increase decrease pretax minimum liability related pension plans included comprehensive income loss 9 million 16 million 2 million fiscal 2007 2006 2005 respectively september 29 2007 three pension plans accumulated benefit obligation excess plan assets september 30 2006 pension plans accumulated benefit obligation excess plan assets accumulated benefit obligation pension plans 128 million 122 million september 29 2007 september 30 2006 respectively plans accumulated benefit obligations excess plan assets follows tyson foods inc net periodic benefit cost components net periodic benefit cost pension postretirement benefit plans recognized consolidated statements operations follows assumptions weighted average assumptions follows determine rateofreturn assets assumption first examined historical rates return various asset classes determined longterm projected rateofreturn based expected returns next five 10 years prior fiscal 2004 defined benefit plans provided retirement benefit based number years service multiplied benefit rate four postretirement health plans two consist fixed annual payments account 35 million postretirement medical obligation september 29 2007 healthcare cost trend required determine obligation remaining two plans premedicare postmedicare account 14 million postretirement medical obligation september 29 2007 premedicare plan covers retirees yet qualify medicare uses healthcare cost trend 10 current year grading 6 fiscal 2012 decision made fourth quarter fiscal 2007 outsource postmedicare plan third party insurer decision effectively settled plan healthcare cost trend applicable plan year end additionally recognized gain approximately 27 million related plan change claims excess negotiated annual maximum payment paid plan participants onepercentage point change assumed healthcare cost trend rate would immaterial impact postretirement benefit obligation total service interest cost tyson foods inc plan assets fair value plan assets domestic union pension benefit plans 80 million 71 million september 29 2007 september 30 2006 respectively following table sets forth actual target asset allocation pension plan assets fiscal 2005 recorded assets benefit obligation related foreign subsidiary pension plan 17 million 14 million plan assets september 29 2007 september 30 2006 respectively plan’s assets held annuity contracts consistent target asset allocation plan trustees established set investment objectives related assets pension plans regularly monitor performance funds portfolio managers objectives pension assets 1 provide growth capital income 2 achieve target weighted average annual rate return competitive funds similar investment objectives 3 diversify reduce risk investment objectives target asset allocation updated january 2004 contributions policy fund least minimum contribution required meet applicable federal employee benefit local tax laws sole discretion may time fund additional amounts expected contributions pension plans fiscal 2008 approximately 3 million fiscal 2007 2006 2005 funded 5 million 0 10 million respectively defined benefit plans estimated future benefit payments following benefit payments expected paid benefit payments postretirement benefit plans expected materially offset medicare part subsidies 2008 thereafter note 13 supplemental cash flow information certain noncash transactions excluded consolidated statements cash flows fiscal 2007 adjustments 28 million primarily related reevaluation certain tax liability accruals deferred tax assets liabilities related 2001 acquisition tfm decreased goodwill certain noncash transactions excluded consolidated statements cash flows fiscal 2006 adjustments 12 million primarily related deferred tax asset liability adjustments related acquisitions previous years tfm assets millard processing services increased goodwill tyson foods inc fiscal 2005 adjustments 53 million made remove preacquisition tax liability accruals longer necessary due closure irs examination reevaluation certain preacquisition deferred tax liabilities adjustments include 46 million 7 million adjustments preacquisition deferred tax assets liabilities related acquisitions previous years tfm hudson foods inc respectively decreased goodwill following table summarizes cash payments interest income taxes note 14 transactions related parties operating leases farms equipment facilities tyson director company john tyson chairman company certain members families randal w tyson testamentary trust total payments 5 million fiscal 2007 8 million fiscal 2006 9 million fiscal 2005 paid entities parties ownership interest fiscal 2005 received approximately 4 million entities owned tyson john tyson payment purchase certain properties owned company note 15 income taxes detail provision benefit income taxes consists reasons difference statutory federal income tax rate effective income tax rate follows fiscal 2007 discovered certain population tax cost accumulated depreciation values accurately recorded primarily related property plant equipment system conversion 1999 system conversion impact recorded book value property plant equipment result net tax basis property plant equipment overstated caused deferred tax liability financial statements understated 2007 increased deferred tax liabilities 17 million recognized additional tax expense 17 million fiscal 2007 effective tax rate reduced 46 due reduction income tax reserves management deemed longer required net reduction current income tax expense approximately 20 million related internal revenue service tyson foods inc examinations appeals united states tax court settlement activity well state income tax examination settlements additional related adjustments resulted 28 million reduction goodwill fiscal 2006 completed review tax account balances result reduced income tax benefit 15 million included 12 million related additional tax reserves foreign operations 3 million related cumulative adjustment recorded tax balances attributable book tax differences associated property plant equipment including synthetic leases certain acquired deferred tax liabilities additional adjustments resulted increase goodwill 12 million deferred tax liabilities 3 million reduction property plant equipment 9 million deferred income taxes recognized future tax consequences attributable differences financial statement carrying amounts existing assets liabilities respective tax bases deferred tax assets liabilities measured using tax rates expected apply taxable income years temporary differences expected recovered settled tax effects major items recorded deferred tax assets liabilities net deferred tax liabilities included current assets current liabilities deferred income taxes consolidated balance sheets deferred tax liability suspended taxes conversion accrual method represents 1987 change cash accrual method accounting recognized 2027 accumulated undistributed earnings foreign subsidiaries aggregating approximately 215 million 153 million september 29 2007 september 30 2006 respectively earnings expected indefinitely reinvested outside united states earnings distributed form dividends otherwise would subject federal income taxes subject adjustment foreign tax credits state income taxes withholding taxes payable various foreign countries currently practicable estimate tax liability might payable repatriation foreign earnings tax effected valuation allowance 55 million consists 30 million state tax credit net operating loss carryforwards 11 million federal net operating loss miscellaneous carryforwards 14 million international net operating loss carryforwards state tax credit net operating loss carryforwards expire fiscal years 2008 2026 september 29 2007 considering utilization restrictions gross federal tax loss carryforwards include net operating losses capital losses charitable contribution carryforwards approximated 190 million gross federal net operating loss carryforwards 33 million subject utilization limitations due ownership changes may utilized offset future taxable income subject limitations carryforwards expire fiscal years 2008 2026 55 million valuation allowance described includes 11 million subsequently recognized allocated reduce goodwill recorded time acquisition tfm provide tax reserves federal state local international exposures relating audit results tax planning initiatives compliance responsibilities evaluation reserves requires judgments tax issues potential outcomes timing inherently subjective estimate although outcome tax items uncertain opinion adequate provisions income taxes made potential liabilities relating exposures tyson foods inc note 16 earnings loss per share earnings weighted average common shares used computation basic diluted earnings loss per share follows approximately four million 28 million two million respectively fiscal years 2007 2006 2005 option shares antidilutive included dilutive earnings per share calculation two classes capital stock class stock class b stock cash dividends cannot paid holders class b stock unless simultaneously paid holders class stock per share amount cash dividends paid holders class b stock cannot exceed 90 cash dividend paid holders class stock allocate undistributed earnings losses based upon 1 09 ratio per share class stock class b stock respectively allocate undistributed earnings losses based ratio due historical dividend patterns voting control class b shareholders contractual limitations dividends class b stock tyson foods inc note 17 segment reporting operate four segments chicken beef pork prepared foods measure segment profit operating income loss chicken operations include breeding raising chickens well processing live chickens fresh frozen valueadded chicken products marketed domestically food retailers foodservice distributors restaurant operators noncommercial foodservice establishments schools hotel chains healthcare facilities military food processors well international markets throughout world chicken segment also includes sales allied products chicken breeding stock subsidiary beef operations include processing live fed cattle fabrication dressed beef carcasses primal subprimal meat cuts caseready products beef segment also derives value allied products hides variety meats sale processors others products marketed domestically food retailers foodservice distributors restaurant operators noncommercial foodservice establishments schools hotel chains healthcare facilities military food processors well international markets throughout world allied products also marketed manufacturers pharmaceuticals technical products pork operations include processing live market hogs fabricating pork carcasses primal subprimal cuts caseready products segment also includes live swine group related allied product processing activities products marketed domestically food retailers foodservice distributors restaurant operators noncommercial foodservice establishments schools hotel chains healthcare facilities military food processors well international markets throughout world also sell allied products pharmaceutical technical products manufacturers well live swine pork processors prepared foods prepared foods operations manufacture market frozen refrigerated food products include pepperoni bacon beef pork pizza toppings pizza crusts flour corn tortilla products appetizers prepared meals ethnic foods soups sauces side dishes meat dishes processed meats products marketed domestically food retailers foodservice distributors restaurant operators noncommercial foodservice establishments schools hotel chains healthcare facilities military food processors well international markets throughout world tyson foods inc allocate expenses related corporate activities segments related assets additions property plant equipment remain pork segment sales 515 million 467 million 505 million fiscal years 2007 2006 2005 respectively transactions operating segments beef segment sales 111 million 104 million 85 million fiscal years 2007 2006 2005 respectively transactions operating segments sales intersegment transactions sold market prices excluded segment sales table largest customer walmart stores inc accounted approximately 129 125 130 consolidated sales fiscal years 2007 2006 2005 respectively sales walmart stores inc included chicken beef pork prepared foods segments extended discontinuance sales customer could replaced material impact operations majority operations domiciled united states approximately 94 95 94 sales external customers fiscal years 2007 2006 2005 respectively sourced united states approximately 60 billion 63 billion 63 billion respectively longlived assets located united states september 29 2007 september 30 2006 october 1 2005 approximately 211 million 197 million 202 million longlived assets located foreign countries primarily canada mexico fiscal years ended 2007 2006 2005 respectively sell certain products foreign markets primarily canada central america china european union japan mexico russia south korea taiwan export sales totaled 27 billion fiscal 2007 21 billion fiscal 2006 2005 substantially export sales facilitated unaffiliated brokers marketing associations foreign sales staffs foreign sales products produced country united states less 10 total consolidated sales fiscal 2007 2006 2005 approximately 5 21 income taxes fiscal 2007 2005 foreign operations fiscal 2006 incurred loss foreign operations 36 million taxes cumulative effect change accounting principle tyson foods inc note 18 quarterly financial data unaudited fourth quarter fiscal 2007 net income includes tax expense 17 million related fixed asset tax cost correction second quarter fiscal 2006 operating income includes 45 million costs related beef plant closings 14 million related prepared foods plant closings fourth quarter fiscal 2006 operating income includes 19 million charges related cost management initiative business consolidation efforts charges include severance expenses product rationalization costs related intangible asset impairment expenses tyson foods inc note 19 capital structure fiscal 2007 tyson limited partnership converted 159 million shares class b stock class stock oneforone basis fiscal 2006 tyson limited partnership converted 15 million shares class b stock class stock oneforone basis additionally tyson director converted 750000 shares class b stock class stock oneforone basis note 20 contingencies listed certain claims made company subsidiaries opinion made appropriate adequate reserves accruals disclosures necessary believe probability material loss beyond amounts accrued remote however ultimate liability matters uncertain accruals reserves adequate adverse outcome could material effect consolidated financial condition results operations believe substantial defenses claims made intend vigorously defend cases 2000 wage hour division us department labor dol conducted industrywide investigation poultry producers including us ascertain compliance various wage hour issues part investigation dol inspected 14 processing facilities may 9 2002 dol filed civil complaint styled elaine l chao secretary labor united states department labor v tyson foods inc us district court northern district alabama plaintiffs allege complaint violated overtime provisions federal fair labor standards act chickenprocessing facility blountsville alabama complaint contain definite statement acts constituted alleged violations statute although secretary labor indicated discovery case seeks require us compensate hourly chicken processing workers pre postshift clothes changing washing related activities one two unpaid 30minute meal periods secretary labor seeks unspecified back wages employees blountsville facility period two years prior date filing complaint additional amount unspecified liquidated damages injunction future violations facility chicken processing facilities operate filed motion partial summary judgment july 23 2007 although date set trial matter likely occur within next year several private lawsuits pending us alleging failed compensate poultry plant employees hours worked including overtime compensation violation fair labor standards act lawsuits include mh fox et al v tyson foods inc fox filed june 22 1999 us district court northern district alabama de asencio v tyson foods inc deasencio filed august 22 2000 us district court eastern district pennsylvania matters involves similar allegations employees paid time takes engage pre postshift activities changing protective sanitary clothing obtaining clothing walking changing area work areas break areas plaintiffs lawsuits seek sought act class representatives behalf current former employees allegedly paid time worked seek back wages liquidated damages pre postjudgment interest attorneys’ fees fox district court denied class certification november 16 2006 ordered cases 10 named plaintiffs matter proceed individually home jurisdictions named plaintiffs deasencio plaintiffs appealed jury verdict final judgment entered favor june 22 2006 district court september 7 2007 us court appeals third circuit reversed jury verdict remanded case district court proceedings sought rehearing en banc denied court appeals october 5 2007 appeal us supreme court must made january 3 2008 case remanded district court tyson foods inc addition fox deasencio additional private lawsuits filed us since beginning fiscal 2007 allege tyson failed compensate poultry plant employees hours worked including overtime compensation violation fair labor standards act lawsuits sheila ackles et al v tyson foods inc n dist alabama october 23 2006 mccluster et al v tyson foods inc dist georgia december 11 2006 dobbins et al v tyson chicken inc et al n dist alabama december 21 2006 buchanan et al v tyson chicken inc et al potter et al v tyson chicken inc et al n dist alabama december 22 2006 jones et al v tyson foods inc et al walton et al v tyson foods inc et al williams et al v tyson foods inc et al dist mississippi february 9 2007 balch et al v tyson foods inc e dist oklahoma march 1 2007 adams et al v tyson foods inc w dist arkansas march 2 2007 atkins et al v tyson foods inc dist georgia march 5 2007 laney et al v tyson foods inc williams et al v tyson foods inc dist georgia may 23 2007 similar fox deasencio matters involves allegations employees paid time takes engage pre postshift activities changing protective sanitary clothing obtaining clothing walking changing area work areas break areas plaintiffs lawsuits seek sought act class representatives behalf current former employees allegedly paid time worked seek back wages liquidated damages pre postjudgment interest attorneys’ fees april 6 2007 filed motion transfer named actions coordinated pretrial proceedings judicial panel multidistrict litigation motion transfer granted august 17 2007 cases listed transferred federal district court middle district georgia tyson foods inc fair labor standards act litigation november 21 2002 10 current former hourly employees tfm case ready facility goodlettsville tennessee filed putative class action lawsuit styled emily jordan et al v ibp inc tyson foods inc us district court middle district tennessee us claiming violations overtime provisions fair labor standards act failing pay employees hours worked suit alleges employees paid time takes collect assemble put take wash health safety production gear beginning end shifts meal period finally suit alleges deduct 30 minutes per day employees’ paychecks regardless whether employees use full 30minute period meal plaintiffs seek declaration defendants comply fair labor standards act award unspecified amount back pay compensation benefits unpaid entitlements liquidated damages prejudgment postjudgment interest attorney fees costs november 17 2003 district court conditionally certified collective action based clothes changing washing activities unpaid production work meal periods since plant operations began april 2001 approximately 573 current former employees opted class august 20 2007 parties filed motions summary judgment trial rescheduled set begin september 16 2008 tyson foods inc report independent registered public accounting firm board directors shareholders tyson foods inc audited accompanying consolidated balance sheets tyson foods inc september 29 2007 september 30 2006 related consolidated statements operations shareholders equity cash flows three years period ended september 29 2007 audits also included financial statement schedule listed index item 15a financial statements schedule responsibility companys management responsibility express opinion financial statements schedule based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion financial statements referred present fairly material respects consolidated financial position tyson foods inc september 29 2007 september 30 2006 consolidated results operations cash flows three years period ended september 29 2007 conformity us generally accepted accounting principles also opinion related financial statement schedule considered relation basic financial statements taken whole presents fairly material respects information set forth therein described note 2 consolidated financial statements 2006 company adopted statement financial accounting standards 123r “sharebased payments” also audited accordance standards public company accounting oversight board united states effectiveness tyson foods inc’s internal control financial reporting september 29 2007 based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission report dated november 19 2007 expressed unqualified opinion thereon ernst young llp rogers arkansas november 19 2007 tyson foods inc report independent registered public accounting firm board directors shareholders tyson foods inc audited tyson foods inc’s internal control financial reporting september 29 2007 based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission coso criteria tyson foods inc’s management responsible maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included accompanying report management caption “management’s report internal control financial reporting” responsibility express opinion company’s internal control financial reporting based audit conducted audit accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether effective internal control financial reporting maintained material respects audit included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk performing procedures considered necessary circumstances believe audit provides reasonable basis opinion company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles company’s internal control financial reporting includes policies procedures 1 pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company 2 provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company 3 provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate opinion tyson foods inc maintained material respects effective internal control financial reporting september 29 2007 based coso criteria also audited accordance standards public company accounting oversight board united states consolidated balance sheets tyson foods inc september 29 2007 september 30 2006 related consolidated statements operations shareholders’ equity cash flows three years period ended september 29 2007 report dated november 19 2007 expressed unqualified opinion thereon ernst young llp rogers arkansas november 19 2007 tyson foods inc item 9item 8 financial statements supplementary data consolidated statements operations tyson foods inc consolidated balance sheets see accompanying notes tyson foods inc consolidated statements shareholders equity tyson foods inc consolidated statements cash flows tyson foods inc notes consolidated financial statements note 1 business summary significant accounting policies description business tyson foods inc collectively “company” “we” “us” “our” founded 1935 world headquarters springdale arkansas world’s largest processor marketer chicken beef pork secondlargest food production company fortune 500 produce wide variety brand name proteinbased prepared food products marketed united states 90 countries around world recognized market leader retail foodservice markets serve approximately 107000 employees 300 facilities offices 28 states 22 countries consolidation consolidated financial statements include accounts whollyowned subsidiaries well majorityowned subsidiaries controlling interest significant intercompany accounts transactions eliminated consolidation investment joint venture dynamic fuels llc dynamic 50 percent ownership interest dynamic qualifies variable interest entity financial accounting standards board fasb interpretation 46r “consolidation variable interest entities interpretation arb 51” fin 46r effective june 30 2008 began consolidating dynamic since primary beneficiary defined fin 46r fiscal year utilize 52 53week accounting period ending saturday closest september 30 reclassification fourth quarter fiscal 2008 began manage report operating results identifiable assets logistics operations segment product moved relates result operating segments reflect logistics operations previously included prior periods restated reflect change discontinued operation june 25 2008 executed letter intent xl foods inc sell beef processing cattle feed yard fertilizer assets lakeside farm industries ltd lakeside whollyowned canadian subsidiary financial statements report lakeside discontinued operation see note 3 discontinued operation notes consolidated financial statements information accordingly prior periods restated cash equivalents cash equivalents consist investments shortterm highly liquid securities original maturities three months less made part cash management activity carrying values assets approximate fair market values primarily utilize cash management system series separate accounts consisting lockbox accounts receiving cash concentration accounts funds moved several “zerobalance” disbursement accounts funding payroll accounts payable livestock procurement grower payments etc result cash management system checks issued presented banks payment may result negative book cash balances negative book cash balances included trade accounts payable current liabilities checks outstanding excess related book cash balances totaled approximately 322 million september 27 2008 255 million september 29 2007 accounts receivable record trade accounts receivable net realizable value includes appropriate allowance estimated uncollectible accounts reflect loss anticipated trade accounts receivable balances charged provision doubtful accounts calculate allowance based history writeoffs level past due accounts relationships economic status customers generally collateral receivables periodically evaluate credit worthiness customers inventories processed products livestock supplies valued lower cost market cost includes purchased raw materials live purchase costs growout costs primarily feed contract grower pay catch haul costs labor manufacturing production overhead related purchase production inventories tyson foods inc depreciation primarily use straightline method calculate depreciation using estimated lives buildings leasehold improvements 10 33 years machinery equipment three 12 years land improvements three 20 years longlived assets review carrying value longlived assets balance sheet date indication impairment exists recoverability assessed using undiscounted cash flows based historical results current projections earnings interest taxes measure impairment excess carrying cost fair value asset fair value asset measured using discounted cash flows future operating results based discount rate corresponds cost capital goodwill intangible assets goodwill indefinite life intangible assets initially recorded fair value amortized reviewed impairment least annually frequently impairment indicators arise goodwill allocated reporting unit follow twostep process evaluate potential impairment exists estimated fair value reporting units using discounted cash flow analysis requires us make various judgmental estimates assumptions sales operating margins growth rates discount factors estimating fair value beef chicken reporting units assumed operating margins future years excess margins realized recent year fair value estimates reporting units assume normalized operating margin assumptions improved operating efficiencies based longterm expectations operating margins historically realized beef chicken industries result first step goodwill impairment review potential impairment exist therefore second step considered necessary believe made reasonable estimates assumptions determine fair value reporting units possible material change could occur actual results consistent estimates assumptions used calculate fair value reporting units may required perform second step could result material impairment goodwill latter part fourth quarter fiscal 2008 continuing november 2008 market capitalization book value considered market capitalization decline evaluation fair value goodwill determined impact overall goodwill impairment analysis believe decline primarily attributed negative market conditions result credit crisis indications possible recession current issues within poultry industry continue monitor market capitalization potential impairment indicator considering overall market conditions poultry industry events fair value trademarks determined using royalty rate method based expected revenues trademark fair value inprocess patents determined using present value estimated future cash flows investments joint ventures entities use cost method accounting voting interests less 20 percent equity method accounting voting interests excess 20 percent controlling interest variable interest primary beneficiary investments joint ventures entities reported consolidated balance sheets assets investments marketable debt securities september 27 2008 september 29 2007 94 million classified assets consolidated balance sheets maturities ranging 48 years determined marketable debt securities availableforsale investments reported fair value based quoted market prices balance sheet date unrealized gains losses net tax recorded comprehensive income amortized cost debt securities adjusted amortization premiums accretion discounts maturity amortization recorded interest income cost securities sold based specific identification method realized gains losses sale debt securities declines value judged temporary recorded net basis income interest dividends securities classified availableforsale recorded interest income accrued self insurance use combination insurance selfinsurance mechanisms provide potential liabilities health welfare workers’ compensation auto liability general liability risks liabilities associated risks retained estimated part considering claims experience demographic factors severity factors actuarial assumptions tyson foods inc capital stock two classes capital stock class common stock 010 par value class stock class b common stock 010 par value class b stock holders class b stock may convert stock class stock shareforshare basis holders class b stock entitled 10 votes per share holders class stock entitled one vote per share matters submitted shareholders approval september 27 2008 members tyson family beneficially aggregate 9997 outstanding shares class b stock 231 outstanding shares class stock giving tyson family control approximately 70 total voting power outstanding voting stock cash dividends cannot paid holders class b stock unless simultaneously paid holders class stock per share amount cash dividend paid holders class b stock cannot exceed 90 cash dividend simultaneously paid holders class stock pay quarterly cash dividends class b shareholders paid class dividends per share 016 class b dividends per share 0144 fiscal years 2008 2007 2006 class b stock considered participating security requiring use twoclass method computation basic earnings per share twoclass computation method period reflects cash dividends paid class stock plus amount allocated undistributed earnings losses computed using participation percentage reflects dividend rights class stock basic earnings per share computed using twoclass method periods presented shares class b stock considered participating convertible securities since shares class b stock convertible shareforshare basis shares class stock diluted earnings per share computed assuming conversion class b shares class shares beginning period financial instruments purchase certain commodities grains livestock course normal operations part commodity risk management activities use derivative financial instruments primarily futures options reduce exposure various market risks related purchases well changes foreign currency exchange rates contract terms financial instrument qualifying hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts designated highly effective meeting risk reduction correlation criteria recorded using hedge accounting derivative instrument accounted hedge changes fair value instrument offset either change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion instrument’s change fair value immediately recognized earnings component cost sales instruments hold part risk management activities meet criteria hedge accounting marked fair value unrealized gains losses reported currently earnings changes market value derivatives used risk management activities relating forward sales contracts recorded sales changes market value derivatives used risk management activities surrounding inventories hand anticipated purchases inventories supplies recorded cost sales generally hedge anticipated transactions beyond 12 months revenue recognition recognize revenue title risk loss transferred customers generally delivery based terms sale revenue recognized net amount estimated received deducting estimated amounts discounts trade allowances product terms litigation reserves variety legal proceedings pending threatened us accruals recorded probable liability incurred amount liability reasonably estimated based current law progress case opinions views legal counsel advisers experience similar matters intended response litigation amounts discounted exclusive claims third parties adjusted periodically assessment efforts progress additional information becomes available expense amounts administering litigating claims incurred accruals legal proceedings included current liabilities consolidated balance sheets freight expense freight expense associated products shipped customers recognized cost sales advertising promotion expenses advertising promotion expenses charged operations period incurred customer incentive trade promotion activities recorded reduction sales based amounts estimated due customers based primarily historical utilization redemption rates advertising promotional activities recorded selling general administrative expenses advertising promotion expenses fiscal years 2008 2007 2006 495 million 467 million 493 million respectively tyson foods inc use estimates consolidated financial statements prepared conformity accounting principles generally accepted united states require us make estimates assumptions affect amounts reported consolidated financial statements accompanying notes actual results could differ estimates recently issued accounting pronouncements september 2006 fasb issued statement financial accounting standards 157 “fair value measurements” sfas 157 sfas 157 provides guidance using fair value measure assets liabilities standard also responds investors’ requests expanded information extent companies measure assets liabilities fair value information used measure fair value effect fair value measurements earnings sfas 157 applies whenever standards require permit assets liabilities measured fair value beginning september 28 2008 partially applied sfas 157 allowed fasb staff position fsp 1572 delayed effective date sfas 157 nonfinancial assets liabilities september 28 2008 applied provisions sfas 157 financial instruments impact material fsp 1572 required apply sfas 157 nonfinancial assets liabilities beginning fiscal 2010 currently reviewing applicability sfas 157 nonfinancial assets liabilities well potential impact consolidated financial statements february 2007 fasb issued statement financial accounting standards 159 “the fair value option financial assets financial liabilities including amendment fasb statement 115” sfas 159 statement provides companies option report selected financial assets liabilities firm commitments nonfinancial warranty insurance contracts fair value contractbycontract basis changes fair value recognized earnings reporting period september 28 2008 elect fair value option sfas 159 therefore impact consolidated financial statements december 2007 fasb issued statement financial accounting standards 160 “noncontrolling interests consolidated financial statements” sfas 160 sfas 160 amends accounting research bulletin 51 “consolidated financial statements” establish accounting reporting standards noncontrolling interest subsidiary deconsolidation subsidiary statement clarifies noncontrolling interest subsidiary ownership interest consolidated entity reported equity consolidated financial statements rather liability mezzanine section liabilities equity sfas 160 also requires consolidated net income reported amounts include amounts attributable parent noncontrolling interest impact sfas 160 material impact current consolidated financial statements sfas 160 effective fiscal years interim periods within fiscal years beginning december 15 2008 therefore expect adopt sfas 160 beginning fiscal 2010 december 2007 fasb issued statement financial accounting standards 141r “business combinations” sfas 141r sfas 141r establishes principles requirements acquirer business combination 1 recognizes measures financial statements identifiable assets acquired liabilities assumed noncontrolling interest acquiree 2 recognizes measures goodwill acquired business combination gain bargain purchase 3 determines information disclose enable users financial statements evaluate nature financial effects business combination sfas 141r effective business combinations acquisition date beginning first annual reporting period beginning december 15 2008 therefore expect adopt sfas 141r business combinations entered beginning fiscal 2010 march 2008 fasb issued statement financial accounting standards 161 “disclosures derivative instruments hedging activities amendment fasb statement 133” sfas 161 sfas 161 establishes enhanced disclosure requirements 1 entity uses derivative instruments 2 derivative instruments related hedged items accounted statement 133 related interpretations 3 derivative instruments related hedged items affect entity’s financial position financial performance cash flows sfas 161 effective financial statements issued fiscal years interim periods beginning november 15 2008 therefore expect adopt sfas 161 second quarter fiscal 2009 may 2008 fasb issued fasb staff position apb 141 “accounting convertible debt instruments may settled cash upon conversion including partial cash settlement” fsp apb 141 fsp apb 141 specifies issuers convertible debt instruments may settled cash upon conversion including partial cash settlement separately account liability equity components manner reflect entity’s nonconvertible debt borrowing rate interest cost recognized subsequent periods amount allocated equity component represents discount debt amortized interest expense using effective interest method life debt fsp apb 141 effective financial statements issued fiscal years beginning december 15 2008 interim periods within fiscal years early adoption permitted therefore expect adopt provisions fsp apb 141 beginning first quarter fiscal 2010 provisions fsp apb 141 required applied retrospectively periods presented upon retrospective adoption anticipate effective interest rate 325 convertible senior notes due 2013 range 80 850 would result recognition approximate 90 million 100 million discount notes offsetting tax amount recorded capital excess par value discount accreted maturity date effective interest rate tyson foods inc materially impact fiscal 2008 interest expense result estimated 15 million 20 million increase fiscal 2009 interest expense note 2 change accounting principles june 2006 financial accounting standards board fasb issued interpretation 48 “accounting uncertainty income taxes” interpretation fasb statement 109 fin 48 fin 48 prescribes recognition threshold measurement attribute financial statement recognition measurement tax position taken expected taken tax return fin 48 also provides guidance derecognition classification interest penalties accounting interim periods disclosure transition adopted fin 48 beginning fiscal 2008 adoption fin 48 resulted change opening consolidated balance sheet follows 32 million increase current assets 17 million decrease current liabilities 106 million increase liabilities 40 million decrease deferred income taxes 17 million decrease retained earnings included changes recognized 120 million increase liability unrecognized tax benefits 21 million increase related liability interest penalties total 141 million september 2006 fasb issued statement financial accounting standards 158 “employers’ accounting defined benefit pension postretirement plans amendment fasb statements 87 88 106 132r” sfas 158 sfas 158 requires companies recognize funded status defined benefit postretirement plan asset liability consolidated balance sheet recognize changes funded status year changes occur comprehensive income adopted sfas 158 end fiscal 2007 except requirement measure funded status plan date annual consolidated balance sheet adopted fiscal 2008 immaterial impact see note 13 “pensions postretirement benefits” notes consolidated financial statements impact adoption sfas 158 march 2005 fasb issued fin 47 interpretation sfas 143 sfas 143 issued june 2001 requires entity recognize fair value liability asset retirement obligation period incurred reasonable estimate fair value made sfas 143 applies legal obligations associated retirement tangible longlived asset resulted acquisition construction development andor normal operation longlived asset associated asset costs capitalized part carrying amount longlived asset fin 47 clarifies term “conditional asset retirement obligation” used sfas 143 refers legal obligation perform asset retirement activity timing andor method settlement conditional future event may within control entity fin 47 requires entity recognize liability fair value conditional asset retirement obligation fair value liability estimated reasonably uncertainty timing andor method settlement conditional asset retirement obligation factored measurement liability sufficient information exists sfas 143 acknowledges cases sufficient information may available reasonably estimate fair value asset retirement obligation aro adopted fin 47 fourth quarter fiscal 2006 connection adoption aro liability 12 million related aro asset 3 million cumulative adjustment due change accounting principle net tax 5 million recorded aro liability included liabilities aro asset included property plant equipment consolidated balance sheets principal conditional asset retirement obligations relate potential future closure sale disposal certain production facilities connection activity legally obligated various federal state local laws properly retire related wastewater treatment facility note 3 discontinued operation june 25 2008 executed letter intent xl foods inc sell beef processing cattle feed yard fertilizer assets lakeside 104 million lakeside part beef segment xl foods pay additional amount cattle inventory fertilizer inventory packaging assets estimated approximate 82 million transaction denominated canadian dollars thus conversion closing date us dollars could result amounts us dollars different noted retain certain working capital items including finished product inventory accounts receivable accounts payable lakeside operation closing date totaled 89 million september 27 2008 transaction complete expect retained working capital including inventory lakeside liquidated settled twomonth period approximately 60 million beef segment goodwill relates lakeside addition september 27 2008 60 million currency translation adjustment gain accumulated comprehensive income related lakeside canadian dollar translation subsequent september 27 2008 canadian dollar weakened versus us dollar may result decrease currency translation adjustment gain transaction remains subject government approvals execution definitive agreement tyson xl foods subject receipt approvals anticipate ready complete sale end first quarter fiscal 2009 reporting lakeside results discontinued operation tyson foods inc following summary lakeside’s operating results millions carrying amounts lakeside’s assets held sale include following millions note 4 dispositions charges fiscal 2008 recorded charges 10 million related intangible asset impairments amount 8 million reflected beef segment’s operating income 2 million prepared foods segment’s operating income recorded consolidated statements operations cost sales recorded estimated charges 7 million related flood damage jefferson wisconsin plant amount reflected prepared foods segment’s operating income included consolidated statements operations cost sales also recorded charge 6 million related impairment unimproved real property memphis tennessee amount reflected chicken segment’s operating income loss included consolidated statements operations cost sales additionally recorded 18 million nonoperating gain result private equity firm’s purchase technology company held minority interest gain recorded income consolidated statements operations february 2008 announced discontinuation existing product line closing one three poultry plants wilkesboro north carolina wilkesboro cooked products plant ceased operations second quarter fiscal 2008 closure resulted elimination approximately 400 jobs fiscal 2008 recorded charges 13 million estimated impairment charges amount reflected chicken segment’s operating income loss included consolidated statements operations charges material adjustments accrual anticipated january 2008 announced decision restructure operations emporia kansas beef plant beef slaughter operations ceased second quarter fiscal 2008 however facility still used process certain commodity specialty cuts ground beef well cold storage distribution warehouse restructuring resulted elimination approximately 1700 jobs emporia plant fiscal 2008 recorded charges 10 million estimated impairment charges 7 million closing costs consisting 6 million employee termination benefits 1 million plantclosing related liabilities amounts reflected beef segment’s operating income loss included consolidated statements operations charges fully paid employee termination benefits plantclosing related liabilities material adjustments accrual anticipated fiscal 2008 management approved plans implementation certain recommendations resulting previously announced fast initiative focused process improvement efficiency creation result fiscal 2008 recorded charges 6 million related employee termination benefits resulting termination approximately 200 employees charges 2 million 2 million 1 million 1 million respectively recorded chicken beef pork prepared foods segments’ operating income loss included consolidated statements operations charges fully paid employee termination benefits material adjustments accrual anticipated may 2007 announced completion sale two alabama poultry plants related support facilities part strategic efforts reduce production commodity chicken sold processing plants ashland gadsden also included nearby feed mill two hatcheries facilities employed approximately 1200 employees approximately 800 hired acquiring company remaining employees offered opportunity transfer operations alabama recorded gain 10 million sale fiscal 2007 gain recorded chicken segment’s operating income loss included consolidated statements operations cost sales july 2006 announced decision implement cost management initiative part strategy return profitability cost reductions include staffing costs consulting professional fees sales marketing costs expenses fiscal 2006 recorded charges approximately 9 million employee termination benefits resulting termination approximately 400 employees charges 4 million 3 million 1 million 1 million respectively included chicken beef pork prepared foods segments’ operating income loss included consolidated statements operations tyson foods inc charges period ending september 30 2006 fiscal 2007 material adjustments amounts accrued fully paid estimated employee termination benefits material adjustments accrual anticipated august 2006 announced decision close boise idaho beef slaughter plant scale back processing operations pasco washington complex decision resulted elimination approximately 770 positions closure processing change occurred october 2006 result significant charge february 2006 announced decision close norfolk nebraska beef processing plant west point nebraska beef slaughter plant facilities closed february 2006 production facilities shifted primarily beef complex dakota city nebraska combined two facilities employed approximately 1665 employees sold west point plant fiscal 2007 norfolk plant related property currently offered sale fiscal 2006 recorded charges 38 million estimated impairment charges 9 million closing costs consisting 5 million employee termination benefits 4 million plant closing related liabilities amounts reflected beef segment’s operating income loss included consolidated statements operations charges fully paid estimated employee termination benefits plant closing related liabilities material adjustments accrual anticipated january 2006 announced decision close two processed meats facilities northeast iowa independence oelwein plants produced chopped ham sliced luncheon meats closed march 2006 combined two facilities employed approximately 400 employees equipment facilities removed either sold transferred locations plants related property currently offered sale fiscal 2006 recorded charges 12 million estimated impairment charges 1 million employee termination benefits amounts reflected prepared foods segment’s operating income loss included consolidated statements operations charges fully paid estimated employee termination benefits material adjustments accrual anticipated note 5 financial instruments derivative related balances 29 million 16 million recorded current assets september 27 2008 september 29 2007 respectively 45 million 48 million current liabilities september 27 2008 september 29 2007 respectively cash flow hedges derivative products futures options designated hedges changes amount future cash flows related commodities procurement purchase derivative products related grain procurement excess physical grain consumption requirements related grain hedges 5 million net losses recorded accumulated comprehensive income september 27 2008 losses recognized within next 12 months losses portion resulting open hedge positions net loss 4 million september 27 2008 ineffectiveness related cash flow hedges significant fiscal 2008 2007 2006 fair value hedges designate certain futures contracts fair value hedges firm commitments purchase livestock slaughter changes fair value derivative designated qualifies fair value hedge along changes fair value hedged asset liability attributable hedged risk including gains losses firm commitments recorded current period earnings ineffectiveness results change fair value hedge instrument differs change fair value hedged item ineffectiveness related fair value hedges significant fiscal 2008 2007 2006 fiscal 2006 discontinued use hedge accounting certain financial instruments hedge forward cattle purchases hedge accounting discontinued provide natural offset gains losses resulting derivatives tied forward fixed price sales boxed beef activity qualify hedge accounting contracts hedge accounting discontinued fair value approximately 28 million discontinued date primarily recognized component cost sales fiscal 2006 however due changes beef market strategies business conditions forward cattle purchase derivatives relative fixed forward boxed beef sales derivatives caused marktomarket earnings volatility accordingly effective fourth quarter fiscal 2008 began designating certain futures contracts fair value hedges forward cattle purchases anticipate change help reduce volatility quarterly reported beef earnings undesignated positions hold positions part risk management activities primarily futures options grains livestock apply hedge accounting instead mark positions fair value earnings reporting date generally enter undesignated positions beyond 18 months related grain positions apply hedge accounting recognized pretax net gains approximately 169 million 50 million 8 million respectively cost sales fiscal 2008 2007 2006 included unrealized pretax loss open marktomarket futures positions 4 million september 27 2008 enter certain forward sales boxed beef boxed pork forward purchases cattle fixed prices fixed price sales contracts lock proceeds sale future fixed cattle purchases lock cost however cost livestock related boxed beef boxed pork market prices time sale purchase could vary fixed price tyson foods inc enter fixed forward sales boxed beef boxed pork forward purchases cattle also enter appropriate number livestock futures positions mitigate portion risk changes market value open livestock futures positions marked market reported earnings reporting date even though economic impact fixed prices market price realized time sale purchase connection livestock futures recorded realized unrealized net gains 83 million fiscal 2008 included unrealized pretax gain open marktomarket futures positions approximately 3 million september 27 2008 recorded realized unrealized net gains 14 million realized unrealized net losses 39 million fiscal 2007 2006 respectively related livestock futures positions additionally enter grain derivatives manage risk costs associated forward sales certain customers sales prices determined costplus arrangements unrealized positions qualify hedge treatment totaled loss 24 million gain 9 million september 27 2008 september 29 2007 respectively positions liquidated expect realized gains losses reflected prices poultry products sold since derivative positions qualify hedge treatment initially create volatility income statement associated marktomarket changes however positions liquidated included sales price customer ultimately income statement impact previous marktomarket gains losses included prices poultry products foreign currency positions enter foreign currency forward contracts manage risk changes fair value future cash flows receivables payables purchase commitments arising changes exchange rates foreign currencies applied hedge accounting contracts fair value foreign exchange contracts significant september 27 2008 september 29 2007 fair values based quoted market prices published forward interest rate curves carrying values derivative positions equal fair values september 27 2008 september 29 2007 carrying value total debt 29 billion 28 billion respectively financial instruments’ fair values approximate recorded values september 27 2008 september 29 2007 concentrations credit risk financial instruments exposed concentrations credit risk consist primarily cash equivalents trade receivables cash equivalents high quality securities placed major banks financial institutions concentrations credit risk respect receivables limited due large number customers dispersion across geographic areas perform periodic credit evaluations customers’ financial condition generally require collateral september 27 2008 september 29 2007 122 121 respectively net accounts receivable balance due walmart stores inc single customer group represents greater 10 net accounts receivable note 6 property plant equipment major categories property plant equipment accumulated depreciation cost september 27 2008 september 29 2007 approximately 228 million required complete buildings equipment construction september 27 2008 tyson foods inc note 7 goodwill intangible assets goodwill segment net 286 million accumulated amortization september 27 2008 september 29 2007 intangible assets type september 27 2008 september 29 2007 amortization expense patents intellectual property 3 million recognized fiscal years 2008 2007 2006 estimate amortization expense intangible assets 5 million next five years patents intellectual property amortized using straightline method estimated period benefit five 15 years 30 years respectively beginning date benefits intangible items realized note 8 current liabilities current liabilities september 27 2008 september 29 2007 include tyson foods inc note 9 commitments lease equipment properties certain farms total rentals approximated 163 million 133 million 146 million respectively fiscal years 2008 2007 2006 leases terms seven years varying renewal periods significant obligations assumed terms leases upkeep facilities payments insurance property taxes guarantee debt outside third parties consist lease grower loans substantially collateralized underlying assets terms underlying debt cover periods nine years maximum potential amount future payments september 27 2008 66 million also maintain operating leases various types equipment contain residual value guarantees market value assets end term lease terms lease maturities cover periods seven years maximum potential amount residual value guarantees approximately 55 million approximately 21 million would recoverable various recourse provisions undeterminable recoverable amount based fair market value underlying leased assets likelihood material payments guarantees considered probable september 27 2008 september 29 2007 material liabilities guarantees recorded additionally enter future purchase commitments various items grains livestock contracts fixed grower fees september 27 2008 commitments totaled tyson foods inc note 10 longterm debt annual maturities longterm debt five fiscal years subsequent september 27 2008 20098 million 2010240 million 201110 billion 20123 million 20132 million revolving credit facility revolving credit facility totaling 10 billion supports shortterm funding needs letters credit facility expires september 2010 september 27 2008 outstanding letters credit totaling approximately 291 million none drawn upon issued primarily support workers’ compensation insurance programs derivative activities amount available borrowings facility september 27 2008 709 million trademarks domestic subsidiaries pledged collateral facility additionally certain domestic subsidiaries guaranteed facility pledged inventory collateral book value 20 billion september 27 2008 accounts receivable securitization facility receivables purchase agreement three copurchasers sell 750 million trade receivables agreement includes 375 million 364day facility expiring august 2009 375 million 364day facility additional oneyear option commits funding august 2010 receivables purchase agreement accounted borrowing interest rate based commercial paper issued copurchasers agreement substantially accounts receivable may sold special purpose entity tyson receivables corporation trc whollyowned consolidated subsidiary company trc creditors entitled satisfied assets trc prior value becoming available company trc’s equity holder september 27 2008 amounts borrowed receivables purchase agreement 325 convertible senior notes due 2013 september 2008 issued 458 million principal amount 325 convertible senior unsecured notes due october 15 2013 convertible notes interest paid semiannually arrears april 15 october 15 conversion rate initially 591935 shares class stock per 1000 principal amount notes equivalent initial conversion price 1689 per share class stock convertible notes may converted close business july 12 2013 following circumstances ● fiscal quarter december 27 2008 last reported sale price class stock least 20 trading days period 30 consecutive trading days ending last trading day preceding fiscal quarter least 130 applicable conversion price applicable trading day would currently require shares trade 2196 ● five business days 10 consecutive trading days measurement period trading price per 1000 principal amount notes trading day measurement period less 98 product last reported sale price class stock applicable conversion rate day ● upon occurrence specified corporate events defined supplemental indenture july 15 2013 close business second scheduled trading day immediately preceding maturity date holders may convert notes time regardless foregoing circumstances upon conversion deliver cash aggregate principal amount convertible notes converted shares class stock respect remainder conversion obligation excess aggregate principal amount convertible notes converted convertible notes accounted combined instrument pursuant eitf issue 9019 “convertible bonds issuer option settle cash upon conversion” accordingly accounted entire agreement one debt instrument conversion feature meet requirements accounted separately derivative financial instrument tyson foods inc convertible note hedge warrant transactions connection issuance convertible notes entered separate convertible note hedge transactions respect common stock minimize potential economic dilution upon conversion convertible notes also entered separate warrant transactions recorded purchase note hedge transactions reduction capital excess par value net 36 million pertaining related deferred tax asset recorded proceeds warrant transactions increase capital excess par value subsequent changes fair value instruments recognized financial statements long instruments continue meet criteria equity classification purchased call options private transactions 94 million permit us acquire approximately 27 million shares class stock initial strike price 1689 per share subject adjustment call options allow us acquire number shares class stock initially equal number shares class stock issuable holders convertible notes upon conversion call options terminate upon maturity convertible notes sold warrants private transactions total proceeds 44 million warrants permit purchasers acquire approximately 27 million shares class stock initial exercise price 2231 per share subject adjustment warrants exercisable various dates january 2014 march 2014 transactions effect increase initial conversion price convertible notes 1689 per share 2231 per share thus reducing potential future economic dilution associated conversion convertible notes convertible notes warrants could dilutive effect earnings per share extent price class stock given measurement period exceeds respective exercise prices instruments call options excluded calculation diluted earnings per share impact antidilutive credit ratings september 4 2008 sp downgraded credit rating applicable senior notes due april 1 2016 notes “bbb“ “bb” downgrade increased interest rate 2016 notes 685 735 effective beginning six month interest payment due october 1 2008 november 13 2008 moody’s downgraded credit rating “ba1” “ba3” downgrade increased interest rate 2016 notes 735 785 effective beginning six month interest payment due april 1 2009 debt covenants debt agreements contain various covenants restrictive contain maximum allowed leverage ratios minimum required interest coverage ratio september 10 2008 amended revolving credit facility agreement provide less restrictive maximum allowed leverage ratio takes effect first quarter fiscal 2009 compliance covenants september 27 2008 tyson fresh meats inc tfm whollyowned subsidiary company fully unconditionally guaranteed 960 million 2016 notes following financial information presents condensed consolidating financial statements include tyson foods inc tfi parent tyson fresh meats inc tfm parent nonguarantor subsidiaries combined basis elimination entries necessary consolidate tfi parent tfm parent nonguarantor subsidiaries tyson foods inc consolidated basis provided alternative providing separate financial statements guarantor tyson foods inc tyson foods inc tyson foods inc tyson foods inc tyson foods inc tyson foods inc tyson foods inc note 11 comprehensive income loss components accumulated comprehensive income follows 1 fiscal 2007 includes adjustment 3 million net tax related initial adoption sfas 158 refer note 13 “pensions postretirement benefits” components comprehensive income loss follows note 12 stockbased compensation issue shares stockbased compensation plans issuing class stock treasury total number shares available future grant tyson foods inc 2000 stock incentive plan incentive plan 24823940 september 27 2008 stock options shareholders approved incentive plan january 2001 incentive plan administered compensation committee board directors compensation committee incentive plan includes provisions granting incentive stock options shares class stock price less fair market value date grant nonqualified stock options may granted price equal less fair market value class stock date option granted stock options incentive plan generally become exercisable ratably two five years date grant must exercised within 10 years date grant policy recognize compensation expense straightline basis requisite service period entire award tyson foods inc weightedaverage grantdate fair value options granted fiscal years 2008 2007 2006 respectively 522 585 686 fair value option grant established date grant using binomial lattice method grants awarded october 1 2005 blackscholes optionpricing model grants awarded october 1 2005 change binomial lattice method made better reflect exercise behavior top management use historical volatility period time comparable expected life option determine volatility assumptions expected life calculated based contractual term grant takes account historical exercise termination behavior participants riskfree interest rates based fiveyear treasury bond rate weighted average assumptions used fair value calculation outlined following table recognized stockbased compensation expense related stock options net income taxes 12 million 11 million 9 million respectively fiscal years 2008 2007 2006 7 million 6 million 5 million related tax benefit 25 million 19 million 33 million options vest fiscal years 2008 2007 2006 respectively fair value 15 million 9 million 16 million respectively fiscal years 2008 2007 2006 received cash 9 million 59 million 28 million respectively exercise stock options shares issued treasury stock option exercises related tax benefit realized stock options exercised fiscal years 2008 2007 2006 1 million 12 million 4 million total intrinsic value options exercised fiscal years 2008 2007 2006 3 million 31 million 10 million respectively sfas 123r requires cash flows resulting tax deductions excess compensation cost options excess tax deductions classified financing cash flows realized 0 9 million 4 million respectively excess tax deductions fiscal years 2008 2007 2006 september 27 2008 40 million total unrecognized compensation cost related stock option plans recognized weighted average period 27 years tyson foods inc restricted stock issue restricted stock market value date grant restrictions expiring periods july 1 2020 unearned compensation recognized vesting period particular grant using straightline method september 27 2008 37 million total unrecognized compensation cost related restricted stock awards recognized weighted average period 24 years recognized stockbased compensation expense related restricted stock net income taxes 11 million 14 million 15 million years 2008 2007 2006 respectively related tax benefit fiscal years 2008 2007 2006 6 million 9 million 9 million respectively 20 million 34 million 04 million respectively restricted stock awards vest fiscal years 2008 2007 2006 grant date fair value 24 million 37 million 5 million performancebased shares july 2003 compensation committee authorized us award performancebased shares class stock certain senior executive officers first business day company’s 2004 2005 2006 fiscal years compensation committee later authorized expansion awards include additional senior officers extend fiscal year 2008 vesting performancebased shares 2006 award two onehalf three years vesting 2007 2008 awards three years vesting period award subject attainment goals determined compensation committee prior date award review progress toward attainment goals quarter vesting period however attainment goals determined end vesting period shares vest ultimate cost equal class stock price date shares vest times number shares awarded performance grants market criteria grants market performance criteria ultimate cost fair value probable shares vest regardless shares actually vest total expense recorded related performancebased shares material fiscal years 2008 2007 2006 note 13 pensions postretirement benefits effective september 29 2007 adopted sfas 158 requires recognition pension obligations accumulated comprehensive income actuarial gains losses prior service costs credits transition assets obligations previously deferred reporting requirements sfas 87 sfas 106 sfas 132r following table reflects effects adoption sfas 158 consolidated balance sheet september 29 2007 september 27 2008 four noncontributory defined benefit pension plans consisting three funded qualified plans one unfunded nonqualified plan three qualified plans frozen provide benefits based formula using years service specified benefit rate effective january 1 2004 implemented nonqualified defined benefit plan certain tyson foods inc contracted officers uses formula based years service final average salary also postretirement benefit plans substantially employees may receive benefits satisfy applicable eligibility criteria postretirement healthcare plans contributory participants’ contributions adjusted deemed necessary defined contribution retirement incentive benefit programs various groups employees recognized expenses 48 million 46 million 55 million fiscal 2008 2007 2006 respectively use fiscal year end measurement date defined benefit plans postretirement plans generally recognize effect actuarial gains losses earnings immediately postretirement plans rather amortizing effect future periods postretirement benefits include postretirement medical costs life insurance benefit obligations funded status following table provides reconciliation changes plans’ benefit obligations assets funded status september 27 2008 september 29 2007 amounts recognized consolidated balance sheets consist increase decrease pretax minimum liability related pension plans included comprehensive income loss 9 million 9 million 16 million fiscal 2008 2007 2006 respectively september 27 2008 pension plans accumulated benefit obligation excess plan assets september 29 2007 three pension plans accumulated benefit obligation excess plan assets accumulated benefit obligation qualified pension plans 90 million 98 million september 27 2008 september 29 2007 respectively plans accumulated tyson foods inc benefit obligations excess plan assets follows net periodic benefit cost components net periodic benefit cost pension postretirement benefit plans recognized consolidated statements operations follows assumptions weighted average assumptions follows determine rateofreturn assets assumption first examined historical rates return various asset classes determined longterm projected rateofreturn based expected returns next five 10 years three postretirement health plans two consist fixed annual payments account 33 million postretirement medical obligation september 27 2008 healthcare cost trend required determine obligation remaining plan accounts 14 million postretirement medical obligation september 27 2008 plan covers retirees yet qualify medicare uses healthcare cost trend 10 current year grading 6 fiscal 2012 decision made fourth quarter fiscal 2007 outsource postage 65 plan third party insurer decision effectively settled plan fiscal 2007 recognized gain approximately 27 million related plan change onepercentage point change assumed healthcare cost trend rate would immaterial impact postretirement benefit obligation total service interest cost plan assets fair value plan assets domestic pension benefit plans 64 million 80 million september 27 2008 september 29 2007 respectively following table sets forth actual target asset allocation pension plan assets tyson foods inc foreign subsidiary pension plan 15 million 17 million plan assets september 27 2008 september 29 2007 respectively plan’s assets held annuity contracts consistent target asset allocation plan trustees established set investment objectives related assets pension plans regularly monitor performance funds portfolio managers objectives pension assets 1 provide growth capital income 2 achieve target weighted average annual rate return competitive funds similar investment objectives 3 diversify reduce risk investment objectives target asset allocation adopted january 2004 amended january 2008 contributions policy fund least minimum contribution required meet applicable federal employee benefit local tax laws sole discretion may time fund additional amounts expected contributions pension plans fiscal 2009 approximately 2 million fiscal 2008 2007 2006 funded 2 million 5 million 0 respectively defined benefit plans estimated future benefit payments following benefit payments expected paid benefit payments postretirement benefit plans expected offset medicare part subsidies 2009 thereafter note 14 supplemental cash flow information following table summarizes cash payments interest income taxes tyson foods inc note 15 transactions related parties operating leases farms equipment facilities tyson director company john tyson chairman company certain members families randal w tyson testamentary trust total payments 3 million fiscal 2008 5 million fiscal 2007 8 million fiscal 2006 paid entities parties ownership interest 2008 lawsuit captioned tyson foods inc consolidated shareholder’s litigation settled pursuant settlement tyson limited partnership paid us 45 million note 16 income taxes detail provision benefit income taxes continuing operations consists reasons difference statutory federal income tax rate effective income tax rate continuing operations follows increase state valuation allowance increased fiscal 2008 tax expense 8 million nondeductible activity relating companyowned life insurance increased fiscal 2008 tax expense 6 million addition fin 48 unrecognized tax benefits fiscal 2008 caused net increase income tax expense approximately 7 million additionally estimated general business credits decreased fiscal 2008 tax expense 6 million fiscal 2007 discovered certain population tax cost accumulated depreciation values accurately recorded primarily related property plant equipment system conversion 1999 system conversion impact recorded book value property plant equipment result net tax basis property plant equipment overstated caused deferred tax liability financial statements understated fiscal 2007 increased deferred tax liabilities 17 million recognized additional tax expense 17 million fiscal 2007 effective tax rate reduced 46 due reduction income tax reserves management deemed longer required net reduction current income tax expense approximately 20 million related internal revenue service examinations appeals united states tax court settlement activity well state income tax examination settlements additional related adjustments resulted 28 million reduction goodwill fiscal 2006 completed review tax account balances result reduced income tax benefit 15 million included 12 million related additional tax reserves foreign operations 3 million related cumulative adjustment recorded tax balances attributable book tax differences associated property plant equipment tyson foods inc including synthetic leases certain acquired deferred tax liabilities additional adjustments resulted increase goodwill 12 million deferred tax liabilities 3 million reduction property plant equipment 9 million deferred income taxes recognized future tax consequences attributable differences financial statement carrying amounts existing assets liabilities respective tax bases deferred tax assets liabilities measured using tax rates expected apply taxable income years temporary differences expected recovered settled tax effects major items recorded deferred tax assets liabilities net deferred tax liabilities included current assets current liabilities deferred income taxes consolidated balance sheets deferred tax liability suspended taxes conversion accrual method represents 1987 change cash accrual method accounting recognized 2027 accumulated undistributed earnings foreign subsidiaries aggregating approximately 219 million 215 million september 27 2008 september 29 2007 respectively earnings expected indefinitely reinvested outside united states earnings distributed form dividends otherwise would subject federal income taxes subject adjustment foreign tax credits state income taxes withholding taxes payable various foreign countries currently practicable estimate tax liability might payable repatriation foreign earnings tax effected valuation allowance 49 million consists 30 million state tax credit net operating loss carryforwards 3 million federal net operating loss carryforwards 16 million international net operating loss carryforwards state tax credit net operating loss carryforwards expire fiscal years 2009 2027 september 27 2008 considering utilization restrictions gross federal tax net operating loss carryforwards approximated 165 million gross federal net operating loss carryforwards 8 million subject utilization limitations due ownership changes may utilized offset future taxable income subject limitations carryforwards expire fiscal years 2009 2024 49 million valuation allowance described includes 3 million subsequently recognized allocated reduce goodwill recorded time acquisition tfm following table summarizes activity related gross unrecognized tax benefits beginning fiscal 2008 september 27 2008 tyson foods inc classify interest penalties unrecognized tax benefits income tax expense september 27 2008 adoption fin 48 beginning fiscal 2008 tax benefits 67 million 70 million respectively accrued interest penalties unrecognized tax benefits september 27 2008 subject income tax examinations us federal income taxes fiscal years 1998 2007 foreign state local income taxes fiscal years 2001 2007 fiscal 2009 tax audit resolutions could potentially reduce unrecognized tax benefits approximately 26 million either tax positions sustained audit agree disallowance note 17 earnings loss per share earnings weighted average common shares used computation basic diluted earnings loss per share follows approximately 10 million 4 million 28 million respectively fiscal years 2008 2007 2006 option shares antidilutive included dilutive earnings per share calculation two classes capital stock class stock class b stock cash dividends cannot paid holders class b stock unless simultaneously paid holders class stock per share amount cash dividends paid holders class b stock cannot exceed 90 cash dividend paid holders class stock allocate undistributed earnings losses based upon 1 09 ratio per share class stock class b stock respectively allocate undistributed earnings losses based ratio due historical dividend patterns voting control class b shareholders contractual limitations dividends class b stock tyson foods inc note 18 segment reporting operate four segments chicken beef pork prepared foods measure segment profit operating income loss chicken operations include breeding raising chickens well processing live chickens fresh frozen valueadded chicken products logistics operations move products supply chain products marketed domestically food retailers foodservice distributors restaurant operators noncommercial foodservice establishments schools hotel chains healthcare facilities military food processors well international markets throughout world also includes sales allied products chicken breeding stock subsidiary beef operations include processing live fed cattle fabricating dressed beef carcasses primal subprimal meat cuts caseready products segment also includes sales allied products hides variety meats well logistics operations move products supply chain products marketed domestically food retailers foodservice distributors restaurant operators noncommercial foodservice establishments schools hotel chains healthcare facilities military food processors well international markets throughout world allied products marketed manufacturers pharmaceuticals technical products pork operations include processing live market hogs fabricating pork carcasses primal subprimal cuts caseready products segment also includes live swine group related allied product processing activities logistics operations move products supply chain products marketed domestically food retailers foodservice distributors restaurant operators noncommercial foodservice establishments schools hotel chains healthcare facilities military food processors well international markets throughout world sell allied products pharmaceutical technical products manufacturers well limited number live swine pork processors prepared foods prepared foods operations include manufacturing marketing frozen refrigerated food products logistics operations move products supply chain products include pepperoni bacon beef pork pizza toppings pizza crusts flour corn tortilla products appetizers prepared meals ethnic foods soups sauces side dishes meat dishes processed meats products marketed domestically food retailers foodservice distributors restaurant operators noncommercial foodservice establishments schools hotel chains healthcare facilities military food processors well international markets throughout world tyson foods inc excludes depreciation related discontinued operation 9 million 10 million 9 million fiscal years 2008 2007 2006 respectively b excludes assets held sale related discontinued operation 159 million 164 million 158 million fiscal years 2008 2007 2006 respectively c excludes additions property plant equipment related discontinued operation 2 million 6 million 3 million fiscal years 2008 2007 2006 respectively fourth quarter fiscal 2008 began manage report operating results identifiable assets logistics operations segment product moved relates result operating segments reflect logistics operations previously included prior periods restated reflect change allocate expenses related corporate activities segments related assets additions property plant equipment remain pork segment sales 517 million 515 million 467 million fiscal years 2008 2007 2006 respectively transactions operating segments beef segment sales 142 million 111 million 104 million fiscal years 2008 2007 2006 respectively transactions operating segments sales intersegment transactions sold market prices excluded segment sales table largest customer walmart stores inc accounted 133 134 130 consolidated sales fiscal years 2008 2007 2006 respectively sales walmart stores inc included chicken beef pork prepared foods segments extended discontinuance sales customer could replaced material impact operations majority operations domiciled united states approximately 98 sales external customers fiscal years 2008 2007 2006 sourced united states approximately 34 billion 35 billion 37 billion respectively property plant equipment located united states september 27 2008 september 29 2007 september 30 2006 approximately 139 million 125 million 116 million property plant equipment located foreign countries primarily mexico fiscal years ended 2008 2007 2006 respectively sell certain products foreign markets primarily canada central america china european union japan mexico middle east russia south korea taiwan export sales totaled 32 billion 25 billion 20 billion fiscal 2008 2007 2006 respectively substantially export sales facilitated unaffiliated brokers marketing associations foreign sales staffs foreign sales products produced country united states less 10 tyson foods inc consolidated sales fiscal years 2008 2007 2006 approximately 22 10 income continuing operations income taxes fiscal 2008 2007 respectively foreign operations fiscal 2006 income continuing operations income taxes related foreign operations 13 million note 19 quarterly financial data unaudited tyson foods inc june 2008 executed letter intent sell beef processing cattle feed yard fertilizer assets lakeside farm industries ltd reporting lakeside discontinued operation restated quarterly financial data accordingly first quarter fiscal 2008 income continuing operations income taxes includes 18 million nonoperating gain related sale investment 6 million severance charge related fast initiative second quarter fiscal 2008 income continuing operations income taxes includes 47 million charges related restructuring beef plant operation closing poultry plant impairment packaging equipment software impairments third quarter fiscal 2008 loss continuing operations income taxes includes 13 million charges related flood damage impairment unimproved real property fourth quarter fiscal 2008 income continuing operations income taxes includes 10 million charge related intangible asset impairments fourth quarter fiscal 2007 income continuing operations includes tax expense 17 million related fixed asset tax cost correction note 20 capital structure september 2008 issued 224 million shares class stock part public offering shares offered 1275 net proceeds underwriting discounts commissions approximately 274 million used toward repayment borrowings accounts receivable securitization facility general corporate purposes entity controlled tyson purchased three million shares class stock offering fiscal 2007 tyson limited partnership converted 159 million shares class b stock class stock oneforone basis fiscal 2006 tyson limited partnership converted 15 million shares class b stock class stock oneforone basis additionally tyson director converted 750000 shares class b stock class stock oneforone basis note 21 contingencies listed certain claims made company subsidiaries opinion made appropriate adequate reserves accruals disclosures necessary believe probability material loss beyond amounts accrued remote however ultimate liability matters uncertain accruals reserves adequate adverse outcome could material effect consolidated financial condition results operations believe substantial defenses claims made intend vigorously defend cases 2000 wage hour division us department labor dol conducted industrywide investigation poultry producers including us ascertain compliance various wage hour issues part investigation dol inspected 14 processing facilities may 9 2002 dol filed civil complaint styled elaine l chao secretary labor united states department labor v tyson foods inc us district court northern district alabama plaintiffs allege complaint violated overtime provisions federal fair labor standards act chickenprocessing facility blountsville alabama complaint contain definite statement acts constituted alleged violations statute although secretary labor indicated discovery case seeks require us compensate hourly chicken processing workers pre postshift clothes changing washing related activities one two unpaid 30minute meal periods secretary labor seeks unspecified back wages employees blountsville facility period two years prior date filing complaint additional amount unspecified liquidated damages injunction future violations facility chicken processing facilities operate district court granted company’s motion partial summary judgment part ruling second meal period appropriately characterized noncompensable reserving remaining issues trial presently set january 5 2009 several private lawsuits pending us alleging failed compensate poultry plant employees hours worked including overtime compensation violation fair labor standards act lawsuits include mh fox et al v tyson foods inc fox filed june 22 1999 us district court northern district alabama deasencio v tyson foods inc deasencio filed august 22 2000 us district court eastern district pennsylvania matters involves similar allegations employees paid time takes engage pre postshift activities changing protective sanitary clothing obtaining clothing walking changing area work areas break areas plaintiffs lawsuits seek sought act class representatives behalf current former employees allegedly paid time worked seek back wages liquidated damages pre postjudgment interest attorneys’ fees fox district court denied class certification november 16 2006 ordered cases 10 named plaintiffs matter proceed individually home jurisdictions named plaintiffs two cases brothers hatchett tried november 2007 alabama jury verdicts favor plaintiffs district court recently entered judgment final cases fox company made offer judgment fox thereby avoiding trial however district court must determine amount attorneys’ fees costs awarded plaintiffs deasencio plaintiffs appealed jury verdict final judgment entered favor june 22 2006 district court september 7 2007 us tyson foods inc court appeals third circuit reversed jury verdict remanded case district court proceedings sought rehearing en banc denied court appeals october 5 2007 united states supreme court denied petition writ certiorari june 9 2008 addition fox deasencio additional private lawsuits filed us since beginning fiscal 2007 allege failed compensate poultry plant employees hours worked including overtime compensation violation fair labor standards act lawsuits sheila ackles et al v tyson foods inc n dist alabama october 23 2006 mccluster et al v tyson foods inc dist georgia december 11 2006 dobbins et al v tyson chicken inc et al n dist alabama december 21 2006 buchanan et al v tyson chicken inc et al potter et al v tyson chicken inc et al n dist alabama december 22 2006 jones et al v tyson foods inc et al walton et al v tyson foods inc et al williams et al v tyson foods inc et al dist mississippi february 9 2007 balch et al v tyson foods inc e dist oklahoma march 1 2007 adams et al v tyson foods inc w dist arkansas march 2 2007 atkins et al v tyson foods inc dist georgia march 5 2007 laney et al v tyson foods inc williams et al v tyson foods inc dist georgia may 23 2007 similar fox deasencio matters involves allegations employees paid time takes engage pre postshift activities changing protective sanitary clothing obtaining clothing walking changing area work areas break areas plaintiffs lawsuits seek sought act class representatives behalf current former employees allegedly paid time worked seek back wages liquidated damages pre postjudgment interest attorneys’ fees april 6 2007 filed motion transfer named actions coordinated pretrial proceedings judicial panel multidistrict litigation motion transfer granted august 17 2007 cases listed five cases subsequently filed involving allegations including armstrong et al v tyson foods inc w dist tennessee january 30 2008 maldonado et al v tyson foods inc e dist tennessee january 31 2008 white et al v tyson foods inc e dist texas february 1 2008 meyer et al v tyson foods inc w dist missouri february 2 2008 leak et al v tyson foods inc w dist north carolina february 6 2008 transferred us district court middle district georgia tyson foods inc fair labor standards act litigation “mdl proceedings” january 2 2008 judge mdl proceedings issued joint scheduling case management order granted conditional class certification called notice given potential putative class members via third party administrator potential class members april 18 2008 “optin” class approximately 13800 employees former employees filed consents “optin” class april 18 2008 parties began conducting discovery period 240 days eight facilities corporate headquarters springdale arkansas discovery may conducted additional facilities future october 15 2008 judge mdl proceedings denied plaintiffs’ motion equitable tolling reduces time period plaintiffs may seek damages june 19 2005 attorney general secretary environment state oklahoma filed complaint us district court northern district oklahoma us three subsidiaries six poultry integrators complaint subsequently amended complaint asserts number state federal causes action including limited counts comprehensive environmental response compensation liability act “cercla” resource conservation recovery act “rcra” statelaw public nuisance theories amended complaint asserts defendants certain contract growers named complaint polluted surface waters groundwater associated drinking water supplies illinois river watershed irw land application poultry litter oklahoma asserts alleged pollution also caused extensive injury environment including soils sediments irw defendants unjustly enriched oklahomas claims cover entire irw encompasses one million acres land natural resources including lakes waterways contained therein oklahoma seeks wideranging relief including injunctive relief compensatory punitive damages attorneys fees disgorgement defendants denied liability asserted various defenses filed thirdparty complaint asserts claims persons entities whose activities may contributed pollution alleged amended complaint district court stayed proceedings third party complaint pending resolution oklahomas claims defendants november 14 2007 oklahoma filed motion rcra requesting preliminary injunction halt land application poultry litter irw oklahomas motion preliminary injunction asserted bacteria poultry litter causing imminent substantial endangerment human health environment throughout irw multiweek evidentiary hearing preliminary injunction completed march 6 2008 september 29 2008 court entered order denying preliminary injunction october 17 2008 oklahoma filed notice appeal district court’s denial preliminary injunction united states court appeals tenth circuit discovery oklahomas case defendants ongoing trial currently scheduled september 2009 currently pending eleven separate wage hour actions involving tfm’s plants located lexington nebraska lopez et al v tyson foods inc district nebraska june 30 2006 garden city emporia kansas garcia et al v tyson foods inc tyson fresh meats inc district kansas may 15 2006 storm lake iowa sharp et al v tyson foods inc nd iowa february 6 2007 columbus junction iowa robinson et al v tyson foods inc dba tyson fresh meats inc sd iowa september 12 2007 joslin illinois murray et al v tyson foods inc cd illinois january 2 2008 dakota city nebraska gomez et al v tyson foods inc district nebraska january 16 2008 madison nebraska acosta et al v tyson foods inc dba tyson fresh meats inc district nebraska february 29 2008 perry waterloo iowa edwards et al v tyson foods inc dba tyson fresh meats inc sd iowa march 20 2008 council bluffs iowa salazar et al v tyson foods inc dba tyson fresh meats inc sd iowa april 29 2008 logansport indiana carter et al v tyson foods inc tyson fresh meats inc tyson foods inc nd indiana april 29 2008 goodlettsville tennessee cunningham v tyson fresh meats inc md tennessee may 22 2008 exception cunningham actions allege tfm failed pay employees hours worked including overtime compensation time takes change protective work uniforms safety equipment sanitary protective clothing worn employees walking changing area work areas break areas violation fair labor standards act analogous state laws plaintiffs seek back wages liquidated damages pre postjudgment interest attorneys’ fees costs cunningham alleges tfm failed pay quality assurance technicians overtime compensation hours worked excess forty hours work week tfm filed motion partial summary judgment garcia based upon injunction entered reich v ibp outlined types activities issue compensable district court kansas denied motion tfm appealed tenth circuit court appeals arguing district court’s ruling effect improperly modifying injunction july 23 2008 tyson filed motion transfer eleven actions district kansas consolidated pretrial proceedings october 9 2008 motion transfer denied judicial panel multidistrict litigation effect order stays previously entered individual actions lifted case resume november 21 2002 10 current former hourly employees tfm case ready facility goodlettsville tennessee filed putative class action lawsuit styled emily jordan et al v ibp inc tyson foods inc us district court middle district tennessee us claiming violations overtime provisions fair labor standards act failing pay employees hours worked suit alleges employees paid time takes collect assemble put take wash health safety production gear beginning end shifts meal period finally suit alleges deduct 30 minutes per day employees’ paychecks regardless whether employees use full 30minute period meal plaintiffs seek declaration defendants comply fair labor standards act award unspecified amount back pay compensation benefits unpaid entitlements liquidated damages prejudgment postjudgment interest attorney fees costs november 17 2003 district court conditionally certified collective action based clothes changing washing activities unpaid production work meal periods since plant operations began april 2001 approximately 650 current former employees opted class august 20 2007 parties filed motions summary judgment court granted part denied part parties’ motions partial summary judgment march 13 2008 jury trial set begin september 16 2008 parties resolved litigation september 25 2008 court entered agreed order dismissal prejudice approved confidential settlement agreement parties note 22 subsequent events october 2008 dynamic fuels received 100 million gulf opportunity zone taxexempt bonds made available federal government regions affected hurricanes katrina rita 2005 floating rate bonds due october 1 2033 initial interest rate 13 issued letter credit guarantee entire bond issuance exchange guarantee syntroleum corporation 50 percent investor dynamic fuels issued us eight million syntroleum stock warrants exercise price 001 per share october 2008 completed acquisition three vertically integrated poultry companies southern brazil purchase price 80 million well additional 15 million contingent purchase price based production volumes payable fiscal 2010 transactions include acquisitions macedo agroindustrial avicola itaiopolis frangobras combined expect companies sales 150175 million fiscal 2009 tyson foods inc report independent registered public accounting firm board directors shareholders tyson foods inc audited accompanying consolidated balance sheets tyson foods inc september 27 2008 september 29 2007 related consolidated statements operations shareholders equity cash flows three years period ended september 27 2008 audits also included financial statement schedule listed index item 15a financial statements schedule responsibility companys management responsibility express opinion financial statements schedule based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion financial statements referred present fairly material respects consolidated financial position tyson foods inc september 27 2008 september 29 2007 consolidated results operations cash flows three years period ended september 27 2008 conformity us generally accepted accounting principles also opinion related financial statement schedule considered relation basic financial statements taken whole presents fairly material respects information set forth therein described note 2 consolidated financial statements company adopted statement financial accounting standards interpretation 48 “accounting uncertainty income taxes” 2008 also audited accordance standards public company accounting oversight board united states tyson foods inc’s internal control financial reporting september 27 2008 based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission report dated november 17 2008 expressed unqualified opinion thereon ernst young llp rogers arkansas november 17 2008 tyson foods inc report independent registered public accounting firm board directors shareholders tyson foods inc audited tyson foods inc’s internal control financial reporting september 27 2008 based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission coso criteria tyson foods inc’s management responsible maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included accompanying report management caption “management’s report internal control financial reporting” responsibility express opinion company’s internal control financial reporting based audit conducted audit accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether effective internal control financial reporting maintained material respects audit included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk performing procedures considered necessary circumstances believe audit provides reasonable basis opinion company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles company’s internal control financial reporting includes policies procedures 1 pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company 2 provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company 3 provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate opinion tyson foods inc maintained material respects effective internal control financial reporting september 27 2008 based coso criteria also audited accordance standards public company accounting oversight board united states consolidated balance sheets tyson foods inc september 27 2008 september 29 2007 related consolidated statements operations shareholders’ equity cash flows three years period ended september 27 2008 report dated november 17 2008 expressed unqualified opinion thereon ernst young llp rogers arkansas november 17 2008 tyson foods inc item 9item 8 financial statements supplementary data consolidated statements income consolidated balance sheets consolidated statements shareholders equity consolidated statements cash flows notes consolidated financial statements note 1 business summary significant accounting policies description business tyson foods inc collectively “company” “we” “us” “our” founded 1935 world headquarters springdale arkansas one world’s largest processor marketer chicken beef pork secondlargest food production company fortune 500 produce wide variety brand name proteinbased prepared food products marketed united states approximately 90 countries around world consolidation consolidated financial statements include accounts whollyowned subsidiaries well majorityowned subsidiaries controlling interest significant intercompany accounts transactions eliminated consolidation investment joint venture dynamic fuels llc dynamic fuels 50 percent ownership interest dynamic fuels qualifies variable interest entity effective june 30 2008 began consolidating dynamic fuels since primary beneficiary fiscal year utilize 52 53week accounting period ending saturday closest september 30 companys accounting cycle resulted 53week year fiscal year 2009 52week year fiscal years 2008 2007 reclassification certain reclassifications made prior periods conform current presentations consolidated financial statements effect reclassifications significant consolidated financial statements discontinued operation june 2008 executed letter intent xl foods inc xl foods sell beef processing cattle feed yard fertilizer assets three alberta canada subsidiaries collectively lakeside part beef segment march 2009 completed sale sold assets related inventories financial statements report lakeside discontinued operation see note 4 discontinued operation notes consolidated financial statements information cash equivalents cash equivalents consist investments shortterm highly liquid securities original maturities three months less made part cash management activity carrying values assets approximate fair market values primarily utilize cash management system series separate accounts consisting lockbox accounts receiving cash concentration accounts funds moved several “zerobalance” disbursement accounts funding payroll accounts payable livestock procurement grower payments etc result cash management system checks issued presented banks payment may result negative book cash balances negative book cash balances included trade accounts payable current liabilities october 3 2009 september 27 2008 checks outstanding excess related book cash balances totaled approximately 254 million 322 million respectively accounts receivable record accounts receivable net realizable value includes appropriate allowance estimated uncollectible accounts reflect loss anticipated accounts receivable balances charged provision doubtful accounts calculate allowance based history writeoffs level past due accounts relationships economic status customers october 3 2009 september 27 2008 allowance uncollectible accounts 33 million 12 million respectively generally collateral receivables periodically evaluate credit worthiness customers inventories processed products livestock supplies valued lower cost market cost includes purchased raw materials live purchase costs growout costs primarily feed contract grower pay catch haul costs labor manufacturing production overhead related purchase production inventories property plant equipment property plant equipment stated cost primarily depreciated straightline method using estimated lives buildings leasehold improvements 10 33 years machinery equipment three 12 years land improvements three 20 years major repairs maintenance costs significantly extend useful life related assets capitalized normal repairs maintenance costs charged operations review carrying value longlived assets balance sheet date indication impairment exists recoverability assessed using undiscounted cash flows based historical results current projections earnings interest taxes measure impairment excess carrying cost fair value asset fair value asset measured using discounted cash flows future operating results based discount rate corresponds cost capital goodwill intangible assets goodwill indefinite life intangible assets initially recorded fair value amortized reviewed impairment least annually frequently impairment indicators arise goodwill allocated reporting unit follow twostep process evaluate potential impairment exists first step identify potential impairment exists comparing fair value reporting unit carrying amount including goodwill fair value reporting unit exceeds carrying amount goodwill reporting unit considered potential impairment second step impairment test necessary however carrying amount reporting unit exceeds fair value second step performed determine goodwill impaired measure amount impairment loss recognize second step compares implied fair value goodwill carrying amount goodwill implied fair value goodwill exceeds carrying amount goodwill considered impaired however carrying amount goodwill exceeds implied fair value impairment loss recognized amount equal excess implied fair value goodwill determined manner amount goodwill recognized business combination ie fair value reporting unit allocated assets liabilities including unrecognized intangible assets reporting unit acquired business combination fair value reporting unit purchase price paid acquire reporting unit elected make first day fourth quarter annual impairment assessment date goodwill indefinite life intangible assets estimated fair value reporting units using discounted cash flow analysis requires us make various judgmental estimates assumptions sales operating margins growth rates discount factors recent disruptions global credit financial markets deterioration economic conditions led increase discount rate used 2009 annual goodwill impairment analysis significant changes key assumptions estimates result increased discount rate failed first step 2009 goodwill impairment analysis beef reporting unit performed second step second step resulted 560 million noncash partial impairment beef reporting units goodwill fiscal 2009 2008 2007 reporting units passed first step goodwill impairment analysis exception beef reporting unit fiscal 2009 estimating fair value beef chicken reporting units assumed operating margins future years excess annual margins realized recent year fair value estimates reporting units assume normalized operating margin assumptions improved operating efficiencies based longterm expectations operating margins historically realized beef chicken industries inherent estimates assumptions used determining fair value reporting units outside control management including interest rates cost capital tax rates credit ratings believe made reasonable estimates assumptions calculate fair value reporting units possible material change could occur actual results consistent estimates assumptions used calculate fair value may required perform second step future years could result additional material impairments goodwill indefinite life intangible assets carrying value intangible asset exceeds fair value impairment loss recognized amount equal excess fair value trademarks determined using royalty rate method based expected revenues trademark investments joint ventures entities use cost method accounting voting interests less 20 percent equity method accounting voting interests excess 20 percent controlling interest variable interest primary beneficiary investments joint ventures entities reported consolidated balance sheets assets investments marketable debt securities october 3 2009 september 27 2008 81 million 94 million respectively classified assets consolidated balance sheets maturities ranging 47 years determined marketable debt securities availableforsale investments reported fair value based quoted market prices balance sheet date unrealized gains losses net tax recorded comprehensive income amortized cost debt securities adjusted amortization premiums accretion discounts maturity amortization recorded interest income cost securities sold based specific identification method realized gains losses sale debt securities declines value judged temporary recorded net basis income interest dividends securities classified availableforsale recorded interest income accrued self insurance use combination insurance selfinsurance mechanisms effort mitigate potential liabilities health welfare workers’ compensation auto liability general liability risks liabilities associated risks retained estimated part considering claims experience demographic factors severity factors actuarial assumptions capital stock two classes capital stock class common stock 010 par value class stock class b common stock 010 par value class b stock holders class b stock may convert stock class stock shareforshare basis holders class b stock entitled 10 votes per share holders class stock entitled one vote per share matters submitted shareholders approval october 3 2009 members tyson family beneficially aggregate 9997 outstanding shares class b stock 236 outstanding shares class stock giving tyson family control approximately 70 total voting power outstanding voting stock cash dividends cannot paid holders class b stock unless simultaneously paid holders class stock per share amount cash dividend paid holders class b stock cannot exceed 90 cash dividend simultaneously paid holders class stock pay quarterly cash dividends class b shareholders paid class dividends per share 016 class b dividends per share 0144 fiscal years 2009 2008 2007 class b stock considered participating security requiring use twoclass method computation basic earnings per share twoclass computation method period reflects cash dividends paid class stock plus amount allocated undistributed earnings losses computed using participation percentage reflects dividend rights class stock basic earnings per share computed using twoclass method periods presented shares class b stock considered participating convertible securities since shares class b stock convertible shareforshare basis shares class stock diluted earnings per share computed assuming conversion class b shares class shares beginning period financial instruments purchase certain commodities grains livestock course normal operations part commodity risk management activities use derivative financial instruments primarily futures options reduce exposure various market risks related purchases well changes foreign currency exchange rates contract terms financial instrument qualifying hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts designated highly effective meeting risk reduction correlation criteria recorded using hedge accounting derivative instrument accounted hedge changes fair value instrument offset either change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion instrument’s change fair value immediately recognized earnings component cost sales instruments hold part risk management activities meet criteria hedge accounting marked fair value unrealized gains losses reported currently earnings changes market value derivatives used risk management activities relating forward sales contracts recorded sales changes market value derivatives used risk management activities surrounding inventories hand anticipated purchases inventories supplies recorded cost sales generally hedge anticipated transactions beyond 18 months revenue recognition recognize revenue title risk loss transferred customers generally delivery based terms sale revenue recognized net amount estimated received deducting estimated amounts discounts trade allowances product terms litigation reserves variety legal proceedings pending threatened us accruals recorded probable liability incurred amount liability reasonably estimated based current law progress case opinions views legal counsel advisers experience similar matters intended response litigation amounts discounted exclusive claims third parties adjusted periodically assessment efforts progress additional information becomes available expense amounts administering litigating claims incurred accruals legal proceedings included current liabilities consolidated balance sheets freight expense freight expense associated products shipped customers recognized cost sales advertising promotion expenses advertising promotion expenses charged operations period incurred customer incentive trade promotion activities recorded reduction sales based amounts estimated due customers based primarily historical utilization redemption rates advertising promotional activities recorded selling general administrative expenses advertising promotion expenses fiscal years 2009 2008 2007 491 million 495 million 467 million respectively use estimates consolidated financial statements prepared conformity accounting principles generally accepted united states require us make estimates assumptions affect amounts reported consolidated financial statements accompanying notes actual results could differ estimates recently issued accounting pronouncements december 2007 financial accounting standards board fasb issued guidance establish accounting reporting standards noncontrolling interest subsidiary deconsolidation subsidiary guidance clarifies noncontrolling interest subsidiary ownership interest consolidated entity may reported equity consolidated financial statements rather liability mezzanine section liabilities equity guidance also requires consolidated net income reported amounts include amounts attributable parent noncontrolling interest statement expected material impact consolidated financial statements however certain financial statement presentation changes additional required disclosures made guidance effective fiscal years interim periods within fiscal years beginning december 15 2008 therefore adopt beginning fiscal 2010 december 2007 fasb issued guidance establishing principles requirements acquirer business combination 1 recognizes measures financial statements identifiable assets acquired liabilities assumed noncontrolling interest acquiree 2 recognizes measures goodwill acquired business combination gain bargain purchase 3 determines information disclose enable users financial statements evaluate nature financial effects business combination guidance effective business combinations acquisition date beginning first annual reporting period beginning december 15 2008 therefore adopt guidance business combinations entered beginning fiscal 2010 may 2008 fasb issued guidance specifies issuers convertible debt instruments may settled cash upon conversion including partial cash settlement separately account liability equity components manner reflect entity’s nonconvertible debt borrowing rate interest cost recognized subsequent periods amount allocated equity component represents discount debt amortized interest expense using effective interest method life debt guidance effective financial statements issued fiscal years beginning december 15 2008 interim periods within fiscal years early adoption permitted adopt provisions guidance beginning first quarter fiscal 2010 provisions required applied retrospectively periods presented upon retrospective adoption effective interest rate 325 convertible senior notes due 2013 826 would result recognition 92 million discount notes offsetting tax amount 56 million recorded capital excess par value discount accreted fiveyear term convertible notes effective interest rate materially impact fiscal 2008 interest expense result estimated 17 million noncash increase reported fiscal year 2009 interest expense december 2008 fasb issued guidance requiring additional disclosures assets held employer’s defined benefit pension postretirement plan guidance effective fiscal years ending december 15 2009 early adoption permitted adopt disclosure requirements beginning fiscal 2010 annual report june 2009 fasb issued guidance removing concept qualifying specialpurpose entity qspe guidance also clarifies requirements isolation limitations portions financial assets eligible sale accounting guidance effective fiscal years beginning november 15 2009 accordingly adopt guidance fiscal year 2011 process evaluating potential impacts june 2009 fasb issued guidance requiring analysis determine whether variable interest gives entity controlling financial interest variable interest entity guidance requires ongoing reassessment eliminates quantitative approach previously required determining whether entity primary beneficiary guidance effective fiscal years beginning november 15 2009 accordingly adopt guidance fiscal year 2011 process evaluating potential impacts subsequent events evaluated subsequent events time filing november 23 2009 represents date consolidated financial statements issued note 2 change accounting principles september 2006 fasb issued guidance using fair value measure assets liabilities guidance also requires expanded information extent companies measure assets liabilities fair value information used measure fair value effect fair value measurements earnings guidance applies whenever standards require permit assets liabilities measured fair value beginning fiscal 2009 partially adopted standard allowed delayed effective date nonfinancial assets liabilities beginning fiscal 2009 applied provisions financial instruments impact material required apply fair value measurements nonfinancial assets liabilities beginning fiscal 2010 adoption significant impact consolidated financial statements february 2007 fasb issued guidance providing companies option report selected financial assets liabilities firm commitments nonfinancial warranty insurance contracts fair value contractbycontract basis changes fair value recognized earnings reporting period adopted beginning fiscal 2009 elect fair value option therefore impact consolidated financial statements april 2007 fasb issued guidance requires entities offset fair value amounts recognized derivative receivables payables also offset fair value amounts recognized right reclaim cash collateral counterparty master netting agreement applied provisions guidance consolidated financial statements beginning fiscal 2009 restate prior periods impact material march 2008 fasb issued guidance disclosures derivative instruments hedging activities guidance establishes enhanced disclosure requirements 1 entity uses derivative instruments 2 derivative instruments related hedged items accounted 3 derivative instruments related hedged items affect entity’s financial position financial performance cash flows guidance effective financial statements issued fiscal years interim periods beginning november 15 2008 therefore adopted fiscal 2009 see note 6 derivative financial instruments required disclosures april 2009 fasb issued guidance regarding recognition presentation otherthantemporary impairments standard provides new guidance recognition presentation otherthantemporary impairment debt securities classified availableforsale heldtomaturity provides certain new disclosure requirements debt equity securities standard effective interim annual periods ending june 15 2009 early adoption permitted periods ending march 15 2009 adopted fiscal 2009 adoption significant impact consolidated financial statements april 2009 fasb issued additional guidance estimating fair value assets liabilities markets experienced significant reduction volume activity relation normal activity guidance effective interim annual periods ending june 15 2009 early adoption permitted periods ending march 15 2009 adopted fiscal 2009 adoption significant impact consolidated financial statements april 2009 fasb issued guidance require disclosures fair value financial instruments interim financial statements guidance effective interim periods ending june 15 2009 early adoption permitted periods ending march 15 2009 adopted guidance fiscal 2009 made required disclosures applicable interim reports may 2009 fasb issued guidance establishing general standards accounting disclosure events occur balance sheet date financial statements issued standard effective interim annual periods ending june 15 2009 adopted guidance fiscal 2009 see “subsequent events” note 1 business summary significant accounting policies required disclosures note 3 acquisitions august 2009 completed establishment related joint ventures china referred shandong tyson xinchang foods aggregate purchase price 60 equity interest 21 million excludes 93 million cash transferred joint venture future capital needs preliminary purchase price included 29 million allocated intangible assets 19 million allocated goodwill well assumption 76 million current longterm debt october 2008 acquired three vertically integrated poultry companies southern brazil macedo agroindustrial avicola itaiopolis frangobras aggregate purchase price 67 million including 4 million mandatory deferred payments made fiscal 2011 addition 15 million contingent purchase price based production volumes payable fiscal 2011 purchase price included 23 million allocated goodwill 19 million allocated intangible assets note 4 discontinued operation june 2008 executed letter intent xl foods sell beef processing cattle feed yard fertilizer assets three alberta canada subsidiaries collectively lakeside part beef segment march 13 2009 completed sale sold assets related inventories total consideration 145 million based exchange rates effect included cash received closing 43 million b 78 million collateralized notes receivable either xl foods affiliated entity collected throughout two years following closing c 24 million xl foods preferred stock redeemed next five years recorded pretax loss sale lakeside 10 million fiscal 2009 included allocation beef reporting unit goodwill 59 million cumulative currency translation adjustment gains 41 million following summary lakeside’s operating results millions carrying amounts lakeside’s assets held sale included following millions note 5 dispositions charges march 2009 announced decision close ponca city oklahoma processed meats plant ceased operations august 2009 closing resulted elimination approximately 600 jobs fiscal 2009 recorded charges 15 million included 14 million impairment charges 1 million employee termination benefits charges reflected prepared foods segment’s operating income included consolidated statements income charges material adjustments accrual anticipated fiscal 2008 recorded charges 10 million related intangible asset impairments amount 8 million reflected beef segment’s operating income 2 million prepared foods segment’s operating income recorded consolidated statements income cost sales recorded charges 7 million related flood damage jefferson wisconsin plant amount reflected prepared foods segment’s operating income included consolidated statements income cost sales also recorded charge 6 million related impairment unimproved real property memphis tennessee amount reflected chicken segment’s operating income loss included consolidated statements income cost sales additionally recorded 18 million nonoperating gain result private equity firm’s purchase technology company held minority interest gain recorded income consolidated statements income february 2008 announced discontinuation existing product line closing one three poultry plants wilkesboro north carolina wilkesboro cooked products plant ceased operations april 2008 closure resulted elimination approximately 400 jobs fiscal 2008 recorded charges 13 million impairment charges amount reflected chicken segment’s operating income loss included consolidated statements income charges january 2008 announced decision restructure operations emporia kansas beef plant beef slaughter operations ceased second quarter fiscal 2008 however facility still used process certain commodity specialty cuts ground beef well cold storage distribution warehouse restructuring resulted elimination approximately 1700 jobs emporia plant fiscal 2008 recorded charges 10 million impairment charges 7 million closing costs consisting 6 million employee termination benefits 1 million plantclosing related liabilities amounts reflected beef segment’s operating income loss included consolidated statements income charges fully paid employee termination benefits plantclosing related liabilities fiscal 2008 management approved plans implementation certain recommendations resulting previously announced fast initiative focused process improvement efficiency creation result fiscal 2008 recorded charges 6 million related employee termination benefits resulting termination approximately 200 employees charges 2 million 2 million 1 million 1 million respectively recorded chicken beef pork prepared foods segments’ operating income loss included consolidated statements income charges fully paid employee termination benefits may 2007 announced completion sale two alabama poultry plants related support facilities part strategic efforts reduce production commodity chicken sold processing plants ashland gadsden also included nearby feed mill two hatcheries facilities employed approximately 1200 employees approximately 800 hired acquiring company remaining employees offered opportunity transfer operations alabama recorded gain 10 million sale fiscal 2007 gain recorded chicken segment’s operating income loss included consolidated statements income cost sales note 6 derivative financial instruments business operations give rise certain market risk exposures mostly due changes commodity prices foreign currency exchange rates interest rates manage portion risks use derivative financial instruments primarily futures options reduce exposure commodity price risk foreign currency risk interest rate risk forward contracts various commodities including grains livestock energy primarily entered manage price risk associated forecasted purchases inputs used production processes foreign exchange forward contracts entered manage fluctuations foreign currency exchange rates primarily result certain receivable payable balances also periodically utilize interest rate swaps manage interest rate risk associated variablerate borrowings risk management programs reviewed board directors’ audit committee programs monitored senior management may revised market conditions dictate current risk management programs utilize industrystandard models take account implicit cost hedging risks associated market risks created derivative instruments fair values strictly monitored times using valueatrisk stress tests credit risks associated derivative contracts significant minimize counterparty concentrations utilize margin accounts letters credit primarily deal counterparties solid credit additionally derivative contracts mostly shortterm duration make use creditriskrelated contingent features significant concentrations credit risk existed october 3 2009 recognize derivative instruments either assets liabilities fair value consolidated balance sheets exception normal purchases normal sales expected result physical delivery accounting changes fair value ie gains losses derivative instrument depends whether designated qualifies part hedging relationship type hedging relationship derivative instruments designated qualify hedging instruments designate hedging instrument based upon exposure hedged ie fair value hedge cash flow hedge net investment foreign operation qualify designate derivative financial instrument hedge contract terms closely mirror hedged item providing high degree risk reduction correlation derivative instrument accounted hedge depending nature hedge changes fair value instrument either offset change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion instrument’s change fair value recognized earnings immediately designate certain forward contracts follows ● cash flow hedges include certain commodity forward contracts forecasted purchases ie grains certain foreign exchange forward contracts ● fair value hedges include certain commodity forward contracts forecasted purchases ie livestock ● net investment hedges include certain foreign currency forward contracts permanently invested capital certain foreign subsidiaries cash flow hedges derivative instruments futures options designated hedges changes amount future cash flows related procurement certain commodities utilized production processes purchase forward commodity contracts excess physical consumption requirements generally hedge forecasted transactions beyond 12 months objective hedges reduce variability cash flows associated forecasted purchase commodities derivative instruments designate qualify cash flow hedge effective portion gain loss derivative reported component comprehensive income oci reclassified earnings period periods hedged transaction affects earnings gains losses representing hedge ineffectiveness recognized earnings current period ineffectiveness related cash flow hedges significant fiscal 2009 2008 2007 october 3 2009 following aggregated notionals outstanding forward contracts accounted cash flow hedges net amount pretax losses accumulated oci october 3 2009 expected reclassified earnings within next 12 months 3 million fiscal 2009 2008 2007 reclassify pretax gainslosses earnings result discontinuance cash flow hedges due probability original forecasted transaction would occur end originally specified time period within additional period time allowed generally accepted accounting principles following table sets forth pretax impact cash flow hedge derivative instruments consolidated statements income millions fair value hedges designate certain futures contracts fair value hedges firm commitments purchase livestock slaughter objective hedges minimize risk changes fair value created fluctuations commodity prices associated fixed price livestock firm commitments october 3 2009 following aggregated notionals outstanding forward contracts entered hedge forecasted commodity purchases accounted fair value hedge derivative instruments designate qualify fair value hedge gain loss derivative well offsetting gain loss hedged item attributable hedged risk recognized earnings current period include gain loss hedged items ie livestock purchase firm commitments line item cost sales offsetting gain loss related livestock forward position ineffectiveness related fair value hedges significant fiscal 2009 2008 2007 foreign net investment hedges utilize forward foreign exchange contracts protect value net investments certain foreign subsidiaries derivative instruments designated qualify hedge net investment foreign currency gain loss reported oci part cumulative translation adjustment extent effective related amounts due counterparties included liabilities assets utilize forwardrate method assessing hedge effectiveness ineffective portions net investment hedges recognized consolidated statements income period change ineffectiveness related foreign net investment hedges significant fiscal 2009 2008 2007 october 3 2009 forward foreign currency contracts accounted foreign net investment hedges following table sets forth pretax impact derivative instruments consolidated statements income millions 1 amounts reclassified oci relate sale lakeside discontinued operation amounts related hedge ineffectiveness significant undesignated positions addition designated positions also hold forward option contracts apply hedge accounting include certain derivative instruments related commodities price risk including grains livestock energy foreign currency risk interest rate risk mark positions fair value earnings reporting date generally enter undesignated positions beyond 18 months undesignated positions primarily include grains energy livestock foreign currency forwards options objective undesignated grains energy livestock commodity positions reduce variability cash flows associated forecasted purchase certain grains energy livestock inputs production processes also enter certain forward sales boxed beef boxed pork forward purchases cattle hogs fixed prices fixed price sales contracts lock proceeds sale future fixed cattle hog purchases lock cost however cost livestock related boxed beef boxed pork market prices time sale purchase could vary fixed price enter fixed forward sales boxed beef boxed pork forward purchases cattle hogs also enter appropriate number livestock futures positions mitigate portion risk changes market value open livestock futures positions marked market reported earnings reporting date even though economic impact fixed prices market price realized time sale purchase positions generally qualify hedge treatment due location basis differences commodity exchanges actual locations purchase commodities foreign currency cash flow hedging program hedge portions forecasted transactions denominated foreign currencies primarily forward contracts protect reduction value forecasted foreign currency cash flows undesignated foreign currency positions generally would qualify cash flow hedge accounting however reduce earnings volatility normally elect hedge accounting treatment position provides offset underlying related transaction objective undesignated interest rate swap manage interest rate risk exposure floatingrate bond interest rate swap agreement effectively modifies exposure interest rate risk converting portion floatingrate bond fixed rate basis first five years thus reducing impact interestrate changes future interest expense interest rate swap qualify hedge treatment due differences underlying bond swap contract interestrate indices october 3 2009 following aggregate outstanding notionals related undesignated positions included undesignated positions certain commodity grain positions qualify hedge treatment enter manage risk costs associated forward sales certain customers sales prices determined costplus arrangements unrealized positions totaled losses 17 million 24 million october 3 2009 september 27 2008 respectively positions liquidated expect realized gains losses reflected prices poultry products sold since derivative positions qualify hedge treatment initially create volatility earnings associated changes fair value however positions liquidated included sales price customer ultimately earnings impact previous fair value gains losses included prices poultry products following table sets forth pretax impact undesignated derivative instruments consolidated statements income millions following table sets forth fair value derivative instruments outstanding consolidated balance sheets millions 1 beginning fiscal 2009 derivative assets liabilities presented consolidated balance sheets net basis net derivative assets liabilities including cash collateral legally enforceable master netting arrangement exists counterparty derivative contract us see note 12 fair value measurements reconciliation amounts reported consolidated balance sheet restate fiscal 2008 balances impact material note 7 property plant equipment major categories property plant equipment accumulated depreciation october 3 2009 september 27 2008 approximately 278 million required complete buildings equipment construction october 3 2009 note 8 goodwill intangible assets goodwill segment net 286 million accumulated amortization october 3 2009 september 27 2008 intangible assets type october 3 2009 september 27 2008 amortization expense 10 million 3 million 3 million recognized fiscal 2009 2008 2007 respectively estimate amortization expense intangible assets next five fiscal years subsequent october 3 2009 2010 14 million 2011 14 million 2012 13 million 2013 13 million 2014 12 million beginning date benefits realized patents intellectual property land use rights amortized using straightline method estimated period benefit 530 years 1030 years respectively note 9 current liabilities current liabilities october 3 2009 september 27 2008 include note 10 commitments lease equipment properties certain farms total rentals approximated 175 million 163 million 133 million respectively fiscal 2009 2008 2007 leases terms six years varying renewal periods significant obligations assumed terms leases upkeep facilities payments insurance property taxes minimum lease commitments noncancelable leases october 3 2009 guarantee debt outside third parties consist lease grower loans substantially collateralized underlying assets terms underlying debt cover periods nine years maximum potential amount future payments october 3 2009 59 million also maintain operating leases various types equipment contain residual value guarantees market value underlying leased assets end term lease terms lease maturities cover periods six years maximum potential amount residual value guarantees 55 million 23 million would recoverable various recourse provisions additional undeterminable recoverable amount based fair market value underlying leased assets likelihood material payments guarantees considered probable october 3 2009 september 27 2008 material liabilities guarantees recorded cash flow assistance programs certain livestock suppliers participate programs pay amount livestock equivalent standard cost grow livestock periods low market sales prices amounts payments excess market sales price recorded receivables accrue interest participating suppliers obligated repay receivables balances market sales prices exceed standard cost upon termination agreement maximum obligation associated programs limited fair value participating livestock supplier’s net tangible assets potential maximum obligation october 3 2009 approximately 250 million total receivables programs 72 million 7 million october 3 2009 september 27 2008 respectively included net allowance uncollectible amounts assets consolidated balance sheets even though programs limited net tangible assets participating livestock suppliers also manage portion credit risk associated programs obtaining security interests livestock suppliers assets analyzing residual credit risks general market conditions recorded allowance programs estimated uncollectible receivables 20 million 2 million october 3 2009 september 27 2008 respectively minority partner shandong tyson xinchang foods joint ventures china right exercise put options require us purchase entire 40 equity interest price equal minority partner’s contributed capital plus minus prorata share joint ventures accumulated undistributed net earnings losses put options exercisable fiveyear term commencing later april 2011 ii date upon shareholder minority partner longer general manager joint venture operations october 3 2009 put options exercisable would resulted purchase price approximately 74 million minority partner’s entire equity interest believe exercise put options would materially impact results operations financial condition additionally enter future purchase commitments various items grains livestock contracts fixed grower fees october 3 2009 commitments totaled note 11 longterm debt major components longterm debt follows millions annual maturities longterm debt five fiscal years subsequent october 3 2009 2010219 million 2011855 million 201211 million 20136 million 201412 billion revolving credit facility entered new revolving credit facility march 2009 totaling 10 billion supports shortterm funding needs letters credit replaced revolving credit facility scheduled expire september 2010 loans made facility mature commitments thereunder terminate march 2012 however 2011 notes refinanced purchased defeased prior july 3 2011 outstanding loans facility mature commitments thereunder terminate july 3 2011 incurred approximately 30 million transaction fees amortized threeyear life facility availability facility 10 billion based percentage certain eligible receivables eligible inventory reduced certain reserves reducing amount available outstanding letters credit issued facility amount available borrowing facility october 3 2009 733 million october 3 2009 outstanding letters credit issued facility totaling approximately 267 million additional 51 million bilateral letters credit issued facility none drawn upon letters credit issued primarily support workers’ compensation insurance programs derivative activities dynamic fuels’ go zone taxexempt bonds facility fully unconditionally guaranteed senior secured basis substantially domestic subsidiaries guarantors’ cash accounts receivable inventory proceeds received related items secure obligations facility notes september 2008 issued 458 million principal amount 325 convertible senior unsecured notes due october 15 2013 interest payable semiannually arrears april 15 october 15 conversion rate initially 591935 shares class stock per 1000 principal amount notes equivalent initial conversion price 1689 per share class stock 2013 notes may converted close business july 12 2013 following circumstances ● fiscal quarter december 27 2008 last reported sale price class stock least 20 trading days period 30 consecutive trading days ending last trading day preceding fiscal quarter least 130 applicable conversion price applicable trading day would currently require shares trade 2196 ● five business days 10 consecutive trading days measurement period trading price per 1000 principal amount notes trading day measurement period less 98 product last reported sale price class stock applicable conversion rate day ● upon occurrence specified corporate events defined supplemental indenture july 15 2013 close business second scheduled trading day immediately preceding maturity date holders may convert notes time regardless foregoing circumstances upon conversion deliver cash aggregate principal amount 2013 notes converted shares class stock respect remainder conversion obligation excess aggregate principal amount 2013 notes converted october 3 2009 none conditions permitting conversion 2013 notes satisfied 2013 notes accounted combined instrument accordingly accounted entire agreement one debt instrument conversion feature meet requirements accounted separately derivative financial instrument connection issuance 2013 notes entered separate convertible note hedge transactions respect common stock minimize potential economic dilution upon conversion 2013 notes also entered separate warrant transactions recorded purchase note hedge transactions reduction capital excess par value net 36 million pertaining related deferred tax asset recorded proceeds warrant transactions increase capital excess par value subsequent changes fair value instruments recognized financial statements long instruments continue meet criteria equity classification purchased call options private transactions 94 million permit us acquire approximately 27 million shares class stock initial strike price 1689 per share subject adjustment call options allow us acquire number shares class stock initially equal number shares class stock issuable holders 2013 notes upon conversion call options terminate upon maturity 2013 notes sold warrants private transactions total proceeds 44 million warrants permit purchasers acquire approximately 27 million shares class stock initial exercise price 2231 per share subject adjustment warrants exercisable various dates january 2014 march 2014 maximum amount shares may issued satisfy conversion 2013 notes limited 359 million shares however convertible note hedge warrant transactions effect increase initial conversion price 2013 notes 1689 per share 2231 per share thus reducing potential future economic dilution associated conversion 2013 notes share price 2231 upon conversion 2013 notes economic net share impact upon conversion 10 increase share price 2231 conversion price would result issuance 25 million incremental shares 2013 notes warrants could dilutive effect earnings per share extent price class stock given measurement period exceeds respective exercise prices instruments call options excluded calculation diluted earnings per share impact antidilutive notes march 2009 issued 810 million senior unsecured notes mature march 2014 notes carry 1050 interest rate interest payments due semiannually march 1 september 1 original issue discount 59 million based issue price 92756 face value received net proceeds 751 million addition incurred offering expenses 18 million used net proceeds towards repayment borrowings former accounts receivable securitization facility general corporate purposes also placed 234 million net proceeds blocked cash collateral account used payment prepayment repurchase defeasance 2010 notes october 3 2009 140 million remaining blocked cash collateral account remaining proceeds recorded current assets restricted cash consolidated condensed balance sheets 2014 notes fully unconditionally guaranteed substantially domestic subsidiaries notes 2016 notes carried interest rate issuance 660 interest step feature dependent credit rating november 13 2008 moody’s investor services inc downgraded credit rating “ba1” “ba3” downgrade increased interest rate 735 785 effective beginning sixmonth interest payment due april 1 2009 go zone taxexempt bonds october 2008 dynamic fuels received 100 million proceeds sale gulf opportunity zone taxexempt bonds made available federal government regions affected hurricanes katrina rita 2005 floating rate bonds due october 1 2033 november 2008 entered interest rate swap related bonds mitigate interest rate risk portion bonds five years also issued letter credit guarantee entire bond issuance proceeds bond issuance used towards construction dynamic fuels’ facility accordingly unused proceeds recorded noncurrent restricted cash consolidated balance sheets expect majority unused proceeds used second quarter fiscal 2010 debt covenants revolving credit facility contains affirmative negative covenants among things may limit restrict ability create liens encumbrances incur debt merge dissolve liquidate consolidate make acquisitions investments dispose transfer assets pay dividends make payments respect capital stock amend material documents change nature business make certain payments debt engage certain transactions affiliates enter saleleaseback hedging transactions case subject certain qualifications exceptions availability facility less greater 15 commitments 150 million required maintain minimum fixed charge coverage ratio 2014 notes also contain affirmative negative covenants among things may limit restrict ability incur additional debt issue preferred stock make certain investments restricted payments create liens create restrictions distributions restricted subsidiaries engage specified sales assets subsidiary stock enter transactions affiliates enter new lines business engage consolidation mergers acquisitions engage certain saleleaseback transactions condensed consolidating financial statements tyson fresh meats inc tfm whollyowned subsidiary fully unconditionally guaranteed 2016 notes tfm substantially whollyowned domestic subsidiaries fully unconditionally guaranteed 2014 notes following financial information presents condensed consolidating financial statements include tyson foods inc tfi parent tyson fresh meats inc tfm parent 2014 notes guarantor subsidiaries guarantors combined basis elimination entries necessary reflect tfm parent guarantors collectively represent 2014 notes total guarantor subsidiaries 2014 guarantors combined basis 2014 notes nonguarantor subsidiaries nonguarantors combined basis elimination entries necessary consolidate tfi parent 2014 guarantors nonguarantors tyson foods inc consolidated basis provided alternative providing separate financial statements guarantors certain prior period amounts recast conform current year presentation reflect legal subsidiary ownership structure october 3 2009 note 12 fair value measurements described note 2 change accounting principles adopted fair value measurement accounting guidance beginning first quarter fiscal 2009 guidance defines fair value establishes framework measuring fair value expands disclosure requirements fair value measurements guidance also defines fair value price would received sell asset paid transfer liability exit price principal advantageous market asset liability orderly transaction market participants measurement date fair value hierarchy prescribed standard contains three levels follows level 1 unadjusted quoted prices available active markets identical assets liabilities measurement date level 2 observable inputs available measurement date quoted prices included level 1 either directly indirectly including ● quoted prices similar assets liabilities active markets ● quoted prices identical similar assets nonactive markets ● inputs quoted prices observable asset liability ● inputs derived principally corroborated observable market data level 3 unobservable inputs cannot corroborated observable market data reflect use significant management judgment values generally determined using pricing models assumptions utilize management’s estimates market participant assumptions assets liabilities measured fair value recurring basis fair value hierarchy requires use observable market data available instances inputs used measure fair value fall different levels fair value hierarchy fair value measurement determined based lowest level input significant fair value measurement entirety assessment significance particular item fair value measurement entirety requires judgment including consideration inputs specific asset liability following table sets forth level within fair value hierarchy financial assets liabilities accounted fair value recurring basis october 3 2009 according valuation techniques used determine fair values millions derivative assets liabilities presented consolidated balance sheets net basis net derivative assets liabilities including cash collateral legally enforceable master netting arrangement exists counterparty derivative contract us october 3 2009 posted 4 million cash collateral held cash collateral various counterparties following table provides reconciliation beginning ending balance debt securities measured fair value recurring basis table used significant unobservable inputs level 3 millions following methods assumptions used estimate fair value class financial instrument derivative assets liabilities derivatives including commodities foreign exchange forward contracts interest rate swap primarily include exchangetraded overthecounter contracts described note 6 derivative financial instruments record commodity derivatives fair value using quoted market prices adjusted credit nonperformance risk internal models use basis readily observable market inputs including current forward commodity market prices foreign exchange forward contracts recorded fair value based quoted prices spot forward currency prices adjusted credit nonperformance risk interest rate swap recorded fair value based quoted libor swap rates adjusted credit nonperformance risk classify instruments level 2 quoted market prices corroborated utilizing observable current forward commodity market prices active exchanges observable market transactions spot currency rates forward currency prices observable benchmark market rates commonly quoted intervals available sale securities investments marketable debt securities classified availableforsale included assets consolidated balance sheets investments generally longterm nature maturities ranging 47 years reported fair value based pricing models quoted market prices adjusted credit nonperformance risk classify investments us government agency debt securities level 2 fair value generally estimated using discounted cash flow models primarily industrystandard models consider various assumptions including time value yield curve well readily available relevant economic measures classify certain corporate assetbacked debt securities level 3 limited activity less observable inputs proprietary valuation models including estimated prepayment default recovery rates underlying portfolio structured investment vehicle october 2008 received eight million warrants purchase equivalent amount syntroleum corporation common stock one cent return entering letter credit guarantee dynamic fuels’ gulf opportunity zone taxexempt bonds see note 11 longterm debt including syntroleum corporation’s 50 percent ownership portion april 2009 exercised warrants eight million shares syntroleum corporation record shares assets consolidated balance sheets fair value based quoted market prices classify shares level 1 fair value based unadjusted quoted prices available active markets following balances october 3 2009 unrealized holding gains losses net tax excluded earnings reported comprehensive income security settled sold quarterly basis evaluate whether losses related availableforsale securities temporary nature losses determined temporary loss would recognized earnings intend likely required sell security prior recovery securities intent ability hold maturity losses determined temporary would remain comprehensive income expected credit losses recognized earnings consider many factors determining whether loss temporary including length time extent fair value cost financial condition nearterm prospects issuer ability intent hold investment period time sufficient allow anticipated recovery fiscal 2009 recognized 4 million temporary impairments earnings amounts recognized fiscal 2008 2007 temporary losses deferred comprehensive income october 3 2009 deferred compensation assets maintain two nonqualified deferred compensation plans certain executives highly compensated employees investments maintained within trust include money market funds mutual funds life insurance policies cash surrender value life insurance policies invested primarily mutual funds investments recorded fair value based quoted market prices adjusted credit nonperformance risk included assets consolidated balance sheets classify investments observable market prices active markets level 1 generally publiclytraded mutual funds remaining deferred compensation assets classified level 2 fair value corroborated based observable market data realized unrealized gains losses deferred compensation included earnings assets liabilities measured fair value nonrecurring basis fiscal 2009 significant measurements assets liabilities fair value nonrecurring basis subsequent initial recognition indicated note 2 change accounting principles effective date deferred aspects fair value measurements related nonfinancial assets liabilities measured fair value recognized disclosed fair value nonrecurring basis deferral applies items nonfinancial assets liabilities initially measured fair value business combination measured fair value subsequent periods nonfinancial longlived asset groups measured fair value impairment assessment financial instruments fair values debt based quoted market prices published forward interest rate curves fair value carrying value debt follows millions financial instruments estimated fair value approximated carrying value october 3 2009 september 27 2008 carrying value financial instrument otherwise disclosed herein included notes receivable approximated fair value october 3 2009 notes receivable recorded assets consolidated balance sheets totaled 45 million 0 october 3 2009 september 27 2008 respectively fair values determined using pricing models assumptions utilize management’s estimates market participant assumptions concentrations credit risk financial instruments exposed concentrations credit risk consist primarily cash equivalents accounts receivable cash equivalents high quality securities placed major banks financial institutions concentrations credit risk respect receivables limited due large number customers dispersion across geographic areas perform periodic credit evaluations customers’ financial condition generally require collateral october 3 2009 september 27 2008 130 122 respectively net accounts receivable balance due walmart stores inc single customer group represents greater 10 net accounts receivable note 13 comprehensive income loss components accumulated comprehensive income follows components comprehensive income loss follows 1 adopted new accounting guidance fiscal 2007 related defined benefit post retirement plans note 14 stockbased compensation issue shares stockbased compensation plans issuing class stock treasury total number shares available future grant tyson foods inc 2000 stock incentive plan incentive plan 22320132 october 3 2009 stock options shareholders approved incentive plan january 2001 incentive plan administered compensation committee board directors compensation committee incentive plan includes provisions granting incentive stock options shares class stock price less fair market value date grant nonqualified stock options may granted price equal less fair market value class stock date option granted stock options incentive plan generally become exercisable ratably two five years date grant must exercised within 10 years date grant policy recognize compensation expense straightline basis requisite service period entire award grant stock options year grantdate fair value options granted fiscal 2009 2008 2007 129 522 585 respectively fair value option grant established date grant using binomial lattice method grants awarded october 1 2005 blackscholes optionpricing model grants awarded october 1 2005 change binomial lattice method made better reflect exercise behavior top management use historical volatility period time comparable expected life option determine volatility assumptions expected life calculated based contractual term grant takes account historical exercise termination behavior participants riskfree interest rates based fiveyear treasury bond rate assumptions grant date used fair value calculation year’s grants outlined following table recognized stockbased compensation expense related stock options net income taxes 9 million 12 million 11 million respectively fiscal years 2009 2008 2007 6 million 7 million 6 million related tax benefit 24 million 25 million 19 million options vest fiscal years 2009 2008 2007 respectively fair value 15 million 15 million 9 million respectively fiscal years 2009 2008 2007 received cash 1 million 9 million 59 million respectively exercise stock options shares issued treasury stock option exercises related tax benefit realized stock options exercised fiscal years 2009 2008 2007 0 1 million 12 million respectively total intrinsic value options exercised fiscal years 2009 2008 2007 0 3 million 31 million respectively cash flows resulting tax deductions excess compensation cost options excess tax deductions classified financing cash flows realized 0 9 million respectively excess tax deductions fiscal years 2009 2008 2007 respectively october 3 2009 29 million total unrecognized compensation cost related stock option plans recognized weighted average period 27 years restricted stock issue restricted stock market value date grant restrictions expiring periods 2013 unearned compensation recognized vesting period particular grant using straightline method october 3 2009 25 million total unrecognized compensation cost related restricted stock awards recognized weighted average period 18 years recognized stockbased compensation expense related restricted stock net income taxes 10 million 11 million 14 million years 2009 2008 2007 respectively related tax benefit fiscal years 2009 2008 2007 7 million 6 million 9 million respectively 07 million 20 million 34 million respectively restricted stock awards vest fiscal years 2009 2008 2007 grant date fair value 11 million 24 million 37 million performancebased shares july 2003 compensation committee began authorizing us award performancebased shares class stock certain senior executives awards typically granted first business day fiscal year vesting performancebased shares generally three years award subject attainment goals determined compensation committee prior date award review progress toward attainment goals quarter vesting period however attainment goals determined end vesting period shares vest ultimate cost equal class stock price date shares vest multiplied number shares awarded performance grants market criteria grants market performance criteria ultimate expense fair value probable shares vest regardless shares actually vest total expense recorded related performancebased shares material fiscal 2009 2008 2007 note 15 pensions postretirement benefits october 3 2009 four noncontributory defined benefit pension plans consisting three funded qualified plans one unfunded nonqualified plan three qualified plans frozen provide benefits based formula using years service specified benefit rate effective january 1 2004 implemented nonqualified defined benefit plan certain contracted officers uses formula based years service final average salary also postretirement benefit plans substantially employees may receive benefits satisfy applicable eligibility criteria postretirement healthcare plans contributory participants’ contributions adjusted deemed necessary defined contribution retirement incentive benefit programs various groups employees recognized expenses 49 million 48 million 46 million fiscal 2009 2008 2007 respectively use fiscal year end measurement date defined benefit plans postretirement plans generally recognize effect actuarial gains losses earnings immediately postretirement plans rather amortizing effect future periods postretirement benefits include postretirement medical costs life insurance benefit obligations funded status following table provides reconciliation changes plans’ benefit obligations assets funded status october 3 2009 september 27 2008 amounts recognized consolidated balance sheets consist increase decrease pretax minimum liability related pension plans included comprehensive income loss 12 million 9 million 9 million fiscal 2009 2008 2007 respectively october 3 2009 september 27 2008 pension plans accumulated benefit obligation excess plan assets accumulated benefit obligation qualified pension plans 89 million 90 million october 3 2009 september 27 2008 respectively plans accumulated benefit obligations excess plan assets follows net periodic benefit cost components net periodic benefit cost pension postretirement benefit plans recognized consolidated statements income follows assumptions weighted average assumptions follows determine rateofreturn assets assumption first examined historical rates return various asset classes determined longterm projected rateofreturn based expected returns next five 10 years three postretirement health plans two consist fixed annual payments account 33 million postretirement medical obligation october 3 2009 healthcare cost trend required determine obligation remaining plan accounts 13 million postretirement medical obligation october 3 2009 plan covers retirees yet qualify medicare uses healthcare cost trend 9 current year grading 6 fiscal 2012 onepercentage point change assumed healthcare cost trend rate would immaterial impact postretirement benefit obligation total service interest cost plan assets fair value plan assets domestic pension benefit plans 54 million 64 million october 3 2009 september 27 2008 respectively following table sets forth actual target asset allocation pension plan assets foreign subsidiary pension plan 14 million 15 million plan assets october 3 2009 september 27 2008 respectively plan’s assets held annuity contracts consistent target asset allocation plan trustees established set investment objectives related assets pension plans regularly monitor performance funds portfolio managers objectives pension assets 1 provide growth capital income 2 achieve target weighted average annual rate return competitive funds similar investment objectives 3 diversify reduce risk investment objectives target asset allocation adopted january 2004 amended november 2008 alternative investments may include limited hedge funds private equity funds fixed income funds contributions policy fund least minimum contribution required meet applicable federal employee benefit local tax laws sole discretion may time fund additional amounts expected contributions pension plans fiscal 2010 approximately 4 million fiscal 2009 2008 2007 funded 2 million 2 million 5 million respectively defined benefit plans estimated future benefit payments following benefit payments expected paid benefit payments postretirement benefit plans expected offset medicare part subsidies 2010 thereafter note 16 supplemental cash flow information following table summarizes cash payments interest income taxes note 17 transactions related parties operating leases farms equipment facilities tyson director company john tyson chairman company certain members families randal w tyson testamentary trust total payments 3 million fiscal 2009 3 million fiscal 2008 5 million fiscal 2007 paid entities parties ownership interest 2008 lawsuit captioned tyson foods inc consolidated shareholder’s litigation settled pursuant settlement tyson limited partnership paid us 45 million note 18 income taxes detail provision income taxes continuing operations consists following reasons difference statutory federal income tax rate effective income tax rate continuing operations follows fiscal 2009 goodwill impairment nondeductible income tax purposes negatively impacted effective income tax rate 372 fiscal 2009 tax expense impacted increase foreign valuation allowance increased tax expense 21 million estimated general business credits decreased tax expense 12 million tax planning foreign jurisdictions decreased tax expense 9 million fiscal 2008 increase state valuation allowance increased tax expense 8 million nondeductible activity relating companyowned life insurance increased tax expense 6 million addition unrecognized tax benefits fiscal 2008 caused net increase income tax expense 7 million additionally estimated general business credits decreased fiscal 2008 tax expense 6 million fiscal 2007 discovered certain population tax cost accumulated depreciation values accurately recorded primarily related property plant equipment system conversion 1999 system conversion impact recorded book value property plant equipment result net tax basis property plant equipment overstated caused deferred tax liability financial statements understated fiscal 2007 increased deferred tax liabilities 17 million recognized additional tax expense 17 million additionally fiscal 2007 effective tax rate reduced 46 due reduction income tax reserves management deemed longer required net reduction current income tax expense approximately 20 million related internal revenue service examinations appeals united states tax court settlement activity well state income tax examination settlements additional related adjustments resulted 28 million reduction goodwill recognize deferred income taxes future tax consequences attributable differences financial statement carrying amounts existing assets liabilities respective tax bases deferred tax assets liabilities measured using tax rates expected apply taxable income years temporary differences expected recovered settled tax effects major items recorded deferred tax assets liabilities follows record deferred tax amounts current assets deferred income taxes consolidated balance sheets deferred tax liability suspended taxes conversion accrual method represents 1987 change cash accrual method accounting recognized 2027 october 3 2009 gross federal tax net operating loss carryforward approximated 45 million carryforward expires fiscal year 2024 gross state tax net operating loss carryforwards approximated 803 million expire fiscal years 2010 2028 gross foreign net operating loss carryforwards approximated 143 million 87 million expire fiscal years 2011 2019 remainder expiration accumulated undistributed earnings foreign subsidiaries aggregating approximately 220 million 219 million october 3 2009 september 27 2008 respectively earnings expected indefinitely reinvested outside united states earnings distributed form dividends otherwise would subject federal income taxes subject adjustment foreign tax credits state income taxes withholding taxes payable various foreign countries currently practicable estimate tax liability might payable repatriation foreign earnings following table summarizes activity related gross unrecognized tax benefits october 3 2009 september 27 2008 amount unrecognized tax benefits recognized would affect effective tax rate 104 million 73 million october 3 2009 september 27 2008 respectively classify interest penalties unrecognized tax benefits income tax expense october 3 2009 september 27 2008 tax benefits 71 million 67 million respectively accrued interest penalties unrecognized tax benefits october 3 2009 subject income tax examinations us federal income taxes fiscal years 1998 2008 excluding 2001 2002 foreign state local income taxes fiscal years 2001 2008 fiscal 2010 tax audit resolutions could potentially reduce unrecognized tax benefits approximately 19 million either tax positions sustained audit agree disallowance note 19 earnings loss per share earnings weighted average common shares used computation basic diluted earnings loss per share follows approximately 24 million 10 million 4 million respectively fiscal years 2009 2008 2007 stockbased compensation shares antidilutive included dilutive earnings per share calculation two classes capital stock class stock class b stock cash dividends cannot paid holders class b stock unless simultaneously paid holders class stock per share amount cash dividends paid holders class b stock cannot exceed 90 cash dividend paid holders class stock allocate undistributed earnings losses based upon 1 09 ratio per share class stock class b stock respectively allocate undistributed earnings losses based ratio due historical dividend patterns voting control class b shareholders contractual limitations dividends class b stock note 20 segment reporting operate four segments chicken beef pork prepared foods measure segment profit operating income loss chicken operations include breeding raising chickens well processing live chickens fresh frozen valueadded chicken products logistics operations move products supply chain products marketed domestically food retailers foodservice distributors restaurant operators noncommercial foodservice establishments schools hotel chains healthcare facilities military food processors well international markets also includes sales allied products chicken breeding stock subsidiary beef operations include processing live fed cattle fabricating dressed beef carcasses primal subprimal meat cuts caseready products segment also includes sales allied products hides variety meats well logistics operations move products supply chain products marketed domestically food retailers foodservice distributors restaurant operators noncommercial foodservice establishments schools hotel chains healthcare facilities military food processors well international markets allied products marketed manufacturers pharmaceuticals technical products pork operations include processing live market hogs fabricating pork carcasses primal subprimal cuts caseready products segment also includes live swine group related allied product processing activities logistics operations move products supply chain products marketed domestically food retailers foodservice distributors restaurant operators noncommercial foodservice establishments schools hotel chains healthcare facilities military food processors well international markets sell allied products pharmaceutical technical products manufacturers well limited number live swine pork processors prepared foods prepared foods operations include manufacturing marketing frozen refrigerated food products logistics operations move products supply chain products include pepperoni bacon beef pork pizza toppings pizza crusts flour corn tortilla products appetizers prepared meals ethnic foods soups sauces side dishes meat dishes processed meats products marketed domestically food retailers foodservice distributors restaurant operators noncommercial foodservice establishments schools hotel chains healthcare facilities military food processors well international markets excludes depreciation related discontinued operation 9 million 10 million fiscal years 2008 2007 respectively b excludes assets held sale related discontinued operation 159 million 164 million fiscal years 2008 2007 respectively c excludes additions property plant equipment related discontinued operation 2 million 6 million fiscal years 2008 2007 respectively allocate expenses related corporate activities segments related assets additions property plant equipment remain pork segment sales 449 million 517 million 515 million fiscal years 2009 2008 2007 respectively transactions operating segments beef segment sales 155 million 142 million 111 million fiscal years 2009 2008 2007 respectively transactions operating segments sales intersegment transactions sold market prices excluded segment sales table largest customer walmart stores inc accounted 138 133 134 consolidated sales fiscal years 2009 2008 2007 respectively sales walmart stores inc included chicken beef pork prepared foods segments extended discontinuance sales customer could replaced material impact operations majority operations domiciled united states approximately 97 98 sales external customers fiscal 2009 2008 2007 respectively sourced united states approximately 32 billion 34 billion 35 billion respectively property plant equipment located united states october 3 2009 september 27 2008 september 29 2007 approximately 329 million 139 million 125 million property plant equipment located foreign countries primarily brazil china mexico fiscal years ended 2009 2008 2007 respectively sell certain products foreign markets primarily canada central america china european union japan mexico middle east russia south korea taiwan vietnam export sales totaled 27 billion 32 billion 25 billion fiscal 2009 2008 2007 respectively substantially export sales facilitated unaffiliated brokers marketing associations foreign sales staffs foreign sales products produced country united states less 10 consolidated sales fiscal 2009 2008 2007 approximately 3 22 10 income loss continuing operations income taxes minority interest fiscal 2009 2008 2007 respectively foreign operations note 21 quarterly financial data unaudited fourth quarter fiscal 2009 14week period remaining quarters table 13week periods second quarter fiscal 2009 operating income included 15 million charge related closing prepared foods processed meats plant fourth quarter fiscal 2009 operating loss included 560 million noncash charge related partial impairment beef segment’s goodwill first quarter fiscal 2008 income continuing operations income taxes includes 18 million nonoperating gain related sale investment 6 million severance charge related fast initiative second quarter fiscal 2008 income continuing operations income taxes includes 47 million charges related restructuring beef plant operation closing poultry plant impairment packaging equipment software impairments third quarter fiscal 2008 loss continuing operations income taxes includes 13 million charges related flood damage impairment unimproved real property fourth quarter fiscal 2008 income continuing operations income taxes includes 10 million charge related intangible asset impairments note 22 capital structure september 2008 issued 224 million shares class stock part public offering shares offered 1275 net proceeds underwriting discounts commissions approximately 274 million used toward repayment borrowings accounts receivable securitization facility general corporate purposes entity controlled tyson purchased three million shares class stock offering fiscal 2007 tyson limited partnership converted 159 million shares class b stock class stock oneforone basis note 23 contingencies listed certain claims made company subsidiaries opinion made appropriate adequate reserves accruals disclosures necessary believe probability material loss beyond amounts accrued remote however ultimate liability matters uncertain accruals reserves adequate adverse outcome could material effect consolidated financial condition results operations believe substantial defenses claims made intend vigorously defend cases 2000 wage hour division us department labor dol conducted industrywide investigation poultry producers including us ascertain compliance various wage hour issues part investigation dol inspected 14 processing facilities may 9 2002 dol filed civil complaint styled elaine l chao hilda l solis secretary labor united states department labor v tyson foods inc us district court northern district alabama plaintiffs allege complaint violated overtime provisions federal fair labor standards act flsa chickenprocessing facility blountsville alabama discovery trial secretary labor sought require us compensate hourly chicken processing workers pre postshift clothes changing washing related activities one two unpaid 30minute meal periods secretary labor sought back wages employees blountsville facility period two years prior date filing complaint injunction future violations facility chicken processing facilities operate district court granted company’s motion partial summary judgment part ruling second meal period appropriately characterized noncompensable reserved remaining issues trial jury trial began february 2 2009 concluded mistrial april 13 2009 jury failed reach unanimous verdict second jury trial held beginning august 25 2009 jury reached verdict november 4 2009 determined blountsville team members performed work compensated awarded 250000 damages nineyear period jury also determined company’s recordkeeping hours work violate flsa court ordered parties mediation within next sixty 60 days also set february 15 2010 trial date injunctive phase trial several private lawsuits pending us alleging failed compensate poultry plant employees hours worked including overtime compensation violation flsa lawsuits include deasencio v tyson foods inc deasencio filed august 22 2000 us district court eastern district pennsylvania matter involves similar allegations employees paid time takes engage pre postshift activities changing protective sanitary clothing obtaining clothing walking changing area work areas break areas seek back wages liquidated damages pre postjudgment interest attorneys’ fees plaintiffs appealed jury verdict final judgment entered favor june 22 2006 district court eastern district pennsylvania september 7 2007 us court appeals third circuit reversed jury verdict remanded case district court proceedings sought rehearing en banc denied court appeals october 5 2007 united states supreme court denied petition writ certiorari june 9 2008 new trial date set addition deasencio several additional private lawsuits filed us since beginning fiscal 2007 allege failed compensate poultry plant employees hours worked including overtime compensation violation flsa lawsuits sheila ackles et al v tyson foods inc n dist alabama october 23 2006 mccluster et al v tyson foods inc dist georgia december 11 2006 dobbins et al v tyson chicken inc et al n dist alabama december 21 2006 buchanan et al v tyson chicken inc et al potter et al v tyson chicken inc et al n dist alabama december 22 2006 jones et al v tyson foods inc et al walton et al v tyson foods inc et al williams et al v tyson foods inc et al dist mississippi february 9 2007 balch et al v tyson foods inc e dist oklahoma march 1 2007 adams et al v tyson foods inc w dist arkansas march 2 2007 atkins et al v tyson foods inc dist georgia march 5 2007 laney et al v tyson foods inc williams et al v tyson foods inc dist georgia may 23 2007 similar deasencio matters involves allegations employees paid time takes engage pre postshift activities changing protective sanitary clothing obtaining clothing walking changing area work areas break areas plaintiffs lawsuits seek sought act class representatives behalf current former employees allegedly paid time worked seek back wages liquidated damages pre postjudgment interest attorneys’ fees april 6 2007 filed motion transfer named actions coordinated pretrial proceedings judicial panel multidistrict litigation motion transfer granted august 17 2007 cases listed five cases subsequently filed involving allegations armstrong et al v tyson foods inc w dist tennessee january 30 2008 maldonado et al v tyson foods inc e dist tennessee january 31 2008 white et al v tyson foods inc e dist texas february 1 2008 meyer et al v tyson foods inc w dist missouri february 2 2008 leak et al v tyson foods inc w dist north carolina february 6 2008 transferred us district court middle district georgia tyson foods inc fair labor standards act litigation “mdl proceedings” january 2 2008 judge mdl proceedings issued joint scheduling case management order granted conditional class certification called notice given potential putative class members via third party administrator potential class members april 18 2008 “optin” class approximately 13800 employees former employees filed consents “optin” class october 15 2008 judge mdl proceedings denied plaintiffs’ motion equitable tolling granted would extended time period plaintiffs could sought damages however addition consents already obtained court allowed plaintiffs obtain corrected reaffirmed optin consents previously filed matter mh fox et al v tyson foods inc n dist alabama june 22 1999 deadline filing consents december 31 2008 according third party administrator approximately 4000 reaffirmed consents filed may addition approximately 13800 consents filed previously parties completed discovery eight facilities corporate headquarters springdale arkansas discovery may conducted additional facilities future filed class decertification motions eight facilities involved discovery also filed motions partial summary judgment eight facilities parties completed briefing parties requested oral arguments present respective positions issues oral argument granted anticipate occur december 2009 pending eleven separate wage hour actions involving tfm’s plants located lexington nebraska lopez et al v tyson foods inc district nebraska june 30 2006 garden city emporia kansas garcia et al v tyson foods inc tyson fresh meats inc district kansas may 15 2006 storm lake iowa bouaphakeo fka sharp et al v tyson foods inc nd iowa february 6 2007 columbus junction iowa robinson et al v tyson foods inc dba tyson fresh meats inc sd iowa september 12 2007 joslin illinois murray et al v tyson foods inc cd illinois january 2 2008 dakota city nebraska gomez et al v tyson foods inc district nebraska january 16 2008 madison nebraska acosta et al v tyson foods inc dba tyson fresh meats inc district nebraska february 29 2008 perry waterloo iowa edwards et al v tyson foods inc dba tyson fresh meats inc sd iowa march 20 2008 council bluffs iowa maxwell fka salazar et al v tyson foods inc dba tyson fresh meats inc sd iowa april 29 2008 logansport indiana carter et al v tyson foods inc tyson fresh meats inc nd indiana april 29 2008 goodlettsville tennessee abadeer v tyson foods inc tyson fresh meats inc md tennessee february 6 2009 actions allege failed pay employees hours worked including overtime compensation time takes change protective work uniforms safety equipment sanitary protective clothing worn employees walking changing area work areas break areas violation flsa analogous state laws plaintiffs seek back wages liquidated damages pre postjudgment interest attorneys’ fees costs case proceeding jurisdiction june 19 2005 attorney general secretary environment state oklahoma filed complaint us district court northern district oklahoma us three subsidiaries six poultry integrators complaint subsequently amended complaint asserts number state federal causes action including limited counts comprehensive environmental response compensation liability act “cercla” resource conservation recovery act “rcra” statelaw public nuisance theories amended complaint asserts defendants certain contract growers named amended complaint polluted surface waters groundwater associated drinking water supplies illinois river watershed “irw” land application poultry litter oklahoma asserts alleged pollution also caused extensive injury environment including soils sediments irw defendants unjustly enriched oklahomas claims cover entire irw encompasses one million acres land natural resources including lakes waterways contained therein oklahoma seeks wideranging relief including injunctive relief compensatory damages excess 800 million unspecified amount punitive damages attorneys fees defendants denied liability asserted various defenses filed thirdparty complaint asserts claims persons entities whose activities may contributed pollution alleged amended complaint district court stayed proceedings third party complaint pending resolution oklahomas claims defendants october 31 2008 defendants filed motion dismiss failure join cherokee nation required party alternative judgment matter law based plaintiffs lack standing motion granted part denied part july 22 2009 ruling district court dismissed oklahomas claims monetary damages denied motion respect claims injunctive relief september 2 2009 cherokee nation filed motion intervene lawsuit motion intervene denied september 15 2009 cherokee nation filed notice appeal ruling september 17 2009 nonjury trial case began september 24 2009 ongoing 2008 following thirteen 13 separate lawsuits filed various plaintiffs alleging tyson falsely advertised chicken products “raised without antibiotics” violation various state consumer protection statutes cutsail v tyson 08cv01643 md cohen v tyson 408cv0366 ed ark wright v tyson 08cv3022 nj wilson v tyson 408cv0587 ed ark gupton v tyson 408cv0588 ed ark kranish v tyson 08cv01619 md latimer v tyson 408cv004051 wd ark zukowosky v tyson 408cv0584 ed ark brickerd v tyson 08cv1796 md court v tyson 08cv03592 wd wash epstein v tyson 08cv2800 nd cal johnson v tyson 08cv291 idaho mize v tyson 08cv4051 wd ark plaintiffs cases seek pursue claims behalf proposed classes similarly situated consumers plaintiffs cases seek compensatory punitive damages unspecified amount excess 5000000 plaintiffs two cases cutsail v tyson cohen v tyson petitioned judicial panel multidistrict litigation transfer actions single court consolidated coordinated pretrial proceedings pursuant 28 usc 1407 october 17 2008 judicial panel granted multidistrict litigation petitions transferred pending cases district maryland trial date set december 29 2008 plaintiff gupton filed voluntary dismissal claims december 30 2008 plaintiffs latimer mize filed voluntary dismissals claims three cases subsequently dismissed discovery ongoing case september 2009 national water commission “conagua” agency mexican governments ministry environment natural resources sent observation letter mexican subsidiary tyson de mexico “tdm” respect tdms water usage certain water wells part poultry production operations letter response tdms previous submission conagua requested information relating water usage wells 2004 2007 observation letter contains initial finding facts conagua alleges tdm may failed report accurate water volume usage ii install measuring equipment iii provide evidence water use exemptions iv pay applicable usage v properly measure water volume required water deeds held tdm october 15 2009 tdm responded conagua denying allegations presented report independent registered public accounting firm board directors shareholders tyson foods inc audited accompanying consolidated balance sheets tyson foods inc october 3 2009 september 27 2008 related consolidated statements income shareholders equity cash flows three years period ended october 3 2009 audits also included financial statement schedule listed index item 15a financial statements schedule responsibility companys management responsibility express opinion financial statements schedule based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion financial statements referred present fairly material respects consolidated financial position tyson foods inc october 3 2009 september 27 2008 consolidated results operations cash flows three years period ended october 3 2009 conformity us generally accepted accounting principles also opinion related financial statement schedule considered relation basic financial statements taken whole presents fairly material respects information set forth therein reflected consolidated statements shareholders’ equity company adopted statement financial accounting standards interpretation 48 “accounting uncertainty income taxes” codified fasb asc topic 740 income taxes 2008 also audited accordance standards public company accounting oversight board united states tyson foods inc’s internal control financial reporting october 3 2009 based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission report dated november 23 2009 expressed unqualified opinion thereon ernst young llp rogers arkansas november 23 2009 report independent registered public accounting firm board directors shareholders tyson foods inc audited tyson foods inc’s internal control financial reporting october 3 2009 based criteria established internal controlintegrated framework issued committee sponsoring organizations treadway commission coso criteria tyson foods inc’s management responsible maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included accompanying report management caption “management’s report internal control financial reporting” responsibility express opinion company’s internal control financial reporting based audit conducted audit accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether effective internal control financial reporting maintained material respects audit included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk performing procedures considered necessary circumstances believe audit provides reasonable basis opinion company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles company’s internal control financial reporting includes policies procedures 1 pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company 2 provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company 3 provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate opinion tyson foods inc maintained material respects effective internal control financial reporting october 3 2009 based coso criteria also audited accordance standards public company accounting oversight board united states consolidated balance sheets tyson foods inc october 3 2009 september 27 2008 related consolidated statements income shareholders’ equity cash flows three years period ended october 3 2009 report dated november 23 2009 expressed unqualified opinion thereon ernst young llp rogers arkansas november 23 2009 item 9item 8 financial statements supplementary data consolidated statements income see accompanying notes consolidated balance sheets see accompanying notes consolidated statements shareholders’ equity see accompanying notes 1 excludes income loss related redeemable noncontrolling interest 9 million 0 fiscal 2010 2009 2008 respectively consolidated statements cash flows see accompanying notes consolidated financial statements note 1 business summary significant accounting policies description business tyson foods inc collectively “company” “we” “us” “our” founded 1935 world headquarters springdale arkansas one world’s largest meat protein companies secondlargest food production company fortune 500 produce wide variety brand name proteinbased prepared food products marketed united states approximately 100 countries around world consolidation consolidated financial statements include accounts whollyowned subsidiaries well majorityowned subsidiaries controlling interest significant intercompany accounts transactions eliminated consolidation investment joint venture dynamic fuels llc dynamic fuels 50 percent ownership interest dynamic fuels qualifies variable interest entity effective june 30 2008 began consolidating dynamic fuels since primary beneficiary october 2 2010 dynamic fuels 154 million total assets 145 million property plant equipment 107 million total liabilities 100 million longterm debt october 3 2009 dynamic fuels 144 million total assets 64 million property plant equipment 108 million total liabilities 100 million longterm debt fiscal year utilize 52 53week accounting period ending saturday closest september 30 company’s accounting cycle resulted 52week year fiscal years 2010 2008 53week year fiscal year 2009 reclassification fiscal 2010 consolidated statements cash flows reclassified 65 million 67 million respectively fiscal 2009 fiscal 2008 changes negative book cash balances financing activities operating activities included increase decrease accounts payable conform current period presentation discontinued operation march 13 2009 completed sale beef processing cattle feed yard fertilizer assets three alberta canada subsidiaries collectively lakeside part beef segment related inventories financial statements report lakeside discontinued operation see note 4 discontinued operation notes consolidated financial statements information cash equivalents cash equivalents consist investments shortterm highly liquid securities original maturities three months less made part cash management activity carrying values assets approximate fair values primarily utilize cash management system series separate accounts consisting lockbox accounts receiving cash concentration accounts funds moved several zerobalance disbursement accounts funding payroll accounts payable livestock procurement grower payments etc result cash management system checks issued presented banks payment may result negative book cash balances negative book cash balances included accounts payable current liabilities october 2 2010 october 3 2009 checks outstanding excess related book cash balances totaled approximately 267 million 254 million respectively accounts receivable record accounts receivable net realizable value includes appropriate allowance estimated uncollectible accounts reflect loss anticipated accounts receivable balances charged provision doubtful accounts calculate allowance based history writeoffs level past due accounts relationships economic status customers october 2 2010 october 3 2009 allowance uncollectible accounts 32 million 33 million respectively generally collateral receivables periodically evaluate credit worthiness customers inventories processed products livestock supplies valued lower cost market cost includes purchased raw materials live purchase costs growout costs primarily feed contract grower pay catch haul costs labor manufacturing production overhead related purchase production inventories property plant equipment property plant equipment stated cost depreciated straightline method using estimated lives buildings leasehold improvements 10 33 years machinery equipment three 12 years land improvements three 20 years major repairs maintenance costs significantly extend useful life related assets capitalized normal repairs maintenance costs charged operations review carrying value longlived assets balance sheet date indication impairment exists recoverability assessed using undiscounted cash flows based historical results current projections earnings interest taxes measure impairment excess carrying cost fair value asset fair value asset measured using discounted cash flows including market participant assumptions future operating results discount rates goodwill intangible assets goodwill indefinite life intangible assets initially recorded fair value amortized reviewed impairment least annually frequently impairment indicators arise goodwill allocated reporting unit follow twostep process evaluate potential impairment exists first step identify potential impairment exists comparing fair value reporting unit carrying amount including goodwill fair value reporting unit exceeds carrying amount goodwill reporting unit considered potential impairment second step impairment test necessary however carrying amount reporting unit exceeds fair value second step performed determine goodwill impaired measure amount impairment loss recognize second step compares implied fair value goodwill carrying amount goodwill implied fair value goodwill exceeds carrying amount goodwill considered impaired however carrying amount goodwill exceeds implied fair value impairment loss recognized amount equal excess implied fair value goodwill determined manner amount goodwill recognized business combination ie fair value reporting unit allocated assets liabilities including unrecognized intangible assets reporting unit acquired business combination fair value reporting unit purchase price paid acquire reporting unit elected make first day fourth quarter annual impairment assessment date goodwill indefinite life intangible assets estimated fair value reporting units using discounted cash flow analysis uses significant unobservable inputs level 3 inputs defined fair value hierarchy analysis requires us make various judgmental estimates assumptions sales operating margins growth rates discount factors believed reflect market participant views would exist exit transaction generally utilize normalized operating margin assumptions based longterm expectations operating margins historically realized reporting units’ industries fiscal 2010 impairment test none material reporting units’ operating margin assumptions excess annual margins realized recent year inherent estimates assumptions used determining fair value reporting units outside control management including interest rates cost capital tax rates credit ratings believe made reasonable estimates assumptions calculate fair value reporting units possible material change could occur actual results consistent estimates assumptions used calculate fair value may required perform second step future years could result material impairments goodwill fiscal 2010 2009 2008 reporting units passed first step goodwill impairment analysis exception immaterial chicken segment reporting unit fiscal 2010 beef reporting unit fiscal 2009 fiscal 2010 recorded noncash 29 million full impairment immaterial chicken segment reporting unit’s goodwill fiscal 2009 recorded 560 million partial impairment beef reporting unit’s goodwill driven increase discount rate used 2009 annual goodwill impairment analysis result disruptions global credit financial markets deterioration economic conditions indefinite life intangible assets carrying value intangible asset exceeds fair value impairment loss recognized amount equal excess fair value trademarks determined using royalty rate method based expected revenues trademark investments joint ventures entities use cost method accounting voting interests less 20 percent use equity method accounting voting interests excess 20 percent controlling interest variable interest primary beneficiary investments joint ventures entities reported consolidated balance sheets assets also investments marketable debt securities determined marketable debt securities availableforsale investments reported fair value based quoted market prices balance sheet date unrealized gains losses net tax recorded comprehensive income amortized cost debt securities adjusted amortization premiums accretion discounts maturity amortization recorded interest income cost securities sold based specific identification method realized gains losses sale debt securities declines value judged temporary recorded net basis income interest dividends securities classified availableforsale recorded interest income accrued self insurance use combination insurance selfinsurance mechanisms effort mitigate potential liabilities health welfare workers’ compensation auto liability general liability risks liabilities associated risks retained estimated part considering claims experience demographic factors severity factors actuarial assumptions capital stock two classes capital stock class common stock 010 par value class stock class b common stock 010 par value class b stock holders class b stock may convert stock class stock shareforshare basis holders class b stock entitled 10 votes per share holders class stock entitled one vote per share matters submitted shareholders approval october 2 2010 members tyson family beneficially aggregate 9997 outstanding shares class b stock 242 outstanding shares class stock giving tyson family control approximately 70 total voting power outstanding voting stock cash dividends cannot paid holders class b stock unless simultaneously paid holders class stock per share amount cash dividend paid holders class b stock cannot exceed 90 cash dividend simultaneously paid holders class stock pay quarterly cash dividends class b shareholders paid class dividends per share 016 class b dividends per share 0144 fiscal years 2010 2009 2008 class b stock considered participating security requiring use twoclass method computation basic earnings per share twoclass computation method period reflects cash dividends paid class stock plus amount allocated undistributed earnings losses computed using participation percentage reflects dividend rights class stock basic earnings per share computed using twoclass method periods presented shares class b stock considered participating convertible securities since shares class b stock convertible shareforshare basis shares class stock diluted earnings per share computed assuming conversion class b shares class shares beginning period financial instruments purchase certain commodities grains livestock course normal operations part commodity risk management activities use derivative financial instruments primarily futures options reduce exposure various market risks related purchases well changes foreign currency exchange rates contract terms financial instrument qualifying hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts designated highly effective meeting risk reduction correlation criteria recorded using hedge accounting derivative instrument accounted hedge changes fair value instrument offset either change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion instrument’s change fair value immediately recognized earnings component cost sales instruments hold part risk management activities meet criteria hedge accounting marked fair value unrealized gains losses reported currently earnings changes market value derivatives used risk management activities relating forward sales contracts recorded sales changes surrounding inventories hand anticipated purchases inventories supplies recorded cost sales generally hedge anticipated transactions beyond 18 months revenue recognition recognize revenue title risk loss transferred customers generally delivery based terms sale revenue recognized net amount estimated received deducting estimated amounts discounts trade allowances product terms litigation reserves variety legal proceedings pending threatened us accruals recorded probable liability incurred amount liability reasonably estimated based current law progress case opinions views legal counsel advisers experience similar matters intended response litigation amounts discounted exclusive claims third parties adjusted periodically assessment efforts progress additional information becomes available expense amounts administering litigating claims incurred accruals legal proceedings included current liabilities consolidated balance sheets freight expense freight expense associated products shipped customers recognized cost sales advertising promotion expenses advertising promotion expenses charged operations period incurred customer incentive trade promotion activities recorded reduction sales based amounts estimated due customers based primarily historical utilization redemption rates advertising promotional activities recorded selling general administrative expenses advertising promotion expenses fiscal years 2010 2009 2008 505 million 491 million 495 million respectively research development research development costs expensed incurred research development costs totaled 38 million 33 million 30 million fiscal 2010 2009 2008 respectively use estimates consolidated financial statements prepared conformity accounting principles generally accepted united states require us make estimates assumptions affect amounts reported consolidated financial statements accompanying notes actual results could differ estimates recently issued accounting pronouncements june 2009 financial accounting standards board fasb issued guidance removing concept qualifying specialpurpose entity qspe guidance also clarifies requirements isolation limitations portions financial assets eligible sale accounting guidance effective fiscal years beginning november 15 2009 accordingly adopt guidance beginning fiscal year 2011 expect adoption material impact june 2009 december 2009 fasb issued guidance requiring analysis determine whether variable interest gives entity controlling financial interest variable interest entity guidance requires ongoing assessment eliminates quantitative approach previously required determining whether entity primary beneficiary guidance effective fiscal years beginning november 15 2009 accordingly adopt guidance beginning fiscal year 2011 expect adoption material impact note 2 change accounting principles december 2007 fasb issued guidance establishing principles requirements acquirer business combination 1 recognizes measures financial statements identifiable assets acquired liabilities assumed noncontrolling interest acquiree 2 recognizes measures goodwill acquired business combination gain bargain purchase 3 determines information disclose enable users financial statements evaluate nature financial effects business combination guidance effective business combinations acquisition date beginning first annual reporting period beginning december 15 2008 therefore adopted guidance beginning fiscal 2010 initial adoption significant impact consolidated financial statements december 2007 fasb issued guidance establish accounting reporting standards noncontrolling interest subsidiary deconsolidation subsidiary guidance clarifies noncontrolling interest subsidiary ownership interest consolidated entity may reported equity consolidated financial statements rather liability mezzanine section liabilities equity guidance also requires consolidated net income reported amounts include net income attributable tyson parent noncontrolling interest adopted presentation disclosure requirements retrospectively beginning fiscal 2010 accordingly “attributable tyson” refers operating results exclusive noncontrolling interest conjunction adoption also adopted guidance applicable noncontrolling interests may required repurchase interest consolidated subsidiary noncontrolling interest holder put option contractual redemption requirement certain redeemable noncontrolling interests noncontrolling interests presented equity section mezzanine section balance sheet liabilities equity may 2008 fasb issued guidance specifies issuers convertible debt instruments may settled cash upon conversion including partial cash settlement separately account liability equity components manner reflect entity’s nonconvertible debt borrowing rate interest cost recognized subsequent periods amount allocated equity component represents discount debt amortized interest expense using effective interest method life debt adopted guidance first quarter fiscal 2010 applied retrospectively upon retrospective adoption effective interest rate 325 convertible senior notes due 2013 issued september 2008 determined 826 resulted recognition 92 million discount notes offsetting tax amount 56 million recorded capital excess par value discount accreted fiveyear term convertible notes effective interest rate impact previously reported fiscal 2008 interest expense significant impact increased fiscal 2009 noncash interest expense 17 million december 2008 fasb issued guidance requiring additional disclosures assets held employer’s defined benefit pension postretirement plan guidance effective fiscal years ending december 15 2009 early adoption permitted adopted disclosure requirements fiscal 2010 see note 15 pensions postretirement benefits required disclosures following table presents effects retrospective application new accounting guidance consolidated financial statements millions except per share data note 3 acquisitions august 2009 completed establishment related joint ventures china referred shandong tyson xinchang foods aggregate purchase price 60 equity interest 21 million excludes 93 million cash transferred joint venture future capital needs purchase price included 29 million allocated intangible assets 19 million allocated goodwill well assumption 76 million current longterm debt october 2008 acquired three vertically integrated poultry companies southern brazil macedo agroindustrial avicola itaiopolis frangobras aggregate purchase price 67 million addition 15 million contingent purchase price based production volumes payable fiscal 2011 purchase price included 23 million allocated goodwill 19 million allocated intangible assets note 4 discontinued operation march 13 2009 completed sale beef processing cattle feed yard fertilizer assets three alberta canada subsidiaries collectively lakeside part beef segment related inventories total consideration 145 million based exchange rates effect included cash received closing 43 million b 78 million collateralized notes receivable either xl foods affiliated entity collected throughout two years following closing c 24 million xl foods preferred stock redeemed five years recorded pretax loss sale lakeside 10 million fiscal 2009 included allocation beef reporting unit goodwill 59 million cumulative currency translation adjustment gains 41 million following summary lakeside’s operating results millions note 5 income charges fiscal 2010 recognized 38 million insurance proceeds received related losses incurred hurricane katrina 2005 proceeds reflected chicken segment’s operating income included consolidated statements income cost sales also fiscal 2010 recorded 12 million impairment charge related equity method investment charge included consolidated statements income net march 27 2009 announced decision close ponca city oklahoma processed meats plant ceased operation august 2009 closing resulted elimination approximately 600 jobs fiscal 2009 recorded charges 15 million included 14 million estimated impairment charges 1 million employee termination benefits charges reflected prepared foods segment’s operating income included consolidated statements income charges fiscal 2008 recorded charges 10 million related intangible asset impairments amount 8 million reflected beef segment’s operating income 2 million prepared foods segment’s operating income recorded consolidated statements income cost sales recorded charges 7 million related flood damage jefferson wisconsin plant amount reflected prepared foods segment’s operating income included consolidated statements income cost sales also recorded charge 6 million related impairment unimproved real property memphis tennessee amount reflected chicken segment’s operating income loss included consolidated statements income cost sales additionally recorded 18 million nonoperating gain result private equity firm’s purchase technology company held minority interest gain recorded income consolidated statements income february 2008 announced discontinuation existing product line closing one three poultry plants wilkesboro north carolina wilkesboro cooked products plant ceased operations april 2008 closure resulted elimination approximately 400 jobs fiscal 2008 recorded charges 13 million impairment charges amount reflected chicken segment’s operating income loss included consolidated statements income charges january 2008 announced decision restructure operations emporia kansas beef plant beef slaughter operations ceased second quarter fiscal 2008 however facility still used process certain commodity specialty cuts ground beef well cold storage distribution warehouse restructuring resulted elimination approximately 1700 jobs emporia plant fiscal 2008 recorded charges 10 million impairment charges 7 million closing costs consisting 6 million employee termination benefits 1 million plantclosing related liabilities amounts reflected beef segment’s operating income loss included consolidated statements income charges fully paid employee termination benefits plantclosing related liabilities fiscal 2008 management approved plans implementation certain recommendations resulting previously announced fast initiative focused process improvement efficiency creation result fiscal 2008 recorded charges 6 million related employee termination benefits resulting termination approximately 200 employees charges 2 million 2 million 1 million 1 million respectively recorded chicken beef pork prepared foods segments’ operating income loss included consolidated statements income charges fully paid employee termination benefits note 6 derivative financial instruments business operations give rise certain market risk exposures mostly due changes commodity prices foreign currency exchange rates interest rates manage portion risks use derivative financial instruments primarily futures options reduce exposure commodity price risk foreign currency risk interest rate risk forward contracts various commodities including grains livestock energy primarily entered manage price risk associated forecasted purchases inputs used production processes foreign exchange forward contracts entered manage fluctuations foreign currency exchange rates primarily result certain receivable payable balances also periodically utilize interest rate swaps manage interest rate risk associated variablerate borrowings risk management programs periodically reviewed board directors’ audit committee programs monitored senior management may revised market conditions dictate current risk management programs utilize industrystandard models take account implicit cost hedging risks associated market risks created derivative instruments fair values strictly monitored times using valueatrisk stress tests credit risks associated derivative contracts significant minimize counterparty concentrations utilize margin accounts letters credit deal creditworthy counterparties additionally derivative contracts mostly shortterm duration generally make use creditriskrelated contingent features significant concentrations credit risk existed october 2 2010 recognize derivative instruments either assets liabilities fair value consolidated balance sheets exception normal purchases normal sales expected result physical delivery accounting changes fair value ie gains losses derivative instrument depends whether designated qualifies part hedging relationship type hedging relationship derivative instruments designated qualify hedging instruments designate hedging instrument based upon exposure hedged ie fair value hedge cash flow hedge net investment foreign operation qualify designate derivative financial instrument hedge contract terms closely mirror hedged item providing high degree risk reduction correlation derivative instrument accounted hedge depending nature hedge changes fair value instrument either offset change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss oci hedged item recognized earnings ineffective portion instrument’s change fair value recognized earnings immediately designate certain forward contracts follows cash flow hedges include certain commodity forward option contracts forecasted purchases ie grains certain foreign exchange forward contracts fair value hedges include certain commodity forward contracts forecasted purchases ie livestock net investment hedges include certain foreign currency forward contracts permanently invested capital certain foreign subsidiaries cash flow hedges derivative instruments futures options designated hedges changes amount future cash flows related procurement certain commodities utilized production processes purchase forward option commodity contracts excess physical consumption requirements generally hedge forecasted transactions beyond 18 months objective hedges reduce variability cash flows associated forecasted purchase commodities derivative instruments designate qualify cash flow hedge effective portion gain loss derivative reported component oci reclassified earnings period periods hedged transaction affects earnings gains losses representing hedge ineffectiveness recognized earnings current period ineffectiveness related cash flow hedges significant fiscal 2010 2009 2008 following aggregated notionals outstanding forward option contracts accounted cash flow hedges net amount pretax gains accumulated oci october 2 2010 expected reclassified earnings within next 12 months 10 million fiscal 2010 2009 2008 reclassify significant pretax gainslosses earnings result discontinuance cash flow hedges due probability original forecasted transaction would occur end originally specified time period within additional period time allowed generally accepted accounting principles following table sets forth pretax impact cash flow hedge derivative instruments consolidated statements income millions fair value hedges designate certain futures contracts fair value hedges firm commitments purchase livestock slaughter objective hedges minimize risk changes fair value created fluctuations commodity prices associated fixed price livestock firm commitments following aggregated notionals outstanding forward contracts entered hedge forecasted commodity purchases accounted fair value hedge derivative instruments designate qualify fair value hedge gain loss derivative well offsetting gain loss hedged item attributable hedged risk recognized earnings current period include gain loss hedged items ie livestock purchase firm commitments line item cost sales offsetting gain loss related livestock forward position ineffectiveness related fair value hedges significant fiscal 2010 2009 2008 foreign net investment hedges utilize forward foreign exchange contracts protect value net investments certain foreign subsidiaries derivative instruments designated qualify hedge net investment foreign currency gain loss reported oci part cumulative translation adjustment extent effective related amounts due counterparties included liabilities assets utilize forwardrate method assessing hedge effectiveness ineffective portions net investment hedges recognized consolidated statements income period change ineffectiveness related foreign net investment hedges significant fiscal 2010 2009 2008 october 2 2010 october 3 2009 approximately 49 million 0 aggregate outstanding notionals related forward foreign currency contracts accounted foreign net investment hedges following table sets forth pretax impact derivative instruments consolidated statements income millions undesignated positions addition designated positions also hold forward option contracts apply hedge accounting include certain derivative instruments related commodities price risk including grains livestock energy foreign currency risk interest rate risk mark positions fair value earnings reporting date generally enter undesignated positions beyond 18 months objective undesignated grains energy livestock commodity positions reduce variability cash flows associated forecasted purchase certain grains energy livestock inputs production processes also enter certain forward sales boxed beef boxed pork forward purchases cattle hogs fixed prices fixed price sales contracts lock proceeds sale future fixed cattle hog purchases lock cost however cost livestock related boxed beef boxed pork market prices time sale purchase could vary fixed price enter fixed forward sales boxed beef boxed pork forward purchases cattle hogs also enter appropriate number livestock futures positions mitigate portion risk changes market value open livestock futures positions marked market reported earnings reporting date even though economic impact fixed prices market price realized time sale purchase positions generally qualify hedge treatment due location basis differences commodity exchanges actual locations purchase commodities foreign currency cash flow hedging program hedge portions forecasted transactions denominated foreign currencies primarily forward contracts protect reduction value forecasted foreign currency cash flows undesignated foreign currency positions generally would qualify cash flow hedge accounting however reduce earnings volatility normally elect hedge accounting treatment position provides offset underlying related transaction currently impacts earnings objective undesignated interest rate swap manage interest rate risk exposure floatingrate bond interest rate swap agreement effectively modifies exposure interest rate risk converting portion floatingrate bond fixed rate basis first five years thus reducing impact interestrate changes future interest expense interest rate swap qualify hedge treatment due differences underlying bond swap contract interestrate indices following aggregate outstanding notionals related undesignated positions included undesignated positions certain commodity grain positions qualify hedge treatment enter manage risk costs associated forward sales certain customers sales prices determined costplus arrangements unrealized positions totaled gains 2 million losses 17 million october 2 2010 october 3 2009 respectively positions liquidated expect realized gains losses reflected prices poultry products sold since derivative positions qualify hedge treatment initially created volatility earnings associated changes fair value however positions liquidated included sales price customer ultimately earnings impact previous fair value gains losses included prices poultry products following table sets forth pretax impact undesignated derivative instruments consolidated statements income millions following table sets forth fair value derivative instruments outstanding consolidated balance sheets millions derivative assets liabilities presented consolidated balance sheets net basis net derivative assets liabilities including cash collateral legally enforceable master netting arrangement exists counterparty derivative contract us see note 12 fair value measurements reconciliation amounts reported consolidated balance sheets current assets current liabilities note 7 property plant equipment major categories property plant equipment accumulated depreciation october 2 2010 october 3 2009 approximately 388 million required complete buildings equipment construction october 2 2010 note 8 goodwill intangible assets following table reflects goodwill activity fiscal years 2010 2009 intangible assets type october 2 2010 october 3 2009 amortization expense 19 million 10 million 3 million recognized fiscal 2010 2009 2008 respectively estimate amortization expense intangible assets next five fiscal years subsequent october 2 2010 2011 17 million 2012 16 million 2013 16 million 2014 15 million 2015 15 million beginning date benefits realized intangible assets amortized using straightline method estimated period benefit 1030 years note 9 current liabilities current liabilities october 2 2010 october 3 2009 include note 10 commitments lease equipment properties certain farms total rentals approximated 188 million 175 million 163 million respectively fiscal 2010 2009 2008 leases initial terms seven years varying renewal periods significant obligations assumed terms leases upkeep facilities payments insurance property taxes minimum lease commitments noncancelable leases october 2 2010 guarantee obligations certain outside third parties consists lease grower loans substantially collateralized underlying assets terms underlying debt cover periods eight years maximum potential amount future payments october 2 2010 69 million also maintain operating leases various types equipment contain residual value guarantees market value underlying leased assets end term lease remaining terms lease maturities cover periods next seven years maximum potential amount residual value guarantees 45 million 21 million would recoverable various recourse provisions additional undeterminable recoverable amount based fair value underlying leased assets likelihood material payments guarantees considered probable october 2 2010 october 3 2009 material liabilities guarantees recorded cash flow assistance programs certain livestock suppliers participate programs pay amount livestock equivalent standard cost grow livestock periods low market sales prices amounts payments excess market sales price recorded receivables accrue interest participating suppliers obligated repay receivables balances market sales prices exceed standard cost upon termination agreement maximum obligation associated programs limited fair value participating livestock supplier’s net tangible assets potential maximum obligation october 2 2010 approximately 215 million total receivables programs 51 million 72 million october 2 2010 october 3 2009 respectively included net allowance uncollectible amounts assets consolidated balance sheets even though programs limited net tangible assets participating livestock suppliers also manage portion credit risk associated programs obtaining security interests livestock suppliers’ assets analyzing residual credit risks general market conditions recorded allowance programs’ estimated uncollectible receivables 15 million 20 million october 2 2010 october 3 2009 respectively minority partner shandong tyson xinchang foods joint ventures china right exercise put options require us purchase entire 40 equity interest price equal minority partner’s contributed capital plus minus prorata share joint venture’s accumulated undistributed net earnings losses put options exercisable fiveyear term commencing april 2011 october 2 2010 put options exercisable would resulted purchase price approximately 67 million minority partner’s entire equity interest believe exercise put options would materially impact results operations financial condition additionally enter future purchase commitments various items grains livestock contracts fixed grower fees october 2 2010 commitments totaled note 11 debt major components debt follows millions annual maturities debt five fiscal years subsequent october 2 2010 2011 401 million 2012 10 million 2013 5 million 2014 1274 million 2015 3 million revolving credit facility 10 billion revolving credit facility supports shortterm funding needs letters credit loans made facility mature commitments thereunder terminate march 2012 however 2011 notes refinanced purchased defeased prior july 3 2011 outstanding loans facility mature commitments thereunder terminate july 3 2011 incurred approximately 30 million transaction fees amortized threeyear life facility availability facility 10 billion based percentage certain eligible receivables eligible inventory reduced certain reserves reducing amount eligible outstanding letters credit issued facility amount available borrowing facility october 2 2010 825 million october 2 2010 outstanding letters credit issued facility totaling approximately 175 million none drawn upon letters credit issued primarily support workers’ compensation insurance programs derivative activities dynamic fuels’ gulf opportunity zone taxexempt bonds additional 66 million bilateral letters credit issued facility none drawn upon facility fully unconditionally guaranteed senior secured basis substantially domestic subsidiaries guarantors’ cash accounts receivable inventory proceeds received related items secure obligations facility 2013 notes september 2008 issued 458 million principal amount 325 convertible senior unsecured notes due october 15 2013 interest payable semiannually arrears april 15 october 15 conversion rate initially 591935 shares class stock per 1000 principal amount notes equivalent initial conversion price 1689 per share class stock 2013 notes may converted close business july 12 2013 following circumstances fiscal quarter december 27 2008 last reported sale price class stock least 20 trading days period 30 consecutive trading days ending last trading day preceding fiscal quarter least 130 applicable conversion price applicable trading day would currently require shares trade 2196 five business days 10 consecutive trading days measurement period trading price per 1000 principal amount notes trading day measurement period less 98 product last reported sale price class stock applicable conversion rate day upon occurrence specified corporate events defined supplemental indenture july 15 2013 close business second scheduled trading day immediately preceding maturity date holders may convert notes time regardless foregoing circumstances upon conversion deliver cash aggregate principal amount 2013 notes converted shares class stock respect remainder conversion obligation excess aggregate principal amount 2013 notes converted october 2 2010 none conditions permitting conversion 2013 notes satisfied 2013 notes originally accounted combined instrument conversion feature meet requirements accounted separately derivative financial instrument however adopted new accounting guidance first quarter fiscal 2010 applied retrospectively periods presented new accounting guidance required us separately account liability equity conversion features upon retrospective adoption effective interest rate 2013 notes determined 826 resulted recognition 92 million discount notes offsetting tax amount 56 million recorded capital excess par value discount accreted fiveyear term convertible notes effective interest rate connection issuance 2013 notes entered separate convertible note hedge transactions respect class stock minimize potential economic dilution upon conversion 2013 notes also entered separate warrant transactions recorded purchase note hedge transactions reduction capital excess par value net 36 million pertaining related deferred tax asset recorded proceeds warrant transactions increase capital excess par value subsequent changes fair value instruments recognized financial statements long instruments continue meet criteria equity classification purchased call options private transactions 94 million permit us acquire approximately 27 million shares class stock initial strike price 1689 per share subject adjustment call options allow us acquire number shares class stock initially equal number shares class stock issuable holders 2013 notes upon conversion call options terminate upon maturity 2013 notes sold warrants private transactions total proceeds 44 million warrants permit purchasers acquire approximately 27 million shares class stock initial exercise price 2231 per share subject adjustment warrants exercisable various dates january 2014 march 2014 maximum amount shares may issued satisfy conversion 2013 notes limited 359 million shares however convertible note hedge warrant transactions effect increase initial conversion price 2013 notes 1689 per share 2231 per share thus reducing potential future economic dilution associated conversion 2013 notes share price 2231 upon conversion 2013 notes economic net share impact upon conversion 10 increase share price 2231 conversion price would result issuance 25 million incremental shares 2013 notes warrants could dilutive effect earnings per share extent price class stock given measurement period exceeds respective exercise prices instruments call options excluded calculation diluted earnings per share impact antidilutive 2014 notes march 2009 issued 810 million senior unsecured notes mature march 2014 notes carry 1050 interest rate interest payments due semiannually march 1 september 1 original issue discount 59 million based issue price 92756 face value received net proceeds 751 million addition incurred offering expenses 18 million used net proceeds towards repayment borrowings former accounts receivable securitization facility general corporate purposes also placed 234 million net proceeds blocked cash collateral account used payment repurchase 2010 notes 2014 notes fully unconditionally guaranteed substantially domestic subsidiaries 2016 notes 2016 notes carried interest rate issuance 660 interest step feature dependent credit rating november 13 2008 moody’s investor services inc moody’s downgraded credit rating “ba1” “ba3” downgrade increased interest rate 735 785 effective beginning sixmonth interest payment due april 1 2009 august 19 2010 standard poor’s upgraded credit rating “bb” “bb” september 2 2010 moody’s upgraded credit rating “ba3” “ba2” upgrades decreased interest rate 2016 notes 785 735 effective beginning sixmonth interest payment due october 1 2010 go zone taxexempt bonds october 2008 dynamic fuels received 100 million proceeds sale gulf opportunity zone taxexempt bonds made available federal government regions affected hurricanes katrina rita 2005 floating rate bonds due october 1 2033 november 2008 entered interest rate swap related bonds mitigate interest rate risk portion bonds five years also issued letter credit guarantee entire bond issuance proceeds bond issuance could used towards construction dynamic fuels’ facility accordingly unused proceeds recorded noncurrent restricted cash consolidated balance sheets utilized prior end fiscal 2010 debt covenants revolving credit facility contains affirmative negative covenants among things may limit restrict ability create liens encumbrances incur debt merge dissolve liquidate consolidate make acquisitions investments dispose transfer assets pay dividends make payments respect capital stock amend material documents change nature business make certain payments debt engage certain transactions affiliates enter saleleaseback hedging transactions case subject certain qualifications exceptions availability facility less greater 15 commitments 150 million required maintain minimum fixed charge coverage ratio 2014 notes also contain affirmative negative covenants among things may limit restrict ability incur additional debt issue preferred stock make certain investments restricted payments create liens create restrictions distributions subsidiaries engage specified sales assets subsidiary stock enter transactions affiliates enter new lines business engage consolidation mergers acquisitions engage certain saleleaseback transactions compliance covenants october 2 2010 condensed consolidating financial statements tyson fresh meats inc tfm parent whollyowned subsidiary fully unconditionally guaranteed 2016 notes tfm parent substantially whollyowned domestic subsidiaries fully unconditionally guaranteed 2014 notes following financial information presents condensed consolidating financial statements include tyson foods inc tfi parent tfm parent 2014 notes’ guarantor subsidiaries guarantors combined basis elimination entries necessary reflect tfm parent guarantors collectively represent 2014 notes’ total guarantor subsidiaries 2014 guarantors combined basis 2014 notes’ nonguarantor subsidiaries nonguarantors combined basis elimination entries necessary consolidate tfi parent 2014 guarantors nonguarantors tyson foods inc consolidated basis provided alternative providing separate financial statements guarantors note 12 fair value measurements adopted fair value measurement accounting guidance beginning fiscal 2009 guidance defines fair value establishes framework measuring fair value expands disclosure requirements fair value measurements guidance also defines fair value price would received sell asset paid transfer liability exit price principal advantageous market asset liability orderly transaction market participants measurement date fair value hierarchy prescribed standard contains three levels follows level 1 unadjusted quoted prices available active markets identical assets liabilities measurement date level 2 observable inputs available measurement date quoted prices included level 1 either directly indirectly including quoted prices similar assets liabilities active markets quoted prices identical similar assets nonactive markets inputs quoted prices observable asset liability inputs derived principally corroborated observable market data level 3 unobservable inputs cannot corroborated observable market data reflect use significant management judgment values generally determined using pricing models assumptions utilize management’s estimates market participant assumptions assets liabilities measured fair value recurring basis fair value hierarchy requires use observable market data available instances inputs used measure fair value fall different levels fair value hierarchy fair value measurement determined based lowest level input significant fair value measurement entirety assessment significance particular item fair value measurement entirety requires judgment including consideration inputs specific asset liability following tables set forth level within fair value hierarchy financial assets liabilities accounted fair value recurring basis according valuation techniques used determine fair values millions derivative assets liabilities presented consolidated balance sheets net basis net derivative assets liabilities including cash collateral legally enforceable master netting arrangement exists counterparty derivative contract us october 2 2010 october 3 2009 posted 35 million 4 million cash collateral held 3 million 0 cash collateral various counterparties respectively following table provides reconciliation beginning ending balance debt securities measured fair value recurring basis table used significant unobservable inputs level 3 millions following methods assumptions used estimate fair value class financial instrument derivative assets liabilities derivatives including commodities foreign exchange forward contracts interest rate swap primarily include exchangetraded overthecounter contracts described note 6 derivative financial instruments record commodity derivatives fair value using quoted market prices adjusted credit nonperformance risk internal models use basis readily observable market inputs including current forward commodity market prices foreign exchange forward contracts recorded fair value based quoted prices spot forward currency prices adjusted credit nonperformance risk interest rate swap recorded fair value based quoted libor swap rates adjusted credit nonperformance risk classify instruments level 2 quoted market prices corroborated utilizing observable current forward commodity market prices active exchanges observable market transactions spot currency rates forward currency prices observable benchmark market rates commonly quoted intervals available sale securities investments marketable debt securities classified availableforsale included assets consolidated balance sheets investments generally longterm nature maturities ranging 46 years reported fair value based pricing models quoted market prices adjusted credit nonperformance risk classify investments us government agency debt securities level 2 fair value generally estimated using discounted cash flow models primarily industrystandard models consider various assumptions including time value yield curve well readily available relevant economic measures classify certain corporate assetbacked debt securities level 3 limited activity less observable inputs proprietary valuation models including estimated prepayment default recovery rates underlying portfolio structured investment vehicle october 2008 received eight million warrants purchase equivalent amount syntroleum corporation common stock one cent return entering letter credit guarantee dynamic fuels’ gulf opportunity zone taxexempt bonds see note 11 debt including syntroleum corporation’s 50 percent ownership portion april 2009 exercised warrants eight million shares syntroleum corporation record shares assets consolidated balance sheets fair value based quoted market prices classify shares level 1 fair value based unadjusted quoted prices available active markets also received 425 million warrants purchases equivalent amount syntroleum corporation common stock average price 287 warrants classified available sale expire early fiscal 2013 recorded warrants assets consolidated balance sheets fair value based quoted market prices classify warrants level 2 fair value corroborated based observable market data unrealized gains losses net tax recorded oci realized gains losses sale securities declines value judged temporary would recorded earnings october 2 2010 october 3 2009 amortized cost basis corporate assetbacked debt securities reduced accumulated temporary impairments 3 million 4 million respectively unrealized holding gains losses net tax excluded earnings reported oci security settled sold quarterly basis evaluate whether losses related availableforsale securities temporary nature losses equity securities recognized earnings decline value judged temporary losses related debt securities determined temporary loss would recognized earnings intend likely required sell security prior recovery debt securities intent ability hold maturity losses determined temporary would remain oci expected credit losses recognized earnings consider many factors determining whether loss temporary including length time extent fair value cost financial condition nearterm prospects issuer ability intent hold investment period time sufficient allow anticipated recovery fiscal 2010 2008 recognized temporary impairments earnings recognized 4 million temporary impairments fiscal 2009 temporary losses deferred oci october 2 2010 october 3 2009 deferred compensation assets maintain two nonqualified deferred compensation plans certain executives highly compensated employees investments maintained within trust include money market funds mutual funds life insurance policies cash surrender value life insurance policies invested primarily mutual funds investments recorded fair value based quoted market prices included assets consolidated balance sheets classify investments observable market prices active markets level 1 generally publiclytraded mutual funds remaining deferred compensation assets classified level 2 fair value corroborated based observable market data realized unrealized gains losses deferred compensation included earnings assets liabilities measured fair value nonrecurring basis addition assets liabilities recorded fair value recurring basis record assets liabilities fair value nonrecurring basis generally assets recorded fair value nonrecurring basis result impairment charges fiscal 2010 recorded 29 million charge fully impair immaterial chicken segment reporting unit’s goodwill utilized discounted cash flow analysis incorporated unobservable level 3 inputs significant measurements assets liabilities fair value nonrecurring basis subsequent initial recognition financial instruments fair values debt based quoted market prices published forward interest rate curves fair value carrying value debt follows millions financial instruments estimated fair value approximated carrying value october 2 2010 october 3 2009 carrying value financial instruments otherwise disclosed herein included notes receivable approximated fair value october 2 2010 october 3 2009 notes receivable recorded current assets consolidated balance sheets totaled 49 million october 2 2010 recorded assets october 3 2009 totaled 45 million fair values determined using pricing models assumptions utilize management’s estimates market participant assumptions concentrations credit risk financial instruments exposed concentrations credit risk consist primarily cash equivalents accounts receivable cash equivalents high quality securities placed major banks financial institutions concentrations credit risk respect receivables limited due large number customers dispersion across geographic areas perform periodic credit evaluations customers’ financial condition generally require collateral october 2 2010 october 3 2009 153 130 respectively net accounts receivable balance due walmart stores inc single customer group represents greater 10 net accounts receivable note 13 comprehensive income loss components accumulated comprehensive income follows components comprehensive income loss follows note 14 stockbased compensation issue shares stockbased compensation plans issuing class stock treasury total number shares available future grant tyson foods inc 2000 stock incentive plan incentive plan 18455244 october 2 2010 stock options shareholders approved incentive plan january 2001 incentive plan administered compensation committee board directors compensation committee incentive plan includes provisions granting incentive stock options shares class stock price less fair value date grant nonqualified stock options may granted price equal less fair value class stock date option granted stock options incentive plan generally become exercisable ratably two five years date grant must exercised within 10 years date grant policy recognize compensation expense straightline basis requisite service period entire award generally grant stock options year however granted stock options twice fiscal 2010 weighted average grantdate fair value options granted fiscal 2010 2009 2008 476 129 522 respectively fair value option grant established date grant using binomial lattice method grants awarded october 1 2005 blackscholes optionpricing model grants awarded october 1 2005 change binomial lattice method made better reflect exercise behavior top management use historical volatility period time comparable expected life option determine volatility assumptions expected life calculated based contractual term grant takes account historical exercise termination behavior participants riskfree interest rates based fiveyear treasury bond rate assumptions grant date used fair value calculation year’s grants outlined following table recognized stockbased compensation expense related stock options net income taxes 11 million 9 million 12 million respectively fiscal years 2010 2009 2008 7 million 6 million 7 million related tax benefit 22 million 24 million 25 million options vest fiscal years 2010 2009 2008 respectively fair value 13 million 15 million 15 million respectively fiscal years 2010 2009 2008 received cash 36 million 1 million 9 million respectively exercise stock options shares issued treasury stock option exercises related tax benefit realized stock options exercised fiscal years 2010 2009 2008 5 million 0 1 million respectively total intrinsic value options exercised fiscal years 2010 2009 2008 12 million 0 3 million respectively cash flows resulting tax deductions excess compensation cost options excess tax deductions classified financing cash flows realized 3 million 0 respectively excess tax deductions fiscal years 2010 2009 2008 respectively october 2 2010 25 million total unrecognized compensation cost related stock option plans recognized weighted average period 25 years restricted stock issue restricted stock market value date grant restrictions expiring periods 2013 unearned compensation recognized vesting period particular grant using straightline method october 2 2010 21 million total unrecognized compensation cost related restricted stock awards recognized weighted average period 17 years recognized stockbased compensation expense related restricted stock net income taxes 8 million 10 million 11 million years 2010 2009 2008 respectively related tax benefit fiscal years 2010 2009 2008 5 million 7 million 6 million respectively 18 million 07 million 20 million respectively restricted stock awards vest fiscal years 2010 2009 2008 grant date fair value 30 million 11 million 24 million performancebased shares july 2003 compensation committee began authorizing us award performancebased shares class stock certain senior executives awards typically granted first business day fiscal year vesting performancebased shares generally three years award subject attainment goals determined compensation committee prior date award review progress toward attainment goals quarter vesting period however attainment goals determined end vesting period shares vest ultimate cost equal class stock price date shares vest multiplied number shares awarded performance grants market criteria grants market performance criteria ultimate expense fair value probable shares vest regardless shares actually vest total expense recorded related performancebased shares material fiscal 2010 2009 2008 note 15 pensions postretirement benefits october 2 2010 four noncontributory defined benefit pension plans consisting three funded qualified plans one unfunded nonqualified plan three qualified plans frozen provide benefits based formula using years service specified benefit rate effective january 1 2004 implemented nonqualified defined benefit plan certain contracted officers uses formula based years service final average salary also postretirement benefit plans substantially employees may receive benefits satisfy applicable eligibility criteria postretirement healthcare plans contributory participants’ contributions adjusted deemed necessary defined contribution retirement incentive benefit programs various groups employees recognized expenses 48 million 49 million 48 million fiscal 2010 2009 2008 respectively use fiscal year end measurement date defined benefit plans postretirement plans generally recognize effect actuarial gains losses earnings immediately postretirement plans rather amortizing effect future periods postretirement benefits include postretirement medical costs life insurance benefit obligations funded status following table provides reconciliation changes plans’ benefit obligations assets funded status october 2 2010 october 3 2009 october 2 2010 october 3 2009 pension plans accumulated benefit obligation excess plan assets accumulated benefit obligation qualified pension plans 97 million 89 million october 2 2010 october 3 2009 respectively plans accumulated benefit obligations excess plan assets follows net periodic benefit cost components net periodic benefit cost pension postretirement benefit plans recognized consolidated statements income follows assumptions weighted average assumptions follows determine rateofreturn assets assumption first examined historical rates return various asset classes determined longterm projected rateofreturn based expected returns next five 10 years discount rate assumptions used account pension postretirement benefit plans reflect rates benefit obligations could effectively settled determined using cash flow matching technique whereby rates yield curve developed highquality debt securities applied benefit obligations determine appropriate discount rate three postretirement health plans two consist fixed annual payments account 31 million postretirement medical obligation october 2 2010 healthcare cost trend required determine obligation remaining plan accounts 14 million postretirement medical obligation october 2 2010 plan covers retirees yet qualify medicare uses healthcare cost trend 7 current year grading 6 fiscal 2012 onepercentage point change assumed healthcare cost trend rate would immaterial impact postretirement benefit obligation total service interest cost plan assets fair value plan assets domestic pension benefit plans 59 million 54 million october 2 2010 october 3 2009 respectively following table sets forth actual target asset allocation pension plan assets foreign subsidiary pension plan 15 million 14 million plan assets october 2 2010 october 3 2009 respectively plan’s assets held insurance contract consistent target asset allocation plan trustees established set investment objectives related assets pension plans regularly monitor performance funds portfolio managers objectives pension assets 1 provide growth capital income 2 achieve target weighted average annual rate return competitive funds similar investment objectives 3 diversify reduce risk investment objectives target asset allocation adopted january 2004 amended november 2008 alternative investments may include limited hedge funds private equity funds fixed income funds following table shows categories pension plan assets level fair values determined fair value hierarchy described note 12 fair value measurements valued using quoted market prices active markets b valued using plan’s assumptions market participants would use pricing assets based best information available investment manager pricing reconciliation change fair value measurement defined benefit plans’ consolidated assets using significant unobservable inputs level 3 follows millions believe significant concentrations risk within plan assets october 2 2010 contributions policy fund least minimum contribution required meet applicable federal employee benefit local tax laws sole discretion may time fund additional amounts expected contributions pension plans fiscal 2011 approximately 7 million fiscal 2010 2009 2008 funded 4 million 2 million 2 million respectively defined benefit plans estimated future benefit payments following benefit payments expected paid benefit payments postretirement benefit plans expected offset medicare part subsidies 2011 thereafter note 16 supplemental cash flow information following table summarizes cash payments interest income taxes note 17 transactions related parties operating leases farms equipment facilities tyson director company john tyson chairman company certain members families randal w tyson testamentary trust total payments 2 million fiscal 2010 3 million fiscal 2009 3 million fiscal 2008 paid entities parties ownership interest 2008 lawsuit captioned tyson foods inc consolidated shareholder’s litigation settled pursuant settlement tyson limited partnership paid us 45 million note 18 income taxes detail provision income taxes continuing operations consists following reasons difference statutory federal income tax rate effective income tax rate continuing operations follows fiscal 2010 tax expense impacted domestic production deduction reduction unrecognized tax benefits reduction state valuation allowance decreased tax expense 24 million 16 million 13 million respectively goodwill impairment deductible income tax purposes negatively impacted effective income tax rate 09 fiscal 2009 goodwill impairment deductible income tax purposes negatively impacted effective income tax rate 361 fiscal 2009 tax expense impacted increase foreign valuation allowance increased tax expense 21 million estimated general business credits decreased tax expense 12 million tax planning foreign jurisdictions decreased tax expense 9 million fiscal 2008 increase state valuation allowance increased tax expense 8 million nondeductible activity relating companyowned life insurance increased tax expense 6 million addition unrecognized tax benefits fiscal 2008 caused net increase income tax expense 7 million additionally estimated general business credits decreased fiscal 2008 tax expense 6 million recognize deferred income taxes future tax consequences attributable differences financial statement carrying amounts existing assets liabilities respective tax bases deferred tax assets liabilities measured using tax rates expected apply taxable income years temporary differences expected recovered settled tax effects major items recorded deferred tax assets liabilities follows record deferred tax amounts current assets deferred income taxes consolidated balance sheets deferred tax liability suspended taxes conversion accrual method represents 1987 change cash accrual method accounting recognized 2027 october 2 2010 gross state tax net operating loss carryforwards approximated 787 million expire fiscal years 2011 2029 gross foreign net operating loss carryforwards approximated 144 million 53 million expire fiscal years 2011 2019 remainder expiration accumulated undistributed earnings foreign subsidiaries aggregating approximately 260 million 220 million october 2 2010 october 3 2009 respectively earnings expected indefinitely reinvested outside united states earnings distributed form dividends otherwise would subject federal income taxes subject adjustment foreign tax credits state income taxes withholding taxes payable various foreign countries currently practicable estimate tax liability might payable repatriation foreign earnings following table summarizes activity related gross unrecognized tax benefits october 2 2010 october 3 2009 september 27 2008 amount unrecognized tax benefits recognized would impact effective tax rate 150 million 104 million october 2 2010 october 3 2009 respectively increase primarily result first quarter adoption new accounting guidance related business combinations classify interest penalties unrecognized tax benefits income tax expense october 2 2010 october 3 2009 tax benefits 64 million 71 million respectively accrued interest penalties unrecognized tax benefits october 2 2010 subject income tax examinations us federal income taxes fiscal years 1998 2009 foreign state local income taxes fiscal years 2001 2009 fiscal 2011 tax audit resolutions could potentially reduce unrecognized tax benefits approximately 15 million either tax positions sustained audit agree disallowance note 19 earnings loss per share earnings weighted average common shares used computation basic diluted earnings loss per share follows approximately 5 million 24 million 10 million respectively fiscal years 2010 2009 2008 stockbased compensation shares antidilutive included dilutive earnings per share calculation two classes capital stock class stock class b stock cash dividends cannot paid holders class b stock unless simultaneously paid holders class stock per share amount cash dividends paid holders class b stock cannot exceed 90 cash dividend paid holders class stock allocate undistributed earnings losses based upon 1 09 ratio per share class stock class b stock respectively allocate undistributed earnings losses based ratio due historical dividend patterns voting control class b shareholders contractual limitations dividends class b stock note 20 segment reporting operate four segments chicken beef pork prepared foods measure segment profit operating income loss chicken operations include breeding raising chickens well processing live chickens fresh frozen valueadded chicken products logistics operations move products supply chain products marketed domestically food retailers foodservice distributors restaurant operators noncommercial foodservice establishments schools hotel chains healthcare facilities military food processors well international markets also includes sales allied products chicken breeding stock subsidiary beef operations include processing live fed cattle fabricating dressed beef carcasses primal subprimal meat cuts caseready products segment also includes sales allied products hides variety meats well logistics operations move products supply chain products marketed domestically food retailers foodservice distributors restaurant operators noncommercial foodservice establishments schools hotel chains healthcare facilities military food processors well international markets allied products marketed manufacturers pharmaceuticals technical products pork operations include processing live market hogs fabricating pork carcasses primal subprimal cuts caseready products segment also includes live swine group related allied product processing activities logistics operations move products supply chain products marketed domestically food retailers foodservice distributors restaurant operators noncommercial foodservice establishments schools hotel chains healthcare facilities military food processors well international markets sell allied products pharmaceutical technical products manufacturers well limited number live swine pork processors prepared foods prepared foods operations include manufacturing marketing frozen refrigerated food products logistics operations move products supply chain products include pepperoni bacon beef pork pizza toppings pizza crusts flour corn tortilla products appetizers prepared meals ethnic foods soups sauces side dishes meat dishes processed meats products marketed domestically food retailers foodservice distributors restaurant operators noncommercial foodservice establishments schools hotel chains healthcare facilities military food processors well international markets excludes depreciation related discontinued operation 9 million fiscal year 2008 b excludes assets held sale related discontinued operation 159 million fiscal year 2008 c excludes additions property plant equipment related discontinued operation 2 million fiscal year 2008 allocate expenses related corporate activities segments related assets additions property plant equipment remain pork segment sales 718 million 449 million 517 million fiscal years 2010 2009 2008 respectively transactions operating segments beef segment sales 172 million 155 million 142 million fiscal years 2010 2009 2008 respectively transactions operating segments beginning fiscal 2010 modified presentation segment sales periods presented include impact intersegment sales market prices largest customer walmart stores inc accounted 134 138 133 consolidated sales fiscal years 2010 2009 2008 respectively sales walmart stores inc included chicken beef pork prepared foods segments extended discontinuance sales customer could replaced material impact operations majority operations domiciled united states approximately 96 97 98 sales external customers fiscal 2010 2009 2008 respectively sourced united states approximately 33 billion 32 billion 34 billion respectively property plant equipment located united states october 2 2010 october 3 2009 september 27 2008 approximately 364 million 329 million 139 million property plant equipment located foreign countries primarily brazil china mexico india fiscal years ended 2010 2009 2008 respectively sell certain products foreign markets primarily canada central america china european union japan mexico middle east russia south korea taiwan vietnam export sales totaled 32 billion 27 billion 32 billion fiscal 2010 2009 2008 respectively substantially export sales facilitated unaffiliated brokers marketing associations foreign sales staffs foreign sales products produced country united states less 10 consolidated sales fiscal 2010 2009 2008 approximately 55 million loss 14 million loss 34 million income continuing operations income taxes fiscal 2010 2009 2008 respectively foreign operations included chicken segment note 21 quarterly financial data unaudited fourth quarter fiscal 2009 14week period remaining quarters table 13week periods second quarter fiscal 2010 net income includes 24 million pretax charges related losses notes repurchased quarter third quarter fiscal 2010 operating income includes 38 million insurance proceeds received quarter net income includes 34 million pretax charges related losses notes repurchased quarter 12 million charge related equity method investment impairment fourth quarter fiscal 2010 operating income includes 29 million noncash charge related full impairment immaterial chicken segment reporting unit’s goodwill second quarter fiscal 2009 operating income included 15 million charge related closing prepared foods processed meats plant fourth quarter fiscal 2009 operating loss included 560 million noncash charge related partial impairment beef segment’s goodwill note 22 capital structure september 2008 issued 224 million shares class stock part public offering shares offered 1275 net proceeds underwriting discounts commissions approximately 274 million used toward repayment borrowings accounts receivable securitization facility general corporate purposes entity controlled tyson purchased three million shares class stock offering note 23 contingencies involved various claims legal proceedings routinely assess likelihood adverse judgments outcomes matters well ranges probable losses extent losses reasonably estimable record accruals matters extent conclude loss probable financial impact adverse outcome occur reasonably estimable accruals reflected company’s consolidated financial statements opinion made appropriate adequate accruals matters believe probability material loss beyond amounts accrued remote however ultimate liability matters uncertain accruals adequate adverse outcome could material effect consolidated financial condition results operations listed certain claims made company andor subsidiaries potential exposure considered material company’s consolidated financial statements believe substantial defenses claims made intend vigorously defend matters several private lawsuits pending us alleging failed compensate poultry plant employees hours worked including overtime compensation violation flsa lawsuits include deasencio v tyson foods inc deasencio filed august 22 2000 us district court eastern district pennsylvania matter involves similar allegations employees paid time takes engage pre postshift activities changing protective sanitary clothing obtaining clothing walking changing area work areas break areas seek back wages liquidated damages pre postjudgment interest attorneys’ fees plaintiffs appealed jury verdict final judgment entered favor june 22 2006 us district court eastern district pennsylvania september 7 2007 us court appeals third circuit reversed jury verdict remanded case district court proceedings sought rehearing en banc denied court appeals october 5 2007 united states supreme court denied petition writ certiorari june 9 2008 new trial date set private lawsuits referred sheila ackles et al v tyson foods inc n dist alabama october 23 2006 mccluster et al v tyson foods inc dist georgia december 11 2006 dobbins et al v tyson chicken inc et al nd alabama december 21 2006 buchanan et al v tyson chicken inc et al potter et al v tyson chicken inc et al nd alabama december 22 2006 jones et al v tyson foods inc et al walton et al v tyson foods inc et al williams et al v tyson foods inc et al sd mississippi february 9 2007 balch et al v tyson foods inc ed oklahoma march 1 2007 adams et al v tyson foods inc wd arkansas march 2 2007 atkins et al v tyson foods inc md georgia march 5 2007 laney et al v tyson foods inc williams et al v tyson foods inc md georgia may 23 2007 “williams case” similar deasencio matters involves allegations employees paid time takes engage pre postshift activities changing protective sanitary clothing obtaining clothing walking changing area work areas break areas plaintiffs lawsuits seek sought act class representatives behalf current former employees allegedly paid time worked seek back wages liquidated damages pre postjudgment interest attorneys’ fees april 6 2007 filed motion transfer named actions coordinated pretrial proceedings judicial panel multidistrict litigation granted august 17 2007 cases five cases subsequently filed involving allegations armstrong et al v tyson foods inc wd tennessee january 30 2008 maldonado et al v tyson foods inc ed tennessee january 31 2008 white et al v tyson foods inc ed texas february 1 2008 meyer et al v tyson foods inc wd missouri february 2 2008 leak et al v tyson foods inc wd north carolina february 6 2008 transferred us district court middle district georgia tyson foods inc fair labor standards act litigation “mdl proceedings” january 2 2008 court issued joint scheduling case management order granted conditional class certification called notice given potential putative class members via third party administrator potential class members april 18 2008 “optin” class approximately 13800 employees former employees filed consents “optin” class october 15 2008 court denied plaintiffs’ motion equitable tolling granted would extended time period plaintiffs could sought damages however addition consents already obtained court allowed plaintiffs obtain corrected reaffirmed optin consents previously filed matter mh fox et al v tyson foods inc nd alabama june 22 1999 deadline filing consents december 31 2008 according third party administrator approximately 4000 reaffirmed consents filed may addition approximately 13800 consents filed previously parties completed discovery eight facilities corporate headquarters springdale arkansas july 2009 filed class decertification motions eight facilities involved discovery also filed motions partial summary judgment eight facilities oral arguments motions occurred february 3 2010 march 16 2010 court granted partial summary judgment respect two unionized facilities denied remaining motions court concluded activities two facilities met definition “clothes changing” section 203o flsa time engaged pre postshift donning doffing compensable court rule whether section 203o activity could begin continuous work day thereby making walking sanitizing washing time activity compensable filed motion certification permissive appeal whether section 203o activity start continuous workday whether washing required clothing items covered section 203o april 23 2010 court granted us permission appeal issues eleventh circuit court appeals court also retained jurisdiction respect eight facilities staying proceedings respect seven scheduled trial williams case october 12 2010 april 16 2010 court lifted previously entered stay discovery respect remaining 32 facilities subject mdl proceedings ordered parties meet confer report court discovery agreements disputed issues within 45 days june 7 2010 court issued scheduling order set close discovery remaining 32 facilities may 31 2012 september 22 2010 court granted parties’ joint motion stay proceedings mdl proceedings including trial williams case order allow parties opportunity explore settlement plaintiffs subsequently filed motion lift stay court granted motion november 15 2010 trial williams case scheduled begin february 14 2011 pending eleven separate wage hour actions involving tfm’s plants located lexington nebraska lopez et al v tyson foods inc nebraska june 30 2006 garden city emporia kansas garcia et al v tyson foods inc tyson fresh meats inc kansas may 15 2006 storm lake iowa bouaphakeo fka sharp et al v tyson foods inc nd iowa february 6 2007 columbus junction iowa robinson et al v tyson foods inc dba tyson fresh meats inc sd iowa september 12 2007 joslin illinois murray et al v tyson foods inc cd illinois january 2 2008 dakota city nebraska gomez et al v tyson foods inc nebraska january 16 2008 madison nebraska acosta et al v tyson foods inc dba tyson fresh meats inc nebraska february 29 2008 perry waterloo iowa edwards et al v tyson foods inc dba tyson fresh meats inc sd iowa march 20 2008 council bluffs iowa maxwell fka salazar et al v tyson foods inc dba tyson fresh meats inc sd iowa april 29 2008 logansport indiana carter et al v tyson foods inc tyson fresh meats inc nd indiana april 29 2008 goodlettsville tennessee abadeer v tyson foods inc tyson fresh meats inc md tennessee february 6 2009 actions allege failed pay employees hours worked including overtime compensation time takes change protective work uniforms safety equipment sanitary protective clothing worn employees walking changing area work areas break areas violation flsa analogous state laws plaintiffs seek back wages liquidated damages pre postjudgment interest attorneys’ fees costs case proceeding jurisdiction trial bouaphakeo case originally set begin november 1 2010 rescheduled september 7 2011 also pending one wage hour action involving tyson prepared foods plant located jefferson wisconsin weissman et al v tyson prepared foods inc jefferson county wisconsin circuit court october 20 2010 plaintiffs allege employees paid time takes engage pre postshift activities changing protective sanitary clothing associated time takes walk workstations postdonning predoffing protective sanitary clothing six named plaintiffs seek act state law class representatives behalf current former employees allegedly paid time worked seek back wages liquidated damages pre postjudgment interest attorneys’ fees costs june 19 2005 attorney general secretary environment state oklahoma filed complaint us district court northern district oklahoma us three subsidiaries six poultry integrators complaint subsequently amended complaint asserts number state federal causes action including limited counts comprehensive environmental response compensation liability act “cercla” resource conservation recovery act “rcra” statelaw public nuisance theories amended complaint asserts defendants certain contract growers named amended complaint polluted surface waters groundwater associated drinking water supplies illinois river watershed “irw” land application poultry litter oklahoma asserts alleged pollution also caused extensive injury environment including soils sediments irw defendants unjustly enriched oklahoma’s claims cover entire irw encompasses one million acres land natural resources including lakes waterways contained therein oklahoma seeks wideranging relief including injunctive relief compensatory damages excess 800 million unspecified amount punitive damages attorneys’ fees defendants denied liability asserted various defenses filed thirdparty complaint asserts claims persons entities whose activities may contributed pollution alleged amended complaint district court stayed proceedings third party complaint pending resolution oklahoma’s claims defendants october 31 2008 defendants filed motion dismiss failure join cherokee nation required party alternative judgment matter law based plaintiffs’ lack standing motion granted part denied part july 22 2009 ruling district court dismissed oklahoma’s claims cost recovery natural resources damages cercla unjust enrichment oklahoma common law ruling also narrowed scope oklahoma’s remaining claims dismissing damage claims causes action oklahoma common law nuisance federal common law nuisance oklahoma common law trespass leaving claims injunctive relief trial august 18 2009 court granted partial summary judgment favor defendants oklahoma’s claims violations oklahoma registered poultry feeding operations act oklahoma later voluntarily dismissed remainder claim september 2 2009 cherokee nation filed motion intervene lawsuit motion intervene denied september 15 2009 cherokee nation filed notice appeal ruling tenth circuit court appeals september 17 2009 nonjury trial case began september 24 2009 close oklahoma’s caseinchief court granted defendants’ motions dismiss claims based rcra nuisance per se health risks related bacteria defense rested case january 13 2010 closing arguments held february 11 2010 september 21 2010 court appeals affirmed district court’s denial cherokee nation’s motion intervene october 6 2010 cherokee nation state oklahoma filed petition rehearing en banc review seeking reconsideration ruling court appeals denied petition september 2009 national water commission “conagua” agency mexican government’s ministry environment natural resources sent observation letter mexican subsidiary tyson de mexico “tdm” respect tdm’s water usage certain water wells part poultry production operations letter response tdm’s previous submission conagua requested information relating water usage wells 2004 2007 observation letter contains initial finding facts conagua alleges tdm may failed report accurate water volume usage ii install measuring equipment iii provide evidence water use exemptions iv pay applicable usage v properly measure water volume required water deeds held tdm october 15 2009 tdm responded conagua denying allegations presented april 13 2010 regional conagua office delivered final determinations tdm matter claimed tdm owed agency approximately 559 million pesos approximately us46 million certain water usage period question tdm appealed regional office’s final determinations administrative courts conagua mexico city may 8 2008 lawsuit filed company two employees district court mccurtain county oklahoma styled armstrong et al v tyson foods inc et al “armstrong case” lawsuit brought group 52 poultry growers allege certain live production practices oklahoma constitute fraudulent inducement fraud unjust enrichment negligence gross negligence unconscionability violations oklahoma business sales act deceptive trade practice violations consumer protection act conversion well theories recovery plaintiffs sought damages unspecified amount october 30 2009 20 additional growers represented attorney filed lawsuit us court asserting similar claims styled clardy et al v tyson foods inc et al “clardy case” cases denied allegations wrongdoing june 2009 plaintiffs armstrong case requested expedited trial date smaller group plaintiffs claimed facing imminent financial peril court ultimately severed group 10 plaintiffs armstrong case trial began march 15 2010 numerous irregularities rulings trial believe legally erroneous highly prejudicial right fair trial april 1 2010 jury returned verdict us one employees april 2 2010 jury returned punitive damages verdict us dispute caused inconsistencies multiple verdict forms completed jury apparent confusion jury complete verdict forms court entered final judgment amount 8655735 subsequent trial presiding judge disqualified cases oklahoma supreme court appointed new judge cases company filed posttrial motions challenging verdict motions denied company intends appeal overturn verdict filed motion trial court change venue mccurtain county grounds numerous irregularities occurred trial coupled attendant publicity resulted community bias would prevent company receiving fair trial mccurtain county trial court granted motion case transferred choctaw county oklahoma filed another motion trial court also granted stay future trials claims plaintiffs armstrong case clardy case pending outcome appeal first trial believe numerous substantial legal errors made court trial review guidance issues appellate court could substantial impact outcome future trials armstrong case clardy case report independent registered public accounting firm board directors shareholders tyson foods inc opinion accompanying consolidated balance sheet october 2 2010 related consolidated statements income shareholders’ equity cash flows fiscal year ended present fairly material respects financial position tyson foods inc subsidiaries october 2 2010 results operations cash flows fiscal year ended october 2 2010 conformity accounting principles generally accepted united states america addition opinion financial statement schedule fiscal year ended october 2 2010 listed index appearing item 15a presents fairly material respects information set forth therein read conjunction related consolidated financial statements also opinion company maintained material respects effective internal control financial reporting october 2 2010 based criteria established internal control integrated framework issued committee sponsoring organizations treadway commission coso company’s management responsible financial statements financial statement schedule maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included management’s annual report internal control financial reporting appearing item 9a responsibility express opinions financial statements financial statement schedule company’s internal control financial reporting based integrated audit conducted audit accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement whether effective internal control financial reporting maintained material respects audit financial statements included examining test basis evidence supporting amounts disclosures financial statements assessing accounting principles used significant estimates made management evaluating overall financial statement presentation audit internal control financial reporting included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk audit also included performing procedures considered necessary circumstances believe audit provides reasonable basis opinions discussed note 2 consolidated financial statements company changed manner accounts noncontrolling interests manner accounts convertible debt instruments may settled cash upon conversion including partial cash settlement 2010 company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles company’s internal control financial reporting includes policies procedures pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company ii provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company iii provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate pricewaterhousecoopers llp fayetteville ar november 22 2010 report independent registered public accounting firm board directors shareholders tyson foods inc audited accompanying consolidated balance sheet tyson foods inc october 3 2009 related consolidated statements income shareholders’ equity cash flows two years period ended october 3 2009 audits also included financial statement schedule two years ended october 3 2009 listed index item 15a financial statements schedule responsibility company’s management responsibility express opinion financial statements schedule based audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion financial statements referred present fairly material respects consolidated financial position tyson foods inc october 3 2009 consolidated results operations cash flows two years period ended october 3 2009 conformity us generally accepted accounting principles also opinion related financial statement schedule two years period ended october 3 2009 considered relation basic financial statements taken whole presents fairly material respects information set forth therein described note 2 consolidated financial statements company adopted guidance establishing accounting reporting standards noncontrolling interest subsidiary convertible debt instruments 2010 reflected consolidated statements shareholders’ equity company changed method accounting uncertainty income taxes 2008 ernst young llp rogers arkansas november 23 2009 except matters described note 2 “change accounting principles” relates retrospective application accounting principles adopted 2010 date november 22 item 9item 8 financial statements supplementary data tyson foods inc consolidated statements income see accompanying notes tyson foods inc consolidated balance sheets tyson foods inc consolidated statements shareholders’ equity see accompanying notes 1 excludes net income loss related redeemable noncontrolling interest 4 million 9 million 0 fiscal 2011 2010 2009 respectively tyson foods inc consolidated statements cash flows notes consolidated financial statements tyson foods inc note 1 business summary significant accounting policies description business tyson foods inc collectively “company” “we” “us” “our” founded 1935 world headquarters springdale arkansas one world’s largest meat protein companies secondlargest food production company fortune 500 produce wide variety brand name proteinbased prepared food products marketed united states approximately 130 countries around world consolidation consolidated financial statements include accounts majorityowned subsidiaries exercise control applicable entities controlling financial interest primary beneficiary significant intercompany accounts transactions eliminated consolidation investment joint venture dynamic fuels llc dynamic fuels 50 percent ownership interest dynamic fuels qualifies variable interest entity consolidate dynamic fuels since primary beneficiary october 1 2011 dynamic fuels 170 million total assets 144 million property plant equipment 116 million total liabilities 100 million longterm debt october 2 2010 dynamic fuels 154 million total assets 145 million property plant equipment 107 million total liabilities 100 million longterm debt fiscal year utilize 52 53week accounting period ending saturday closest september 30 company’s accounting cycle resulted 52week year fiscal years 2011 2010 53week year fiscal year 2009 discontinued operation march 13 2009 completed sale beef processing cattle feed yard fertilizer assets three alberta canada subsidiaries collectively lakeside part beef segment related inventories financial statements report lakeside discontinued operation see note 3 acquisitions discontinued operation notes consolidated financial statements information cash equivalents cash equivalents consist investments shortterm highly liquid securities original maturities three months less made part cash management activity carrying values assets approximate fair values primarily utilize cash management system series separate accounts consisting lockbox accounts receiving cash concentration accounts funds moved several zerobalance disbursement accounts funding payroll accounts payable livestock procurement grower payments etc result cash management system checks issued presented banks payment may result negative book cash balances negative book cash balances included accounts payable current liabilities october 1 2011 october 2 2010 checks outstanding excess related book cash balances totaled approximately 281 million 267 million respectively accounts receivable record accounts receivable net realizable value includes appropriate allowance estimated uncollectible accounts reflect loss anticipated accounts receivable balances charged provision doubtful accounts calculate allowance based history writeoffs level past due accounts relationships economic status customers october 1 2011 october 2 2010 allowance uncollectible accounts 31 million 32 million respectively generally collateral receivables periodically evaluate credit worthiness customers inventories processed products livestock supplies valued lower cost market cost includes purchased raw materials live purchase costs growout costs primarily feed contract grower pay catch haul costs labor manufacturing production overhead related purchase production inventories property plant equipment property plant equipment stated cost depreciated straightline method using estimated lives buildings leasehold improvements 10 33 years machinery equipment three 12 years land improvements three 20 years major repairs maintenance costs significantly extend useful life related assets capitalized normal repairs maintenance costs charged operations review carrying value longlived assets balance sheet date indication impairment exists recoverability assessed using undiscounted cash flows based historical results current projections earnings interest taxes measure impairment excess carrying cost fair value asset fair value asset measured using discounted cash flows including market participant assumptions future operating results discount rates goodwill intangible assets goodwill indefinite life intangible assets initially recorded fair value amortized reviewed impairment least annually frequently impairment indicators arise goodwill allocated reporting unit follow twostep process evaluate potential impairment exists first step identify potential impairment exists comparing fair value reporting unit carrying amount including goodwill fair value reporting unit exceeds carrying amount goodwill reporting unit considered potential impairment second step impairment test necessary however carrying amount reporting unit exceeds fair value second step performed determine goodwill impaired measure amount impairment loss recognize second step compares implied fair value goodwill carrying amount goodwill implied fair value goodwill exceeds carrying amount goodwill considered impaired however carrying amount goodwill exceeds implied fair value impairment loss recognized amount equal excess implied fair value goodwill determined manner amount goodwill recognized business combination ie fair value reporting unit allocated assets liabilities including unrecognized intangible assets reporting unit acquired business combination fair value reporting unit determined exit price market participant would pay business elected make first day fourth quarter annual impairment assessment date goodwill indefinite life intangible assets estimated fair value reporting units using discounted cash flow analysis uses significant unobservable inputs level 3 inputs defined fair value hierarchy analysis requires us make various judgmental estimates assumptions sales operating margins growth rates discount factors believed reflect market participant views would exist exit transaction generally utilize normalized operating margin assumptions based future expectations operating margins historically realized reporting units’ industries fiscal 2011 impairment test material reporting units domestic chicken reporting unit goodwill october 1 2011 totaling 900 million utilized operating margins future years excess operating margins realized recent year current year domestic chicken reporting unit results indicative future market participant expectations exit transaction assumed operating margins future years would return normalized range believe consistent market participant views exit transaction inherent estimates assumptions used determining fair value reporting units outside control management including interest rates cost capital tax rates credit ratings believe made reasonable estimates assumptions calculate fair value reporting units possible material change could occur actual results consistent estimates assumptions used calculate fair value may required perform second step future years could result material impairments goodwill fiscal 2011 2010 2009 reporting units passed first step goodwill impairment analysis exception immaterial chicken segment reporting unit fiscal 2010 beef reporting unit fiscal 2009 fiscal 2010 recorded 29 million full impairment immaterial chicken segment reporting unit’s goodwill fiscal 2009 recorded 560 million partial impairment beef reporting unit’s goodwill driven increase discount rate used 2009 annual goodwill impairment analysis result disruptions global credit financial markets deterioration economic conditions indefinite life intangible assets carrying value intangible asset exceeds fair value impairment loss recognized amount equal excess fair value trademarks determined using royalty rate method based expected revenues trademark investments joint ventures entities use cost method accounting voting interests less 20 percent use equity method accounting voting interests excess 20 percent controlling interest variable interest primary beneficiary investments joint ventures entities reported consolidated balance sheets assets also investments marketable debt securities determined marketable debt securities availableforsale investments reported fair value based quoted market prices balance sheet date unrealized gains losses net tax recorded comprehensive income amortized cost debt securities adjusted amortization premiums accretion discounts maturity amortization recorded interest income cost securities sold based specific identification method realized gains losses sale debt securities declines value judged temporary recorded net basis income interest dividends securities classified availableforsale recorded interest income accrued self insurance use combination insurance selfinsurance mechanisms effort mitigate potential liabilities health welfare workers’ compensation auto liability general liability risks liabilities associated risks retained estimated part considering claims experience demographic factors severity factors actuarial assumptions capital stock two classes capital stock class common stock 010 par value class stock class b common stock 010 par value class b stock holders class b stock may convert stock class stock shareforshare basis holders class b stock entitled 10 votes per share holders class stock entitled one vote per share matters submitted shareholders approval october 1 2011 tyson limited partnership tlp owned 9997 outstanding shares class b stock tlp members tyson family owned aggregate 245 outstanding shares class stock giving collectively control approximately 7074 total voting power outstanding voting stock cash dividends cannot paid holders class b stock unless simultaneously paid holders class stock per share amount cash dividend paid holders class b stock cannot exceed 90 cash dividend simultaneously paid holders class stock pay quarterly cash dividends class b shareholders paid class dividends per share 016 class b dividends per share 0144 fiscal years 2011 2010 2009 class b stock considered participating security requiring use twoclass method computation basic earnings per share twoclass computation method period reflects cash dividends paid class stock plus amount allocated undistributed earnings losses computed using participation percentage reflects dividend rights class stock basic earnings per share computed using twoclass method periods presented shares class b stock considered participating convertible securities since shares class b stock convertible shareforshare basis shares class stock diluted earnings per share computed assuming conversion class b shares class shares beginning period may 11 2011 announced board directors reactivated share repurchase program activity since fiscal 2005 repurchase remaining available 225 million shares class common stock program share repurchase program fixed scheduled termination date fiscal 2011 repurchased 97 million shares approximately 170 million plan october 1 2011 128 million shares remain authorized repurchase timing extent repurchase shares depend upon among things market conditions liquidity targets limitations debt obligations regulatory requirements addition share repurchase program purchase shares open market fund certain obligations equity compensation plans repurchases totaled 37 million 48 million fiscal 2011 2010 respectively financial instruments purchase certain commodities grains livestock course normal operations part commodity risk management activities use derivative financial instruments primarily futures options reduce exposure various market risks related purchases well changes foreign currency exchange rates contract terms financial instrument qualifying hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts designated highly effective meeting risk reduction correlation criteria recorded using hedge accounting derivative instrument accounted hedge changes fair value instrument offset either change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion instrument’s change fair value immediately recognized earnings component cost sales instruments hold part risk management activities meet criteria hedge accounting marked fair value unrealized gains losses reported currently earnings changes market value derivatives used risk management activities relating forward sales contracts recorded sales changes surrounding inventories hand anticipated purchases inventories supplies recorded cost sales generally hedge anticipated transactions beyond 18 months revenue recognition recognize revenue title risk loss transferred customers generally delivery based terms sale revenue recognized net amount estimated received deducting estimated amounts discounts trade allowances product terms litigation reserves variety legal proceedings pending threatened us accruals recorded probable liability incurred amount liability reasonably estimated based current law progress case opinions views legal counsel advisers experience similar matters intended response litigation amounts discounted exclusive claims third parties adjusted periodically assessment efforts progress additional information becomes available expense amounts administering litigating claims incurred accruals legal proceedings included current liabilities consolidated balance sheets freight expense freight expense associated products shipped customers recognized cost sales advertising promotion expenses advertising promotion expenses charged operations period incurred customer incentive trade promotion activities recorded reduction sales based amounts estimated due customers based primarily historical utilization redemption rates advertising promotional activities recorded selling general administrative expenses advertising promotion expenses fiscal years 2011 2010 2009 552 million 505 million 491 million respectively research development research development costs expensed incurred research development costs totaled 42 million 38 million 33 million fiscal 2011 2010 2009 respectively use estimates consolidated financial statements prepared conformity accounting principles generally accepted united states require us make estimates assumptions affect amounts reported consolidated financial statements accompanying notes actual results could differ estimates recently issued accounting pronouncements may 2011 financial accounting standards board fasb clarified guidance around fair value measurements disclosures guidance effective interim annual periods beginning december 15 2011 adopt guidance second quarter fiscal year 2012 expect adoption significant impact consolidated financial statements june 2011 fasb issued guidance regarding presentation comprehensive income guidance effective annual periods interim periods within years beginning december 15 2011 anticipate adopt guidance first quarter fiscal year 2013 upon adoption required present comprehensive income part consolidated statements income separate financial statement currently present information notes consolidated financial statements changing presentation comprehensive income expect adoption significant impact consolidated financial statements september 2011 fasb issued guidance amending way companies test goodwill impairment guidance effective interim annual periods beginning december 15 2011 early adoption permitted expect adoption significant impact consolidated financial statements note 2 changes accounting principles december 2007 fasb issued guidance establish accounting reporting standards noncontrolling interest subsidiary deconsolidation subsidiary guidance clarifies noncontrolling interest subsidiary ownership interest consolidated entity may reported equity consolidated financial statements rather liability mezzanine section liabilities equity guidance also requires consolidated net income reported amounts include net income attributable tyson parent noncontrolling interest adopted presentation disclosure requirements retrospectively beginning fiscal 2010 accordingly “attributable tyson” refers operating results exclusive noncontrolling interest conjunction adoption also adopted guidance applicable noncontrolling interests may required repurchase interest consolidated subsidiary noncontrolling interest holder put option contractual redemption requirement certain redeemable noncontrolling interests noncontrolling interests presented equity section mezzanine section balance sheet liabilities equity may 2008 fasb issued guidance specifies issuers convertible debt instruments may settled cash upon conversion including partial cash settlement separately account liability equity components manner reflect entity’s nonconvertible debt borrowing rate interest cost recognized subsequent periods amount allocated equity component represents discount debt amortized interest expense using effective interest method life debt adopted guidance first quarter fiscal 2010 applied retrospectively upon retrospective adoption effective interest rate 325 convertible senior notes due 2013 issued september 2008 determined 826 resulted recognition 92 million discount notes offsetting tax amount 56 million recorded capital excess par value discount accreted fiveyear term convertible notes effective interest rate following table presents effects retrospective application new accounting guidance consolidated financial statements millions except per share data december 2008 fasb issued guidance requiring additional disclosures assets held employer’s defined benefit pension postretirement plan guidance effective fiscal years ending december 15 2009 early adoption permitted adopted disclosure requirements fiscal 2010 see note 14 pensions postretirement benefits required disclosures june 2009 fasb issued guidance removing concept qualifying specialpurpose entity guidance also clarifies requirements isolation limitations portions financial assets eligible sale accounting guidance effective fiscal years beginning november 15 2009 adopted guidance beginning fiscal year 2011 adoption significant impact consolidated financial statements june 2009 december 2009 fasb issued guidance requiring analysis determine whether variable interest gives entity controlling financial interest variable interest entity guidance requires ongoing assessment eliminates quantitative approach previously required determining whether entity primary beneficiary guidance effective fiscal years beginning november 15 2009 adopted guidance beginning fiscal year 2011 adoption significant impact consolidated financial statements note 3 acquisitions discontinued operation acquisitions august 2009 completed establishment related joint ventures china referred shandong tyson xinchang foods aggregate purchase price 60 equity interest 21 million excludes 93 million cash transferred joint venture future capital needs purchase price included 29 million allocated intangible assets 19 million allocated goodwill well assumption 76 million current longterm debt may 2011 minority partner exercised put options requiring us purchase entire 40 equity interest august 2011 transaction closed 66 million october 2008 acquired three vertically integrated poultry companies southern brazil macedo agroindustrial avicola itaiopolis frangobras aggregate purchase price 67 million addition 15 million contingent purchase price based production volumes purchase price included 23 million allocated goodwill 19 million allocated intangible assets fiscal 2011 paid 11 million contingent purchase price discontinued operation march 13 2009 completed sale beef processing cattle feed yard fertilizer assets three alberta canada subsidiaries collectively lakeside part beef segment related inventories total consideration 145 million based exchange rates effect included cash received closing 43 million b 78 million collateralized notes receivable either xl foods affiliated entity collected throughout two years following closing c 24 million xl foods preferred stock redeemed five years recorded pretax loss sale lakeside 10 million fiscal 2009 included allocation beef reporting unit goodwill 59 million cumulative currency translation adjustment gains 41 million following summary lakeside’s operating results prior disposition millions note 4 property plant equipment major categories property plant equipment accumulated depreciation october 1 2011 october 2 2010 approximately 427 million required complete buildings equipment construction october 1 2011 note 5 goodwill intangible assets following table reflects goodwill activity fiscal years 2011 2010 intangible assets type october 1 2011 october 2 2010 beginning date benefits realized intangible assets amortized using straightline method estimated period benefit three 30 years amortization expense 18 million 19 million 10 million recognized fiscal 2011 2010 2009 respectively estimate amortization expense intangible assets next five fiscal years subsequent october 1 2011 2012 16 million 2013 16 million 2014 15 million 2015 15 million 2016 14 million note 6 current liabilities current liabilities october 1 2011 october 2 2010 include note 7 debt major components debt follows millions annual maturities debt five fiscal years subsequent october 1 2011 2012 70 million 2013 17 million 2014 1279 million 2015 7 million 2016 643 million revolving credit facility february 2011 amended extended 10 billion revolving credit facility supports shortterm funding needs letters credit facility mature commitments thereunder terminate february 2016 provided time sixmonth period ending november 29 2013 corporate credit ratings lower bbb baa3 standard poor’s sp moody’s investor services inc moody’s respectively case stable outlook better b prior november 29 2013 refinanced purchased defeased 2014 notes c irrevocably deposited cash amount less aggregate principal amount outstanding 2014 notes prior november 29 2013 blocked cash collateral account event none foregoing events occurred loans made facility mature commitments thereunder terminate november 29 2013 october 1 2011 none foregoing events occurred reducing amount available outstanding letters credit issued facility amount available borrowing facility october 1 2011 842 million october 1 2011 outstanding letters credit issued facility totaling 158 million none drawn upon letters credit issued primarily support workers’ compensation insurance programs derivative activities dynamic fuels’ gulf opportunity zone taxexempt bonds additional 50 million bilateral letters credit issued facility none drawn upon facility fully unconditionally guaranteed substantially domestic subsidiaries guarantors’ cash accounts receivable inventory proceeds received related items previously secured obligations facility satisfied certain credit rating requirements provided facility requested release liens securing facility october 1 2011 liens securing obligations facility released facility remains fully unconditionally guaranteed substantially domestic subsidiaries 2013 notes september 2008 issued 458 million principal amount 325 convertible senior unsecured notes due october 15 2013 interest payable semiannually arrears april 15 october 15 conversion rate initially 591935 shares class stock per 1000 principal amount notes equivalent initial conversion price 1689 per share class stock 2013 notes may converted close business july 12 2013 following circumstances fiscal quarter december 27 2008 last reported sale price class stock least 20 trading days period 30 consecutive trading days ending last trading day preceding fiscal quarter least 130 applicable conversion price applicable trading day would currently require shares trade 2196 five business days 10 consecutive trading days measurement period trading price per 1000 principal amount notes trading day measurement period less 98 product last reported sale price class stock applicable conversion rate day upon occurrence specified corporate events defined supplemental indenture july 15 2013 close business second scheduled trading day immediately preceding maturity date holders may convert notes time regardless foregoing circumstances upon conversion deliver cash aggregate principal amount 2013 notes converted shares class stock respect remainder conversion obligation excess aggregate principal amount 2013 notes converted october 1 2011 none conditions permitting conversion 2013 notes satisfied 2013 notes originally accounted combined instrument conversion feature meet requirements accounted separately derivative financial instrument however adopted new accounting guidance first quarter fiscal 2010 applied retrospectively periods presented new accounting guidance required us separately account liability equity conversion features upon retrospective adoption effective interest rate 2013 notes determined 826 resulted recognition 92 million discount notes offsetting tax amount 56 million recorded capital excess par value discount accreted fiveyear term convertible notes effective interest rate connection issuance 2013 notes entered separate convertible note hedge transactions respect class stock minimize potential economic dilution upon conversion 2013 notes also entered separate warrant transactions recorded purchase note hedge transactions reduction capital excess par value net 36 million pertaining related deferred tax asset recorded proceeds warrant transactions increase capital excess par value subsequent changes fair value instruments recognized financial statements long instruments continue meet criteria equity classification purchased call options private transactions 94 million permit us acquire approximately 27 million shares class stock initial strike price 1689 per share subject adjustment call options allow us acquire number shares class stock initially equal number shares class stock issuable holders 2013 notes upon conversion call options terminate upon maturity 2013 notes sold warrants private transactions total proceeds 44 million warrants permit purchasers acquire approximately 27 million shares class stock initial exercise price 2231 per share subject adjustment warrants exercisable various dates january 2014 march 2014 maximum amount shares may issued satisfy conversion 2013 notes limited 359 million shares however convertible note hedge warrant transactions effect increase initial conversion price 2013 notes 1689 per share 2231 per share thus reducing potential future economic dilution associated conversion 2013 notes share price 2231 upon conversion 2013 notes economic net share impact upon conversion 10 increase share price 2231 conversion price would result issuance 25 million incremental shares 2013 notes warrants could dilutive effect earnings per share extent price class stock given measurement period exceeds respective exercise prices instruments call options excluded calculation diluted earnings per share impact antidilutive notes march 2009 issued 810 million senior unsecured notes mature march 2014 notes carry 1050 interest rate interest payments due semiannually march 1 september 1 issued original issue discount 59 million based issue price 92756 face value 2014 notes fully unconditionally guaranteed substantially domestic subsidiaries 2016 notes 2016 notes carried interest rate issuance 660 interest step feature dependent credit rating november 13 2008 moody’s downgraded credit rating “ba1” “ba3” downgrade increased interest rate 735 785 effective beginning sixmonth interest payment due april 1 2009 august 19 2010 sp upgraded credit rating notes “bb” “bb” september 2 2010 moody’s upgraded credit rating “ba3” “ba2” upgrades decreased interest rate 2016 notes 785 735 effective beginning sixmonth interest payment due october 1 2010 february 24 2011 sp upgraded credit rating notes “bb” “bbb” march 29 2011 moody’s upgraded credit rating “ba2” “ba1” upgrades decreased interest rate 2016 notes 735 685 effective beginning sixmonth interest payment due april 1 2011 go zone taxexempt bonds october 2008 dynamic fuels received 100 million proceeds sale gulf opportunity zone taxexempt bonds made available federal government regions affected hurricanes katrina rita 2005 floating rate bonds due october 1 2033 november 2008 entered interest rate swap related bonds mitigate interest rate risk portion bonds five years also issued letter credit guarantee entire bond issuance debt covenants revolving credit facility contains affirmative negative covenants among things may limit restrict ability create liens encumbrances incur debt merge dissolve liquidate consolidate make acquisitions investments dispose transfer assets pay dividends make payments respect capital stock amend material documents change nature business make certain payments debt engage certain transactions affiliates enter saleleaseback hedging transactions case subject certain qualifications exceptions addition required maintain minimum interest expense coverage maximum leverage ratios 2014 notes also contain affirmative negative covenants among things may limit restrict ability incur additional debt issue preferred stock make certain investments restricted payments create liens create restrictions distributions subsidiaries engage specified sales assets subsidiary stock enter transactions affiliates enter new lines business engage consolidation mergers acquisitions engage certain saleleaseback transactions compliance debt covenants october 1 2011 note 8 income taxes detail provision income taxes continuing operations consists following reasons difference statutory federal income tax rate effective income tax rate continuing operations follows fiscal 2011 tax expense impacted domestic production deduction adjustments reserves uncertain tax positions due domestic foreign tax audit activities estimated general business credits decreased tax expense 25 million 19 million 9 million respectively fiscal 2010 tax expense impacted domestic production deduction reductions unrecognized tax benefits decreased tax expense 24 million 16 million respectively fiscal 2009 goodwill impairment deductible income tax purposes negatively impacted effective income tax rate 361 fiscal 2009 tax expense impacted increase foreign valuation allowance increased tax expense 21 million estimated general business credits decreased tax expense 12 million tax planning foreign jurisdictions decreased tax expense 9 million recognize deferred income taxes future tax consequences attributable differences financial statement carrying amounts existing assets liabilities respective tax bases deferred tax assets liabilities measured using tax rates expected apply taxable income years temporary differences expected recovered settled tax effects major items recorded deferred tax assets liabilities follows record deferred tax amounts current assets deferred income taxes consolidated balance sheets deferred tax liability suspended taxes conversion accrual method represents 1987 change cash accrual method accounting recognized 2027 october 1 2011 gross state tax net operating loss carryforwards approximated 635 million expire fiscal years 2012 2029 gross foreign net operating loss carryforwards approximated 160 million 63 million expire fiscal years 2012 2020 remainder expiration also tax credit carryforwards approximately 19 million expire fiscal years 2012 2025 accumulated undistributed earnings foreign subsidiaries aggregating approximately 339 million 260 million october 1 2011 october 2 2010 respectively earnings expected indefinitely reinvested outside united states earnings distributed form dividends otherwise would subject federal income taxes subject adjustment foreign tax credits state income taxes withholding taxes payable various foreign countries currently practicable estimate tax liability might payable repatriation foreign earnings following table summarizes activity related gross unrecognized tax benefits october 1 2011 october 2 2010 october 3 2009 amount unrecognized tax benefits recognized would impact effective tax rate 155 million 150 million october 1 2011 october 2 2010 respectively classify interest penalties unrecognized tax benefits income tax expense october 1 2011 october 2 2010 tax benefits 58 million 64 million respectively accrued interest penalties unrecognized tax benefits october 1 2011 subject income tax examinations us federal income taxes fiscal years 2003 2010 also subject income tax examinations state foreign income taxes fiscal years 2001 2010 fiscal 2012 tax audit resolutions could potentially reduce unrecognized tax benefits approximately 10 million either tax positions sustained audit agree disallowance note 9 income charges fiscal 2011 recorded 11 million gain related sale interests equity method investment gain recorded consolidated statements income net fiscal 2010 recognized 38 million insurance proceeds received related losses incurred hurricane katrina 2005 proceeds reflected chicken segment’s operating income included consolidated statements income cost sales also fiscal 2010 recorded 12 million impairment charge related equity method investment charge included consolidated statements income net march 27 2009 announced decision close ponca city oklahoma processed meats plant ceased operation august 2009 closing resulted elimination approximately 600 jobs fiscal 2009 recorded charges 15 million included 14 million estimated impairment charges 1 million employee termination benefits charges reflected prepared foods segment’s operating income included consolidated statements income charges note 10 earnings loss per share earnings weighted average common shares used computation basic diluted earnings loss per share follows approximately 4 million 5 million 24 million fiscal years 2011 2010 2009 respectively stockbased compensation shares antidilutive included dilutive earnings per share calculation two classes capital stock class stock class b stock cash dividends cannot paid holders class b stock unless simultaneously paid holders class stock per share amount cash dividends paid holders class b stock cannot exceed 90 cash dividends paid holders class stock allocate undistributed earnings losses based upon 1 09 ratio per share class stock class b stock respectively allocate undistributed earnings losses based ratio due historical dividend patterns voting control class b shareholders contractual limitations dividends class b stock note 11 derivative financial instruments business operations give rise certain market risk exposures mostly due changes commodity prices foreign currency exchange rates interest rates manage portion risks use derivative financial instruments primarily futures options reduce exposure commodity price risk foreign currency risk interest rate risk forward contracts various commodities including grains livestock energy primarily entered manage price risk associated forecasted purchases inputs used production processes foreign exchange forward contracts entered manage fluctuations foreign currency exchange rates primarily result certain receivable payable balances also periodically utilize interest rate swaps manage interest rate risk associated variablerate borrowings risk management programs periodically reviewed board directors’ audit committee programs monitored senior management may revised market conditions dictate current risk management programs utilize industrystandard models take account implicit cost hedging risks associated market risks created derivative instruments fair values strictly monitored times using valueatrisk stress tests credit risks associated derivative contracts significant minimize counterparty concentrations utilize margin accounts letters credit deal creditworthy counterparties additionally derivative contracts mostly shortterm duration generally make use creditriskrelated contingent features significant concentrations credit risk existed october 1 2011 recognize derivative instruments either assets liabilities fair value consolidated balance sheets exception normal purchases normal sales expected result physical delivery accounting changes fair value ie gains losses derivative instrument depends whether designated qualifies part hedging relationship type hedging relationship derivative instruments designated qualify hedging instruments designate hedging instrument based upon exposure hedged ie fair value hedge cash flow hedge net investment foreign operation qualify designate derivative financial instrument hedge contract terms closely mirror hedged item providing high degree risk reduction correlation derivative instrument accounted hedge depending nature hedge changes fair value instrument either offset change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss oci hedged item recognized earnings ineffective portion instrument’s change fair value recognized earnings immediately designate certain forward contracts follows cash flow hedges include certain commodity forward option contracts forecasted purchases ie grains certain foreign exchange forward contracts fair value hedges include certain commodity forward contracts forecasted purchases ie livestock net investment hedges include certain foreign currency forward contracts permanently invested capital certain foreign subsidiaries cash flow hedges derivative instruments futures options designated hedges changes amount future cash flows related procurement certain commodities utilized production processes purchase forward option commodity contracts excess physical consumption requirements generally hedge forecasted transactions beyond 18 months objective hedges reduce variability cash flows associated forecasted purchase commodities derivative instruments designate qualify cash flow hedge effective portion gain loss derivative reported component oci reclassified earnings period periods hedged transaction affects earnings gains losses representing hedge ineffectiveness recognized earnings current period ineffectiveness related cash flow hedges significant fiscal 2011 2010 2009 following aggregated notionals outstanding forward option contracts accounted cash flow hedges october 1 2011 net amounts expected reclassified earnings within next 12 months pretax losses 21 million related grain pretax gains 9 million related foreign currency fiscal 2011 2010 2009 reclassify significant pretax gainslosses earnings result discontinuance cash flow hedges due probability original forecasted transaction would occur end originally specified time period within additional period time allowed generally accepted accounting principles following table sets forth pretax impact cash flow hedge derivative instruments consolidated statements income millions fair value hedges designate certain futures contracts fair value hedges firm commitments purchase livestock slaughter objective hedges minimize risk changes fair value created fluctuations commodity prices associated fixed price livestock firm commitments following aggregated notionals outstanding forward contracts entered hedge forecasted commodity purchases accounted fair value hedge derivative instruments designate qualify fair value hedge gain loss derivative well offsetting gain loss hedged item attributable hedged risk recognized earnings period include gain loss hedged items ie livestock purchase firm commitments line item cost sales offsetting gain loss related livestock forward position ineffectiveness related fair value hedges significant fiscal 2011 2010 2009 foreign net investment hedges utilize forward foreign exchange contracts protect value net investments certain foreign subsidiaries derivative instruments designated qualify hedge net investment foreign currency gain loss reported oci part cumulative translation adjustment extent effective related amounts due counterparties included liabilities assets utilize forwardrate method assessing hedge effectiveness ineffective portions net investment hedges recognized consolidated statements income period change ineffectiveness related foreign net investment hedges significant fiscal 2011 2010 2009 october 1 2011 october 2 2010 35 million 49 million aggregate outstanding notionals related forward foreign currency contracts accounted foreign net investment hedges following table sets forth pretax impact derivative instruments consolidated statements income millions undesignated positions addition designated positions also hold forward option contracts apply hedge accounting include certain derivative instruments related commodities price risk including grains livestock energy foreign currency risk interest rate risk mark positions fair value earnings reporting date generally enter undesignated positions beyond 18 months objective undesignated grains energy livestock commodity positions reduce variability cash flows associated forecasted purchase certain grains energy livestock inputs production processes also enter certain forward sales boxed beef boxed pork forward purchases cattle hogs fixed prices fixed price sales contracts lock proceeds sale future fixed cattle hog purchases lock cost however cost livestock related boxed beef boxed pork market prices time sale purchase could vary fixed price enter fixed forward sales boxed beef boxed pork forward purchases cattle hogs also enter appropriate number livestock futures positions mitigate portion risk changes market value open livestock futures positions marked market reported earnings reporting date even though economic impact fixed prices market price realized time sale purchase positions generally qualify hedge treatment due location basis differences commodity exchanges actual locations purchase commodities foreign currency cash flow hedging program hedge portions forecasted transactions denominated foreign currencies primarily forward option contracts protect reduction value forecasted foreign currency cash flows undesignated foreign currency positions generally would qualify cash flow hedge accounting however reduce earnings volatility normally elect hedge accounting treatment position provides offset underlying related transaction currently impacts earnings objective undesignated interest rate swap manage interest rate risk exposure floatingrate bond interest rate swap agreement effectively modifies exposure interest rate risk converting portion floatingrate bond fixed rate basis first five years thus reducing impact interestrate changes future interest expense interest rate swap qualify hedge treatment due differences underlying bond swap contract interestrate indices following aggregate outstanding notionals related undesignated positions following table sets forth pretax impact undesignated derivative instruments consolidated statements income millions following table sets forth fair value derivative instruments outstanding consolidated balance sheets millions derivative assets liabilities presented consolidated balance sheets net basis net derivative assets liabilities including cash collateral legally enforceable master netting arrangement exists counterparty derivative contract us see note 12 fair value measurements reconciliation amounts reported consolidated balance sheets current assets current liabilities note 12 fair value measurements fair value defined price would received sell asset paid transfer liability exit price principal advantageous market asset liability orderly transaction market participants measurement date fair value hierarchy contains three levels follows level 1 unadjusted quoted prices available active markets identical assets liabilities measurement date level 2 observable inputs available measurement date quoted prices included level 1 either directly indirectly including quoted prices similar assets liabilities active markets quoted prices identical similar assets nonactive markets inputs quoted prices observable asset liability inputs derived principally corroborated observable market data level 3 unobservable inputs cannot corroborated observable market data reflect use significant management judgment values generally determined using pricing models assumptions utilize management’s estimates market participant assumptions assets liabilities measured fair value recurring basis fair value hierarchy requires use observable market data available instances inputs used measure fair value fall different levels fair value hierarchy fair value measurement determined based lowest level input significant fair value measurement entirety assessment significance particular item fair value measurement entirety requires judgment including consideration inputs specific asset liability following tables set forth level within fair value hierarchy financial assets liabilities accounted fair value recurring basis according valuation techniques used determine fair values millions derivative assets liabilities presented consolidated balance sheets net basis net derivative assets liabilities including cash collateral legally enforceable master netting arrangement exists counterparty derivative contract us october 1 2011 october 2 2010 posted 113 million 35 million cash collateral held 0 3 million cash collateral various counterparties respectively following table provides reconciliation beginning ending balance debt securities measured fair value recurring basis table used significant unobservable inputs level 3 millions following methods assumptions used estimate fair value class financial instrument derivative assets liabilities derivatives including commodities foreign exchange forward contracts interest rate swap primarily include exchangetraded overthecounter contracts described note 11 derivative financial instruments record commodity derivatives fair value using quoted market prices adjusted credit nonperformance risk internal models use basis readily observable market inputs including current forward commodity market prices foreign exchange forward contracts recorded fair value based quoted prices spot forward currency prices adjusted credit nonperformance risk interest rate swap recorded fair value based quoted libor swap rates adjusted credit nonperformance risk classify instruments level 2 quoted market prices corroborated utilizing observable current forward commodity market prices active exchanges observable market transactions spot currency rates forward currency prices observable benchmark market rates commonly quoted intervals available sale securities investments marketable debt securities classified availableforsale included assets consolidated balance sheets investments generally longterm nature maturities ranging 45 years reported fair value based pricing models quoted market prices adjusted credit nonperformance risk classify investments us government agency debt securities level 2 fair value generally estimated using discounted cash flow models primarily industrystandard models consider various assumptions including time value yield curve well readily available relevant economic measures classify certain corporate assetbacked debt securities level 3 limited activity less observable inputs proprietary valuation models including estimated prepayment default recovery rates underlying portfolio structured investment vehicle additionally eight million shares syntroleum corporation common stock 425 million warrants expire early fiscal 2014 purchase equivalent amount syntroleum corporation common stock average price 287 record shares warrants assets consolidated balance sheets fair value based quoted market prices classify shares level 1 fair value based unadjusted quoted prices available active markets classify warrants level 2 fair value corroborated based observable market data october 1 2011 october 2 2010 amortized cost basis corporate assetbacked debt securities reduced accumulated temporary impairments 3 million 3 million respectively unrealized holding gains losses net tax excluded earnings reported oci security settled sold quarterly basis evaluate whether losses related availableforsale securities temporary nature losses equity securities recognized earnings decline value judged temporary losses related debt securities determined temporary loss would recognized earnings intend likely required sell security prior recovery debt securities intent ability hold maturity losses determined temporary would remain oci expected credit losses recognized earnings consider many factors determining whether loss temporary including length time extent fair value cost financial condition nearterm prospects issuer ability intent hold investment period time sufficient allow anticipated recovery fiscal 2011 2010 recognized temporary impairments earnings recognized 4 million temporary impairments fiscal 2009 temporary losses deferred oci october 1 2011 october 2 2010 deferred compensation assets maintain nonqualified deferred compensation plans certain executives highly compensated employees investments maintained within trust include money market funds mutual funds life insurance policies cash surrender value life insurance policies invested primarily mutual funds investments recorded fair value based quoted market prices included assets consolidated balance sheets classify investments observable market prices active markets level 1 generally publiclytraded mutual funds remaining deferred compensation assets classified level 2 fair value corroborated based observable market data realized unrealized gains losses deferred compensation included earnings assets liabilities measured fair value nonrecurring basis addition assets liabilities recorded fair value recurring basis record assets liabilities fair value nonrecurring basis generally assets recorded fair value nonrecurring basis result impairment charges fiscal 2010 recorded 29 million charge fully impair immaterial chicken segment reporting unit’s goodwill utilized discounted cash flow analysis incorporated unobservable level 3 inputs significant measurements assets liabilities fair value nonrecurring basis subsequent initial recognition financial instruments fair values debt based quoted market prices published forward interest rate curves fair value carrying value debt follows millions financial instruments estimated fair value approximated carrying value october 1 2011 october 2 2010 carrying value financial instruments otherwise disclosed herein included notes receivable approximated fair value october 1 2011 october 2 2010 notes receivable recorded current assets consolidated balance sheets totaled 0 49 million october 1 2011 october 2 2010 respectively fair values determined using pricing models assumptions utilize management’s estimates market participant assumptions concentrations credit risk financial instruments exposed concentrations credit risk consist primarily cash equivalents accounts receivable cash equivalents high quality securities placed major banks financial institutions concentrations credit risk respect receivables limited due large number customers dispersion across geographic areas perform periodic credit evaluations customers’ financial condition generally require collateral october 1 2011 october 2 2010 165 153 respectively net accounts receivable balance due walmart stores inc single customer group represented greater 10 net accounts receivable note 13 stockbased compensation issue shares stockbased compensation plans issuing class stock treasury total number shares available future grant tyson foods inc 2000 stock incentive plan incentive plan 15102409 october 1 2011 stock options shareholders approved incentive plan january 2001 incentive plan administered compensation committee board directors compensation committee incentive plan includes provisions granting incentive stock options shares class stock price less fair value date grant nonqualified stock options may granted price equal less fair value class stock date option granted stock options incentive plan generally become exercisable ratably two five years date grant must exercised within 10 years date grant policy recognize compensation expense straightline basis requisite service period entire award generally grant stock options year however granted stock options twice fiscal 2010 weighted average grantdate fair value options granted fiscal 2011 2010 2009 619 476 129 respectively fair value option grant established date grant using binomial lattice method use historical volatility period time comparable expected life option determine volatility assumptions expected life calculated based contractual term grant takes account historical exercise termination behavior participants riskfree interest rates based fiveyear treasury bond rate assumptions grant date used fair value calculation year’s grants outlined following table recognized stockbased compensation expense related stock options net income taxes 12 million 11 million 9 million respectively fiscal years 2011 2010 2009 7 million 7 million 6 million related tax benefit 68 million 22 million 24 million options vest fiscal years 2011 2010 2009 respectively grant date fair value 16 million 13 million 15 million respectively fiscal years 2011 2010 2009 received cash 51 million 31 million 1 million respectively exercise stock options shares issued treasury stock option exercises related tax benefit realized stock options exercised fiscal years 2011 2010 2009 10 million 5 million 0 respectively total intrinsic value options exercised fiscal years 2011 2010 2009 26 million 12 million 0 respectively cash flows resulting tax deductions excess compensation cost options excess tax deductions classified financing cash flows realized 5 million 3 million 0 respectively excess tax deductions fiscal years 2011 2010 2009 respectively october 1 2011 26 million total unrecognized compensation cost related stock option plans recognized weighted average period 14 years restricted stock issue restricted stock market value date grant restrictions expiring periods 2014 unearned compensation recognized vesting period particular grant using straightline method october 1 2011 14 million total unrecognized compensation cost related restricted stock awards recognized weighted average period 12 years recognized stockbased compensation expense related restricted stock net income taxes 7 million 8 million 10 million years 2011 2010 2009 respectively related tax benefit fiscal years 2011 2010 2009 5 million 5 million 7 million respectively 09 million 18 million 07 million respectively restricted stock awards vest fiscal years 2011 2010 2009 grant date fair value 14 million 30 million 11 million performancebased shares july 2003 compensation committee began authorizing us award performancebased shares class stock certain senior executives awards typically granted first business day fiscal year vesting performancebased shares generally three years award subject attainment goals determined compensation committee prior date award review progress toward attainment goals quarter vesting period however attainment goals determined end vesting period shares vest ultimate cost equal class stock price date shares vest multiplied number shares awarded performance grants market criteria grants market performance criteria ultimate expense fair value probable shares vest regardless shares actually vest total expense recorded related performancebased shares material fiscal 2011 2010 2009 note 14 pensions postretirement benefits october 1 2011 four noncontributory defined benefit pension plans consisting three funded qualified plans one unfunded nonqualified plan three qualified plans frozen provide benefits based formula using years service specified benefit rate effective january 1 2004 implemented nonqualified defined benefit plan certain contracted officers uses formula based years service final average salary also postretirement benefit plans substantially employees may receive benefits satisfy applicable eligibility criteria postretirement healthcare plans contributory participants’ contributions adjusted deemed necessary defined contribution retirement incentive benefit programs various groups employees recognized expenses 45 million 48 million 49 million fiscal 2011 2010 2009 respectively use fiscal year end measurement date defined benefit plans postretirement plans generally recognize effect actuarial gains losses earnings immediately postretirement plans rather amortizing effect future periods postretirement benefits include postretirement medical costs life insurance benefit obligations funded status following table provides reconciliation changes plans’ benefit obligations assets funded status october 1 2011 october 2 2010 amounts recognized consolidated balance sheets consist october 1 2011 october 2 2010 pension plans accumulated benefit obligation excess plan assets accumulated benefit obligation qualified pension plans 99 million 97 million october 1 2011 october 2 2010 respectively plans accumulated benefit obligations excess plan assets follows net periodic benefit cost components net periodic benefit cost pension postretirement benefit plans recognized consolidated statements income follows assumptions weighted average assumptions follows determine rateofreturn assets assumption first examined historical rates return various asset classes determined longterm projected rateofreturn based expected returns next five 10 years discount rate assumptions used account pension postretirement benefit plans reflect rates benefit obligations could effectively settled determined using cash flow matching technique whereby rates yield curve developed highquality debt securities applied benefit obligations determine appropriate discount rate three postretirement health plans two consist fixed annual payments account 28 million postretirement medical obligation october 1 2011 healthcare cost trend required determine obligation remaining plan accounts 16 million postretirement medical obligation october 1 2011 plan covers retirees yet qualify medicare uses healthcare cost trend 6 current year onepercentage point change assumed healthcare cost trend rate would immaterial impact postretirement benefit obligation total service interest cost plan assets fair value plan assets domestic pension benefit plans 59 million october 1 2011 october 2 2010 following table sets forth actual target asset allocation pension plan assets foreign subsidiary pension plan 15 million plan assets october 1 2011 october 2 2010 plan’s assets held insurance contract consistent target asset allocation plan trustees established set investment objectives related assets pension plans regularly monitor performance funds portfolio managers objectives pension assets 1 provide growth capital income 2 achieve target weighted average annual rate return competitive funds similar investment objectives 3 diversify reduce risk investment objectives target asset allocation adopted january 2004 amended november 2008 alternative investments may include limited hedge funds private equity funds fixed income funds following table shows categories pension plan assets level fair values determined fair value hierarchy described note 12 fair value measurements valued using quoted market prices active markets b valued using plan’s assumptions market participants would use pricing assets based best information available investment manager pricing reconciliation change fair value measurement defined benefit plans’ consolidated assets using significant unobservable inputs level 3 follows millions believe significant concentrations risk within plan assets october 1 2011 contributions policy fund least minimum contribution required meet applicable federal employee benefit local tax laws sole discretion may time fund additional amounts expected contributions pension plans fiscal 2012 approximately 7 million fiscal 2011 2010 2009 funded 7 million 4 million 2 million respectively defined benefit plans estimated future benefit payments following benefit payments expected paid benefit payments postretirement benefit plans expected offset medicare part subsidies 2011 thereafter note 15 comprehensive income loss components accumulated comprehensive income loss follows components comprehensive income loss follows note 16 segment reporting operate four segments chicken beef pork prepared foods measure segment profit operating income loss chicken operations include breeding raising chickens well processing live chickens fresh frozen valueadded chicken products logistics operations move products supply chain products marketed domestically food retailers foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments schools healthcare facilities military food processors well international markets also includes sales allied products chicken breeding stock subsidiary beef operations include processing live fed cattle fabricating dressed beef carcasses primal subprimal meat cuts caseready products segment also includes sales allied products hides variety meats well logistics operations move products supply chain products marketed domestically food retailers foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments schools healthcare facilities military food processors well international markets allied products marketed manufacturers pharmaceuticals technical products pork operations include processing live market hogs fabricating pork carcasses primal subprimal cuts caseready products segment also includes live swine group related allied product processing activities logistics operations move products supply chain products marketed domestically food retailers foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments schools healthcare facilities military food processors well international markets sell allied products pharmaceutical technical products manufacturers well limited number live swine pork processors prepared foods prepared foods operations include manufacturing marketing frozen refrigerated food products logistics operations move products supply chain products include pepperoni bacon beef pork pizza toppings pizza crusts flour corn tortilla products appetizers prepared meals ethnic foods soups sauces side dishes meat dishes processed meats products marketed domestically food retailers foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments schools healthcare facilities military food processors well international markets results dynamic fuels included allocate expenses related corporate activities segments related assets additions property plant equipment remain pork segment sales 816 million 718 million 449 million fiscal 2011 2010 2009 respectively transactions operating segments beef segment sales 286 million 172 million 155 million fiscal 2011 2010 2009 respectively transactions operating segments largest customer walmart stores inc accounted 133 134 138 consolidated sales fiscal 2011 2010 2009 respectively sales walmart stores inc included chicken beef pork prepared foods segments extended discontinuance sales customer could replaced material impact operations majority operations domiciled united states approximately 96 97 sales external customers fiscal 2011 2010 2009 respectively sourced united states approximately 58 billion 56 billion respectively longlived assets located united states october 1 2011 october 2 2010 approximately 539 million 511 million longlived assets located foreign countries primarily brazil china mexico india fiscal years ended 2011 2010 respectively sell certain products foreign markets primarily canada central america china european union japan mexico middle east russia south korea taiwan vietnam export sales united states totaled 41 billion 32 billion 27 billion fiscal 2011 2010 2009 respectively substantially export sales facilitated unaffiliated brokers marketing associations foreign sales staffs sales products produced country united states less 10 consolidated sales fiscal 2011 2010 2009 approximately 57 million income 11 million loss 14 million loss continuing operations income taxes fiscal 2011 2010 2009 respectively operations based country united states included chicken segment note 17 supplemental cash flow information following table summarizes cash payments interest income taxes note 18 transactions related parties operating leases farms equipment facilities estate tyson former director company john tyson chairman company certain members families randal w tyson testamentary trust total payments 2 million fiscal 2011 2 million fiscal 2010 3 million fiscal 2009 paid entities parties ownership interest note 19 commitments contingencies commitments lease equipment properties certain farms total rentals approximated 183 million 188 million 175 million respectively fiscal 2011 2010 2009 leases initial terms seven years varying renewal periods significant obligations assumed terms leases upkeep facilities payments insurance property taxes minimum lease commitments noncancelable leases october 1 2011 guarantee obligations certain outside third parties consists lease grower loans substantially collateralized underlying assets terms underlying debt cover periods ten years maximum potential amount future payments october 1 2011 76 million also maintain operating leases various types equipment contain residual value guarantees market value underlying leased assets end term lease remaining terms lease maturities cover periods next seven years maximum potential amount residual value guarantees 50 million 43 million would recoverable various recourse provisions additional undeterminable recoverable amount based fair value underlying leased assets likelihood material payments guarantees considered probable october 1 2011 october 2 2010 material liabilities guarantees recorded cash flow assistance programs certain livestock suppliers participate programs pay amount livestock equivalent standard cost grow livestock periods low market sales prices amounts payments excess market sales price recorded receivables accrue interest participating suppliers obligated repay receivables balances market sales prices exceed standard cost upon termination agreement maximum obligation associated programs limited fair value participating livestock supplier’s net tangible assets potential maximum obligation october 1 2011 approximately 220 million total receivables programs 28 million 51 million october 1 2011 october 2 2010 respectively included net allowance uncollectible amounts assets consolidated balance sheets even though programs limited net tangible assets participating livestock suppliers also manage portion credit risk associated programs obtaining security interests livestock suppliers’ assets analyzing residual credit risks general market conditions recorded allowance programs’ estimated uncollectible receivables 10 million 15 million october 1 2011 october 2 2010 respectively additionally enter future purchase commitments various items grains livestock contracts fixed grower fees october 1 2011 commitments totaled contingencies involved various claims legal proceedings routinely assess likelihood adverse judgments outcomes matters well ranges probable losses extent losses reasonably estimable record accruals matters extent conclude loss probable financial impact adverse outcome occur reasonably estimable accruals reflected company’s consolidated financial statements opinion made appropriate adequate accruals matters believe probability material loss beyond amounts accrued remote however ultimate liability matters uncertain accruals adequate adverse outcome could material effect consolidated financial condition results operations listed certain claims made company andor subsidiaries potential exposure considered material company’s consolidated financial statements believe substantial defenses claims made intend vigorously defend matters several private lawsuits pending us alleging failed compensate poultry plant employees hours worked including overtime compensation violation federal labor standards act flsa lawsuits include deasencio v tyson foods inc deasencio filed august 22 2000 us district court eastern district pennsylvania matter involves similar allegations employees paid time takes engage pre postshift activities changing protective sanitary clothing obtaining clothing walking changing area work areas break areas seek back wages liquidated damages pre postjudgment interest attorneys’ fees plaintiffs appealed jury verdict final judgment entered favor june 22 2006 us district court eastern district pennsylvania september 7 2007 us court appeals third circuit reversed jury verdict remanded case district court proceedings sought rehearing en banc denied court appeals october 5 2007 united states supreme court denied petition writ certiorari june 9 2008 new trial date set private lawsuits referred sheila ackles et al v tyson foods inc n dist alabama october 23 2006 mccluster et al v tyson foods inc dist georgia december 11 2006 dobbins et al v tyson chicken inc et al nd alabama december 21 2006 buchanan et al v tyson chicken inc et al potter et al v tyson chicken inc et al nd alabama december 22 2006 jones et al v tyson foods inc et al walton et al v tyson foods inc et al williams et al v tyson foods inc et al sd mississippi february 9 2007 balch et al v tyson foods inc ed oklahoma march 1 2007 adams et al v tyson foods inc wd arkansas march 2 2007 atkins et al v tyson foods inc md georgia march 5 2007 laney et al v tyson foods inc williams et al v tyson foods inc md georgia may 23 2007 williams case similar deasencio matters involves allegations employees paid time takes engage pre postshift activities changing protective sanitary clothing obtaining clothing walking changing area work areas break areas plaintiffs lawsuits seek sought act class representatives behalf current former employees allegedly paid time worked seek back wages liquidated damages pre postjudgment interest attorneys’ fees april 6 2007 filed motion transfer named actions coordinated pretrial proceedings judicial panel multidistrict litigation granted august 17 2007 cases five cases subsequently filed involving allegations ie armstrong et al v tyson foods inc wd tennessee january 30 2008 maldonado et al v tyson foods inc ed tennessee january 31 2008 white et al v tyson foods inc ed texas february 1 2008 meyer et al v tyson foods inc wd missouri february 2 2008 leak et al v tyson foods inc wd north carolina february 6 2008 transferred us district court middle district georgia tyson foods inc fair labor standards act litigation mdl proceedings september 2 2011 parties executed settlement agreement filed joint motion court seeking approval settlement court approved settlement september 15 2011 tyson pay least 1225 million 175 million back pay damages eligible class members settlement agreement provides process identifying certifying eligible class members includes 75day notice period certain class members become eligible payment settlement addition settlement agreement provides plaintiffs’ attorneys must file application fees court 145 million attorneys’ fees costs paid plaintiffs’ attorneys filed fee application october 11 2011 pending twelve separate wage hour actions involving tyson fresh meats inc’s plants located lexington nebraska lopez et al v tyson foods inc nebraska june 30 2006 garden city emporia kansas garcia et al v tyson foods inc tyson fresh meats inc kansas may 15 2006 storm lake iowa bouaphakeo fka sharp et al v tyson foods inc nd iowa february 6 2007 columbus junction iowa guyton fka robinson et al v tyson foods inc dba tyson fresh meats inc sd iowa september 12 2007 joslin illinois murray et al v tyson foods inc cd illinois january 2 2008 devoss v tyson foods inc dba tyson fresh meats cd illinois march 2 2011 dakota city nebraska gomez et al v tyson foods inc nebraska january 16 2008 madison nebraska acosta et al v tyson foods inc dba tyson fresh meats inc nebraska february 29 2008 perry waterloo iowa edwards et al v tyson foods inc dba tyson fresh meats inc sd iowa march 20 2008 council bluffs iowa maxwell fka salazar et al v tyson foods inc dba tyson fresh meats inc sd iowa april 29 2008 logansport indiana carter et al v tyson foods inc tyson fresh meats inc nd indiana april 29 2008 goodlettsville tennessee abadeer v tyson foods inc tyson fresh meats inc md tennessee february 6 2009 actions allege failed pay employees hours worked including overtime compensation time takes change protective work uniforms safety equipment sanitary protective clothing worn employees walking changing area work areas break areas violation flsa analogous state laws plaintiffs seek back wages liquidated damages pre postjudgment interest attorneys’ fees costs case proceeding jurisdiction trial garcia case jury verdict favor plaintiffs entered march 17 2011 respect garden city kansas facility exclusive pre postjudgment interest attorneys’ fees costs jury found violations federal state laws pre postshift work activities awarded damages amount 503011 respectively plaintiffs’ counsel filed application attorneys’ fees expenses amount 3475422 contested application currently evaluating appeal options jury trial held lopez case involved lexington ne beef plant resulted jury verdict favor tyson judgment entered complaint dismissed prejudice may 26 2011 plaintiffs filed appeal eighth circuit court appeals june 16 2011 jury trial held bouaphakeo case involved storm lake iowa pork plant resulted jury verdict favor plaintiffs september 26 2011 exclusive pre postjudgment interest attorneys’ fees costs jury found violations federal state laws pre postshift work activities awarded damages amount 2892379 october 24 2011 renewed motion judgment matter law due failure classwide proof alternative new trial damages guyton gomez acosta cases scheduled trials april 9 2012 october 15 2012 november 13 2012 respectively pending one wage hour action involving tyson prepared foods plant located jefferson wisconsin weissman et al v tyson prepared foods inc jefferson county wisconsin circuit court october 20 2010 plaintiffs allege employees paid time takes engage pre postshift activities changing protective sanitary clothing associated time takes walk workstations postdonning predoffing protective sanitary clothing six named plaintiffs seek act state law class representatives behalf current former employees allegedly paid time worked seek back wages liquidated damages pre postjudgment interest attorneys’ fees costs may 16 2011 plaintiffs filed motion certify state law class hourly employees worked jefferson plant october 20 2008 present filed motions summary judgment seeking dismissal claims alternative limit claims made noncompensable clothes changing activities june 19 2005 attorney general secretary environment state oklahoma filed complaint us district court northern district oklahoma us three subsidiaries six poultry integrators complaint subsequently amended complaint asserts number state federal causes action including limited counts comprehensive environmental response compensation liability act cercla resource conservation recovery act rcra statelaw public nuisance theories amended complaint asserts defendants certain contract growers named amended complaint polluted surface waters groundwater associated drinking water supplies illinois river watershed irw land application poultry litter oklahoma asserts alleged pollution also caused extensive injury environment including soils sediments irw defendants unjustly enriched oklahoma’s claims cover entire irw encompasses one million acres land natural resources including lakes waterways contained therein oklahoma seeks wideranging relief including injunctive relief compensatory damages excess 800 million unspecified amount punitive damages attorneys’ fees defendants denied liability asserted various defenses filed thirdparty complaint asserts claims persons entities whose activities may contributed pollution alleged amended complaint district court stayed proceedings third party complaint pending resolution oklahoma’s claims defendants october 31 2008 defendants filed motion dismiss failure join cherokee nation required party alternative judgment matter law based plaintiffs’ lack standing motion granted part denied part july 22 2009 ruling district court dismissed oklahoma’s claims cost recovery natural resources damages cercla unjust enrichment oklahoma common law ruling also narrowed scope oklahoma’s remaining claims dismissing damage claims causes action oklahoma common law nuisance federal common law nuisance oklahoma common law trespass leaving claims injunctive relief trial august 18 2009 court granted partial summary judgment favor defendants oklahoma’s claims violations oklahoma registered poultry feeding operations act oklahoma later voluntarily dismissed remainder claim september 2 2009 cherokee nation filed motion intervene lawsuit motion intervene denied september 15 2009 cherokee nation filed notice appeal ruling tenth circuit court appeals september 17 2009 nonjury trial case began september 24 2009 close oklahoma’s caseinchief court granted defendants’ motions dismiss claims based rcra nuisance per se health risks related bacteria defense rested case january 13 2010 closing arguments held february 11 2010 september 21 2010 court appeals affirmed district court’s denial cherokee nation’s motion intervene october 6 2010 cherokee nation state oklahoma filed petition rehearing en banc review seeking reconsideration ruling court appeals denied petition may 8 2008 lawsuit filed company two employees district court mccurtain county oklahoma styled armstrong et al v tyson foods inc et al armstrong case lawsuit brought group 52 poultry growers allege certain live production practices oklahoma constitute fraudulent inducement fraud unjust enrichment negligence gross negligence unconscionability violations oklahoma business sales act deceptive trade practice violations consumer protection act conversion well theories recovery plaintiffs sought damages unspecified amount october 30 2009 20 additional growers represented attorney filed lawsuit us court asserting similar claims styled clardy et al v tyson foods inc et al clardy case cases denied allegations wrongdoing june 2009 plaintiffs armstrong case requested expedited trial date smaller group plaintiffs claimed facing imminent financial peril court ultimately severed group 10 plaintiffs armstrong case trial began march 15 2010 numerous irregularities rulings trial believe legally erroneous highly prejudicial right fair trial april 1 2010 jury returned verdict us one employees april 2 2010 jury returned punitive damages verdict us dispute caused inconsistencies multiple verdict forms completed jury apparent confusion jury complete verdict forms court entered final judgment amount 8655735 subsequent trial presiding judge disqualified cases oklahoma supreme court appointed new judge cases company filed posttrial motions challenging verdict motions denied company appealed verdict oklahoma supreme court filed motion trial court change venue mccurtain county grounds numerous irregularities occurred trial coupled attendant publicity resulted community bias would prevent company receiving fair trial mccurtain county trial court granted motion case transferred choctaw county oklahoma filed another motion trial court also granted stay future trials claims plaintiffs armstrong case clardy case pending outcome appeal first trial also filed motion sever plaintiffs’ claims individual cases heard january 25 2010 motion denied court took advisement sizes groupings plaintiffs future trials believe numerous substantial legal errors made court trial review guidance issues appellate court could substantial impact outcome future trials armstrong case clardy case note 20 quarterly financial data unaudited first quarter fiscal 2011 net income included 11 million gain related sale interests equity method investment third quarter fiscal 2011 net income included 21 million reduction income tax expense related reversal reserves foreign uncertain tax positions second quarter fiscal 2010 net income included 24 million pretax charges related losses notes repurchased quarter third quarter fiscal 2010 operating income included 38 million insurance proceeds received quarter net income included 34 million pretax charges related losses notes repurchased quarter 12 million charge related equity method investment impairment fourth quarter fiscal 2010 operating income included 29 million noncash charge related full impairment immaterial chicken segment reporting unit’s goodwill note 21 condensed consolidating financial statements tyson fresh meats inc tfm parent whollyowned subsidiary fully unconditionally guaranteed 2016 notes tfm parent substantially whollyowned domestic subsidiaries fully unconditionally guaranteed 2014 notes following financial information presents condensed consolidating financial statements include tyson foods inc tfi parent tfm parent 2014 notes’ guarantor subsidiaries guarantors combined basis elimination entries necessary reflect tfm parent guarantors collectively represent 2014 notes’ total guarantor subsidiaries 2014 guarantors combined basis 2014 notes’ nonguarantor subsidiaries nonguarantors combined basis elimination entries necessary consolidate tfi parent 2014 guarantors nonguarantors tyson foods inc consolidated basis provided alternative providing separate financial statements guarantors report independent registered public accounting firm board directors shareholders tyson foods inc opinion accompanying consolidated balance sheets october 1 2011 october 2 2010 related consolidated statements income shareholders’ equity cash flows fiscal years ended present fairly material respects financial position tyson foods inc subsidiaries october 1 2011 october 2 2010 results operations cash flows two years period ended october 1 2011 conformity accounting principles generally accepted united states america addition opinion financial statement schedules fiscal years ended october 1 2011 october 2 2010 listed index appearing item 15a present fairly material respects information set forth therein read conjunction related consolidated financial statements also opinion company maintained material respects effective internal control financial reporting october 1 2011 based criteria established internal control integrated framework issued committee sponsoring organizations treadway commission coso company’s management responsible financial statements financial statement schedules maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included management’s annual report internal control financial reporting appearing item 9a responsibility express opinions financial statements financial statement schedules company’s internal control financial reporting based integrated audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audits obtain reasonable assurance whether financial statements free material misstatement whether effective internal control financial reporting maintained material respects audits financial statements included examining test basis evidence supporting amounts disclosures financial statements assessing accounting principles used significant estimates made management evaluating overall financial statement presentation audit internal control financial reporting included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk audits also included performing procedures considered necessary circumstances believe audits provide reasonable basis opinions company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles company’s internal control financial reporting includes policies procedures pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company ii provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company iii provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate pricewaterhousecoopers llp fayetteville ar november 21 2011 report independent registered public accounting firm board directors shareholders tyson foods inc audited accompanying consolidated statements income shareholders’ equity cash flows tyson foods inc year ended october 3 2009 audit also included financial statement schedule year ended october 3 2009 listed index item 15a financial statements schedule responsibility company’s management responsibility express opinion financial statements schedule based audit conducted audit accordance standards public company accounting oversight board united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audit provides reasonable basis opinion financial statements referred present fairly material respects results operations tyson foods inc cash flows year ended october 3 2009 conformity us generally accepted accounting principles also opinion related financial statement schedule year ended october 3 2009 considered relation basic financial statements taken whole presents fairly material respects information set forth therein described note 2 consolidated financial statements company adopted guidance establishing accounting reporting standards noncontrolling interest subsidiary convertible debt instruments 2010 ernst young llp rogers arkansas november 23 2009 except matters described note 2 “change accounting principles” relates retrospective application accounting principles adopted 2010 date november 22 2010 item 9item 8 financial statements supplementary data tyson foods inc consolidated statements income see accompanying notes tyson foods inc consolidated balance sheets see accompanying notes tyson foods inc consolidated statements shareholders’ equity see accompanying notes 1 excludes net loss related redeemable noncontrolling interest 4 million 9 million fiscal 2011 2010 respectively tyson foods inc consolidated statements cash flows see accompanying notes consolidated financial statements tyson foods inc note 1 business summary significant accounting policies description business tyson foods inc collectively “company” “we” “us” “our” founded 1935 world headquarters springdale arkansas one world’s largest meat protein companies secondlargest food production company fortune 500 produce wide variety brand name proteinbased prepared food products marketed united states approximately 130 countries around world consolidation consolidated financial statements include accounts whollyowned subsidiaries well majorityowned subsidiaries exercise control applicable entities controlling financial interest variable interest entities primary beneficiary significant intercompany accounts transactions eliminated consolidation fiscal year utilize 52 53week accounting period ending saturday closest september 30 company’s accounting cycle resulted 52week year fiscal 2012 2011 2010 cash equivalents cash equivalents consist investments shortterm highly liquid securities original maturities three months less made part cash management activity carrying values assets approximate fair values primarily utilize cash management system series separate accounts consisting lockbox accounts receiving cash concentration accounts funds moved several zerobalance disbursement accounts funding payroll accounts payable livestock procurement grower payments etc result cash management system checks issued presented banks payment may result negative book cash balances negative book cash balances included accounts payable current liabilities september 29 2012 october 1 2011 checks outstanding excess related book cash balances totaled approximately 265 million 281 million respectively accounts receivable record accounts receivable net realizable value includes appropriate allowance estimated uncollectible accounts reflect loss anticipated accounts receivable balances charged provision doubtful accounts calculate allowance based history writeoffs level past due accounts relationships economic status customers september 29 2012 october 1 2011 allowance uncollectible accounts 33 million 31 million respectively generally collateral receivables periodically evaluate credit worthiness customers inventories processed products livestock supplies valued lower cost market cost includes purchased raw materials live purchase costs growout costs primarily feed contract grower pay catch haul costs labor manufacturing production overhead related purchase production inventories property plant equipment property plant equipment stated cost depreciated straightline method using estimated lives buildings leasehold improvements 10 33 years machinery equipment three 12 years land improvements three 20 years major repairs maintenance costs significantly extend useful life related assets capitalized normal repairs maintenance costs charged operations review carrying value longlived assets balance sheet date indication impairment exists recoverability assessed using undiscounted cash flows based historical results current projections earnings interest taxes measure impairment excess carrying cost fair value asset fair value asset measured using discounted cash flows including market participant assumptions future operating results discount rates goodwill intangible assets goodwill indefinite life intangible assets initially recorded fair value amortized reviewed impairment least annually frequently impairment indicators arise goodwill allocated reporting unit evaluated impairment first performing qualitative assessment determine whether quantitative goodwill test necessary determined based qualitative factors fair value reporting unit may likely less carrying amount significant changes macroeconomic factors related reporting unit occurred could materially impact fair value quantitative goodwill impairment test would required additionally elect forgo qualitative assessment perform quantitative test first step quantitative test identify potential impairment exists comparing fair value reporting unit carrying amount including goodwill fair value reporting unit exceeds carrying amount goodwill reporting unit considered potential impairment second step quantitative impairment test necessary however carrying amount reporting unit exceeds fair value second step performed determine goodwill impaired measure amount impairment loss recognize second step compares implied fair value goodwill carrying amount goodwill implied fair value goodwill exceeds carrying amount goodwill considered impaired however carrying amount goodwill exceeds implied fair value impairment loss recognized amount equal excess implied fair value goodwill determined manner amount goodwill recognized business combination ie fair value reporting unit allocated assets liabilities including unrecognized intangible assets reporting unit acquired business combination fair value reporting unit determined exit price market participant would pay business elected make first day fourth quarter annual impairment assessment date goodwill indefinite life intangible assets estimate fair value reporting units using discounted cash flow analysis uses significant unobservable inputs level 3 inputs defined fair value hierarchy analysis requires us make various judgmental estimates assumptions sales operating margins growth rates discount factors believed reflect market participant views would exist exit transaction generally utilize normalized operating margin assumptions based future expectations operating margins historically realized reporting units industries fiscal 2012 impairment test material reporting units requiring quantitative test domestic chicken beef reporting units goodwill september 29 2012 totaling 900 million 563 million respectively utilized operating margins future years excess operating margins realized recent year assumed operating margins future years generally would return normalized range believe consistent market participant views exit transactions inherent estimates assumptions used determining fair value reporting units outside control management including interest rates cost capital tax rates credit ratings believe made reasonable estimates assumptions calculate fair value reporting units possible material change could occur actual results consistent estimates assumptions used calculate fair value may required perform second step quantitative test future years could result material impairments goodwill fiscal 2012 2011 2010 material reporting units underwent quantitative test passed first step goodwill impairment analysis therefore second step necessary fiscal 2010 recorded 29 million full impairment immaterial chicken segment reporting units goodwill indefinite life intangible assets qualitative assessment also performed determine whether existence events circumstances indicates likely intangible asset impaired similar goodwill also elect forgo qualitative test indefinite life intangible assets perform quantitative test upon performing quantitative test carrying value intangible asset exceeds fair value impairment loss recognized amount equal excess fair value trademarks determined using royalty rate method based expected revenues trademark investments joint ventures entities use cost method accounting voting interests less 20 percent use equity method accounting voting interests excess 20 percent controlling interest variable interest primary beneficiary investments joint ventures entities reported consolidated balance sheets assets also investments marketable debt securities determined marketable debt securities availableforsale investments reported fair value based quoted market prices balance sheet date unrealized gains losses net tax recorded comprehensive income amortized cost debt securities adjusted amortization premiums accretion discounts maturity amortization recorded interest income cost securities sold based specific identification method realized gains losses sale debt securities declines value judged temporary recorded net basis income interest dividends securities classified availableforsale recorded interest income variable interest entity investment joint venture dynamic fuels llc dynamic fuels 50 ownership interest dynamic fuels qualifies variable interest entity consolidate primary beneficiary september 29 2012 dynamic fuels 177 million total assets 146 million net property plant equipment 124 million total liabilities 100 million longterm debt october 1 2011 dynamic fuels 170 million total assets 144 million net property plant equipment 116 million total liabilities 100 million longterm debt accrued self insurance use combination insurance selfinsurance mechanisms effort mitigate potential liabilities health welfare workers’ compensation auto liability general liability risks liabilities associated risks retained estimated part considering claims experience demographic factors severity factors actuarial assumptions capital stock two classes capital stock class common stock 010 par value class stock class b common stock 010 par value class b stock holders class b stock may convert stock class stock shareforshare basis holders class b stock entitled 10 votes per share holders class stock entitled one vote per share matters submitted shareholders approval september 29 2012 tyson limited partnership tlp owned 99977 outstanding shares class b stock tlp members tyson family owned aggregate 253 outstanding shares class stock giving collectively control approximately 7152 total voting power outstanding voting stock cash dividends cannot paid holders class b stock unless simultaneously paid holders class stock per share amount cash dividend paid holders class b stock cannot exceed 90 cash dividend simultaneously paid holders class stock pay quarterly cash dividends class b shareholders paid class dividends per share 016 class b dividends per share 0144 fiscal years 2012 2011 2010 class b stock considered participating security requiring use twoclass method computation basic earnings per share twoclass computation method period reflects cash dividends paid class stock plus amount allocated undistributed earnings losses computed using participation percentage reflects dividend rights class stock basic earnings per share computed using twoclass method periods presented shares class b stock considered participating convertible securities since shares class b stock convertible shareforshare basis shares class stock diluted earnings per share computed assuming conversion class b shares class shares beginning period may 11 2011 announced board directors reactivated share repurchase program activity since fiscal 2005 repurchase remaining available 225 million shares class common stock program may 2012 board directors approved increase 35 million shares authorized repurchase share repurchase program september 29 2012 352 million shares remained available repurchase share repurchase program fixed scheduled termination date timing extent repurchase shares depend upon among things working capital needs market conditions liquidity targets debt obligations regulatory requirements addition share repurchase program purchase shares open market fund certain obligations equity compensation plans summary cumulative share repurchases class stock follows millions financial instruments purchase certain commodities grains livestock course normal operations part commodity risk management activities use derivative financial instruments primarily futures options reduce exposure various market risks related purchases well changes foreign currency exchange rates contract terms financial instrument qualifying hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts designated highly effective meeting risk reduction correlation criteria recorded using hedge accounting derivative instrument accounted hedge changes fair value instrument offset either change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion instrument’s change fair value immediately recognized earnings component cost sales instruments hold part risk management activities meet criteria hedge accounting marked fair value unrealized gains losses reported currently earnings changes market value derivatives used risk management activities relating forward sales contracts recorded sales changes surrounding inventories hand anticipated purchases inventories supplies recorded cost sales generally hedge anticipated transactions beyond 18 months revenue recognition recognize revenue title risk loss transferred customers generally delivery based terms sale revenue recognized net amount estimated received deducting estimated amounts discounts trade allowances product terms litigation reserves variety legal proceedings pending threatened us accruals recorded probable liability incurred amount liability reasonably estimated based current law progress case opinions views legal counsel advisers experience similar matters intended response litigation amounts discounted exclusive claims third parties adjusted periodically assessment efforts progress additional information becomes available expense amounts administering litigating claims incurred accruals legal proceedings included current liabilities consolidated balance sheets freight expense freight expense associated products shipped customers recognized cost sales advertising promotion expenses advertising promotion expenses charged operations period incurred customer incentive trade promotion activities recorded reduction sales based amounts estimated due customers based primarily historical utilization redemption rates advertising promotional activities recorded selling general administrative expenses advertising promotion expenses fiscal 2012 2011 2010 496 million 552 million 505 million respectively research development research development costs expensed incurred research development costs totaled 43 million 42 million 38 million fiscal 2012 2011 2010 respectively use estimates consolidated financial statements prepared conformity accounting principles generally accepted united states require us make estimates assumptions affect amounts reported consolidated financial statements accompanying notes actual results could differ estimates recently issued accounting pronouncements june 2011 financial accounting standards board fasb issued guidance regarding presentation comprehensive income guidance effective annual periods interim periods within years beginning december 15 2011 adopt guidance first quarter fiscal 2013 upon adoption required present comprehensive income part consolidated statements income separate financial statement currently present information notes consolidated financial statements changing presentation comprehensive income expect adoption significant impact consolidated financial statements december 2011 fasb issued guidance enhancing disclosures related offsetting certain assets liabilities guidance effective annual reporting periods beginning january 1 2013 interim periods within annual periods expect adoption significant impact consolidated financial statements note 2 changes accounting principles may 2011 fasb clarified guidance around fair value measurements disclosures guidance effective interim annual periods beginning december 15 2011 adopted guidance second quarter fiscal 2012 adoption significant impact consolidated financial statements september 2011 fasb issued guidance amending way companies test goodwill impairment allowing option first assess qualitative factors determine whether necessary perform twostep quantitative impairment test guidance effective interim annual periods beginning december 15 2011 early adoption permitted adopted guidance connection annual goodwill impairment test fourth quarter fiscal 2012 adoption significant impact consolidated financial statements july 2012 fasb issued guidance amending way companies test indefinitelived intangible asset impairment allowing option first assess qualitative factors determine whether necessary perform quantitative impairment test guidance effective interim annual periods beginning september 15 2012 early adoption permitted adopted guidance connection annual indefinitelived intangible assets impairment test fourth quarter fiscal 2012 adoption significant impact consolidated financial statements note 3 acquisitions august 2009 completed establishment related joint ventures china referred shandong tyson xinchang foods currently referred shandong tyson aggregate purchase price 60 equity interest 21 million excludes 93 million cash transferred joint venture future capital needs purchase price included 29 million allocated intangible assets 19 million allocated goodwill well assumption 76 million current longterm debt may 2011 minority partner exercised put options requiring us purchase entire 40 equity interest august 2011 transaction closed 66 million october 2008 acquired three vertically integrated poultry companies southern brazil macedo agroindustrial avicola itaiopolis frangobras aggregate purchase price 67 million addition 15 million contingent purchase price based production volumes purchase price included 23 million allocated goodwill 19 million allocated intangible assets fiscal 2012 paid 10 million contingent purchase price note 4 property plant equipment major categories property plant equipment accumulated depreciation september 29 2012 october 1 2011 approximately 433 million required complete buildings equipment construction september 29 2012 note 5 goodwill intangible assets following table reflects goodwill activity fiscal 2012 2011 intangible assets type september 29 2012 october 1 2011 beginning date benefits realized intangible assets amortized using straightline method estimated period benefit three 30 years amortization expense 16 million 18 million 19 million recognized fiscal 2012 2011 2010 respectively estimate amortization expense intangible assets next five fiscal years subsequent september 29 2012 2013 16 million 2014 15 million 2015 15 million 2016 14 million 2017 12 million note 6 current liabilities current liabilities september 29 2012 october 1 2011 include note 7 debt major components debt follows millions annual maturities debt five fiscal years subsequent september 29 2012 2013 537 million 2014 22 million 2015 13 million 2016 646 million 2017 4 million revolving credit facility august 2012 entered new 10 billion revolving credit facility supports shortterm funding needs letters credit replaced revolving credit facility scheduled expire february 2016 facility mature commitments thereunder terminate august 2017 reducing amount available outstanding letters credit issued facility amount available borrowing september 29 2012 962 million september 29 2012 outstanding letters credit issued facility totaling 38 million none drawn upon additional 151 million bilateral letters credit issued separately revolving credit facility none drawn upon letters credit issued primarily support workers’ compensation insurance programs derivative activities dynamic fuels’ gulf opportunity zone taxexempt bonds facility unsecured however time collateral trigger date shall fail corporate rating moodys investors service inc moodys ba1 better b corporate rating standard poors ratings services standard poors financial services llc business sp bb better c corporate rating fitch ratings wholly owned subsidiary fimalac sa fitch bb better subsidiary guaranteed material indebtedness company substantially domestic subsidiaries shall required secure obligations credit agreement related documents firstpriority perfected security interest subsidiarys cash deposit securities accounts receivable related assets inventory proceeds foregoing collateral requirement date prior collateral trigger date shall corporate rating moodys baa2 better b corporate rating sp bbb better c corporate rating fitch bbb better case stable better outlook collateral requirement longer effective facility fully guaranteed tyson fresh meats inc tfm parent wholly owned subsidiary date tfm parent released guarantees material indebtedness future subsidiaries shall guarantee material indebtedness subsidiary shall also required guarantee indebtedness obligations liabilities facility 2013 notes september 2008 issued 458 million principal amount 325 convertible senior unsecured notes due october 15 2013 interest payable semiannually arrears april 15 october 15 conversion rate initially 591935 shares class stock per 1000 principal amount notes equivalent initial conversion price 1689 per share class stock 2013 notes may converted close business july 12 2013 following circumstances • fiscal quarter december 27 2008 last reported sale price class stock least 20 trading days period 30 consecutive trading days ending last trading day preceding fiscal quarter least 130 applicable conversion price applicable trading day would currently require shares trade 2196 • five business days 10 consecutive trading days measurement period trading price per 1000 principal amount notes trading day measurement period less 98 product last reported sale price class stock applicable conversion rate day • upon occurrence specified corporate events defined supplemental indenture july 15 2013 close business second scheduled trading day immediately preceding maturity date holders may convert notes time regardless foregoing circumstances upon conversion deliver cash aggregate principal amount 2013 notes converted shares class stock respect remainder conversion obligation excess aggregate principal amount 2013 notes converted september 29 2012 none conditions permitting conversion 2013 notes satisfied however due early conversion option regardless conversion conditions beginning july 2013 recorded 2013 notes balance net remaining discount current debt consolidated balance sheets september 29 2012 2013 notes originally accounted combined instrument conversion feature meet requirements accounted separately derivative financial instrument however adopted new accounting guidance first quarter fiscal 2010 applied retrospectively periods presented new accounting guidance required us separately account liability equity conversion features upon retrospective adoption effective interest rate 2013 notes determined 826 resulted recognition 92 million discount notes offsetting tax amount 56 million recorded capital excess par value discount accreted fiveyear term convertible notes effective interest rate connection issuance 2013 notes entered separate convertible note hedge transactions respect class stock minimize potential economic dilution upon conversion 2013 notes also entered separate warrant transactions recorded purchase note hedge transactions reduction capital excess par value net 36 million pertaining related deferred tax asset recorded proceeds warrant transactions increase capital excess par value subsequent changes fair value instruments recognized financial statements long instruments continue meet criteria equity classification purchased call options private transactions 94 million permit us acquire approximately 27 million shares class stock initial strike price 1689 per share subject adjustment call options allow us acquire number shares class stock initially equal number shares class stock issuable holders 2013 notes upon conversion call options terminate upon maturity 2013 notes sold warrants private transactions total proceeds 44 million warrants permit purchasers acquire approximately 27 million shares class stock initial exercise price 2231 per share subject adjustment warrants exercisable various dates january 2014 march 2014 maximum amount shares may issued satisfy conversion 2013 notes limited 359 million shares however convertible note hedge warrant transactions effect increase initial conversion price 2013 notes 1689 per share 2231 per share thus reducing potential future economic dilution associated conversion 2013 notes share price 2231 upon conversion 2013 notes economic net share impact upon conversion 10 increase share price 2231 conversion price would result issuance 25 million incremental shares 2013 notes warrants could dilutive effect earnings per share extent price class stock given measurement period exceeds respective exercise prices instruments call options excluded calculation diluted earnings per share impact antidilutive 2014 notes march 2009 issued 810 million senior unsecured notes scheduled mature march 2014 notes carried 1050 interest rate interest payments due semiannually march 1 september 1 issued original issue discount 59 million based issue price 92756 face value 2014 notes fully unconditionally guaranteed substantially domestic subsidiaries june 2012 commenced cash tender offer purchase outstanding 2014 notes upon completion tender offer repurchased 790 million principal amount 2014 notes incurred loss 167 million related early extinguishment 2014 notes recorded interest expense consolidated statements income fiscal 2012 subsequent settlement tender offer called redemption remaining aggregate principal amount 2014 notes validly tendered july 2012 redeemed remaining 2014 notes 2016 notes 2016 notes carried interest rate issuance 660 interest step feature dependent credit rating august 19 2010 sp upgraded credit rating notes bb september 2 2010 moody’s upgraded credit rating ba3 ba2 upgrades decreased interest rate 2016 notes 785 735 effective beginning sixmonth interest payment due october 1 2010 february 24 2011 sp upgraded credit rating notes bb bbb march 29 2011 moody’s upgraded credit rating ba2 ba1 upgrades decreased interest rate 2016 notes 735 685 effective beginning sixmonth interest payment due april 1 2011 june 7 2012 moodys upgraded credit rating notes ba1 baa3 upgrade decreased interest rate 2016 notes 685 660 effective beginning sixmonth interest payment due october 1 2012 2022 notes june 2012 issued 10 billion senior unsecured notes mature june 2022 notes carry 450 interest rate interest payments due semiannually june 15 december 15 original issue discount 5 million based issue price 99458 received net proceeds 995 million addition incurred offering expenses 9 million used net proceeds towards repurchase redemption 2014 notes including payments accrued interest related premiums general corporate purposes go zone taxexempt bonds october 2008 dynamic fuels received 100 million proceeds sale gulf opportunity zone taxexempt bonds made available federal government regions affected hurricanes katrina rita 2005 floating rate bonds due october 1 2033 november 2008 entered interest rate swap related bonds mitigate interest rate risk portion bonds five years also issued letter credit guarantee entire bond issuance debt covenants revolving credit facility contains affirmative negative covenants among things may limit restrict ability create liens encumbrances incur debt merge dissolve liquidate consolidate dispose transfer assets change nature business engage certain transactions affiliates enter saleleaseback hedging transactions case subject certain qualifications exceptions addition required maintain minimum interest expense coverage maximum debt capitalization ratios 2022 notes also contain affirmative negative covenants among things may limit restrict ability create liens engage certain saleleaseback transactions engage certain consolidations mergers sales assets compliance debt covenants september 29 2012 note 8 income taxes detail provision income taxes continuing operations consists following reasons difference statutory federal income tax rate effective income tax rate continuing operations follows fiscal 2012 foreign tax rates different statutory federal rate increased effective tax rate 22 tax expense also impacted foreign valuation allowances increased tax expense 11 million well domestic production deduction decreased tax expense 17 million fiscal 2011 tax expense impacted domestic production deduction adjustments reserves uncertain tax positions due domestic foreign tax audit activities estimated general business credits decreased tax expense 25 million 19 million 9 million respectively fiscal 2010 tax expense impacted domestic production deduction reductions unrecognized tax benefits decreased tax expense 24 million 16 million respectively approximately 36 million loss 32 million income 27 million loss continuing operations income taxes fiscal 2012 2011 2010 respectively operations based countries united states recognize deferred income taxes future tax consequences attributable differences financial statement carrying amounts existing assets liabilities respective tax bases deferred tax assets liabilities measured using tax rates expected apply taxable income years temporary differences expected recovered settled tax effects major items recorded deferred tax assets liabilities follows record deferred tax amounts current assets deferred income taxes consolidated balance sheets deferred tax liability property plant equipment increased significantly fiscal 2012 due primarily increased capital expenditures along bonus depreciation federal income tax purposes deferred tax liability suspended taxes conversion accrual method represents 1987 change cash accrual method accounting recognized 2027 september 29 2012 gross state tax net operating loss carryforwards approximated 580 million expire fiscal years 2013 2032 gross foreign net operating loss carryforwards approximated 215 million 112 million expire fiscal years 2013 2022 remainder expiration also tax credit carryforwards approximately 22 million expire fiscal years 2013 2026 accumulated undistributed earnings foreign subsidiaries aggregating approximately 230 million 339 million september 29 2012 october 1 2011 respectively earnings expected indefinitely reinvested outside united states earnings distributed form dividends otherwise would subject federal income taxes subject adjustment foreign tax credits state income taxes withholding taxes payable various foreign countries currently practicable estimate tax liability might payable repatriation foreign earnings following table summarizes activity related gross unrecognized tax benefits september 29 2012 october 1 2011 october 2 2010 amount unrecognized tax benefits recognized would impact effective tax rate 154 million 155 million september 29 2012 october 1 2011 respectively classify interest penalties unrecognized tax benefits income tax expense september 29 2012 october 1 2011 tax benefits 64 million 58 million respectively accrued interest penalties unrecognized tax benefits september 29 2012 subject income tax examinations us federal income taxes fiscal years 2003 2011 also subject income tax examinations major state foreign jurisdictions fiscal years 2001 2011 fiscal 2013 tax audit resolutions could potentially change unrecognized tax benefits approximately 20 million tax positions sustained audit note 9 income charges fiscal 2012 recorded 16 million equity earnings joint ventures 4 million net foreign currency exchange gains recorded consolidated statements income net fiscal 2011 recorded 11 million gain related sale interests equity method investment gain recorded consolidated statements income net fiscal 2010 recognized 38 million insurance proceeds received related losses incurred hurricane katrina 2005 proceeds reflected chicken segment’s operating income included consolidated statements income cost sales also fiscal 2010 recorded 12 million impairment charge related equity method investment charge included consolidated statements income net note 10 earnings per share earnings weighted average common shares used computation basic diluted earnings per share follows approximately 4 million 4 million 5 million fiscal 2012 2011 2010 respectively stockbased compensation shares antidilutive included dilutive earnings per share calculation two classes capital stock class stock class b stock cash dividends cannot paid holders class b stock unless simultaneously paid holders class stock per share amount cash dividends paid holders class b stock cannot exceed 90 cash dividends paid holders class stock allocate undistributed earnings based upon 1 09 ratio per share class stock class b stock respectively allocate undistributed earnings based ratio due historical dividend patterns voting control class b shareholders contractual limitations dividends class b stock note 11 derivative financial instruments business operations give rise certain market risk exposures mostly due changes commodity prices foreign currency exchange rates interest rates manage portion risks use derivative financial instruments primarily futures options reduce exposure commodity price risk foreign currency risk interest rate risk forward contracts various commodities including grains livestock energy primarily entered manage price risk associated forecasted purchases inputs used production processes foreign exchange forward contracts entered manage fluctuations foreign currency exchange rates primarily result certain receivable payable balances also periodically utilize interest rate swaps manage interest rate risk associated variablerate borrowings risk management programs periodically reviewed board directors’ audit committee programs monitored senior management may revised market conditions dictate current risk management programs utilize industrystandard models take account implicit cost hedging risks associated market risks created derivative instruments fair values strictly monitored using valueatrisk stress tests credit risks associated derivative contracts significant minimize counterparty concentrations utilize margin accounts letters credit deal creditworthy counterparties additionally derivative contracts mostly shortterm duration generally make use creditriskrelated contingent features significant concentrations credit risk existed september 29 2012 recognize derivative instruments either assets liabilities fair value consolidated balance sheets exception normal purchases normal sales expected result physical delivery accounting changes fair value ie gains losses derivative instrument depends whether designated qualifies part hedging relationship type hedging relationship derivative instruments designated qualify hedging instruments designate hedging instrument based upon exposure hedged ie fair value hedge cash flow hedge net investment foreign operation qualify designate derivative financial instrument hedge contract terms closely mirror hedged item providing high degree risk reduction correlation derivative instrument accounted hedge depending nature hedge changes fair value instrument either offset change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss oci hedged item recognized earnings ineffective portion instrument’s change fair value recognized earnings immediately designate certain forward contracts follows • cash flow hedges include certain commodity forward option contracts forecasted purchases ie grains certain foreign exchange forward contracts • fair value hedges include certain commodity forward contracts forecasted purchases ie livestock • net investment hedges include certain foreign currency forward contracts permanently invested capital certain foreign subsidiaries cash flow hedges derivative instruments futures options designated hedges changes amount future cash flows related procurement certain commodities utilized production processes purchase forward option commodity contracts excess physical consumption requirements generally hedge forecasted transactions beyond 18 months objective hedges reduce variability cash flows associated forecasted purchase commodities derivative instruments designate qualify cash flow hedge effective portion gain loss derivative reported component oci reclassified earnings period periods hedged transaction affects earnings gains losses representing hedge ineffectiveness recognized earnings current period ineffectiveness related cash flow hedges significant fiscal 2012 2011 2010 following aggregated notional values outstanding forward option contracts accounted cash flow hedges millions except soy meal tons september 29 2012 net amounts expected reclassified earnings within next 12 months pretax gains 18 million related grain pretax losses 2 million related foreign currency fiscal 2012 2011 2010 reclassify significant pretax gainslosses earnings result discontinuance cash flow hedges due probability original forecasted transaction would occur end originally specified time period within additional period time allowed generally accepted accounting principles following table sets forth pretax impact cash flow hedge derivative instruments consolidated statements income millions fair value hedges designate certain futures contracts fair value hedges firm commitments purchase livestock slaughter objective hedges minimize risk changes fair value created fluctuations commodity prices associated fixed price livestock firm commitments following aggregated notional values outstanding forward contracts entered hedge forecasted commodity purchases accounted fair value hedge millions derivative instruments designate qualify fair value hedge gain loss derivative well offsetting gain loss hedged item attributable hedged risk recognized earnings period include gain loss hedged items ie livestock purchase firm commitments line item cost sales offsetting gain loss related livestock forward position ineffectiveness related fair value hedges significant fiscal 2012 2011 2010 foreign net investment hedges utilize forward foreign exchange contracts protect value net investments certain foreign subsidiaries derivative instruments designated qualify hedge net investment foreign currency gain loss reported oci part cumulative translation adjustment extent effective related amounts due counterparties included liabilities assets utilize forwardrate method assessing hedge effectiveness ineffective portions net investment hedges recognized consolidated statements income period change ineffectiveness related foreign net investment hedges significant fiscal 2012 2011 2010 september 29 2012 october 1 2011 27 million 35 million respectively aggregate outstanding notional values related forward foreign currency contracts accounted foreign net investment hedges following table sets forth pretax impact derivative instruments consolidated statements income millions undesignated positions addition designated positions also hold forward option contracts apply hedge accounting include certain derivative instruments related commodities price risk including grains livestock energy foreign currency risk interest rate risk mark positions fair value earnings reporting date generally enter undesignated positions beyond 18 months objective undesignated grains livestock energy commodity positions reduce variability cash flows associated forecasted purchase certain grains energy livestock inputs production processes also enter certain forward sales boxed beef boxed pork forward purchases cattle hogs fixed prices fixed price sales contracts lock proceeds future sale fixed cattle hog purchases lock cost however cost livestock related boxed beef boxed pork market prices time sale purchase could vary fixed price enter fixed forward sales boxed beef boxed pork forward purchases cattle hogs also enter appropriate number livestock options futures positions mitigate portion risk changes market value open livestock options futures positions marked market reported earnings reporting date even though economic impact fixed prices market price realized time sale purchase positions generally qualify hedge treatment due location basis differences commodity exchanges actual locations purchase commodities foreign currency cash flow hedging program hedge portions forecasted transactions denominated foreign currencies primarily forward option contracts protect reduction value forecasted foreign currency cash flows undesignated foreign currency positions generally would qualify cash flow hedge accounting however reduce earnings volatility normally elect hedge accounting treatment position provides offset underlying related transaction impacts current impacts objective undesignated interest rate swap manage interest rate risk exposure floatingrate bond interest rate swap agreement effectively modifies exposure interest rate risk converting portion floatingrate bond fixed rate basis first five years thus reducing impact interestrate changes future interest expense interest rate swap qualify hedge treatment due differences underlying bond swap contract interestrate indices following aggregate outstanding notional values related undesignated positions millions except soy meal tons following table sets forth pretax impact undesignated derivative instruments consolidated statements income millions following table sets forth fair value derivative instruments outstanding consolidated balance sheets millions derivative assets liabilities presented consolidated balance sheets net basis net derivative assets liabilities including cash collateral legally enforceable master netting arrangement exists counterparty derivative contract us see note 12 fair value measurements reconciliation amounts reported consolidated balance sheets current assets current liabilities note 12 fair value measurements fair value defined price would received sell asset paid transfer liability exit price principal advantageous market asset liability orderly transaction market participants measurement date fair value hierarchy contains three levels follows level 1 unadjusted quoted prices available active markets identical assets liabilities measurement date level 2 observable inputs available measurement date quoted prices included level 1 either directly indirectly including • quoted prices similar assets liabilities active markets • quoted prices identical similar assets nonactive markets • inputs quoted prices observable asset liability • inputs derived principally corroborated observable market data level 3 unobservable inputs cannot corroborated observable market data reflect use significant management judgment values generally determined using pricing models assumptions utilize management’s estimates market participant assumptions assets liabilities measured fair value recurring basis fair value hierarchy requires use observable market data available instances inputs used measure fair value fall different levels fair value hierarchy fair value measurement determined based lowest level input significant fair value measurement entirety assessment significance particular item fair value measurement entirety requires judgment including consideration inputs specific asset liability following tables set forth level within fair value hierarchy financial assets liabilities accounted fair value recurring basis according valuation techniques used determine fair values millions derivative assets liabilities presented consolidated balance sheets net basis net derivative assets liabilities including cash collateral legally enforceable master netting arrangement exists counterparty derivative contract us september 29 2012 october 1 2011 posted various counterparties 59 million 113 million respectively cash collateral held cash collateral following table provides reconciliation beginning ending balance debt securities measured fair value recurring basis table used significant unobservable inputs level 3 millions following methods assumptions used estimate fair value class financial instrument derivative assets liabilities derivatives including commodities foreign exchange forward contracts interest rate swap primarily include exchangetraded overthecounter contracts described note 11 derivative financial instruments record commodity derivatives fair value using quoted market prices adjusted credit nonperformance risk internal models use basis readily observable market inputs including current forward commodity market prices foreign exchange forward contracts recorded fair value based quoted prices spot forward currency prices adjusted credit nonperformance risk interest rate swap recorded fair value based quoted libor swap rates adjusted credit nonperformance risk classify instruments level 2 quoted market prices corroborated utilizing observable current forward commodity market prices active exchanges observable market transactions spot currency rates forward currency prices observable benchmark market rates commonly quoted intervals available sale securities investments marketable debt securities classified availableforsale included assets consolidated balance sheets investments generally longterm nature maturities ranging 35 years reported fair value based pricing models quoted market prices adjusted credit nonperformance risk classify investments us government agency debt securities level 2 fair value generally estimated using discounted cash flow models primarily industrystandard models consider various assumptions including time value yield curve well readily available relevant economic measures classify certain corporate assetbacked debt securities level 3 limited activity less observable inputs valuation models including current interest rates estimated prepayment default recovery rates underlying portfolio structured investment vehicle also classify privately held redeemable preferred stock securities level 3 limited activity less observable inputs valuation models including current interest rates credit worthiness underlying private issuer significant changes assumptions unobservable inputs valuation level 3 instruments would significant impact consolidated financial statements additionally eight million shares syntroleum corporation common stock 425 million warrants expire june 2015 purchase equivalent amount syntroleum corporation common stock average price 287 record shares warrants assets consolidated balance sheets fair value based quoted market prices classify shares level 1 fair value based unadjusted quoted prices available active markets classify warrants level 2 fair value corroborated based observable market data september 29 2012 october 1 2011 amortized cost basis corporate assetbacked debt securities reduced accumulated temporary impairments 2 million 3 million respectively unrealized holding gains losses net tax excluded earnings reported oci security settled sold quarterly basis evaluate whether losses related availableforsale securities temporary nature losses equity securities recognized earnings decline value judged temporary losses related debt securities determined temporary loss would recognized earnings intend likely required sell security prior recovery debt securities intent ability hold maturity losses determined temporary would remain oci expected credit losses recognized earnings consider many factors determining whether loss temporary including length time extent fair value cost financial condition nearterm prospects issuer ability intent hold investment period time sufficient allow anticipated recovery fiscal 2012 2011 2010 recognized temporary impairments earnings temporary losses deferred oci september 29 2012 october 1 2011 deferred compensation assets maintain nonqualified deferred compensation plans certain executives highly compensated employees investments maintained within trust include money market funds mutual funds life insurance policies cash surrender value life insurance policies invested primarily mutual funds investments recorded fair value based quoted market prices included assets consolidated balance sheets classify investments observable market prices active markets level 1 generally publiclytraded mutual funds remaining deferred compensation assets classified level 2 fair value corroborated based observable market data realized unrealized gains losses deferred compensation included earnings assets liabilities measured fair value nonrecurring basis addition assets liabilities recorded fair value recurring basis record assets liabilities fair value nonrecurring basis generally assets recorded fair value nonrecurring basis result impairment charges fiscal 2010 recorded 29 million charge fully impair immaterial chicken segment reporting unit’s goodwill utilized discounted cash flow analysis incorporated unobservable level 3 inputs significant measurements assets liabilities fair value nonrecurring basis subsequent initial recognition financial instruments fair value debt principally estimated using level 2 inputs based quoted prices similar instruments fair value carrying value debt follows millions concentrations credit risk financial instruments exposed concentrations credit risk consist primarily cash equivalents accounts receivable cash equivalents high quality securities placed major banks financial institutions concentrations credit risk respect receivables limited due large number customers dispersion across geographic areas perform periodic credit evaluations customers’ financial condition generally require collateral september 29 2012 october 1 2011 171 165 respectively net accounts receivable balance due walmart stores inc single customer group represented greater 10 net accounts receivable note 13 stockbased compensation issue shares stockbased compensation plans issuing class stock treasury total number shares available future grant tyson foods inc 2000 stock incentive plan incentive plan 10795188 september 29 2012 stock options shareholders approved incentive plan january 2001 incentive plan administered compensation committee board directors compensation committee incentive plan includes provisions granting incentive stock options shares class stock price less fair value date grant nonqualified stock options may granted price equal less fair value class stock date option granted stock options incentive plan generally become exercisable ratably three years date grant must exercised within 10 years date grant policy recognize compensation expense straightline basis requisite service period entire award generally grant stock options year however granted stock options twice fiscal 2010 weighted average grantdate fair value options granted fiscal 2012 2011 2010 699 619 476 respectively fair value option grant established date grant using binomial lattice method use historical volatility period time comparable expected life option determine volatility assumptions expected life calculated based contractual term grant takes account historical exercise termination behavior participants riskfree interest rates based fiveyear treasury bond rate assumptions grant date used fair value calculation year’s grants outlined following table recognized stockbased compensation expense related stock options net income taxes 15 million 12 million 11 million fiscal 2012 2011 2010 respectively related tax benefit fiscal 2012 2011 2010 10 million 7 million 7 million respectively 34 million 38 million 22 million options vest fiscal 2012 2011 2010 respectively grant date fair value 17 million 16 million 13 million respectively fiscal 2012 2011 2010 received cash 34 million 51 million 31 million respectively exercise stock options shares issued treasury stock option exercises related tax benefit realized stock options exercised fiscal 2012 2011 2010 7 million 10 million 5 million respectively total intrinsic value options exercised fiscal 2012 2011 2010 21 million 26 million 12 million respectively cash flows resulting tax deductions excess compensation cost options excess tax deductions classified financing cash flows realized 3 million 5 million 3 million excess tax deductions fiscal 2012 2011 2010 respectively september 29 2012 27 million total unrecognized compensation cost related stock option plans recognized weighted average period 11 years restricted stock issue restricted stock market value date grant restrictions expiring periods 2015 unearned compensation recognized vesting period particular grant using straightline method september 29 2012 13 million total unrecognized compensation cost related restricted stock awards recognized weighted average period 10 year recognized stockbased compensation expense related restricted stock net income taxes 7 million 7 million 8 million fiscal 2012 2011 2010 respectively related tax benefit fiscal 2012 2011 2010 4 million 5 million 5 million respectively 12 million 09 million 18 million restricted stock awards vest fiscal 2012 2011 2010 respectively grant date fair value 17 million 14 million 30 million respectively performancebased shares july 2003 compensation committee began authorizing us award performancebased shares class stock certain senior executives awards typically granted first business day fiscal year vesting performancebased shares generally three years award subject attainment goals determined compensation committee prior date award review progress toward attainment goals quarter vesting period however attainment goals determined end vesting period shares vest ultimate cost equal class stock price date shares vest multiplied number shares awarded performance grants market criteria grants market performance criteria ultimate expense fair value probable shares vest regardless shares actually vest total expense recorded related performancebased shares material fiscal 2012 2011 2010 note 14 pensions postretirement benefits september 29 2012 four noncontributory defined benefit pension plans consisting three funded qualified plans one unfunded nonqualified plan three qualified plans frozen provide benefits based formula using years service specified benefit rate effective january 1 2004 implemented nonqualified defined benefit plan certain contracted officers uses formula based years service final average salary also postretirement benefit plans substantially employees may receive benefits satisfy applicable eligibility criteria postretirement healthcare plans contributory participants’ contributions adjusted deemed necessary defined contribution retirement programs various groups employees recognized expenses 47 million 45 million 48 million fiscal 2012 2011 2010 respectively use fiscal year end measurement date defined benefit plans postretirement plans recognize effect actuarial gains losses earnings immediately postretirement plans rather amortizing effect future periods postretirement benefits include postretirement medical costs life insurance benefit obligations funded status following table provides reconciliation changes plans’ benefit obligations assets funded status september 29 2012 october 1 2011 amounts recognized consolidated balance sheets consist september 29 2012 october 1 2011 pension plans accumulated benefit obligation excess plan assets accumulated benefit obligation qualified pension plans 101 million 99 million september 29 2012 october 1 2011 respectively plans accumulated benefit obligations excess plan assets follows net periodic benefit cost components net periodic benefit cost pension postretirement benefit plans recognized consolidated statements income follows september 29 2012 amounts expected reclassified earnings within next 12 months related net periodic benefit cost qualified nonqualified pensions 3 million 3 million respectively assumptions weighted average assumptions follows determine expected return plan assets assumption first examined historical rates return various asset classes determined longterm projected rateofreturn based expected returns next five 10 years discount rate assumptions used account pension postretirement benefit plans reflect rates benefit obligations could effectively settled determined using cash flow matching technique whereby rates yield curve developed highquality debt securities applied benefit obligations determine appropriate discount rate three postretirement benefit plans healthcare related two plans benefit obligations totaled 26 million september 29 2012 impacted healthcare cost trend rates consist fixed annual payments remaining plan benefit obligation 38 million september 29 2012 covers retirees yet qualify medicare utilized assumed healthcare cost trend rate 8 onepercentage point change assumed healthcare cost trend rate would approximate 4 million impact postretirement benefit obligation plan assets fair value plan assets domestic pension benefit plans 69 million 59 million september 29 2012 october 1 2011 respectively following table sets forth actual target asset allocation pension plan assets foreign subsidiary pension plan 17 million 15 million plan assets september 29 2012 october 1 2011 respectively plan’s assets held insurance contract consistent target asset allocation plan trustees established set investment objectives related assets pension plans regularly monitor performance funds portfolio managers objectives pension assets provide growth capital income ii achieve target weighted average annual rate return competitive funds similar investment objectives iii diversify reduce risk investment objectives target asset allocation adopted january 2004 amended august 2012 alternative investments may include limited hedge funds private equity funds fixed income funds following table shows categories pension plan assets level fair values determined fair value hierarchy described note 12 fair value measurements valued using quoted market prices active markets b valued using plan’s assumptions market participants would use pricing assets based best information available investment manager pricing reconciliation change fair value measurement defined benefit plans’ consolidated assets using significant unobservable inputs level 3 follows millions believe significant concentrations risk within plan assets september 29 2012 contributions policy fund least minimum contribution required meet applicable federal employee benefit local tax laws sole discretion may time fund additional amounts expected contributions pension plans fiscal 2013 approximately 8 million fiscal 2012 2011 2010 funded 8 million 7 million 4 million respectively defined benefit plans estimated future benefit payments following benefit payments expected paid benefit payments postretirement benefit plans expected offset medicare part subsidies 2013 thereafter note 15 comprehensive income loss components accumulated comprehensive loss follows components comprehensive income loss follows note 16 segment reporting operate four segments chicken beef pork prepared foods measure segment profit operating income loss chicken operations include breeding raising chickens well processing live chickens fresh frozen valueadded chicken products logistics operations move products supply chain products marketed domestically food retailers foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments schools healthcare facilities military food processors well international markets also includes sales allied products chicken breeding stock subsidiary beef operations include processing live fed cattle fabricating dressed beef carcasses primal subprimal meat cuts caseready products segment also includes sales allied products hides variety meats well logistics operations move products supply chain products marketed domestically food retailers foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments schools healthcare facilities military food processors well international markets pork operations include processing live market hogs fabricating pork carcasses primal subprimal cuts caseready products segment also includes live swine group related allied product processing activities logistics operations move products supply chain products marketed domestically food retailers foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments schools healthcare facilities military food processors well international markets prepared foods prepared foods operations include manufacturing marketing frozen refrigerated food products logistics operations move products supply chain products include pepperoni bacon beef pork pizza toppings pizza crusts flour corn tortilla products appetizers prepared meals ethnic foods soups sauces side dishes meat dishes processed meats products marketed domestically food retailers foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments schools healthcare facilities military food processors well international markets results dynamic fuels included allocate expenses related corporate activities segments related assets additions property plant equipment remain pork segment sales 771 million 816 million 718 million fiscal 2012 2011 2010 respectively transactions operating segments beef segment sales 211 million 286 million 172 million fiscal 2012 2011 2010 respectively transactions operating segments largest customer walmart stores inc accounted 138 133 134 consolidated sales fiscal 2012 2011 2010 respectively sales walmart stores inc included chicken beef pork prepared foods segments extended discontinuance sales customer could replaced material impact operations majority operations domiciled united states approximately 95 96 sales external customers fiscal 2012 2011 2010 respectively sourced united states approximately 59 billion 58 billion respectively longlived assets located united states september 29 2012 october 1 2011 approximately 564 million 539 million longlived assets located foreign countries primarily brazil china mexico india september 29 2012 october 1 2011 respectively sell certain products foreign markets primarily brazil canada central america china european union japan mexico middle east russia south korea taiwan ukraine vietnam export sales united states totaled 40 billion 41 billion 32 billion fiscal 2012 2011 2010 respectively substantially export sales facilitated unaffiliated brokers marketing associations foreign sales staffs sales products produced country united states less 10 consolidated sales fiscal 2012 2011 2010 note 17 supplemental cash flow information following table summarizes cash payments interest income taxes note 18 transactions related parties operating leases airplane two wastewater facilities john tyson chairman company certain members tyson family donald j tyson revocable trust randal w tyson testamentary trust total payments 2 million fiscal 2012 2011 2010 paid entities parties ownership interest note 19 commitments contingencies commitments lease equipment properties certain farms total rentals approximated 193 million 183 million 188 million respectively fiscal 2012 2011 2010 leases initial terms seven years varying renewal periods significant obligations assumed terms leases upkeep facilities payments insurance property taxes minimum lease commitments noncancelable leases september 29 2012 guarantee obligations certain outside third parties consists lease grower loans substantially collateralized underlying assets terms underlying debt cover periods ten years maximum potential amount future payments september 29 2012 75 million also maintain operating leases various types equipment contain residual value guarantees market value underlying leased assets end term lease remaining terms lease maturities cover periods next seven years maximum potential amount residual value guarantees 58 million 52 million would recoverable various recourse provisions additional undeterminable recoverable amount based fair value underlying leased assets likelihood material payments guarantees considered probable september 29 2012 october 1 2011 material liabilities guarantees recorded cash flow assistance programs certain livestock suppliers participate programs pay amount livestock equivalent standard cost grow livestock periods low market sales prices amounts payments excess market sales price recorded receivables accrue interest participating suppliers obligated repay receivables balances market sales prices exceed standard cost upon termination agreement maximum obligation associated programs limited fair value participating livestock supplier’s net tangible assets potential maximum obligation september 29 2012 approximately 275 million total receivables programs 25 million 28 million september 29 2012 october 1 2011 respectively included net allowance uncollectible amounts accounts receivable assets consolidated balance sheets even though programs limited net tangible assets participating livestock suppliers also manage portion credit risk associated programs obtaining security interests livestock suppliers’ assets analyzing residual credit risks general market conditions recorded allowance programs’ estimated uncollectible receivables 10 million september 29 2012 october 1 2011 additionally enter future purchase commitments various items grains livestock contracts fixed grower fees september 29 2012 commitments totaled contingencies involved various claims legal proceedings routinely assess likelihood adverse judgments outcomes matters well ranges probable losses extent losses reasonably estimable record accruals matters extent conclude loss probable financial impact adverse outcome occur reasonably estimable accruals reflected company’s consolidated financial statements opinion made appropriate adequate accruals matters believe probability material loss beyond amounts accrued remote however ultimate liability matters uncertain accruals adequate adverse outcome could material effect consolidated financial condition results operations listed certain claims made company andor subsidiaries potential exposure considered material company’s consolidated financial statements believe substantial defenses claims made intend vigorously defend matters pending us lawsuit styled deasencio v tyson foods inc e dist pennsylvania august 22 2000 plaintiffs allege failed compensate certain poultry plant employees time takes engage pre postshift activities changing protective sanitary clothing walking changing area work areas break areas violation federal labor standards act flsa seek back wages liquidated damages pre postjudgment interest attorneys’ fees plaintiffs appealed jury verdict final judgment entered favor june 22 2006 september 7 2007 us court appeals third circuit reversed jury verdict remanded case district court proceedings sought rehearing en banc denied court appeals october 5 2007 united states supreme court denied petition writ certiorari june 9 2008 new trial date set pending twelve separate wage hour actions involving tyson fresh meats inc’s plants located lexington nebraska lopez et al v tyson foods inc nebraska june 30 2006 garden city emporia kansas garcia et al v tyson foods inc tyson fresh meats inc kansas may 15 2006 storm lake iowa bouaphakeo fka sharp et al v tyson foods inc nd iowa february 6 2007 columbus junction iowa guyton fka robinson et al v tyson foods inc dba tyson fresh meats inc sd iowa september 12 2007 joslin illinois murray et al v tyson foods inc cd illinois january 2 2008 devoss v tyson foods inc dba tyson fresh meats cd illinois march 2 2011 dakota city nebraska gomez et al v tyson foods inc nebraska january 16 2008 madison nebraska acosta et al v tyson foods inc dba tyson fresh meats inc nebraska february 29 2008 perry waterloo iowa edwards et al v tyson foods inc dba tyson fresh meats inc sd iowa march 20 2008 council bluffs iowa maxwell fka salazar et al v tyson foods inc dba tyson fresh meats inc sd iowa april 29 2008 logansport indiana carter et al v tyson foods inc tyson fresh meats inc nd indiana april 29 2008 goodlettsville tennessee abadeer v tyson foods inc tyson fresh meats inc md tennessee february 6 2009 actions allege failed pay employees hours worked including overtime compensation time takes change protective work uniforms safety equipment sanitary protective clothing worn employees walking changing area work areas break areas violation flsa analogous state laws plaintiffs seek back wages liquidated damages pre postjudgment interest attorneys’ fees costs case proceeding jurisdiction • trial garcia case involved garden city kansas facility jury verdict favor plaintiffs entered march 17 2011 exclusive pre postjudgment interest attorneys’ fees costs jury found violations federal state laws pre postshift work activities awarded damages amount 503011 plaintiffs’ counsel filed application attorneys’ fees expenses amount 3475422 contested court stayed filing notice appeal pending decision plaintiffs application attorneys fees expenses • jury trial held lopez case involved lexington ne beef plant resulted jury verdict favor tyson judgment entered complaint dismissed prejudice may 26 2011 plaintiffs filed appeal eighth circuit court appeals june 16 2011 appellate court affirmed jurys verdict favor tyson september 4 2012 • jury trial held bouaphakeo case involved storm lake iowa pork plant resulted jury verdict favor plaintiffs violations federal state laws pre postshift work activities trial court also awarded plaintiffs liquidated damages resulting total damages awarded amount 5784758 appealed jurys verdict trial courts award plaintiffs counsel also filed application attorneys fees expenses amount 2692145 • jury trial held guyton case involved columbus junction iowa pork plant resulted jury verdict favor tyson april 25 2012 plaintiffs filed posttrial motion remains pending trial court • maxwell case resolved parties filed joint motion approval terms settlement trial court october 31 2012 trial court preliminarily approved • acosta gomez cases scheduled trials january 14 2013 march 18 2013 respectively pending one wage hour action involving tyson prepared foods plant located jefferson wisconsin weissman et al v tyson prepared foods inc jefferson county wisconsin circuit court october 20 2010 plaintiffs allege employees paid time takes engage pre postshift activities changing protective sanitary clothing associated time takes walk workstations postdonning predoffing protective sanitary clothing six named plaintiffs seek act state law class representatives behalf current former employees allegedly paid time worked seek back wages liquidated damages pre postjudgment interest attorneys’ fees costs may 16 2011 plaintiffs filed motion certify state law class hourly employees worked jefferson plant october 20 2008 present filed motions summary judgment seeking dismissal claims alternative limit claims made noncompensable clothes changing activities court granted summary judgment favor tyson august 31 2012 plaintiffs filed notice appeal october 5 2012 june 19 2005 attorney general secretary environment state oklahoma filed complaint us district court northern district oklahoma us three subsidiaries six poultry integrators complaint subsequently amended asserts number state federal causes action including limited counts comprehensive environmental response compensation liability act cercla resource conservation recovery act rcra statelaw public nuisance theories amended complaint asserts defendants certain contract growers named amended complaint polluted surface waters groundwater associated drinking water supplies illinois river watershed irw land application poultry litter oklahoma asserts alleged pollution also caused extensive injury environment including soils sediments irw defendants unjustly enriched oklahoma’s claims cover entire irw encompasses one million acres land natural resources including lakes waterways contained therein oklahoma seeks wideranging relief including injunctive relief compensatory damages excess 800 million unspecified amount punitive damages attorneys’ fees defendants denied liability asserted various defenses filed thirdparty complaint asserts claims persons entities whose activities may contributed pollution alleged amended complaint district court stayed proceedings third party complaint pending resolution oklahoma’s claims defendants october 31 2008 defendants filed motion dismiss failure join cherokee nation required party alternative judgment matter law based plaintiffs’ lack standing motion granted part denied part july 22 2009 ruling district court dismissed oklahoma’s claims cost recovery natural resources damages cercla unjust enrichment oklahoma common law ruling also narrowed scope oklahoma’s remaining claims dismissing damage claims causes action oklahoma common law nuisance federal common law nuisance oklahoma common law trespass leaving claims injunctive relief trial august 18 2009 court granted partial summary judgment favor defendants oklahoma’s claims violations oklahoma registered poultry feeding operations act oklahoma later voluntarily dismissed remainder claim september 2 2009 cherokee nation filed motion intervene lawsuit motion intervene denied september 15 2009 cherokee nation filed notice appeal ruling tenth circuit court appeals september 17 2009 nonjury trial case began september 24 2009 close oklahoma’s caseinchief court granted defendants’ motions dismiss claims based rcra nuisance per se health risks related bacteria defense rested case january 13 2010 closing arguments held february 11 2010 september 21 2010 court appeals affirmed district court’s denial cherokee nation’s motion intervene october 6 2010 cherokee nation state oklahoma filed petition rehearing en banc review seeking reconsideration ruling court appeals denied petition district court yet rendered decision trial ended february 2010 may 8 2008 lawsuit filed company two employees district court mccurtain county oklahoma styled armstrong et al v tyson foods inc et al armstrong case lawsuit brought group 52 poultry growers allege certain live production practices oklahoma constitute fraudulent inducement fraud unjust enrichment negligence gross negligence unconscionability violations oklahoma business sales act deceptive trade practice violations consumer protection act conversion well theories recovery plaintiffs sought damages unspecified amount october 30 2009 20 additional growers represented attorney filed lawsuit us court asserting similar claims styled clardy et al v tyson foods inc et al clardy case cases denied allegations wrongdoing june 2009 plaintiffs armstrong case requested expedited trial date smaller group plaintiffs claimed facing imminent financial peril court ultimately severed group 10 plaintiffs armstrong case trial began march 15 2010 april 1 2010 jury returned verdict us one employees april 2 2010 court entered judgment amount 8655735 included punitive damages subsequent trial presiding judge disqualified cases oklahoma supreme court appointed new judge cases following appointment trial court granted motions change venue stay future trials plaintiffs armstrong case clardy case pending outcome appeal initial armstrong case verdict trial court took advisement sizes groupings plaintiffs future trials response motion sever plaintiffs claims individual cases appealed initial armstrong case verdict oklahoma supreme court based numerous irregularities rulings trial oklahoma supreme court reversed verdict remanded case back trial court time new trial dates armstrong case scheduled trial dates clardy case late 2010 united states environmental protection agency epa region 7 began clean air act investigation company related operation maintenance ammonia refrigeration equipment multiple facilities epa subsequently referred matter involves allegations potential noncompliance clean air act’s risk management plan requirements 25 tyson facilities kansas missouri iowa nebraska united states department justice doj epa doj indicated seek monetary penalties injunctive relief requiring equipment infrastructure changes several facilities currently engaged settlement discussions epa doj note 20 quarterly financial data unaudited third quarter fiscal 2012 net income included 167 million pretax charge related early extinguishment debt fourth quarter fiscal 2012 net income included 15 million noncash charge related impairment noncore assets china first quarter fiscal 2011 net income included 11 million gain related sale interests equity method investment third quarter fiscal 2011 net income included 21 million reduction income tax expense related reversal reserves foreign uncertain tax positions note 21 condensed consolidating financial statements tfm parent whollyowned subsidiary fully unconditionally guaranteed 2016 notes additionally tfm parent fully unconditionally guaranteed 2022 notes date tfm parent released guarantee tysons 10 billion revolving credit facility ii 2016 notes time tfm parents guarantee 2022 notes permanently released following financial information presents condensed consolidating financial statements include tyson foods inc tfi parent tfm parent nonguarantor subsidiaries nonguarantors combined basis elimination entries necessary consolidate tfi parent tfm parent nonguarantors tyson foods inc consolidated basis provided alternative providing separate financial statements guarantor presentation revised financial presentation disclosed prior periods reflect changes subsidiary guarantees associated permanent release certain subsidiary guarantors upon retirement 2014 notes report independent registered public accounting firm board directors shareholders tyson foods inc opinion accompanying consolidated balance sheets related consolidated statements income shareholders equity cash flows present fairly material respects financial position tyson foods inc subsidiaries september 29 2012 october 1 2011 results operations cash flows three years period ended september 29 2012 conformity accounting principles generally accepted united states america addition opinion financial statement schedule listed index appearing item 15a presents fairly material respects information set forth therein read conjunction related consolidated financial statements also opinion company maintained material respects effective internal control financial reporting september 29 2012 based criteria established internal control integrated framework issued committee sponsoring organizations treadway commission coso companys management responsible financial statements financial statement schedule maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included managements report internal control financial reporting appearing item 9a responsibility express opinions financial statements financial statement schedule companys internal control financial reporting based integrated audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audits obtain reasonable assurance whether financial statements free material misstatement whether effective internal control financial reporting maintained material respects audits financial statements included examining test basis evidence supporting amounts disclosures financial statements assessing accounting principles used significant estimates made management evaluating overall financial statement presentation audit internal control financial reporting included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk audits also included performing procedures considered necessary circumstances believe audits provide reasonable basis opinions company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles companys internal control financial reporting includes policies procedures pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company ii provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company iii provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition companys assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate pricewaterhousecoopers llp fayetteville ar november 19 2012 item 9item 8 financial statements supplementary data tyson foods inc consolidated statements income see accompanying notes tyson foods inc consolidated statements comprehensive income see accompanying notes tyson foods inc consolidated balance sheets see accompanying notes tyson foods inc consolidated statements shareholders’ equity see accompanying notes 1 excludes net loss related redeemable noncontrolling interest 4 million fiscal 2011 tyson foods inc consolidated statements cash flows see accompanying notes consolidated financial statements tyson foods inc note 1 business summary significant accounting policies description business tyson foods inc collectively “company” “we” “us” “our” founded 1935 world headquarters springdale arkansas one world’s largest meat protein companies secondlargest food production company fortune 500 produce wide variety brand name proteinbased prepared food products marketed united states approximately 130 countries around world consolidation consolidated financial statements include accounts whollyowned subsidiaries well majorityowned subsidiaries exercise control applicable entities controlling financial interest variable interest entities primary beneficiary significant intercompany accounts transactions eliminated consolidation fiscal year utilize 52 53week accounting period ending saturday closest september 30 company’s accounting cycle resulted 52week year fiscal 2013 2012 2011 cash equivalents cash equivalents consist investments shortterm highly liquid securities original maturities three months less made part cash management activity carrying values assets approximate fair values primarily utilize cash management system series separate accounts consisting lockbox accounts receiving cash concentration accounts funds moved several zerobalance disbursement accounts funding payroll accounts payable livestock procurement grower payments etc result cash management system checks issued presented banks payment may result negative book cash balances negative book cash balances included accounts payable current liabilities september 28 2013 september 29 2012 checks outstanding excess related book cash balances totaled approximately 246 million 265 million respectively accounts receivable record accounts receivable net realizable value includes appropriate allowance estimated uncollectible accounts reflect loss anticipated accounts receivable balances charged provision doubtful accounts calculate allowance based history writeoffs level past due accounts relationships economic status customers september 28 2013 september 29 2012 allowance uncollectible accounts 46 million 33 million respectively generally collateral receivables periodically evaluate credit worthiness customers inventories processed products livestock supplies valued lower cost market cost includes purchased raw materials live purchase costs growout costs primarily feed contract grower pay catch haul costs labor manufacturing production overhead related purchase production inventories following table reflects major components inventory september 28 2013 september 29 2012 property plant equipment property plant equipment stated cost generally depreciated straightline method estimated lives buildings leasehold improvements 10 33 years machinery equipment three 12 years land improvements three 20 years major repairs maintenance costs significantly extend useful life related assets capitalized normal repairs maintenance costs charged operations review carrying value longlived assets balance sheet date indication impairment exists recoverability assessed using undiscounted cash flows based historical results current projections earnings interest taxes measure impairment excess carrying cost fair value asset fair value asset measured using discounted cash flows including market participant assumptions future operating results discount rates goodwill intangible assets goodwill indefinite life intangible assets initially recorded fair value amortized reviewed impairment least annually frequently impairment indicators arise goodwill allocated reporting unit evaluated impairment first performing qualitative assessment determine whether quantitative goodwill test necessary determined based qualitative factors fair value reporting unit may likely less carrying amount significant changes macroeconomic factors related reporting unit occurred could materially impact fair value quantitative goodwill impairment test would required additionally elect forgo qualitative assessment perform quantitative test first step quantitative test identify potential impairment exists comparing fair value reporting unit carrying amount including goodwill fair value reporting unit exceeds carrying amount goodwill reporting unit considered potential impairment second step quantitative impairment test necessary however carrying amount reporting unit exceeds fair value second step performed determine goodwill impaired measure amount impairment loss recognize second step compares implied fair value goodwill carrying amount goodwill implied fair value goodwill exceeds carrying amount goodwill considered impaired however carrying amount goodwill exceeds implied fair value impairment loss recognized amount equal excess implied fair value goodwill determined manner amount goodwill recognized business combination ie fair value reporting unit allocated assets liabilities including unrecognized intangible assets reporting unit acquired business combination fair value reporting unit determined exit price market participant would pay business elected make first day fourth quarter annual impairment assessment date goodwill indefinite life intangible assets estimate fair value reporting units using discounted cash flow analysis uses significant unobservable inputs level 3 inputs defined fair value hierarchy analysis requires us make various judgmental estimates assumptions sales operating margins growth rates discount factors believed reflect market participant views would exist exit transaction generally utilize normalized operating margin assumptions based future expectations operating margins historically realized reporting units industries inherent estimates assumptions used determining fair value reporting units outside control management including interest rates cost capital tax rates credit ratings believe made reasonable estimates assumptions calculate fair value reporting units possible material change could occur actual results consistent estimates assumptions used calculate fair value may required perform second step quantitative test future years could result material impairments goodwill fiscal 2013 2012 2011 material reporting units underwent quantitative test passed first step goodwill impairment analysis therefore second step necessary indefinite life intangible assets qualitative assessment also performed determine whether existence events circumstances indicates likely intangible asset impaired similar goodwill also elect forgo qualitative test indefinite life intangible assets perform quantitative test upon performing quantitative test carrying value intangible asset exceeds fair value impairment loss recognized amount equal excess fair value trademarks determined using royalty rate method based expected revenues trademark investments joint ventures entities use cost method accounting voting interests less 20 percent use equity method accounting voting interests excess 20 percent controlling interest variable interest primary beneficiary investments joint ventures entities reported consolidated balance sheets assets also investments marketable debt securities determined marketable debt securities availableforsale investments reported fair value based quoted market prices balance sheet date unrealized gains losses net tax recorded comprehensive income amortized cost debt securities adjusted amortization premiums accretion discounts maturity amortization recorded interest income cost securities sold based specific identification method realized gains losses sale debt securities declines value judged temporary recorded net basis income interest dividends securities classified availableforsale recorded interest income variable interest entity investment joint venture dynamic fuels llc dynamic fuels 50 ownership interest dynamic fuels qualifies variable interest entity consolidate primary beneficiary september 28 2013 dynamic fuels 166 million total assets 142 million net property plant equipment 113 million total liabilities 100 million longterm debt september 29 2012 dynamic fuels 177 million total assets 146 million net property plant equipment 124 million total liabilities 100 million longterm debt accrued selfinsurance use combination insurance selfinsurance mechanisms effort mitigate potential liabilities health welfare workers’ compensation auto liability general liability risks liabilities associated risks retained estimated part considering claims experience demographic factors severity factors actuarial assumptions capital stock two classes capital stock class common stock 010 par value class stock class b common stock 010 par value class b stock holders class b stock may convert stock class stock shareforshare basis holders class b stock entitled 10 votes per share holders class stock entitled one vote per share matters submitted shareholders approval september 28 2013 tyson limited partnership tlp owned 99981 outstanding shares class b stock tlp members tyson family owned aggregate 209 outstanding shares class stock giving collectively control approximately 7246 total voting power outstanding voting stock cash dividends cannot paid holders class b stock unless simultaneously paid holders class stock per share amount cash dividend paid holders class b stock cannot exceed 90 cash dividend simultaneously paid holders class stock pay quarterly cash dividends class b shareholders november 14 2013 board directors increased quarterly dividend previously declared august 1 2013 00750 per share class common stock 00675 per share class b common stock increased quarterly dividend payable december 13 2013 shareholders record close business november 29 2013 paid class dividends per share 030 class b dividends per share 027 fiscal 2013 includes special dividend 010 per share class stock 009 per share class b stock paid december 14 2012 shareholders record november 30 2012 paid class dividends per share 016 class b dividends per share 0144 fiscal years 2012 2011 class b stock considered participating security requiring use twoclass method computation basic earnings per share twoclass computation method period reflects cash dividends paid class stock plus amount allocated undistributed earnings losses computed using participation percentage reflects dividend rights class stock basic earnings per share computed using twoclass method periods presented shares class b stock considered participating convertible securities since shares class b stock convertible shareforshare basis shares class stock diluted earnings per share computed assuming conversion class b shares class shares beginning period may 11 2011 announced board directors reactivated share repurchase program activity since fiscal 2005 repurchase remaining available 225 million shares class common stock program may 2012 board directors approved increase 35 million shares authorized repurchase share repurchase program september 28 2013 142 million shares remained available repurchase share repurchase program fixed scheduled termination date timing extent repurchase shares depend upon among things working capital needs market conditions liquidity targets debt obligations regulatory requirements addition share repurchase program purchase shares open market fund certain obligations equity compensation plans summary cumulative share repurchases class stock follows financial instruments purchase certain commodities grains livestock course normal operations part commodity risk management activities use derivative financial instruments primarily futures options reduce exposure various market risks related purchases well changes foreign currency exchange rates contract terms financial instrument qualifying hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts designated highly effective meeting risk reduction correlation criteria recorded using hedge accounting derivative instrument accounted hedge changes fair value instrument offset either change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion instrument’s change fair value immediately recognized earnings component cost sales instruments hold part risk management activities meet criteria hedge accounting marked fair value unrealized gains losses reported currently earnings changes market value derivatives used risk management activities relating forward sales contracts recorded sales changes surrounding inventories hand anticipated purchases inventories supplies recorded cost sales generally hedge anticipated transactions beyond 18 months revenue recognition recognize revenue title risk loss transferred customers generally delivery based terms sale revenue recognized net amount estimated received deducting estimated amounts discounts trade allowances product terms litigation reserves variety legal proceedings pending threatened us accruals recorded probable liability incurred amount liability reasonably estimated based current law progress case opinions views legal counsel advisers experience similar matters intended response litigation amounts discounted exclusive claims third parties adjusted periodically assessment efforts progress additional information becomes available expense amounts administering litigating claims incurred accruals legal proceedings included current liabilities consolidated balance sheets freight expense freight expense associated products shipped customers recognized cost sales advertising promotion expenses advertising promotion expenses charged operations period incurred customer incentive trade promotion activities recorded reduction sales based amounts estimated due customers based primarily historical utilization redemption rates advertising promotional activities recorded selling general administrative expenses advertising promotion expenses fiscal 2013 2012 2011 555 million 496 million 552 million respectively research development research development costs expensed incurred research development costs totaled 50 million 43 million 42 million fiscal 2013 2012 2011 respectively use estimates consolidated financial statements prepared conformity accounting principles generally accepted united states require us make estimates assumptions affect amounts reported consolidated financial statements accompanying notes actual results could differ estimates recently issued accounting pronouncements december 2011 february 2013 financial accounting standards board fasb issued guidance enhancing disclosures related offsetting certain assets liabilities guidance effective annual reporting periods beginning january 1 2013 interim periods within annual periods expect adoption significant impact consolidated financial statements note 2 changes accounting principles june 2011 fasb issued guidance regarding presentation comprehensive income guidance effective annual periods interim periods within years beginning december 15 2011 adopted guidance first quarter fiscal 2013 adoption required separate statement comprehensive income additional disclosures consolidated financial statements february 2013 fasb issued guidance clarifying disclosures related amounts reclassified accumulated comprehensive income component adopted guidance second quarter fiscal 2013 adoption required additional disclosures consolidated financial statements july 2013 fasb issued guidance eliminate diversity practice presentation unrecognized tax benefits net operating loss carryforward similar tax loss tax credit carryforward exists guidance unrecognized tax benefit portion unrecognized tax benefit presented financial statements reduction deferred tax asset net operating loss carryforward similar tax loss tax credit carryforward except certain circumstances adopted guidance fourth quarter fiscal 2013 adoption significant impact consolidated financial statements note 3 acquisitions fiscal 2013 acquired two valueadded food businesses part strategic expansion initiative included prepared foods segment aggregate purchase price acquisitions 106 million included 50 million property plant equipment 41 million allocated intangible assets 12 million allocated goodwill fiscal 2011 paid 66 million purchase minority partners 40 equity interest shandong tyson xinchang foods subsidiaries pursuant minority partners exercise put options note 4 discontinued operation conducting assessment fiscal 2013 longterm business strategy china determined weifang operation weifang part chicken segment longer core execution strategy given capital investment required execute future business plan consequently conducted impairment test recorded 56 million impairment charge subsequently sold weifang resulted reporting discontinued operation sale completed july 2013 result significant gain loss carrying value approximated sales proceeds time sale weifangs prior periods results including impairment charge reclassified presented discontinued operation consolidated statements income following summary discontinued operations results note 5 property plant equipment following table reflects major categories property plant equipment accumulated depreciation september 28 2013 september 29 2012 approximately 418 million required complete buildings equipment construction september 28 2013 note 6 goodwill intangible assets following table reflects goodwill activity fiscal 2013 2012 following table reflects intangible assets type september 28 2013 september 29 2012 beginning date benefits realized intangible assets generally amortized using straightline method estimated period benefit three 30 years amortization expense 17 million 16 million 18 million recognized fiscal 2013 2012 2011 respectively estimate amortization expense intangible assets next five fiscal years subsequent september 28 2013 2014 18 million 2015 18 million 2016 17 million 2017 14 million 2018 13 million note 7 current liabilities current liabilities september 28 2013 september 29 2012 include note 8 debt following table reflects major components debt september 28 2013 september 29 2012 annual maturities debt five fiscal years subsequent september 28 2013 2014 514 million 2015 12 million 2016 645 million 2017 4 million 2018 120 million revolving credit facility 10 billion revolving credit facility supports shortterm funding needs letters credit facility mature commitments thereunder terminate august 2017 reducing amount available outstanding letters credit issued facility amount available borrowing september 28 2013 958 million september 28 2013 outstanding letters credit issued facility totaling 42 million none drawn upon additional 146 million bilateral letters credit issued separately revolving credit facility none drawn upon letters credit issued primarily support workers’ compensation insurance programs derivative activities dynamic fuels’ gulf opportunity zone taxexempt bonds facility unsecured however time collateral trigger date shall fail corporate rating moodys investors service inc moodys ba1 better b corporate rating standard poors ratings services standard poors financial services llc business sp bb better c corporate rating fitch ratings wholly owned subsidiary fimalac sa fitch bb better subsidiary guaranteed material indebtedness company substantially domestic subsidiaries shall required secure obligations credit agreement related documents firstpriority perfected security interest subsidiarys cash deposit securities accounts receivable related assets inventory proceeds foregoing collateral requirement date prior collateral trigger date shall corporate rating moodys baa2 better b corporate rating sp bbb better c corporate rating fitch bbb better case stable better outlook collateral requirement longer effective facility fully guaranteed tyson fresh meats inc tfm parent wholly owned subsidiary date tfm parent released guarantees material indebtedness future subsidiaries shall guarantee material indebtedness subsidiary shall also required guarantee indebtedness obligations liabilities facility 2013 notes september 2008 issued 458 million principal amount 325 convertible senior unsecured notes due october 15 2013 interest payable semiannually arrears april 15 october 15 2013 notes originally accounted combined instrument conversion feature meet requirements accounted separately derivative financial instrument however adopted new accounting guidance first quarter fiscal 2010 applied retrospectively periods presented new accounting guidance required us separately account liability equity conversion features upon retrospective adoption effective interest rate 2013 notes determined 826 resulted recognition 92 million discount notes offsetting tax amount 56 million recorded capital excess par value discount accreted fiveyear term convertible notes effective interest rate connection issuance 2013 notes entered separate convertible note hedge transactions respect class stock minimize potential economic dilution upon conversion 2013 notes also entered separate warrant transactions recorded purchase note hedge transactions reduction capital excess par value net 36 million pertaining related deferred tax asset recorded proceeds warrant transactions increase capital excess par value subsequent changes fair value instruments recognized financial statements long instruments continue meet criteria equity classification purchased call options private transactions 94 million permit us acquire approximately 27 million shares class stock current strike price 1678 per share subject adjustment call options allow us acquire number shares class stock initially equal number shares class stock issuable holders 2013 notes upon conversion call options contractually expire upon maturity 2013 notes sold warrants private transactions total proceeds 44 million warrants permit purchasers acquire approximately 27 million shares class stock current exercise price 2216 per share subject adjustment warrants exercisable various dates january 2014 april 2014 convertible note hedge warrant transactions effect increased conversion price 2013 notes 1678 per share 2216 per share thus reducing potential future economic dilution associated conversion 2013 notes share price 2216 upon exercise warrants economic net share impact 10 increase share price 2216 warrant exercise price would result issuance 25 million incremental shares 2860 closing share price september 28 2013 incremental shares would required issue upon exercise warrants would resulted 61 million shares 2013 notes warrants dilutive effect earnings per share extent price class stock given measurement period exceeds respective exercise prices instruments call options excluded calculation diluted earnings per share impact antidilutive 2013 notes matured october 15 2013 time paid 458 million principal value cash hand settled conversion premium issuing 117 million shares class stock available treasury shares simultaneous settlement conversion premium received 117 million shares class stock call options 2016 notes february 24 2011 sp upgraded credit rating notes bb bbb march 29 2011 moody’s upgraded credit rating ba2 ba1 upgrades decreased interest rate 2016 notes 735 685 effective beginning sixmonth interest payment due april 1 2011 june 7 2012 moodys upgraded credit rating notes ba1 baa3 upgrade decreased interest rate 2016 notes 685 660 effective beginning sixmonth interest payment due october 1 2012 2022 notes june 2012 issued 10 billion senior unsecured notes mature june 2022 notes carry 450 interest rate interest payments due semiannually june 15 december 15 original issue discount 5 million based issue price 99458 received net proceeds 995 million addition incurred offering expenses 9 million go zone taxexempt bonds october 2008 dynamic fuels received 100 million proceeds sale gulf opportunity zone taxexempt bonds made available federal government regions affected hurricanes katrina rita 2005 floating rate bonds due october 1 2033 issued letter credit effectively guarantee bond issuance amounts disbursed related guarantee would seek recovery 50 million syntroleum corporation joint venture partner accordance 2008 warrant agreement syntroleum corporation debt covenants revolving credit facility contains affirmative negative covenants among things may limit restrict ability create liens encumbrances incur debt merge dissolve liquidate consolidate dispose transfer assets change nature business engage certain transactions affiliates enter saleleaseback hedging transactions case subject certain qualifications exceptions addition required maintain minimum interest expense coverage maximum debt capitalization ratios 2022 notes also contain affirmative negative covenants among things may limit restrict ability create liens engage certain saleleaseback transactions engage certain consolidations mergers sales assets compliance debt covenants september 28 2013 note 9 income taxes detail provision income taxes continuing operations consists following reasons difference statutory federal income tax rate effective income tax rate continuing operations follows fiscal 2013 domestic production deduction estimated general business credits decreased tax expense 40 million 17 million respectively fiscal 2012 foreign valuation allowances increased tax expense 10 million domestic production deduction decreased tax expense 17 million fiscal 2011 domestic production deduction estimated general business credits decreased tax expense 25 million 9 million respectively approximately 53 million 2 million 36 million income continuing operations income taxes fiscal 2013 2012 2011 respectively operations based countries united states recognize deferred income taxes future tax consequences attributable differences financial statement carrying amounts existing assets liabilities respective tax bases deferred tax assets liabilities measured using tax rates expected apply taxable income years temporary differences expected recovered settled tax effects major items recorded deferred tax assets liabilities september 28 2013 september 29 2012 follows record deferred tax amounts current assets current liabilities deferred income taxes consolidated balance sheets deferred tax liability suspended taxes conversion accrual method represents 1987 change cash accrual method accounting recognized 2027 september 28 2013 gross state tax net operating loss carryforwards approximated 457 million expire fiscal years 2014 2033 gross foreign net operating loss carryforwards approximated 116 million 27 million expire fiscal years 2017 2022 remainder expiration also tax credit carryforwards approximately 22 million expire fiscal years 2014 2027 accumulated undistributed earnings foreign subsidiaries aggregating approximately 351 million 230 million september 28 2013 september 29 2012 respectively earnings expected indefinitely reinvested outside united states earnings distributed form dividends otherwise would subject federal income taxes subject adjustment foreign tax credits state income taxes withholding taxes payable various foreign countries currently practicable estimate tax liability might payable repatriation foreign earnings following table summarizes activity related gross unrecognized tax benefits september 28 2013 september 29 2012 october 1 2011 amount unrecognized tax benefits recognized would impact effective tax rate 149 million 154 million september 28 2013 september 29 2012 respectively classify interest penalties unrecognized tax benefits income tax expense september 28 2013 september 29 2012 tax benefits 63 million 64 million respectively accrued interest penalties unrecognized tax benefits september 28 2013 subject income tax examinations us federal income taxes fiscal years 2004 2012 also subject income tax examinations major state foreign jurisdictions fiscal years 2003 2012 2002 2012 respectively estimate next twelve months reasonably possible unrecognized tax benefits could decrease much 44 million primarily due expiration statutes various jurisdictions settlements taxing authorities note 10 income charges fiscal 2013 recorded 19 million currency translation adjustment gain recognized conjunction receipt proceeds constituting final resolution investment canada recorded consolidated statements income net fiscal 2012 recorded 16 million equity earnings joint ventures 4 million net foreign currency exchange gains recorded consolidated statements income net fiscal 2011 recorded 11 million gain related sale interests equity method investment gain recorded consolidated statements income net note 11 earnings per share earnings weighted average common shares used computation basic diluted earnings per share follows stockbased compensation shares antidilutive fiscal 2013 approximately 4 million stockbased compensation shares antidilutive fiscal 2012 2011 shares included dilutive earnings per share calculation two classes capital stock class stock class b stock cash dividends cannot paid holders class b stock unless simultaneously paid holders class stock per share amount cash dividends paid holders class b stock cannot exceed 90 cash dividends paid holders class stock allocate undistributed earnings based upon 1 09 ratio per share class stock class b stock respectively allocate undistributed earnings based ratio due historical dividend patterns voting control class b shareholders contractual limitations dividends class b stock note 12 derivative financial instruments business operations give rise certain market risk exposures mostly due changes commodity prices foreign currency exchange rates interest rates manage portion risks use derivative financial instruments primarily futures options reduce exposure commodity price risk foreign currency risk interest rate risk forward contracts various commodities including grains livestock energy primarily entered manage price risk associated forecasted purchases inputs used production processes foreign exchange forward contracts entered manage fluctuations foreign currency exchange rates primarily result certain receivable payable balances also periodically utilize interest rate swaps manage interest rate risk associated variablerate borrowings risk management programs periodically reviewed board directors’ audit committee programs monitored senior management may revised market conditions dictate current risk management programs utilize industrystandard models take account implicit cost hedging risks associated market risks created derivative instruments fair values strictly monitored using valueatrisk stress tests credit risks associated derivative contracts significant minimize counterparty concentrations utilize margin accounts letters credit deal creditworthy counterparties additionally derivative contracts mostly shortterm duration generally make use creditriskrelated contingent features significant concentrations credit risk existed september 28 2013 recognize derivative instruments either assets liabilities fair value consolidated balance sheets exception normal purchases normal sales expected result physical delivery accounting changes fair value ie gains losses derivative instrument depends whether designated qualifies part hedging relationship type hedging relationship derivative instruments designated qualify hedging instruments designate hedging instrument based upon exposure hedged ie cash flow hedge fair value hedge qualify designate derivative financial instrument hedge contract terms closely mirror hedged item providing high degree risk reduction correlation derivative instrument accounted hedge depending nature hedge changes fair value instrument either offset change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss oci hedged item recognized earnings ineffective portion instrument’s change fair value recognized earnings immediately designate certain forward contracts follows • cash flow hedges include certain commodity forward option contracts forecasted purchases ie grains certain foreign exchange forward contracts • fair value hedges include certain commodity forward contracts firm commitments ie livestock cash flow hedges derivative instruments futures options designated hedges changes amount future cash flows related procurement certain commodities utilized production processes purchase forward option commodity contracts excess physical consumption requirements generally hedge forecasted transactions beyond 18 months objective hedges reduce variability cash flows associated forecasted purchase commodities derivative instruments designate qualify cash flow hedge effective portion gain loss derivative reported component oci reclassified earnings period periods hedged transaction affects earnings gains losses representing hedge ineffectiveness recognized earnings current period ineffectiveness related cash flow hedges significant fiscal 2013 2012 2011 following aggregated notional values outstanding forward option contracts accounted cash flow hedges september 28 2013 net amounts expected reclassified earnings within next 12 months pretax losses 7 million related grain pretax gains 1 million related foreign currency fiscal 2013 2012 2011 reclassify significant pretax gainslosses earnings result discontinuance cash flow hedges due probability original forecasted transaction would occur end originally specified time period within additional period time allowed generally accepted accounting principles following table sets forth pretax impact cash flow hedge derivative instruments consolidated statements income fair value hedges designate certain futures contracts fair value hedges firm commitments purchase livestock slaughter objective hedges minimize risk changes fair value created fluctuations commodity prices associated fixed price livestock firm commitments following aggregated notional values outstanding forward contracts entered hedge firm commitments accounted fair value hedge derivative instruments designate qualify fair value hedge gain loss derivative well offsetting gain loss hedged item attributable hedged risk recognized earnings period include gain loss hedged items ie livestock purchase firm commitments line item cost sales offsetting gain loss related livestock forward position ineffectiveness related fair value hedges significant fiscal 2013 2012 2011 undesignated positions addition designated positions also hold forward option contracts apply hedge accounting include certain derivative instruments related commodities price risk including grains livestock energy foreign currency risk mark positions fair value earnings reporting date generally enter undesignated positions beyond 18 months objective undesignated grains livestock energy commodity positions reduce variability cash flows associated forecasted purchase certain grains energy livestock inputs production processes also enter certain forward sales boxed beef boxed pork forward purchases cattle hogs fixed prices fixed price sales contracts lock proceeds future sale fixed cattle hog purchases lock cost however cost livestock related boxed beef boxed pork market prices time sale purchase could vary fixed price enter fixed forward sales boxed beef boxed pork forward purchases cattle hogs also enter appropriate number livestock options futures positions mitigate portion risk changes market value open livestock options futures positions marked market reported earnings reporting date even though economic impact fixed prices market price realized time sale purchase positions generally qualify hedge treatment due location basis differences commodity exchanges actual locations purchase commodities foreign currency cash flow hedging program hedge portions forecasted transactions denominated foreign currencies primarily forward option contracts protect reduction value forecasted foreign currency cash flows undesignated foreign currency positions generally would qualify cash flow hedge accounting however reduce earnings volatility normally elect hedge accounting treatment position provides offset underlying related transaction impacts current earnings following aggregate outstanding notional values related undesignated positions following table sets forth pretax impact undesignated derivative instruments consolidated statements income following table sets forth fair value derivative instruments outstanding consolidated balance sheets derivative assets liabilities presented consolidated balance sheets net basis net derivative assets liabilities including cash collateral legally enforceable master netting arrangement exists counterparty derivative contract us see note 13 fair value measurements reconciliation amounts reported consolidated balance sheets current assets current liabilities note 13 fair value measurements fair value defined price would received sell asset paid transfer liability exit price principal advantageous market asset liability orderly transaction market participants measurement date fair value hierarchy contains three levels follows level 1 unadjusted quoted prices available active markets identical assets liabilities measurement date level 2 observable inputs available measurement date quoted prices included level 1 either directly indirectly including • quoted prices similar assets liabilities active markets • quoted prices identical similar assets nonactive markets • inputs quoted prices observable asset liability • inputs derived principally corroborated observable market data level 3 unobservable inputs cannot corroborated observable market data reflect use significant management judgment values generally determined using pricing models assumptions utilize management’s estimates market participant assumptions assets liabilities measured fair value recurring basis fair value hierarchy requires use observable market data available instances inputs used measure fair value fall different levels fair value hierarchy fair value measurement determined based lowest level input significant fair value measurement entirety assessment significance particular item fair value measurement entirety requires judgment including consideration inputs specific asset liability following tables set forth level within fair value hierarchy financial assets liabilities accounted fair value recurring basis according valuation techniques used determine fair values derivative assets liabilities presented consolidated balance sheets net basis net derivative assets liabilities including cash collateral legally enforceable master netting arrangement exists counterparty derivative contract us september 28 2013 september 29 2012 posted various counterparties 79 million 59 million respectively cash collateral held cash collateral following table provides reconciliation beginning ending balance debt securities measured fair value recurring basis table used significant unobservable inputs level 3 following methods assumptions used estimate fair value class financial instrument derivative assets liabilities commodities foreign exchange forward contracts primarily include exchangetraded overthecounter contracts described note 12 derivative financial instruments record commodity derivatives fair value using quoted market prices adjusted credit nonperformance risk internal models use basis readily observable market inputs including current forward commodity market prices foreign exchange forward contracts recorded fair value based quoted prices spot forward currency prices adjusted credit nonperformance risk classify instruments level 2 quoted market prices corroborated utilizing observable current forward commodity market prices active exchanges observable market transactions spot currency rates forward currency prices available sale securities investments marketable debt securities classified availableforsale reported fair value based pricing models quoted market prices adjusted credit nonperformance risk shortterm investments maturities less 12 months included current assets consolidated balance sheets primarily include certificates deposit commercial paper marketable debt securities included assets consolidated balance sheets maturities ranging 35 years classify investments us government us agency certificates deposit commercial paper debt securities level 2 fair value generally estimated using discounted cash flow models primarily industrystandard models consider various assumptions including time value yield curve well readily available relevant economic measures classify certain corporate assetbacked debt securities level 3 limited activity less observable inputs valuation models including current interest rates estimated prepayment default recovery rates underlying portfolio structured investment vehicle also classified privately held redeemable preferred stock securities level 3 limited activity less observable inputs valuation models including interest rates credit worthiness underlying private issuer september 28 2013 privately held redeemable preferred stock fully redeemed significant changes assumptions unobservable inputs valuation level 3 instruments would significant impact consolidated financial statements additionally 08 million shares syntroleum corporation common stock 04 million warrants expire june 2015 purchase equivalent amount syntroleum corporation common stock average price 2870 record shares warrants assets consolidated balance sheets fair value based quoted market prices classify shares level 1 fair value based unadjusted quoted prices available active markets classify warrants level 2 fair value corroborated based observable market data september 28 2013 september 29 2012 amortized cost basis corporate assetbacked debt securities reduced accumulated temporary impairments 1 million 2 million respectively unrealized holding gains losses net tax excluded earnings reported oci security settled sold quarterly basis evaluate whether losses related availableforsale securities temporary nature losses equity securities recognized earnings decline value judged temporary losses related debt securities determined temporary loss would recognized earnings intend likely required sell security prior recovery debt securities intent ability hold maturity losses determined temporary would remain oci expected credit losses recognized earnings consider many factors determining whether loss temporary including length time extent fair value cost financial condition nearterm prospects issuer ability intent hold investment period time sufficient allow anticipated recovery fiscal 2013 2012 2011 recognized temporary impairments earnings temporary losses deferred oci september 28 2013 september 29 2012 deferred compensation assets maintain nonqualified deferred compensation plans certain executives highly compensated employees investments maintained within trust include money market funds mutual funds life insurance policies cash surrender value life insurance policies invested primarily mutual funds investments recorded fair value based quoted market prices included assets consolidated balance sheets classify investments observable market prices active markets level 1 generally publiclytraded mutual funds remaining deferred compensation assets classified level 2 fair value corroborated based observable market data realized unrealized gains losses deferred compensation included earnings assets liabilities measured fair value nonrecurring basis addition assets liabilities recorded fair value recurring basis record assets liabilities fair value nonrecurring basis generally assets recorded fair value nonrecurring basis result impairment charges fiscal 2013 recorded 56 million impairment charge related weifang operation china impairment charge resulted completion assessment longterm business strategy china determined weifang longer core execution future business plan valuation assets incorporated unobservable level 3 inputs significant measurements assets liabilities fair value nonrecurring basis subsequent initial recognition financial instruments fair value debt principally estimated using level 2 inputs based quoted prices similar instruments fair value carrying value debt follows concentrations credit risk financial instruments exposed concentrations credit risk consist primarily cash equivalents accounts receivable cash equivalents high quality securities placed major banks financial institutions concentrations credit risk respect receivables limited due large number customers dispersion across geographic areas perform periodic credit evaluations customers’ financial condition generally require collateral september 28 2013 september 29 2012 175 171 respectively net accounts receivable balance due walmart stores inc single customer group represented greater 10 net accounts receivable note 14 stockbased compensation issue shares stockbased compensation plans issuing class stock treasury total number shares available future grant tyson foods inc 2000 stock incentive plan incentive plan 35365400 september 28 2013 stock options shareholders approved incentive plan january 2001 incentive plan administered compensation leadership development committee board directors compensation committee incentive plan includes provisions granting incentive stock options shares class stock price less fair value date grant nonqualified stock options may granted price equal fair value class stock date option granted stock options incentive plan generally become exercisable ratably three years date grant must exercised within 10 years date grant policy recognize compensation expense straightline basis requisite service period entire award generally grant stock options year weighted average grantdate fair value options granted fiscal 2013 2012 2011 644 699 619 respectively fair value option grant established date grant using binomial lattice method use historical volatility period time comparable expected life option determine volatility assumptions expected life calculated based contractual term grant takes account historical exercise termination behavior participants riskfree interest rates based fiveyear treasury bond rate assumptions grant date used fair value calculation year’s grants outlined following table recognized stockbased compensation expense related stock options net income taxes 14 million 15 million 12 million fiscal 2013 2012 2011 respectively related tax benefit fiscal 2013 2012 2011 9 million 10 million 7 million respectively 39 million 34 million 38 million options vest fiscal 2013 2012 2011 respectively grant date fair value 22 million 17 million 16 million respectively fiscal 2013 2012 2011 received cash 123 million 34 million 51 million respectively exercise stock options shares issued treasury stock option exercises related tax benefit realized stock options exercised fiscal 2013 2012 2011 35 million 7 million 10 million respectively total intrinsic value options exercised fiscal 2013 2012 2011 90 million 21 million 26 million respectively cash flows resulting tax deductions excess compensation cost options excess tax deductions classified financing cash flows realized 18 million 3 million 5 million related excess tax deductions fiscal 2013 2012 2011 respectively september 28 2013 25 million total unrecognized compensation cost related stock option plans recognized weighted average period 12 years restricted stock issue restricted stock market value date grant restrictions expiring periods fiscal 2016 unearned compensation recognized vesting period particular grant using straightline method september 28 2013 8 million total unrecognized compensation cost related restricted stock awards recognized weighted average period 10 year recognized stockbased compensation expense related restricted stock net income taxes 5 million 7 million 7 million fiscal 2013 2012 2011 respectively related tax benefit fiscal 2013 2012 2011 3 million 4 million 5 million respectively 14 million 12 million 09 million restricted stock awards vest fiscal 2013 2012 2011 respectively grant date fair value 20 million 17 million 14 million respectively performancebased shares award performancebased shares class stock certain senior executives awards typically granted year performancebased shares vest based upon passage time achievement performance market performance criteria ranging 0 200 determined compensation committee prior date award vesting periods awards generally three years review progress toward attainment performance criteria quarter vesting period probable minimum performance criteria award achieved begin recognizing expense equal proportionate share total fair value class stock price grant date total expense recognized duration performance awards equal class stock price date grant multiplied number shares ultimately awarded based level attainment performance criteria grants market performance criteria total expense recognized duration award equal fair value determined grant date regardless market performance criteria met following table summarizes performancebased shares maximum award amounts based upon respective performance share agreements actual shares vest depend level attainment performancebased criteria recognized stockbased compensation expense related performance shares net income taxes 24 million 02 million 03 million fiscal 2013 2012 2011 respectively related tax benefit fiscal 2013 2012 2011 15 million 01 million 02 million respectively september 28 2013 10 million total unrecognized compensation based upon progress toward attainment criteria related performancebased share awards recognized weighted average period 20 years note 15 pensions postretirement benefits september 28 2013 four noncontributory defined benefit pension plans consisting three funded qualified plans one unfunded nonqualified plan three qualified plans frozen provide benefits based formula using years service specified benefit rate effective january 1 2004 implemented nonqualified defined benefit plan certain contracted officers uses formula based years service final average salary also postretirement benefit plans substantially employees may receive benefits satisfy applicable eligibility criteria postretirement healthcare plans contributory participants’ contributions adjusted deemed necessary defined contribution retirement programs various groups employees recognized expenses 50 million 47 million 45 million fiscal 2013 2012 2011 respectively use fiscal year end measurement date defined benefit plans postretirement plans recognize effect actuarial gains losses earnings immediately postretirement plans rather amortizing effect future periods postretirement benefits include postretirement medical costs life insurance benefit obligations funded status following table provides reconciliation changes plans’ benefit obligations assets funded status september 28 2013 september 29 2012 amounts recognized consolidated balance sheets consist september 28 2013 three pension plans accumulated benefit obligation excess plan assets september 29 2012 pension plans accumulated benefit obligation excess plan assets plans accumulated benefit obligations excess plan assets follows accumulated benefit obligation qualified pension plans 86 million 101 million september 28 2013 september 29 2012 respectively net periodic benefit cost components net periodic benefit cost pension postretirement benefit plans recognized consolidated statements income follows september 28 2013 amounts expected reclassified earnings within next 12 months related net periodic benefit cost qualified nonqualified pensions 2 million 2 million respectively assumptions weighted average assumptions follows determine expected return plan assets assumption first examined historical rates return various asset classes determined longterm projected rateofreturn based expected returns next five 10 years discount rate assumptions used account pension postretirement benefit plans reflect rates benefit obligations could effectively settled determined using cash flow matching technique whereby rates yield curve developed highquality debt securities applied benefit obligations determine appropriate discount rate three postretirement benefit plans healthcare related two plans benefit obligations totaled 23 million september 28 2013 impacted healthcare cost trend rates consist fixed annual payments remaining plan benefit obligation 48 million september 28 2013 covers retirees yet qualify medicare utilized assumed healthcare cost trend rate 76 onepercentage point increase assumed healthcare cost trend rate would 9 million impact postretirement benefit obligation onepercentage point decrease assumed healthcare cost trend rate would 5 million impact postretirement benefit obligation plan assets fair value plan assets domestic pension benefit plans 71 million 69 million september 28 2013 september 29 2012 respectively following table sets forth actual target asset allocation pension plan assets foreign subsidiary pension plan 14 million 17 million plan assets september 28 2013 september 29 2012 respectively plan’s assets held insurance contract consistent target asset allocation plan trustees established set investment objectives related assets domestic pension plans regularly monitor performance funds portfolio managers objectives pension assets provide growth capital income ii achieve target weighted average annual rate return competitive funds similar investment objectives iii diversify reduce risk investment objectives target asset allocation amended fiscal 2013 alternative investments may include limited hedge funds private equity funds fixed income funds following table shows categories pension plan assets level fair values determined fair value hierarchy described note 13 fair value measurements valued using net asset value nav provided trustee practical expedient estimating fair value nav based fair value underlying investments within funds determined daily b valued using plan’s assumptions market participants would use pricing assets based best information available investment manager pricing reconciliation change fair value measurement defined benefit plans’ consolidated assets using significant unobservable inputs level 3 follows believe significant concentrations risk within plan assets september 28 2013 contributions policy fund least minimum contribution required meet applicable federal employee benefit local tax laws sole discretion may time fund additional amounts expected contributions pension plans fiscal 2014 approximately 8 million fiscal 2013 2012 2011 funded 8 million 8 million 7 million respectively pension plans estimated future benefit payments following benefit payments expected paid benefit payments postretirement benefit plans expected offset medicare part subsidies 2013 thereafter note 16 comprehensive income loss components accumulated comprehensive loss follows tax changes components comprehensive income loss follows note 17 segment reporting operate four segments chicken beef pork prepared foods measure segment profit operating income loss chicken operations include breeding raising chickens well processing live chickens fresh frozen valueadded chicken products logistics operations move products supply chain products marketed domestically food retailers foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments schools healthcare facilities military food processors well international markets also includes sales allied products chicken breeding stock subsidiary beef operations include processing live fed cattle fabricating dressed beef carcasses primal subprimal meat cuts caseready products segment also includes sales allied products hides variety meats well logistics operations move products supply chain products marketed domestically food retailers foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments schools healthcare facilities military food processors well international markets pork operations include processing live market hogs fabricating pork carcasses primal subprimal cuts caseready products segment also includes live swine group related allied product processing activities logistics operations move products supply chain products marketed domestically food retailers foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments schools healthcare facilities military food processors well international markets prepared foods prepared foods operations include manufacturing marketing frozen refrigerated food products logistics operations move products supply chain products include pepperoni bacon beef pork pizza toppings pizza crusts flour corn tortilla products appetizers prepared meals ethnic foods soups sauces side dishes meat dishes processed meats products marketed domestically food retailers foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments schools healthcare facilities military food processors well international markets results dynamic fuels included allocate expenses related corporate activities segments related assets additions property plant equipment remain pork segment sales 872 million 771 million 816 million fiscal 2013 2012 2011 respectively transactions operating segments beef segment sales 226 million 211 million 286 million fiscal 2013 2012 2011 respectively transactions operating segments largest customer walmart stores inc accounted 130 138 133 consolidated sales fiscal 2013 2012 2011 respectively sales walmart stores inc included chicken beef pork prepared foods segments extended discontinuance sales customer could replaced material impact operations majority operations domiciled united states approximately 96 95 96 sales external customers fiscal 2013 2012 2011 respectively sourced united states approximately 61 billion 59 billion longlived assets located united states september 28 2013 september 29 2012 respectively approximately 485 million 564 million longlived assets located foreign countries primarily brazil china mexico india september 28 2013 september 29 2012 respectively sell certain products foreign markets primarily brazil canada central america china european union japan mexico middle east south korea taiwan vietnam export sales united states totaled 42 billion 40 billion 41 billion fiscal 2013 2012 2011 respectively substantially export sales facilitated unaffiliated brokers marketing associations foreign sales staffs sales products produced country united states less 10 consolidated sales fiscal 2013 2012 2011 note 18 supplemental cash flows information following table summarizes cash payments interest income taxes note 19 transactions related parties operating leases two wastewater facilities entity owned donald j tyson revocable trust mr john tyson chairman company trustee berry street waste water treatment plant lp 90 owned tyson limited partnership “tlp” sisters mr tyson total payments approximately 1 million fiscal 2013 2012 2011 paid entity fiscal 2012 2011 aircraft lease agreement tyson family aviation llc mr tyson senior chairman mr john tyson randal w tyson testamentary trust members upon mr tyson’s death january 6 2011 membership interest passed trust mr john tyson trustee fiscal 2012 tyson family aviation llc sold aircraft nonrelated party entered aircraft lease agreement new owner total payments tyson family aviation llc approximately 04 million 1 million paid fiscal 2012 2011 respectively part companys previously approved stock repurchase plan september 11 2013 purchased one million shares class common stock tyson limited partnership 2985 million 2985 per share tyson limited partnership john tyson director barbara tyson general partners owns 70 million shares 99981 class b common stock 2 million shares class common stock giving control approximately 7246 total voting power outstanding voting stock note 20 commitments contingencies commitments lease equipment properties certain farms total rentals approximated 200 million 193 million 183 million fiscal 2013 2012 2011 respectively leases initial terms seven years varying renewal periods significant obligations assumed terms leases upkeep facilities payments insurance property taxes minimum lease commitments noncancelable leases september 28 2013 guarantee obligations certain outside third parties consists lease grower loans substantially collateralized underlying assets terms underlying debt cover periods ten years maximum potential amount future payments september 28 2013 64 million also maintain operating leases various types equipment contain residual value guarantees market value underlying leased assets end term lease remaining terms lease maturities cover periods next seven years maximum potential amount residual value guarantees 58 million 52 million would recoverable various recourse provisions additional undeterminable recoverable amount based fair value underlying leased assets likelihood material payments guarantees considered probable september 28 2013 september 29 2012 material liabilities guarantees recorded cash flow assistance programs certain livestock suppliers participate programs pay amount livestock equivalent standard cost grow livestock periods low market sales prices amounts payments excess market sales price recorded receivables accrue interest participating suppliers obligated repay receivables balances market sales prices exceed standard cost upon termination agreement maximum obligation associated programs limited fair value participating livestock supplier’s net tangible assets potential maximum obligation september 28 2013 approximately 340 million total receivables programs 44 million 25 million september 28 2013 september 29 2012 respectively included net allowance uncollectible amounts accounts receivable consolidated balance sheets even though programs limited net tangible assets participating livestock suppliers also manage portion credit risk associated programs obtaining security interests livestock suppliers’ assets analyzing residual credit risks general market conditions recorded allowance programs’ estimated uncollectible receivables 15 million 10 million september 28 2013 september 29 2012 respectively additionally enter future purchase commitments various items grains livestock contracts fixed grower fees september 28 2013 commitments totaled contingencies involved various claims legal proceedings routinely assess likelihood adverse judgments outcomes matters well ranges probable losses extent losses reasonably estimable record accruals matters extent conclude loss probable financial impact adverse outcome occur reasonably estimable accruals reflected company’s consolidated financial statements opinion made appropriate adequate accruals matters believe probability material loss beyond amounts accrued remote however ultimate liability matters uncertain accruals adequate adverse outcome could material effect consolidated financial condition results operations listed certain claims made company andor subsidiaries potential exposure considered material company’s consolidated financial statements believe substantial defenses claims made intend vigorously defend matters pending us lawsuit styled deasencio v tyson foods inc ed pennsylvania august 22 2000 plaintiffs allege failed compensate certain poultry plant employees time takes engage pre postshift activities changing protective sanitary clothing walking changing area work areas break areas violation fair labor standards act flsa seek back wages liquidated damages pre postjudgment interest attorneys’ fees plaintiffs appealed jury verdict final judgment entered favor june 22 2006 september 7 2007 us court appeals third circuit reversed jury verdict remanded case district court proceedings sought rehearing en banc denied court appeals october 5 2007 united states supreme court denied petition writ certiorari june 9 2008 october 4 2013 district court ordered parties provide status report within ten days case would dismissed without prejudice neither party made filing case dismissed without prejudice pending eleven separate wage hour actions involving tyson fresh meats inc’s plants located garden city kansas garcia et al v tyson foods inc tyson fresh meats inc kansas may 15 2006 storm lake iowa bouaphakeo fka sharp et al v tyson foods inc nd iowa february 6 2007 columbus junction iowa guyton fka robinson et al v tyson foods inc dba tyson fresh meats inc sd iowa september 12 2007 madison nebraska acosta et al v tyson foods inc dba tyson fresh meats inc nebraska february 29 2008 dakota city nebraska gomez et al v tyson foods inc nebraska january 16 2008 perry waterloo iowa edwards et al v tyson foods inc dba tyson fresh meats inc sd iowa march 20 2008 logansport indiana carter et al v tyson foods inc tyson fresh meats inc nd indiana april 29 2008 goodlettsville tennessee abadeer v tyson foods inc tyson fresh meats inc md tennessee february 6 2009 emporia kansas abdiaziz et al v tyson foods inc tyson fresh meats inc kansas september 30 2011 joslin illinois murray et al v tyson foods inc cd illinois january 2 2008 devoss v tyson foods inc dba tyson fresh meats cd illinois march 2 2011 actions allege failed pay employees hours worked including overtime compensation time takes change protective work uniforms safety equipment sanitary protective clothing worn employees walking changing area work areas break areas violation flsa analogous state laws plaintiffs seek back wages liquidated damages pre postjudgment interest attorneys’ fees costs case proceeding jurisdiction • trial garcia case involving garden city kansas facility jury verdict favor plaintiffs entered march 17 2011 exclusive pre postjudgment interest attorneys’ fees costs jury found violations federal state laws pre postshift work activities awarded damages amount 503011 plaintiffs’ counsel filed application attorneys’ fees expenses contested december 7 2012 court granted plaintiffs counsels application awarded total 3609723 filed appeal tenth circuit court appeals december 27 2012 oral argument scheduled november 18 2013 • jury trial held bouaphakeo case involves storm lake iowa pork plant resulted jury verdict favor plaintiffs violations federal state laws pre postshift work activities trial court also awarded plaintiffs liquidated damages resulting total damages awarded amount 5784758 appealed jurys verdict trial courts award plaintiffs counsel also filed application attorneys fees expenses amount 2692145 • jury trial held guyton case involves columbus junction iowa pork plant resulted jury verdict favor tyson april 25 2012 plaintiffs appealed eighth circuit court appeals • bench trial held acosta case involves madison nebraska pork plant january 2013 may 2013 trial court awarded plaintiffs 5733943 unpaid overtime wages subsequently court ordered class plaintiffs expanded plaintiffs submitted updated calculation 6258492 unpaid overtime wages reflected payroll data date order expanding class judgment yet entered • jury trial gomez case involves dakota city nebraska beef plant held jury found favor plaintiffs april 3 2013 october 2 2013 trial court denied parties’ posttrial motions entered judgment awarding unpaid overtime wages liquidated damages penalties totaling 4960787 filed notice appeal november 12 2013 • trial court edwards case involves perry waterloo iowa facilities decertified state law class granted pretrial motions resulted judgment favor respect plaintiffs’ claims • parties carter case involves logansport indiana pork plant agreed settle claims 950000 parties filed joint motion approval settlement plaintiffs subsequently filed motion certify class plaintiffs joint motion approval settlement pending october 30 2013 filed motion court enforce settlement • trial court abadeer case involves goodlettsville tennessee plant granted plaintiffs’ motion summary judgment part finding certain pre postshift activities compensable nonpayment activities willful good faith trial remaining issues including damages scheduled begin april 15 2014 pending one wage hour action involving tyson prepared foods plant located jefferson wisconsin weissman et al v tyson prepared foods inc jefferson county wisconsin circuit court october 20 2010 plaintiffs allege employees paid time takes engage pre postshift activities changing protective sanitary clothing associated time takes walk workstations postdonning predoffing protective sanitary clothing six named plaintiffs seek act state law class representatives behalf current former employees allegedly paid time worked seek back wages liquidated damages pre postjudgment interest attorneys’ fees costs may 16 2011 plaintiffs filed motion certify state law class hourly employees worked jefferson plant october 20 2008 present filed motions summary judgment seeking dismissal claims alternative limit claims made noncompensable clothes changing activities court granted summary judgment favor tyson august 31 2012 plaintiffs filed notice appeal october 5 2012 august 1 2013 appeals court reversed remanded case trial court concluding applicable activities plant compensable subject certain defenses petitioned wisconsin supreme court review june 19 2005 attorney general secretary environment state oklahoma filed complaint us district court northern district oklahoma us three subsidiaries six poultry integrators complaint subsequently amended asserts number state federal causes action including limited counts comprehensive environmental response compensation liability act cercla resource conservation recovery act rcra statelaw public nuisance theories amended complaint asserts defendants certain contract growers named amended complaint polluted surface waters groundwater associated drinking water supplies illinois river watershed irw land application poultry litter oklahoma asserts alleged pollution also caused extensive injury environment including soils sediments irw defendants unjustly enriched oklahoma’s claims cover entire irw encompasses one million acres land natural resources including lakes waterways contained therein oklahoma seeks wideranging relief including injunctive relief compensatory damages excess 800 million unspecified amount punitive damages attorneys’ fees defendants denied liability asserted various defenses filed thirdparty complaint asserts claims persons entities whose activities may contributed pollution alleged amended complaint district court stayed proceedings third party complaint pending resolution oklahoma’s claims defendants october 31 2008 defendants filed motion dismiss failure join cherokee nation required party alternative judgment matter law based plaintiffs’ lack standing motion granted part denied part july 22 2009 ruling district court dismissed oklahoma’s claims cost recovery natural resources damages cercla unjust enrichment oklahoma common law ruling also narrowed scope oklahoma’s remaining claims dismissing damage claims causes action oklahoma common law nuisance federal common law nuisance oklahoma common law trespass leaving claims injunctive relief trial august 18 2009 court granted partial summary judgment favor defendants oklahoma’s claims violations oklahoma registered poultry feeding operations act oklahoma later voluntarily dismissed remainder claim september 2 2009 cherokee nation filed motion intervene lawsuit motion intervene denied september 15 2009 cherokee nation filed notice appeal ruling tenth circuit court appeals september 17 2009 nonjury trial case began september 24 2009 close oklahoma’s caseinchief court granted defendants’ motions dismiss claims based rcra nuisance per se health risks related bacteria defense rested case january 13 2010 closing arguments held february 11 2010 september 21 2010 court appeals affirmed district court’s denial cherokee nation’s motion intervene october 6 2010 cherokee nation state oklahoma filed petition rehearing en banc review seeking reconsideration ruling court appeals denied petition district court yet rendered decision trial ended february 2010 note 21 quarterly financial data unaudited second quarter fiscal 2013 net income included 19 million currency translation adjustment gain recognized conjunction receipt proceeds constituting final resolution investment canada included 56 million noncash charge reported discontinued operation related impairment weifang third quarter fiscal 2012 net income included 167 million pretax charge related early extinguishment debt fourth quarter fiscal 2012 net income included 15 million noncash charge related impairment weifang note 22 condensed consolidating financial statements tfm parent whollyowned subsidiary fully unconditionally guaranteed 2016 notes additionally tfm parent fully unconditionally guaranteed 2022 notes date tfm parent released guarantee tysons 10 billion revolving credit facility ii 2016 notes time tfm parents guarantee 2022 notes permanently released following financial information presents condensed consolidating financial statements include tyson foods inc tfi parent tfm parent nonguarantor subsidiaries nonguarantors combined basis elimination entries necessary consolidate tfi parent tfm parent nonguarantors tyson foods inc consolidated basis provided alternative providing separate financial statements guarantor report independent registered public accounting firm board directors shareholders tyson foods inc opinion accompanying consolidated balance sheets related consolidated statements income comprehensive income shareholders’ equity cash flows present fairly material respects financial position tyson foods inc subsidiaries september 28 2013 september 29 2012 results operations cash flows three years period ended september 28 2013 conformity accounting principles generally accepted united states america addition opinion financial statement schedule listed index appearing item 15a presents fairly material respects information set forth therein read conjunction related consolidated financial statements also opinion company maintained material respects effective internal control financial reporting september 28 2013 based criteria established internal control integrated framework 1992 issued committee sponsoring organizations treadway commission coso companys management responsible financial statements financial statement schedule maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included managements annual report internal control financial reporting appearing item 9a responsibility express opinions financial statements financial statement schedule companys internal control financial reporting based integrated audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audits obtain reasonable assurance whether financial statements free material misstatement whether effective internal control financial reporting maintained material respects audits financial statements included examining test basis evidence supporting amounts disclosures financial statements assessing accounting principles used significant estimates made management evaluating overall financial statement presentation audit internal control financial reporting included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk audits also included performing procedures considered necessary circumstances believe audits provide reasonable basis opinions company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles company’s internal control financial reporting includes policies procedures pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company ii provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company iii provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate pricewaterhousecoopers llp fayetteville ar november 18 2013 item 9item 8 financial statements supplementary data tyson foods inc consolidated statements income see accompanying notes tyson foods inc consolidated statements comprehensive income see accompanying notes tyson foods inc consolidated balance sheets see accompanying notes tyson foods inc consolidated statements shareholders’ equity see accompanying notes tyson foods inc consolidated statements cash flows see accompanying notes consolidated financial statements tyson foods inc note 1 business summary significant accounting policies description business tyson foods inc collectively “company” “we” “us” “our” founded 1935 world headquarters springdale arkansas one worlds largest producers chicken beef pork prepared foods include leading brands tyson® jimmy dean® hillshire farm® sara lee® frozen bakery ball park® wright® aidells® state fair® consolidation consolidated financial statements include accounts whollyowned subsidiaries well majorityowned subsidiaries exercise control applicable entities controlling financial interest variable interest entities primary beneficiary significant intercompany accounts transactions eliminated consolidation fiscal year utilize 52 53week accounting period ending saturday closest september 30 company’s accounting cycle resulted 52week year fiscal 2014 2013 2012 cash equivalents cash equivalents consist investments shortterm highly liquid securities original maturities three months less made part cash management activity carrying values assets approximate fair values primarily utilize cash management system series separate accounts consisting lockbox accounts receiving cash concentration accounts funds moved several zerobalance disbursement accounts funding payroll accounts payable livestock procurement grower payments etc result cash management system checks issued presented banks payment may result negative book cash balances negative book cash balances included accounts payable current liabilities september 27 2014 september 28 2013 checks outstanding excess related book cash balances totaled approximately 298 million 246 million respectively accounts receivable record accounts receivable net realizable value includes appropriate allowance estimated uncollectible accounts reflect loss anticipated accounts receivable balances charged provision doubtful accounts calculate allowance based history writeoffs level past due accounts relationships economic status customers september 27 2014 september 28 2013 allowance uncollectible accounts 34 million 46 million respectively generally collateral receivables periodically evaluate credit worthiness customers inventories processed products livestock supplies valued lower cost market cost includes purchased raw materials live purchase costs growout costs primarily feed grower pay catch haul costs labor manufacturing production overhead related purchase production inventories fiscal 2014 66 cost inventories determined firstin firstout fifo method compared 58 2013 remaining cost inventories years determined weightedaverage method following table reflects major components inventory september 27 2014 september 28 2013 property plant equipment property plant equipment stated cost generally depreciated straightline method estimated lives buildings leasehold improvements 10 33 years machinery equipment three 12 years land improvements three 20 years major repairs maintenance costs significantly extend useful life related assets capitalized normal repairs maintenance costs charged operations review carrying value longlived assets balance sheet date indication impairment exists recoverability assessed using undiscounted cash flows based historical results current projections earnings interest taxes measure impairment excess carrying cost fair value asset fair value asset measured using discounted cash flows including market participant assumptions future operating results discount rates goodwill intangible assets goodwill indefinite life intangible assets initially recorded fair value amortized reviewed impairment least annually frequently impairment indicators arise goodwill allocated reporting unit evaluated impairment first performing qualitative assessment determine whether quantitative goodwill test necessary determined based qualitative factors fair value reporting unit may likely less carrying amount significant changes macroeconomic factors related reporting unit occurred could materially impact fair value quantitative goodwill impairment test would required additionally elect forgo qualitative assessment perform quantitative test first step quantitative test identify potential impairment exists comparing fair value reporting unit carrying amount including goodwill fair value reporting unit exceeds carrying amount goodwill reporting unit considered potential impairment second step quantitative impairment test necessary however carrying amount reporting unit exceeds fair value second step performed determine goodwill impaired measure amount impairment loss recognize second step compares implied fair value goodwill carrying amount goodwill implied fair value goodwill exceeds carrying amount goodwill considered impaired however carrying amount goodwill exceeds implied fair value impairment loss recognized amount equal excess implied fair value goodwill determined manner amount goodwill recognized business combination ie fair value reporting unit allocated assets liabilities including unrecognized intangible assets reporting unit acquired business combination fair value reporting unit determined exit price market participant would pay business elected make first day fourth quarter annual impairment assessment date goodwill indefinite life intangible assets estimate fair value reporting units using discounted cash flow analysis uses significant unobservable inputs level 3 inputs defined fair value hierarchy analysis requires us make various judgmental estimates assumptions sales operating margins growth rates discount factors believed reflect market participant views would exist exit transaction generally utilize normalized operating margin assumptions based future expectations operating margins historically realized reporting units industries inherent estimates assumptions used determining fair value reporting units outside control management including interest rates cost capital tax rates credit ratings believe made reasonable estimates assumptions calculate fair value reporting units possible material change could occur actual results consistent estimates assumptions used calculate fair value may required perform second step quantitative test future years could result material impairments goodwill fiscal 2014 2013 2012 material reporting units underwent quantitative test passed first step goodwill impairment analysis therefore second step necessary indefinite life intangible assets qualitative assessment also performed determine whether existence events circumstances indicates likely intangible asset impaired similar goodwill also elect forgo qualitative test indefinite life intangible assets perform quantitative test upon performing quantitative test carrying value intangible asset exceeds fair value impairment loss recognized amount equal excess fair value indefinite life intangible assets calculated principally using relieffromroyalty excess earnings valuation approaches believed reflect market participant views would exist exit transaction valuation approaches required make estimates assumptions sales operating margins growth rates royalty rates discount rates based budgets business plans economic projections anticipated future cash flows marketplace data investments joint ventures entities generally use cost method accounting voting interests less 20 percent use equity method accounting voting interests excess 20 percent controlling interest variable interest primary beneficiary investments joint ventures entities reported consolidated balance sheets assets also investments marketable debt securities determined marketable debt securities availableforsale investments reported fair value based quoted market prices balance sheet date unrealized gains losses net tax recorded comprehensive income amortized cost debt securities adjusted amortization premiums accretion discounts maturity amortization recorded interest income cost securities sold based specific identification method realized gains losses sale debt securities declines value judged temporary recorded net basis income interest dividends securities classified availableforsale recorded interest income accrued selfinsurance use combination insurance selfinsurance mechanisms effort mitigate potential liabilities health welfare workers’ compensation auto liability general liability risks liabilities associated risks retained estimated part considering claims experience demographic factors severity factors actuarial assumptions current liabilities current liabilities september 27 2014 september 28 2013 include defined benefit plans recognize funded status defined pension postretirement plans consolidated balance sheets funded status measured difference fair value plan assets benefit obligation measure plan assets liabilities end fiscal year defined benefit pension plan benefit obligation projected benefit obligation defined benefit postretirement plan retiree health care plan benefit obligation accumulated postretirement benefit obligation overfunded status recognized asset underfunded status recognized liability transitional assetliability prior service cost actuarial gainloss yet recognized component net periodic cost recognized accumulated comprehensive income accumulated comprehensive income adjusted amounts subsequently recognized component net periodic benefit costs future periods financial instruments purchase certain commodities grains livestock course normal operations part commodity risk management activities use derivative financial instruments primarily futures options reduce exposure various market risks related purchases well changes foreign currency exchange rates contract terms financial instrument qualifying hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts designated highly effective meeting risk reduction correlation criteria recorded using hedge accounting derivative instrument accounted hedge changes fair value instrument offset either change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion instrument’s change fair value immediately recognized earnings component cost sales instruments hold part risk management activities meet criteria hedge accounting marked fair value unrealized gains losses reported currently earnings changes market value derivatives used risk management activities relating forward sales contracts recorded sales changes surrounding inventories hand anticipated purchases inventories supplies recorded cost sales generally hedge anticipated transactions beyond 18 months revenue recognition recognize revenue title risk loss transferred customers generally delivery based terms sale revenue recognized net amount estimated received deducting estimated amounts discounts trade allowances product terms litigation reserves variety legal proceedings pending threatened us accruals recorded probable liability incurred amount liability reasonably estimated based current law progress case opinions views legal counsel advisers experience similar matters intended response litigation amounts discounted exclusive claims third parties adjusted periodically assessment efforts progress additional information becomes available expense amounts administering litigating claims incurred accruals legal proceedings included current liabilities consolidated balance sheets freight expense freight expense associated products shipped customers recognized cost sales advertising promotion expenses advertising promotion expenses charged operations period incurred customer incentive trade promotion activities recorded reduction sales based amounts estimated due customers based primarily historical utilization redemption rates advertising promotional activities recorded selling general administrative expenses advertising promotion expenses fiscal 2014 2013 2012 641 million 555 million 496 million respectively research development research development costs expensed incurred research development costs totaled 52 million 50 million 43 million fiscal 2014 2013 2012 respectively use estimates consolidated financial statements prepared conformity accounting principles generally accepted united states require us make estimates assumptions affect amounts reported consolidated financial statements accompanying notes actual results could differ estimates recently issued accounting pronouncements may 2014 financial accounting standards board fasb issued guidance changing criteria recognizing revenue guidance also modifies related disclosure requirements clarifies guidance multipleelement arrangements provides guidance transactions addressed fully previous guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2016 fiscal 2018 early adoption permitted company currently evaluating impact guidance consolidated financial statements note 2 changes accounting principles december 2011 february 2013 fasb issued guidance enhancing disclosures related offsetting certain assets liabilities guidance effective annual reporting periods beginning january 1 2013 interim periods within annual periods adopted guidance first quarter fiscal 2014 adoption significant impact consolidated financial statements april 2014 fasb issued guidance changing criteria reporting discontinued operations guidance also modifies related disclosure requirements guidance effective prospective basis annual reporting periods beginning december 15 2014 interim periods within annual periods beginning december 15 2015 early adoption permitted adopted third quarter fiscal 2014 adoption significant impact consolidated financial statements note 3 acquisitions dispositions acquisitions august 28 2014 acquired outstanding stock hillshire brands company hillshire brands part strategic expansion initiative purchase price equal 6300 per share hillshire brands outstanding common stock 8081 million addition paid 163 million cash breakage costs incurred hillshire brands related previously announced acquisition funded acquisition existing cash hand net proceeds issuance new senior notes class common stock class stock tangible equity units well borrowings new term loan facility refer note 7 debt note 8 equity hillshire brands results operations subsequent acquisition closing included prepared foods segment following table summarizes preliminary fair values assets acquired liabilities assumed acquisition date certain estimated values acquisition including goodwill intangible assets plant property equipment deferred taxes yet finalized preliminary purchase price allocations subject change complete analysis fair value date acquisition fair value identifiable intangible assets follows result acquisition recognized total 4804 million goodwill purchase price assigned assets acquired liabilities assumed based estimated fair values date acquisition excess allocated goodwill shown table goodwill represents value expect achieve implementation operational synergies growth opportunities primarily prepared foods segment expect final fair value goodwill deductible us income tax purposes used various valuation techniques determine fair value primary techniques discounted cash flow analysis relieffromroyalty excess earnings valuation approaches use significant unobservable inputs level 3 inputs defined fair value hierarchy valuation approaches required make estimates assumptions sales operating margins growth rates royalty rates discount rates based budgets business plans economic projections anticipated future cash flows marketplace data acquisition hillshire brands accounted using acquisition method accounting consequently results operations hillshire brands reported consolidated financial statements date acquisition hillshire brands one month results insignificant consolidated statements income following unaudited pro forma information presents combined results operations acquisition hillshire brands occurred beginning fiscal 2013 hillshire brands preacquisition results added historical results pro forma results contained table include adjustments amortization acquired intangibles depreciation expense interest expense related financing related income taxes potential cost savings operational efficiencies could result acquisition included pro forma results 2013 pro forma results include transaction related expenses incurred hillshire brands prior acquisition 168 million including items consultant fees accelerated stock compensation deal costs transaction related expenses incurred company 115 million including fees paid third parties financing costs deal costs 32 million expense related fair value inventory adjustment date acquisition pro forma results prepared comparative purposes necessarily indicative results operations would acquisitions occurred assumed dates necessarily indication future operating results second quarter fiscal 2014 acquired valueadded food business part strategic expansion initiative included prepared foods segment aggregate purchase price acquisition 56 million included 12 million property plant equipment 27 million allocated intangible assets 18 million allocated goodwill fiscal 2013 acquired two valueadded food businesses part strategic expansion initiative included prepared foods segment aggregate purchase price acquisitions 106 million included 50 million property plant equipment 41 million allocated intangible assets 12 million allocated goodwill dispositions july 28 2014 announced plan sell brazil mexico operations included international segment jbs sa jbs 575 million cash result conducted impairment test recorded 39 million impairment charge fourth quarter fiscal 2014 related brazil operation expect complete sale brazil operation first quarter fiscal 2015 expect realize gain sale mexico operation pending necessary government approvals expect close first half fiscal 2015 reclassified assets liabilities related mexico brazil assets liabilities held sale 2014 consolidated balance sheet following table summarizes net assets liabilities held sale june 2014 sold 50 percent ownership interest dynamic fuels llc dynamic fuels 30 million cash consideration closing 35 million future cash payments contingent dynamic fuels production volumes period 115 years additionally part terms sale released guarantee 100 million gulf opportunity zone taxexempt bonds issued october 2008 fund portion plant construction costs dynamic fuels previously qualified variable interest entity consolidated primary beneficiary result sale deconsolidated dynamic fuels recorded gain approximately 3 million reflected cost sales consolidated statements income recognize future contingent payments income required volumes produced september 28 2013 dynamic fuels 166 million total assets 142 million net property plant equipment 113 million total liabilities 100 million longterm debt fiscal 2014 recorded impairment charges 52 million related planned closure three prepared foods plants company’s cherokee iowa plant closed september 2014 company’s plants buffalo new york santa teresa new mexico expected cease operations first half calendar 2015 impairment charges reflected consolidated statements income cost sales additionally april 2014 hillshire brands announced discontinue production florence alabama facility december 30 2014 remaining closure costs expected significant impact companys financial results note 4 discontinued operation conducting assessment fiscal 2013 longterm business strategy china determined weifang operation weifang previously part chicken segment longer core execution strategy given capital investment required execute future business plan consequently conducted impairment test recorded 56 million impairment charge second quarter fiscal 2013 subsequently sold weifang resulted reporting discontinued operation sale completed july 2013 result significant gain loss carrying value approximated sales proceeds time sale weifangs prior periods results including impairment charge reclassified presented discontinued operation consolidated statements income following summary discontinued operations results note 5 property plant equipment following table reflects major categories property plant equipment accumulated depreciation september 27 2014 september 28 2013 approximately 661 million required complete buildings equipment construction september 27 2014 note 6 goodwill intangible assets following table reflects goodwill activity fiscal 2014 2013 august 28 2014 acquired consolidated hillshire brands unallocated portion goodwill attributable acquisition hillshire brands allocation goodwill reportable segments pending finalization expected synergies impact synergies reporting units following table reflects intangible assets type september 27 2014 september 28 2013 beginning date benefits realized amortizable intangible assets generally amortized using straightline method estimated period benefit 20 years less amortization expense 26 million 17 million 16 million recognized fiscal 2014 2013 2012 respectively estimate amortization expense intangible assets next five fiscal years subsequent september 27 2014 2015 94 million 2016 85 million 2017 80 million 2018 79 million 2019 75 million note 7 debt following table reflects major components debt september 27 2014 september 28 2013 annual maturities debt five fiscal years subsequent september 27 2014 2015 644 million 2016 885 million 2017 1059 million 2018 176 million 2019 1688 million revolving credit facility september 2014 amended existing credit facility among things increased line credit 10 billion 125 billion facility supports shortterm funding needs letters credit mature commitments thereunder terminating september 2019 reducing amount available outstanding letters credit issued facility amount available borrowing september 27 2014 1209 million september 27 2014 outstanding letters credit issued facility totaling 41 million none drawn upon additional 105 million bilateral letters credit issued separately revolving credit facility none drawn upon letters credit issued primarily support workers’ compensation insurance programs derivative activities revolving credit facility unsecured fully guaranteed tyson fresh meats inc tfm parent wholly owned subsidiary date tfm parent released guarantees material indebtedness future subsidiaries shall guarantee material indebtedness subsidiary shall also required guarantee indebtedness obligations liabilities facility 2013 notes september 2008 issued 458 million principal amount 325 convertible senior unsecured notes due october 15 2013 connection issuance 2013 notes entered separate call option warrant transactions respect class stock minimize potential economic dilution upon conversion 2013 notes call options contractually expired upon maturity 2013 notes 2013 notes matured october 15 2013 time paid 458 million principal value cash hand settled conversion premium issuing 117 million shares class stock available treasury shares simultaneously settlement conversion premium received 117 million shares class stock call options warrants settled various dates fiscal 2014 resulting issuance 117 million shares class stock 2016 notes 2016 notes carry interest rate issuance 660 interest step feature dependent credit rating june 7 2012 moodys upgraded credit rating notes ba1 baa3 upgrade decreased interest rate 2016 notes 685 660 effective beginning sixmonth interest payment due october 1 2012 february 11 2013 sp upgraded credit rating 2016 notes bbb upgrade impact interest rate 2016 notes 2019 2024 2034 2044 notes august 2014 issued senior unsecured notes aggregate principal amount 3250 million consisting 1000 million due august 2019 1250 million due august 2024 500 million due august 2034 500 million due august 2044 2019 notes 2024 notes 2034 notes 2044 notes carry interest rates 265 395 488 515 respectively interest payments due semiannually august 15 february 15 original issue discounts 7 million received net proceeds 3243 million addition incurred offering expenses 27 million 2022 notes june 2012 issued 10 billion senior unsecured notes mature june 2022 notes carry 450 interest rate interest payments due semiannually june 15 december 15 original issue discount 5 million based issue price 99458 received net proceeds 995 million addition incurred offering expenses 9 million term loan facility august 2014 borrowed unsecured term loan facility provided total term loans aggregate principal amount 2300 million consisting 1202 million 3year tranche facility 546 million 5year tranche facility 552 million 5year tranche b facility principal 3year tranche facility 5year tranche facility amortize 25 per quarter addition incurred term loan issuance costs approximately 11 million 2015 2020 2032 notes august 2014 connection acquisition hillshire brands assumed 840 million hillshire brands debt estimated fair value approximately 868 million acquisition date recorded assumed debt fair value fair value adjustment amortized reduction interest expense future periods debt assumed mainly comprised senior unsecured notes consist 400 million due september 2015 278 million due september 2020 152 million due november 2032 2015 notes 2020 notes 2032 notes carry interest rates 275 410 613 respectively go zone taxexempt bonds october 2008 dynamic fuels received 100 million proceeds sale gulf opportunity zone taxexempt bonds made available federal government regions affected hurricanes katrina rita 2005 described note 3 acquisitions dispositions sold interest dynamic fuels fiscal 2014 resulted deconsolidation assets liabilities including bonds debt covenants revolving credit facility contains affirmative negative covenants among things may limit restrict ability create liens encumbrances incur debt merge dissolve liquidate consolidate make acquisitions investments dispose transfer assets change nature business engage certain transactions affiliates enter hedging transactions case subject certain qualifications exceptions addition required maintain minimum interest expense coverage maximum debt capitalization ratios senior notes term loans also contain affirmative negative covenants among things may limit restrict ability create liens engage certain saleleaseback transactions engage certain consolidations mergers sales assets compliance debt covenants september 27 2014 note 8 equity capital stock two classes capital stock class stock 010 par value class b common stock 010 par value class b stock holders class b stock may convert stock class stock shareforshare basis holders class b stock entitled 10 votes per share holders class stock entitled one vote per share matters submitted shareholders approval september 27 2014 tyson limited partnership tlp owned 99985 outstanding shares class b stock tlp members tyson family owned aggregate 178 outstanding shares class stock giving collectively control approximately 7014 total voting power outstanding voting stock class b stock considered participating security requiring use twoclass method computation basic earnings per share twoclass computation method period reflects cash dividends paid class stock plus amount allocated undistributed earnings losses computed using participation percentage reflects dividend rights class stock basic earnings per share computed using twoclass method periods presented shares class b stock considered participating convertible securities since shares class b stock convertible shareforshare basis shares class stock diluted earnings per share computed assuming conversion class b shares class shares beginning period dividends cash dividends cannot paid holders class b stock unless simultaneously paid holders class stock per share amount cash dividend paid holders class b stock cannot exceed 90 cash dividend simultaneously paid holders class stock pay quarterly cash dividends class b shareholders paid class dividends per share 030 class b dividends per share 027 fiscal 2014 2013 respectively fiscal 2013 included special dividend 010 per share class stock 009 per share class b paid class dividends per share 016 class b dividends per share 0144 fiscal 2012 november 13 2014 board directors increased quarterly dividend previously declared july 30 2014 010 per share class stock 009 per share class b stock increased quarterly dividend payable december 15 2014 shareholders record close business december 1 2014 share repurchases january 30 2014 board directors approved increase 25 million shares authorized repurchase share repurchase program september 27 2014 321 million shares remained available repurchase share repurchase program fixed scheduled termination date timing extent repurchase shares depend upon among things working capital needs market conditions liquidity targets debt obligations regulatory requirements addition share repurchase program purchase shares open market fund certain obligations equity compensation plans summary cumulative share repurchases class stock follows share issuance fiscal 2014 issued 238 million shares class stock provide funding hillshire brands acquisition total proceeds net underwriting discounts offering related fees expenses 873 million tangible equity units july 2014 completed public issuance 30 million 475 tangible equity units teus total proceeds net underwriting discounts expenses 1454 million teu stated amount 50 comprised prepaid stock purchase contract senior amortizing note due july 15 2017 allocated proceeds issuance teus equity debt based relative fair values respective components teu fair value prepaid stock purchase contracts 1295 million recorded capital excess par value net issuance costs fair value senior amortizing notes 205 million recorded debt 65 million current issuance costs associated teu debt recorded deferred financing costs consolidated balance sheets assets amortized term instrument july 15 2017 aggregate values assigned upon issuance component teus based relative fair value respective components teu follows senior amortizing note initial principal amount 683 bears interest 15 per annum january 15 april 15 july 15 october 15 commencing october 15 2014 pay equal quarterly cash installments 059 per amortizing note except october 15 2014 installment payment 046 per amortizing note cash payment aggregate principal interest equivalent 475 per year respect 50 stated amount per teu installment constitute payment interest partial repayment principal unless settled earlier holders companys option purchase contract automatically settle july 15 2017 subject postponement certain limited circumstances deliver minimum 317 million shares maximum 397 million shares class stock subject adjustment based upon applicable market value defined class stock described • applicable market value equal greater conversion price 4725 per share deliver 10582 shares class stock per purchase contract minimum 317 million class shares • applicable market value greater reference price 3780 less conversion price 4725 per share deliver number shares per purchase contract equal 50 divided applicable market value • applicable market value less equal reference price 3780 per share deliver 13228 shares class stock per purchase contract maximum 397 million class shares applicable market value means average closing prices class stock 20 consecutive trading days beginning including 23rd scheduled trading day immediately preceding july 15 2017 teus dilutive effect earnings per share 317 million minimum shares issued included calculation class basic weighted average shares 8 million share difference minimum shares 397 million maximum shares potentially dilutive securities accordingly included diluted earnings per share pro rata basis extent applicable market value higher reference price less conversion price note 9 income taxes detail provision income taxes continuing operations consists following reasons difference statutory federal income tax rate effective income tax rate continuing operations follows fiscal 2014 domestic production deduction decrease unrecognized tax benefits decreased tax expense 50 million 58 million respectively fiscal 2013 domestic production deduction estimated general business credits decreased tax expense 40 million 17 million respectively fiscal 2012 foreign valuation allowances increased tax expense 10 million domestic production deduction decreased tax expense 17 million approximately 18 million loss 53 million 2 million income continuing operations income taxes fiscal 2014 2013 2012 respectively operations based countries united states recognize deferred income taxes future tax consequences attributable differences financial statement carrying amounts existing assets liabilities respective tax bases deferred tax assets liabilities measured using tax rates expected apply taxable income years temporary differences expected recovered settled tax effects major items recorded deferred tax assets liabilities september 27 2014 september 28 2013 follows record deferred tax amounts current assets current liabilities deferred income taxes consolidated balance sheets deferred tax liability suspended taxes conversion accrual method represents 1987 change cash accrual method accounting recognized 2027 deferred tax liability intangible assets increased prior year due acquisition hillshire brands september 27 2014 gross state tax net operating loss carryforwards approximated 13 billion expire fiscal years 2015 2034 gross foreign net operating loss carryforwards approximated 146 million 50 million expire fiscal years 2017 2024 remainder expiration also tax credit carryforwards approximately 25 million expire fiscal years 2015 2028 accumulated undistributed earnings foreign subsidiaries aggregating approximately 403 million 351 million september 27 2014 september 28 2013 respectively fiscal 2014 company changed permanent reinvestment assertion respect 183 million earnings related poultry operations mexico brazil due planned sale operations repatriation related proceeds result recorded expense net foreign tax credits 17 million respect remaining 220 million undistributed earnings foreign subsidiaries september 27 2014 earnings expected indefinitely reinvested outside united states earnings distributed form dividends otherwise could subject federal income taxes subject adjustment foreign tax credits state income taxes withholding taxes payable various foreign countries currently practicable estimate tax liability might payable repatriation foreign earnings following table summarizes activity related gross unrecognized tax benefits september 27 2014 september 28 2013 september 29 2012 amount unrecognized tax benefits recognized would impact effective tax rate 241 million 149 million september 27 2014 september 28 2013 respectively classify interest penalties unrecognized tax benefits income tax expense september 27 2014 september 28 2013 tax benefits 54 million 63 million respectively accrued interest penalties unrecognized tax benefits september 27 2014 subject income tax examinations us federal income taxes fiscal years 2011 2013 also subject income tax examinations major state foreign jurisdictions fiscal years 2005 2013 2002 2013 respectively estimate next twelve months reasonably possible unrecognized tax benefits could decrease much 30 million primarily due expiration statutes various jurisdictions note 10 income charges fiscal 2014 recorded 11 million equity earnings joint ventures 3 million net foreign currency exchange gains 6 million temporary impairment related availableforsale security 60 million costs associated bridge financing facilities hillshire brands acquisition recorded consolidated statements income net fiscal 2013 recorded 19 million currency translation adjustment gain recognized conjunction receipt proceeds constituting final resolution investment canada recorded consolidated statements income net fiscal 2012 recorded 16 million equity earnings joint ventures 4 million net foreign currency exchange gains recorded consolidated statements income net note 11 earnings per share earnings weighted average common shares used computation basic diluted earnings per share follows approximately 4 million stockbased compensation shares antidilutive fiscal 2014 stockbased compensation shares antidilutive fiscal 2013 approximately 4 million stockbased compensation shares antidilutive fiscal 2012 shares included dilutive earnings per share calculation two classes capital stock class stock class b stock cash dividends cannot paid holders class b stock unless simultaneously paid holders class stock per share amount cash dividends paid holders class b stock cannot exceed 90 cash dividends paid holders class stock allocate undistributed earnings based upon 1 09 ratio per share class stock class b stock respectively allocate undistributed earnings based ratio due historical dividend patterns voting control class b shareholders contractual limitations dividends class b stock note 12 derivative financial instruments business operations give rise certain market risk exposures mostly due changes commodity prices foreign currency exchange rates interest rates manage portion risks use derivative financial instruments primarily futures options reduce exposure commodity price risk foreign currency risk interest rate risk forwards various commodities including grains livestock energy primarily entered manage price risk associated forecasted purchases inputs used production processes foreign exchange forward contracts entered manage fluctuations foreign currency exchange rates primarily result certain receivable payable balances also periodically utilize interest rate swaps manage interest rate risk associated variablerate borrowings risk management programs periodically reviewed board directors’ audit committee programs monitored senior management may revised market conditions dictate current risk management programs utilize industrystandard models take account implicit cost hedging risks associated market risks created derivative instruments fair values strictly monitored using valueatrisk stress tests credit risks associated derivative contracts significant minimize counterparty concentrations utilize margin accounts letters credit deal creditworthy counterparties additionally derivative contracts mostly shortterm duration generally make use creditriskrelated contingent features significant concentrations credit risk existed september 27 2014 recognize derivative instruments either assets liabilities fair value consolidated balance sheets exception normal purchases normal sales expected result physical delivery accounting changes fair value ie gains losses derivative instrument depends whether designated qualifies part hedging relationship type hedging relationship derivative instruments designated qualify hedging instruments designate hedging instrument based upon exposure hedged ie cash flow hedge fair value hedge qualify designate derivative financial instrument hedge contract terms closely mirror hedged item providing high degree risk reduction correlation derivative instrument accounted hedge depending nature hedge changes fair value instrument either offset change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss oci hedged item recognized earnings ineffective portion instrument’s change fair value recognized earnings immediately designate certain forward contracts follows • cash flow hedges include certain commodity forward option contracts forecasted purchases ie grains certain foreign exchange forward contracts • fair value hedges include certain commodity forward contracts firm commitments ie livestock cash flow hedges derivative instruments futures options designated hedges changes amount future cash flows related procurement certain commodities utilized production processes purchase forward option commodity contracts excess physical consumption requirements generally hedge forecasted transactions beyond 18 months objective hedges reduce variability cash flows associated forecasted purchase commodities derivative instruments designate qualify cash flow hedge effective portion gain loss derivative reported component oci reclassified earnings period periods hedged transaction affects earnings gains losses representing hedge ineffectiveness recognized earnings current period ineffectiveness related cash flow hedges significant fiscal 2014 2013 2012 following aggregated notional values outstanding forward option contracts accounted cash flow hedges september 27 2014 net amounts expected reclassified earnings within next 12 months pretax losses 4 million related grain fiscal 2014 2013 2012 reclassify significant pretax gainslosses earnings result discontinuance cash flow hedges due probability original forecasted transaction would occur end originally specified time period within additional period time allowed generally accepted accounting principles following table sets forth pretax impact cash flow hedge derivative instruments consolidated statements income fair value hedges designate certain futures contracts fair value hedges firm commitments purchase livestock slaughter objective hedges minimize risk changes fair value created fluctuations commodity prices associated fixed price livestock firm commitments following aggregated notional values outstanding forward contracts entered hedge firm commitments accounted fair value hedge derivative instruments designate qualify fair value hedge gain loss derivative well offsetting gain loss hedged item attributable hedged risk recognized earnings period include gain loss hedged items ie livestock purchase firm commitments line item cost sales offsetting gain loss related livestock forward position ineffectiveness related fair value hedges significant fiscal 2014 2013 2012 undesignated positions addition designated positions also hold forward option contracts apply hedge accounting include certain derivative instruments related commodities price risk including grains livestock energy foreign currency risk mark positions fair value earnings reporting date generally enter undesignated positions beyond 18 months objective undesignated grains livestock energy commodity positions reduce variability cash flows associated forecasted purchase certain grains energy livestock inputs production processes also enter certain forward sales boxed beef boxed pork forward purchases cattle hogs fixed prices fixed price sales contracts lock proceeds future sale fixed cattle hog purchases lock cost however cost livestock related boxed beef boxed pork market prices time sale purchase could vary fixed price enter fixed forward sales boxed beef boxed pork forward purchases cattle hogs also enter appropriate number livestock options futures positions mitigate portion risk changes market value open livestock options futures positions marked market reported earnings reporting date even though economic impact fixed prices market price realized time sale purchase positions generally qualify hedge treatment due location basis differences commodity exchanges actual locations purchase commodities foreign currency cash flow hedging program hedge portions forecasted transactions denominated foreign currencies primarily forward option contracts protect reduction value forecasted foreign currency cash flows undesignated foreign currency positions generally would qualify cash flow hedge accounting however reduce earnings volatility normally elect hedge accounting treatment position provides offset underlying related transaction impacts current earnings following aggregate outstanding notional values related undesignated positions following table sets forth pretax impact undesignated derivative instruments consolidated statements income following table sets forth fair value derivative instruments outstanding consolidated balance sheets derivative assets liabilities presented consolidated balance sheets net basis net derivative assets liabilities including cash collateral legally enforceable master netting arrangement exists counterparty derivative contract us see note 13 fair value measurements reconciliation amounts reported consolidated balance sheets current assets current liabilities note 13 fair value measurements fair value defined price would received sell asset paid transfer liability exit price principal advantageous market asset liability orderly transaction market participants measurement date fair value hierarchy contains three levels follows level 1 unadjusted quoted prices available active markets identical assets liabilities measurement date level 2 observable inputs available measurement date quoted prices included level 1 either directly indirectly including • quoted prices similar assets liabilities active markets • quoted prices identical similar assets nonactive markets • inputs quoted prices observable asset liability • inputs derived principally corroborated observable market data level 3 unobservable inputs cannot corroborated observable market data reflect use significant management judgment values generally determined using pricing models assumptions utilize management’s estimates market participant assumptions assets liabilities measured fair value recurring basis fair value hierarchy requires use observable market data available instances inputs used measure fair value fall different levels fair value hierarchy fair value measurement determined based lowest level input significant fair value measurement entirety assessment significance particular item fair value measurement entirety requires judgment including consideration inputs specific asset liability following tables set forth level within fair value hierarchy financial assets liabilities accounted fair value recurring basis according valuation techniques used determine fair values derivative assets liabilities presented consolidated balance sheets net basis net derivative assets liabilities including cash collateral legally enforceable master netting arrangement exists counterparty derivative contract us september 27 2014 september 28 2013 posted various counterparties 98 million 79 million respectively cash collateral related commodity derivatives held cash collateral following table provides reconciliation beginning ending balance debt securities measured fair value recurring basis table used significant unobservable inputs level 3 following methods assumptions used estimate fair value class financial instrument derivative assets liabilities commodities foreign exchange forward contracts primarily include exchangetraded overthecounter contracts described note 12 derivative financial instruments record commodity derivatives fair value using quoted market prices adjusted credit nonperformance risk internal models use basis readily observable market inputs including current forward commodity market prices foreign exchange forward contracts recorded fair value based quoted prices spot forward currency prices adjusted credit nonperformance risk classify instruments level 2 quoted market prices corroborated utilizing observable current forward commodity market prices active exchanges observable market transactions spot currency rates forward currency prices available sale securities investments marketable debt securities classified availableforsale reported fair value based pricing models quoted market prices adjusted credit nonperformance risk shortterm investments maturities less 12 months included current assets consolidated balance sheets primarily include certificates deposit commercial paper marketable debt securities included assets consolidated balance sheets maturities ranging 35 years classify investments us government us agency certificates deposit commercial paper debt securities level 2 fair value generally estimated using discounted cash flow models primarily industrystandard models consider various assumptions including time value yield curve well readily available relevant economic measures classify certain corporate assetbacked debt securities level 3 limited activity less observable inputs valuation models including current interest rates estimated prepayment default recovery rates underlying portfolio structured investment vehicle significant changes assumptions unobservable inputs valuation level 3 instruments would significant impact consolidated financial statements september 27 2014 amortized cost basis equity securities reduced accumulated temporary impairment approximately 2 million unrealized holding gains losses net tax excluded earnings reported oci security settled sold quarterly basis evaluate whether losses related availableforsale securities temporary nature losses equity securities recognized earnings decline value judged temporary losses related debt securities determined temporary loss would recognized earnings intend likely required sell security prior recovery debt securities intent ability hold maturity losses determined temporary would remain oci expected credit losses recognized earnings consider many factors determining whether loss temporary including length time extent fair value cost financial condition nearterm prospects issuer ability intent hold investment period time sufficient allow anticipated recovery recognized 6 million temporary impairment year ended september 27 2014 recorded consolidated statements income net temporary losses deferred oci september 27 2014 september 28 2013 deferred compensation assets maintain nonqualified deferred compensation plans certain executives highly compensated employees investments generally maintained within trust include money market funds mutual funds life insurance policies cash surrender value life insurance policies invested primarily mutual funds investments recorded fair value based quoted market prices included assets consolidated balance sheets classify investments observable market prices active markets level 1 generally publiclytraded mutual funds remaining deferred compensation assets classified level 2 fair value corroborated based observable market data realized unrealized gains losses deferred compensation included earnings assets liabilities measured fair value nonrecurring basis addition assets liabilities recorded fair value recurring basis record assets liabilities fair value nonrecurring basis generally assets recorded fair value nonrecurring basis result impairment charges fiscal 2014 recorded 52 million impairment charge related closure three prepared foods plants recorded consolidated statements income cost sales prepared foods segment valuation assets primarily based discounted cash flow models included unobservable level 3 inputs july 28 2014 announced plan sell brazil operation result recorded 39 million charge impair assets fair value 144 million impairment charge recorded consolidated statements income cost sales international segment fair value used determine impairment based upon contracted sales price financial instruments fair value debt principally estimated using level 2 inputs based quoted prices similar instruments fair value carrying value debt follows concentrations credit risk financial instruments exposed concentrations credit risk consist primarily cash equivalents accounts receivable cash equivalents high quality securities placed major banks financial institutions concentrations credit risk respect receivables limited due large number customers dispersion across geographic areas perform periodic credit evaluations customers’ financial condition generally require collateral september 27 2014 september 28 2013 186 175 respectively net accounts receivable balance due walmart stores inc single customer group represented greater 10 net accounts receivable note 14 stockbased compensation issue shares stockbased compensation plans issuing class stock treasury total number shares available future grant tyson foods inc 2000 stock incentive plan incentive plan 30428186 september 27 2014 stock options shareholders approved incentive plan january 2001 incentive plan administered compensation leadership development committee board directors compensation committee incentive plan includes provisions granting incentive stock options shares class stock price less fair value date grant nonqualified stock options may granted price equal fair value class stock date option granted stock options incentive plan generally become exercisable ratably three years date grant must exercised within 10 years date grant policy recognize compensation expense straightline basis requisite service period entire award generally grant stock options year weighted average grantdate fair value options granted fiscal 2014 2013 2012 1083 644 699 respectively fair value option grant established date grant using binomial lattice method use historical volatility period time comparable expected life option determine volatility assumptions expected life calculated based contractual term grant takes account historical exercise termination behavior participants riskfree interest rates based fiveyear treasury bond rate assumptions grant date used fair value calculation year’s grants outlined following table recognized stockbased compensation expense related stock options net income taxes 20 million 14 million 15 million fiscal 2014 2013 2012 respectively related tax benefit fiscal 2014 2013 2012 13 million 9 million 10 million respectively 48 million 39 million 34 million options vest fiscal 2014 2013 2012 respectively grant date fair value 30 million 22 million 17 million respectively fiscal 2014 2013 2012 received cash 67 million 123 million 34 million respectively exercise stock options shares issued treasury stock option exercises related tax benefit realized stock options exercised fiscal 2014 2013 2012 33 million 35 million 7 million respectively total intrinsic value options exercised fiscal 2014 2013 2012 87 million 90 million 21 million respectively cash flows resulting tax deductions excess compensation cost options excess tax deductions classified financing cash flows realized 24 million 18 million 3 million related excess tax deductions fiscal 2014 2013 2012 respectively september 27 2014 35 million total unrecognized compensation cost related stock option plans recognized weighted average period 14 years restricted stock issue restricted stock market value date grant restrictions expiring periods fiscal 2017 unearned compensation recognized vesting period particular grant using straightline method september 27 2014 10 million total unrecognized compensation cost related restricted stock awards recognized weighted average period 12 years recognized stockbased compensation expense related restricted stock net income taxes 6 million 5 million 7 million fiscal 2014 2013 2012 respectively related tax benefit fiscal 2014 2013 2012 4 million 3 million 4 million respectively 06 million 14 million 12 million restricted stock awards vest fiscal 2014 2013 2012 respectively grant date fair value 11 million 20 million 17 million respectively performancebased shares award performancebased shares class stock certain senior executives awards typically granted year performancebased shares vest based upon passage time achievement performance market performance criteria ranging 0 200 determined compensation committee prior date award vesting periods awards generally three years review progress toward attainment performance criteria quarter vesting period probable minimum performance criteria award achieved begin recognizing expense equal proportionate share total fair value class stock price grant date total expense recognized duration performance awards equal class stock price date grant multiplied number shares ultimately awarded based level attainment performance criteria grants market performance criteria total expense recognized duration award equal fair value determined grant date regardless market performance criteria met following table summarizes performancebased shares maximum award amounts based upon respective performance share agreements actual shares vest depend level attainment performancebased criteria recognized stockbased compensation expense related performance shares net income taxes 38 million 24 million 02 million fiscal 2014 2013 2012 respectively related tax benefit fiscal 2014 2013 2012 25 million 15 million 01 million respectively september 27 2014 9 million total unrecognized compensation based upon progress toward attainment criteria related performancebased share awards recognized weighted average period 15 years note 15 pensions postretirement benefits september 27 2014 nine defined benefit pension plans consisting six funded qualified plans three unfunded nonqualified plans regards qualified plans five frozen noncontributory benefits provided plans based formula using years service either specified benefit rate compensation level nonqualified defined benefit plans certain contracted officers use formula based years service final average salary also postretirement benefit plans substantially employees may receive benefits satisfy applicable eligibility criteria postretirement healthcare plans contributory participants’ contributions adjusted deemed necessary defined contribution retirement programs various groups employees recognized expenses 53 million 50 million 47 million fiscal 2014 2013 2012 respectively use fiscal year end measurement date defined benefit plans postretirement plans recognize effect actuarial gains losses earnings immediately postretirement plans rather amortizing effect future periods postretirement benefits include postretirement medical costs life insurance benefit obligations funded status following table provides reconciliation changes plans’ benefit obligations assets funded status september 27 2014 september 28 2013 amounts recognized consolidated balance sheets consist september 27 2014 seven pension plans accumulated benefit obligation excess plan assets september 28 2013 three pension plans accumulated benefit obligation excess plan assets plans accumulated benefit obligations excess plan assets follows accumulated benefit obligation qualified pension plans 1849 million 86 million september 27 2014 september 28 2013 respectively net periodic benefit cost components net periodic benefit cost pension postretirement benefit plans recognized consolidated statements income follows september 27 2014 amounts expected reclassified earnings within next 12 months related net periodic benefit cost qualified nonqualified pensions 2 million 4 million respectively assumptions weighted average assumptions follows determine expected return plan assets assumption first examined historical rates return various asset classes within plans determined longterm projected rateofreturn based expected returns discount rate assumptions used account pension postretirement benefit plans reflect rates benefit obligations could effectively settled determined using cash flow matching technique whereby rates yield curve developed highquality debt securities applied benefit obligations determine appropriate discount rate september 27 2014 pension postretirement benefit plans used rp2014 mortality tables september 28 2013 pension plans used 2013 irs mortality tables postretirement benefit plans used either rp2000 2013 irs mortality tables align applicable participant data six postretirement benefit plans healthcare life insurance related two plans benefit obligations totaled 22 million september 27 2014 impacted healthcare cost trend rates consist fixed annual payments remaining plans benefit obligations 141 million september 27 2014 covering retirees yet qualify medicare utilized assumed healthcare cost trend rate 73 covering retirees qualify medicare utilized assumed healthcare cost trend 65 healthcare cost trend rate grading ultimate rate 50 20212022 onepercentagepoint change assumed healthcare cost trend rates would following effects plan assets following table sets forth actual target asset allocation pension plan assets additionally one foreign subsidiary pension plans 15 million 14 million plan assets held insurance trust september 27 2014 september 28 2013 respectively plan trustees established set investment objectives related assets domestic pension plans regularly monitor performance funds portfolio managers objectives pension assets provide growth capital income ii achieve target weighted average annual rate return competitive funds similar investment objectives iii diversify reduce risk target asset allocations based upon funded status plans pension obligations become better funded lower risk increasing allocation fixed income noted previous table aggregate fair value basis plan assets currently approximately 81 fixed income securities 12 equity securities fixed income securities include limited direct bond investments pooled indirect bond investments may include limited international domestic equities real estate commodities private equity derivative instruments may also used concert either fixed income equity investments achieve desired exposure hedge certain risks derivative instruments include limited futures options swaps swaptions believe significant concentrations risk within plan assets september 27 2014 following tables show categories pension plan assets level fair values determined fair value hierarchy described note 13 fair value measurements classify investments us government us agency fixed income funds bond funds corporate bonds debt securities level 2 fair value generally estimated using discounted cash flow models primarily industrystandard models consider various assumptions including time value yield curve well readily available relevant economic measures funds valued using net asset value nav provided trustee practical expedient estimating fair value nav based fair value underlying investments within funds determined daily b classify certain mortgagebacked assetbacked insurance contracts level 3 limited activity less observable inputs valuation models including current interest rates estimated prepayment default recovery rates underlying portfolio structured investment vehicle insurance contracts valued using plan’s assumptions market participants would use pricing assets based best information available investment manager pricing significant changes assumptions unobservable inputs valuation level 3 instruments would significant impact consolidated financial statements reconciliation change fair value measurement defined benefit plans’ consolidated assets using significant unobservable inputs level 3 follows contributions policy fund least minimum contribution required meet applicable federal employee benefit local tax laws sole discretion may time fund additional amounts expected contributions pension plans fiscal 2015 approximately 14 million fiscal 2014 2013 2012 funded 9 million 8 million 8 million plans respectively pension plans estimated future benefit payments following benefit payments expected paid benefit payments postretirement benefit plans expected offset medicare part subsidies 2015 thereafter multiemployer plans additionally participate multiemployer plan provides defined benefits certain employees covered collective bargaining agreements plans usually administered board trustees composed management participating companies labor representatives risks participating multiemployer plans different singleemployer plans assets contributed multiemployer plan one employer may used provide benefits employees participating employers participating employer stops contributing plan unfunded obligation plan may borne remaining participating employers stop participating plan may required pay plan amount based underfunded status plan referred withdrawal liability contributions pension funds excess 5 total plan contributions plan year 2014 contractually required minimum contributions plans september 27 2014 net pension cost plan equal annual contribution determined accordance provisions negotiated labor contracts contributions plan less 1 million fiscal 2014 assets contributed plans segregated otherwise restricted provide benefits employees future cost plan dependent number factors including funded status plan ability participating companies meet ongoing funding obligations participation multiemployer plan fiscal 2014 outlined einpension plan number column provides employer identification number ein three digit plan number unless otherwise noted recent pension protection act ppa zone status available 2014 2013 plans year beginning january 1 2014 2013 respectively zone status based information received plan certified plans actuaries among factors plans red zone generally less 65 percent funded fiprp status pendingimplemented column indicates plans financial improvement plan fip rehabilitation plan rp either pending implemented last column lists expiration dates collectivebargaining agreements plan subject significant changes affect comparability contributions year addition regular contributions could obligated pay additional contributions known complete partial withdrawal liabilities unfunded vested benefits note 16 comprehensive income loss components accumulated comprehensive loss follows tax changes components comprehensive income loss follows note 17 segment reporting operate five segments chicken beef pork prepared foods international measure segment profit operating income loss second quarter fiscal 2014 began reporting international operation separate segment previously included chicken segment international segment became separate reportable segment result changes internal financial reporting align previously announced executive leadership changes periods presented reclassified reflect change beef pork prepared foods results impacted change chicken includes domestic operations related raising processing live chickens fresh frozen valueadded chicken products well sales allied products marketed domestically food retailers foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments schools healthcare facilities military food processors well international export markets segment also includes logistics operations move products domestic supply chain global operations chicken breeding stock subsidiary beef includes operations related processing live fed cattle fabricating dressed beef carcasses primal subprimal meat cuts caseready products marketed domestically food retailers foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments schools healthcare facilities military food processors well international export markets segment also includes sales allied products hides variety meats well logistics operations move products supply chain pork includes operations related processing live market hogs fabricating pork carcasses primal subprimal cuts caseready products marketed domestically food retailers foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments schools healthcare facilities military food processors well international export markets segment also includes live swine group related allied product processing activities logistics operations move products supply chain prepared foods prepared foods includes operations related manufacturing marketing frozen refrigerated food products logistics operations move products supply chain products primarily include pepperoni bacon sausage beef pork pizza toppings pizza crusts flour corn tortilla products appetizers prepared meals ethnic foods soups sauces side dishes meat dishes breadsticks processed meats products marketed domestically food retailers foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments schools healthcare facilities military food processors well international export markets august 28 2014 completed acquisition hillshire brands manufacturer marketer branded convenient foods includes brands jimmy dean® ball park® hillshire farm® state fair® vans® sara lee® frozen bakery chef pierre® pies well artisanal brands aidells® gallo salame® golden island® premium jerky hillshire brands one month results operations fiscal 2014 included prepared foods segment international includes foreign operations primarily related raising processing live chickens fresh frozen valueadded chicken products brazil china india mexico products marketed respective country food retailers foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments live markets well international export markets july 28 2014 announced plan sell brazil mexico operations part international segment jbs 575 million cash expect complete sale brazil operation first quarter fiscal 2015 sale mexico operation pending necessary government approvals expected close first half fiscal 2015 results dynamic fuels included allocate expenses related corporate activities segments except acquisition integration related fees 59 million included assets additions property plant equipment relating corporate activities remain september 27 2014 included 48 billion goodwill associated acquisition hillshire brands allocation goodwill reportable segments pending finalization expected synergies impact synergies reporting units information segments reconciliation income continuing operations income taxes follows chicken segment sales 7 million 16 million 6 million fiscal 2014 2013 2012 respectively transactions operating segments pork segment sales 10 billion 872 million 771 million fiscal 2014 2013 2012 respectively transactions operating segments beef segment sales 307 million 226 million 211 million fiscal 2014 2013 2012 respectively transactions operating segments aforementioned sales intersegment transactions market prices included segment sales table largest customer walmart stores inc accounted 146 130 138 consolidated sales fiscal 2014 2013 2012 respectively sales walmart stores inc included segments extended discontinuance sales customer could replaced material impact operations majority operations domiciled united states approximately 96 95 sales external customers fiscal 2014 2013 2012 respectively sourced united states approximately 174 billion 61 billion longlived assets located united states september 27 2014 september 28 2013 respectively approximately 324 million 485 million longlived assets located foreign countries primarily brazil china india september 27 2014 september 28 2013 respectively sell certain products foreign markets primarily brazil canada central america china european union japan mexico middle east south korea taiwan vietnam export sales united states totaled 47 billion 42 billion 40 billion fiscal 2014 2013 2012 respectively substantially export sales facilitated unaffiliated brokers marketing associations foreign sales staffs sales products produced country united states less 10 consolidated sales fiscal 2014 2013 2012 note 18 supplemental cash flows information following table summarizes cash payments interest income taxes note 19 transactions related parties operating leases two wastewater facilities entity owned donald j tyson revocable trust mr john tyson chairman company trustee berry street waste water treatment plant lp 90 owned tlp sisters mr tyson total payments approximately 1 million fiscal 2014 2013 2012 paid lease facilities fiscal 2014 purchased real estate jht llc 05 million build new data center jht llc mr john tyson manager owned 50 donald j tyson revocable trust 50 randal w tyson testamentary trust september 27 2014 tlp john tyson director barbara tyson general partners owned 70 million shares 99985 class b stock along members tyson family owned 55 million shares class stock giving control approximately 7014 total voting power outstanding voting stock fiscal 2013 part companys previously approved stock repurchase plan purchased one million shares class stock tlp 2985 million 2985 per share fiscal 2012 aircraft lease agreement tyson family aviation llc mr tyson formerly senior chairman mr john tyson randal w tyson testamentary trust members upon mr tyson’s death january 6 2011 membership interest passed trust mr john tyson trustee fiscal 2012 tyson family aviation llc sold aircraft nonrelated party entered aircraft lease agreement new owner total payments tyson family aviation llc approximately 04 million paid fiscal 2012 note 20 commitments contingencies commitments lease equipment properties certain farms total rentals approximated 161 million 200 million 193 million fiscal 2014 2013 2012 respectively leases initial terms seven years varying renewal periods significant obligations assumed terms leases upkeep facilities payments insurance property taxes minimum lease commitments noncancelable leases september 27 2014 guarantee obligations certain outside third parties consisting primarily leases grower loans substantially collateralized underlying assets terms underlying debt cover periods 15 years maximum potential amount future payments september 27 2014 70 million also maintain operating leases various types equipment contain residual value guarantees market value underlying leased assets end term lease remaining terms lease maturities cover periods next 13 years maximum potential amount residual value guarantees 54 million 48 million could recoverable various recourse provisions additional undeterminable recoverable amount based fair value underlying leased assets likelihood material payments guarantees considered probable september 27 2014 september 28 2013 material liabilities guarantees recorded cash flow assistance programs certain livestock suppliers participate programs pay amount livestock equivalent standard cost grow livestock periods low market sales prices amounts payments excess market sales price recorded receivables accrue interest participating suppliers obligated repay receivables balances market sales prices exceed standard cost upon termination agreement maximum obligation associated programs limited fair value participating livestock supplier’s net tangible assets potential maximum obligation september 27 2014 approximately 330 million total receivables programs 4 million 44 million september 27 2014 september 28 2013 respectively included net allowance uncollectible amounts accounts receivable consolidated balance sheets even though programs limited net tangible assets participating livestock suppliers also manage portion credit risk associated programs obtaining security interests livestock suppliers’ assets analyzing residual credit risks general market conditions allowance programs estimated uncollectible receivables september 27 2014 15 million september 28 2013 additionally enter future purchase commitments various items grains livestock contracts fixed grower fees september 27 2014 commitments totaled contingencies involved various claims legal proceedings routinely assess likelihood adverse judgments outcomes matters well ranges probable losses extent losses reasonably estimable record accruals matters extent conclude loss probable financial impact adverse outcome occur reasonably estimable accruals reflected company’s consolidated financial statements opinion made appropriate adequate accruals matters believe probability material loss beyond amounts accrued remote however ultimate liability matters uncertain accruals adequate adverse outcome could material effect consolidated financial condition results operations listed certain claims made company andor subsidiaries potential exposure considered material company’s consolidated financial statements believe substantial defenses claims made intend vigorously defend matters nine pending lawsuits involving beef pork plants certain present past employees allege failed compensate time takes engage pre postshift activities changing protective sanitary clothing walking changing area work areas break areas violation fair labor standards act various state laws plaintiffs seek back wages liquidated damages pre postjudgment interest attorneys’ fees costs case proceeding jurisdiction • garcia et al v tyson foods inc tyson fresh meats inc kansas may 15 2006 trial involving garden city kansas beef plant jury verdict favor plaintiffs entered march 17 2011 exclusive pre postjudgment interest attorneys’ fees costs jury found violations federal state laws pre postshift work activities awarded damages amount 503011 plaintiffs’ counsel filed application attorneys’ fees expenses contested december 7 2012 court granted plaintiffs counsels application awarded total 3609723 appealed jury’s verdict trial court’s award tenth circuit court appeals appellate court affirmed jury verdict judgment subsequently denied petition rehearing • bouaphakeo fka sharp et al v tyson foods inc nd iowa february 6 2007 jury trial held involving storm lake iowa pork plant resulted jury verdict favor plaintiffs violations federal state laws pre postshift work activities trial court also awarded plaintiffs liquidated damages resulting total damages awarded amount 5784758 plaintiffs counsel also filed application attorneys fees expenses amount 2692145 appealed jurys verdict trial courts award eighth circuit court appeals appellate court affirmed jury verdict judgment august 25 2014 filed petition rehearing september 22 2014 • guyton fka robinson et al v tyson foods inc dba tyson fresh meats inc sd iowa september 12 2007 jury trial held involving columbus junction iowa pork plant resulted jury verdict favor tyson april 25 2012 plaintiffs appealed eighth circuit court appeals oral arguments held february 11 2014 appellate court affirmed jury verdict judgment august 25 2014 • acosta et al v tyson foods inc dba tyson fresh meats inc nebraska february 29 2008 bench trial held involving madison nebraska pork plant january 2013 may 2013 trial court awarded plaintiffs 5733943 unpaid overtime wages subsequently court ordered class plaintiffs expanded plaintiffs submitted updated calculation 6258330 unpaid overtime wages reflected payroll data may 2013 january 30 2014 trial court entered judgment favor plaintiffs amount 18774989 represents tripling plaintiffs’ alleged damages court denied posttrial motions appealed eighth circuit court appeals • gomez et al v tyson foods inc nebraska january 16 2008 jury trial involving dakota city nebraska beef plant held jury found favor plaintiffs april 3 2013 october 2 2013 trial court denied parties’ posttrial motions entered judgment awarding unpaid overtime wages liquidated damages penalties totaling 4960787 appealed jury’s verdict trial court’s award eighth circuit court appeals • edwards et al v tyson foods inc dba tyson fresh meats inc sd iowa march 20 2008 trial court case involves perry waterloo iowa pork plants decertified state law class granted pretrial motions resulted judgment favor respect plaintiffs’ claims plaintiffs filed motion modify judgment • abadeer v tyson foods inc tyson fresh meats inc md tennessee february 6 2009 trial court abadeer case involves goodlettsville tennessee caseready beef pork plant granted plaintiffs’ motion summary judgment part finding certain pre postshift activities compensable nonpayment activities willful good faith parties subsequently agreed settle claims 7750000 parties joint motion approval settlement granted • abdiaziz et al v tyson foods inc tyson fresh meats inc kansas september 30 2011 case involves emporia kansas beef plant bifurcated case involving garden city kansas beef plant stayed pending resolution matter • murray et al v tyson foods inc cd illinois january 2 2008 devoss v tyson foods inc dba tyson fresh meats cd illinois march 2 2011 cases involve joslin illinois beef plant preliminary stages subsidiary hillshire brands company formerly named sara lee corporation party consolidation cases filed individual complainants republic philippines department labor employment national labor relations commission nlrc 1998 july 1999 complaint filed aris philippines inc sara lee corporation sara lee philippines inc fashion accessories philippines inc attorney cesar c cruz collectively “respondents” complaint primarily alleges unfair labor practices due termination manufacturing operations philippines aris philippines inc former subsidiary hillshire brands company 2006 arbitrator ruled respondents awarded complainants php3453664710 approximately us76 million damages fees respondents appealed ruling subsequently set aside nlrc december 2006 however decision dated june 4 2014 supreme court philippines set aside nlrc’s december 2006 ruling premature parties filed numerous appeals motions reconsideration petitions review cases merits complainants’ claims appropriate amount appeal bond posted respondents certain appeals motions remain pending nlrc supreme court philippines june 23 2014 without admitting liability hillshire brands company filed motion requesting supreme court philippines order dismissal prejudice claims predecessorsininterest exchange payments allocated court among complainants amount exceed php342287800 approximately us7 million note 21 quarterly financial data unaudited sum quarterly earnings per share amounts equal total year due effects rounding dilution impact result issuing class shares tangible equity units fourth quarter fiscal 2014 third quarter fiscal 2014 net income included 29 million pretax expense related hillshire brands acquisition fees paid third parties 49 million pretax expense related closure three prepared foods facilities 40 million unrecognized tax benefit gain fourth quarter fiscal 2014 net income included 42 million pretax impairment costs related sale brazil operation mexicos undistributed earnings tax 119 million pretax expense related hillshire brands acquisition integration costs associated prepared foods improvement plan 40 million pretax expense related hillshire brands postclosing results purchase price accounting adjustments ongoing costs related legacy hillshire brands plant fire 27 million pretax expense related hillshire brands acquisition financing incremental interest cost 12 million unrecognized tax benefit gain second quarter fiscal 2013 net income included 19 million currency translation adjustment gain recognized conjunction receipt proceeds constituting final resolution investment canada included 56 million noncash charge reported discontinued operation related impairment weifang note 22 condensed consolidating financial statements tfm parent whollyowned subsidiary fully unconditionally guaranteed 2016 notes additionally tfm parent fully unconditionally guaranteed 2022 notes date tfm parent released guarantee tysons 125 billion revolving credit facility ii 2016 notes time tfm parents guarantee 2019 2022 2024 2034 2044 notes permanently released following financial information presents condensed consolidating financial statements include tyson foods inc tfi parent tfm parent nonguarantor subsidiaries nonguarantors combined basis elimination entries necessary consolidate tfi parent tfm parent nonguarantors tyson foods inc consolidated basis provided alternative providing separate financial statements guarantor report independent registered public accounting firm board directors shareholders tyson foods inc opinion accompanying consolidated balance sheets related consolidated statements income comprehensive income shareholders’ equity cash flows present fairly material respects financial position tyson foods inc subsidiaries september 27 2014 september 28 2013 results operations cash flows three years period ended september 27 2014 conformity accounting principles generally accepted united states america addition opinion financial statement schedule listed index appearing item 15a presents fairly material respects information set forth therein read conjunction related consolidated financial statements also opinion company maintained material respects effective internal control financial reporting september 27 2014 based criteria established internal control integrated framework 1992 issued committee sponsoring organizations treadway commission coso companys management responsible financial statements financial statement schedule maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included managements annual report internal control financial reporting appearing item 9a responsibility express opinions financial statements financial statement schedule companys internal control financial reporting based integrated audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audits obtain reasonable assurance whether financial statements free material misstatement whether effective internal control financial reporting maintained material respects audits financial statements included examining test basis evidence supporting amounts disclosures financial statements assessing accounting principles used significant estimates made management evaluating overall financial statement presentation audit internal control financial reporting included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk audits also included performing procedures considered necessary circumstances believe audits provide reasonable basis opinions company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles company’s internal control financial reporting includes policies procedures pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company ii provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company iii provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate described management’s annual report internal control financial reporting management excluded hillshire brands company assessment internal control financial reporting september 27 2014 acquired company purchase business combination august 2014 also excluded hillshire brands company audit internal control financial reporting hillshire brands company whollyowned subsidiary whose total assets total revenues represent 10 1 respectively related consolidated financial statement amounts year ended september 27 2014 pricewaterhousecoopers llp fayetteville ar november 17 2014 item 9item 8 financial statements supplementary data tyson foods inc consolidated statements income see accompanying notes tyson foods inc consolidated statements comprehensive income see accompanying notes tyson foods inc consolidated balance sheets see accompanying notes tyson foods inc consolidated statements shareholders’ equity see accompanying notes tyson foods inc consolidated statements cash flows see accompanying notes consolidated financial statements tyson foods inc note 1 business summary significant accounting policies description business tyson foods inc collectively “company” “we” “us” “our” founded 1935 world headquarters springdale arkansas one worlds largest food companies leading brands tyson® jimmy dean® hillshire farm® sara lee® ball park® wright® aidells® state fair® recognized market leader chicken beef pork well prepared foods including bacon breakfast sausage turkey lunchmeat hot dogs pizza crusts toppings tortillas desserts consolidation consolidated financial statements include accounts whollyowned subsidiaries well majorityowned subsidiaries exercise control applicable entities controlling financial interest variable interest entities primary beneficiary significant intercompany accounts transactions eliminated consolidation fiscal year utilize 52 53week accounting period ending saturday closest september 30 company’s accounting cycle resulted 52week year fiscal 2016 fiscal 2014 53week year fiscal 2015 cash equivalents cash equivalents consist investments shortterm highly liquid securities original maturities three months less made part cash management activity carrying values assets approximate fair values primarily utilize cash management system series separate accounts consisting lockbox accounts receiving cash concentration accounts funds moved several zerobalance disbursement accounts funding payroll accounts payable livestock procurement grower payments etc result cash management system checks issued presented banks payment may result negative book cash balances negative book cash balances included accounts payable current liabilities october 1 2016 october 3 2015 checks outstanding excess related book cash balances totaled approximately 261 million 257 million respectively accounts receivable record accounts receivable net realizable value includes appropriate allowance estimated uncollectible accounts reflect loss anticipated accounts receivable balances charged provision doubtful accounts calculate allowance based history writeoffs level past due accounts relationships economic status customers october 1 2016 october 3 2015 allowance uncollectible accounts 33 million 27 million respectively generally collateral receivables periodically evaluate credit worthiness customers inventories processed products livestock supplies valued lower cost market cost includes purchased raw materials live purchase costs growout costs primarily feed grower pay catch haul costs labor manufacturing production overhead related purchase production inventories fiscal 2016 61 cost inventories determined firstin firstout fifo method compared 63 fiscal 2015 remaining cost inventories years determined weightedaverage method following table reflects major components inventory october 1 2016 october 3 2015 property plant equipment property plant equipment stated cost generally depreciated straightline method estimated lives buildings leasehold improvements 10 33 years machinery equipment three 12 years land improvements three 20 years major repairs maintenance costs significantly extend useful life related assets capitalized normal repairs maintenance costs charged operations review carrying value longlived assets balance sheet date indication impairment exists recoverability assessed using undiscounted cash flows based historical results current projections earnings interest taxes depreciation amortization measure impairment excess carrying value fair value asset fair value asset measured using discounted cash flows including market participant assumptions future operating results discount rates goodwill intangible assets definite life intangibles initially recorded fair value amortized estimated period benefit brands trademarks generally based straightline method 20 years less customer relationships generally amortized seven 17 years based pattern revenue expected generated use asset amortization expense generally recognized selling general administrative expense review carrying value definite life intangibles balance sheet date indication impairment exists recoverability assessed using undiscounted cash flows based historical results current projections earnings interest taxes depreciation amortization measure impairment excess carrying value fair value definite life intangible asset use various valuation techniques estimate fair value primary techniques discounted cash flows relieffromroyalty multiperiod excess earnings valuation approaches use significant unobservable inputs level 3 inputs defined fair value hierarchy valuation approaches required make estimates assumptions sales operating margins growth rates royalty rates discount rates based budgets business plans economic projections anticipated future cash flows marketplace data goodwill indefinite life intangible assets initially recorded fair value amortized reviewed impairment least annually frequently impairment indicators arise goodwill allocated reporting unit evaluated impairment first performing qualitative assessment determine whether quantitative goodwill test necessary determined based qualitative factors fair value reporting unit may likely less carrying amount significant changes macroeconomic factors related reporting unit occurred could materially impact fair value quantitative goodwill impairment test would required additionally elect forgo qualitative assessment perform quantitative test first step quantitative test identify potential impairment exists comparing fair value reporting unit carrying amount including goodwill fair value reporting unit exceeds carrying amount goodwill reporting unit considered potential impairment second step quantitative impairment test necessary however carrying amount reporting unit exceeds fair value second step performed determine goodwill impaired measure amount impairment loss recognize second step compares implied fair value goodwill carrying amount goodwill implied fair value goodwill exceeds carrying amount goodwill considered impaired however carrying amount goodwill exceeds implied fair value impairment loss recognized amount equal excess implied fair value goodwill determined manner amount goodwill recognized business combination ie fair value reporting unit allocated assets liabilities including unrecognized intangible assets reporting unit acquired business combination fair value reporting unit determined exit price market participant would pay business elected make first day fourth quarter annual impairment assessment date goodwill indefinite life intangible assets estimate fair value reporting units using discounted cash flow analysis uses significant unobservable inputs level 3 inputs defined fair value hierarchy analysis requires us make various judgmental estimates assumptions sales operating margins growth rates discount factors believed reflect market participant views would exist exit transaction generally utilize normalized operating margin assumptions based future expectations operating margins historically realized reporting units industries inherent estimates assumptions used determining fair value reporting units outside control management including interest rates cost capital tax rates credit ratings believe made reasonable estimates assumptions calculate fair value reporting units possible material change could occur actual results consistent estimates assumptions used calculate fair value may required perform second step quantitative test future years could result material impairments goodwill discount rate used annual goodwill impairment test decreased 62 fiscal 2016 68 fiscal 2015 discount rate used indefinite life intangible test decreased 79 fiscal 2016 80 fiscal 2015 fiscal 2016 2015 2014 material reporting units underwent quantitative test passed first step goodwill impairment analysis therefore second step necessary fiscal 2015 recorded 23 million full impairment immaterial reporting unit’s goodwill indefinite life intangible assets qualitative assessment also performed determine whether existence events circumstances indicates likely intangible asset impaired similar goodwill also elect forgo qualitative test indefinite life intangible assets perform quantitative test upon performing quantitative test carrying value intangible asset exceeds fair value impairment loss recognized amount equal excess fair value indefinite life intangible assets calculated principally using relieffromroyalty multiperiod excess earnings valuation approaches use significant unobservable inputs level 3 inputs defined fair value hierarchy believed reflect market participant views would exist exit transaction valuation approaches required make estimates assumptions sales operating margins growth rates royalty rates discount rates based budgets business plans economic projections anticipated future cash flows marketplace data investments joint ventures entities generally use cost method accounting voting interests less 20 percent use equity method accounting voting interests excess 20 percent controlling interest variable interest primary beneficiary investments joint ventures entities reported consolidated balance sheets assets also investments marketable debt securities determined marketable debt securities availableforsale investments reported fair value based quoted market prices balance sheet date unrealized gains losses net tax recorded comprehensive income amortized cost debt securities adjusted amortization premiums accretion discounts maturity amortization recorded interest income cost securities sold based specific identification method realized gains losses sale debt securities declines value judged temporary recorded net basis income interest dividends securities classified availableforsale recorded interest income accrued selfinsurance use combination insurance selfinsurance mechanisms effort mitigate potential liabilities health welfare workers’ compensation auto liability general liability risks liabilities associated risks retained estimated part considering claims experience demographic factors severity factors actuarial assumptions current liabilities current liabilities october 1 2016 october 3 2015 include defined benefit plans recognize funded status defined pension postretirement plans consolidated balance sheets funded status measured difference fair value plan assets benefit obligation measure plan assets liabilities end fiscal year defined benefit pension plan benefit obligation projected benefit obligation defined benefit postretirement plan retiree health care plan benefit obligation accumulated postretirement benefit obligation overfunded status recognized asset underfunded status recognized liability transitional assetliability prior service cost actuarial gainloss yet recognized component net periodic cost recognized accumulated comprehensive income accumulated comprehensive income adjusted amounts subsequently recognized component net periodic benefit costs future periods derivative financial instruments purchase certain commodities grains livestock course normal operations part commodity risk management activities use derivative financial instruments primarily futures options reduce exposure various market risks related purchases well changes foreign currency exchange rates contract terms financial instrument qualifying hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts designated highly effective meeting risk reduction correlation criteria recorded using hedge accounting derivative instrument accounted hedge changes fair value instrument offset either change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion instrument’s change fair value immediately recognized earnings component cost sales instruments hold part risk management activities meet criteria hedge accounting marked fair value unrealized gains losses reported currently earnings changes market value derivatives used risk management activities relating forward sales contracts recorded sales changes surrounding inventories hand anticipated purchases inventories supplies recorded cost sales generally hedge anticipated transactions beyond 18 months litigation reserves variety legal proceedings pending threatened us accruals recorded probable liability incurred amount liability reasonably estimated based current law progress case opinions views legal counsel advisers experience similar matters intended response litigation amounts discounted exclusive claims third parties adjusted periodically assessment efforts progress additional information becomes available expense amounts administering litigating claims incurred accruals legal proceedings included current liabilities consolidated balance sheets revenue recognition recognize revenue title risk loss transferred customers generally delivery based terms sale revenue recognized net amount estimated received deducting estimated amounts discounts trade allowances product returns freight expense freight expense associated products shipped customers recognized cost sales marketing promotion costs promote products marketing advertising trade promotions consumer incentives include limited coupons discounts rebates volumebased incentives marketing promotion expenses charged operations period incurred customer incentive trade promotion activities recorded reduction sales based amounts estimated due customers based primarily historical utilization redemption rates marketing promotional activities recorded selling general administrative expense advertising expenses advertising expense charged operations period incurred recorded selling general administrative expense advertising expense totaled 238 million 181 million 112 million fiscal 2016 2015 2014 respectively research development research development costs expensed incurred research development costs totaled 96 million 75 million 52 million fiscal 2016 2015 2014 respectively use estimates consolidated financial statements prepared conformity accounting principles generally accepted united states require us make estimates assumptions affect amounts reported consolidated financial statements accompanying notes actual results could differ estimates recently issued accounting pronouncements august 2016 financial accounting standards board fasb issued guidance aims eliminate diversity practice certain cash receipts cash payments presented classified statement cash flows guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2017 fiscal 2019 early adoption permitted retrospective transition method applied currently evaluating impact guidance consolidated financial statements march 2016 fasb issued guidance simplifies several aspects accounting employee sharebased payment transactions including accounting income taxes forfeitures statutory tax withholding requirements well classification related amounts within statement cash flows impact earnings per share guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2016 fiscal 2018 early adoption permitted application guidance requires various transition methods depending specific amendment currently evaluating impact guidance consolidated financial statements february 2016 fasb issued guidance created new accounting reporting guidelines leasing arrangements guidance requires lessees recognize rightofuse asset lease liability leases terms 12 months recognition measurement presentation expenses cash flows arising lease depend classification finance operating lease guidance also requires qualitative quantitative disclosures regarding amount timing uncertainty cash flows arising leases guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2018 fiscal 2020 early adoption permitted modified retrospective method applied currently evaluating impact guidance consolidated financial statements january 2016 fasb issued guidance requires equity investments measured fair value subsequent changes fair value recognized net income guidance also impacts financial liabilities fair value option presentation disclosure requirements classification measurement financial instruments guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2017 fiscal 2019 applied means cumulativeeffect adjustment balance sheet beginning fiscal year adoption unless equity securities readily determinable fair values case amendments applied prospectively currently evaluating impact guidance consolidated financial statements july 2015 fasb issued guidance requires management evaluate inventory lower cost net realizable value guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2016 fiscal 2018 early adoption permitted prospective transition method applied currently evaluating impact guidance consolidated financial statements april 2015 fasb issued guidance recognition fees paid customer cloud computing arrangements guidance clarifies cloud computing arrangement includes software license customer account software license consistent acquisition software licenses arrangement include software license customer account arrangement service contract guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2015 fiscal 2017 applied prospectively retrospectively apply prospectively adoption guidance expected material impact consolidated financial statements february 2015 fasb issued guidance changing analysis procedures reporting entity must perform determine whether consolidate certain types legal entities legal entities subject reevaluation revised consolidation model new guidance affects following areas 1 limited partnerships similar legal entities 2 evaluating fees paid decision maker service provider variable interest 3 effect fee arrangements primary beneficiary determination 4 effect related parties primary beneficiary determination 5 certain investment funds guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2015 fiscal 2017 early adoption permitted retrospective modified retrospective transition method applied new guidance expected material impact consolidated financial statements may 2014 fasb issued guidance changing criteria recognizing revenue guidance provides single fivestep model applied revenue contracts customers standard also requires additional financial statement disclosures enable users understand nature amount timing uncertainty revenue cash flows relating customer contracts companies option use either retrospective approach cumulative effect adjustment approach implement standard guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2017 fiscal 2019 early adoption permitted fiscal years beginning december 15 2016 fiscal 2018 currently evaluating impact guidance consolidated financial statements note 2 changes accounting principles november 2015 fasb issued guidance simplify presentation deferred income taxes guidance requires deferred tax liabilities assets classified noncurrent balance sheet guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2016 fiscal 2018 may applied either prospectively deferred tax liabilities assets retrospectively periods presented early adoption permitted early adopted guidance prospectively year ended october 1 2016 result prior period balances retrospectively adjusted adoption material impact consolidated financial statements may 2015 fasb issued guidance removes requirement categorize investments within fair value hierarchy fair values measured using net asset value nav per share practical expedient guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2015 fiscal 2017 early adoption permitted retrospective transition method applied early adopted guidance retrospectively year ended october 1 2016 result investments measured using nav per share practical expedient categorized fair value hierarchy october 1 2016 october 3 2015 adoption material impact consolidated financial statements april 2015 fasb issued guidance requires debt issuance costs presented balance sheet direct deduction associated debt liability however debt issuance costs related revolving credit facilities remain assets guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2015 fiscal 2017 early adoption permitted early adopted guidance retrospectively year ended october 1 2016 result 29 million 35 million deferred issuance costs reclassified assets longterm debt consolidated balance sheets october 1 2016 october 3 2015 respectively april 2015 fasb issued guidance allows entities fiscal year end coincide calendar month end make accounting policy election measure defined benefit plan assets obligations end month closest fiscal year end guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2015 fiscal 2017 early adoption permitted prospective transition method applied early adopted guidance prospectively year ended october 1 2016 elected measure fair value defined benefit postretirement benefit plans close business friday prior yearend adoption material impact consolidated financial statements note 3 acquisitions dispositions acquisitions august 28 2014 acquired outstanding stock hillshire brands company hillshire brands part strategic expansion initiative purchase price equal 6300 per share hillshire brands outstanding common stock 8081 million addition paid 163 million cash breakage costs incurred hillshire brands related previously announced acquisition funded acquisition existing cash hand net proceeds issuance new senior notes class common stock class stock tangible equity units well borrowings new term loan facility refer note 6 debt note 7 equity hillshire brands results operations subsequent acquisition closing included prepared foods segment fiscal 2015 recorded measurement period adjustments reduced goodwill 14 million obtaining additional information regarding among things asset valuations liabilities assumed amount considered material therefore prior periods revised purchase price allocation finalized fourth quarter fiscal 2015 completed allocation goodwill segments fourth quarter fiscal 2015 using withandwithout approach synergy impact fair value reporting units allocation goodwill chicken beef pork prepared foods segments 658 million 113 million 106 million 3913 million respectively fair value goodwill deductible united states income tax purposes following unaudited pro forma information presents combined results operations acquisition hillshire brands occurred beginning fiscal 2013 hillshire brands preacquisition results added historical results pro forma results contained table include adjustments amortization acquired intangibles depreciation expense interest expense related financing related income taxes potential cost savings operational efficiencies could result acquisition included pro forma results pro forma results prepared comparative purposes necessarily indicative results operations would acquisitions occurred assumed dates necessarily indication future operating results fiscal 2014 acquired valueadded food business part strategic expansion initiative included prepared foods segment aggregate purchase price acquisition 56 million included 12 million property plant equipment 27 million allocated intangible assets 18 million allocated goodwill dispositions fiscal 2014 announced plan sell brazil mexico operations included segment reporting jbs sa jbs 575 million cash less debt adjustments result conducted impairment test recorded 39 million impairment charge fourth quarter fiscal 2014 related brazil operation completed sale brazil operation first quarter fiscal 2015 received net proceeds 148 million including working capital net debt adjustments cash transferred sale result significant gain loss carrying value brazil operation approximated sales proceeds time sale completed sale mexico operation fourth quarter fiscal 2015 received net proceeds approximately 374 million including working capital net debt adjustments cash transferred result sale recorded pretax gain 161 million reflected cost sales consolidated statements income utilized net proceeds retire 275 senior notes due september 2015 fourth quarter fiscal 2015 better align overall production capacity thencurrent cattle supplies ceased beef operations denison iowa plant result recorded 12 million closure impairment charges fourth quarter fiscal 2015 charges impacted beef segment’s operating income reflected cost sales consolidated statements income fourth quarter fiscal 2015 recorded 59 million impairment related charges associated prepared foods project designed optimize combined tyson hillshire brands network capacity enhance manufacturing efficiencies future charges reflected prepared foods segment’s operating income fourth quarter fiscal 2015 49 million included consolidated statements income cost sales 10 million included consolidated statements income selling general administrative result project sold chicago illinois hospitality plant june 2016 closed jefferson wisconsin plant july 2016 sale chicago illinois plant closure jefferson wisconsin plant significant impact companys operating results third quarter fiscal 2015 part ongoing efforts increase efficiencies chicken business closed buena vista georgia plant closure costs significant impact companys operating results fiscal 2014 recorded impairment charges 52 million related closure three prepared foods plants company’s cherokee iowa plant closed september 2014 buffalo new york santa teresa new mexico plants closed january 2015 additionally april 2014 hillshire brands announced would discontinue production florence alabama plant closed december 2014 closure costs significant impact companys financial results fiscal 2014 sold 50 percent ownership interest dynamic fuels llc dynamic fuels 30 million cash consideration closing 35 million future cash payments contingent dynamic fuels production volumes period 115 years additionally part terms sale released guarantee 100 million gulf opportunity zone taxexempt bonds issued october 2008 fund portion plant construction costs dynamic fuels previously qualified variable interest entity consolidated primary beneficiary result sale deconsolidated dynamic fuels recorded gain approximately 3 million reflected cost sales consolidated statements income recognize future contingent payments income required volumes produced note 4 property plant equipment following table reflects major categories property plant equipment accumulated depreciation october 1 2016 october 3 2015 approximately 871 million required complete buildings equipment construction october 1 2016 note 5 goodwill intangible assets following table reflects goodwill activity fiscal 2016 2015 included goodwill foreign chicken operation august 28 2014 acquired consolidated hillshire brands unallocated portion goodwill september 27 2014 attributable acquisition hillshire brands fiscal 2015 recorded measurement period adjustments reduced goodwill 14 million completed allocation goodwill segments see note 3 acquisitions dispositions following table reflects intangible assets type october 1 2016 october 3 2015 amortization expense 80 million 92 million 26 million recognized fiscal 2016 2015 2014 respectively estimate amortization expense intangible assets next five fiscal years subsequent october 1 2016 2017 78 million 2018 76 million 2019 72 million 2020 69 million 2021 66 million note 6 debt following table reflects major components debt october 1 2016 october 3 2015 annual maturities debt five fiscal years subsequent october 1 2016 2017 79 million 2018 128 million 2019 2359 million 2020 285 million 2021 10 million revolving credit facility 125 billion revolving credit facility supports shortterm funding needs letters credit facility mature commitments thereunder terminate september 2019 reducing amount borrowed outstanding letters credit issued facility amount available borrowing october 1 2016 943 million october 1 2016 outstanding letters credit issued facility totaling 7 million none drawn upon additional 91 million bilateral letters credit issued separately revolving credit facility none drawn upon letters credit issued primarily support leasing obligations workers’ compensation insurance programs future subsidiaries shall guarantee material indebtedness subsidiary shall required guarantee indebtedness obligations liabilities facility 2013 notes september 2008 issued 458 million principal amount 325 convertible senior unsecured notes due october 15 2013 connection issuance 2013 notes entered separate call option warrant transactions respect class stock minimize potential economic dilution upon conversion 2013 notes call options contractually expired upon maturity 2013 notes 2013 notes matured october 15 2013 time paid 458 million principal value cash hand settled conversion premium issuing 117 million shares class stock available treasury shares simultaneously settlement conversion premium received 117 million shares class stock call options warrants settled various dates fiscal 2014 resulting issuance 117 million shares class stock 2016 notes march 31 2016 repaid entire outstanding 638 million principal balance 2016 notes tyson fresh meats inc tfm parent wholly owned subsidiary fully unconditionally guaranteed 2016 notes 2019 notes 2022 notes 2024 notes 2034 notes 2044 notes amortizing notes related tangible equity units 125 billion revolving credit facility term loans result retirement 2016 notes second quarter fiscal 2016 tfm parents guarantees released tfm parent longer required disclose guarantor financial statements term loans may 5 2016 amended existing 500 million tranche b term loan agreement extended maturity loan april 2018 april 2019 debt covenants revolving credit term loan facilities contain affirmative negative covenants among things may limit restrict ability create liens encumbrances incur debt merge dissolve liquidate consolidate make acquisitions investments dispose transfer assets change nature business engage certain transactions affiliates enter hedging transactions case subject certain qualifications exceptions addition required maintain minimum interest expense coverage maximum debttocapitalization ratios senior notes also contain affirmative negative covenants among things may limit restrict ability create liens engage certain saleleaseback transactions engage certain consolidations mergers sales assets compliance debt covenants october 1 2016 note 7 equity capital stock two classes capital stock class stock 010 par value class b common stock 010 par value class b stock holders class b stock may convert stock class stock shareforshare basis holders class b stock entitled 10 votes per share holders class stock entitled one vote per share matters submitted shareholders approval october 1 2016 tyson limited partnership tlp owned 99985 outstanding shares class b stock tlp members tyson family owned aggregate 206 outstanding shares class stock giving collectively control approximately 7118 total voting power outstanding voting stock class b stock considered participating security requiring use twoclass method computation basic earnings per share twoclass computation method period reflects cash dividends paid class stock plus amount allocated undistributed earnings losses computed using participation percentage reflects dividend rights class stock basic earnings per share computed using twoclass method periods presented shares class b stock considered participating convertible securities since shares class b stock convertible shareforshare basis shares class stock diluted earnings per share computed assuming conversion class b shares class shares beginning period dividends cash dividends cannot paid holders class b stock unless simultaneously paid holders class stock per share amount cash dividend paid holders class b stock cannot exceed 90 cash dividend simultaneously paid holders class stock pay quarterly cash dividends class b shareholders paid class dividends per share 060 040 030 fiscal 2016 2015 2014 respectively paid class b dividends per share 054 036 027 fiscal 2016 2015 2014 respectively november 17 2016 board directors increased quarterly dividend previously declared august 4 2016 0225 per share class stock 02025 per share class b stock increased quarterly dividend payable december 15 2016 shareholders record close business december 1 2016 share repurchases february 4 2016 board directors approved increase 50 million shares authorized repurchase share repurchase program october 1 2016 403 million shares remained available repurchase share repurchase program fixed scheduled termination date timing extent repurchase shares depend upon among things working capital needs markets industry conditions liquidity targets limitations debt obligations regulatory requirements addition share repurchase program purchase shares open market fund certain obligations equity compensation plans summary cumulative share repurchases class stock fiscal 2016 2015 2014 follows subsequent october 1 2016 november 18 2016 repurchased approximately 36 million shares common stock share repurchase program shares repurchased 255 million share issuance fiscal 2014 issued 238 million shares class stock provide funding hillshire brands acquisition total proceeds net underwriting discounts offering related fees expenses 873 million tangible equity units fiscal 2014 completed public issuance 30 million 475 tangible equity units teus total proceeds net underwriting discounts expenses 1454 million teu stated amount 50 comprised prepaid stock purchase contract senior amortizing note due july 15 2017 allocated proceeds issuance teus equity debt based relative fair values respective components teu fair value prepaid stock purchase contracts 1295 million recorded capital excess par value net issuance costs fair value senior amortizing notes 205 million recorded debt issuance costs associated teu debt recorded deferred debt issuance cost amortized term instrument july 15 2017 aggregate values assigned upon issuance component teus based relative fair value respective components teu follows senior amortizing note initial principal amount 683 bears interest 15 per annum january 15 april 15 july 15 october 15 pay equal quarterly cash installments 059 per amortizing note cash payment aggregate principal interest equivalent 475 per year respect 50 stated amount per teu installment constitutes payment interest partial repayment principal fiscal 2016 holders settled 177 million purchase contracts exchange company issued 188 million shares class stock upon early settlement purchase contracts corresponding amortizing notes remain outstanding beneficially owned holders settled purchase contracts early october 1 2016 123 million teus remained outstanding remaining teus continue held pursuant original terms conditions including automatic settlement july 15 2017 described result purchase contracts tendered fiscal 2016 remaining obligation deliver minimum 131 million shares maximum 164 million shares class stock subject adjustment based upon applicable market value defined class stock described • applicable market value equal greater conversion price 4690 per share deliver 10660 shares class stock per purchase contract minimum 131 million class shares • applicable market value greater reference price 3752 less conversion price 4690 per share deliver number shares per purchase contract equal 50 divided applicable market value • applicable market value less equal reference price 3752 per share deliver 13326 shares class stock per purchase contract maximum 164 million class shares applicable market value means average closing prices class stock 20 consecutive trading days beginning including 23rd scheduled trading day immediately preceding july 15 2017 september 15 2016 paid quarterly dividend shareholders record september 1 2016 equal 015 per share class stock amount distribution exceeded 0075 per share dividend threshold amount consequently settlement rates reference price conversion price adjusted reflected teus dilutive effect earnings per share 131 million minimum shares issued included calculation class basic weighted average shares 33 million share difference minimum shares 164 million maximum shares potentially dilutive securities accordingly included diluted earnings per share pro rata basis extent applicable market value higher reference price less conversion price note 8 income taxes detail provision income taxes continuing operations consists following reasons difference statutory federal income tax rate effective income tax rate continuing operations follows fiscal 2016 domestic production deduction changes unrecognized tax benefits decreased tax expense 68 million 43 million respectively state tax expense net federal tax benefit 70 million fiscal 2015 domestic production deduction changes unrecognized tax benefits decreased tax expense 72 million 34 million respectively state tax expense net federal tax benefit 59 million additionally foreign rate differences mostly driven china impairment unfavorably impacted tax expense 73 million sale mexico brazil operations related repatriation proceeds significant impact effective income tax rate fiscal 2014 domestic production deduction decrease unrecognized tax benefits decreased tax expense 50 million 58 million respectively approximately 2543 million 1908 million 1270 million income continuing operations income taxes fiscal 2016 2015 2014 respectively operations based united states recognize deferred income taxes future tax consequences attributable differences financial statement carrying amounts existing assets liabilities respective tax bases deferred tax assets liabilities measured using tax rates expected apply taxable income years temporary differences expected recovered settled tax effects major items recorded deferred tax assets liabilities october 1 2016 october 3 2015 follows october 1 2016 gross state tax net operating loss carryforwards approximated 845 million expire fiscal years 2017 2036 gross foreign net operating loss carryforwards approximated 35 million expire fiscal years 2017 2022 also tax credit carryforwards approximately 42 million expire fiscal years 2017 2031 accumulated undistributed earnings foreign subsidiaries aggregating approximately 219 million 139 million october 1 2016 october 3 2015 respectively accumulated undistributed earnings october 1 2016 expected indefinitely reinvested outside united states earnings distributed form dividends otherwise could subject federal income taxes subject adjustment foreign tax credits state income taxes withholding taxes payable various foreign countries due uncertainty manner undistributed earnings would brought back united states tax laws effect time well availability company claim foreign tax credits currently practicable estimate tax liability might payable repatriation foreign earnings following table summarizes activity related gross unrecognized tax benefits october 1 2016 october 3 2015 september 27 2014 amount unrecognized tax benefits recognized would impact effective tax rate 205 million 244 million october 1 2016 october 3 2015 respectively classify interest penalties unrecognized tax benefits income tax expense october 1 2016 october 3 2015 tax benefits 52 million 46 million respectively accrued interest penalties unrecognized tax benefits october 1 2016 subject income tax examinations united states federal income taxes fiscal years 2013 2015 also subject income tax examinations major state foreign jurisdictions fiscal years 2005 2015 2002 2015 respectively estimate next twelve months reasonably possible unrecognized tax benefits could decrease much 10 million primarily due expiration statutes various jurisdictions note 9 income charges fiscal 2016 recorded 12 million equity earnings joint ventures 4 million net foreign currency exchange losses recorded consolidated statements income net fiscal 2015 following sale mexico brazil chicken production operations reviewed strategy outlook remaining international businesses operations include chicken production operations china despite belief potential business chinese operations achieved profitability given losses generated business changes strategy management business depressed economic outlook china time assessed chinese operations potential impairment fourth quarter fiscal 2015 result evaluation fourth quarter fiscal 2015 recorded 169 million impairment charge impairment comprised 126 million property plant equipment 23 million goodwill 20 million assets china operation included segment reporting impairment included cost sales consolidated statements income fiscal 2015 recorded 12 million equity earnings joint ventures 21 million gains sale equity securities recorded consolidated statements income net fiscal 2014 recorded 11 million equity earnings joint ventures 3 million net foreign currency exchange gains 6 million temporary impairment related availableforsale security 60 million costs associated bridge financing facilities hillshire brands acquisition recorded consolidated statements income net note 10 earnings per share earnings weighted average common shares used computation basic diluted earnings per share follows stockbased compensation shares antidilutive fiscal 2016 approximately 5 million 4 million stockbased compensation shares antidilutive fiscal 2015 fiscal 2014 respectively shares included dilutive earnings per share calculation two classes capital stock class stock class b stock cash dividends cannot paid holders class b stock unless simultaneously paid holders class stock per share amount cash dividends paid holders class b stock cannot exceed 90 cash dividends paid holders class stock allocate undistributed earnings based upon 1 09 ratio per share class stock class b stock respectively allocate undistributed earnings based ratio due historical dividend patterns voting control class b shareholders contractual limitations dividends class b stock note 11 derivative financial instruments business operations give rise certain market risk exposures mostly due changes commodity prices foreign currency exchange rates interest rates manage portion risks use derivative financial instruments reduce exposure commodity price risk foreign currency risk interest rate risk management programs periodically reviewed board directors audit committee programs monitored senior management may revised market conditions dictate current risk management programs utilize industrystandard models take account implicit cost hedging risks associated market risks created derivative instruments fair values strictly monitored using valueatrisk stress tests credit risks associated derivative contracts significant minimize counterparty concentrations utilize margin accounts letters credit deal creditworthy counterparties additionally derivative contracts mostly shortterm duration generally make use creditriskrelated contingent features significant concentrations credit risk existed october 1 2016 following aggregated outstanding notional amounts related derivative financial instruments recognize derivative instruments either assets liabilities fair value consolidated balance sheets exception normal purchases normal sales expected result physical delivery derivative instruments designated qualify hedging instruments designate hedging instrument based upon exposure hedged ie cash flow hedge fair value hedge designate certain forward contracts follows • cash flow hedges include certain commodity forward option contracts forecasted purchases ie grains certain foreign exchange forward contracts • fair value hedges include certain commodity forward contracts firm commitments ie livestock cash flow hedges derivative instruments designated hedges changes amount future cash flows related procurement certain commodities utilized production processes derivative instruments designate qualify cash flow hedge effective portion gain loss derivative reported component comprehensive income oci reclassified earnings period periods hedged transaction affects earnings gains losses representing hedge ineffectiveness recognized earnings current period ineffectiveness related cash flow hedges significant fiscal 2016 2015 2014 october 1 2016 net amounts expected reclassified earnings within next 12 months pretax losses 3 million fiscal 2016 2015 2014 reclassify significant pretax gainslosses earnings result discontinuance cash flow hedges following table sets forth pretax impact cash flow hedge derivative instruments consolidated statements income fair value hedges designate certain derivative contracts fair value hedges firm commitments purchase livestock slaughter objective hedges minimize risk changes fair value created fluctuations commodity prices associated fixed price livestock firm commitments derivative instruments designate qualify fair value hedge gain loss derivative well offsetting gain loss hedged item attributable hedged risk recognized earnings period include gain loss hedged items ie livestock purchase firm commitments line item cost sales offsetting gain loss related livestock forward position ineffectiveness related fair value hedges significant fiscal 2016 2015 2014 undesignated positions addition designated positions also hold derivative contracts apply hedge accounting include certain derivative instruments related commodities price risk including grains livestock energy foreign currency risk mark positions fair value earnings reporting date following table sets forth pretax impact undesignated derivative instruments consolidated statements income fair value outstanding derivative instruments consolidated balance sheets included note 12 fair value measurements note 12 fair value measurements fair value defined price would received sell asset paid transfer liability exit price principal advantageous market asset liability orderly transaction market participants measurement date fair value hierarchy contains three levels follows level 1 unadjusted quoted prices available active markets identical assets liabilities measurement date level 2 observable inputs available measurement date quoted prices included level 1 either directly indirectly including • quoted prices similar assets liabilities active markets • quoted prices identical similar assets nonactive markets • inputs quoted prices observable asset liability • inputs derived principally corroborated observable market data level 3 unobservable inputs cannot corroborated observable market data reflect use significant management judgment values generally determined using pricing models assumptions utilize management’s estimates market participant assumptions assets liabilities measured fair value recurring basis fair value hierarchy requires use observable market data available instances inputs used measure fair value fall different levels fair value hierarchy fair value measurement determined based lowest level input significant fair value measurement entirety assessment significance particular item fair value measurement entirety requires judgment including consideration inputs specific asset liability following tables set forth level within fair value hierarchy financial assets liabilities accounted fair value recurring basis according valuation techniques used determine fair values derivative assets liabilities presented consolidated balance sheets net basis net derivative assets liabilities including cash collateral legally enforceable master netting arrangement exists counterparty derivative contract us october 1 2016 october 3 2015 posted various counterparties 8 million 5 million respectively cash collateral related derivative financial instruments held cash collateral following table provides reconciliation beginning ending balance debt securities measured fair value recurring basis table used significant unobservable inputs level 3 following methods assumptions used estimate fair value class financial instrument derivative assets liabilities derivative financial instruments primarily include exchangetraded overthecounter contracts described note 11 derivative financial instruments record derivative financial instruments fair value using quoted market prices adjusted credit nonperformance risk internal models use basis readily observable market inputs including current forward market prices classify instruments level 2 quoted market prices corroborated utilizing observable current forward commodity market prices active exchanges observable market transactions available sale securities investments marketable debt securities classified availableforsale reported fair value based pricing models quoted market prices adjusted credit nonperformance risk shortterm investments maturities less 12 months included current assets consolidated balance sheets primarily include certificates deposit commercial paper marketable debt securities included assets consolidated balance sheets maturities ranging 31 years classify investments united states government united states agency certificates deposit commercial paper debt securities level 2 fair value generally estimated using discounted cash flow models primarily industrystandard models consider various assumptions including time value yield curve well readily available relevant economic measures classify certain corporate assetbacked debt securities level 3 limited activity less observable inputs valuation models including current interest rates estimated prepayment default recovery rates underlying portfolio structured investment vehicle significant changes assumptions unobservable inputs valuation level 3 instruments would significant impact consolidated financial statements unrealized holding gains losses net tax excluded earnings reported oci security settled sold quarterly basis evaluate whether losses related availableforsale securities temporary nature losses equity securities recognized earnings decline value judged temporary losses related debt securities determined temporary loss would recognized earnings intend likely required sell security prior recovery debt securities intent ability hold maturity losses determined temporary would remain oci expected credit losses recognized earnings consider many factors determining whether loss temporary including length time extent fair value cost financial condition nearterm prospects issuer ability intent hold investment period time sufficient allow anticipated recovery recognized temporary impairment earnings fiscal 2016 fiscal 2015 temporary losses deferred oci october 1 2016 october 3 2015 deferred compensation assets maintain nonqualified deferred compensation plans certain executives highly compensated employees investments generally maintained within trust include money market funds mutual funds life insurance policies cash surrender value life insurance policies invested primarily mutual funds investments recorded fair value based quoted market prices included assets consolidated balance sheets classify investments observable market prices active markets level 1 generally publiclytraded mutual funds remaining deferred compensation assets classified level 2 fair value corroborated based observable market data realized unrealized gains losses deferred compensation included earnings assets liabilities measured fair value nonrecurring basis addition assets liabilities recorded fair value recurring basis record assets liabilities fair value nonrecurring basis generally assets recorded fair value nonrecurring basis result impairment charges significant measurements assets liabilities fair value nonrecurring basis subsequent initial recognition fiscal 2016 fiscal 2015 better align overall production capacity thencurrent cattle supplies ceased beef operations denison iowa plant result recorded 12 million closure impairment charges fourth quarter fiscal 2015 charges impacted beef segment’s operating income reflected cost sales consolidated statements income valuation assets primarily based discounted cash flow models included unobservable level 3 inputs fourth quarter fiscal 2015 recorded 59 million impairment related charges associated prepared foods project designed optimize combined tyson hillshire brands network capacity enhance manufacturing efficiencies future charges reflected prepared foods segment’s operating income 49 million included consolidated statements income cost sales 10 million included consolidated statements income selling general administrative valuation assets primarily based discounted cash flow models included unobservable level 3 inputs following sale mexico brazil chicken operations fiscal 2015 reviewed longterm business strategy outlook remaining international businesses operations include chicken production operations china india assessed chinese operation potential impairment fourth quarter fiscal 2015 result evaluation recorded 169 million charge impair longlived assets fair value fully impair goodwill china operation included segment reporting impairment included cost sales consolidated statements income impairment comprised 126 million property plant equipment 23 million goodwill 20 million assets utilized discounted cash flow analysis included unobservable level 3 inputs financial instruments fair value debt principally estimated using level 2 inputs based quoted prices similar instruments fair value carrying value debt follows concentrations credit risk financial instruments exposed concentrations credit risk consist primarily cash equivalents accounts receivable cash equivalents high quality securities placed major banks financial institutions concentrations credit risk respect receivables limited due large number customers dispersion across geographic areas perform periodic credit evaluations customers’ financial condition generally require collateral october 1 2016 october 3 2015 189 200 respectively net accounts receivable balance due walmart stores inc single customer group represented greater 10 net accounts receivable note 13 stockbased compensation issue shares stockbased compensation plans issuing class stock treasury total number shares available future grant tyson foods inc 2000 stock incentive plan incentive plan 20726621 october 1 2016 stock options shareholders approved incentive plan january 2001 incentive plan administered compensation leadership development committee board directors compensation committee incentive plan includes provisions granting incentive stock options shares class stock price less fair value date grant nonqualified stock options may granted price equal fair value class stock date option granted stock options incentive plan generally become exercisable ratably three years date grant must exercised within 10 years date grant policy recognize compensation expense straightline basis requisite service period entire award generally grant stock options year weighted average grantdate fair value options granted fiscal 2016 2015 2014 1147 1151 1083 respectively fair value option grant established date grant using binomial lattice method use historical volatility period time comparable expected life option determine volatility assumptions expected life calculated based contractual term grant takes account historical exercise termination behavior participants riskfree interest rates based fiveyear treasury bond rate assumptions grant date used fair value calculation year’s grants outlined following table recognized stockbased compensation expense related stock options net income taxes 23 million 27 million 20 million fiscal 2016 2015 2014 respectively related tax benefit fiscal 2016 2015 2014 15 million 17 million 13 million respectively 38 million 38 million 48 million options vest fiscal 2016 2015 2014 respectively grant date fair value 38 million 32 million 30 million respectively fiscal 2016 2015 2014 received cash 128 million 84 million 67 million respectively exercise stock options shares issued treasury stock option exercises related tax benefit realized stock options exercised fiscal 2016 2015 2014 80 million 30 million 33 million respectively total intrinsic value options exercised fiscal 2016 2015 2014 204 million 79 million 87 million respectively cash flows resulting tax deductions excess compensation cost options excess tax deductions classified financing cash flows realized 58 million 19 million 24 million related excess tax deductions fiscal 2016 2015 2014 respectively october 1 2016 29 million total unrecognized compensation cost related stock option plans recognized weighted average period 11 years restricted stock issue restricted stock market value date grant restrictions expiring periods fiscal 2019 unearned compensation recognized vesting period particular grant using straightline method october 1 2016 33 million total unrecognized compensation cost related restricted stock awards recognized weighted average period 18 years recognized stockbased compensation expense related restricted stock net income taxes 14 million 9 million 6 million fiscal 2016 2015 2014 respectively related tax benefit fiscal 2016 2015 2014 9 million 6 million 4 million respectively 02 million 05 million 06 million restricted stock awards vest fiscal 2016 2015 2014 respectively grant date fair value 4 million 10 million 11 million respectively performancebased shares award performancebased shares class stock certain employees awards typically granted year performancebased shares vest based upon passage time achievement performance market performance criteria ranging 0 200 determined compensation committee prior date award vesting periods awards three years review progress toward attainment performance criteria quarter vesting period probable minimum performance criteria award achieved begin recognizing expense equal proportionate share total fair value class stock price grant date total expense recognized duration performance awards equal class stock price date grant multiplied number shares ultimately awarded based level attainment performance criteria grants market performance criteria fair value determined grant date calculated using inputs expected volatility expected dividend yield riskfree rate stock options noted duration three years total expense recognized duration award equal fair value regardless market performance criteria met following table summarizes performancebased shares maximum award amounts based upon respective performance share agreements actual shares vest depend level attainment performancebased criteria recognized stockbased compensation expense related performance shares net income taxes 11 million 5 million 4 million fiscal 2016 2015 2014 respectively related tax benefit fiscal 2016 2015 2014 7 million 3 million 2 million respectively october 1 2016 30 million total unrecognized compensation based upon progress toward attainment criteria related performancebased share awards recognized weighted average period 2 years note 14 pensions postretirement benefits october 1 2016 nine defined benefit pension plans consisting six funded qualified plans three unfunded nonqualified plans regards qualified plans five frozen noncontributory benefits provided plans based formula using years service either specified benefit rate compensation level nonqualified defined benefit plans certain contracted officers use formula based years service final average salary also postretirement benefit plans substantially employees may receive benefits satisfy applicable eligibility criteria postretirement healthcare plans contributory participants’ contributions adjusted deemed necessary defined contribution retirement programs various groups employees recognized expenses 67 million 62 million 53 million fiscal 2016 2015 2014 respectively use fiscal year end measurement date defined benefit plans postretirement plans recognize effect actuarial gains losses earnings immediately postretirement plans rather amortizing effect future periods postretirement benefits include postretirement medical costs life insurance benefit obligations funded status following table provides reconciliation changes plans’ benefit obligations assets funded status october 1 2016 october 3 2015 amounts recognized consolidated balance sheets consist amounts recognized accumulated comprehensive income consist change prior service credit primarily attributed plan amendments postretirement benefits noted within change benefit obligation remainder change immaterial october 1 2016 october 3 2015 eight pension plans accumulated benefit obligation excess plan assets plans accumulated benefit obligations excess plan assets follows accumulated benefit obligation qualified pension plans 1554 million 1785 million october 1 2016 october 3 2015 respectively net periodic benefit cost credit components net periodic benefit cost credit pension postretirement benefit plans recognized consolidated statements income follows october 1 2016 amounts expected reclassified earnings within next 12 months related net periodic benefit cost qualified nonqualified pensions 1 million 6 million respectively october 1 2016 amount expected reclassified earnings within next 12 months related net periodic benefit credit postretirement benefits 25 million assumptions weighted average assumptions follows determine expected return plan assets assumption first examined historical rates return various asset classes within plans determined longterm projected rateofreturn based expected returns discount rate assumptions used account pension postretirement benefit plans reflect rates benefit obligations could effectively settled determined using cash flow matching technique whereby rates yield curve developed highquality debt securities applied benefit obligations determine appropriate discount rate october 1 2016 october 3 2015 pension postretirement benefit plans used rp2014 mortality tables five postretirement benefit plans healthcare life insurance related two plans benefit obligations totaled 22 million october 1 2016 impacted healthcare cost trend rates one consists fixed annual payments one life insurance related two healthcare plans benefit obligations totaled 2 million october 1 2016 impacted healthcare cost trend rates due plan amendments remaining plan benefit obligation totaled 12 million october 1 2016 utilized assumed healthcare cost trend rates 90 76 retirees qualify medicare respectively healthcare cost trend rate grading ultimate rate 45 20242025 onepercentagepoint change assumed healthcare cost trend rates would following effects plan assets following table sets forth actual target asset allocation pension plan assets additionally one foreign subsidiary pension plans 28 million 14 million plan assets held insurance trust october 1 2016 october 3 2015 respectively plan trustees established set investment objectives related assets domestic pension plans regularly monitor performance funds portfolio managers objectives pension assets provide growth capital income ii achieve target weighted average annual rate return competitive funds similar investment objectives iii diversify reduce risk target asset allocations based upon funded status plans pension obligations become better funded lower risk increasing allocation fixed income domestic plan assets consist mainly common collective trusts primarily comprised fixed income funds equity securities investments fixed income securities include limited direct bond investments pooled indirect bond investments may include limited international domestic equities real estate commodities private equity derivative instruments may also used concert either fixed income equity investments achieve desired exposure hedge certain risks derivative instruments include limited futures options swaps swaptions domestic plan assets also include mutual funds believe significant concentrations risk within plan assets october 1 2016 following tables show categories pension plan assets level fair values determined fair value hierarchy described note 12 fair value measurements classify insurance contracts level 3 limited activity less observable inputs valuation models including current interest rates estimated prepayment default recovery rates underlying portfolio structured investment vehicle insurance contracts valued using plan’s assumptions market participants would use pricing assets based best information available investment manager pricing significant changes assumptions unobservable inputs valuation level 3 instruments would significant impact consolidated financial statements b funds measured fair value using net asset value nav per share practical expedient categorized fair value hierarchy amounts presented intended permit reconciliation fair value hierarchy fair value total plan assets order determine amounts included liabilities consolidated balance sheets reconciliation change fair value measurement defined benefit plans’ consolidated assets using significant unobservable inputs level 3 follows contributions policy fund least minimum contribution required meet applicable federal employee benefit local tax laws sole discretion may time fund additional amounts expected contributions pension plans fiscal 2017 approximately 40 million fiscal 2016 2015 2014 funded 64 million 14 million 9 million plans respectively pension plans estimated future benefit payments following benefit payments expected paid benefit payments postretirement benefit plans expected offset medicare part subsidies fiscal 2017 thereafter benefit payments include anticipated payments partial settlement deferred vested participants within two qualified pension plans assuming election rate 50 changes benefit obligation accumulated comprehensive income due remeasurement partial settlement result 2 million expense reclassified earnings actual results may differ estimated amounts multiemployer plans additionally participate multiemployer plan provides defined benefits certain employees covered collective bargaining agreements plans usually administered board trustees composed management participating companies labor representatives risks participating multiemployer plans different singleemployer plans assets contributed multiemployer plan one employer may used provide benefits employees participating employers participating employer stops contributing plan unfunded obligation plan may borne remaining participating employers stop participating plan may required pay plan amount based underfunded status plan referred withdrawal liability contributions pension funds excess 5 total plan contributions plan year 2016 net pension cost plan equal annual contribution determined accordance provisions negotiated labor contracts contributions plan 1 million fiscal 2016 2015 assets contributed plans segregated otherwise restricted provide benefits employees future cost plan dependent number factors including funded status plan ability participating companies meet ongoing funding obligations participation multiemployer plan fiscal 2016 outlined einpension plan number column provides employer identification number ein three digit plan number unless otherwise noted recent pension protection act ppa zone status available fiscal 2016 fiscal 2015 plans year beginning january 1 2016 2015 respectively zone status based information received plan certified plans actuaries zone status secondary classification critical declining within red zone fiscal 2016 among factors plans red zone generally less 65 percent funded plans critical declining status projected accumulated funding deficiency fiprp status column indicates plans financial improvement plan fip rehabilitation plan rp either pending implemented last column lists expiration dates collectivebargaining agreements plan subject significant changes affect comparability contributions year addition regular contributions could obligated pay additional contributions known complete partial withdrawal liabilities unfunded vested benefits renewal negotiations progress note 15 comprehensive income loss components accumulated comprehensive loss follows tax changes components comprehensive income loss follows translation loss reclassified cost sales related disposition foreign operation described note 3 acquisitions dispositions note 16 segment reporting operate four reportable segments chicken beef pork prepared foods measure segment profit operating income loss primarily includes foreign chicken production operations china india thirdparty merger integration costs chicken includes domestic operations related raising processing live chickens purchasing raw materials fresh frozen valueadded chicken products well sales allied products marketed domestically food retailers foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments schools healthcare facilities military food processors well international export markets segment also includes logistics operations move products domestic supply chain global operations chicken breeding stock subsidiary beef includes operations related processing live fed cattle fabricating dressed beef carcasses primal subprimal meat cuts caseready products marketed domestically food retailers foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments schools healthcare facilities military food processors well international export markets segment also includes sales allied products hides variety meats well logistics operations move products supply chain pork includes operations related processing live market hogs fabricating pork carcasses primal subprimal cuts caseready products marketed domestically food retailers foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments schools healthcare facilities military food processors well international export markets segment also includes live swine group related allied product processing activities logistics operations move products supply chain prepared foods prepared foods includes operations related manufacturing marketing frozen refrigerated food products logistics operations move products supply chain segment includes brands jimmy dean® hillshire farm® ball park® wright® state fair® vans® sara lee® chef pierre® well artisanal brands aidells® gallo salame® golden island® products primarily include pepperoni bacon breakfast sausage turkey lunchmeat hot dogs pizza crusts toppings flour corn tortilla products desserts appetizers snacks prepared meals ethnic foods soups sauces side dishes meat dishes breadsticks processed meats products marketed domestically food retailers foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments schools healthcare facilities military food processors well international export markets allocate expenses related corporate activities segments except thirdparty merger integration costs 37 million 47 million 59 million fiscal 2016 2015 2014 respectively included assets additions property plant equipment relating corporate activities remain addition september 27 2014 included 48 billion goodwill associated acquisition hillshire brands completed allocation goodwill segments fiscal 2015 see note 5 goodwill intangible assets description regarding allocation goodwill results dynamic fuels also included fiscal 2014 information segments reconciliation income continuing operations income taxes follows chicken segment sales 27 million 18 million 7 million fiscal 2016 2015 2014 respectively transactions operating segments pork segment sales 840 million 847 million 10 billion fiscal 2016 2015 2014 respectively transactions operating segments beef segment sales 327 million 351 million 307 million fiscal 2016 2015 2014 respectively transactions operating segments aforementioned sales intersegment transactions market prices included segment sales table largest customer walmart stores inc accounted 175 168 146 consolidated sales fiscal 2016 2015 2014 respectively sales walmart stores inc included segments extended discontinuance sales customer could replaced material impact operations majority operations domiciled united states approximately 98 97 96 sales external customers fiscal 2016 2015 2014 respectively sourced united states approximately 173 billion 174 billion longlived assets located united states october 1 2016 october 3 2015 excluding goodwill intangible assets longlived assets located united states totaled approximately 56 billion october 1 2016 october 3 2015 approximately 204 million 191 million longlived assets located foreign countries primarily brazil china india october 1 2016 october 3 2015 respectively excluding goodwill intangible assets longlived assets foreign countries totaled approximately 180 million 165 million october 1 2016 october 3 2015 respectively sell certain products foreign markets primarily canada central america china european union japan mexico middle east south korea taiwan export sales united states totaled 35 billion 41 billion 47 billion fiscal 2016 2015 2014 respectively substantially export sales facilitated unaffiliated brokers marketing associations foreign sales staffs sales products produced country united states less 10 consolidated sales fiscal 2016 2015 2014 note 17 supplemental cash flows information following table summarizes cash payments interest income taxes note 18 transactions related parties operating leases two wastewater facilities entity owned donald j tyson revocable trust mr john tyson chairman company trustee berry street waste water treatment plant lp 90 owned tlp sisters mr tyson total payments approximately 1 million fiscal 2016 2015 2014 paid lease facilities fiscal 2014 purchased real estate jht llc 05 million build new data center jht llc mr john tyson manager owned 50 donald j tyson revocable trust 50 randal w tyson testamentary trust october 1 2016 tlp john tyson director barbara tyson general partners owned 70 million shares 99985 outstanding class b stock along members tyson family owned 60 million shares class stock giving control approximately 7118 total voting power outstanding voting stock note 19 commitments contingencies commitments lease equipment properties certain farms total rentals approximated 172 million 165 million 161 million fiscal 2016 2015 2014 respectively leases initial terms seven years varying renewal periods significant obligations assumed terms leases upkeep facilities payments insurance property taxes minimum lease commitments noncancelable leases october 1 2016 guarantee obligations certain outside third parties consisting primarily leases debt grower loans substantially collateralized underlying assets terms underlying debt cover periods 10 years maximum potential amount future payments october 1 2016 35 million also maintain operating leases various types equipment contain residual value guarantees market value underlying leased assets end term lease remaining terms lease maturities cover periods next 11 years maximum potential amount residual value guarantees 91 million 83 million could recoverable various recourse provisions additional undeterminable recoverable amount based fair value underlying leased assets likelihood material payments guarantees considered probable october 1 2016 october 3 2015 material liabilities guarantees recorded cash flow assistance programs certain livestock suppliers participate programs pay amount livestock equivalent standard cost grow livestock periods low market sales prices amounts payments excess market sales price recorded receivables accrue interest participating suppliers obligated repay receivables balances market sales prices exceed standard cost upon termination agreement maximum obligation associated programs limited fair value participating livestock supplier’s net tangible assets potential maximum obligation october 1 2016 approximately 380 million total receivables programs 2 million october 1 2016 receivables program october 3 2015 receivables included net allowance uncollectible amounts accounts receivable consolidated balance sheets even though programs limited net tangible assets participating livestock suppliers also manage portion credit risk associated programs obtaining security interests livestock suppliers’ assets analyzing residual credit risks general market conditions allowance programs estimated uncollectible receivables october 1 2016 october 3 2015 constructing new facilities making major enhancements existing facilities occasionally enter incentive agreements local government agencies order reduce certain state local tax expenditures agreements transfer related assets various local government entities receive industrial revenue bonds immediately lease facilities local government entities option repurchase facilities nominal amount upon tendering industrial revenue bonds local government entities various predetermined dates industrial revenue bonds associated obligations leases facilities offset underlying assets remain property plant equipment october 1 2016 total amounts type arrangements totaled 502 million additionally enter future purchase commitments various items grains livestock contracts fixed grower fees october 1 2016 commitments totaled contingencies involved various claims legal proceedings routinely assess likelihood adverse judgments outcomes matters well ranges probable losses extent losses reasonably estimable record accruals matters extent conclude loss probable financial impact adverse outcome occur reasonably estimable accruals reflected company’s consolidated financial statements opinion made appropriate adequate accruals matters believe probability material loss beyond amounts accrued remote however ultimate liability matters uncertain accruals adequate adverse outcome could material effect consolidated financial condition results operations listed certain claims made company andor subsidiaries potential exposure considered material company’s consolidated financial statements believe substantial defenses claims made intend vigorously defend matters details six lawsuits involving beef pork prepared foods plants certain present past employees allege failed compensate time takes engage pre postshift activities changing protective sanitary clothing walking changing area work areas break areas violation fair labor standards act various state laws plaintiffs seek back wages liquidated damages pre postjudgment interest attorneys’ fees costs case proceeding jurisdiction • bouaphakeo fka sharp et al v tyson foods inc nd iowa february 6 2007 jury trial held involving storm lake iowa pork plant resulted jury verdict favor plaintiffs violations federal state laws pre postshift work activities trial court also awarded plaintiffs liquidated damages resulting total damages awarded amount 5784758 plaintiffs counsel also filed application attorneys fees expenses amount 2692145 appealed jurys verdict trial courts award eighth circuit court appeals appellate court affirmed jury verdict judgment august 25 2014 filed petition rehearing september 22 2014 denied filed petition writ certiorari united states supreme court granted june 8 2015 oral arguments supreme court occurred november 10 2015 march 22 2016 supreme court affirmed appellate court’s rulings remanded trial court allocate lump sum award among class participants • edwards et al v tyson foods inc dba tyson fresh meats inc sd iowa march 20 2008 trial court case involves perry waterloo iowa pork plants decertified state law class granted pretrial motions resulted judgment favor respect plaintiffs’ claims plaintiffs filed motion modify judgment • murray et al v tyson foods inc cd illinois january 2 2008 devoss v tyson foods inc dba tyson fresh meats cd illinois march 2 2011 cases involve joslin illinois beef plant preliminary stages • dozier southerland et al v hillshire brands company ed north carolina september 2 2014 case involves tarboro north carolina prepared foods plant march 25 2016 parties filed joint motion settlement totaling 425000 includes plaintiffs’ attorneys’ fees costs • awad et al v tyson foods inc tyson fresh meats inc md tennessee february 12 2015 october 12 2016 parties filed joint motion approval 725000 settlement plaintiffs filed application attorneys’ fees costs court granted preliminary approval parties’ joint motion application attorneys’ fees costs october 21 2016 dismissed action prejudice subsidiary hillshire brands company formerly named sara lee corporation party consolidation cases filed individual complainants republic philippines department labor employment national labor relations commission nlrc 1998 july 1999 complaint filed aris philippines inc sara lee corporation sara lee philippines inc fashion accessories philippines inc attorney cesar c cruz collectively “respondents” complaint alleges among things respondents engaged unfair labor practices connection termination manufacturing operations philippines aris philippines inc former subsidiary hillshire brands company 2006 labor arbiter ruled respondents awarded complainants php3453664710 approximately us71 million damages fees respondents appealed labor arbiters ruling subsequently set aside nlrc december 2006 subsequent nlrc’s decision parties filed numerous appeals motions reconsideration petitions review certain remained outstanding several years various appeals motions andor petitions pending hillshire brands company june 23 2014 without admitting liability filed settlement motion requesting supreme court philippines order dismissal prejudice claims certain respondents exchange payments allocated court among complainants amount exceed php342287800 approximately us71 million based part finding consideration paid complainants part settlement insufficient supreme court philippines denied respondents’ settlement motion motions reconsideration thereof supreme court philippines also set aside premature nlrc’s december 2006 ruling result cases back nlrc rule respondents’ appeals regarding labor arbiter’s 2006 ruling favor complainants meantime respondents reached settlement group comprising approximately 18 class 5984 complainants pursuant hillshire brands company would pay settling complainant php68000 approximately us1402 settlement approved nlrc around april 8 2016 certain motions reconsideration relating thereto resolved june 30 2016 appeals motions reconsideration hillshire brands company make payments associated settlement meantime hillshire brands company awaits nlrc’s decision pending appeal respect nonsettling complainants september 2 2016 maplevale farms inc acting behalf putative class direct purchasers poultry products filed class action complaint us certain poultry subsidiaries well several poultry processing companies northern district illinois complaint alleges among things beginning january 2008 defendants conspired combined fix raise maintain stabilize price broiler chickens violation united states antitrust laws alleged defendants concealed conduct plaintiff putative class plaintiff putative class seeking treble damages injunctive relief pre postjudgment interest costs attorneys’ fees subsequent filing initial complaint additional lawsuits making similar claims behalf putative classes direct indirect purchaser classes filed united states district court northern district illinois lawsuits brought behalf putative classes indirect purchasers allege addition violations federal antitrust laws causes action various state unfair competition laws consumer protection laws unjust enrichment common laws court consolidated pretrial purposes direct purchaser actions one case indirect purchaser actions one case two actions styled broiler chicken antitrust litigation october 28 2016 plaintiffs filed consolidated amended complaints two new consolidated actions allegations complaints substantially similar allegations set forth note 20 quarterly financial data unaudited second quarter fiscal 2016 net income included 12 million recognition previously unrecognized tax benefits third quarter fiscal 2016 net income included 15 million recognition previously unrecognized tax benefits audit settlement fourth quarter fiscal 2016 net income included 26 million recognition previously unrecognized tax benefits first quarter fiscal 2015 net income included 19 million pretax expense related merger integration 36 million pretax loss due costs related legacy hillshire brands plant fire 26 million unrecognized tax benefit gain second quarter fiscal 2015 net income included 14 million pretax expense related merger integration 8 million pretax gain due insurance proceeds net costs related legacy hillshire brands plant fire third quarter fiscal 2015 net income included 16 million pretax expense related merger integration 11 million pretax gains due insurance proceeds net costs related legacy hillshire brands plant fire 21 million pretax gains sale equity securities fourth quarter fiscal 2015 net income included 8 million pretax expense related merger integration 25 million pretax gains due insurance proceeds related legacy hillshire brands plant fire 169 million pretax china impairment charge 59 million pretax impairment charges related prepared foods network optimization 12 million pretax closure impairment charges related denison plant closure 161 million pretax gain sale mexico operation 39 million pretax gain related accounting cycle resulting 53week year fiscal 2015 report independent registered public accounting firm board directors shareholders tyson foods inc opinion accompanying consolidated balance sheets related consolidated statements income comprehensive income shareholders’ equity cash flows present fairly material respects financial position tyson foods inc subsidiaries october 1 2016 october 3 2015 results operations cash flows three years period ended october 1 2016 conformity accounting principles generally accepted united states america addition opinion financial statement schedule listed index appearing item 15a2 presents fairly material respects information set forth therein read conjunction related consolidated financial statements also opinion company maintained material respects effective internal control financial reporting october 1 2016 based criteria established internal control integrated framework 2013 issued committee sponsoring organizations treadway commission coso companys management responsible financial statements financial statement schedule maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included managements annual report internal control financial reporting appearing item 9a responsibility express opinions financial statements financial statement schedule companys internal control financial reporting based integrated audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audits obtain reasonable assurance whether financial statements free material misstatement whether effective internal control financial reporting maintained material respects audits financial statements included examining test basis evidence supporting amounts disclosures financial statements assessing accounting principles used significant estimates made management evaluating overall financial statement presentation audit internal control financial reporting included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk audits also included performing procedures considered necessary circumstances believe audits provide reasonable basis opinions company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles company’s internal control financial reporting includes policies procedures pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company ii provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company iii provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate pricewaterhousecoopers llp fayetteville arkansas november 21 2016 item 9item 8 financial statements supplementary data tyson foods inc consolidated statements income see accompanying notes tyson foods inc consolidated statements comprehensive income see accompanying notes tyson foods inc consolidated balance sheets see accompanying notes tyson foods inc consolidated statements shareholders’ equity 1 reclass accumulated comprehensive income retained earnings stranded tax effects resulting tax act following adoption applicable new accounting standard refer part ii item 8 notes consolidated financial statements note 2 changes accounting principles see accompanying notes tyson foods inc consolidated statements cash flows see accompanying notes consolidated financial statements tyson foods inc note 1 business summary significant accounting policies description business tyson foods inc collectively “company” “we” “us” “our” one worlds largest food companies recognized leader protein founded 1935 john w tyson grown three generations family leadership company broad portfolio products brands like tyson® jimmy dean® hillshire farm® ball park® wright® aidells® ibp® state fair® innovate continually make protein sustainable tailor food everywhere it’s available raise world’s expectations much good food consolidation consolidated financial statements include accounts whollyowned subsidiaries well majorityowned subsidiaries exercise control applicable entities controlling financial interest variable interest entities primary beneficiary significant intercompany accounts transactions eliminated consolidation fiscal year utilize 52 53week accounting period ending saturday closest september 30 company’s accounting cycle resulted 52week year fiscal 2018 fiscal 2017 fiscal 2016 cash equivalents cash equivalents consist investments shortterm highly liquid securities original maturities three months less made part cash management activity carrying values assets approximate fair values primarily utilize cash management system series separate accounts consisting lockbox accounts receiving cash concentration accounts funds moved several zerobalance disbursement accounts funding payroll accounts payable livestock procurement grower payments etc result cash management system checks issued presented banks payment may result negative book cash balances negative book cash balances included accounts payable current liabilities september 29 2018 september 30 2017 checks outstanding excess related book cash balances totaled approximately 220 million 237 million respectively accounts receivable record accounts receivable net realizable value includes appropriate allowance estimated uncollectible accounts reflect loss anticipated accounts receivable balances charged provision doubtful accounts calculate allowance based history writeoffs level past due accounts relationships economic status customers september 29 2018 september 30 2017 allowance uncollectible accounts 19 million 34 million respectively generally collateral receivables periodically evaluate credit worthiness customers inventories processed products livestock supplies valued lower cost net realizable value cost includes purchased raw materials live purchase costs growout costs primarily feed grower pay catch haul costs labor manufacturing production overhead related purchase production inventories fiscal 2018 fiscal 2017 63 cost inventories determined firstin firstout fifo method remaining cost inventories years determined weightedaverage method following table reflects major components inventory september 29 2018 september 30 2017 property plant equipment property plant equipment stated cost generally depreciated straightline method estimated lives buildings leasehold improvements 10 33 years machinery equipment three 12 years land improvements three 20 years major repairs maintenance costs significantly extend useful life related assets capitalized normal repairs maintenance costs charged operations review carrying value longlived assets balance sheet date indication impairment exists recoverability assessed using undiscounted cash flows based historical results current projections earnings interest taxes depreciation amortization measure impairment excess carrying value fair value asset fair value asset generally measured using discounted cash flows including market participant assumptions future operating results discount rates goodwill intangible assets definite life intangibles initially recorded fair value amortized estimated period benefit brands trademarks generally amortized using straightline method 20 years less customer relationships supply arrangements generally amortized seven 20 years based pattern revenue expected generated use asset amortization expense generally recognized selling general administrative expense review carrying value definite life intangibles balance sheet date indication impairment exists recoverability assessed using undiscounted cash flows based historical results current projections earnings interest taxes depreciation amortization measure impairment excess carrying value fair value definite life intangible asset use various valuation techniques estimate fair value primary techniques discounted cash flows relieffromroyalty multiperiod excess earnings valuation approaches use significant unobservable inputs level 3 inputs defined fair value hierarchy valuation approaches required make estimates assumptions sales operating margins growth rates royalty rates discount rates based budgets business plans economic projections anticipated future cash flows marketplace data goodwill indefinite life intangible assets initially recorded fair value amortized reviewed impairment least annually frequently impairment indicators arise goodwill allocated reporting unit evaluated impairment first performing qualitative assessment determine whether quantitative goodwill test necessary determined based qualitative factors fair value reporting unit may likely less carrying amount significant changes macroeconomic factors related reporting unit occurred could materially impact fair value quantitative goodwill impairment test would required additionally elect forgo qualitative assessment perform quantitative test quantitative test identify potential impairment exists comparing fair value reporting unit carrying amount including goodwill carrying amount reporting unit exceeds fair value impairment loss recognized amount equal excess exceed carrying amount goodwill estimate fair value reporting units using combination various valuation techniques including income approach discounted cash flow analysis market approaches earnings interest taxes depreciation amortization ebitda multiples comparable publiclytraded companies precedent transactions primary technique discounted cash flow analysis approaches use significant unobservable inputs level 3 inputs defined fair value hierarchy requires us make various judgmental assumptions sales operating margins growth rates discount rates consider budgets business plans economic projections believed reflect market participant views would exist exit transaction assumptions also made varying perpetual growth rates periods beyond longterm business plan period generally utilize normalized operating margin assumptions based future expectations operating margins historically realized reporting units industries inherent estimates assumptions used determining fair value reporting units outside control management including interest rates cost capital tax rates market ebitda comparables credit ratings believe made reasonable estimates assumptions calculate fair value reporting units possible material change could occur actual results consistent estimates assumptions used calculate fair value could result additional material impairments goodwill discount rate used annual goodwill impairment test increased 69 fiscal 2018 67 fiscal 2017 fiscal 2018 2017 2016 fair value material reporting units exceeded carrying value indefinite life intangible assets qualitative assessment also performed determine whether existence events circumstances indicates likely intangible asset impaired similar goodwill also elect forgo qualitative test indefinite life intangible assets perform quantitative test upon performing quantitative test carrying value intangible asset exceeds fair value impairment loss recognized amount equal excess fair value indefinite life intangible assets calculated principally using relieffromroyalty multiperiod excess earnings valuation approaches use significant unobservable inputs level 3 inputs defined fair value hierarchy believed reflect market participant views would exist exit transaction valuation approaches required make estimates assumptions sales operating margins growth rates royalty rates discount rates based budgets business plans economic projections anticipated future cash flows marketplace data fiscal 2018 2017 2016 fair value indefinite life intangible assets exceeded carrying value discount rate used indefinite life intangible test increased 82 fiscal 2018 79 fiscal 2017 investments joint ventures entities generally use cost method accounting voting interests less 20 percent use equity method accounting voting interests excess 20 percent controlling interest variable interest primary beneficiary investments joint ventures entities reported consolidated balance sheets assets also investments marketable debt securities determined marketable debt securities availableforsale investments reported fair value based quoted market prices balance sheet date unrealized gains losses net tax recorded comprehensive income amortized cost debt securities adjusted amortization premiums accretion discounts maturity amortization recorded interest income cost securities sold based specific identification method realized gains losses sale debt securities declines value judged temporary recorded net basis income interest dividends securities classified availableforsale recorded interest income accrued selfinsurance use combination insurance selfinsurance mechanisms effort mitigate potential liabilities health welfare workers’ compensation auto liability general liability risks liabilities associated risks retained estimated part considering claims experience demographic factors severity factors actuarial assumptions current liabilities current liabilities september 29 2018 september 30 2017 include defined benefit plans recognize funded status defined pension postretirement plans consolidated balance sheets funded status measured difference fair value plan assets benefit obligation measure plan assets liabilities end fiscal year defined benefit pension plan benefit obligation projected benefit obligation defined benefit postretirement plan retiree health care plan benefit obligation accumulated postretirement benefit obligation overfunded status recognized asset underfunded status recognized liability transitional assetliability prior service cost actuarial gainloss yet recognized component net periodic cost recognized accumulated comprehensive income accumulated comprehensive income adjusted amounts subsequently recognized component net periodic benefit costs future periods derivative financial instruments purchase certain commodities grains livestock course normal operations part commodity risk management activities use derivative financial instruments primarily futures options reduce exposure various market risks related purchases well changes foreign currency exchange rates contract terms financial instrument qualifying hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts designated highly effective meeting risk reduction correlation criteria recorded using hedge accounting derivative instrument accounted hedge changes fair value instrument offset either change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion instrument’s change fair value immediately recognized earnings component cost sales instruments hold part risk management activities meet criteria hedge accounting marked fair value unrealized gains losses reported currently earnings changes market value derivatives used risk management activities relating forward sales contracts recorded sales changes market value derivatives used risk management activities surrounding inventories hand anticipated purchases inventories recorded cost sales changes market value derivatives used risk management activities related interest rates recorded interest expense generally hedge anticipated transactions beyond 18 months litigation reserves variety legal proceedings pending threatened us accruals recorded probable liability incurred amount liability reasonably estimated based current law progress case opinions views legal counsel advisers experience similar matters intended response litigation amounts discounted exclusive claims third parties adjusted periodically assessment efforts progress additional information becomes available expense amounts administering litigating claims incurred accruals legal proceedings included current liabilities consolidated balance sheets revenue recognition recognize revenue title risk loss transferred customers generally delivery based terms sale revenue recognized net amount estimated received deducting estimated amounts discounts trade allowances product returns freight expense freight expense associated products shipped customers recognized cost sales marketing promotion costs promote products marketing advertising trade promotions consumer incentives include limited coupons discounts rebates volumebased incentives marketing promotion costs charged operations period incurred customer incentive trade promotion activities recorded reduction sales based amounts estimated due customers based primarily historical utilization redemption rates marketing promotional activities recorded selling general administrative expense advertising expenses advertising expense charged operations period incurred recorded selling general administrative expense advertising expense totaled 243 million 238 million 238 million fiscal 2018 2017 2016 respectively research development research development costs expensed incurred research development costs totaled 114 million 113 million 96 million fiscal 2018 2017 2016 respectively use estimates consolidated financial statements prepared conformity accounting principles generally accepted united states require us make estimates assumptions affect amounts reported consolidated financial statements accompanying notes actual results could differ estimates recently issued accounting pronouncements august 2018 financial accounting standards board fasb issued guidance aligning requirements capitalizing implementation costs incurred hosting arrangement service contract requirements capitalizing implementation costs incurred develop obtain internaluse software guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2019 fiscal 2020 early adoption permitted applied prospectively qualified implementation costs incurred adoption date plan adopt guidance beginning first quarter fiscal 2019 expect adoption guidance material impact consolidated financial statements august 2017 fasb issued guidance eases certain documentation assessment requirements hedge effectiveness modifies accounting components excluded assessment modifications include ineffectiveness derivative gainloss highly effective cash flow hedge recorded comprehensive income change fair value derivative recorded income statement line hedged item additional disclosures required cumulative basis adjustment fair value hedges effect hedging financial statement lines components excluded assessment amendment also simplifies application hedge accounting certain situations permit new hedging strategies eligible hedge accounting guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2018 fiscal 2020 early adoption permitted modified retrospective transition method applied currently evaluating impact guidance consolidated financial statements may 2017 fasb issued guidance clarifies changes terms conditions sharebased payment award require entity apply modification accounting topic 718 guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2017 fiscal 2019 early adoption permitted prospective transition method applied awards modified adoption date adopt guidance beginning first quarter fiscal 2019 expect adoption guidance material impact consolidated financial statements march 2017 fasb issued guidance shortens amortization period certain callable debt securities held premium specifically amendments require premium amortized earliest call date guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2018 fiscal 2020 early adoption permitted modified retrospective transition method applied currently evaluating impact guidance consolidated financial statements march 2017 fasb issued guidance change presentation net periodic benefit cost related employer sponsored defined benefit plans postretirement benefits service cost included within income statement line item compensation costs arising services rendered period components net periodic benefit pension cost presented separately outside operating income additionally service cost component eligible capitalization applicable guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2017 fiscal 2019 early adoption permitted retrospective transition method applied presentation service cost component components net periodic pension cost net periodic postretirement benefit cost income statement prospective transition method applied effective date capitalization service cost component net periodic pension cost net periodic postretirement benefit assets adopt guidance beginning first quarter fiscal 2019 expect adoption guidance material impact consolidated financial statements november 2016 fasb issued guidance requires entities show changes total cash equivalents restricted cash restricted cash equivalents statement cash flows guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2017 fiscal 2019 early adoption permitted retrospective transition method applied adopt guidance beginning first quarter fiscal 2019 expect adoption guidance material impact consolidated financial statements october 2016 fasb issued guidance requires companies recognize income tax effects intercompany sales transfers assets inventory period transfer occurs guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2017 fiscal 2019 early adoption permitted modified retrospective transition method applied adopt guidance beginning first quarter fiscal 2019 expect adoption guidance material impact consolidated financial statements august 2016 fasb issued guidance aims eliminate diversity practice certain cash receipts cash payments presented classified statement cash flows guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2017 fiscal 2019 early adoption permitted retrospective transition method applied adopt guidance beginning first quarter fiscal 2019 expect adoption guidance material impact consolidated financial statements june 2016 fasb issued guidance provides decisionuseful information expected credit losses financial instruments changes loss impairment methodology guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2019 fiscal 2021 early adoption permitted annual reporting periods interim periods within annual reporting periods beginning december 15 2018 fiscal 2020 application guidance requires various transition methods depending specific amendment currently evaluating impact guidance consolidated financial statements february 2016 fasb issued guidance created new accounting reporting guidelines leasing arrangements guidance requires lessees recognize rightofuse asset lease liability leases terms 12 months recognition measurement presentation expenses cash flows arising lease depend classification finance operating lease guidance also requires qualitative quantitative disclosures regarding amount timing uncertainty cash flows arising leases guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2018 fiscal 2020 early adoption permitted modified retrospective method applied still evaluating impact guidance consolidated financial statements related disclosures completed initial scoping reviews made progress assessment phase continue identify leasing processes impacted new standard also made progress developing policy elections make upon adoption implementing software meet reporting requirements standard expect financial statement disclosures expanded present additional details leasing arrangements although expect impacts material time unable reasonably estimate expected increase assets liabilities consolidated balance sheets impacts consolidated financial statements upon adoption january 2016 fasb issued guidance requires equity investments measured fair value subsequent changes fair value recognized net income guidance also impacts financial liabilities fair value option presentation disclosure requirements classification measurement financial instruments guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2017 fiscal 2019 applied means cumulativeeffect adjustment balance sheet beginning fiscal year adoption unless equity securities readily determinable fair values case amendments applied prospectively expect adoption guidance material impact consolidated financial statements may 2014 fasb issued guidance changes criteria recognizing revenue guidance provides single fivestep model applied revenue contracts customers standard also requires additional financial statement disclosures enable users understand nature amount timing uncertainty revenue cash flows relating customer contracts companies option use either retrospective approach cumulative effect adjustment approach implement standard guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2017 fiscal 2019 adopt guidance using modified retrospective transition method beginning first quarter fiscal 2019 expect adoption guidance material impact consolidated financial statements additional disclosure requirements note 2 changes accounting principles march 2018 fasb issued guidance clarifies application topic 740 regards tax cuts jobs act tax act enacted december 22 2017 guidance requires provisional amounts reported within reporting period tax act enacted reasonable estimate determined within measurement period exceed one year enactment date accounting required completed accordance topic 740 provisional amounts adjustments provisional amounts reported measurement period included income continuing operations adjustment tax expense benefit reporting period amounts determined guidance effective immediately adopted guidance first quarter fiscal 2018 impact adoption material impact financial statements see note 9 income taxes february 2018 fasb issued guidance allows reclassification accumulated comprehensive income retained earnings stranded tax effects resulting tax act guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2018 fiscal 2020 early adoption permitted entities choice apply either period adoption retrospectively period effect change federal income tax rate tax act adopted guidance fourth quarter fiscal 2018 resulting reclass increasing accumulated comprehensive income decreasing retained earnings 13 million consolidated financial statements march 2016 fasb issued guidance simplifies several aspects accounting employee sharebased payment transactions including accounting income taxes forfeitures statutory tax withholding requirements well classification related amounts within statement cash flows impact earnings per share guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2016 fiscal 2018 adopted guidance first quarter fiscal 2018 guidance requires income tax effects sharebased payment awards recognized consolidated statements income awards vest settled change previous guidance required activity recorded capital excess par value within stockholders equity adopted guidance prospectively may create volatility effective tax rate adopted depending largely future events factors may include stock price timing stock option exercises value realized upon vesting exercise shares compared grant date fair value shares year ended september 29 2018 recorded tax benefit material addition calculating potential common shares used determine diluted earnings per share guidance requires assumed proceeds treasury stock method modified exclude amount excess tax benefits would recognized additional paidin capital changes applied prospective basis material impact diluted earnings per share year ended september 29 2018 new guidance companies also make accounting policy election either estimate forfeitures period account forfeitures occur changed accounting policy account forfeitures occur using modified retrospective transition method material impact consolidated financial statements guidance changes presentation excess tax benefits financing activity operating activity consolidated statements cash flows guidance also requires presentation related cash paid taxing authority shares withheld satisfy statutory income tax withholding obligation financing activity consolidated statements cash flows applied changes prospectively thus prior periods adjusted adoption standard material impact consolidated statements cash flows july 2015 fasb issued guidance requires management evaluate inventory lower cost net realizable value guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2016 fiscal 2018 prospective transition method applied adopted guidance first quarter fiscal 2018 material impact consolidated financial statements note 3 acquisitions dispositions acquisitions august 20 2018 acquired assets american proteins inc ampro products inc american proteins poultry rendering blending operation 866 million subject net working capital adjustments part strategic expansion sustainability initiatives results subsequent acquisition closing included chicken segment preliminary purchase price allocation included 71 million net working capital 155 million property plant equipment 411 million intangible assets 242 million goodwill 13 million liabilities intangible assets primarily included 358 million assigned supply network amortized 14 years 51 million assigned customer relationships amortized weighted average 12 years goodwill acquired amortizable tax purposes certain estimated values acquisition including goodwill intangible assets property plant equipment yet finalized subject revision additional information becomes available detailed analyses completed august 17 2018 company announced reached definitive agreement buy keystone foods business “keystone” marfrig global foods 216 billion cash acquisition keystone major supplier growing global foodservice industry latest investment furtherance growth strategy expansion valueadded protein capabilities transaction expected close first quarter early second quarter fiscal 2019 subject customary closing conditions including regulatory approvals however assurance acquisition close time expect majority keystone’s domestic results included chicken segment international results included segment presentation june 4 2018 acquired tecumseh poultry llc tecumseh vertically integrated valueadded protein business 382 million net cash acquired part strategy grow high quality branded poultry market results subsequent acquisition closing included chicken segment preliminary purchase price allocation included 13 million net working capital including 1 million cash acquired 49 million property plant equipment 227 million intangible assets 94 million goodwill intangible assets included 193 million assigned brands trademarks amortized 20 years goodwill acquired amortizable tax purposes certain estimated values acquisition including goodwill intangible assets property plant equipment yet finalized subject revision additional information becomes available detailed analyses completed november 10 2017 acquired original philly holdings inc original philly valueadded protein business 226 million net cash acquired part strategic expansion initiative results subsequent acquisition closing included prepared foods chicken segments preliminary purchase price allocation included 21 million net working capital including 10 million cash acquired 13 million property plant equipment 90 million intangible assets 112 million goodwill second quarter fiscal 2018 recorded measurement period adjustments decreased goodwill 1 million obtaining additional information regarding among things asset valuations liabilities assumed completed allocation goodwill segments second quarter fiscal 2018 using acquisition method approach resulted 82 million 29 million goodwill allocated prepared foods chicken segments respectively goodwill acquired amortizable tax purposes june 7 2017 acquired outstanding common stock advancepierre foods holdings inc advancepierre part strategy sustainably feed world fastest growing portfolio proteinpacked brands purchase price equal 4025 per share advancepierres outstanding common stock approximately 32 billion funded acquisition existing cash hand net proceeds issuance new senior notes new term loan facility well borrowings commercial paper program advancepierres results operations subsequent acquisition closing included prepared foods chicken segments following table summarizes purchase price allocation fair values assets acquired liabilities assumed acquisition date advancepierre first quarter fiscal 2018 recorded measurement period adjustments decreased goodwill 2 million primarily related updated information related income taxes fair value identifiable intangible assets follows result acquisition recognized total 2980 million goodwill purchase price assigned assets acquired liabilities assumed based estimated fair values date acquisition excess allocated goodwill shown table goodwill represents value expect achieve implementation operational synergies growth opportunities completed allocation goodwill segments first quarter fiscal 2018 using withandwithout approach estimated operating results synergy impact fair value reporting units resulted 2412 million 568 million goodwill allocated prepared foods chicken segments respectively goodwill acquired 163 million related previous advancepierre acquisitions expected amortizable tax purposes used various valuation techniques determine fair value primary techniques discounted cash flow analysis relieffromroyalty multiperiod excess earnings valuation approaches use significant unobservable inputs level 3 inputs defined fair value hierarchy valuation approaches required make estimates assumptions sales operating margins growth rates royalty rates discount rates based budgets business plans economic projections anticipated future cash flows marketplace data acquisition advancepierre accounted using acquisition method accounting consequently results operations advancepierre reported consolidated financial statements date acquisition following unaudited pro forma information presents combined results operations acquisition advancepierre occurred beginning fiscal 2016 advancepierres preacquisition results added historical results pro forma results contained table include adjustments amortization acquired intangibles depreciation expense interest expense related financing related income taxes potential cost savings operational efficiencies could result acquisition included pro forma results 2016 pro forma results include transaction related expenses incurred advancepierre prior acquisition 84 million including items consultant fees accelerated stock compensation deal costs transaction related expenses incurred company 67 million including fees paid third parties financing costs deal costs 36 million expense related fair value inventory adjustment date acquisition pro forma results prepared comparative purposes necessarily indicative results operations would acquisitions occurred assumed dates necessarily indication future operating results dispositions april 24 2017 announced intent sell three nonprotein businesses part strategic focus protein brands businesses part prepared foods segment included sara lee® frozen bakery kettle van’s® produce items frozen desserts waffles snack bars soups sauces sides sale also included chef pierre® bistro collection® kettle collection™ van’s® brands license use sara lee® brand various channels well tarboro north carolina fort worth texas traverse city michigan prepared foods facilities september 30 2017 reclassified assets liabilities related businesses including allocated goodwill assets liabilities held sale consolidated balance sheets company concluded businesses significant disposal groups represent strategic shift therefore classified discontinued operations periods presented completed sale kettle business december 30 2017 received net proceeds 125 million including working capital adjustment result sale recorded pretax gain 22 million reflected cost sales consolidated statement income fiscal 2018 utilized net proceeds pay term loan debt completed sale sara lee® frozen bakery van’s® businesses july 30 2018 623 million including working capital adjustment result sale recorded pretax gain 11 million reflected cost sales consolidated statement income fiscal 2018 utilized net proceeds repay commercial paper previously fiscal 2018 2017 recorded pretax impairment charges businesses 101 million 45 million respectively due revised estimates businesses fair value based expected net sales proceeds time impairments charges recorded cost sales consolidated statement income primarily consisted goodwill previously classified within assets held sale first quarter fiscal 2018 made decision sell tnt crust pizza crust business also included prepared foods segment part strategic focus protein brands completed sale business september 2 2018 57 million net adjustments result sale recorded pretax gain 9 million reflected cost sales consolidated statement income fiscal 2018 utilized net proceeds repay commercial paper following table summarizes net assets liabilities held sale september 30 2017 note 4 property plant equipment following table reflects major categories property plant equipment accumulated depreciation september 29 2018 september 30 2017 approximately 1832 million required complete buildings equipment construction september 29 2018 note 5 goodwill intangible assets following table reflects goodwill activity fiscal 2018 2017 included goodwill foreign chicken operation following table reflects intangible assets type september 29 2018 september 30 2017 amortization expense 210 million 107 million 80 million recognized fiscal 2018 2017 2016 respectively estimate amortization expense intangible assets next five fiscal years subsequent september 29 2018 2019 241 million 2020 240 million 2021 222 million 2022 212 million 2023 201 million note 6 restructuring related charges fourth quarter fiscal 2017 board directors approved multiyear restructuring program “financial fitness program” expected contribute company’s overall strategy financial fitness increased operational effectiveness overhead reduction company currently anticipates financial fitness program result cumulative pretax charges implemented approximately 253 million consist primarily severance employee related costs impairments accelerated depreciation technology assets incremental costs implement new technology contract termination costs program included elimination approximately 550 positions across several areas job levels eliminated positions originating corporate offices springdale arkansas chicago illinois cincinnati ohio company recognized restructuring related charges 59 million 150 million associated program fiscal 2018 2017 respectively following table reflects pretax impact restructuring related charges consolidated statements income following table reflects pretax impact restructuring related charges incurred fiscal 2017 2018 estimated charges future years primarily fiscal 2019 total estimated program charges reportable segments fiscal 2017 restructuring related charges consisted 53 million severance employee related costs 72 million technology impairment related costs 25 million contract termination costs fiscal 2018 restructuring related charges consisted 59 million incremental costs implement new technology accelerated depreciation technology assets majority remaining estimated charges related incremental costs implement new technology following table reflects liability related restructuring recognized current liabilities consolidated balance sheet september 29 2018 note 7 debt following table reflects major components debt september 29 2018 september 30 2017 annual maturities debt five fiscal years subsequent september 29 2018 2019 1911 million 2020 1037 million 2021 511 million 2022 1007 million 2023 405 million revolving credit facility letters credit march 2018 amended existing credit facility among things increased line credit 15 billion 175 billion facility supports shortterm funding needs serves backstop commercial paper program mature commitments thereunder terminate march 2023 amounts available borrowing facility totaled 175 billion september 29 2018 deducting amounts backstop commercial paper program september 29 2018 outstanding letters credit issued facility september 29 2018 105 million bilateral letters credit issued separately revolving credit facility none drawn upon letters credit issued primarily support leasing obligations workers’ compensation insurance programs legal obligations future subsidiaries shall guarantee material indebtedness subsidiary shall required guarantee indebtedness obligations liabilities facility commercial paper program commercial paper program may issue unsecured shortterm promissory notes commercial paper aggregate maximum principal amount 1 billion september 29 2018 september 29 2018 605 million commercial paper outstanding weighted average interest rate 233 maturities less 25 days 20232048 notes september 2018 issued senior unsecured notes aggregate principal amount 900 million consisting 400 million due september 2023 500 million due september 2048 used net proceeds issuance extinguish term loan tranche b due august 2020 reduce amounts outstanding commercial paper program september 2023 notes carry fixed interest rate 39 2048 notes carry fixed interest rate 51 interest payments 2023 2048 notes due semiannually march 28 september 28 original issue discounts 3 million received net proceeds 897 million addition incurred debt issuance costs 9 million related issuance term loan tranche b due august 2020 june 8 2018 amended existing term loan agreement increased principal amount borrowed 500 million 750 million proceeds borrowings primarily used fund acquisition fourth quarter fiscal 2018 extinguished 750 million outstanding balance using cash hand funds borrowed new 2023 2048 senior notes 700 notes due may 2018 fiscal 2018 extinguished 120 million outstanding balance senior notes due may 2018 using cash hand term loan tranche b due august 2019 fiscal 2018 extinguished 427 million outstanding balance term loan tranche b due august 2019 using cash hand proceeds received sale nonprotein business debt covenants revolving credit term loan facilities contain affirmative negative covenants among things may limit restrict ability create liens encumbrances incur debt merge dissolve liquidate consolidate make acquisitions investments dispose transfer assets change nature business engage certain transactions affiliates enter hedging transactions case subject certain qualifications exceptions addition required maintain minimum interest expense coverage maximum debttocapitalization ratios senior notes also contain affirmative negative covenants among things may limit restrict ability create liens engage certain saleleaseback transactions engage certain consolidations mergers sales assets compliance debt covenants september 29 2018 note 8 equity capital stock two classes capital stock class common stock 010 par value class stock class b common stock 010 par value class b stock holders class b stock may convert stock class stock shareforshare basis holders class b stock entitled 10 votes per share holders class stock entitled one vote per share matters submitted shareholders approval september 29 2018 tyson limited partnership tlp owned 99985 outstanding shares class b stock tlp members tyson family owned aggregate 209 outstanding shares class stock giving collectively control approximately 7096 total voting power outstanding voting stock class b stock considered participating security requiring use twoclass method computation basic earnings per share twoclass computation method period reflects cash dividends paid class stock plus amount allocated undistributed earnings losses computed using participation percentage reflects dividend rights class stock basic earnings per share computed using twoclass method periods presented shares class b stock considered participating convertible securities since shares class b stock convertible shareforshare basis shares class stock diluted earnings per share computed assuming conversion class b shares class shares beginning period dividends cash dividends cannot paid holders class b stock unless simultaneously paid holders class stock per share amount cash dividend paid holders class b stock cannot exceed 90 cash dividend simultaneously paid holders class stock pay quarterly cash dividends class b shareholders paid class dividends per share 120 090 060 fiscal 2018 2017 2016 respectively paid class b dividends per share 108 081 054 fiscal 2018 2017 2016 respectively effective november 12 2018 board directors increased quarterly dividend previously declared august 9 2018 0375 per share class stock 03375 per share class b stock increased quarterly dividend payable december 14 2018 shareholders record close business november 30 2018 share repurchases february 4 2016 board directors approved increase 50 million shares authorized repurchase share repurchase program september 29 2018 229 million shares remained available repurchase share repurchase program fixed scheduled termination date timing extent repurchase shares depend upon among things working capital needs markets industry conditions liquidity targets limitations debt obligations regulatory requirements addition share repurchase program purchase shares open market fund certain obligations equity compensation plans summary cumulative share repurchases class stock fiscal 2018 2017 2016 follows tangible equity units fiscal 2014 completed public issuance 30 million 475 tangible equity units teus total proceeds net underwriting discounts expenses 1454 million teu stated amount 50 comprised prepaid stock purchase contract senior amortizing note due july 15 2017 allocated proceeds issuance teus equity debt based relative fair values respective components teu fair value prepaid stock purchase contracts 1295 million recorded capital excess par value net issuance costs fair value senior amortizing notes 205 million recorded debt issuance costs associated teu debt recorded deferred debt issuance cost amortized term instrument july 15 2017 july 2017 company made final quarterly cash installment payment 059 per senior amortizing note issued required remaining shares class stock upon automatic settlement outstanding purchase contract note 9 income taxes december 22 2017 president trump signed law tax act tax act includes significant changes us tax code affected fiscal year ended september 29 2018 affect future periods changes include limited 1 reducing corporate federal income tax rate 35 21 2 bonus depreciation allows full expensing qualified property year placed service 3 general elimination us federal income taxes dividends foreign subsidiaries section 15 internal revenue code stipulates fiscal year ended september 29 2018 blended corporate tax rate 245 based applicable tax rates tax act number days year additionally tax act includes repeal domestic production activity deduction new provision designed tax global intangible lowtaxed income gilti new provision allows deduction foreignderived intangible income fdii new provision institutes base erosion antiabuse tax beat beginning fiscal year 2019 still evaluating new international provisions however expect material impact financial statements changes code tax act material impact financial statements fiscal 2018 generally accepted accounting principles us gaap specifically asc topic 740 income taxes tax effects changes tax laws must recognized period law enacted december 22 2017 tax act asc 740 also requires deferred tax assets liabilities measured enacted tax rate expected apply temporary differences realized settled thus date enactment company’s deferred taxes remeasured based upon new tax rates change deferred taxes recorded adjustment deferred tax provision staff us securities exchange commission recognized complexity reflecting impacts tax act issued guidance staff accounting bulletin 118 sab 118 clarifies accounting income taxes asc 740 information yet available complete provides one year period complete required analyses accounting measurement period sab 118 describes three scenarios buckets associated company’s status accounting income tax reform 1 company complete accounting certain effects tax reform 2 company able determine reasonable estimate certain effects tax reform records estimate provisional amount 3 company able determine reasonable estimate therefore continues apply asc 740 based provisions tax laws effect immediately prior tax act enacted fasb also issued guidance essentially adopts sec guidance see note 2 changes accounting principles transition tax act requires onetime deemed repatriation transition tax previously untaxed net accumulated current earnings profits foreign subsidiaries based analysis foreign earnings profits net deficits foreign tax credits transition tax due company accounting element tax act complete corporate tax rate reduction tax act reduced corporate tax rate 35 21 effective january 1 2018 results blended corporate tax rate 245 fiscal year 2018 21 thereafter analyzed domestic deferred tax balances estimate balances expected reverse fiscal 2018 thereafter remeasured deferred taxes 245 21 accordingly fiscal 2018 recorded discrete net deferred income tax benefit 1004 million corresponding provisional reduction net deferred income tax liability accounting element tax act incomplete however able make reasonable estimates effects therefore recorded provisional adjustment remeasurement may continue change receive additional information timing deferred income tax reversals however expect additional changes material gilti tax act created new requirement tax years beginning december 31 2017 fiscal 2019 certain income ie gilti earned controlled foreign corporations cfcs must included currently gross income cfcs’ us shareholder us gaap allowed make accounting policy choice either 1 treating taxes due future us inclusions taxable income related gilti currentperiod expense incurred “period cost method” 2 factoring amounts company’s measurement deferred taxes “deferred method” elected account tax using period cost method therefore recorded adjustments fiscal 2018 financial statements accounting component tax reform incomplete however based upon initial analysis gilti tax expected material impact financial statements changes included tax act broad complex final transition impacts tax act may differ estimates due among things changes interpretations tax act legislative action address questions arise tax act changes accounting standards income taxes related interpretations response tax act updates changes estimates company utilized calculate impacts detail provision income taxes continuing operations consists following reasons difference statutory federal income tax rate effective income tax rate continuing operations follows fiscal 2018 domestic production deduction decreased tax expense 46 million state tax expense net federal tax benefit 90 million change federal tax rate tax act resulted tax benefit 1004 million related deferred tax remeasurement additionally current year favorable timing differences currently deductible 245 blended tax rate reversing future years 21 resulted 35 million tax benefit impacts nondeductible impairment sale certain assets nonprotein businesses increased effective tax rate 31 fiscal 2017 domestic production deduction decreased tax expense 80 million state tax expense net federal tax benefit 61 million fiscal 2016 domestic production deduction decreased tax expense 68 million state tax expense net federal tax benefit 70 million approximately 2700 million 2603 million 2543 million income continuing operations income taxes fiscal 2018 2017 2016 respectively operations based united states recognize deferred income taxes future tax consequences attributable differences financial statement carrying amounts existing assets liabilities respective tax bases deferred tax assets liabilities measured using tax rates expected apply taxable income years temporary differences expected recovered settled fiscal 2018 deferred tax liability includes effects tax act including remeasurement deferred taxes bonus depreciation tax effects major items recorded deferred tax assets liabilities september 29 2018 september 30 2017 follows september 29 2018 gross state tax net operating loss carryforwards approximated 662 million expire fiscal years 2019 2038 gross foreign net operating loss carryforwards approximated 46 million 41 million expire fiscal years 2019 2028 remainder expiration also tax credit carryforwards approximately 47 million 43 million expire fiscal years 2019 2031 remainder expiration accumulated undistributed earnings foreign subsidiaries aggregating approximately 210 million 182 million september 29 2018 september 30 2017 respectively tax act generally eliminates us federal income taxes dividends foreign subsidiaries december 31 2017 result intention excess cash held foreign subsidiaries subject regulatory restrictions expected repatriated net applicable withholding taxes expected immaterial remainder accumulated undistributed earnings expected indefinitely reinvested outside united states earnings distributed form dividends otherwise could subject state income taxes withholding taxes payable various foreign countries due uncertainty manner undistributed earnings would brought back united states tax laws effect time currently practicable estimate tax liability might payable repatriation foreign earnings following table summarizes activity related gross unrecognized tax benefits september 29 2018 september 30 2017 october 1 2016 amount unrecognized tax benefits recognized would impact effective tax rate 216 million september 29 2018 205 million september 30 2017 classify interest penalties unrecognized tax benefits income tax expense september 29 2018 september 30 2017 tax benefits 73 million 63 million respectively accrued interest penalties unrecognized tax benefits september 29 2018 subject income tax examinations united states federal income taxes fiscal years 2013 2017 also subject income tax examinations major state foreign jurisdictions fiscal years 2007 2017 2002 2017 respectively estimate next twelve months reasonably possible unrecognized tax benefits could decrease much 28 million primarily due expiration statutes settlements various jurisdictions note 10 income charges fiscal 2018 recognized onetime cash bonus hourly frontline employees 109 million using incremental cash savings tax act predominantly recorded consolidated statements income cost sales additionally recorded 11 million insurance proceeds 21 million equity earnings joint ventures 1 million net foreign currency exchange gains recognized consolidated statements income net fiscal 2017 recorded 28 million legal costs related two former subsidiaries hillshire brands sold hillshire brands 1986 1994 18 million acquisition bridge financing fees related advancepierre acquisition 19 million equity earnings joint ventures recorded consolidated statements income net second quarter fiscal 2017 recorded 52 million impairment charge related san diego prepared foods operation impairment comprised 43 million property plant equipment 8 million definite lived intangible assets 1 million assets charge 44 million included consolidated statements income cost sales 8 million included consolidated statements income selling general administrative triggered change comanufacturing contract ongoing losses fiscal 2016 recorded 12 million equity earnings joint ventures 4 million net foreign currency exchange losses recorded consolidated statements income net note 11 earnings per share earnings weighted average common shares used computation basic diluted earnings per share follows approximately 1 million stockbased compensation shares antidilutive fiscal 2018 2017 stockbased compensation shares antidilutive fiscal 2016 shares included dilutive earnings per share calculation two classes capital stock class stock class b stock cash dividends cannot paid holders class b stock unless simultaneously paid holders class stock per share amount cash dividends paid holders class b stock cannot exceed 90 cash dividends paid holders class stock allocate undistributed earnings based upon 1 09 ratio per share class stock class b stock respectively allocate undistributed earnings based ratio due historical dividend patterns voting control class b shareholders contractual limitations dividends class b stock note 12 derivative financial instruments business operations give rise certain market risk exposures mostly due changes commodity prices foreign currency exchange rates interest rates manage portion risks use derivative financial instruments reduce exposure commodity price risk foreign currency risk interest rate risk management programs periodically reviewed board directors audit committee programs monitored senior management may revised market conditions dictate current risk management programs utilize industrystandard models take account implicit cost hedging risks associated market risks created derivative instruments fair values strictly monitored using valueatrisk stress tests credit risks associated derivative contracts significant minimize counterparty concentrations utilize margin accounts letters credit deal creditworthy counterparties additionally derivative contracts mostly shortterm duration generally make use creditriskrelated contingent features significant concentrations credit risk existed september 29 2018 following aggregated outstanding notional amounts related derivative financial instruments recognize derivative instruments either assets liabilities fair value consolidated balance sheets exception normal purchases normal sales expected result physical delivery derivative instruments designated qualify hedging instruments designate hedging instrument based upon exposure hedged ie cash flow hedge fair value hedge designate certain forward contracts follows • cash flow hedges include certain commodity forward option contracts forecasted purchases ie grains interest rate swaps certain foreign exchange forward contracts • fair value hedges include certain commodity forward contracts firm commitments ie livestock cash flow hedges derivative instruments designated hedges changes amount future cash flows related procurement certain commodities utilized production processes well interest rates variable rate debt derivative instruments designate qualify cash flow hedge effective portion gain loss derivative reported component comprehensive income oci reclassified earnings period periods hedged transaction affects earnings gains losses representing hedge ineffectiveness recognized earnings current period ineffectiveness related cash flow hedges significant fiscal 2018 2017 2016 september 29 2018 net pretax losses 11 million commodity contracts 1 million pretax gains related interest swaps expected reclassified earnings within next 12 months fiscal 2018 2017 2016 reclassify significant pretax gains losses earnings result discontinuance cash flow hedges following table sets forth pretax impact cash flow hedge derivative instruments consolidated statements income fair value hedges designate certain derivative contracts fair value hedges firm commitments purchase livestock harvest objective hedges minimize risk changes fair value created fluctuations commodity prices associated fixed price livestock firm commitments derivative instruments designate qualify fair value hedge gain loss derivative well offsetting gain loss hedged item attributable hedged risk recognized earnings period include gain loss hedged items ie livestock purchase firm commitments line item cost sales offsetting gain loss related livestock forward position ineffectiveness related fair value hedges significant fiscal 2018 2017 2016 undesignated positions addition designated positions also hold derivative contracts apply hedge accounting include certain derivative instruments related commodities price risk including grains livestock energy foreign currency risk mark positions fair value earnings reporting date following table sets forth pretax impact undesignated derivative instruments consolidated statements income fair value outstanding derivative instruments consolidated balance sheets included note 13 fair value measurements note 13 fair value measurements fair value defined price would received sell asset paid transfer liability exit price principal advantageous market asset liability orderly transaction market participants measurement date fair value hierarchy contains three levels follows level 1 unadjusted quoted prices available active markets identical assets liabilities measurement date level 2 observable inputs available measurement date quoted prices included level 1 either directly indirectly including • quoted prices similar assets liabilities active markets • quoted prices identical similar assets nonactive markets • inputs quoted prices observable asset liability • inputs derived principally corroborated observable market data level 3 unobservable inputs cannot corroborated observable market data reflect use significant management judgment values generally determined using pricing models assumptions utilize management’s estimates market participant assumptions assets liabilities measured fair value recurring basis fair value hierarchy requires use observable market data available instances inputs used measure fair value fall different levels fair value hierarchy fair value measurement determined based lowest level input significant fair value measurement entirety assessment significance particular item fair value measurement entirety requires judgment including consideration inputs specific asset liability following tables set forth level within fair value hierarchy financial assets liabilities accounted fair value recurring basis according valuation techniques used determine fair values derivative assets liabilities presented consolidated balance sheets net basis legally enforceable master netting arrangement exists counterparty derivative contract us additionally september 29 2018 september 30 2017 18 million 22 million respectively cash collateral posted various counterparties master netting arrangements exist held cash collateral following table provides reconciliation beginning ending balance marketable debt securities measured fair value recurring basis table used significant unobservable inputs level 3 following methods assumptions used estimate fair value class financial instrument derivative assets liabilities derivative financial instruments primarily include exchangetraded overthecounter contracts described note 12 derivative financial instruments record derivative financial instruments fair value using quoted market prices adjusted necessary credit nonperformance risk internal models use readily observable market inputs basis including current forward market prices rates classify instruments level 2 quoted market prices corroborated utilizing observable current forward commodity market prices active exchanges observable market transactions available sale securities investments marketable debt securities classified availableforsale reported fair value based pricing models quoted market prices adjusted credit nonperformance risk shortterm investments maturities less 12 months included current assets consolidated balance sheets primarily include certificates deposit commercial paper marketable debt securities included assets consolidated balance sheets maturities ranging 32 years classify investments us government us agency certificates deposit commercial paper debt securities level 2 fair value generally estimated using discounted cash flow models primarily industrystandard models consider various assumptions including time value yield curve well readily available relevant economic measures classify certain corporate assetbacked debt securities level 3 limited activity less observable inputs valuation models including current interest rates estimated prepayment default recovery rates underlying portfolio structured investment vehicle significant changes assumptions unobservable inputs valuation level 3 instruments would significant impact consolidated financial statements following table sets forth availableforsale securities amortized cost basis fair value unrealized gain loss significant investment category millions unrealized holding gains losses net tax excluded earnings reported oci security settled sold quarterly basis evaluate whether losses related availableforsale securities temporary nature losses equity securities recognized earnings decline value judged temporary losses related debt securities determined temporary loss would recognized earnings intend likely required sell security prior recovery debt securities intent ability hold maturity losses determined temporary would remain oci expected credit losses recognized earnings consider many factors determining whether loss temporary including length time extent fair value cost financial condition nearterm prospects issuer ability intent hold investment period time sufficient allow anticipated recovery recognized temporary impairment earnings fiscal 2018 fiscal 2017 temporary losses deferred oci september 29 2018 september 30 2017 deferred compensation assets maintain nonqualified deferred compensation plans certain executives highly compensated employees investments generally maintained within trust include money market funds mutual funds life insurance policies cash surrender value life insurance policies invested primarily mutual funds investments recorded fair value based quoted market prices included assets consolidated balance sheets classify investments observable market prices active markets level 1 generally publiclytraded mutual funds remaining deferred compensation assets classified level 2 fair value corroborated based observable market data realized unrealized gains losses deferred compensation included earnings assets liabilities measured fair value nonrecurring basis addition assets liabilities recorded fair value recurring basis record assets liabilities fair value nonrecurring basis generally assets recorded fair value nonrecurring basis result impairment charges fiscal 2018 recorded 101 million impairment charges related expected sale nonprotein businesses held sale due revised estimates businesses fair value based current expected net sales proceeds time impairment charges recorded cost sales consolidated statement income primarily consisted goodwill previously classified within assets held sale valuation included unobservable level 3 inputs based expected sales proceeds competitive bidding process ongoing discussions potential buyers fourth quarter fiscal 2017 recorded impairment charge totaling 45 million related one nonprotein businesses held sale due revised estimate business’ fair value based current expected net sales proceeds impairment charge recorded cost sales consolidated statement income fiscal 2017 consisted goodwill intangible assets previously classified within assets held sale valuation included unobservable level 3 inputs based expected sales proceeds following competitive bidding process second quarter fiscal 2017 recorded 52 million impairment charge related san diego prepared foods operation impairment comprised 43 million property plant equipment 8 million definite lived intangibles assets 1 million assets charge 44 million included consolidated statements income cost sales 8 million included consolidated statements income selling general administrative triggered change comanufacturing contract ongoing losses valuation assets primarily based discounted cash flows relieffromroyalty models included unobservable level 3 inputs significant measurements assets liabilities fair value nonrecurring basis subsequent initial recognition fiscal 2016 financial instruments fair value debt principally estimated using level 2 inputs based quoted prices similar instruments fair value carrying value debt follows concentrations credit risk financial instruments exposed concentrations credit risk consist primarily cash equivalents accounts receivable cash equivalents high quality securities placed major banks financial institutions concentrations credit risk respect receivables limited due large number customers dispersion across geographic areas perform periodic credit evaluations customers’ financial condition generally require collateral september 29 2018 september 30 2017 186 net accounts receivable balance due walmart inc single customer group represented greater 10 net accounts receivable note 14 stockbased compensation issue shares stockbased compensation plans issuing class stock treasury total number shares available future grant tyson foods inc 2000 stock incentive plan incentive plan 16150273 september 29 2018 stock options shareholders approved incentive plan january 2001 incentive plan administered compensation leadership development committee board directors compensation committee incentive plan includes provisions granting incentive stock options shares class stock price less fair value date grant nonqualified stock options may granted price equal fair value class stock date option granted stock options incentive plan generally become exercisable ratably three years date grant must exercised within 10 years date grant policy recognize compensation expense straightline basis requisite service period entire award generally grant stock options year weighted average grantdate fair value options granted fiscal 2018 2017 2016 1831 1342 1147 respectively fair value option grant established date grant using binomial lattice method use historical volatility period time comparable expected life option determine volatility assumptions expected life calculated based contractual term grant takes account historical exercise termination behavior participants riskfree interest rates based fiveyear treasury bond rate fiscal 2018 additional grant awarded two executive officers joined company subsequent initial annual grant accordingly assumptions fiscal 2018 calculated using weighted average amounts two fiscal 2018 grants assumptions grant date used fair value calculation year’s grants outlined following table recognized stockbased compensation expense related stock options net income taxes 13 million 22 million 23 million fiscal 2018 2017 2016 respectively related tax benefit fiscal 2018 2017 2016 6 million 14 million 15 million respectively 22 million 41 million 38 million options vest fiscal 2018 2017 2016 respectively grant date fair value 27 million 47 million 38 million respectively fiscal 2018 2017 2016 received cash 102 million 154 million 128 million respectively exercise stock options shares issued treasury stock option exercises related tax benefit realized stock options exercised fiscal 2018 2017 2016 30 million 65 million 80 million respectively total intrinsic value options exercised fiscal 2018 2017 2016 103 million 164 million 204 million respectively cash flows resulting tax deductions excess compensation cost options excess tax deductions classified financing cash flows realized 20 million 42 million 58 million related excess tax deductions fiscal 2018 2017 2016 respectively september 29 2018 18 million total unrecognized compensation cost related stock option plans recognized weighted average period 13 years restricted stock issue restricted stock market value date grant restrictions expiring periods fiscal 2020 unearned compensation recognized vesting period particular grant using straightline method september 29 2018 40 million total unrecognized compensation cost related restricted stock awards recognized weighted average period 19 years recognized stockbased compensation expense related restricted stock net income taxes 22 million 18 million 14 million fiscal 2018 2017 2016 respectively related tax benefit fiscal 2018 2017 2016 9 million 11 million 9 million respectively 06 million 05 million 02 million restricted stock awards vest fiscal 2018 2017 2016 respectively grant date fair value 27 million 19 million 4 million respectively performancebased shares award performancebased shares class stock certain employees awards typically granted year performancebased shares vest based upon passage time achievement performance market performance criteria ranging 0 200 determined compensation committee prior date award vesting periods awards three years review progress toward attainment performance criteria quarter vesting period probable minimum performance criteria award achieved begin recognizing expense equal proportionate share total fair value class stock price grant date total expense recognized duration performance awards equal class stock price date grant multiplied number shares ultimately awarded based level attainment performance criteria grants market performance criteria fair value determined grant date calculated using inputs expected volatility expected dividend yield riskfree rate stock options noted duration three years total expense recognized duration award equal fair value regardless market performance criteria met following table summarizes performancebased shares maximum award amounts based upon respective performance share agreements actual shares vest depend level attainment performancebased criteria recognized stockbased compensation expense related performance shares net income taxes 12 million 16 million 11 million fiscal 2018 2017 2016 respectively related tax benefit fiscal 2018 2017 2016 5 million 10 million 7 million respectively september 29 2018 25 million total unrecognized compensation based upon progress toward attainment criteria related performancebased share awards recognized weighted average period 18 years note 15 pensions postretirement benefits september 29 2018 nine defined benefit pension plans consisting six funded qualified plans frozen noncontributory three unfunded nonqualified plans benefits provided plans based formula using years service either specified benefit rate compensation level nonqualified defined benefit plans certain contracted officers use formula based years service final average salary also postretirement benefit plans substantially employees may receive benefits satisfy applicable eligibility criteria postretirement healthcare plans contributory participants’ contributions adjusted deemed necessary defined contribution retirement programs various groups employees recognized expenses 84 million 78 million 67 million fiscal 2018 2017 2016 respectively use fiscal year end measurement date defined benefit plans postretirement plans recognize effect actuarial gains losses earnings immediately postretirement plans rather amortizing effect future periods postretirement benefits include postretirement medical costs life insurance second quarter fiscal 2017 issued notice intent terminate two qualified pension plans termination date april 30 2017 settlements terminated plans occur first quarter fiscal 2019 purchased annuities made minimal additional contributions preparation estimated 21 million onetime settlement charge final liquidation additionally subsequent fiscal year ended september 29 2018 issued notice intent terminate three qualified pension plans termination dates first quarter fiscal 2019 settlements plans expected occur fiscal 2020 purchased annuities since amount settlement depends number factors determined liquidation date including annuity pricing interest rate environment asset experience currently unable determine ultimate cost settlement however based current market rates onetime settlement gain final liquidation estimated range approximately 35 million 55 million contributions purchase annuities time settlement expected range approximately 5 million 25 million based current market conditions plan september 29 2018 benefit obligations funded status following table provides reconciliation changes plans’ benefit obligations assets funded status september 29 2018 september 30 2017 amounts recognized consolidated balance sheets consist amounts recognized accumulated comprehensive income consist change prior service credit primarily attributed plan amendments postretirement benefits noted within change benefit obligation remainder change immaterial five pension plans september 29 2018 september 30 2017 accumulated benefit obligation excess plan assets plans accumulated benefit obligations excess plan assets follows accumulated benefit obligation qualified pension plans 1392 million 1477 million september 29 2018 september 30 2017 respectively net periodic benefit cost credit components net periodic benefit cost credit pension postretirement benefit plans recognized consolidated statements income follows september 29 2018 amounts expected reclassified earnings within next 12 months related net periodic benefit cost credit qualified nonqualified pension plans excluding pending settlements 1 million 3 million respectively september 29 2018 amount expected reclassified earnings within next 12 months related net periodic benefit credit postretirement benefits 11 million assumptions weighted average assumptions follows determine expected return plan assets assumption first examined historical rates return various asset classes within plans determined longterm projected rateofreturn based expected returns discount rate assumptions used account pension postretirement benefit plans reflect rates benefit obligations could effectively settled determined using cash flow matching technique whereby rates yield curve developed highquality debt securities applied benefit obligations determine appropriate discount rate periods presented pension postretirement benefit plans used rp2014 mortality tables five postretirement benefit plans healthcare life insurance related two plans benefit obligations totaling 17 million september 29 2018 impacted healthcare cost trend rates one consists fixed annual payments one life insurance related two healthcare plans benefit obligations less 1 million september 29 2018 impacted healthcare cost trend rates due previous plan amendments remaining plan benefit obligation totaling 10 million september 29 2018 utilized assumed healthcare cost trend rate 76 healthcare cost trend rate grading ultimate rate 45 2027 onepercentagepoint change assumed healthcare cost trend rates would following effects plan assets following table sets forth actual target asset allocation pension plan assets additionally one foreign subsidiary pension plans 30 million 28 million plan assets held insurance trust september 29 2018 september 30 2017 respectively plan trustees established set investment objectives related assets domestic pension plans regularly monitor performance funds portfolio managers 100 target asset allocation fixed income securities based upon intent terminate plans domestic plan assets consist mainly common collective trusts primarily comprised fixed income funds equity securities investments fixed income securities include limited direct bond investments pooled indirect bond investments may include limited international domestic equities real estate commodities private equity derivative instruments may also used concert either fixed income equity investments achieve desired exposure hedge certain risks derivative instruments include limited futures options swaps swaptions domestic plan assets also include mutual funds believe significant concentrations risk within plan assets september 29 2018 following tables show categories pension plan assets level fair values determined fair value hierarchy described note 13 fair value measurements classify insurance contracts level 3 limited activity less observable inputs valuation models including current interest rates estimated prepayment default recovery rates underlying portfolio structured investment vehicle insurance contracts valued using plan’s assumptions market participants would use pricing assets based best information available investment manager pricing significant changes assumptions unobservable inputs valuation level 3 instruments would significant impact consolidated financial statements b funds measured fair value using net asset value nav per share practical expedient categorized fair value hierarchy amounts presented intended permit reconciliation fair value hierarchy fair value total plan assets order determine amounts included assets liabilities consolidated balance sheets reconciliation change fair value measurement defined benefit plans’ consolidated assets using significant unobservable inputs level 3 follows contributions policy fund least minimum contribution required meet applicable federal employee benefit local tax laws sole discretion may time fund additional amounts expected contributions pension plans fiscal 2019 approximately 15 million fiscal 2018 2017 2016 funded 29 million 53 million 64 million respectively pension plans estimated future benefit payments following benefit payments expected paid benefit payments postretirement benefit plans expected offset medicare part subsidies fiscal 2019 benefit payments include anticipated payments plan termination within two qualified pension plans plan termination process plans began april 30 2017 full settlement expected occur first quarter fiscal 2019 2020 benefit payments include anticipated accelerated payments plan termination within three qualified pension plans plan termination process one plans began october 1 2018 remaining two plans expected begin december 31 2018 full settlement expected occur fiscal 2020 multiemployer plans additionally participate multiemployer plan provides defined benefits certain employees covered collective bargaining agreements plans usually administered board trustees composed management participating companies labor representatives risks participating multiemployer plans different singleemployer plans assets contributed multiemployer plan one employer may used provide benefits employees participating employers participating employer stops contributing plan unfunded obligation plan may borne remaining participating employers stop participating plan may required pay plan amount based underfunded status plan referred withdrawal liability contributions multiemployer pension funds excess 5 total plan contributions plan year 2018 excess 5 total plan contributions plan years 2017 2016 net pension cost plan equal annual contribution determined accordance provisions negotiated labor contracts contributions plan 2 million fiscal 2018 2017 assets contributed plans segregated otherwise restricted provide benefits employees future cost plan dependent number factors including funded status plan ability participating companies meet ongoing funding obligations participation multiemployer plan fiscal 2018 outlined einpension plan number column provides employer identification number ein threedigit plan number unless otherwise noted recent pension protection act ppa zone status available fiscal 2018 fiscal 2017 plans year beginning january 1 2018 2017 respectively zone status based information received plan certified plans actuaries zone status secondary classification critical declining within red zone fiscal 2018 among factors plans red zone generally less 65 percent funded plans critical declining status projected accumulated funding deficiency fiprp status column indicates plans financial improvement plan fip rehabilitation plan rp either pending implemented last column lists expiration dates collectivebargaining agreements plan subject significant changes affect comparability contributions year addition regular contributions could obligated pay additional contributions known complete partial withdrawal liabilities unfunded vested benefits renewal negotiations progress note 16 comprehensive income loss components accumulated comprehensive loss follows 1 includes reclass accumulated comprehensive income retained earnings stranded tax effects resulting tax act following adoption applicable new accounting standard refer part ii item 8 notes consolidated financial statements note 2 changes accounting principles tax changes components comprehensive income loss follows note 17 segment reporting operate four reportable segments beef pork chicken prepared foods measure segment profit operating income loss primarily includes foreign chicken production operations china thirdparty merger integration costs corporate overhead related tyson new ventures llc fiscal 2017 acquired consolidated advancepierre producer distributor valueadded convenient readytoeat sandwiches sandwich components entrées snacks fiscal 2018 acquired original philly valued added protein business results operations businesses included prepared foods chicken segments fiscal 2018 acquired tecumseh vertically integrated valueadded protein business american proteins poultry rendering blending operation part strategic expansion sustainability initiatives results operations businesses included chicken segment description transactions refer part ii item 8 notes consolidated financial statements note 3 acquisitions dispositions fiscal 2018 completed sale four nonprotein businesses part strategic focus protein brands businesses part prepared foods segment included sara lee® frozen bakery kettle van’s® tnt crust produced items frozen desserts waffles snack bars soups sauces sides pizza crusts sales included chef pierre® bistro collection® kettle collection™ van’s® brands license use sara lee® brand various channels well tarboro north carolina fort worth texas traverse city michigan green bay wisconsin prepared foods facilities description transactions refer part ii item 8 notes consolidated financial statements note 3 acquisitions dispositions beef includes operations related processing live fed cattle fabricating dressed beef carcasses primal subprimal meat cuts caseready products marketed domestically food retailers foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments schools healthcare facilities military food processors well international export markets segment also includes sales allied products hides variety meats well logistics operations move products supply chain pork includes operations related processing live market hogs fabricating pork carcasses primal subprimal cuts caseready products marketed domestically food retailers foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments schools healthcare facilities military food processors well international export markets segment also includes live swine group related allied product processing activities logistics operations move products supply chain chicken includes domestic operations related raising processing live chickens purchasing raw materials fresh frozen valueadded chicken products well sales allied products valueadded chicken products primarily include breaded chicken strips nuggets patties readytofix fully cooked chicken parts products marketed domestically food retailers foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments schools convenience stores healthcare facilities military food processors well international export markets segment also includes logistics operations move products domestic supply chain global operations chicken breeding stock subsidiary prepared foods prepared foods includes operations related manufacturing marketing frozen refrigerated food products logistics operations move products supply chain segment includes brands jimmy dean® hillshire farm® ball park® wright® state fair® well artisanal brands aidells® gallo salame® golden island® products primarily include readytoeat sandwiches sandwich components flamegrilled hamburgers philly steaks pepperoni bacon breakfast sausage turkey lunchmeat hot dogs flour corn tortilla products appetizers snacks prepared meals ethnic foods side dishes meat dishes breadsticks processed meats products marketed domestically food retailers foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments schools convenience stores healthcare facilities military food processors well international export markets allocate expenses related corporate activities segments except thirdparty merger integration costs 26 million 67 million 37 million fiscal 2018 2017 2016 respectively corporate overhead related tyson new ventures llc included assets additions property plant equipment relating corporate activities remain september 30 2017 included 3 billion unallocated goodwill associated acquisition advancepierre completed allocation goodwill segments fiscal 2018 additionally september 29 2018 completed allocation goodwill associated fiscal 2018 acquisitions refer note 5 goodwill intangible assets description information segments reconciliation income continuing operations income taxes follows beef segment sales 420 million 386 million 327 million fiscal 2018 2017 2016 respectively transactions operating segments pork segment sales 817 million 966 million 840 million fiscal 2018 2017 2016 respectively transactions operating segments chicken segment sales 80 million 60 million 27 million fiscal 2018 2017 2016 respectively transactions operating segments aforementioned sales intersegment transactions market prices included segment sales table largest customer walmart inc accounted 173 175 consolidated sales fiscal 2018 2017 2016 respectively sales walmart inc included segments extended discontinuance sales customer could replaced material impact operations majority operations domiciled united states approximately 99 98 sales external customers fiscal 2018 2017 2016 respectively sourced united states approximately 232 billion 216 billion longlived assets located united states september 29 2018 september 30 2017 respectively excluding goodwill intangible assets longlived assets located united states totaled approximately 67 billion 60 billion september 29 2018 september 30 2017 respectively approximately 212 million 217 million longlived assets located foreign countries primarily brazil china european union new zealand september 29 2018 september 30 2017 respectively excluding goodwill intangible assets longlived assets foreign countries totaled approximately 201 million 193 million september 29 2018 september 30 2017 respectively sell certain products foreign markets primarily canada central america china european union japan mexico middle east south korea taiwan export sales united states totaled 42 billion 39 billion 35 billion fiscal 2018 2017 2016 respectively substantially export sales facilitated unaffiliated brokers marketing associations foreign sales staffs sales products produced country united states less 10 consolidated sales fiscal 2018 2017 2016 note 18 supplemental cash flows information following table summarizes cash payments interest income taxes note 19 transactions related parties operating leases two wastewater facilities entity owned donald j tyson revocable trust mr john tyson chairman company trustee berry street waste water treatment plant lp 90 owned tlp sisters mr tyson total payments approximately 1 million fiscal 2018 2017 2016 paid lease facilities september 29 2018 tlp john tyson director barbara tyson general partners owned 70 million shares 99985 outstanding class b stock along members tyson family owned 62 million shares class stock giving control approximately 7096 total voting power outstanding voting stock august 2017 company committed invest 5 million 175 equity interest buchan ltd mauritian private holding company poultry operations subsaharan africa acacia foods bv committed invest 9 million buchan ltd donnie smith first quarter fiscal year 2017 chief executive officer company serves chairman acacia foods bv director buchan ltd john randal tyson son john tyson serves director buchan ltd company completed funding commitment fiscal 2018 fiscal 2018 company provided administrative services tyson limited partnership beneficial owner 70 million shares class b stock tyson limited partnership tlp investment lp reimbursed company 03 million note 20 commitments contingencies commitments lease equipment properties certain farms total rentals approximated 200 million 186 million 172 million fiscal 2018 2017 2016 respectively leases initial terms seven years varying renewal periods significant obligations assumed terms leases upkeep facilities payments insurance property taxes minimum lease commitments noncancelable leases september 29 2018 guarantee obligations certain outside third parties consisting primarily leases debt grower loans substantially collateralized underlying assets terms underlying debt cover periods 10 years maximum potential amount future payments september 29 2018 16 million also maintain operating leases various types equipment contain residual value guarantees market value underlying leased assets end term lease remaining terms lease maturities cover periods next 10 years maximum potential amount residual value guarantees 91 million could recoverable various recourse provisions including based fair value underlying leased assets likelihood material payments guarantees considered probable september 29 2018 september 30 2017 material liabilities guarantees recorded cash flow assistance programs certain livestock suppliers participate programs pay amount livestock equivalent standard cost grow livestock periods low market sales prices amounts payments excess market sales price recorded receivables accrue interest participating suppliers obligated repay receivables balances market sales prices exceed standard cost upon termination agreement potential maximum obligation associated programs limited fair value participating livestock supplier’s net tangible assets potential maximum obligation september 29 2018 approximately 300 million total receivables programs 6 million september 29 2018 receivables programs september 30 2017 receivable included net allowance uncollectible amounts accounts receivable consolidated balance sheets even though programs limited net tangible assets participating livestock suppliers also manage portion credit risk associated programs obtaining security interests livestock suppliers’ assets analyzing residual credit risks general market conditions allowance programs estimated uncollectible receivables september 29 2018 september 30 2017 constructing new facilities making major enhancements existing facilities occasionally enter incentive agreements local government agencies order reduce certain state local tax expenditures agreements transfer related assets various local government entities receive industrial revenue bonds immediately lease facilities local government entities option repurchase facilities nominal amount upon tendering industrial revenue bonds local government entities various predetermined dates industrial revenue bonds associated obligations leases facilities offset underlying assets remain property plant equipment september 29 2018 total amounts types arrangements totaled 636 million enter agreements growers fixed variable payment structures generally cancelable based flocks placed growers grower commitments september 29 2018 additionally enter purchase commitments various items grains livestock contracts september 29 2018 contingencies involved various claims legal proceedings routinely assess likelihood adverse judgments outcomes matters well ranges probable losses extent losses reasonably estimable record accruals matters extent conclude loss probable financial impact adverse outcome occur reasonably estimable accruals reflected company’s consolidated financial statements opinion made appropriate adequate accruals matters unless noted otherwise believe probability material loss beyond amounts accrued remote however ultimate liability matters uncertain accruals adequate adverse outcome could material effect consolidated financial condition results operations listed certain claims made company andor subsidiaries potential exposure considered material company’s consolidated financial statements believe substantial defenses claims made intend vigorously defend matters september 2 2016 maplevale farms inc acting behalf putative class direct purchasers poultry products filed class action complaint us certain poultry subsidiaries well several poultry processing companies northern district illinois subsequent filing initial complaint additional lawsuits making similar claims behalf putative classes direct indirect purchasers filed united states district court northern district illinois court consolidated complaints pretrial purposes actions behalf three different putative classes direct purchasers indirect purchasersconsumers commercialinstitutional indirect purchasers three actions styled broiler chicken antitrust litigation several amended consolidated complaints filed behalf putative class currently operative complaints allege among things beginning january 2008 defendants conspired combined fix raise maintain stabilize price broiler chickens violation united states antitrust laws complaints behalf putative classes indirect purchasers also include causes action various state unfair competition laws consumer protection laws unjust enrichment common laws complaints also allege defendants “manipulated artificially inflated widely used broiler price index georgia dock” alleged defendants concealed conduct plaintiffs members putative classes plaintiffs seeking treble damages injunctive relief pre postjudgment interest costs attorneys’ fees behalf putative classes court issued ruling november 20 2017 denying defendants’ motions dismiss litigation currently discovery phase decisions class certification summary judgment motions likely filed defendants expected latter part calendar year 2020 scheduling order currently governing case scheduling trial necessary occur rulings class certification summary judgment motions certain putative class members opted matter proceeding separately others may future march 1 2017 received civil investigative demand cid office attorney general department legal affairs state florida cid requests information primarily related possible anticompetitive conduct connection georgia dock chicken products pricing index formerly published georgia department agriculture cooperating attorney general’s office june 18 2018 wanda duryea matthew hosking john mckee lisa melegari michael reilly sandra steffan paul glantz edwin blakey jennifer sullivan lisa axelrod anbessa tufa christina hall acting behalf individually behalf putative plaintiff class consisting persons entities indirectly purchased pork filed class action complaint us certain pork subsidiaries well several pork processing companies federal district court district minnesota subsequent filing initial complaint additional lawsuits making similar claims behalf putative classes direct indirect purchasers also filed court complaints allege among things beginning january 2009 defendants conspired combined fix raise maintain stabilize price pork products violation united states antitrust laws complaints behalf putative classes indirect purchasers also include causes action various state unfair competition laws consumer protection laws unjust enrichment common laws plaintiffs seeking treble damages injunctive relief pre postjudgment interest costs attorneys’ fees behalf putative classes direct purchaser actions indirect purchaser actions consolidated pretrial purposes october 23 2018 defendants filed motions dismiss complaints subsidiary hillshire brands company formerly named sara lee corporation party consolidation cases filed individual complainants republic philippines department labor employment national labor relations commission nlrc 1998 july 1999 complaint filed aris philippines inc sara lee corporation sara lee philippines inc fashion accessories philippines inc attorney cesar c cruz collectively “respondents” complaint alleges among things respondents engaged unfair labor practices connection termination manufacturing operations philippines 1995 aris philippines inc former subsidiary hillshire brands company late 2004 labor arbiter ruled respondents awarded complainants php3453664710 approximately us64 million damages fees respondents appealed labor arbiters ruling subsequently set aside nlrc december 2006 subsequent nlrc’s decision parties filed numerous appeals motions reconsideration petitions review certain remained outstanding several years various appeals motions andor petitions pending hillshire brands company june 23 2014 without admitting liability filed settlement motion requesting supreme court philippines order dismissal prejudice claims certain respondents exchange payments allocated court among complainants amount exceed php342287800 approximately us63 million based part finding consideration paid complainants part settlement insufficient supreme court philippines denied respondents’ settlement motion motions reconsideration thereof supreme court philippines also set aside premature nlrc’s december 2006 ruling result cases remanded back nlrc rule merits case december 15 2016 learned nlrc rendered decision november 29 2016 regarding respondents’ appeals regarding labor arbiter’s 2004 ruling favor complainants nlrc increased award 4922 total 5984 complainants php14858495937 approximately us 275 million however nlrc approved prior settlement reached group comprising approximately 18 class 5984 complainants pursuant hillshire brands company agreed pay settling complainant php68000 approximately us 1300 settlement payment made december 21 2016 nlrc responsible distributing funds settling complainant december 27 2016 respondents filed motions reconsideration nlrc asking award set aside nlrc denied respondents motions reconsideration resolution received may 5 2017 entered judgment award july 24 2017 aris philippines inc sara lee corporation sara lee philippines inc appealed award sought injunction preclude enforcement award philippines court appeals november 23 2017 court appeals granted writ preliminary injunction precluded execution nlrc award pendency appeal court appeals subsequently vacated nlrc’s award april 12 2018 complainants filed motions reconsideration court appeals motions denied court appeals’ decision nevertheless remains subject appeal supreme court philippines continue maintain accrual matter hillshire brands company named defendant asbestos exposure case filed mark lopez may 2014 superior court alameda county california mr lopez diagnosed mesothelioma january 2014 deceased mr lopez’s family members asserted negligence premises liability strict liability claims related mr lopez’s alleged asbestos exposure 19541986 union sugar plant betteravia california plant sold 1986 owned entities predecessorsininterest hillshire brands company august 2017 jury returned verdict approximately 13 million favor plaintiffs judgment entered appealed judgment filed initial appellate brief note 21 quarterly financial data unaudited first quarter fiscal 2018 net income included 994 million post tax recognition tax benefit remeasurement net deferred tax liabilities lower enacted tax rates 4 million pretax impairment charge net realized gain related divestiture nonprotein businesses 19 million pretax restructuring related charges second quarter fiscal 2018 net income included 9 million post tax recognition tax benefit remeasurement net deferred tax liabilities lower enacted tax rates 75 million pretax impairment charge related divestiture nonprotein businesses 109 million onetime cash bonus frontline employees 12 million pretax restructuring related charges third quarter fiscal 2018 net income included 14 million pretax restructuring related charges fourth quarter fiscal 2018 net income included 11 million pretax realized gain related divestiture nonprotein business 14 million pretax restructuring related charges second quarter fiscal 2017 net income included 52 million pretax impairment charge related san diego prepared foods operation third quarter fiscal 2017 net income included 77 million pretax expense advancepierre purchase accounting acquisition related costs included 24 million purchase accounting adjustment amortization fair value stepup inventory related advancepierre 35 million acquisition related costs 18 million acquisition bridge financing fees third quarter fiscal 2017 net income included post tax 26 million recognition tax benefit related expected sale nonprotein business fourth quarter fiscal 2017 net income included 150 million pretax restructuring related charges 45 million pretax impairment related expected sale nonprotein business 26 million pretax expense advancepierre purchase accounting acquisition related costs included 12 million purchase accounting adjustment amortization fair value stepup inventory related advancepierre 14 million acquisition related costs report independent registered public accounting firm board directors shareholders tyson foods inc opinions financial statements internal control financial reporting audited accompanying consolidated balance sheets tyson foods inc subsidiaries september 29 2018 september 30 2017 related consolidated statements income comprehensive income shareholders’ equity cash flows three years period ended september 29 2018 including related notes schedule valuation qualifying accounts three years period ended september 29 2018 appearing item 15 collectively referred consolidated financial statements also audited companys internal control financial reporting september 29 2018 based criteria established internal control integrated framework 2013 issued committee sponsoring organizations treadway commission coso opinion consolidated financial statements referred present fairly material respects financial position company september 29 2018 september 30 2017 results operations cash flows three years period ended september 29 2018 conformity accounting principles generally accepted united states america also opinion company maintained material respects effective internal control financial reporting september 29 2018 based criteria established internal control integrated framework 2013 issued coso basis opinions companys management responsible consolidated financial statements maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included managements annual report internal control financial reporting appearing item 9a responsibility express opinions companys consolidated financial statements companys internal control financial reporting based audits public accounting firm registered public company accounting oversight board united states pcaob required independent respect company accordance us federal securities laws applicable rules regulations securities exchange commission pcaob conducted audits accordance standards pcaob standards require plan perform audits obtain reasonable assurance whether consolidated financial statements free material misstatement whether due error fraud whether effective internal control financial reporting maintained material respects audits consolidated financial statements included performing procedures assess risks material misstatement consolidated financial statements whether due error fraud performing procedures respond risks procedures included examining test basis evidence regarding amounts disclosures consolidated financial statements audits also included evaluating accounting principles used significant estimates made management well evaluating overall presentation consolidated financial statements audit internal control financial reporting included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk audits also included performing procedures considered necessary circumstances believe audits provide reasonable basis opinions definition limitations internal control financial reporting company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles company’s internal control financial reporting includes policies procedures pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company ii provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company iii provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate pricewaterhousecoopers llp fayetteville arkansas november 13 2018 served company’s auditor since 2009 item 9item 8 financial statements supplementary data tyson foods inc consolidated statements income see accompanying notes tyson foods inc consolidated statements comprehensive income see accompanying notes tyson foods inc consolidated balance sheets see accompanying notes tyson foods inc consolidated statements shareholders’ equity 1 reclass accumulated comprehensive income retained earnings stranded tax effects resulting tax act following adoption applicable new accounting standard fiscal year ended september 29 2018 see accompanying notes tyson foods inc consolidated statements cash flows see accompanying notes consolidated financial statements tyson foods inc note 1 business summary significant accounting policies description business tyson foods inc collectively “company” “we” “us” “our” one worlds largest food companies recognized leader protein founded 1935 john w tyson grown three generations family leadership company broad portfolio products brands including tyson® jimmy dean® hillshire farm® ball park® wright® aidells® ibp® state fair® innovate continually make protein sustainable tailor food everywhere it’s available raise world’s expectations much good food consolidation consolidated financial statements include accounts whollyowned subsidiaries well majorityowned subsidiaries exercise control applicable entities controlling financial interest variable interest entities primary beneficiary significant intercompany accounts transactions eliminated consolidation fiscal year utilize 52 53week accounting period ending saturday closest september 30 company’s accounting cycle resulted 52week year fiscal 2019 fiscal 2018 fiscal 2017 cash equivalents cash equivalents consist investments shortterm highly liquid securities original maturities three months less made part cash management activity carrying values assets approximate fair values primarily utilize cash management system series separate accounts consisting lockbox accounts receiving cash concentration accounts funds moved several zerobalance disbursement accounts funding payroll accounts payable livestock procurement livestock grower payments etc result cash management system checks issued presented banks payment may result negative book cash balances negative book cash balances included accounts payable current liabilities september 28 2019 september 29 2018 checks outstanding excess related book cash balances totaled approximately 200 million 220 million respectively accounts receivable record accounts receivable net realizable value includes appropriate allowance estimated uncollectible accounts reflect loss anticipated accounts receivable balances charged provision doubtful accounts calculate allowance based history writeoffs level past due accounts relationships economic status customers september 28 2019 september 29 2018 allowance uncollectible accounts 21 million 19 million respectively generally collateral receivables periodically evaluate credit worthiness customers inventories processed products livestock supplies valued lower cost net realizable value cost includes purchased raw materials live purchase costs livestock growout costs primarily feed livestock grower pay catch haul costs labor manufacturing production overhead related purchase production inventories fiscal 2019 fiscal 2018 cost inventories determined either firstin firstout fifo method weightedaverage method following table reflects major components inventory september 28 2019 september 29 2018 property plant equipment property plant equipment stated cost generally depreciated straightline method estimated lives buildings leasehold improvements 10 33 years machinery equipment 3 12 years land improvements 3 20 years major repairs maintenance costs significantly extend useful life related assets capitalized normal repairs maintenance costs charged operations review carrying value longlived assets balance sheet date indication impairment exists recoverability assessed using undiscounted cash flows based historical results current projections earnings interest taxes depreciation amortization measure impairment excess carrying value fair value asset fair value asset generally measured using discounted cash flows including market participant assumptions future operating results discount rates goodwill intangible assets definite life intangibles initially recorded fair value amortized estimated period benefit brands trademarks generally amortized using straightline method 20 years less customer relationships supply arrangements generally amortized 7 30 years based pattern revenue expected generated use asset gross cost accumulated amortization intangible assets removed recorded amounts fully amortized asset longer use contract expired amortization expense generally recognized selling general administrative expense review carrying value definite life intangibles balance sheet date indication impairment exists recoverability assessed using undiscounted cash flows based historical results current projections earnings interest taxes depreciation amortization measure impairment excess carrying value fair value definite life intangible asset use various valuation techniques estimate fair value primary techniques discounted cash flows relieffromroyalty multiperiod excess earnings valuation approaches use significant unobservable inputs level 3 inputs defined fair value hierarchy valuation approaches required make estimates assumptions sales operating margins growth rates royalty rates discount rates based budgets business plans economic projections anticipated future cash flows marketplace data goodwill indefinite life intangible assets initially recorded fair value amortized reviewed impairment least annually frequently impairment indicators arise goodwill allocated reporting unit evaluated impairment first performing qualitative assessment determine whether quantitative goodwill test necessary determined based qualitative factors fair value reporting unit may likely less carrying amount significant changes macroeconomic factors related reporting unit occurred could materially impact fair value quantitative goodwill impairment test would required additionally elect forgo qualitative assessment perform quantitative test quantitative test identify potential impairment exists comparing fair value reporting unit carrying amount including goodwill carrying amount reporting unit exceeds fair value impairment loss recognized amount equal excess exceed carrying amount goodwill estimate fair value reporting units using combination various valuation techniques including income approach discounted cash flow analysis market approaches earnings interest taxes depreciation amortization ebitda multiples comparable publiclytraded companies precedent transactions primary technique discounted cash flow analysis approaches use significant unobservable inputs level 3 inputs defined fair value hierarchy requires us make various judgmental assumptions sales operating margins growth rates discount rates consider budgets business plans economic projections believed reflect market participant views would exist exit transaction assumptions also made varying perpetual growth rates periods beyond longterm business plan period generally utilize normalized operating margin assumptions based future expectations operating margins historically realized reporting units industries inherent estimates assumptions used determining fair value reporting units outside control management including interest rates cost capital tax rates market ebitda comparables credit ratings believe made reasonable estimates assumptions calculate fair value reporting units possible material change could occur actual results consistent estimates assumptions used calculate fair value could result additional material impairments goodwill fiscal 2019 2018 2017 determined none material reporting units fair values carrying value indefinite life intangible assets qualitative assessment also performed determine whether existence events circumstances indicates likely intangible asset impaired similar goodwill also elect forgo qualitative test indefinite life intangible assets perform quantitative test upon performing quantitative test carrying value intangible asset exceeds fair value impairment loss recognized amount equal excess fair value indefinite life intangible assets calculated principally using relieffromroyalty multiperiod excess earnings valuation approaches use significant unobservable inputs level 3 inputs defined fair value hierarchy believed reflect market participant views would exist exit transaction valuation approaches required make estimates assumptions sales operating margins growth rates royalty rates discount rates based budgets business plans economic projections anticipated future cash flows marketplace data fiscal 2019 2018 2017 determined fair value indefinite life intangible assets exceeded carrying value discount rate used indefinite life intangible test decreased 75 fiscal 2019 82 fiscal 2018 investments joint ventures entities equity method accounting used entities exercise significant influence controlling interest variable interest primary beneficiary investments accounted using equity method readily determinable fair values qualify practical expedient measure investment using net asset value per share investments recorded using measurement alternative equity interests recorded cost less impairments adjusted observable price changes orderly transactions identical similar investment issuer reporting period assess investments continue qualify measurement alternative impairment recorded evidence expected fair value investment declined recorded cost adjustments carrying value recorded net consolidated statements income investments joint ventures entities reported consolidated balance sheets assets also investments marketable debt securities determined marketable debt securities availableforsale investments reported fair value based quoted market prices balance sheet date unrealized gains losses net tax recorded comprehensive income amortized cost debt securities adjusted amortization premiums accretion discounts maturity amortization recorded interest income cost securities sold based specific identification method realized gains losses sale debt securities declines value judged temporary recorded net basis income interest dividends securities classified availableforsale recorded interest income accrued selfinsurance use combination insurance selfinsurance mechanisms effort mitigate potential liabilities health welfare workers’ compensation auto liability general liability risks liabilities associated risks retained estimated part considering claims experience demographic factors severity factors actuarial assumptions current liabilities current liabilities september 28 2019 september 29 2018 include defined benefit plans recognize funded status defined pension postretirement plans consolidated balance sheets funded status measured difference fair value plan assets benefit obligation measure plan assets liabilities end fiscal year defined benefit pension plan benefit obligation projected benefit obligation defined benefit postretirement plan retiree health care plan benefit obligation accumulated postretirement benefit obligation overfunded status recognized asset underfunded status recognized liability transitional assetliability prior service cost actuarial gainloss yet recognized component net periodic cost recognized accumulated comprehensive income accumulated comprehensive income adjusted amounts subsequently recognized component net periodic benefit costs future periods derivative financial instruments purchase certain commodities grains livestock course normal operations part commodity risk management activities use derivative financial instruments primarily futures options reduce exposure various market risks related purchases well changes foreign currency exchange interest rates contract terms financial instrument qualifying hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts designated highly effective meeting risk reduction correlation criteria recorded using hedge accounting derivative instrument accounted hedge depending nature hedge changes fair value instrument offset either change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion instrument’s change fair value immediately recognized earnings component cost sales instruments hold part risk management activities meet criteria hedge accounting marked fair value unrealized gains losses reported currently earnings changes market value derivatives used risk management activities relating forward sales contracts recorded sales changes market value derivatives used risk management activities surrounding inventories hand anticipated purchases inventories recorded cost sales changes market value derivatives used risk management activities related interest rates recorded interest expense changes market value derivatives used risk management activities related foreign exchange contracts recorded net generally hedge anticipated transactions beyond 18 months litigation reserves variety legal proceedings pending threatened us accruals recorded probable liability incurred amount liability reasonably estimated based current law progress case opinions views legal counsel advisers experience similar matters intended response litigation amounts discounted exclusive claims third parties adjusted periodically assessment efforts progress additional information becomes available expense amounts administering litigating claims incurred accruals legal proceedings included current liabilities consolidated balance sheets revenue recognition recognize revenue mainly consumer products retail foodservice international industrial distribution channels revenues primarily result contracts customers generally short term nature delivery product single performance obligation recognize revenue sale product point time performance obligation satisfied control product transferred customer generally occurs upon shipment delivery customer based terms sale elected account shipping handling activities occur customer obtained control product fulfillment cost rather additional promised service contracts generally less one year therefore recognize costs paid third party brokers obtain contracts expenses additionally items material context contract recognized expense taxes collected behalf government authorities excluded net revenues revenue measured transaction price defined amount consideration expect receive exchange providing goods customers transaction price adjusted estimates known expected variable consideration includes consumer incentives trade promotions allowances coupons discounts rebates volumebased incentives cooperative advertising programs variable consideration related programs recorded reduction revenue based amounts expect pay base estimates current performance historical utilization projected redemption rates program review update estimates regularly incentives product returns realized impact adjustments recognized period adjustments identified many cases key sales terms pricing quantities ordered established regular basis customer arrangements related incentives duration less one year amounts billed due customers short term nature classified receivables since payments unconditional passage time required payments due additionally grant payment financing terms greater one year freight expense associated products shipped customers recognized cost sales advertising expenses advertising expense charged operations period incurred recorded selling general administrative expense advertising expense totaled 276 million 243 million 238 million fiscal 2019 2018 2017 respectively research development research development costs expensed incurred research development costs totaled 97 million 114 million 113 million fiscal 2019 2018 2017 respectively business combinations account acquired businesses using acquisition method accounting requires control business obtained 100 assets acquired liabilities assumed including amounts attributable noncontrolling interests recorded date acquisition respective fair values excess purchase price estimated fair values net assets acquired recorded goodwill acquisitionrelated expenses including transaction integration costs expensed incurred use various models determine value assets acquired net realizable value inventory cost method market approach value property relieffromroyalty multiperiod excess earnings value intangibles discounted cash flow value goodwill make estimates assumptions projected future cash flows including sales operating margins attrition rates growth rates discount rates based historical results business plans expected synergies perceived risk market place data considering perspective marketplace participants determining useful life intangible asset also requires judgment different types intangible assets different useful lives certain assets may considered indefinite useful lives use estimates consolidated financial statements prepared conformity accounting principles generally accepted united states require us make estimates assumptions affect amounts reported consolidated financial statements accompanying notes actual results could differ estimates recently issued accounting pronouncements august 2017 financial accounting standards board fasb issued guidance eases certain documentation assessment requirements hedge effectiveness modifies accounting components excluded assessment modifications include ineffectiveness derivative gainloss highly effective cash flow hedges recorded comprehensive income alignment recognition presentation effects related hedging instrument hedged item financial statements additional disclosures required cumulative basis adjustment fair value hedges effect hedging financial statement lines components excluded assessment amendment also simplifies application hedge accounting certain situations permit new hedging strategies eligible hedge accounting guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2018 fiscal 2020 modified retrospective transition method applied adopt guidance beginning first quarter fiscal 2020 upon adoption expect guidance material impact consolidated financial statements june 2016 fasb issued guidance provides decisionuseful information expected credit losses financial instruments changes loss impairment methodology guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2019 fiscal 2021 early adoption permitted annual reporting periods interim periods within annual reporting periods beginning december 15 2018 fiscal 2020 application guidance requires various transition methods depending specific amendment adopt guidance beginning first quarter fiscal 2020 expect adoption guidance material impact consolidated financial statements february 2016 fasb issued guidance created new accounting reporting guidelines leasing arrangements guidance requires lessees recognize rightofuse asset lease liability leases terms 12 months recognition measurement presentation expenses cash flows arising lease depend classification finance operating lease guidance also requires qualitative quantitative disclosures regarding amount timing uncertainty cash flows arising leases guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2018 fiscal 2020 early adoption permitted july 2018 fasb issued adoption approach allows entities apply guidance date initial application adopt standard first quarter fiscal 2020 using transition method result adjust comparative period financial information make new required lease disclosures periods effective date performed review lease portfolio implemented leasing software solution support future state lease accounting requirements elected package practical expedients available transition guidance allows us reassess prior conclusions related lease classifications existing contracts containing leases initial direct costs continue finalize implementation efforts currently estimate upon adoption record operating right use assets related lease liabilities approximately 2 total assets subject completion assessment including finalizing impacts recent business acquisitions expect financial statement disclosures expanded present additional details leasing arrangements expect adoption standard material impact consolidated statements income consolidated statements cash flows note 2 changes accounting principles august 2018 fasb issued guidance aligning requirements capitalizing implementation costs incurred hosting arrangement service contract requirements capitalizing implementation costs incurred develop obtain internaluse software guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2019 fiscal 2021 prospective transition method applied qualified implementation costs incurred adoption date elected early adopt guidance beginning first quarter fiscal 2019 material impact consolidated financial statements may 2017 fasb issued guidance clarifies changes terms conditions sharebased payment award require entity apply modification accounting topic 718 guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2017 fiscal 2019 prospective transition method applied awards modified adoption date adopted guidance first quarter fiscal 2019 material impact consolidated financial statements march 2017 fasb issued guidance changes presentation net periodic benefit cost related employer sponsored defined benefit plans postretirement benefits service cost included within income statement line item compensation costs arising services rendered period components net periodic benefit pension cost presented separately outside operating income additionally service cost component eligible capitalization applicable guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2017 fiscal 2019 retrospective transition method applied presentation service cost component components net periodic pension cost net periodic postretirement benefit cost income statement prospective transition method applied effective date capitalization service cost component net periodic pension cost net periodic postretirement benefit assets guidance includes practical expedient allowing entities estimate amounts comparative periods using information previously disclosed pension postretirement benefit plan footnote adopted guidance first quarter fiscal 2019 retrospective basis using practical expedient material impact consolidated financial statements following reconciliations provide effect reclassification net periodic benefit cost operating expenses income expense consolidated statements income fiscal year 2018 2017 millions november 2016 fasb issued guidance requires entities show changes total cash equivalents restricted cash restricted cash equivalents statement cash flows guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2017 fiscal 2019 retrospective transition method applied adopted guidance first quarter fiscal 2019 material impact consolidated financial statements october 2016 fasb issued guidance requires companies recognize income tax effects intercompany sales transfers assets inventory period transfer occurs guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2017 fiscal 2019 modified retrospective transition method applied adopted guidance first quarter fiscal 2019 material impact consolidated financial statements august 2016 fasb issued guidance aims eliminate diversity practice certain cash receipts cash payments presented classified statement cash flows guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2017 fiscal 2019 retrospective transition method applied adopted guidance first quarter fiscal 2019 material impact consolidated financial statements january 2016 fasb issued guidance requires equity investments measured fair value subsequent changes fair value recognized net income guidance also impacts financial liabilities fair value option presentation disclosure requirements classification measurement financial instruments guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2017 fiscal 2019 applied means cumulativeeffect adjustment balance sheet beginning fiscal year adoption unless equity securities readily determinable fair values case amendments applied prospectively adopted guidance first quarter fiscal 2019 use prospective amendments investments adoption material impact consolidated financial statements may 2014 fasb issued guidance changes criteria recognizing revenue guidance provides single fivestep model applied revenue contracts customers standard also requires additional financial statement disclosures enable users understand nature amount timing uncertainty revenue cash flows relating customer contracts including disaggregated revenue disclosures companies option use either retrospective approach cumulative effect adjustment approach implement standard guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2017 fiscal 2019 adopted guidance first quarter fiscal 2019 using modified retrospective transition method prior periods adjusted based implementation assessment cumulativeeffect adjustment made opening balance retained earnings adoption standard material impact consolidated financial statements description revenue recognition policy refer part item 1 notes consolidated financial statements note 1 business summary significant accounting policies disaggregated revenue information refer part item 1 notes consolidated condensed financial statements note 17 segment reporting note 3 acquisitions dispositions acquisitions june 3 2019 acquired thai european operations brf sa thai european operations 326 million net cash acquired subject certain adjustments part growth strategy expand offerings valueadded protein global markets results subsequent acquisition closing included internationalother segment presentation certain estimated values acquisition including goodwill intangible assets property plant equipment noncontrolling interest deferred income taxes yet finalized subject revision additional information becomes available detailed analyses completed preliminary purchase price allocation includes 307 million net working capital including 56 million cash acquired 93 million property plant equipment 1 million goodwill 23 million intangible assets 24 million liabilities 11 million deferred income taxes 7 million noncontrolling interest intangible assets included customer relationships amortized life 7 years expect goodwill deductible income tax purposes fourth quarter fiscal 2019 recorded measurement period adjustments including 15 million purchase price adjustments collectively decreased goodwill 66 million including increase net working capital 3 million reduction intangible assets 11 million reduction property plant equipment 13 million reduction deferred income taxes 4 million reduction noncontrolling interest 68 million november 30 2018 acquired outstanding common stock mfg usa holdings inc mckey luxembourg holdings sàrl “keystone foods” marfrig global foods marfrig 23 billion cash subject certain adjustments initially funded acquisition existing cash hand net proceeds issuance 364day term loan borrowings commercial paper program february 2019 used net proceeds issuance senior notes repay amounts outstanding 364day term loan commercial paper obligations keystone foods domestic international results subsequent acquisition closing included chicken segment internationalother respectively following table summarizes preliminary purchase price allocation keystone foods fair values assets acquired liabilities assumed acquisition date subject change pending finalization working capital adjustments certain estimated values acquisition including goodwill intangible assets inventory property plant equipment deferred income taxes yet finalized subject revision additional information becomes available detailed analyses completed purchase price allocated based information currently available acquisition date fiscal 2019 recorded measurement period adjustments including 61 million purchase price adjustments collectively increased goodwill 47 million primarily consisting reduction intangible assets 86 million reduction property plant equipment 49 million reduction deferred income taxes 36 million reduction net working capital 13 million fair value identifiable intangible assets primarily consisted customer relationships weighted average life 25 years result acquisition recognized total 1120 million goodwill purchase price allocated assets acquired liabilities assumed based preliminary estimated fair values date acquisition excess allocated goodwill shown table goodwill represents value expect achieve implementation operational synergies growth opportunities preliminary allocation goodwill segments 779 million 341 million chicken segment internationalother respectively expect goodwill deductible income tax purposes used various valuation techniques determine fair value primary techniques discounted cash flow relieffromroyalty market pricing multiple multiperiod excess earnings valuation approaches use significant unobservable inputs level 3 inputs defined fair value hierarchy valuation approaches required make estimates assumptions sales operating margins growth rates attrition rates royalty rates ebitda multiples discount rates based budgets business plans economic projections anticipated future cash flows marketplace data acquisition keystone foods accounted using acquisition method accounting consequently results operations reported consolidated financial statements date acquisition keystone foods sales date acquisition september 28 2019 1970 million results period significant overall consolidated statements income august 20 2018 acquired assets american proteins inc ampro products inc american proteins poultry rendering blending operation 864 million part strategic expansion sustainability initiatives results subsequent acquisition closing included chicken segment purchase price allocation included 56 million net working capital 152 million property plant equipment 361 million intangible assets 308 million goodwill 13 million liabilities intangible assets primarily included 310 million assigned supply network amortized 14 years 51 million assigned customer relationships amortized weighted average 12 years goodwill acquired amortizable tax purposes fiscal 2019 settled networking capital purchase price adjustment reducing purchase price 2 million recorded measurement period adjustments increased goodwill 66 million including reduction net working capital 15 million reduction property plant equipment 3 million reduction intangible assets 50 million june 4 2018 acquired tecumseh poultry llc tecumseh vertically integrated valueadded protein business 382 million net cash acquired part strategy grow high quality branded poultry market results subsequent acquisition closing included chicken segment purchase price allocation included 13 million net working capital including 1 million cash acquired 49 million property plant equipment 227 million intangible assets 94 million goodwill intangible assets included 193 million assigned brands trademarks amortized 20 years goodwill acquired amortizable tax purposes november 10 2017 acquired original philly holdings inc original philly valueadded protein business 226 million net cash acquired part strategic expansion initiative results subsequent acquisition closing included prepared foods chicken segments purchase price allocation included 21 million net working capital including 10 million cash acquired 13 million property plant equipment 90 million intangible assets 111 million goodwill allocated 82 million 29 million goodwill prepared foods chicken segments respectively using acquisition method approach goodwill acquired amortizable tax purposes june 7 2017 acquired outstanding common stock advancepierre foods holdings inc advancepierre part strategy sustainably feed world fastest growing portfolio proteinpacked brands purchase price equal 4025 per share advancepierres outstanding common stock approximately 32 billion advancepierres results operations subsequent acquisition closing included prepared foods chicken segments following unaudited pro forma information presents combined results operations acquisition advancepierre occurred beginning fiscal 2017 advancepierres preacquisition results added historical results pro forma results contained table include adjustments amortization acquired intangibles depreciation expense interest expense related financing related income taxes potential cost savings operational efficiencies could result acquisition included pro forma results pro forma results prepared comparative purposes necessarily indicative results operations would acquisitions occurred assumed dates necessarily indication future operating results dispositions april 24 2017 announced intent sell three nonprotein businesses part strategic focus protein brands businesses part prepared foods segment included sara lee® frozen bakery kettle van’s® produce items frozen desserts waffles snack bars soups sauces sides sale also included chef pierre® bistro collection® kettle collection™ van’s® brands license use sara lee® brand various channels well tarboro north carolina fort worth texas traverse city michigan prepared foods facilities completed sale kettle business december 30 2017 received net proceeds 125 million including working capital adjustment result sale recorded pretax gain 22 million reflected cost sales consolidated statement income fiscal 2018 utilized net proceeds pay term loan debt completed sale sara lee® frozen bakery van’s® businesses july 30 2018 623 million including working capital adjustment result sale recorded pretax gain 11 million reflected cost sales consolidated statement income fiscal 2018 utilized net proceeds repay commercial paper previously fiscal 2018 2017 recorded pretax impairment charges businesses 101 million 45 million respectively due revised estimates businesses fair value based expected net sales proceeds time impairments charges recorded cost sales consolidated statement income primarily consisted goodwill previously classified within assets held sale first quarter fiscal 2018 made decision sell tnt crust pizza crust business also included prepared foods segment part strategic focus protein brands completed sale business september 2 2018 57 million net adjustments result sale recorded pretax gain 9 million reflected cost sales consolidated statement income fiscal 2018 utilized net proceeds repay commercial paper completed sale chicken processing facility acquired keystone foods acquisition august 31 2019 170 million net proceeds result significant gain loss fourth quarter fiscal 2019 made decision sell prepared foods business recorded pretax impairment charge business 41 million due estimate business fair value based current expected net sales proceeds remaining carrying value business significant note 4 property plant equipment following table reflects major categories property plant equipment accumulated depreciation september 28 2019 september 29 2018 approximately 1772 million required complete buildings equipment construction september 28 2019 note 5 goodwill intangible assets following table reflects goodwill activity fiscal 2019 2018 following table reflects intangible assets type september 28 2019 september 29 2018 amortization expense 267 million 210 million 107 million recognized fiscal 2019 2018 2017 respectively estimate amortization expense intangible assets next five fiscal years subsequent september 28 2019 2020 276 million 2021 258 million 2022 244 million 2023 225 million 2024 221 million note 6 restructuring related charges fourth quarter fiscal 2017 board directors approved multiyear restructuring program “financial fitness program” expected contribute company’s overall strategy financial fitness increased operational effectiveness overhead reduction financial fitness program expected result cumulative pretax charges approximately 280 million consist primarily severance employee related costs impairments accelerated depreciation technology assets incremental costs implement new technology contract termination costs company recognized restructuring related charges 41 million 59 million 150 million associated program fiscal 2019 2018 2017 respectively fiscal 2019 2018 restructuring related charges consisted 41 million 59 million respectively incremental costs implement new technology accelerated depreciation technology assets costs recorded selling general administrative consolidated statements income fiscal 2017 restructuring related charges consisted 53 million severance employee related costs 72 million technology impairment related costs 25 million contract termination costs 35 million recorded cost sales 115 million recorded selling general administrative consolidated statements income restructuring liability september 28 2019 restructuring liability 10 million september 29 2018 note 7 debt following table reflects major components debt september 28 2019 september 29 2018 annual maturities debt five fiscal years subsequent september 28 2019 2020 2104 million 2021 535 million 2022 1033 million 2023 493 million 2024 1266 million revolving credit facility letters credit 175 billion revolving credit facility supports shortterm funding needs serves backstop commercial paper program facility mature commitments thereunder terminate march 2023 amounts available borrowing facility totaled 168 billion september 28 2019 deducting amounts backstop commercial paper program september 28 2019 70 million borrowings outstanding letters credit issued facility september 28 2019 99 million bilateral letters credit issued separately revolving credit facility none drawn upon letters credit issued primarily support leasing obligations workers’ compensation insurance programs legal obligations future subsidiaries shall guarantee material indebtedness subsidiary shall required guarantee indebtedness obligations liabilities facility commercial paper program commercial paper program may issue unsecured shortterm promissory notes commercial paper aggregate maximum principal amount 1 billion september 28 2019 september 28 2019 1 billion commercial paper outstanding weighted average interest rate 224 maturities less 25 days 2019 notes fiscal 2019 extinguished 300 million outstanding balance senior notes due may 2019 1 billion outstanding balance senior notes due august 2019 using cash hand liquidity sources 364day term loan november 2018 part financing keystone foods acquisition borrowed 18 billion unsecured term loan facility due november 2019 interest rate set based selected libor interest period plus 1125 second quarter fiscal 2019 extinguished 18 billion outstanding balance using funds borrowed 2026 2029 notes funds borrowed reopening 2048 notes 202620292048 notes february 2019 issued senior unsecured notes aggregate principal amount 18 billion consisting 800 million due march 2026 1 billion due march 2029 additionally reopened 2048 notes issuing additional 1 billion bringing aggregate principal amount outstanding 2048 notes 15 billion net proceeds issuances used repay amounts outstanding 364day term loan agreement commercial paper obligations fund acquisition thai european operations 2026 notes carry fixed interest rate 400 2029 notes carry fixed interest rate 435 interest payments 2026 2029 notes due semiannually march 1 september 1 original issue discounts 36 million received net proceeds 2764 million incurred debt issuance costs 26 million related issuances debt covenants revolving credit facility contains affirmative negative covenants among things may limit restrict ability create liens encumbrances incur debt merge dissolve liquidate consolidate make acquisitions investments dispose transfer assets change nature business engage certain transactions affiliates enter hedging transactions case subject certain qualifications exceptions addition required maintain minimum interest expense coverage maximum debttocapitalization ratios senior notes also contain affirmative negative covenants among things may limit restrict ability create liens engage certain saleleaseback transactions engage certain consolidations mergers sales assets compliance debt covenants september 28 2019 note 8 equity capital stock two classes capital stock class common stock 010 par value class stock class b common stock 010 par value class b stock holders class b stock may convert stock class stock shareforshare basis holders class b stock entitled 10 votes per share holders class stock entitled one vote per share matters submitted shareholders approval september 28 2019 tyson limited partnership tlp owned 99985 outstanding shares class b stock tlp members tyson family owned aggregate 215 outstanding shares class stock giving collectively control approximately 7097 total voting power outstanding voting stock class b stock considered participating security requiring use twoclass method computation basic earnings per share twoclass computation method period reflects cash dividends paid class stock plus amount allocated undistributed earnings losses computed using participation percentage reflects dividend rights class stock basic earnings per share computed using twoclass method periods presented shares class b stock considered participating convertible securities since shares class b stock convertible shareforshare basis shares class stock diluted earnings per share computed assuming conversion class b shares class shares beginning period dividends cash dividends cannot paid holders class b stock unless simultaneously paid holders class stock per share amount cash dividend paid holders class b stock cannot exceed 90 cash dividend simultaneously paid holders class stock pay quarterly cash dividends class b shareholders paid class dividends per share 150 120 090 fiscal 2019 2018 2017 respectively paid class b dividends per share 135 108 081 fiscal 2019 2018 2017 respectively effective november 11 2019 board directors increased quarterly dividend previously declared august 8 2019 042 per share class stock 0378 per share class b stock increased quarterly dividend payable december 13 2019 shareholders record close business november 29 2019 share repurchases september 28 2019 207 million shares remained available repurchase companys share repurchase program fixed scheduled termination date timing extent repurchase shares depend upon among things working capital needs markets industry conditions liquidity targets limitations debt obligations regulatory requirements addition share repurchase program purchase shares open market fund certain obligations equity compensation plans summary cumulative share repurchases class stock fiscal 2019 2018 2017 follows note 9 income taxes detail provision income taxes continuing operations consists following reasons difference statutory federal income tax rate effective income tax rate continuing operations follows fiscal 2019 changes unrecognized tax benefits decreased tax expense 160 million state tax expense excluding changes unrecognized tax benefits net federal tax benefit 69 million fiscal 2018 domestic production deduction decreased tax expense 46 million state tax expense net federal tax benefit 90 million change federal tax rate tax act resulted tax benefit 1004 million related deferred tax remeasurement additionally favorable timing differences deductible fiscal 2018 245 blended tax rate reversing future years 21 resulted 35 million tax benefit impacts nondeductible impairment sale certain assets nonprotein businesses increased effective tax rate 31 fiscal 2017 domestic production deduction decreased tax expense 80 million state tax expense net federal tax benefit 61 million approximately 2332 million 2700 million 2603 million income continuing operations income taxes fiscal 2019 2018 2017 respectively operations based united states december 22 2017 president trump signed law tax act tax act made significant changes us tax code including limited 1 reducing corporate federal income tax rate 35 21 effective january 1 2018 2 general elimination us federal income taxes dividends foreign subsidiaries 3 repeal domestic production activity deduction beginning fiscal 2019 4 new provisions designed tax global intangible lowtaxed income allow deduction foreignderived intangible income beginning fiscal 2019 generally accepted accounting principles us gaap specifically asc topic 740 income taxes tax effects changes tax laws must recognized period law enacted december 22 2017 tax act asc 740 also requires deferred tax assets liabilities measured enacted tax rate expected apply temporary differences realized settled thus date enactment company’s deferred taxes remeasured based upon new tax rates change deferred taxes recorded adjustment fiscal 2018 deferred tax provision first quarter fiscal 2019 completed accounting tax act recorded immaterial adjustment income tax expense recognize deferred income taxes future tax consequences attributable differences financial statement carrying amounts existing assets liabilities respective tax bases deferred tax assets liabilities measured using tax rates expected apply taxable income years temporary differences expected recovered settled tax effects major items recorded deferred tax assets liabilities september 28 2019 september 29 2018 follows september 28 2019 gross state tax net operating loss carryforwards approximated 691 million expire fiscal years 2020 2039 gross foreign net operating loss carryforwards approximated 98 million 65 million expire fiscal years 2020 2031 remainder expiration also tax credit carryforwards approximately 42 million 38 million expire fiscal years 2020 2033 remainder expiration accumulated undistributed earnings foreign subsidiaries aggregating approximately 252 million 210 million september 28 2019 september 29 2018 respectively tax act generally eliminates us federal income taxes dividends foreign subsidiaries december 31 2017 result intention excess cash held foreign subsidiaries subject regulatory restrictions repatriated net applicable withholding taxes expected immaterial remainder accumulated undistributed earnings expected indefinitely reinvested outside united states earnings distributed form dividends otherwise could subject state income taxes withholding taxes payable various foreign countries due uncertainty manner undistributed earnings would brought back united states tax laws effect time currently practicable estimate tax liability might payable repatriation foreign earnings however expect tax due material following table summarizes activity related gross unrecognized tax benefits september 28 2019 september 29 2018 september 30 2017 amount unrecognized tax benefits recognized would impact effective tax rate 116 million september 28 2019 216 million september 29 2018 classify interest penalties unrecognized tax benefits income tax expense september 28 2019 september 29 2018 tax benefits 46 million 73 million respectively accrued interest penalties unrecognized tax benefits september 28 2019 certain united states federal income tax returns subject examination fiscal years 2013 2018 also subject income tax examinations major state foreign jurisdictions fiscal years 2012 2018 2002 2018 respectively expect material changes unrecognized tax benefits next twelve months note 10 income charges fiscal 2019 recognized 48 million net periodic pension postretirement benefit cost excluding service cost component pension plan settlements recorded consolidated statements income net recognized 20 million equity earnings joint ventures also recorded consolidated statements income net additionally sold investment 79 million net proceeds resulting pretax gain 55 million recorded consolidated statements income net fiscal 2018 recognized onetime cash bonus hourly frontline employees 109 million using incremental cash savings tax act predominantly recorded consolidated statements income cost sales additionally recorded 11 million insurance proceeds 21 million equity earnings joint ventures 1 million net foreign currency exchange gains recognized consolidated statements income net fiscal 2017 recorded 28 million legal costs related two former subsidiaries hillshire brands sold hillshire brands 1986 1994 18 million acquisition bridge financing fees related advancepierre acquisition 19 million equity earnings joint ventures recorded consolidated statements income net fiscal 2017 recorded 52 million impairment charge related san diego prepared foods operation impairment comprised 43 million property plant equipment 8 million definite lived intangible assets 1 million assets charge 44 million included consolidated statements income cost sales 8 million included consolidated statements income selling general administrative triggered change comanufacturing contract ongoing losses additionally accordance recently adopted accounting guidance retrospectively recognized 23 million 10 million net periodic pension postretirement benefit credit excluding service cost component fiscal 2018 fiscal 2017 respectively recorded amounts consolidated condensed statements income net note 11 earnings per share earnings weighted average common shares used computation basic diluted earnings per share follows approximately 1 million stockbased compensation shares antidilutive fiscal 2019 2018 2017 shares included dilutive earnings per share calculation two classes capital stock class stock class b stock cash dividends cannot paid holders class b stock unless simultaneously paid holders class stock per share amount cash dividends paid holders class b stock cannot exceed 90 cash dividends paid holders class stock allocate undistributed earnings based upon 1 09 ratio per share class stock class b stock respectively allocate undistributed earnings based ratio due historical dividend patterns voting control class b shareholders contractual limitations dividends class b stock note 12 derivative financial instruments business operations give rise certain market risk exposures mostly due changes commodity prices foreign currency exchange rates interest rates manage portion risks use derivative financial instruments reduce exposure commodity price risk foreign currency risk interest rate risk management programs periodically reviewed board directors audit committee programs monitored senior management may revised market conditions dictate current risk management programs utilize industrystandard models take account implicit cost hedging risks associated market risks created derivative instruments fair values strictly monitored using valueatrisk stress tests credit risks associated derivative contracts significant minimize counterparty concentrations utilize margin accounts letters credit deal creditworthy counterparties additionally derivative contracts mostly shortterm duration generally make use creditriskrelated contingent features significant concentrations credit risk existed september 28 2019 following aggregated outstanding notional amounts related derivative financial instruments recognize derivative instruments either assets liabilities fair value consolidated balance sheets exception normal purchases normal sales expected result physical delivery derivative instruments designated qualify hedging instruments designate hedging instrument based upon exposure hedged ie cash flow hedge fair value hedge designate certain forward contracts follows • cash flow hedges include certain commodity forward option contracts forecasted purchases ie grains interest rate swaps locks certain foreign exchange forward contracts • fair value hedges include certain commodity forward contracts firm commitments ie livestock cash flow hedges derivative instruments designated hedges changes amount future cash flows related procurement certain commodities utilized production processes well interest rates variable rate debt derivative instruments designate qualify cash flow hedge effective portion gain loss derivative reported component comprehensive income oci reclassified earnings period periods hedged transaction affects earnings gains losses representing hedge ineffectiveness recognized earnings current period ineffectiveness related cash flow hedges significant fiscal 2019 2018 2017 september 28 2019 net pretax losses 8 million commodity contracts 3 million pretax losses related interest swaps expected reclassified earnings within next 12 months additionally incurred 19 million realized losses related treasury rate locks connection issuance 2026 2029 2048 notes reclassified earnings lives notes fiscal 2019 2018 2017 reclassify significant pretax gains losses earnings result discontinuance cash flow hedges following table sets forth pretax impact cash flow hedge derivative instruments consolidated statements income fair value hedges designate certain derivative contracts fair value hedges firm commitments purchase livestock harvest objective hedges minimize risk changes fair value created fluctuations commodity prices associated fixed price livestock firm commitments derivative instruments designate qualify fair value hedge gain loss derivative well offsetting gain loss hedged item attributable hedged risk recognized earnings period include gain loss hedged items ie livestock purchase firm commitments line item cost sales offsetting gain loss related livestock forward position ineffectiveness related fair value hedges significant fiscal 2019 2018 2017 undesignated positions addition designated positions also hold derivative contracts apply hedge accounting include certain derivative instruments related commodities price risk including grains livestock energy foreign currency risk mark positions fair value earnings reporting date following table sets forth pretax impact undesignated derivative instruments consolidated statements income fair value outstanding derivative instruments consolidated balance sheets included note 13 fair value measurements note 13 fair value measurements fair value defined price would received sell asset paid transfer liability exit price principal advantageous market asset liability orderly transaction market participants measurement date fair value hierarchy contains three levels follows level 1 unadjusted quoted prices available active markets identical assets liabilities measurement date level 2 observable inputs available measurement date quoted prices included level 1 either directly indirectly including • quoted prices similar assets liabilities active markets • quoted prices identical similar assets nonactive markets • inputs quoted prices observable asset liability • inputs derived principally corroborated observable market data level 3 unobservable inputs cannot corroborated observable market data reflect use significant management judgment values generally determined using pricing models assumptions utilize management’s estimates market participant assumptions assets liabilities measured fair value recurring basis fair value hierarchy requires use observable market data available instances inputs used measure fair value fall different levels fair value hierarchy fair value measurement determined based lowest level input significant fair value measurement entirety assessment significance particular item fair value measurement entirety requires judgment including consideration inputs specific asset liability following tables set forth level within fair value hierarchy financial assets liabilities accounted fair value recurring basis according valuation techniques used determine fair values derivative assets liabilities presented consolidated balance sheets net basis legally enforceable master netting arrangement exists counterparty derivative contract us additionally september 28 2019 september 29 2018 95 million 18 million respectively net cash collateral posted various counterparties master netting arrangements exist held cash collateral following table provides reconciliation beginning ending balance marketable debt securities measured fair value recurring basis table used significant unobservable inputs level 3 following methods assumptions used estimate fair value class financial instrument derivative assets liabilities derivative financial instruments primarily include exchangetraded overthecounter contracts described note 12 derivative financial instruments record derivative financial instruments fair value using quoted market prices adjusted necessary credit nonperformance risk internal models use readily observable market inputs basis including current forward market prices rates classify instruments level 2 quoted market prices corroborated utilizing observable current forward commodity market prices active exchanges observable market transactions available sale securities investments marketable debt securities classified availableforsale reported fair value based pricing models quoted market prices adjusted credit nonperformance risk shortterm investments maturities less 12 months included current assets consolidated balance sheets primarily include certificates deposit commercial paper marketable debt securities included assets consolidated balance sheets maturities ranging 41 years classify investments us government us agency certificates deposit commercial paper debt securities level 2 fair value generally estimated using discounted cash flow models primarily industrystandard models consider various assumptions including time value yield curve well readily available relevant economic measures classify certain corporate assetbacked debt securities level 3 limited activity less observable inputs valuation models including current interest rates estimated prepayment default recovery rates underlying portfolio structured investment vehicle significant changes assumptions unobservable inputs valuation level 3 instruments would significant impact consolidated financial statements following table sets forth availableforsale securities amortized cost basis fair value unrealized gain loss significant investment category unrealized holding gains losses net tax excluded earnings reported oci security settled sold quarterly basis evaluate whether losses related availableforsale securities temporary nature losses equity securities recognized earnings decline value judged temporary losses related debt securities determined temporary loss would recognized earnings intend likely required sell security prior recovery debt securities intent ability hold maturity losses determined temporary would remain oci expected credit losses recognized earnings consider many factors determining whether loss temporary including length time extent fair value cost financial condition nearterm prospects issuer ability intent hold investment period time sufficient allow anticipated recovery recognized temporary impairment earnings fiscal 2019 fiscal 2018 temporary losses deferred oci september 28 2019 september 29 2018 deferred compensation assets maintain nonqualified deferred compensation plans certain executives highly compensated employees investments generally maintained within trust include money market funds mutual funds life insurance policies cash surrender value life insurance policies invested primarily mutual funds investments recorded fair value based quoted market prices included assets consolidated balance sheets classify investments observable market prices active markets level 1 generally publiclytraded mutual funds remaining deferred compensation assets classified level 2 fair value corroborated based observable market data realized unrealized gains losses deferred compensation included earnings assets liabilities measured fair value nonrecurring basis addition assets liabilities recorded fair value recurring basis record assets liabilities fair value nonrecurring basis generally assets recorded fair value nonrecurring basis result impairment charges fiscal 2019 recorded 41 million impairment charge related prepared foods business held sale due estimate business fair value based current expected net sales proceeds impairment charge recorded cost sales consolidated statement income fiscal 2019 valuation included unobservable level 3 inputs based expected sales proceeds competitive bidding process ongoing discussions potential buyers fiscal 2018 recorded 101 million impairment charges related expected sale nonprotein businesses held sale due revised estimates businesses fair value based current expected net sales proceeds time impairment charges recorded cost sales consolidated statement income primarily consisted goodwill previously classified within assets held sale valuation included unobservable level 3 inputs based expected sales proceeds competitive bidding process ongoing discussions potential buyers fourth quarter fiscal 2017 recorded impairment charge totaling 45 million related one nonprotein businesses held sale due revised estimate business’ fair value based current expected net sales proceeds impairment charge recorded cost sales consolidated statement income fiscal 2017 consisted goodwill intangible assets previously classified within assets held sale valuation included unobservable level 3 inputs based expected sales proceeds following competitive bidding process second quarter fiscal 2017 recorded 52 million impairment charge related san diego prepared foods operation impairment comprised 43 million property plant equipment 8 million definite lived intangibles assets 1 million assets charge 44 million included consolidated statements income cost sales 8 million included consolidated statements income selling general administrative triggered change comanufacturing contract ongoing losses valuation assets primarily based discounted cash flows relieffromroyalty models included unobservable level 3 inputs financial instruments fair value debt principally estimated using level 2 inputs based quoted prices similar instruments fair value carrying value debt follows concentrations credit risk financial instruments exposed concentrations credit risk consist primarily cash equivalents accounts receivable cash equivalents high quality securities placed major banks financial institutions concentrations credit risk respect receivables limited due large number customers dispersion across geographic areas perform periodic credit evaluations customers’ financial condition generally require collateral september 28 2019 september 29 2018 162 186 respectively net accounts receivable balance due walmart inc single customer group represented greater 10 net accounts receivable note 14 stockbased compensation issue shares stockbased compensation plans issuing class stock treasury total number shares available future grant tyson foods inc 2000 stock incentive plan incentive plan 12952617 september 28 2019 stock options shareholders approved incentive plan january 2001 incentive plan administered compensation leadership development committee board directors compensation committee incentive plan includes provisions granting incentive stock options shares class stock price less fair value date grant nonqualified stock options may granted price equal fair value class stock date option granted stock options incentive plan generally become exercisable ratably three years date grant must exercised within 10 years date grant policy recognize compensation expense straightline basis requisite service period entire award forfeitures recognized occur generally grant stock options year weighted average grantdate fair value options granted fiscal 2019 2018 2017 1135 1831 1342 respectively fair value option grant established date grant using binomial lattice method use historical volatility period time comparable expected life option determine volatility assumptions expected life calculated based contractual term grant takes account historical exercise termination behavior participants riskfree interest rates based fiveyear treasury bond rate fiscal 2018 additional grant awarded two executive officers joined company subsequent initial annual grant accordingly assumptions fiscal 2018 calculated using weighted average amounts two fiscal 2018 grants assumptions grant date used fair value calculation year’s grants outlined following table recognized stockbased compensation expense related stock options net income taxes 16 million 13 million 22 million fiscal 2019 2018 2017 respectively related tax benefit fiscal 2019 2018 2017 3 million 6 million 14 million respectively 12 million 22 million 41 million options vest fiscal 2019 2018 2017 respectively grant date fair value 18 million 27 million 47 million respectively fiscal 2019 2018 2017 received cash 99 million 102 million 154 million respectively exercise stock options shares issued treasury stock option exercises related tax benefit realized stock options exercised fiscal 2019 2018 2017 21 million 30 million 65 million respectively total intrinsic value options exercised fiscal 2019 2018 2017 79 million 103 million 164 million respectively cash flows resulting tax deductions excess compensation cost options excess tax deductions classified financing cash flows realized 14 million 20 million 42 million related excess tax deductions fiscal 2019 2018 2017 respectively september 28 2019 18 million total unrecognized compensation cost related stock option plans recognized weighted average period 15 years restricted stock issue restricted stock market value date grant restrictions expiring periods fiscal 2022 unearned compensation recognized vesting period particular grant using straightline method september 28 2019 46 million total unrecognized compensation cost related restricted stock awards recognized weighted average period 19 years recognized stockbased compensation expense related restricted stock net income taxes 26 million 22 million 18 million fiscal 2019 2018 2017 respectively related tax benefit fiscal 2019 2018 2017 8 million 9 million 11 million respectively 05 million 06 million 05 million restricted stock awards vest fiscal 2019 2018 2017 respectively grant date fair value 29 million 27 million 19 million respectively performancebased shares award performancebased shares class stock certain employees awards typically granted year performancebased shares vest based upon passage time achievement performance market performance criteria ranging 0 200 determined compensation committee prior date award vesting periods awards three years review progress toward attainment performance criteria quarter vesting period probable minimum performance criteria award achieved begin recognizing expense equal proportionate share total fair value class stock price grant date total expense recognized duration performance awards equal class stock price date grant multiplied number shares ultimately awarded based level attainment performance criteria grants market performance criteria fair value determined grant date calculated using inputs expected volatility expected dividend yield riskfree rate stock options noted duration three years total expense recognized duration award equal fair value regardless market performance criteria met following table summarizes performancebased shares maximum award amounts based upon respective performance share agreements actual shares vest depend level attainment performancebased criteria recognized stockbased compensation expense related performance shares net income taxes 16 million 12 million 16 million fiscal 2019 2018 2017 respectively related tax benefit fiscal 2019 2018 2017 4 million 5 million 10 million respectively september 28 2019 26 million total unrecognized compensation based upon progress toward attainment criteria related performancebased share awards recognized weighted average period 18 years note 15 pensions postretirement benefits september 28 2019 nine defined benefit pension plans consisting five funded qualified plans frozen noncontributory four unfunded nonqualified plans benefits provided plans based formula using years service either specified benefit rate compensation level nonqualified defined benefit plans certain contracted officers use formula based years service final average salary also postretirement benefit plans substantially employees may receive benefits satisfy applicable eligibility criteria postretirement healthcare plans contributory participants’ contributions adjusted deemed necessary defined contribution retirement programs various groups employees recognized expenses 97 million 84 million 78 million fiscal 2019 2018 2017 respectively use fiscal year end measurement date defined benefit plans postretirement plans recognize effect actuarial gains losses earnings immediately postretirement plans rather amortizing effect future periods postretirement benefits include postretirement medical costs life insurance fiscal 2017 issued notice intent terminate two qualified pension plans termination date april 30 2017 settlements terminated plans occurred fiscal 2019 purchased annuities incurred 19 million settlement charge final liquidation fiscal 2019 issued notice intent terminate three qualified pension plans settlements plans expected occur fiscal 2020 purchased annuities since amount settlements depends number factors determined liquidation date including annuity pricing interest rates investment performance currently unable determine ultimate cost settlements however based current market rates estimate incur settlement gains final liquidation range approximately 40 million 60 million contributions purchase annuities time settlement expected range approximately 10 million 30 million based current market conditions plan september 28 2019 benefit obligations funded status following table provides reconciliation changes plans’ benefit obligations assets funded status september 28 2019 september 29 2018 amounts recognized consolidated balance sheets consist amounts recognized accumulated comprehensive income consist five pension plans september 28 2019 september 29 2018 accumulated benefit obligation excess plan assets plans accumulated benefit obligations excess plan assets follows accumulated benefit obligation qualified pension plans 1478 million 1392 million september 28 2019 september 29 2018 respectively net periodic benefit cost credit components net periodic benefit cost credit pension postretirement benefit plans recognized consolidated statements income follows september 28 2019 expect amounts reclassified earnings within next 12 months related net periodic benefit cost credit qualified pension plans excluding pending settlements september 28 2019 amounts expected reclassified earnings within next 12 months related net periodic benefit cost credit nonqualified pension plans postretirement benefit plans significant assumptions weighted average assumptions follows determine expected return plan assets assumption first examined historical rates return various asset classes within plans determined longterm projected rateofreturn based expected returns discount rate assumptions used account pension postretirement benefit plans reflect rates benefit obligations could effectively settled discount rates two plans expected settle fiscal 2020 determined using composite rate comprised annuity purchase rate lump sum conversion discount rate based portions populations assumed purchased annuity contract insurance company versus elect lump sums respectively discount rates plans determined using cash flow matching technique whereby rates yield curve developed highquality debt securities applied benefit obligations determine appropriate discount rate periods presented pension postretirement benefit plans used rp2014 mortality tables eight postretirement benefit plans five healthcare life insurance related two plans benefit obligations totaling 17 million september 28 2019 impacted healthcare cost trend rates one consists fixed annual payments one life insurance related one healthcare plans benefit obligations less 1 million september 28 2019 impacted healthcare cost trend rates due previous plan amendments remaining two plans benefit obligations totaling 11 million 9 million september 28 2019 utilized assumed healthcare cost trend rates 73 70 respectively healthcare cost trend rates grading ultimate rate 5 2026 45 2027 onepercentagepoint change assumed healthcare cost trend rates would significant effect postretirement benefit obligation plan assets asset allocation pension plan assets september 28 2019 approximately 73 fixed income securities approximately 27 cash increased allocation cash due intent terminate plans next year target asset allocation 100 fixed income securities additionally one foreign subsidiary pension plans 31 million plan assets held insurance trust september 28 2019 plan trustees established set investment objectives related assets domestic pension plans regularly monitor performance funds portfolio managers 100 target asset allocation fixed income securities based upon intent terminate plans domestic plan assets consist mainly common collective trusts primarily comprised fixed income funds equity securities fixed income securities include limited direct bond investments pooled indirect bond investments derivative instruments may also used concert either fixed income equity investments achieve desired exposure hedge certain risks derivative instruments include limited futures options swaps swaptions domestic plan assets also include mutual funds believe significant concentrations risk within plan assets september 28 2019 september 28 2019 36 plan assets held cash equivalents level 1 61 corporate municipal bonds level 2 fair value plan assets using level 3 inputs significant september 28 2019 september 29 2018 97 plan assets invested common collective trusts measured net asset value fair value plan assets using level 2 level 3 inputs significant september 29 2018 contributions policy fund least minimum contribution required meet applicable federal employee benefit local tax laws sole discretion may time fund additional amounts expected contributions pension plans fiscal 2020 approximately 33 million fiscal 2019 2018 2017 funded 13 million 29 million 53 million respectively pension plans estimated future benefit payments following benefit payments expected paid benefit payments postretirement benefit plans expected offset medicare part subsidies fiscal 2020 benefit payments include anticipated accelerated payments plan termination within three qualified pension plans plan termination process one plans began october 1 2018 remaining two plans began december 31 2018 full settlement expected occur fiscal 2020 multiemployer plans additionally participate three multiemployer plans provide defined benefits certain employees covered collective bargaining agreements plans usually administered board trustees composed management participating companies labor representatives risks participating multiemployer plans different singleemployer plans assets contributed multiemployer plan one employer may used provide benefits employees participating employers participating employer stops contributing plan unfunded obligation plan may borne remaining participating employers stop participating plan may required pay plan amount based underfunded status plan referred withdrawal liability net pension cost plans equal annual contributions determined accordance provisions negotiated labor contracts contributions plans 2 million fiscal 2019 2018 assets contributed plans segregated otherwise restricted provide benefits employees future cost plans dependent number factors including funded status plans ability participating companies meet ongoing funding obligations participation multiemployer plans fiscal 2019 outlined einpension plan number column provides employer identification number ein threedigit plan number unless otherwise noted recent pension protection act ppa zone status available fiscal 2019 fiscal 2018 plans year beginning january 1 2019 2018 respectively zone status based information received plan certified plans actuaries among factors plans red zone generally less 65 percent funded plans critical declining status projected accumulated funding deficiency fiprp status column indicates plans financial improvement plan fip rehabilitation plan rp either pending implemented last column lists expiration date collectivebargaining agreements plan subject fiscal 2019 part acquisition keystone foods acquired interest four multiemployer plans interest two plans subsequently disposed conjunction divestiture chicken processing facility acquired keystone foods acquisition see note 3 acquisitions divestitures additional information transactions additionally fiscal 2019 initiated withdrawal retail wholesale department store international union industry pension fund rwdsu fund result anticipated withdrawal rwdsu fund recorded 15 million termination liability addition regular contributions could obligated pay additional contributions known complete partial withdrawal liabilities unfunded vested benefits renewal negotiations bakery confectionery union industry international pension fund progress b contributions fiscal 2019 exceeded 5 plan contributions plan year ended october 31 2018 c contributions fiscal 2019 exceeded 5 plan contributions plan year ended december 31 2018 note 16 comprehensive income loss components accumulated comprehensive loss follows 1 includes reclass accumulated comprehensive income retained earnings stranded tax effects resulting tax act following adoption applicable new accounting standard fiscal 2018 tax changes components comprehensive income loss follows note 17 segment reporting operate four reportable segments beef pork chicken prepared foods measure segment profit operating income loss internationalother primarily includes foreign operations australia china south korea malaysia mexico netherlands thailand united kingdom thirdparty merger integration costs corporate overhead related tyson new ventures llc beef includes operations related processing live fed cattle fabricating dressed beef carcasses primal subprimal meat cuts caseready products marketed domestically food retailers foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments schools healthcare facilities military food processors well international export markets segment also includes sales allied products hides variety meats well logistics operations move products supply chain pork includes operations related processing live market hogs fabricating pork carcasses primal subprimal cuts caseready products marketed domestically food retailers foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments schools healthcare facilities military food processors well international export markets segment also includes live swine group related allied product processing activities logistics operations move products supply chain chicken includes domestic operations related raising processing live chickens purchasing raw materials fresh frozen valueadded chicken products well sales allied products valueadded chicken products primarily include breaded chicken strips nuggets patties readytofix fully cooked chicken parts products marketed domestically food retailers foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments schools convenience stores healthcare facilities military food processors well international export markets segment also includes logistics operations move products domestic supply chain global operations chicken breeding stock subsidiary prepared foods prepared foods includes operations related manufacturing marketing frozen refrigerated food products logistics operations move products supply chain segment includes brands jimmy dean® hillshire farm® ball park® wright® state fair® well artisanal brands aidells® gallo salame® golden island® products primarily include readytoeat sandwiches sandwich components flamegrilled hamburgers philly steaks pepperoni bacon breakfast sausage turkey lunchmeat hot dogs flour corn tortilla products appetizers snacks prepared meals ethnic foods side dishes meat dishes breadsticks processed meats products marketed domestically food retailers foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments schools convenience stores healthcare facilities military food processors well international export markets allocate expenses related corporate activities segments except thirdparty merger integration costs 36 million 26 million 67 million fiscal 2019 2018 2017 respectively included internationalother assets additions property plant equipment relating corporate activities remain internationalother fiscal 2017 included 3 billion unallocated goodwill associated acquisition advancepierre internationalother completed allocation goodwill segments fiscal 2018 additionally september 28 2019 allocated approximately 342 million goodwill internationalother result keystone foods thai european operations acquisitions refer note 5 goodwill intangible assets description information segments reconciliation income continuing operations income taxes follows beef segment sales 411 million 420 million 386 million fiscal 2019 2018 2017 respectively transactions operating segments pork segment sales 893 million 817 million 966 million fiscal 2019 2018 2017 respectively transactions operating segments chicken segment sales 58 million 80 million 60 million fiscal 2019 2018 2017 respectively transactions operating segments aforementioned sales intersegment transactions market prices included segment sales table largest customer walmart inc accounted 169 173 consolidated sales fiscal 2019 2018 2017 respectively sales walmart inc included segments extended discontinuance sales customer could replaced material impact operations majority operations domiciled united states approximately 96 99 98 sales external customers fiscal 2019 2018 2017 respectively sourced united states approximately 248 billion 232 billion longlived assets located united states september 28 2019 september 29 2018 respectively excluding goodwill intangible assets longlived assets located united states totaled approximately 75 billion 67 billion september 28 2019 september 29 2018 respectively approximately 1107 million 212 million longlived assets located foreign locations primarily brazil china european union new zealand thailand september 28 2019 september 29 2018 respectively excluding goodwill intangible assets longlived assets foreign countries totaled approximately 506 million 201 million september 28 2019 september 29 2018 respectively sell certain products foreign markets primarily australia canada central america china european union japan mexico malaysia middle east south korea taiwan thailand export sales united states totaled 41 billion 42 billion 39 billion fiscal 2019 2018 2017 respectively substantially export sales facilitated unaffiliated brokers marketing associations foreign sales staffs sales products produced country united states less 10 consolidated sales fiscal 2019 2018 2017 following table disaggregates sales customers major distribution channels includes sales consumer products food retailers grocery retailers warehouse club stores internetbased retailers b includes sales foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments schools convenience stores healthcare facilities military c includes sales international markets related internationally produced products export sales domestically produced products includes sales industrial food processing companies process product sell end consumers remaining sales included consumer products foodservice international categories note 18 supplemental cash flows information following table summarizes cash payments interest income taxes note 19 transactions related parties operating leases two wastewater facilities entity owned donald j tyson revocable trust mr john tyson chairman company trustee berry street waste water treatment plant lp 90 owned tlp sisters mr tyson total payments approximately 1 million fiscal 2019 2018 2017 paid lease facilities september 28 2019 tlp john tyson director barbara tyson general partners owned 70 million shares 99985 outstanding class b stock along members tyson family owned 63 million shares class stock giving control approximately 7097 total voting power outstanding voting stock august 2017 company committed invest 5 million 175 equity interest buchan ltd mauritian private holding company poultry operations subsaharan africa acacia foods bv committed invest 9 million buchan ltd donnie smith first quarter fiscal year 2017 chief executive officer company serves chairman acacia foods bv director buchan ltd john randal tyson son john tyson chief sustainability officer serves director buchan ltd company completed funding commitment fiscal 2018 fiscal 2019 2018 2017 company provided administrative services tyson limited partnership beneficial owner 70 million shares class b stock tyson limited partnership tlp investment lp reimbursed company 03 million note 20 commitments contingencies commitments lease equipment properties certain farms total rentals approximated 220 million 200 million 186 million fiscal 2019 2018 2017 respectively leases initial terms seven years varying renewal periods minimum lease commitments noncancelable leases september 28 2019 guarantee obligations certain outside third parties consisting primarily leases debt grower loans substantially collateralized underlying assets terms underlying debt cover periods 10 years maximum potential amount future payments september 28 2019 14 million also maintain operating leases various types equipment contain residual value guarantees market value underlying leased assets end term lease remaining terms lease maturities cover periods next 10 years maximum potential amount residual value guarantees 93 million could recoverable various recourse provisions including based fair value underlying leased assets likelihood material payments guarantees considered probable september 28 2019 september 29 2018 significant liabilities guarantees recorded cash flow assistance programs certain livestock suppliers participate programs pay amount livestock equivalent standard cost grow livestock periods low market sales prices amounts payments excess market sales price recorded receivables accrue interest participating suppliers obligated repay receivables balances market sales prices exceed standard cost upon termination agreement potential maximum obligation associated programs limited fair value participating livestock supplier’s net tangible assets potential maximum obligation september 28 2019 approximately 300 million total receivables programs 5 million 6 million september 28 2019 september 29 2018 respectively receivables included net allowance uncollectible amounts accounts receivable consolidated balance sheets even though programs limited net tangible assets participating livestock suppliers also manage portion credit risk associated programs obtaining security interests livestock suppliers’ assets analyzing residual credit risks general market conditions allowance programs estimated uncollectible receivables september 28 2019 september 29 2018 constructing new facilities making major enhancements existing facilities occasionally enter incentive agreements local government agencies order reduce certain state local tax expenditures agreements transfer related assets various local government entities receive industrial revenue bonds immediately lease facilities local government entities option repurchase facilities nominal amount upon tendering industrial revenue bonds local government entities various predetermined dates industrial revenue bonds associated obligations leases facilities offset underlying assets remain property plant equipment september 28 2019 total amounts types arrangements totaled 698 million enter agreements livestock growers fixed variable payment structures generally cancelable based flocks placed growers livestock grower fixed estimable noncancelable commitments september 28 2019 additionally enter purchase commitments various items grains livestock contracts september 28 2019 contingencies involved various claims legal proceedings routinely assess likelihood adverse judgments outcomes matters well ranges probable losses extent losses reasonably estimable record accruals companys consolidated financial statements matters extent conclude loss probable financial impact adverse outcome occur reasonably estimable additionally matters losses reasonably possible reasonable estimate possible loss range loss excess amounts accrued made among reasons proceedings preliminary stages ii specific damages sought iii damage claims unsupported andor unreasonable iv uncertainty outcome pending appeals motions v significant factual issues resolved vi novel legal issues unsettled legal theories asserted opinion made appropriate adequate accruals matters accruals reflect company’s best estimate probable loss matters dates accruals recorded amounts may differ materially actual amount losses matters listed certain claims made company andor subsidiaries potential exposure considered material company’s consolidated financial statements believe substantial defenses claims made intend vigorously defend matters september 2 2016 maplevale farms inc acting behalf putative class direct purchasers poultry products filed class action complaint us certain poultry subsidiaries well several poultry processing companies northern district illinois subsequent filing initial complaint additional lawsuits making similar claims behalf putative classes direct indirect purchasers filed united states district court northern district illinois court consolidated complaints pretrial purposes actions behalf three different putative classes direct purchasers indirect purchasersconsumers commercialinstitutional indirect purchasers consolidated actions styled broiler chicken antitrust litigation since original filing certain putative class members opted matter proceeding individual direct actions making similar claims others may future opt complaints filed transferred northern district illinois proceeding coordinated pretrial basis consolidated actions operative complaints amended throughout litigation allege among things beginning january 2008 defendants conspired combined fix raise maintain stabilize price broiler chickens violation united states antitrust laws complaints behalf putative classes indirect purchasers also include causes action various state unfair competition laws consumer protection laws unjust enrichment common laws plaintiffs also allege defendants “manipulated artificially inflated widely used broiler price index georgia dock” plaintiffs allege defendants concealed conduct plaintiffs members putative classes plaintiffs seek treble damages injunctive relief pre postjudgment interest costs attorneys’ fees behalf putative classes decisions class certification summary judgment motions likely filed defendants currently expected late calendar year 2020 early 2021 necessary trial occur rulings class certification summary judgment motions april 26 2019 plaintiffs notified us department justice doj antitrust division issued grand jury subpoena requesting discovery produced parties civil case june 21 2019 doj filed motion intervene sought limited stay discovery civil action court granted part subsequently received grand jury subpoena doj seeking additional documents information related chicken industry fully cooperating doj’s request october 16 2019 court extended limited stay discovery civil action june 27 2020 commonwealth puerto rico behalf citizens also initiated civil lawsuit us certain subsidiaries several poultry processing companies alleging activities violation puerto rican antitrust laws lawsuit transferred northern district illinois coordinated pretrial proceedings march 1 2017 received civil investigative demand cid office attorney general department legal affairs state florida cid requests information primarily related possible anticompetitive conduct connection georgia dock chicken products pricing index formerly published georgia department agriculture cooperating attorney general’s office july 2019 attorney general issued subpoena broiler chicken antitrust litigation plaintiffs requesting information provided doj august 18 2019 advised broiler chicken antitrust litigation plaintiffs received cid louisiana department justice office attorney general public protection division louisiana cid requests deposition transcripts related broiler chicken antitrust litigation june 18 2018 group plaintiffs acting behalf putative class persons entities indirectly purchased pork filed class action complaint us certain pork subsidiaries well several pork processing companies united states district court district minnesota subsequent filing initial complaint additional lawsuits making similar claims behalf putative classes direct indirect purchasers also filed court consolidated complaints pretrial purposes actions behalf three different putative classes direct purchasers indirect purchasersconsumers commercialinstitutional indirect purchasers consolidated actions styled pork antitrust litigation since original filing putative class member proceeding individual direct action making similar claims others may future individual complaint filed district minnesota proceeding coordinated pretrial basis consolidated actions complaints allege among things beginning january 2009 defendants conspired combined fix raise maintain stabilize price pork products violation united states antitrust laws complaints behalf putative classes indirect purchasers also include causes action various state unfair competition laws consumer protection laws unjust enrichment common laws plaintiffs seek treble damages injunctive relief pre postjudgment interest costs attorneys’ fees behalf putative classes august 8 2019 matter dismissed without prejudice plaintiffs filed amended complaints november 6 2019 plaintiffs alleged defendants conspired combined fix raise maintain stabilize price pork products violation state federal antitrust consumer protection unjust enrichment common laws plaintiffs seeking treble damages injunctive relief pre postjudgment interest costs attorneys’ fees behalf putative classes intend respond amended complaints commonwealth puerto rico behalf citizens also initiated civil lawsuit us certain subsidiaries several pork processing companies alleging activities violation puerto rican antitrust laws lawsuit transferred district minnesota remains pending amended complaint due december 6 2019 april 23 2019 group plaintiffs acting behalf putative class persons entities directly sold named defendants fed cattle slaughter persons transacted live cattle futures andor options traded chicago mercantile exchange another us exchange filed class action complaint us beef pork subsidiary tyson fresh meats inc well beef packer defendants united states district court northern district illinois plaintiffs allege defendants engaged conspiracy january 2015 present reduce fed cattle prices violation federal antitrust laws grain inspection packers stockyards act 1921 commodities exchange act periodically reducing slaughter volumes reduce demand fed cattle curtailing purchases slaughters cashpurchased cattle periods coordinating procurement practices fed cattle settled cash basis importing foreign cattle loss reduce domestic demand closing idling plants addition plaintiffs also allege defendants colluded manipulate live cattle futures options traded chicago mercantile exchange plaintiffs seek among things treble monetary damages punitive damages restitution pre postjudgment interest well declaratory injunctive relief complaint subsequently voluntarily dismissed refiled united states district court district minnesota similar lawsuits filed ranchers district courts actions seeking relief ranchers futures traders transferred united states district court district minnesota action consolidated pretrial proceedings cattle antitrust litigation following filing defendants’ motion dismiss matter plaintiffs filed second amended complaint october 4 2019 april 26 2019 group plaintiffs acting behalf putative class indirect purchasers beef personal use filed class action complaint us beef packers agri stats inc information services provider united states district court district minnesota agristats subsequently dismissed suit plaintiffs allege packer defendants conspired reduce slaughter capacity closing idling plants limiting purchases cash cattle coordinating procurement cash cattle reducing slaughter numbers reduce beef output order artificially raise prices beef plaintiffs seek among things damages state antitrust consumer protection statutes common law approximately 30 states well injunctive relief defendants’ motions dismiss matter pending indirect consumer purchaser litigation styled peterson v jbs usa food company holdings et al october 16 2019 direct purchaser beef behalf direct purchasers beef filed class action complaint us beef packer defendants united states district court district minnesota plaintiff alleges defendants conspired reduce slaughter capacity closing idling plants limiting purchases cash cattle coordinating procurement cash cattle reducing slaughter numbers reduce beef output order artificially raise prices beef plaintiffs seek among things treble monetary damages punitive damages restitution pre postjudgment interest well declaratory injunctive relief august 30 2019 judy jien kieo jibidi elaisa clement acting behalf putative class nonsupervisory production maintenance employees chicken processing plants continental united states filed class action complaint us certain subsidiaries well several poultry processing companies united states district court district maryland additional complaint making similar allegations also filed emily earnest plaintiffs allege defendants directly wage survey benchmarking service exchanged information regarding labor rates effort depress fix rates wages nonsupervisory production maintenance workers violation federal antitrust laws plaintiffs seek among things treble monetary damages punitive damages restitution pre postjudgment interest well declaratory injunctive relief court consolidated jien earnest cases coordinated pretrial proceedings following consolidation two additional lawsuits filed individuals making similar allegations subsidiary hillshire brands company formerly named sara lee corporation party consolidation cases filed individual complainants republic philippines department labor employment national labor relations commission nlrc 1998 july 1999 complaint filed aris philippines inc sara lee corporation sara lee philippines inc fashion accessories philippines inc attorney cesar c cruz collectively “respondents” complaint alleges among things respondents engaged unfair labor practices connection termination manufacturing operations philippines 1995 aris philippines inc former subsidiary hillshire brands company late 2004 labor arbiter ruled respondents awarded complainants php3453664710 approximately us 66 million damages fees respondents appealed labor arbiters ruling subsequently set aside nlrc december 2006 subsequent nlrc’s decision parties filed numerous appeals motions reconsideration petitions review certain remained outstanding several years various appeals motions andor petitions pending hillshire brands company june 23 2014 without admitting liability filed settlement motion requesting supreme court philippines order dismissal prejudice claims certain respondents exchange payments allocated court among complainants amount exceed php342287800 approximately us 66 million based part finding consideration paid complainants part settlement insufficient supreme court philippines denied respondents’ settlement motion motions reconsideration thereof supreme court philippines also set aside premature nlrc’s december 2006 ruling result cases remanded back nlrc rule merits case december 15 2016 learned nlrc rendered decision november 29 2016 regarding respondents’ appeals regarding labor arbiter’s 2004 ruling favor complainants nlrc increased award 4922 total 5984 complainants php14858495937 approximately us 285 million however nlrc approved prior settlement reached group comprising approximately 18 class 5984 complainants pursuant hillshire brands company agreed pay settling complainant php68000 approximately us 1300 settlement payment made december 21 2016 nlrc responsible distributing funds settling complainant december 27 2016 respondents filed motions reconsideration nlrc asking award set aside nlrc denied respondents motions reconsideration resolution received may 5 2017 entered judgment award july 24 2017 aris philippines inc sara lee corporation sara lee philippines inc appealed award sought injunction preclude enforcement award philippines court appeals november 23 2017 court appeals granted writ preliminary injunction precluded execution nlrc award pendency appeal court appeals subsequently vacated nlrc’s award april 12 2018 complainants filed motions reconsideration court appeals november 14 2018 court appeals denied claimants’ motions reconsideration granted defendants’ motion release discharge preliminary injunction bond claimants since filed petitions writ certiorari supreme court philippines supreme court accepted case review continue maintain accrual matter hillshire brands company named defendant asbestos exposure case filed mark lopez may 2014 superior court alameda county california mr lopez diagnosed mesothelioma january 2014 deceased mr lopez’s family members asserted negligence premises liability strict liability claims related mr lopez’s alleged asbestos exposure 19541986 union sugar plant betteravia california plant sold 1986 owned entities predecessorsininterest hillshire brands company august 2017 jury returned verdict approximately 13 million favor plaintiffs judgment entered appealed judgment appellate court affirmed trial courts judgment full note 21 quarterly financial data unaudited first quarter fiscal 2019 net income included 26 million pretax keystone foods purchase accounting acquisition related costs included 11 million purchase accounting adjustment amortization fair value stepup inventory 15 million acquisition related costs 8 million pretax restructuring related charges second quarter fiscal 2019 net income included 11 million pretax keystone foods acquisition related costs 8 million pretax restructuring related charges third quarter fiscal 2019 net income included 105 million post tax recognition previously unrecognized tax benefit 55 million pretax gain sale investment 15 million pretax restructuring related charges fourth quarter fiscal 2019 net income included 31 million pretax beef production plant fire costs 41 million pretax impairment charge related divestiture business 15 million pretax pension plan termination charge 10 million pretax restructuring related charges first quarter fiscal 2018 net income included 994 million post tax recognition tax benefit remeasurement net deferred tax liabilities lower enacted tax rates 4 million pretax impairment charge net realized gain related divestiture nonprotein businesses 19 million pretax restructuring related charges second quarter fiscal 2018 net income included 9 million post tax recognition tax benefit remeasurement net deferred tax liabilities lower enacted tax rates 75 million pretax impairment charge related divestiture nonprotein businesses 109 million onetime cash bonus frontline employees 12 million pretax restructuring related charges third quarter fiscal 2018 net income included 14 million pretax restructuring related charges fourth quarter fiscal 2018 net income included 11 million pretax realized gain related divestiture nonprotein business 14 million pretax restructuring related charges report independent registered public accounting firm board directors shareholders tyson foods inc opinions financial statements internal control financial reporting audited accompanying consolidated balance sheets tyson foods inc subsidiaries “company” september 28 2019 september 29 2018 related consolidated statements income comprehensive income shareholders’ equity cash flows three years period ended september 28 2019 including related notes schedule valuation qualifying accounts three years period ended september 28 2019 appearing item 15 collectively referred “consolidated financial statements” also audited companys internal control financial reporting september 28 2019 based criteria established internal control integrated framework 2013 issued committee sponsoring organizations treadway commission coso opinion consolidated financial statements referred present fairly material respects financial position company september 28 2019 september 29 2018 results operations cash flows three years period ended september 28 2019 conformity accounting principles generally accepted united states america also opinion company maintained material respects effective internal control financial reporting september 28 2019 based criteria established internal control integrated framework 2013 issued coso basis opinions companys management responsible consolidated financial statements maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included management’s annual report internal control financial reporting appearing item 9a responsibility express opinions company’s consolidated financial statements companys internal control financial reporting based audits public accounting firm registered public company accounting oversight board united states pcaob required independent respect company accordance us federal securities laws applicable rules regulations securities exchange commission pcaob conducted audits accordance standards pcaob standards require plan perform audits obtain reasonable assurance whether consolidated financial statements free material misstatement whether due error fraud whether effective internal control financial reporting maintained material respects audits consolidated financial statements included performing procedures assess risks material misstatement consolidated financial statements whether due error fraud performing procedures respond risks procedures included examining test basis evidence regarding amounts disclosures consolidated financial statements audits also included evaluating accounting principles used significant estimates made management well evaluating overall presentation consolidated financial statements audit internal control financial reporting included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk audits also included performing procedures considered necessary circumstances believe audits provide reasonable basis opinions definition limitations internal control financial reporting company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles company’s internal control financial reporting includes policies procedures pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company ii provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company iii provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate critical audit matters critical audit matters communicated matters arising current period audit consolidated financial statements communicated required communicated audit committee relate accounts disclosures material consolidated financial statements ii involved especially challenging subjective complex judgments communication critical audit matters alter way opinion consolidated financial statements taken whole communicating critical audit matters providing separate opinions critical audit matters accounts disclosures relate acquisition keystone foods valuation acquired customer relationships described note 3 consolidated financial statements fiscal year 2019 company completed acquisition keystone foods 23 billion cash subject certain adjustments resulted 659 million intangible assets recorded primarily consisting customer relationships management used multiperiod excess earnings valuation approach determine fair value customer relationships intangible assets acquired management applied significant judgment estimating fair value customer relationships intangible assets acquired involved use significant estimates assumptions sales operating margins attrition rates growth rates discount rates based budgets business plans economic projections anticipated future cash flows market place data principal considerations determination performing procedures relating valuation customer relationships intangible assets result acquisition keystone foods critical audit matter high degree auditor judgment subjectivity involved performing procedures evaluating audit evidence related fair value measurements acquired customer relationships intangible assets due significant amount judgment management developing estimates ii significant audit effort necessary evaluate management’s anticipated future cash flows significant assumptions including attrition rates iii audit effort involved use professionals specialized skill knowledge assist performing procedures evaluating audit evidence obtained procedures addressing matter involved performing procedures evaluating audit evidence connection forming overall opinion consolidated financial statements procedures included testing effectiveness controls relating acquisition accounting including controls management’s valuation acquired customer relationships well controls development significant assumptions related acquired customer relationships intangible assets including attrition rates procedures also included among others testing management’s process estimating fair value acquired customer relationships testing management’s process included evaluating appropriateness multiperiod excess earnings valuation approach testing completeness accuracy relevance underlying data used valuation approach evaluating reasonableness significant assumptions including attrition rates evaluating management’s assumptions related attrition rates involved evaluating whether assumptions reasonable considering current past performance acquired businesses ii consistency external market industry data iii whether assumptions consistent evidence obtained areas audit professionals specialized skill knowledge used assist evaluation company’s multiperiod excess earnings valuation approach certain significant assumptions including attrition rates indefinite life intangible assets quantitative impairment assessments described notes 1 5 consolidated financial statements company’s consolidated indefinite life intangible assets balance 41 billion september 28 2019 disclosed management indefinite life intangible asset impairment test conducted first day fourth quarter year frequently impairment indicators arise management estimates fair value indefinite life intangible assets quantitative impairment assessment performed using relieffromroyalty multiperiod excess earnings valuation approaches valuation approaches management makes estimates assumptions sales operating margins growth rates royalty rates discount rates based budgets business plans economic projections anticipated future cash flows marketplace data principal considerations determination performing procedures relating indefinite life intangible assets quantitative impairment assessment critical audit matter significant judgment management developing fair value measurements indefinite life intangible assets turn led high degree auditor judgment subjectivity performing procedures evaluating audit evidence related fair value measurements ii significant audit effort necessary evaluate management’s anticipated future cash flows significant assumptions including sales growth rates addressing matter involved performing procedures evaluating audit evidence connection forming overall opinion consolidated financial statements procedures included testing effectiveness controls relating valuation indefinite life intangible assets procedures also included among others testing management’s process developing fair value estimates evaluating appropriateness relieffromroyalty multiperiod excess earnings valuation approaches testing completeness accuracy relevance underlying data used valuation approaches evaluating significant assumptions used management including sales growth rates evaluating management’s assumptions related sales growth rates involved evaluating whether assumptions used management reasonable considering current past performance associated related brands ii consistency external market industry data iii whether assumptions consistent evidence obtained areas audit pricewaterhousecoopers llp fayetteville arkansas november 12 2019 served company’s auditor since 2009 item 9item 8 financial statements supplementary data tyson foods inc consolidated statements income see accompanying notes tyson foods inc consolidated statements comprehensive income see accompanying notes tyson foods inc consolidated balance sheets see accompanying notes tyson foods inc consolidated statements shareholders’ equity see accompanying notes tyson foods inc consolidated statements cash flows see accompanying notes consolidated financial statements tyson foods inc note 1 business summary significant accounting policies description business tyson foods inc collectively “company” “we” “us” “our” founded 1935 world headquarters springdale arkansas one worlds largest food companies leading brands tyson® jimmy dean® hillshire farm® sara lee® ball park® wright® aidells® state fair® recognized market leader chicken beef pork well prepared foods including bacon breakfast sausage turkey lunchmeat hot dogs pizza crusts toppings tortillas desserts consolidation consolidated financial statements include accounts whollyowned subsidiaries well majorityowned subsidiaries exercise control applicable entities controlling financial interest variable interest entities primary beneficiary significant intercompany accounts transactions eliminated consolidation fiscal year utilize 52 53week accounting period ending saturday closest september 30 company’s accounting cycle resulted 53week year fiscal 2015 52week year fiscal 2014 2013 cash equivalents cash equivalents consist investments shortterm highly liquid securities original maturities three months less made part cash management activity carrying values assets approximate fair values primarily utilize cash management system series separate accounts consisting lockbox accounts receiving cash concentration accounts funds moved several zerobalance disbursement accounts funding payroll accounts payable livestock procurement grower payments etc result cash management system checks issued presented banks payment may result negative book cash balances negative book cash balances included accounts payable current liabilities october 3 2015 september 27 2014 checks outstanding excess related book cash balances totaled approximately 257 million 298 million respectively accounts receivable record accounts receivable net realizable value includes appropriate allowance estimated uncollectible accounts reflect loss anticipated accounts receivable balances charged provision doubtful accounts calculate allowance based history writeoffs level past due accounts relationships economic status customers october 3 2015 september 27 2014 allowance uncollectible accounts 27 million 34 million respectively generally collateral receivables periodically evaluate credit worthiness customers inventories processed products livestock supplies valued lower cost market cost includes purchased raw materials live purchase costs growout costs primarily feed grower pay catch haul costs labor manufacturing production overhead related purchase production inventories fiscal 2015 63 cost inventories determined firstin firstout fifo method compared 66 fiscal 2014 remaining cost inventories years determined weightedaverage method following table reflects major components inventory october 3 2015 september 27 2014 property plant equipment property plant equipment stated cost generally depreciated straightline method estimated lives buildings leasehold improvements 10 33 years machinery equipment three 12 years land improvements three 20 years major repairs maintenance costs significantly extend useful life related assets capitalized normal repairs maintenance costs charged operations review carrying value longlived assets balance sheet date indication impairment exists recoverability assessed using undiscounted cash flows based historical results current projections earnings interest taxes depreciation amortization measure impairment excess carrying value fair value asset fair value asset measured using discounted cash flows including market participant assumptions future operating results discount rates goodwill intangible assets definite life intangibles initially recorded fair value amortized estimated period benefit generally based straightline method 20 years less amortization expense generally recognized selling general administrative expense review carrying value definite life intangibles balance sheet date indication impairment exists recoverability assessed using undiscounted cash flows based historical results current projections earnings interest taxes depreciation amortization measure impairment excess carrying value fair value definite life intangible asset use various valuation techniques estimate fair value primary techniques discounted cash flows relieffromroyalty multiperiod excess earnings valuation approaches use significant unobservable inputs level 3 inputs defined fair value hierarchy valuation approaches required make estimates assumptions sales operating margins growth rates royalty rates discount rates based budgets business plans economic projections anticipated future cash flows marketplace data goodwill indefinite life intangible assets initially recorded fair value amortized reviewed impairment least annually frequently impairment indicators arise goodwill allocated reporting unit evaluated impairment first performing qualitative assessment determine whether quantitative goodwill test necessary determined based qualitative factors fair value reporting unit may likely less carrying amount significant changes macroeconomic factors related reporting unit occurred could materially impact fair value quantitative goodwill impairment test would required additionally elect forgo qualitative assessment perform quantitative test first step quantitative test identify potential impairment exists comparing fair value reporting unit carrying amount including goodwill fair value reporting unit exceeds carrying amount goodwill reporting unit considered potential impairment second step quantitative impairment test necessary however carrying amount reporting unit exceeds fair value second step performed determine goodwill impaired measure amount impairment loss recognize second step compares implied fair value goodwill carrying amount goodwill implied fair value goodwill exceeds carrying amount goodwill considered impaired however carrying amount goodwill exceeds implied fair value impairment loss recognized amount equal excess implied fair value goodwill determined manner amount goodwill recognized business combination ie fair value reporting unit allocated assets liabilities including unrecognized intangible assets reporting unit acquired business combination fair value reporting unit determined exit price market participant would pay business elected make first day fourth quarter annual impairment assessment date goodwill indefinite life intangible assets estimate fair value reporting units using discounted cash flow analysis uses significant unobservable inputs level 3 inputs defined fair value hierarchy analysis requires us make various judgmental estimates assumptions sales operating margins growth rates discount factors believed reflect market participant views would exist exit transaction generally utilize normalized operating margin assumptions based future expectations operating margins historically realized reporting units industries inherent estimates assumptions used determining fair value reporting units outside control management including interest rates cost capital tax rates credit ratings believe made reasonable estimates assumptions calculate fair value reporting units possible material change could occur actual results consistent estimates assumptions used calculate fair value may required perform second step quantitative test future years could result material impairments goodwill discount rate used annual goodwill impairment test decreased 68 fiscal 2015 79 fiscal 2014 discount rate used indefinite life intangible test 80 fiscal 2015 material indefinite life intangible assets prior acquisition hillshire brands august 2014 fiscal 2015 2014 2013 material reporting units underwent quantitative test passed first step goodwill impairment analysis therefore second step necessary fiscal 2015 recorded 23 million full impairment immaterial reporting unit’s goodwill indefinite life intangible assets qualitative assessment also performed determine whether existence events circumstances indicates likely intangible asset impaired similar goodwill also elect forgo qualitative test indefinite life intangible assets perform quantitative test upon performing quantitative test carrying value intangible asset exceeds fair value impairment loss recognized amount equal excess fair value indefinite life intangible assets calculated principally using relieffromroyalty multiperiod excess earnings valuation approaches use significant unobservable inputs level 3 inputs defined fair value hierarchy believed reflect market participant views would exist exit transaction valuation approaches required make estimates assumptions sales operating margins growth rates royalty rates discount rates based budgets business plans economic projections anticipated future cash flows marketplace data investments joint ventures entities generally use cost method accounting voting interests less 20 percent use equity method accounting voting interests excess 20 percent controlling interest variable interest primary beneficiary investments joint ventures entities reported consolidated balance sheets assets also investments marketable debt securities determined marketable debt securities availableforsale investments reported fair value based quoted market prices balance sheet date unrealized gains losses net tax recorded comprehensive income amortized cost debt securities adjusted amortization premiums accretion discounts maturity amortization recorded interest income cost securities sold based specific identification method realized gains losses sale debt securities declines value judged temporary recorded net basis income interest dividends securities classified availableforsale recorded interest income accrued selfinsurance use combination insurance selfinsurance mechanisms effort mitigate potential liabilities health welfare workers’ compensation auto liability general liability risks liabilities associated risks retained estimated part considering claims experience demographic factors severity factors actuarial assumptions current liabilities current liabilities october 3 2015 september 27 2014 include defined benefit plans recognize funded status defined pension postretirement plans consolidated balance sheets funded status measured difference fair value plan assets benefit obligation measure plan assets liabilities end fiscal year defined benefit pension plan benefit obligation projected benefit obligation defined benefit postretirement plan retiree health care plan benefit obligation accumulated postretirement benefit obligation overfunded status recognized asset underfunded status recognized liability transitional assetliability prior service cost actuarial gainloss yet recognized component net periodic cost recognized accumulated comprehensive income accumulated comprehensive income adjusted amounts subsequently recognized component net periodic benefit costs future periods derivative financial instruments purchase certain commodities grains livestock course normal operations part commodity risk management activities use derivative financial instruments primarily futures options reduce exposure various market risks related purchases well changes foreign currency exchange rates contract terms financial instrument qualifying hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts designated highly effective meeting risk reduction correlation criteria recorded using hedge accounting derivative instrument accounted hedge changes fair value instrument offset either change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion instrument’s change fair value immediately recognized earnings component cost sales instruments hold part risk management activities meet criteria hedge accounting marked fair value unrealized gains losses reported currently earnings changes market value derivatives used risk management activities relating forward sales contracts recorded sales changes surrounding inventories hand anticipated purchases inventories supplies recorded cost sales generally hedge anticipated transactions beyond 18 months revenue recognition recognize revenue title risk loss transferred customers generally delivery based terms sale revenue recognized net amount estimated received deducting estimated amounts discounts trade allowances product returns litigation reserves variety legal proceedings pending threatened us accruals recorded probable liability incurred amount liability reasonably estimated based current law progress case opinions views legal counsel advisers experience similar matters intended response litigation amounts discounted exclusive claims third parties adjusted periodically assessment efforts progress additional information becomes available expense amounts administering litigating claims incurred accruals legal proceedings included current liabilities consolidated balance sheets freight expense freight expense associated products shipped customers recognized cost sales advertising promotion expenses advertising promotion expenses charged operations period incurred customer incentive trade promotion activities recorded reduction sales based amounts estimated due customers based primarily historical utilization redemption rates advertising promotional activities recorded selling general administrative expenses advertising promotion expenses fiscal 2015 2014 2013 966 million 641 million 555 million respectively research development research development costs expensed incurred research development costs totaled 75 million 52 million 50 million fiscal 2015 2014 2013 respectively use estimates consolidated financial statements prepared conformity accounting principles generally accepted united states require us make estimates assumptions affect amounts reported consolidated financial statements accompanying notes actual results could differ estimates reclassification reclassified sharebased compensation expense previously included net within cash flows operating activities consolidated statements cash flows conform current period presentation note 2 recently issued accounting pronoucements may 2014 financial accounting standards board fasb issued guidance changing criteria recognizing revenue guidance provides single fivestep model applied revenue contracts customers standard also requires additional financial statement disclosures enable users understand nature amount timing uncertainty revenue cash flows relating customer contracts companies option use either retrospective approach cumulative effect adjustment approach implement standard guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2017 fiscal 2019 early adoption permitted fiscal years beginning december 15 2016 company currently evaluating impact guidance consolidated financial statements february 2015 fasb issued guidance changing analysis procedures reporting entity must perform determine whether consolidate certain types legal entities legal entities subject reevaluation revised consolidation model new guidance affects following areas 1 limited partnerships similar legal entities 2 evaluating fees paid decision maker service provider variable interest 3 effect fee arrangements primary beneficiary determination 4 effect related parties primary beneficiary determination 5 certain investment funds guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2015 fiscal 2017 early adoption permitted company currently evaluating impact guidance consolidated financial statements april 2015 fasb issued guidance requires debt issuance costs presented balance sheet direct deduction associated debt liability guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2015 fiscal 2017 early adoption permitted new guidance expected material impact consolidated financial statements april 2015 fasb issued guidance recognition fees paid customer cloud computing arrangements new guidance clarifies cloud computing arrangement includes software license customer account software license consistent acquisition software licenses arrangement include software license customer account arrangement service contract guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2015 fiscal 2017 company currently evaluating impact guidance consolidated financial statements july 2015 fasb issued guidance requires management evaluate inventory lower cost net realizable value guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2016 fiscal 2018 early adoption permitted prospective transition method applied company currently evaluating impact guidance consolidated financial statements april 2014 fasb issued guidance changing criteria reporting discontinued operations guidance also modifies related disclosure requirements guidance effective prospective basis annual reporting periods beginning december 15 2014 interim periods within annual periods beginning december 15 2015 early adoption permitted adopted fiscal 2014 adoption significant impact consolidated financial statements note 3 acquisitions dispositions acquisitions august 28 2014 acquired outstanding stock hillshire brands company hillshire brands part strategic expansion initiative purchase price equal 6300 per share hillshire brands outstanding common stock 8081 million addition paid 163 million cash breakage costs incurred hillshire brands related previously announced acquisition funded acquisition existing cash hand net proceeds issuance new senior notes class common stock class stock tangible equity units well borrowings new term loan facility refer note 7 debt note 8 equity hillshire brands results operations subsequent acquisition closing included prepared foods segment following table summarizes fair values assets acquired liabilities assumed acquisition date purchase price allocated based information available acquisition date fiscal 2015 recorded measurement period adjustments reduced goodwill 14 million obtaining additional information regarding among things asset valuations liabilities assumed amount considered material therefore prior periods revised purchase price allocation finalized fourth quarter fiscal 2015 fair value identifiable intangible assets acquisition date follows result acquisition recognized total 4790 million goodwill purchase price assigned assets acquired liabilities assumed based estimated fair values date acquisition excess allocated goodwill shown table goodwill represents value expect achieve implementation operational synergies growth opportunities primarily prepared foods segment completed allocation goodwill segments fourth quarter fiscal 2015 using withandwithout approach synergy impact fair value reporting units allocation goodwill chicken beef pork prepared foods segments 658 million 113 million 106 million 3913 million respectively fair value goodwill deductible united states income tax purposes used various valuation techniques determine fair value primary techniques discounted cash flow analysis relieffromroyalty multiperiod excess earnings valuation approaches use significant unobservable inputs level 3 inputs defined fair value hierarchy valuation approaches required make estimates assumptions sales operating margins growth rates royalty rates discount rates based budgets business plans economic projections anticipated future cash flows marketplace data acquisition hillshire brands accounted using acquisition method accounting consequently results operations hillshire brands reported consolidated financial statements date acquisition following unaudited pro forma information presents combined results operations acquisition hillshire brands occurred beginning fiscal 2013 hillshire brands preacquisition results added historical results pro forma results contained table include adjustments amortization acquired intangibles depreciation expense interest expense related financing related income taxes potential cost savings operational efficiencies could result acquisition included pro forma results 2013 pro forma results include transaction related expenses incurred hillshire brands prior acquisition 168 million including items consultant fees accelerated stock compensation deal costs transaction related expenses incurred company 115 million including fees paid third parties financing costs deal costs 32 million expense related fair value inventory adjustment date acquisition pro forma results prepared comparative purposes necessarily indicative results operations would acquisitions occurred assumed dates necessarily indication future operating results fiscal 2014 acquired valueadded food business part strategic expansion initiative included prepared foods segment aggregate purchase price acquisition 56 million included 12 million property plant equipment 27 million allocated intangible assets 18 million allocated goodwill fiscal 2013 acquired two valueadded food businesses part strategic expansion initiative included prepared foods segment aggregate purchase price acquisitions 106 million included 50 million property plant equipment 41 million allocated intangible assets 12 million allocated goodwill dispositions fiscal 2014 announced plan sell brazil mexico operations included jbs sa jbs 575 million cash less debt adjustments result conducted impairment test recorded 39 million impairment charge fourth quarter fiscal 2014 related brazil operation completed sale brazil operation first quarter fiscal 2015 received net proceeds 148 million including working capital net debt adjustments cash transferred sale result significant gain loss carrying value brazil operation approximated sales proceeds time sale completed sale mexico operation fourth quarter fiscal 2015 received net proceeds approximately 374 million including working capital net debt adjustments cash transferred result sale recorded pretax gain 161 million reflected cost sales consolidated statements income utilized net proceeds retire 275 senior notes due september 2015 assets liabilities related brazil mexico operations classified held sale balance sheet september 27 2014 following table summarizes net assets liabilities held sale fourth quarter fiscal 2015 better align overall production capacity current cattle supplies ceased beef operations denison iowa plant result recorded 12 million closure impairment charges fourth quarter fiscal 2015 charges impact beef segment’s operating income reflected cost sales consolidated statements income fourth quarter fiscal 2015 recorded 59 million impairment related charges associated prepared foods project designed optimize combined tyson hillshire brands network capacity enhance manufacturing efficiencies future result project expect close chicago illinois hospitality plant jefferson wisconsin plant back half fiscal 2016 charges reflected prepared foods segment’s operating income 49 million included consolidated statements income cost sales 10 million included consolidated statements income selling general administrative fiscal 2015 part ongoing efforts increase efficiencies chicken business announced planned closure buena vista georgia plant closed may 2015 closure costs significant impact companys operating results fiscal 2014 recorded impairment charges 52 million related closure three prepared foods plants company’s cherokee iowa plant closed september 2014 buffalo new york santa teresa new mexico plants closed january 2015 additionally april 2014 hillshire brands announced would discontinue production florence alabama plant closed december 2014 closure costs significant impact companys financial results fiscal 2014 sold 50 percent ownership interest dynamic fuels llc dynamic fuels 30 million cash consideration closing 35 million future cash payments contingent dynamic fuels production volumes period 115 years additionally part terms sale released guarantee 100 million gulf opportunity zone taxexempt bonds issued october 2008 fund portion plant construction costs dynamic fuels previously qualified variable interest entity consolidated primary beneficiary result sale deconsolidated dynamic fuels recorded gain approximately 3 million reflected cost sales consolidated statements income recognize future contingent payments income required volumes produced note 4 discontinued operation conducting assessment fiscal 2013 longterm business strategy china determined weifang operation weifang included note 17 segment reporting longer core execution strategy given capital investment required execute future business plan consequently conducted impairment test recorded 56 million impairment charge second quarter fiscal 2013 subsequently sold weifang resulted reporting discontinued operation based accounting guidance effect time sale completed july 2013 result significant gain loss carrying value approximated sales proceeds time sale weifangs prior periods results including impairment charge reclassified presented discontinued operation consolidated statements income following summary discontinued operations results note 5 property plant equipment following table reflects major categories property plant equipment accumulated depreciation october 3 2015 september 27 2014 approximately 565 million required complete buildings equipment construction october 3 2015 note 6 goodwill intangible assets following table reflects goodwill activity fiscal 2015 2014 included goodwill international chicken operation august 28 2014 acquired consolidated hillshire brands unallocated portion goodwill september 27 2014 attributable acquisition hillshire brands fiscal 2015 recorded measurement period adjustments reduced goodwill 14 million completed allocation goodwill segments see note 3 acquisitions dispositions following table reflects intangible assets type october 3 2015 september 27 2014 amortization expense 92 million 26 million 17 million recognized fiscal 2015 2014 2013 respectively estimate amortization expense intangible assets next five fiscal years subsequent october 3 2015 2016 80 million 2017 78 million 2018 76 million 2019 72 million 2020 69 million note 7 debt following table reflects major components debt october 3 2015 september 27 2014 annual maturities debt five fiscal years subsequent october 3 2015 2016 715 million 2017 79 million 2018 627 million 2019 1559 million 2020 285 million revolving credit facility 125 billion revolving credit facility supports shortterm funding needs letters credit facility mature commitments thereunder terminate september 2019 reducing amount borrowed outstanding letters credit issued facility amount available borrowing october 3 2015 1244 million october 3 2015 outstanding letters credit issued facility totaling 6 million none drawn upon additional 93 million bilateral letters credit issued separately revolving credit facility none drawn upon letters credit issued primarily support leasing obligations workers’ compensation insurance programs revolving credit facility unsecured fully guaranteed tyson fresh meats inc tfm parent wholly owned subsidiary date tfm parent released guarantees material indebtedness future subsidiaries shall guarantee material indebtedness subsidiary shall also required guarantee indebtedness obligations liabilities facility 2013 notes september 2008 issued 458 million principal amount 325 convertible senior unsecured notes due october 15 2013 connection issuance 2013 notes entered separate call option warrant transactions respect class stock minimize potential economic dilution upon conversion 2013 notes call options contractually expired upon maturity 2013 notes 2013 notes matured october 15 2013 time paid 458 million principal value cash hand settled conversion premium issuing 117 million shares class stock available treasury shares simultaneously settlement conversion premium received 117 million shares class stock call options warrants settled various dates fiscal 2014 resulting issuance 117 million shares class stock 2015 notes july 2015 exercised early redemption option retire outstanding 401 million balance 2015 notes using cash proceeds sale mexico operation described note 3 acquisitions dispositions term loans april 2015 entered term loan agreement provided total borrowings aggregate principal amount 500 million full balance used prepay outstanding borrowings existing 3year tranche term loan facility 500 million 3year tranche b term loan facility due april 7 2018 interest reset based selected libor interest period plus 1125 debt covenants revolving credit term loan facilities contain affirmative negative covenants among things may limit restrict ability create liens encumbrances incur debt merge dissolve liquidate consolidate make acquisitions investments dispose transfer assets change nature business engage certain transactions affiliates enter hedging transactions case subject certain qualifications exceptions addition required maintain minimum interest expense coverage maximum debttocapitalization ratios senior notes also contain affirmative negative covenants among things may limit restrict ability create liens engage certain saleleaseback transactions engage certain consolidations mergers sales assets compliance debt covenants october 3 2015 note 8 equity capital stock two classes capital stock class stock 010 par value class b common stock 010 par value class b stock holders class b stock may convert stock class stock shareforshare basis holders class b stock entitled 10 votes per share holders class stock entitled one vote per share matters submitted shareholders approval october 3 2015 tyson limited partnership tlp owned 99985 outstanding shares class b stock tlp members tyson family owned aggregate 179 outstanding shares class stock giving collectively control approximately 7064 total voting power outstanding voting stock class b stock considered participating security requiring use twoclass method computation basic earnings per share twoclass computation method period reflects cash dividends paid class stock plus amount allocated undistributed earnings losses computed using participation percentage reflects dividend rights class stock basic earnings per share computed using twoclass method periods presented shares class b stock considered participating convertible securities since shares class b stock convertible shareforshare basis shares class stock diluted earnings per share computed assuming conversion class b shares class shares beginning period dividends cash dividends cannot paid holders class b stock unless simultaneously paid holders class stock per share amount cash dividend paid holders class b stock cannot exceed 90 cash dividend simultaneously paid holders class stock pay quarterly cash dividends class b shareholders paid class dividends per share 040 030 fiscal 2015 2014 2013 respectively paid class b dividends per share 036 027 fiscal 2015 2014 2013 respectively fiscal 2013 included special dividend 010 per share class stock 009 per share class b november 19 2015 board directors increased quarterly dividend previously declared july 30 2015 015 per share class stock 0135 per share class b stock increased quarterly dividend payable december 15 2015 shareholders record close business december 1 2015 share repurchases fiscal 2014 board directors approved increase 25 million shares authorized repurchase share repurchase program october 3 2015 211 million shares remained available repurchase share repurchase program fixed scheduled termination date timing extent repurchase shares depend upon among things working capital needs market conditions liquidity targets debt obligations regulatory requirements addition share repurchase program purchase shares open market fund certain obligations equity compensation plans summary cumulative share repurchases class stock follows subsequent october 3 2015 repurchased approximately 57 million shares common stock share repurchase program shares repurchased 257 million share issuance fiscal 2014 issued 238 million shares class stock provide funding hillshire brands acquisition total proceeds net underwriting discounts offering related fees expenses 873 million tangible equity units fiscal 2014 completed public issuance 30 million 475 tangible equity units teus total proceeds net underwriting discounts expenses 1454 million teu stated amount 50 comprised prepaid stock purchase contract senior amortizing note due july 15 2017 allocated proceeds issuance teus equity debt based relative fair values respective components teu fair value prepaid stock purchase contracts 1295 million recorded capital excess par value net issuance costs fair value senior amortizing notes 205 million recorded debt issuance costs associated teu debt recorded deferred financing costs consolidated balance sheets assets amortized term instrument july 15 2017 aggregate values assigned upon issuance component teus based relative fair value respective components teu follows senior amortizing note initial principal amount 683 bears interest 15 per annum january 15 april 15 july 15 october 15 pay equal quarterly cash installments 059 per amortizing note cash payment aggregate principal interest equivalent 475 per year respect 50 stated amount per teu installment constitutes payment interest partial repayment principal unless settled earlier holders companys option purchase contract automatically settle july 15 2017 subject postponement certain limited circumstances deliver minimum 318 million shares maximum 398 million shares class stock subject adjustment based upon applicable market value defined class stock described • applicable market value equal greater conversion price 4714 per share deliver 10606 shares class stock per purchase contract minimum 318 million class shares • applicable market value greater reference price 3771 less conversion price 4714 per share deliver number shares per purchase contract equal 50 divided applicable market value • applicable market value less equal reference price 3771 per share deliver 13260 shares class stock per purchase contract maximum 398 million class shares applicable market value means average closing prices class stock 20 consecutive trading days beginning including 23rd scheduled trading day immediately preceding july 15 2017 september 15 2015 paid quarterly dividend shareholders record september 1 2015 equal 010 per share class stock amount distribution exceeded 0075 per share dividend threshold amount consequently settlement rates reference price conversion price adjusted reflected teus dilutive effect earnings per share 318 million minimum shares issued included calculation class basic weighted average shares 8 million share difference minimum shares 398 million maximum shares potentially dilutive securities accordingly included diluted earnings per share pro rata basis extent applicable market value higher reference price less conversion price note 9 income taxes detail provision income taxes continuing operations consists following reasons difference statutory federal income tax rate effective income tax rate continuing operations follows fiscal 2015 domestic production deduction changes unrecognized tax benefits decreased tax expense 72 million 34 million respectively state tax expense net federal tax benefit 59 million additionally foreign rate differences mostly driven china impairment unfavorably impacted tax expense 73 million sale mexico brazil operations related repatriation proceeds significant impact effective income tax rate fiscal 2014 domestic production deduction decrease unrecognized tax benefits decreased tax expense 50 million 58 million respectively fiscal 2013 domestic production deduction estimated general business credits decreased tax expense 40 million 17 million respectively approximately 1908 million 1270 million 1204 million income continuing operations income taxes fiscal 2015 2014 2013 respectively domestic operations based united states recognize deferred income taxes future tax consequences attributable differences financial statement carrying amounts existing assets liabilities respective tax bases deferred tax assets liabilities measured using tax rates expected apply taxable income years temporary differences expected recovered settled tax effects major items recorded deferred tax assets liabilities october 3 2015 september 27 2014 follows record deferred tax amounts current assets current liabilities deferred income taxes consolidated balance sheets october 3 2015 gross state tax net operating loss carryforwards approximated 938 million expire fiscal years 2016 2035 gross foreign net operating loss carryforwards approximated 29 million expire fiscal years 2016 2021 also tax credit carryforwards approximately 46 million expire fiscal years 2016 2035 accumulated undistributed earnings foreign subsidiaries aggregating approximately 139 million 403 million october 3 2015 september 27 2014 respectively fiscal 2015 company completed sales mexico brazil operations repatriated related net proceeds resulting significant decrease balance accumulated undistributed earnings accumulated undistributed earnings october 3 2015 expected indefinitely reinvested outside united states earnings distributed form dividends otherwise could subject federal income taxes subject adjustment foreign tax credits state income taxes withholding taxes payable various foreign countries due uncertainty manner undistributed earnings would brought back united states tax laws effect time well availability company claim foreign tax credits currently practicable estimate tax liability might payable repatriation foreign earnings following table summarizes activity related gross unrecognized tax benefits october 3 2015 september 27 2014 september 28 2013 amount unrecognized tax benefits recognized would impact effective tax rate 244 million 241 million october 3 2015 september 27 2014 respectively classify interest penalties unrecognized tax benefits income tax expense october 3 2015 september 27 2014 tax benefits 46 million 54 million respectively accrued interest penalties unrecognized tax benefits october 3 2015 subject income tax examinations united states federal income taxes fiscal years 2011 2014 also subject income tax examinations major state foreign jurisdictions fiscal years 2005 2014 2002 2014 respectively estimate next twelve months reasonably possible unrecognized tax benefits could decrease much 14 million primarily due expiration statutes various jurisdictions note 10 income charges following sale mexico brazil chicken production operations continued review strategies outlook remaining international businesses operations include chicken production operations china despite belief potential business chinese operations achieved profitability given ongoing losses generated business recent changes strategy management business depressed economic outlook china assessed chinese operations potential impairment fourth quarter fiscal 2015 result evaluation fourth quarter fiscal 2015 recorded 169 million impairment charge impairment comprised 126 million property plant equipment 23 million goodwill 20 million assets china operation included segment reporting impairment included cost sales consolidated statements income fiscal 2015 recorded 12 million equity earnings joint ventures 21 million gains sale equity securities recorded consolidated statements income net fiscal 2014 recorded 11 million equity earnings joint ventures 3 million net foreign currency exchange gains 6 million temporary impairment related availableforsale security 60 million costs associated bridge financing facilities hillshire brands acquisition recorded consolidated statements income net fiscal 2013 recorded 19 million currency translation adjustment gain recognized conjunction receipt proceeds constituting final resolution investment canada recorded consolidated statements income net note 11 earnings per share earnings weighted average common shares used computation basic diluted earnings per share follows approximately 5 million 4 million stockbased compensation shares antidilutive fiscal 2015 2014 respectively stockbased compensation shares antidilutive fiscal 2013 shares included dilutive earnings per share calculation two classes capital stock class stock class b stock cash dividends cannot paid holders class b stock unless simultaneously paid holders class stock per share amount cash dividends paid holders class b stock cannot exceed 90 cash dividends paid holders class stock allocate undistributed earnings based upon 1 09 ratio per share class stock class b stock respectively allocate undistributed earnings based ratio due historical dividend patterns voting control class b shareholders contractual limitations dividends class b stock note 12 derivative financial instruments business operations give rise certain market risk exposures mostly due changes commodity prices foreign currency exchange rates interest rates manage portion risks use derivative financial instruments reduce exposure commodity price risk foreign currency risk interest rate risk management programs periodically reviewed board directors audit committee programs monitored senior management may revised market conditions dictate current risk management programs utilize industrystandard models take account implicit cost hedging risks associated market risks created derivative instruments fair values strictly monitored using valueatrisk stress tests credit risks associated derivative contracts significant minimize counterparty concentrations utilize margin accounts letters credit deal creditworthy counterparties additionally derivative contracts mostly shortterm duration generally make use creditriskrelated contingent features significant concentrations credit risk existed october 3 2015 following aggregated outstanding notional amounts related derivative financial instruments recognize derivative instruments either assets liabilities fair value consolidated balance sheets exception normal purchases normal sales expected result physical delivery derivative instruments designated qualify hedging instruments designate hedging instrument based upon exposure hedged ie cash flow hedge fair value hedge designate certain forward contracts follows • cash flow hedges include certain commodity forward option contracts forecasted purchases ie grains certain foreign exchange forward contracts • fair value hedges include certain commodity forward contracts firm commitments ie livestock cash flow hedges derivative instruments designated hedges changes amount future cash flows related procurement certain commodities utilized production processes derivative instruments designate qualify cash flow hedge effective portion gain loss derivative reported component comprehensive income oci reclassified earnings period periods hedged transaction affects earnings gains losses representing hedge ineffectiveness recognized earnings current period ineffectiveness related cash flow hedges significant fiscal 2015 2014 2013 october 3 2015 net amounts expected reclassified earnings within next 12 months pretax losses 1 million fiscal 2015 2014 2013 reclassify significant pretax gainslosses earnings result discontinuance cash flow hedges following table sets forth pretax impact cash flow hedge derivative instruments consolidated statements income fair value hedges designate certain derivative contracts fair value hedges firm commitments purchase livestock slaughter objective hedges minimize risk changes fair value created fluctuations commodity prices associated fixed price livestock firm commitments derivative instruments designate qualify fair value hedge gain loss derivative well offsetting gain loss hedged item attributable hedged risk recognized earnings period include gain loss hedged items ie livestock purchase firm commitments line item cost sales offsetting gain loss related livestock forward position ineffectiveness related fair value hedges significant fiscal 2015 2014 2013 undesignated positions addition designated positions also hold derivative contracts apply hedge accounting include certain derivative instruments related commodities price risk including grains livestock energy foreign currency risk mark positions fair value earnings reporting date following table sets forth pretax impact undesignated derivative instruments consolidated statements income fair value outstanding derivative instruments consolidated balance sheets included note 13 fair value measurements note 13 fair value measurements fair value defined price would received sell asset paid transfer liability exit price principal advantageous market asset liability orderly transaction market participants measurement date fair value hierarchy contains three levels follows level 1 unadjusted quoted prices available active markets identical assets liabilities measurement date level 2 observable inputs available measurement date quoted prices included level 1 either directly indirectly including • quoted prices similar assets liabilities active markets • quoted prices identical similar assets nonactive markets • inputs quoted prices observable asset liability • inputs derived principally corroborated observable market data level 3 unobservable inputs cannot corroborated observable market data reflect use significant management judgment values generally determined using pricing models assumptions utilize management’s estimates market participant assumptions assets liabilities measured fair value recurring basis fair value hierarchy requires use observable market data available instances inputs used measure fair value fall different levels fair value hierarchy fair value measurement determined based lowest level input significant fair value measurement entirety assessment significance particular item fair value measurement entirety requires judgment including consideration inputs specific asset liability following tables set forth level within fair value hierarchy financial assets liabilities accounted fair value recurring basis according valuation techniques used determine fair values derivative assets liabilities presented consolidated balance sheets net basis net derivative assets liabilities including cash collateral legally enforceable master netting arrangement exists counterparty derivative contract us october 3 2015 september 27 2014 posted various counterparties 5 million 98 million respectively cash collateral related derivative financial instruments held cash collateral following table provides reconciliation beginning ending balance debt securities measured fair value recurring basis table used significant unobservable inputs level 3 following methods assumptions used estimate fair value class financial instrument derivative assets liabilities derivative financial instruments primarily include exchangetraded overthecounter contracts described note 12 derivative financial instruments record derivative financial instruments fair value using quoted market prices adjusted credit nonperformance risk internal models use basis readily observable market inputs including current forward market prices classify instruments level 2 quoted market prices corroborated utilizing observable current forward commodity market prices active exchanges observable market transactions available sale securities investments marketable debt securities classified availableforsale reported fair value based pricing models quoted market prices adjusted credit nonperformance risk shortterm investments maturities less 12 months included current assets consolidated balance sheets primarily include certificates deposit commercial paper marketable debt securities included assets consolidated balance sheets maturities ranging 35 years classify investments united states government united states agency certificates deposit commercial paper debt securities level 2 fair value generally estimated using discounted cash flow models primarily industrystandard models consider various assumptions including time value yield curve well readily available relevant economic measures classify certain corporate assetbacked debt securities level 3 limited activity less observable inputs valuation models including current interest rates estimated prepayment default recovery rates underlying portfolio structured investment vehicle significant changes assumptions unobservable inputs valuation level 3 instruments would significant impact consolidated financial statements october 3 2015 september 27 2014 amortized cost basis equity securities reduced accumulated temporary impairment approximately nil 2 million respectively unrealized holding gains losses net tax excluded earnings reported oci security settled sold quarterly basis evaluate whether losses related availableforsale securities temporary nature losses equity securities recognized earnings decline value judged temporary losses related debt securities determined temporary loss would recognized earnings intend likely required sell security prior recovery debt securities intent ability hold maturity losses determined temporary would remain oci expected credit losses recognized earnings consider many factors determining whether loss temporary including length time extent fair value cost financial condition nearterm prospects issuer ability intent hold investment period time sufficient allow anticipated recovery recognized temporary impairment earnings fiscal 2015 6 million temporary impairment fiscal 2014 recorded consolidated statements income net temporary losses deferred oci october 3 2015 september 27 2014 deferred compensation assets maintain nonqualified deferred compensation plans certain executives highly compensated employees investments generally maintained within trust include money market funds mutual funds life insurance policies cash surrender value life insurance policies invested primarily mutual funds investments recorded fair value based quoted market prices included assets consolidated balance sheets classify investments observable market prices active markets level 1 generally publiclytraded mutual funds remaining deferred compensation assets classified level 2 fair value corroborated based observable market data realized unrealized gains losses deferred compensation included earnings assets liabilities measured fair value nonrecurring basis addition assets liabilities recorded fair value recurring basis record assets liabilities fair value nonrecurring basis generally assets recorded fair value nonrecurring basis result impairment charges fiscal 2015 better align overall production capacity current cattle supplies ceased beef operations denison iowa plant result recorded 12 million impairment charge fourth quarter fiscal 2015 charge impacts beef segment’s operating income reflected cost sales consolidated statements income valuation assets primarily based discounted cash flow models included unobservable level 3 inputs fourth quarter fiscal 2015 recorded 59 million impairment related charges associated prepared foods project designed optimize combined tyson hillshire brands network capacity enhance manufacturing efficiencies future charge reflected prepared foods segment’s operating income 49 million included consolidated statements income cost sales 10 million included consolidated statements income selling general administrative valuation assets primarily based discounted cash flow models included unobservable level 3 inputs following sale mexico brazil chicken operations fiscal 2015 reviewed longterm business strategy outlook remaining international businesses includes chicken production operations china india assessed chinese operation potential impairment fourth quarter fiscal 2015 result evaluation recorded 169 million charge impair longlived assets fair value fully impair goodwill china operation included segment reporting impairment included cost sales consolidated statements income impairment comprised 126 million property plant equipment 23 million goodwill 20 million assets utilized discounted cash flow analysis included unobservable level 3 inputs fiscal 2014 recorded 52 million impairment charge related closure three prepared foods plants recorded consolidated statements income cost sales prepared foods segment valuation assets primarily based discounted cash flow models included unobservable level 3 inputs fiscal 2014 announced plan sell brazil operation result recorded 39 million charge impair assets fair value 144 million impairment charge recorded consolidated statements income cost sales segment reporting fair value used determine impairment based upon contracted sales price financial instruments fair value debt principally estimated using level 2 inputs based quoted prices similar instruments fair value carrying value debt follows concentrations credit risk financial instruments exposed concentrations credit risk consist primarily cash equivalents accounts receivable cash equivalents high quality securities placed major banks financial institutions concentrations credit risk respect receivables limited due large number customers dispersion across geographic areas perform periodic credit evaluations customers’ financial condition generally require collateral october 3 2015 september 27 2014 200 186 respectively net accounts receivable balance due walmart stores inc single customer group represented greater 10 net accounts receivable note 14 stockbased compensation issue shares stockbased compensation plans issuing class stock treasury total number shares available future grant tyson foods inc 2000 stock incentive plan incentive plan 24293913 october 3 2015 stock options shareholders approved incentive plan january 2001 incentive plan administered compensation leadership development committee board directors compensation committee incentive plan includes provisions granting incentive stock options shares class stock price less fair value date grant nonqualified stock options may granted price equal fair value class stock date option granted stock options incentive plan generally become exercisable ratably three years date grant must exercised within 10 years date grant policy recognize compensation expense straightline basis requisite service period entire award generally grant stock options year weighted average grantdate fair value options granted fiscal 2015 2014 2013 1151 1083 644 respectively fair value option grant established date grant using binomial lattice method use historical volatility period time comparable expected life option determine volatility assumptions expected life calculated based contractual term grant takes account historical exercise termination behavior participants riskfree interest rates based fiveyear treasury bond rate assumptions grant date used fair value calculation year’s grants outlined following table recognized stockbased compensation expense related stock options net income taxes 27 million 20 million 14 million fiscal 2015 2014 2013 respectively related tax benefit fiscal 2015 2014 2013 17 million 13 million 9 million respectively 38 million 48 million 39 million options vest fiscal 2015 2014 2013 respectively grant date fair value 32 million 30 million 22 million respectively fiscal 2015 2014 2013 received cash 84 million 67 million 123 million respectively exercise stock options shares issued treasury stock option exercises related tax benefit realized stock options exercised fiscal 2015 2014 2013 30 million 33 million 35 million respectively total intrinsic value options exercised fiscal 2015 2014 2013 79 million 87 million 90 million respectively cash flows resulting tax deductions excess compensation cost options excess tax deductions classified financing cash flows realized 19 million 24 million 18 million related excess tax deductions fiscal 2015 2014 2013 respectively october 3 2015 45 million total unrecognized compensation cost related stock option plans recognized weighted average period 14 years restricted stock issue restricted stock market value date grant restrictions expiring periods fiscal 2018 unearned compensation recognized vesting period particular grant using straightline method october 3 2015 24 million total unrecognized compensation cost related restricted stock awards recognized weighted average period 21 years recognized stockbased compensation expense related restricted stock net income taxes 9 million 6 million 5 million fiscal 2015 2014 2013 respectively related tax benefit fiscal 2015 2014 2013 6 million 4 million 3 million respectively 05 million 06 million 14 million restricted stock awards vest fiscal 2015 2014 2013 respectively grant date fair value 10 million 11 million 20 million respectively performancebased shares award performancebased shares class stock certain senior executives awards typically granted year performancebased shares vest based upon passage time achievement performance market performance criteria ranging 0 200 determined compensation committee prior date award vesting periods awards generally three years review progress toward attainment performance criteria quarter vesting period probable minimum performance criteria award achieved begin recognizing expense equal proportionate share total fair value class stock price grant date total expense recognized duration performance awards equal class stock price date grant multiplied number shares ultimately awarded based level attainment performance criteria grants market performance criteria fair value determined grant date calculated using inputs expected volatility expected dividend yield riskfree rate stock options noted duration three years total expense recognized duration award equal fair value regardless market performance criteria met following table summarizes performancebased shares maximum award amounts based upon respective performance share agreements actual shares vest depend level attainment performancebased criteria recognized stockbased compensation expense related performance shares net income taxes 5 million 4 million 2 million fiscal 2015 2014 2013 respectively related tax benefit fiscal 2015 2014 2013 3 million 2 million 2 million respectively october 3 2015 11 million total unrecognized compensation based upon progress toward attainment criteria related performancebased share awards recognized weighted average period 17 years note 15 pensions postretirement benefits october 3 2015 nine defined benefit pension plans consisting six funded qualified plans three unfunded nonqualified plans regards qualified plans five frozen noncontributory benefits provided plans based formula using years service either specified benefit rate compensation level nonqualified defined benefit plans certain contracted officers use formula based years service final average salary also postretirement benefit plans substantially employees may receive benefits satisfy applicable eligibility criteria postretirement healthcare plans contributory participants’ contributions adjusted deemed necessary defined contribution retirement programs various groups employees recognized expenses 62 million 53 million 50 million fiscal 2015 2014 2013 respectively use fiscal year end measurement date defined benefit plans postretirement plans recognize effect actuarial gains losses earnings immediately postretirement plans rather amortizing effect future periods postretirement benefits include postretirement medical costs life insurance benefit obligations funded status following table provides reconciliation changes plans’ benefit obligations assets funded status october 3 2015 september 27 2014 amounts recognized consolidated balance sheets consist amounts recognized accumulated comprehensive income consist change prior service cost primarily attributed plan amendments postretirement benefits noted within change benefit obligation remainder change immaterial october 3 2015 eight pension plans accumulated benefit obligation excess plan assets september 27 2014 seven pension plans accumulated benefit obligation excess plan assets plans accumulated benefit obligations excess plan assets follows accumulated benefit obligation qualified pension plans 1785 million 1849 million october 3 2015 september 27 2014 respectively net periodic benefit cost components net periodic benefit cost pension postretirement benefit plans recognized consolidated statements income follows october 3 2015 amounts expected reclassified earnings within next 12 months related net periodic benefit cost qualified nonqualified pensions 2 million 5 million respectively october 3 2015 amount expected reclassified earnings within next 12 months related net periodic benefit credit postretirement benefits 18 million assumptions weighted average assumptions follows determine expected return plan assets assumption first examined historical rates return various asset classes within plans determined longterm projected rateofreturn based expected returns discount rate assumptions used account pension postretirement benefit plans reflect rates benefit obligations could effectively settled determined using cash flow matching technique whereby rates yield curve developed highquality debt securities applied benefit obligations determine appropriate discount rate october 3 2015 september 27 2014 pension postretirement benefit plans used rp2014 mortality tables five postretirement benefit plans healthcare life insurance related two plans benefit obligations totaled 24 million october 3 2015 impacted healthcare cost trend rates one consists fixed annual payments one life insurance related two healthcare plans benefit obligations totaled 23 million october 3 2015 impacted healthcare cost trend rates due plan amendments remaining plan benefit obligation totaled 67 million october 3 2015 utilized assumed healthcare cost trend rates 90 76 retirees qualify medicare respectively healthcare cost trend rate grading ultimate rate 45 20242025 onepercentagepoint change assumed healthcare cost trend rates would following effects plan assets following table sets forth actual target asset allocation pension plan assets additionally one foreign subsidiary pension plans 14 million 15 million plan assets held insurance trust october 3 2015 september 27 2014 respectively plan trustees established set investment objectives related assets domestic pension plans regularly monitor performance funds portfolio managers objectives pension assets provide growth capital income ii achieve target weighted average annual rate return competitive funds similar investment objectives iii diversify reduce risk target asset allocations based upon funded status plans pension obligations become better funded lower risk increasing allocation fixed income noted previous table aggregate fair value basis plan assets currently approximately 85 fixed income securities 11 equity securities fixed income securities include limited direct bond investments pooled indirect bond investments may include limited international domestic equities real estate commodities private equity derivative instruments may also used concert either fixed income equity investments achieve desired exposure hedge certain risks derivative instruments include limited futures options swaps swaptions believe significant concentrations risk within plan assets october 3 2015 following tables show categories pension plan assets level fair values determined fair value hierarchy described note 13 fair value measurements classify investments united states government united states agency fixed income funds bond funds corporate bonds debt securities level 2 fair value generally estimated using discounted cash flow models primarily industrystandard models consider various assumptions including time value yield curve well readily available relevant economic measures funds valued using net asset value nav provided trustee practical expedient estimating fair value nav based fair value underlying investments within funds determined daily b classify certain mortgagebacked assetbacked insurance contracts level 3 limited activity less observable inputs valuation models including current interest rates estimated prepayment default recovery rates underlying portfolio structured investment vehicle insurance contracts valued using plan’s assumptions market participants would use pricing assets based best information available investment manager pricing significant changes assumptions unobservable inputs valuation level 3 instruments would significant impact consolidated financial statements reconciliation change fair value measurement defined benefit plans’ consolidated assets using significant unobservable inputs level 3 follows contributions policy fund least minimum contribution required meet applicable federal employee benefit local tax laws sole discretion may time fund additional amounts expected contributions pension plans fiscal 2016 approximately 63 million fiscal 2015 2014 2013 funded 14 million 9 million 8 million plans respectively pension plans estimated future benefit payments following benefit payments expected paid benefit payments postretirement benefit plans expected offset medicare part subsidies fiscal 2016 thereafter benefit payments include anticipated payments partial settlement deferred vested participants within two qualified pension plans assuming election rate 50 changes benefit obligation accumulated comprehensive income due remeasurement partial settlement include approximate payments 252 million resulting 2 million income reclassified earnings actual results may differ estimated amounts multiemployer plans additionally participate multiemployer plan provides defined benefits certain employees covered collective bargaining agreements plans usually administered board trustees composed management participating companies labor representatives risks participating multiemployer plans different singleemployer plans assets contributed multiemployer plan one employer may used provide benefits employees participating employers participating employer stops contributing plan unfunded obligation plan may borne remaining participating employers stop participating plan may required pay plan amount based underfunded status plan referred withdrawal liability contributions pension funds excess 5 total plan contributions plan year 2015 net pension cost plan equal annual contribution determined accordance provisions negotiated labor contracts contributions plan 1 million fiscal 2015 2014 assets contributed plans segregated otherwise restricted provide benefits employees future cost plan dependent number factors including funded status plan ability participating companies meet ongoing funding obligations participation multiemployer plan fiscal 2015 outlined einpension plan number column provides employer identification number ein three digit plan number unless otherwise noted recent pension protection act ppa zone status available fiscal 2015 fiscal 2014 plans year beginning january 1 2015 2014 respectively zone status based information received plan certified plans actuaries fiscal 2015 zone status updated secondary classification critical declining within red zone among factors plans red zone generally less 65 percent funded plans critical declining status projected accumulated funding deficiency fiprp status column indicates plans financial improvement plan fip rehabilitation plan rp either pending implemented last column lists expiration dates collectivebargaining agreements plan subject significant changes affect comparability contributions year addition regular contributions could obligated pay additional contributions known complete partial withdrawal liabilities unfunded vested benefits renewal negotiations progress note 16 comprehensive income loss components accumulated comprehensive loss follows tax changes components comprehensive income loss follows translation loss reclassified cost sales related disposition foreign operation described note 3 acquisitions dispositions note 17 segment reporting operate four reportable segments chicken beef pork prepared foods measure segment profit operating income loss following sale mexico brazil operations fiscal 2015 see note 3 acquisitions dispositions began reporting international operation previously reported international segment includes foreign chicken production operations china india thirdparty merger integration costs periods presented reclassified reflect change chicken beef pork prepared foods results impacted change chicken includes domestic operations related raising processing live chickens fresh frozen valueadded chicken products well sales allied products marketed domestically food retailers foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments schools healthcare facilities military food processors well international export markets segment also includes logistics operations move products domestic supply chain global operations chicken breeding stock subsidiary beef includes operations related processing live fed cattle fabricating dressed beef carcasses primal subprimal meat cuts caseready products marketed domestically food retailers foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments schools healthcare facilities military food processors well international export markets segment also includes sales allied products hides variety meats well logistics operations move products supply chain pork includes operations related processing live market hogs fabricating pork carcasses primal subprimal cuts caseready products marketed domestically food retailers foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments schools healthcare facilities military food processors well international export markets segment also includes live swine group related allied product processing activities logistics operations move products supply chain prepared foods prepared foods includes operations related manufacturing marketing frozen refrigerated food products logistics operations move products supply chain fiscal 2014 completed acquisition hillshire brands manufacturer marketer branded convenient foods includes brands jimmy dean® ball park® hillshire farm® state fair® vans® sara lee® chef pierre® pies well artisanal brands aidells® gallo salame® golden island® premium jerky hillshire brands results operations reported prepared foods segment date acquisition products primarily include pepperoni bacon breakfast sausage turkey lunchmeat hot dogs pizza crusts toppings flour corn tortilla products desserts appetizers prepared meals ethnic foods soups sauces side dishes meat dishes breadsticks processed meats products marketed domestically food retailers foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments schools healthcare facilities military food processors well international export markets allocate expenses related corporate activities segments except thirdparty merger integration costs 47 million 59 million fiscal 2015 2014 respectively included assets additions property plant equipment relating corporate activities remain addition september 27 2014 included 48 billion goodwill associated acquisition hillshire brands completed allocation goodwill segments fiscal 2015 see note 6 goodwill intangible assets description regarding allocation goodwill results dynamic fuels also included fiscal 2014 fiscal 2013 information segments reconciliation income continuing operations income taxes follows chicken segment sales 18 million 7 million 16 million fiscal 2015 2014 2013 respectively transactions operating segments pork segment sales 847 million 10 billion 872 million fiscal 2015 2014 2013 respectively transactions operating segments beef segment sales 351 million 307 million 226 million fiscal 2015 2014 2013 respectively transactions operating segments aforementioned sales intersegment transactions market prices included segment sales table largest customer walmart stores inc accounted 168 146 130 consolidated sales fiscal 2015 2014 2013 respectively sales walmart stores inc included segments extended discontinuance sales customer could replaced material impact operations majority operations domiciled united states approximately 97 96 sales external customers fiscal 2015 2014 2013 respectively sourced united states approximately 174 billion longlived assets located united states october 3 2015 september 27 2014 excluding goodwill intangible assets longlived assets totaled approximately 56 billion 54 billion october 3 2015 september 27 2014 respectively approximately 191 million 324 million longlived assets located foreign countries primarily brazil china india october 3 2015 september 27 2014 respectively excluding goodwill intangible assets longlived assets foreign countries totaled approximately 165 million 272 million october 3 2015 september 27 2014 respectively sell certain products foreign markets primarily brazil canada central america china european union japan mexico middle east south korea taiwan export sales united states totaled 41 billion 47 billion 42 billion fiscal 2015 2014 2013 respectively substantially export sales facilitated unaffiliated brokers marketing associations foreign sales staffs sales products produced country united states less 10 consolidated sales fiscal 2015 2014 2013 note 18 supplemental cash flows information following table summarizes cash payments interest income taxes note 19 transactions related parties operating leases two wastewater facilities entity owned donald j tyson revocable trust mr john tyson chairman company trustee berry street waste water treatment plant lp 90 owned tlp sisters mr tyson total payments approximately 1 million fiscal 2015 2014 2013 paid lease facilities fiscal 2014 purchased real estate jht llc 05 million build new data center jht llc mr john tyson manager owned 50 donald j tyson revocable trust 50 randal w tyson testamentary trust october 3 2015 tlp john tyson director barbara tyson general partners owned 70 million shares 99985 class b stock along members tyson family owned 54 million shares class stock giving control approximately 7064 total voting power outstanding voting stock fiscal 2013 part companys previously approved stock repurchase plan purchased one million shares class stock tlp 2985 million 2985 per share note 20 commitments contingencies commitments lease equipment properties certain farms total rentals approximated 165 million 161 million 200 million fiscal 2015 2014 2013 respectively leases initial terms seven years varying renewal periods significant obligations assumed terms leases upkeep facilities payments insurance property taxes minimum lease commitments noncancelable leases october 3 2015 guarantee obligations certain outside third parties consisting primarily leases debt grower loans substantially collateralized underlying assets terms underlying debt cover periods 10 years maximum potential amount future payments october 3 2015 38 million also maintain operating leases various types equipment contain residual value guarantees market value underlying leased assets end term lease remaining terms lease maturities cover periods next 12 years maximum potential amount residual value guarantees 81 million 74 million could recoverable various recourse provisions additional undeterminable recoverable amount based fair value underlying leased assets likelihood material payments guarantees considered probable october 3 2015 september 27 2014 material liabilities guarantees recorded cash flow assistance programs certain livestock suppliers participate programs pay amount livestock equivalent standard cost grow livestock periods low market sales prices amounts payments excess market sales price recorded receivables accrue interest participating suppliers obligated repay receivables balances market sales prices exceed standard cost upon termination agreement maximum obligation associated programs limited fair value participating livestock supplier’s net tangible assets potential maximum obligation october 3 2015 approximately 310 million receivables program october 3 2015 4 million september 27 2014 receivables included net allowance uncollectible amounts accounts receivable consolidated balance sheets even though programs limited net tangible assets participating livestock suppliers also manage portion credit risk associated programs obtaining security interests livestock suppliers’ assets analyzing residual credit risks general market conditions allowance programs estimated uncollectible receivables october 3 2015 september 27 2014 additionally enter future purchase commitments various items grains livestock contracts fixed grower fees october 3 2015 commitments totaled contingencies involved various claims legal proceedings routinely assess likelihood adverse judgments outcomes matters well ranges probable losses extent losses reasonably estimable record accruals matters extent conclude loss probable financial impact adverse outcome occur reasonably estimable accruals reflected company’s consolidated financial statements opinion made appropriate adequate accruals matters believe probability material loss beyond amounts accrued remote however ultimate liability matters uncertain accruals adequate adverse outcome could material effect consolidated financial condition results operations listed certain claims made company andor subsidiaries potential exposure considered material company’s consolidated financial statements believe substantial defenses claims made intend vigorously defend matters details seven lawsuits involving beef pork prepared foods plants certain present past employees allege failed compensate time takes engage pre postshift activities changing protective sanitary clothing walking changing area work areas break areas violation fair labor standards act various state laws plaintiffs seek back wages liquidated damages pre postjudgment interest attorneys’ fees costs case proceeding jurisdiction • bouaphakeo fka sharp et al v tyson foods inc nd iowa february 6 2007 jury trial held involving storm lake iowa pork plant resulted jury verdict favor plaintiffs violations federal state laws pre postshift work activities trial court also awarded plaintiffs liquidated damages resulting total damages awarded amount 5784758 plaintiffs counsel also filed application attorneys fees expenses amount 2692145 appealed jurys verdict trial courts award eighth circuit court appeals appellate court affirmed jury verdict judgment august 25 2014 filed petition rehearing september 22 2014 denied filed petition writ certiorari united states supreme court granted june 8 2015 oral arguments supreme court occurred november 10 2015 • acosta et al v tyson foods inc dba tyson fresh meats inc nebraska february 29 2008 bench trial held involving madison nebraska pork plant january 2013 may 2013 trial court awarded plaintiffs 5733943 unpaid overtime wages subsequently court ordered class plaintiffs expanded plaintiffs submitted updated calculation 6258330 unpaid overtime wages reflected payroll data may 2013 january 30 2014 trial court entered judgment favor plaintiffs amount 18774989 represents tripling plaintiffs’ alleged damages court denied posttrial motions appealed eighth circuit court appeals august 26 2015 eighth circuit reversed district court’s order judgment trial court subsequently entered judgment favor dismissed case • gomez et al v tyson foods inc nebraska january 16 2008 jury trial involving dakota city nebraska beef plant held jury found favor plaintiffs april 3 2013 october 2 2013 trial court denied parties’ posttrial motions entered judgment awarding unpaid overtime wages liquidated damages penalties totaling 4960787 appealed jury’s verdict trial court’s award eighth circuit court appeals august 26 2015 eighth circuit reversed jury verdict judgment trial court subsequently entered judgment favor dismissed case • edwards et al v tyson foods inc dba tyson fresh meats inc sd iowa march 20 2008 trial court case involves perry waterloo iowa pork plants decertified state law class granted pretrial motions resulted judgment favor respect plaintiffs’ claims plaintiffs filed motion modify judgment • murray et al v tyson foods inc cd illinois january 2 2008 devoss v tyson foods inc dba tyson fresh meats cd illinois march 2 2011 cases involve joslin illinois beef plant preliminary stages • dozier southerland et al v hillshire brands company ed north carolina september 2 2014 case involves tarboro north carolina prepared foods plant preliminary stages • awad et al v tyson foods inc tyson fresh meats inc md tennessee february 12 2015 case involves goodlettsville tennessee case ready beef plant preliminary stages subsidiary hillshire brands company formerly named sara lee corporation party consolidation cases filed individual complainants republic philippines department labor employment national labor relations commission nlrc 1998 july 1999 complaint filed aris philippines inc sara lee corporation sara lee philippines inc fashion accessories philippines inc attorney cesar c cruz collectively “respondents” complaint alleges among things respondents engaged unfair labor practices connection termination manufacturing operations philippines aris philippines inc former subsidiary hillshire brands company 2006 arbitrator ruled respondents awarded complainants php3453664710 approximately us74 million damages fees respondents appealed arbitrator’s ruling subsequently set aside nlrc december 2006 subsequent nlrc’s decision parties filed numerous appeals motions reconsideration petitions review certain remained outstanding several years various appeals motions andor petitions pending hillshire brands company june 23 2014 without admitting liability filed settlement motion requesting supreme court philippines order dismissal prejudice claims predecessorsininterest exchange payments allocated court among complainants amount exceed php342287800 approximately us7 million note 21 quarterly financial data unaudited sum quarterly earnings per share amounts equal total year due effects rounding dilution impact result issuing class shares tangible equity units fourth quarter fiscal 2014 first quarter fiscal 2015 net income included 19 million pretax expense related merger integration 36 million pretax loss due costs related legacy hillshire brands plant fire 26 million unrecognized tax benefit gain second quarter fiscal 2015 net income included 14 million pretax expense related merger integration 8 million pretax gain due insurance proceeds net costs related legacy hillshire brands plant fire third quarter fiscal 2015 net income included 16 million pretax expense related merger integration 11 million pretax gains due insurance proceeds net costs related legacy hillshire brands plant fire 21 million pretax gains sale equity securities fourth quarter fiscal 2015 net income included 8 million pretax expense related merger integration 25 million pretax gains due insurance proceeds related legacy hillshire brands plant fire 169 million pretax china impairment charge 59 million pretax impairment charges related prepared foods network optimization 12 million pretax closure impairment charges related denison plant closure 161 million pretax gain sale mexico operation 39 million pretax gain related accounting cycle resulting 53week year fiscal 2015 third quarter fiscal 2014 net income included 29 million pretax expense related hillshire brands acquisition fees paid third parties 49 million pretax expense related closure three prepared foods facilities 40 million unrecognized tax benefit gain fourth quarter fiscal 2014 net income included 42 million pretax impairment costs related sale brazil operation mexicos undistributed earnings tax 119 million pretax expense related hillshire brands acquisition integration costs associated prepared foods improvement plan 40 million pretax expense related hillshire brands postclosing results purchase price accounting adjustments ongoing costs related legacy hillshire brands plant fire 27 million pretax expense related hillshire brands acquisition financing incremental interest cost 12 million unrecognized tax benefit gain note 22 condensed consolidating financial statements tfm parent whollyowned subsidiary fully unconditionally guaranteed 2016 notes additionally tfm parent fully unconditionally guaranteed 2022 notes date tfm parent released guarantee tysons 125 billion revolving credit facility ii 2016 notes time tfm parents guarantee 2019 2022 2024 2034 2044 notes permanently released following financial information presents condensed consolidating financial statements include tyson foods inc tfi parent tfm parent nonguarantor subsidiaries nonguarantors combined basis elimination entries necessary consolidate tfi parent tfm parent nonguarantors tyson foods inc consolidated basis provided alternative providing separate financial statements guarantor report independent registered public accounting firm board directors shareholders tyson foods inc opinion accompanying consolidated balance sheets related consolidated statements income comprehensive income shareholders’ equity cash flows present fairly material respects financial position tyson foods inc subsidiaries october 3 2015 september 27 2014 results operations cash flows three years period ended october 3 2015 conformity accounting principles generally accepted united states america addition opinion financial statement schedule listed index appearing item 15a2 presents fairly material respects information set forth therein read conjunction related consolidated financial statements also opinion company maintained material respects effective internal control financial reporting october 3 2015 based criteria established internal control integrated framework 2013 issued committee sponsoring organizations treadway commission coso companys management responsible financial statements financial statement schedule maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included managements annual report internal control financial reporting appearing item 9a responsibility express opinions financial statements financial statement schedule companys internal control financial reporting based integrated audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audits obtain reasonable assurance whether financial statements free material misstatement whether effective internal control financial reporting maintained material respects audits financial statements included examining test basis evidence supporting amounts disclosures financial statements assessing accounting principles used significant estimates made management evaluating overall financial statement presentation audit internal control financial reporting included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk audits also included performing procedures considered necessary circumstances believe audits provide reasonable basis opinions company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles company’s internal control financial reporting includes policies procedures pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company ii provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company iii provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate pricewaterhousecoopers llp fayetteville ar november 23 2015 item 9item 8 financial statements supplementary data tyson foods inc consolidated statements income see accompanying notes tyson foods inc consolidated statements comprehensive income see accompanying notes tyson foods inc consolidated balance sheets see accompanying notes tyson foods inc consolidated statements shareholders’ equity see accompanying notes tyson foods inc consolidated statements cash flows see accompanying notes consolidated financial statements tyson foods inc note 1 business summary significant accounting policies description business tyson foods inc collectively “company” “we” “us” “our” one worlds largest food companies recognized leader protein founded 1935 john w tyson grown three generations family leadership company broad portfolio products brands like tyson® jimmy dean® hillshire farm® ball park® wright® aidells® ibp® state fair® innovate continually make protein sustainable tailor food everywhere it’s available raise world’s expectations much good food consolidation consolidated financial statements include accounts whollyowned subsidiaries well majorityowned subsidiaries exercise control applicable entities controlling financial interest variable interest entities primary beneficiary significant intercompany accounts transactions eliminated consolidation fiscal year utilize 52 53week accounting period ending saturday closest september 30 company’s accounting cycle resulted 52week year fiscal 2017 fiscal 2016 53week year fiscal 2015 cash equivalents cash equivalents consist investments shortterm highly liquid securities original maturities three months less made part cash management activity carrying values assets approximate fair values primarily utilize cash management system series separate accounts consisting lockbox accounts receiving cash concentration accounts funds moved several zerobalance disbursement accounts funding payroll accounts payable livestock procurement grower payments etc result cash management system checks issued presented banks payment may result negative book cash balances negative book cash balances included accounts payable current liabilities september 30 2017 october 1 2016 checks outstanding excess related book cash balances totaled approximately 237 million 261 million respectively accounts receivable record accounts receivable net realizable value includes appropriate allowance estimated uncollectible accounts reflect loss anticipated accounts receivable balances charged provision doubtful accounts calculate allowance based history writeoffs level past due accounts relationships economic status customers september 30 2017 october 1 2016 allowance uncollectible accounts 34 million 33 million respectively generally collateral receivables periodically evaluate credit worthiness customers inventories processed products livestock supplies valued lower cost market cost includes purchased raw materials live purchase costs growout costs primarily feed grower pay catch haul costs labor manufacturing production overhead related purchase production inventories fiscal 2017 63 cost inventories determined firstin firstout fifo method compared 61 fiscal 2016 remaining cost inventories years determined weightedaverage method following table reflects major components inventory september 30 2017 october 1 2016 property plant equipment property plant equipment stated cost generally depreciated straightline method estimated lives buildings leasehold improvements 10 33 years machinery equipment three 12 years land improvements three 20 years major repairs maintenance costs significantly extend useful life related assets capitalized normal repairs maintenance costs charged operations review carrying value longlived assets balance sheet date indication impairment exists recoverability assessed using undiscounted cash flows based historical results current projections earnings interest taxes depreciation amortization measure impairment excess carrying value fair value asset fair value asset generally measured using discounted cash flows including market participant assumptions future operating results discount rates goodwill intangible assets definite life intangibles initially recorded fair value amortized estimated period benefit brands trademarks generally amortized using straightline method 20 years less customer relationships generally amortized seven 20 years based pattern revenue expected generated use asset amortization expense generally recognized selling general administrative expense review carrying value definite life intangibles balance sheet date indication impairment exists recoverability assessed using undiscounted cash flows based historical results current projections earnings interest taxes depreciation amortization measure impairment excess carrying value fair value definite life intangible asset use various valuation techniques estimate fair value primary techniques discounted cash flows relieffromroyalty multiperiod excess earnings valuation approaches use significant unobservable inputs level 3 inputs defined fair value hierarchy valuation approaches required make estimates assumptions sales operating margins growth rates royalty rates discount rates based budgets business plans economic projections anticipated future cash flows marketplace data goodwill indefinite life intangible assets initially recorded fair value amortized reviewed impairment least annually frequently impairment indicators arise goodwill allocated reporting unit evaluated impairment first performing qualitative assessment determine whether quantitative goodwill test necessary determined based qualitative factors fair value reporting unit may likely less carrying amount significant changes macroeconomic factors related reporting unit occurred could materially impact fair value quantitative goodwill impairment test would required additionally elect forgo qualitative assessment perform quantitative test january 2017 financial accounting standards board “fasb” issued updated guidance simplifying accounting goodwill impairment guidance removes step 2 goodwill impairment test required hypothetical purchase price allocation goodwill impairment amount reporting units carrying value exceeds fair value exceed carrying amount goodwill early adopted guidance third quarter fiscal 2017 however adoption impact fiscal 2017 goodwill impairment assessment elected make first day fourth quarter annual impairment assessment date goodwill indefinite life intangible assets estimate fair value reporting units using combination various valuation techniques including income approach discounted cash flow analysis market approaches earnings interest taxes depreciation amortization ebitda multiples comparable publiclytraded companies precedent transactions primary technique discounted cash flow analysis approaches use significant unobservable inputs level 3 inputs defined fair value hierarchy requires us make various judgmental assumptions sales operating margins growth rates discount rates consider budgets business plans economic projections believed reflect market participant views would exist exit transaction assumptions also made varying perpetual growth rates periods beyond longterm business plan period generally utilize normalized operating margin assumptions based future expectations operating margins historically realized reporting units industries inherent estimates assumptions used determining fair value reporting units outside control management including interest rates cost capital tax rates market ebitda comparables credit ratings believe made reasonable estimates assumptions calculate fair value reporting units possible material change could occur actual results consistent estimates assumptions used calculate fair value could result additional material impairments goodwill discount rate used annual goodwill impairment test increased 67 fiscal 2017 62 fiscal 2016 fiscal 2017 2016 2015 fair value material reporting units exceeded carrying value fiscal 2015 recorded 23 million full impairment immaterial reporting unit’s goodwill indefinite life intangible assets qualitative assessment also performed determine whether existence events circumstances indicates likely intangible asset impaired similar goodwill also elect forgo qualitative test indefinite life intangible assets perform quantitative test upon performing quantitative test carrying value intangible asset exceeds fair value impairment loss recognized amount equal excess fair value indefinite life intangible assets calculated principally using relieffromroyalty multiperiod excess earnings valuation approaches use significant unobservable inputs level 3 inputs defined fair value hierarchy believed reflect market participant views would exist exit transaction valuation approaches required make estimates assumptions sales operating margins growth rates royalty rates discount rates based budgets business plans economic projections anticipated future cash flows marketplace data fiscal 2017 2016 2015 fair value indefinite life intangible assets exceeded carrying value discount rate used indefinite life intangible test 79 fiscal 2017 2016 investments joint ventures entities generally use cost method accounting voting interests less 20 percent use equity method accounting voting interests excess 20 percent controlling interest variable interest primary beneficiary investments joint ventures entities reported consolidated balance sheets assets also investments marketable debt securities determined marketable debt securities availableforsale investments reported fair value based quoted market prices balance sheet date unrealized gains losses net tax recorded comprehensive income amortized cost debt securities adjusted amortization premiums accretion discounts maturity amortization recorded interest income cost securities sold based specific identification method realized gains losses sale debt securities declines value judged temporary recorded net basis income interest dividends securities classified availableforsale recorded interest income accrued selfinsurance use combination insurance selfinsurance mechanisms effort mitigate potential liabilities health welfare workers’ compensation auto liability general liability risks liabilities associated risks retained estimated part considering claims experience demographic factors severity factors actuarial assumptions current liabilities current liabilities september 30 2017 october 1 2016 include defined benefit plans recognize funded status defined pension postretirement plans consolidated balance sheets funded status measured difference fair value plan assets benefit obligation measure plan assets liabilities end fiscal year defined benefit pension plan benefit obligation projected benefit obligation defined benefit postretirement plan retiree health care plan benefit obligation accumulated postretirement benefit obligation overfunded status recognized asset underfunded status recognized liability transitional assetliability prior service cost actuarial gainloss yet recognized component net periodic cost recognized accumulated comprehensive income accumulated comprehensive income adjusted amounts subsequently recognized component net periodic benefit costs future periods derivative financial instruments purchase certain commodities grains livestock course normal operations part commodity risk management activities use derivative financial instruments primarily futures options reduce exposure various market risks related purchases well changes foreign currency exchange rates contract terms financial instrument qualifying hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts designated highly effective meeting risk reduction correlation criteria recorded using hedge accounting derivative instrument accounted hedge changes fair value instrument offset either change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion instrument’s change fair value immediately recognized earnings component cost sales instruments hold part risk management activities meet criteria hedge accounting marked fair value unrealized gains losses reported currently earnings changes market value derivatives used risk management activities relating forward sales contracts recorded sales changes surrounding inventories hand anticipated purchases inventories supplies recorded cost sales generally hedge anticipated transactions beyond 18 months litigation reserves variety legal proceedings pending threatened us accruals recorded probable liability incurred amount liability reasonably estimated based current law progress case opinions views legal counsel advisers experience similar matters intended response litigation amounts discounted exclusive claims third parties adjusted periodically assessment efforts progress additional information becomes available expense amounts administering litigating claims incurred accruals legal proceedings included current liabilities consolidated balance sheets revenue recognition recognize revenue title risk loss transferred customers generally delivery based terms sale revenue recognized net amount estimated received deducting estimated amounts discounts trade allowances product returns freight expense freight expense associated products shipped customers recognized cost sales marketing promotion costs promote products marketing advertising trade promotions consumer incentives include limited coupons discounts rebates volumebased incentives marketing promotion costs charged operations period incurred customer incentive trade promotion activities recorded reduction sales based amounts estimated due customers based primarily historical utilization redemption rates marketing promotional activities recorded selling general administrative expense advertising expenses advertising expense charged operations period incurred recorded selling general administrative expense advertising expense totaled 238 million 238 million 181 million fiscal 2017 2016 2015 respectively research development research development costs expensed incurred research development costs totaled 113 million 96 million 75 million fiscal 2017 2016 2015 respectively use estimates consolidated financial statements prepared conformity accounting principles generally accepted united states require us make estimates assumptions affect amounts reported consolidated financial statements accompanying notes actual results could differ estimates recently issued accounting pronouncements august 2017 fasb issued guidance eases certain documentation assessment requirements hedge effectiveness modifies accounting components excluded assessment modifications include ineffectiveness derivative gainloss highly effective cash flow hedge recorded oci change fair value derivative recorded income statement line hedged item additional disclosures required cumulative basis adjustment fair value hedges effect hedging financial statement lines components excluded assessment amendment also simplifies application hedge accounting certain situations permit new hedging strategies eligible hedge accounting guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2018 fiscal 2020 early adoption permitted modified retrospective transition method applied currently evaluating impact guidance consolidated financial statements may 2017 fasb issued guidance clarifies changes terms conditions sharebased payment award require entity apply modification accounting topic 718 guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2017 fiscal 2019 early adoption permitted prospective transition method applied awards modified adoption date currently evaluating impact guidance consolidated financial statements march 2017 fasb issued guidance shortens amortization period certain callable debt securities held premium specifically amendments require premium amortized earliest call date guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2018 fiscal 2020 early adoption permitted modified retrospective transition method applied currently evaluating impact guidance consolidated financial statements march 2017 fasb issued guidance change presentation net periodic benefit cost related employer sponsored defined benefit plans postretirement benefits service cost included within income statement line item compensation costs arising services rendered period components net periodic benefit pension cost presented separately outside operating income additionally service cost component eligible capitalization applicable guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2017 fiscal 2019 early adoption permitted retrospective transition method applied presentation service cost component components net periodic pension cost net periodic postretirement benefit cost income statement prospective transition method applied effective date capitalization service cost component net periodic pension cost net periodic postretirement benefit assets plan adopt guidance beginning first quarter fiscal 2019 expect adoption guidance material impact consolidated financial statements november 2016 fasb issued guidance requires entities show changes total cash equivalents restricted cash restricted cash equivalents statement cash flows guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2017 fiscal 2019 early adoption permitted retrospective transition method applied currently evaluating impact guidance consolidated financial statements october 2016 fasb issued guidance requires companies recognize income tax effects intercompany sales transfers assets inventory period transfer occurs guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2017 fiscal 2019 early adoption permitted modified retrospective transition method applied currently evaluating impact guidance consolidated financial statements august 2016 fasb issued guidance aims eliminate diversity practice certain cash receipts cash payments presented classified statement cash flows guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2017 fiscal 2019 early adoption permitted retrospective transition method applied currently evaluating impact guidance consolidated financial statements june 2016 fasb issued guidance provides decisionuseful information expected credit losses financial instruments changes loss impairment methodology guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2019 fiscal 2021 early adoption permitted annual reporting periods interim periods within annual reporting periods beginning december 15 2018 fiscal 2020 application guidance requires various transition methods depending specific amendment currently evaluating impact guidance consolidated financial statements march 2016 fasb issued guidance simplifies several aspects accounting employee sharebased payment transactions including accounting income taxes forfeitures statutory tax withholding requirements well classification related amounts within statement cash flows impact earnings per share guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2016 fiscal 2018 early adoption permitted application guidance requires various transition methods depending specific amendment adopted guidance first quarter fiscal 2018 guidance requires income tax effects sharebased payment awards recognized consolidated statements income awards vest settled change current guidance requires activity recorded capital excess par value within stockholders equity adopted guidance prospectively may create volatility effective tax rate adopted depending largely future events factors may include stock price timing stock option exercises value realized upon vesting exercise shares compared grant date fair value shares new guidance companies also make accounting policy election either estimate forfeitures period account forfeitures occur changed accounting policy account forfeitures occur using modified retrospective transition method expect impact change consolidated financial statements immaterial guidance also changes presentation excess tax benefits financing activity operating activity consolidated statements cash flows applied change prospectively expect material impact consolidated statements cash flows february 2016 fasb issued guidance created new accounting reporting guidelines leasing arrangements guidance requires lessees recognize rightofuse asset lease liability leases terms 12 months recognition measurement presentation expenses cash flows arising lease depend classification finance operating lease guidance also requires qualitative quantitative disclosures regarding amount timing uncertainty cash flows arising leases guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2018 fiscal 2020 early adoption permitted modified retrospective method applied still evaluating impact guidance consolidated financial statements related disclosures completed initial scoping reviews made progress assessment phase continue identify leasing processes impacted new standard also made progress developing policy elections make upon adoption implementing software meet reporting requirements standard expect financial statement disclosures expanded present additional details leasing arrangements time unable reasonably estimate expected increase assets liabilities consolidated balance sheets impacts consolidated financial statements upon adoption january 2016 fasb issued guidance requires equity investments measured fair value subsequent changes fair value recognized net income guidance also impacts financial liabilities fair value option presentation disclosure requirements classification measurement financial instruments guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2017 fiscal 2019 applied means cumulativeeffect adjustment balance sheet beginning fiscal year adoption unless equity securities readily determinable fair values case amendments applied prospectively currently evaluating impact guidance consolidated financial statements july 2015 fasb issued guidance requires management evaluate inventory lower cost net realizable value guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2016 fiscal 2018 prospective transition method applied adopted guidance first quarter fiscal 2018 expect guidance material impact consolidated financial statements may 2014 fasb issued guidance changing criteria recognizing revenue guidance provides single fivestep model applied revenue contracts customers standard also requires additional financial statement disclosures enable users understand nature amount timing uncertainty revenue cash flows relating customer contracts companies option use either retrospective approach cumulative effect adjustment approach implement standard guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2017 fiscal 2019 early adoption permitted fiscal years beginning december 15 2016 fiscal 2018 plan adopt guidance using modified retrospective transition method beginning first quarter fiscal 2019 continue evaluate impact adoption guidance currently expect new guidance materially impact consolidated financial statements additional disclosure requirements note 2 changes accounting principles january 2017 fasb issued guidance removes step 2 goodwill impairment test result entity perform annual interim goodwill impairment test comparing fair value reporting unit carrying amount recognize impairment charge amount carrying amount exceeds reporting units fair value guidance effective annual interim goodwill impairment tests fiscal years beginning december 15 2019 fiscal 2021 early adoption permitted annual interim goodwill impairment tests performed testing dates january 1 2017 prospective transition method applied adopted guidance prospectively third quarter fiscal 2017 adoption material impact consolidated financial statements october 2016 fasb issued guidance reporting entity single decision maker variable interest entity vie treat indirect interests entity held related parties common control reporting entity determining whether primary beneficiary vie guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2016 fiscal 2018 required adopt guidance time adopted amendments asu 201502 therefore early adopted guidance retrospectively first quarter fiscal 2017 adoption material impact consolidated financial statements april 2015 fasb issued guidance recognition fees paid customer cloud computing arrangements guidance clarifies cloud computing arrangement includes software license customer account software license consistent acquisition software licenses arrangement include software license customer account arrangement service contract guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2015 fiscal 2017 applied prospectively retrospectively adopted guidance prospectively first quarter fiscal 2017 result prior period balances retrospectively adjusted adoption material impact consolidated financial statements february 2015 fasb issued guidance changing analysis procedures reporting entity must perform determine whether consolidate certain types legal entities legal entities subject reevaluation revised consolidation model new guidance affects following areas 1 limited partnerships similar legal entities 2 evaluating fees paid decision maker service provider variable interest 3 effect fee arrangements primary beneficiary determination 4 effect related parties primary beneficiary determination 5 certain investment funds guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2015 fiscal 2017 adopted guidance retrospectively first quarter fiscal 2017 adoption material impact consolidated financial statements note 3 acquisitions dispositions acquisitions june 7 2017 acquired outstanding common stock advancepierre foods holdings inc advancepierre part strategy sustainably feed world fastest growing portfolio proteinpacked brands purchase price equal 4025 per share advancepierres outstanding common stock approximately 32 billion funded acquisition existing cash hand net proceeds issuance new senior notes new term loan facility well borrowings commercial paper program refer note 7 debt advancepierres results operations subsequent acquisition closing included prepared foods chicken segments following table summarizes preliminary purchase price allocation fair values assets acquired liabilities assumed acquisition date certain estimated values acquisition including goodwill intangible assets property plant equipment deferred income taxes yet finalized subject revision additional information becomes available detailed analyses completed purchase price allocated based information available acquisition date fourth quarter fiscal 2017 recorded measurement period adjustments increased goodwill 60 million primarily related updated valuations intangible assets deferred income taxes based additional information regarding assets liabilities assumed fair value identifiable intangible assets follows result acquisition recognized total 2982 million goodwill purchase price assigned assets acquired liabilities assumed based estimated fair values date acquisition excess allocated goodwill shown table goodwill represents value expect achieve implementation operational synergies growth opportunities allocation goodwill reporting units pending finalization expected synergies impact synergies reporting units goodwill acquired 163 million related previous advancepierre acquisitions expected deductible tax purposes used various valuation techniques determine fair value primary techniques discounted cash flow analysis relieffromroyalty multiperiod excess earnings valuation approaches use significant unobservable inputs level 3 inputs defined fair value hierarchy valuation approaches required make estimates assumptions sales operating margins growth rates royalty rates discount rates based budgets business plans economic projections anticipated future cash flows marketplace data acquisition advancepierre accounted using acquisition method accounting consequently results operations advancepierre reported consolidated financial statements date acquisition advancepierres results date acquisition included net increase 508 million sales insignificant overall consolidated statements income following unaudited pro forma information presents combined results operations acquisition advancepierre occurred beginning fiscal 2016 advancepierres preacquisition results added historical results pro forma results contained table include adjustments amortization acquired intangibles depreciation expense interest expense related financing related income taxes potential cost savings operational efficiencies could result acquisition included pro forma results 2016 pro forma results include transaction related expenses incurred advancepierre prior acquisition 84 million including items consultant fees accelerated stock compensation deal costs transaction related expenses incurred company 67 million including fees paid third parties financing costs deal costs 36 million expense related fair value inventory adjustment date acquisition pro forma results prepared comparative purposes necessarily indicative results operations would acquisitions occurred assumed dates necessarily indication future operating results november 10 2017 acquired outstanding shares valuedadded protein business 225 million subject certain adjustments included prepared foods chicken segments dispositions april 24 2017 announced intent sell three nonprotein businesses part strategic focus proteinpacked brands businesses part prepared foods segment include sara lee® frozen bakery kettle van’s® produce items frozen desserts waffles snack bars soups sauces sides sale also expected include chef pierre® bistro collection® kettle collection™ van’s® brands license use sara lee® brand various channels well tarboro north carolina fort worth texas traverse city michigan prepared foods facilities reclassified assets liabilities related businesses assets liabilities held sale consolidated balance sheet september 30 2017 fourth quarter 2017 recorded impairment charge totaling 45 million related one businesses due revised estimate business’ fair value based current expected net sales proceeds impairment charge recorded cost sales consolidated statement income fiscal 2017 consisted goodwill intangible assets previously classified within assets held sale october 2017 executed definitive asset purchase agreement sell kettle operation 125 million subject certain contingencies including regulatory approval anticipate close kettle remaining transactions end calendar 2017 early calendar 2018 expect record net pretax gain result sale businesses company concluded businesses significant disposal groups represent strategic shift therefore classified discontinued operations periods presented following table summarizes net assets liabilities held sale fiscal 2014 announced plan sell brazil mexico operations included segment reporting jbs sa 575 million cash less debt adjustments completed sale brazil operation first quarter fiscal 2015 received net proceeds 148 million including working capital net debt adjustments cash transferred sale result significant gain loss carrying value brazil operation approximated sales proceeds time sale completed sale mexico operation fourth quarter fiscal 2015 received net proceeds approximately 374 million including working capital net debt adjustments cash transferred result sale recorded pretax gain 161 million reflected cost sales consolidated statements income utilized net proceeds retire 275 senior notes due september 2015 fourth quarter fiscal 2015 better align overall production capacity thencurrent cattle supplies ceased beef operations denison iowa plant result recorded 12 million closure impairment charges fourth quarter fiscal 2015 charges impacted beef segment’s operating income reflected cost sales consolidated statements income fourth quarter fiscal 2015 recorded 59 million impairment related charges associated prepared foods project designed optimize combined tyson hillshire brands network capacity enhance manufacturing efficiencies future charges reflected prepared foods segment’s operating income fourth quarter fiscal 2015 49 million included consolidated statements income cost sales 10 million included consolidated statements income selling general administrative result project sold chicago illinois hospitality plant june 2016 closed jefferson wisconsin plant july 2016 sale chicago illinois plant closure jefferson wisconsin plant significant impact companys operating results third quarter fiscal 2015 part ongoing efforts increase efficiencies chicken business closed buena vista georgia plant closure costs significant impact companys operating results note 4 property plant equipment following table reflects major categories property plant equipment accumulated depreciation september 30 2017 october 1 2016 approximately 1387 million required complete buildings equipment construction september 30 2017 note 5 goodwill intangible assets following table reflects goodwill activity fiscal 2017 2016 included goodwill foreign chicken operation june 7 2017 acquired consolidated advancepierre allocation goodwill reportable segments pending finalization expected synergies impact synergies reporting units following table reflects intangible assets type september 30 2017 october 1 2016 amortization expense 107 million 80 million 92 million recognized fiscal 2017 2016 2015 respectively estimate amortization expense intangible assets next five fiscal years subsequent september 30 2017 2018 194 million 2019 189 million 2020 185 million 2021 170 million 2022 160 million note 6 restructuring related charges fourth quarter fiscal 2017 board directors approved multiyear restructuring program “financial fitness program” expected contribute company’s overall strategy financial fitness increased operational effectiveness overhead reduction company currently anticipates financial fitness program result cumulative pretax charges implemented approximately 215 million consist primarily severance employee related costs asset impairments accelerated depreciation incremental costs implement new technology contract termination costs part program anticipate eliminating approximately 500 positions across several areas job levels eliminated positions originating corporate offices springdale arkansas chicago illinois cincinnati ohio fourth quarter fiscal 2017 company recognized restructuring related charges 150 million associated program following table reflects pretax impact restructuring related charges consolidated statements income following table reflects pretax impact restructuring related charges incurred fiscal 2017 estimated charges fiscal 2018 reportable segments fiscal 2017 restructuring related charges consisted 53 million severance employee related costs 72 million technology impairment related costs 25 million contract termination costs expected fiscal 2018 restructuring related charges expected approximate 5 million employee related costs 25 million incremental costs implement new technology 34 million accelerated depreciation 1 million charges timing actual amounts estimated charges may change following table reflects liability related restructuring recognized current liabilities consolidated balance sheet september 30 2017 note 7 debt following table reflects major components debt september 30 2017 october 1 2016 annual maturities debt five fiscal years subsequent september 30 2017 2018 906 million 2019 1737 million 2020 1537 million 2021 511 million 2022 1007 million revolving credit facility may 2017 amended existing credit facility among things increased line credit 125 billion 150 billion facility supports shortterm funding needs letters credit mature commitments thereunder terminate may 2022 amounts available borrowing facility totaled 1492 million september 30 2017 net outstanding letters credit september 30 2017 outstanding letters credit issued facility totaling 8 million none drawn upon additional 85 million bilateral letters credit issued separately revolving credit facility none drawn upon letters credit issued primarily support leasing obligations workers’ compensation insurance programs future subsidiaries shall guarantee material indebtedness subsidiary shall required guarantee indebtedness obligations liabilities facility august 2020 floatingrate notes 2021 notes august 21 2017 issued senior unsecured notes aggregate principal amount 900 million consisting 400 million due august 2020 500 million due august 2021 used net proceeds issuance repay amounts outstanding term loan tranche due june 2020 august 2020 floatingrate notes carry interest rate 3month libor plus 045 2021 notes carry fixed interest rate 225 interest payments august 2020 floatingrate notes due quarterly february 21 may 21 august 21 november 21 interest payments 2021 notes due semiannually february 23 august 23 original issue discounts 1 million received net proceeds 899 million addition incurred debt issuance costs 5 million related issuance 2019 floatingrate june 2020 floatingrate 2027 2047 notes june 2017 part financing advancepierre acquisition issued senior unsecured notes aggregate principal amount 2750 million consisting 300 million due may 2019 350 million due june 2020 1350 million due june 2027 750 million due june 2047 2019 floatingrate notes june 2020 floatingrate notes 2027 notes 2047 notes carry interest rates 3month libor plus 045 3month libor plus 055 355 455 respectively interest payments 2019 floatingrate notes due quarterly february 28 may 30 august 30 november 30 interest payments june 2020 floatingrate notes due quarterly march 2 june 2 september 2 december 2 interest payments 2027 notes 2047 notes due semiannually june 2 december 2 original issue discounts 7 million received net proceeds 2743 million addition incurred debt issuance costs 22 million related issuance term loan tranche b due august 2020 august 18 2017 amended existing 500 million term loan tranche b extended maturity loan april 2019 august 2020 term loan tranche due june 2020 june 2017 part financing advancepierre acquisition borrowed 1800 million unsecured term loan facility due june 2020 facility amortized 25 per quarter interest reset based selected libor interest period plus 125 incurred debt issuance costs 5 million related borrowing fiscal 2017 repaid full amount loan advancepierres debt extinguishment june 2017 connection advancepierre acquisition assumed 1119 million advancepierres gross debt estimated fair value approximately 1181 million acquisition date recorded assumed debt fair value used funds borrowed new senior notes term loan extinguish 1146 million total outstanding balance additionally assumed 223 million tra liability due advancepierres former shareholders assumed debt tra liability noncash investing activities commercial paper program 2017 initiated commercial paper program may issue unsecured shortterm promissory notes commercial paper aggregate maximum principal amount 800 million september 30 2017 used net proceeds commercial paper program part financing advancepierre acquisition general corporate purposes september 30 2017 778 million commercial paper outstanding weighted average interest rate 137 maturities less 45 days debt covenants revolving credit term loan facilities contain affirmative negative covenants among things may limit restrict ability create liens encumbrances incur debt merge dissolve liquidate consolidate make acquisitions investments dispose transfer assets change nature business engage certain transactions affiliates enter hedging transactions case subject certain qualifications exceptions addition required maintain minimum interest expense coverage maximum debttocapitalization ratios senior notes also contain affirmative negative covenants among things may limit restrict ability create liens engage certain saleleaseback transactions engage certain consolidations mergers sales assets compliance debt covenants september 30 2017 note 8 equity capital stock two classes capital stock class common stock 010 par value class stock class b common stock 010 par value class b stock holders class b stock may convert stock class stock shareforshare basis holders class b stock entitled 10 votes per share holders class stock entitled one vote per share matters submitted shareholders approval september 30 2017 tyson limited partnership tlp owned 99985 outstanding shares class b stock tlp members tyson family owned aggregate 207 outstanding shares class stock giving collectively control approximately 7078 total voting power outstanding voting stock class b stock considered participating security requiring use twoclass method computation basic earnings per share twoclass computation method period reflects cash dividends paid class stock plus amount allocated undistributed earnings losses computed using participation percentage reflects dividend rights class stock basic earnings per share computed using twoclass method periods presented shares class b stock considered participating convertible securities since shares class b stock convertible shareforshare basis shares class stock diluted earnings per share computed assuming conversion class b shares class shares beginning period dividends cash dividends cannot paid holders class b stock unless simultaneously paid holders class stock per share amount cash dividend paid holders class b stock cannot exceed 90 cash dividend simultaneously paid holders class stock pay quarterly cash dividends class b shareholders paid class dividends per share 090 060 040 fiscal 2017 2016 2015 respectively paid class b dividends per share 081 054 036 fiscal 2017 2016 2015 respectively november 10 2017 board directors increased quarterly dividend previously declared august 10 2017 030 per share class stock 027 per share class b stock increased quarterly dividend payable december 15 2017 shareholders record close business december 1 2017 share repurchases february 4 2016 board directors approved increase 50 million shares authorized repurchase share repurchase program september 30 2017 278 million shares remained available repurchase share repurchase program fixed scheduled termination date timing extent repurchase shares depend upon among things working capital needs markets industry conditions liquidity targets limitations debt obligations regulatory requirements addition share repurchase program purchase shares open market fund certain obligations equity compensation plans summary cumulative share repurchases class stock fiscal 2017 2016 2015 follows tangible equity units fiscal 2014 completed public issuance 30 million 475 tangible equity units teus total proceeds net underwriting discounts expenses 1454 million teu stated amount 50 comprised prepaid stock purchase contract senior amortizing note due july 15 2017 allocated proceeds issuance teus equity debt based relative fair values respective components teu fair value prepaid stock purchase contracts 1295 million recorded capital excess par value net issuance costs fair value senior amortizing notes 205 million recorded debt issuance costs associated teu debt recorded deferred debt issuance cost amortized term instrument july 15 2017 aggregate values assigned upon issuance component teus based relative fair value respective components teu follows july 2017 company made final quarterly cash installment payment 059 per senior amortizing note issued required remaining shares class stock upon automatic settlement outstanding purchase contract note 9 income taxes detail provision income taxes continuing operations consists following reasons difference statutory federal income tax rate effective income tax rate continuing operations follows fiscal 2017 domestic production deduction decreased tax expense 80 million state tax expense net federal tax benefit 61 million fiscal 2016 domestic production deduction changes unrecognized tax benefits decreased tax expense 68 million 43 million respectively state tax expense net federal tax benefit 70 million fiscal 2015 domestic production deduction changes unrecognized tax benefits decreased tax expense 72 million 34 million respectively state tax expense net federal tax benefit 59 million additionally foreign rate differences mostly driven china impairment unfavorably impacted tax expense 73 million sale mexico brazil operations related repatriation proceeds significant impact effective income tax rate approximately 2603 million 2543 million 1908 million income continuing operations income taxes fiscal 2017 2016 2015 respectively operations based united states recognize deferred income taxes future tax consequences attributable differences financial statement carrying amounts existing assets liabilities respective tax bases deferred tax assets liabilities measured using tax rates expected apply taxable income years temporary differences expected recovered settled tax effects major items recorded deferred tax assets liabilities september 30 2017 october 1 2016 follows september 30 2017 gross state tax net operating loss carryforwards approximated 806 million expire fiscal years 2018 2035 gross foreign net operating loss carryforwards approximated 39 million expire fiscal years 2018 2028 gross federal net operating loss carryforwards approximated 12 million expire fiscal years 2031 2033 also tax credit carryforwards approximately 52 million 45 million expire fiscal years 2018 2031 remainder expiration accumulated undistributed earnings foreign subsidiaries aggregating approximately 182 million 219 million september 30 2017 october 1 2016 respectively accumulated undistributed earnings september 30 2017 expected indefinitely reinvested outside united states earnings distributed form dividends otherwise could subject federal income taxes subject adjustment foreign tax credits state income taxes withholding taxes payable various foreign countries due uncertainty manner undistributed earnings would brought back united states tax laws effect time well availability company claim foreign tax credits currently practicable estimate tax liability might payable repatriation foreign earnings following table summarizes activity related gross unrecognized tax benefits september 30 2017 october 1 2016 october 3 2015 amount unrecognized tax benefits recognized would impact effective tax rate 205 million september 30 2017 october 1 2016 classify interest penalties unrecognized tax benefits income tax expense september 30 2017 october 1 2016 tax benefits 63 million 52 million respectively accrued interest penalties unrecognized tax benefits september 30 2017 subject income tax examinations united states federal income taxes fiscal years 2013 2016 also subject income tax examinations major state foreign jurisdictions fiscal years 2005 2016 2002 2016 respectively estimate next twelve months reasonably possible unrecognized tax benefits could decrease much 9 million primarily due expiration statutes various jurisdictions note 10 income charges fiscal 2017 recorded 28 million legal costs related two former subsidiaries hillshire brands sold hillshire brands 1986 1994 18 million acquisition bridge financing fees related advancepierre acquisition 19 million equity earnings joint ventures recorded consolidated statements income net second quarter fiscal 2017 recorded 52 million impairment charge related san diego prepared foods operation impairment comprised 43 million property plant equipment 8 million definite lived intangible assets 1 million assets charge 44 million included consolidated statements income cost sales 8 million included consolidated statements income selling general administrative triggered change comanufacturing contract ongoing losses fiscal 2016 recorded 12 million equity earnings joint ventures 4 million net foreign currency exchange losses recorded consolidated statements income net fiscal 2015 following sale mexico brazil chicken production operations reviewed strategy outlook remaining international businesses operations include chicken production operations china despite belief potential business chinese operations achieved profitability given losses generated business changes strategy management business depressed economic outlook china time assessed chinese operations potential impairment fourth quarter fiscal 2015 result evaluation fourth quarter fiscal 2015 recorded 169 million impairment charge impairment comprised 126 million property plant equipment 23 million goodwill 20 million assets china operation included segment reporting impairment included cost sales consolidated statements income fiscal 2015 recorded 12 million equity earnings joint ventures 21 million gains sale equity securities recorded consolidated statements income net note 11 earnings per share earnings weighted average common shares used computation basic diluted earnings per share follows approximately 1 million stockbased compensation shares antidilutive fiscal 2017 stockbased compensation shares antidilutive fiscal 2016 approximately 5 million stockbased compensation shares antidilutive fiscal 2015 shares included dilutive earnings per share calculation two classes capital stock class stock class b stock cash dividends cannot paid holders class b stock unless simultaneously paid holders class stock per share amount cash dividends paid holders class b stock cannot exceed 90 cash dividends paid holders class stock allocate undistributed earnings based upon 1 09 ratio per share class stock class b stock respectively allocate undistributed earnings based ratio due historical dividend patterns voting control class b shareholders contractual limitations dividends class b stock note 12 derivative financial instruments business operations give rise certain market risk exposures mostly due changes commodity prices foreign currency exchange rates interest rates manage portion risks use derivative financial instruments reduce exposure commodity price risk foreign currency risk interest rate risk management programs periodically reviewed board directors audit committee programs monitored senior management may revised market conditions dictate current risk management programs utilize industrystandard models take account implicit cost hedging risks associated market risks created derivative instruments fair values strictly monitored using valueatrisk stress tests credit risks associated derivative contracts significant minimize counterparty concentrations utilize margin accounts letters credit deal creditworthy counterparties additionally derivative contracts mostly shortterm duration generally make use creditriskrelated contingent features significant concentrations credit risk existed september 30 2017 following aggregated outstanding notional amounts related derivative financial instruments recognize derivative instruments either assets liabilities fair value consolidated balance sheets exception normal purchases normal sales expected result physical delivery derivative instruments designated qualify hedging instruments designate hedging instrument based upon exposure hedged ie cash flow hedge fair value hedge designate certain forward contracts follows • cash flow hedges include certain commodity forward option contracts forecasted purchases ie grains certain foreign exchange forward contracts • fair value hedges include certain commodity forward contracts firm commitments ie livestock cash flow hedges derivative instruments designated hedges changes amount future cash flows related procurement certain commodities utilized production processes derivative instruments designate qualify cash flow hedge effective portion gain loss derivative reported component comprehensive income oci reclassified earnings period periods hedged transaction affects earnings gains losses representing hedge ineffectiveness recognized earnings current period ineffectiveness related cash flow hedges significant fiscal 2017 2016 2015 september 30 2017 net amounts expected reclassified earnings within next 12 months pretax losses 2 million fiscal 2017 2016 2015 reclassify significant pretax gainslosses earnings result discontinuance cash flow hedges following table sets forth pretax impact cash flow hedge derivative instruments consolidated statements income fair value hedges designate certain derivative contracts fair value hedges firm commitments purchase live cattle harvesting feeder cattle growout production objective hedges minimize risk changes fair value created fluctuations commodity prices associated fixed price livestock firm commitments derivative instruments designate qualify fair value hedge gain loss derivative well offsetting gain loss hedged item attributable hedged risk recognized earnings period include gain loss hedged items ie livestock purchase firm commitments line item cost sales offsetting gain loss related livestock forward position ineffectiveness related fair value hedges significant fiscal 2017 2016 2015 undesignated positions addition designated positions also hold derivative contracts apply hedge accounting include certain derivative instruments related commodities price risk including grains livestock energy foreign currency risk mark positions fair value earnings reporting date following table sets forth pretax impact undesignated derivative instruments consolidated statements income fair value outstanding derivative instruments consolidated balance sheets included note 13 fair value measurements note 13 fair value measurements fair value defined price would received sell asset paid transfer liability exit price principal advantageous market asset liability orderly transaction market participants measurement date fair value hierarchy contains three levels follows level 1 unadjusted quoted prices available active markets identical assets liabilities measurement date level 2 observable inputs available measurement date quoted prices included level 1 either directly indirectly including • quoted prices similar assets liabilities active markets • quoted prices identical similar assets nonactive markets • inputs quoted prices observable asset liability • inputs derived principally corroborated observable market data level 3 unobservable inputs cannot corroborated observable market data reflect use significant management judgment values generally determined using pricing models assumptions utilize management’s estimates market participant assumptions assets liabilities measured fair value recurring basis fair value hierarchy requires use observable market data available instances inputs used measure fair value fall different levels fair value hierarchy fair value measurement determined based lowest level input significant fair value measurement entirety assessment significance particular item fair value measurement entirety requires judgment including consideration inputs specific asset liability following tables set forth level within fair value hierarchy financial assets liabilities accounted fair value recurring basis according valuation techniques used determine fair values derivative assets liabilities presented consolidated balance sheets net basis legally enforceable master netting arrangement exists counterparty derivative contract us september 30 2017 october 1 2016 22 million 8 million respectively cash collateral posted various counterparties master netting arrangements exist held cash collateral following table provides reconciliation beginning ending balance debt securities measured fair value recurring basis table used significant unobservable inputs level 3 following methods assumptions used estimate fair value class financial instrument derivative assets liabilities derivative financial instruments primarily include exchangetraded overthecounter contracts described note 12 derivative financial instruments record derivative financial instruments fair value using quoted market prices adjusted credit nonperformance risk internal models use basis readily observable market inputs including current forward market prices classify instruments level 2 quoted market prices corroborated utilizing observable current forward commodity market prices active exchanges observable market transactions available sale securities investments marketable debt securities classified availableforsale reported fair value based pricing models quoted market prices adjusted credit nonperformance risk shortterm investments maturities less 12 months included current assets consolidated balance sheets primarily include certificates deposit commercial paper marketable debt securities included assets consolidated balance sheets maturities ranging 32 years classify investments united states government united states agency certificates deposit commercial paper debt securities level 2 fair value generally estimated using discounted cash flow models primarily industrystandard models consider various assumptions including time value yield curve well readily available relevant economic measures classify certain corporate assetbacked debt securities level 3 limited activity less observable inputs valuation models including current interest rates estimated prepayment default recovery rates underlying portfolio structured investment vehicle significant changes assumptions unobservable inputs valuation level 3 instruments would significant impact consolidated financial statements unrealized holding gains losses net tax excluded earnings reported oci security settled sold quarterly basis evaluate whether losses related availableforsale securities temporary nature losses equity securities recognized earnings decline value judged temporary losses related debt securities determined temporary loss would recognized earnings intend likely required sell security prior recovery debt securities intent ability hold maturity losses determined temporary would remain oci expected credit losses recognized earnings consider many factors determining whether loss temporary including length time extent fair value cost financial condition nearterm prospects issuer ability intent hold investment period time sufficient allow anticipated recovery recognized temporary impairment earnings fiscal 2017 fiscal 2016 temporary losses deferred oci september 30 2017 october 1 2016 deferred compensation assets maintain nonqualified deferred compensation plans certain executives highly compensated employees investments generally maintained within trust include money market funds mutual funds life insurance policies cash surrender value life insurance policies invested primarily mutual funds investments recorded fair value based quoted market prices included assets consolidated balance sheets classify investments observable market prices active markets level 1 generally publiclytraded mutual funds remaining deferred compensation assets classified level 2 fair value corroborated based observable market data realized unrealized gains losses deferred compensation included earnings assets liabilities measured fair value nonrecurring basis addition assets liabilities recorded fair value recurring basis record assets liabilities fair value nonrecurring basis generally assets recorded fair value nonrecurring basis result impairment charges fourth quarter fiscal 2017 recorded impairment charge totaling 45 million related one nonprotein businesses held sale due revised estimate business’ fair value based current expected net sales proceeds impairment charge recorded cost sales consolidated statement income fiscal 2017 consisted goodwill intangible assets previously classified within assets held sale valuation included unobservable level 3 inputs based expected sales proceeds following competitive bidding process second quarter fiscal 2017 recorded 52 million impairment charge related san diego prepared foods operation impairment comprised 43 million property plant equipment 8 million definite lived intangibles assets 1 million assets charge 44 million included consolidated statements income cost sales 8 million included consolidated statements income selling general administrative triggered change comanufacturing contract ongoing losses valuation assets primarily based discounted cash flows relieffromroyalty models included unobservable level 3 inputs significant measurements assets liabilities fair value nonrecurring basis subsequent initial recognition fiscal 2016 fiscal 2015 better align overall production capacity thencurrent cattle supplies ceased beef operations denison iowa plant result recorded 12 million closure impairment charges fourth quarter fiscal 2015 charges impacted beef segment’s operating income reflected cost sales consolidated statements income valuation assets primarily based discounted cash flow models included unobservable level 3 inputs fiscal 2015 recorded 59 million impairment related charges associated prepared foods project designed optimize combined tyson hillshire brands network capacity enhance manufacturing efficiencies future charges reflected prepared foods segment’s operating income 49 million included consolidated statements income cost sales 10 million included consolidated statements income selling general administrative valuation assets primarily based discounted cash flow models included unobservable level 3 inputs following sale mexico brazil chicken operations fiscal 2015 reviewed longterm business strategy outlook remaining international businesses operations include chicken production operations china india assessed chinese operation potential impairment fiscal 2015 result evaluation recorded 169 million charge impair longlived assets fair value fully impair goodwill china operation included segment reporting impairment included cost sales consolidated statements income impairment comprised 126 million property plant equipment 23 million goodwill 20 million assets utilized discounted cash flow analysis included unobservable level 3 inputs financial instruments fair value debt principally estimated using level 2 inputs based quoted prices similar instruments fair value carrying value debt follows concentrations credit risk financial instruments exposed concentrations credit risk consist primarily cash equivalents accounts receivable cash equivalents high quality securities placed major banks financial institutions concentrations credit risk respect receivables limited due large number customers dispersion across geographic areas perform periodic credit evaluations customers’ financial condition generally require collateral september 30 2017 october 1 2016 186 189 respectively net accounts receivable balance due walmart stores inc single customer group represented greater 10 net accounts receivable note 14 stockbased compensation issue shares stockbased compensation plans issuing class stock treasury total number shares available future grant tyson foods inc 2000 stock incentive plan incentive plan 18094438 september 30 2017 stock options shareholders approved incentive plan january 2001 incentive plan administered compensation leadership development committee board directors compensation committee incentive plan includes provisions granting incentive stock options shares class stock price less fair value date grant nonqualified stock options may granted price equal fair value class stock date option granted stock options incentive plan generally become exercisable ratably three years date grant must exercised within 10 years date grant policy recognize compensation expense straightline basis requisite service period entire award generally grant stock options year weighted average grantdate fair value options granted fiscal 2017 2016 2015 1342 1147 1151 respectively fair value option grant established date grant using binomial lattice method use historical volatility period time comparable expected life option determine volatility assumptions expected life calculated based contractual term grant takes account historical exercise termination behavior participants riskfree interest rates based fiveyear treasury bond rate assumptions grant date used fair value calculation year’s grants outlined following table recognized stockbased compensation expense related stock options net income taxes 22 million 23 million 27 million fiscal 2017 2016 2015 respectively related tax benefit fiscal 2017 2016 2015 14 million 15 million 17 million respectively 41 million 38 million 38 million options vest fiscal 2017 2016 2015 respectively grant date fair value 47 million 38 million 32 million respectively fiscal 2017 2016 2015 received cash 154 million 128 million 84 million respectively exercise stock options shares issued treasury stock option exercises related tax benefit realized stock options exercised fiscal 2017 2016 2015 65 million 80 million 30 million respectively total intrinsic value options exercised fiscal 2017 2016 2015 164 million 204 million 79 million respectively cash flows resulting tax deductions excess compensation cost options excess tax deductions classified financing cash flows realized 42 million 58 million 19 million related excess tax deductions fiscal 2017 2016 2015 respectively september 30 2017 15 million total unrecognized compensation cost related stock option plans recognized weighted average period 1 year restricted stock issue restricted stock market value date grant restrictions expiring periods fiscal 2019 unearned compensation recognized vesting period particular grant using straightline method september 30 2017 38 million total unrecognized compensation cost related restricted stock awards recognized weighted average period 2 years recognized stockbased compensation expense related restricted stock net income taxes 18 million 14 million 9 million fiscal 2017 2016 2015 respectively related tax benefit fiscal 2017 2016 2015 11 million 9 million 6 million respectively 05 million 02 million 05 million restricted stock awards vest fiscal 2017 2016 2015 respectively grant date fair value 19 million 4 million 10 million respectively performancebased shares award performancebased shares class stock certain employees awards typically granted year performancebased shares vest based upon passage time achievement performance market performance criteria ranging 0 200 determined compensation committee prior date award vesting periods awards three years review progress toward attainment performance criteria quarter vesting period probable minimum performance criteria award achieved begin recognizing expense equal proportionate share total fair value class stock price grant date total expense recognized duration performance awards equal class stock price date grant multiplied number shares ultimately awarded based level attainment performance criteria grants market performance criteria fair value determined grant date calculated using inputs expected volatility expected dividend yield riskfree rate stock options noted duration three years total expense recognized duration award equal fair value regardless market performance criteria met following table summarizes performancebased shares maximum award amounts based upon respective performance share agreements actual shares vest depend level attainment performancebased criteria recognized stockbased compensation expense related performance shares net income taxes 16 million 11 million 5 million fiscal 2017 2016 2015 respectively related tax benefit fiscal 2017 2016 2015 10 million 7 million 3 million respectively september 30 2017 33 million total unrecognized compensation based upon progress toward attainment criteria related performancebased share awards recognized weighted average period 2 years note 15 pensions postretirement benefits september 30 2017 nine defined benefit pension plans consisting six funded qualified plans frozen noncontributory three unfunded nonqualified plans benefits provided plans based formula using years service either specified benefit rate compensation level nonqualified defined benefit plans certain contracted officers use formula based years service final average salary also postretirement benefit plans substantially employees may receive benefits satisfy applicable eligibility criteria postretirement healthcare plans contributory participants’ contributions adjusted deemed necessary defined contribution retirement programs various groups employees recognized expenses 78 million 67 million 62 million fiscal 2017 2016 2015 respectively use fiscal year end measurement date defined benefit plans postretirement plans recognize effect actuarial gains losses earnings immediately postretirement plans rather amortizing effect future periods postretirement benefits include postretirement medical costs life insurance second quarter fiscal 2017 issued notice intent terminate two qualified pension plans termination date april 30 2017 settlements terminated plans expected occur fourth quarter fiscal 2018 first quarter fiscal 2019 purchased annuities since amount settlement depends number factors determined liquidation date including annuity pricing interest rate environment asset experience currently unable determine ultimate cost settlement however based current market rates onetime settlement charge final liquidation estimated range approximately 25 million 30 million contributions purchase annuities time settlement expected minimal based upon funded status plan september 30 2017 benefit obligations funded status following table provides reconciliation changes plans’ benefit obligations assets funded status september 30 2017 october 1 2016 amounts recognized consolidated balance sheets consist amounts recognized accumulated comprehensive income consist change prior service credit primarily attributed plan amendments postretirement benefits noted within change benefit obligation remainder change immaterial five eight pension plans september 30 2017 october 1 2016 respectively accumulated benefit obligation excess plan assets plans accumulated benefit obligations excess plan assets follows accumulated benefit obligation qualified pension plans 1477 million 1554 million september 30 2017 october 1 2016 respectively net periodic benefit cost credit components net periodic benefit cost credit pension postretirement benefit plans recognized consolidated statements income follows september 30 2017 amounts expected reclassified earnings within next 12 months related net periodic benefit cost qualified nonqualified pension plans excluding pending settlements 1 million 4 million respectively september 30 2017 amount expected reclassified earnings within next 12 months related net periodic benefit credit postretirement benefits 25 million assumptions weighted average assumptions follows determine expected return plan assets assumption first examined historical rates return various asset classes within plans determined longterm projected rateofreturn based expected returns discount rate assumptions used account pension postretirement benefit plans reflect rates benefit obligations could effectively settled determined using cash flow matching technique whereby rates yield curve developed highquality debt securities applied benefit obligations determine appropriate discount rate september 30 2017 october 1 2016 pension postretirement benefit plans used rp2014 mortality tables five postretirement benefit plans healthcare life insurance related two plans benefit obligations totaled 19 million september 30 2017 impacted healthcare cost trend rates one consists fixed annual payments one life insurance related two healthcare plans benefit obligations totaled 1 million september 30 2017 impacted healthcare cost trend rates due plan amendments remaining plan benefit obligation totaled 13 million september 30 2017 utilized assumed healthcare cost trend rates 91 73 retirees qualify medicare respectively healthcare cost trend rate grading ultimate rate 45 20242025 onepercentagepoint change assumed healthcare cost trend rates would following effects plan assets following table sets forth actual target asset allocation pension plan assets additionally one foreign subsidiary pension plans 28 million plan assets held insurance trust september 30 2017 october 1 2016 plan trustees established set investment objectives related assets domestic pension plans regularly monitor performance funds portfolio managers objectives pension assets provide growth capital income ii achieve target weighted average annual rate return competitive funds similar investment objectives iii diversify reduce risk target asset allocations based upon funded status plans pension obligations become better funded lower risk increasing allocation fixed income domestic plan assets consist mainly common collective trusts primarily comprised fixed income funds equity securities investments fixed income securities include limited direct bond investments pooled indirect bond investments may include limited international domestic equities real estate commodities private equity derivative instruments may also used concert either fixed income equity investments achieve desired exposure hedge certain risks derivative instruments include limited futures options swaps swaptions domestic plan assets also include mutual funds believe significant concentrations risk within plan assets september 30 2017 following tables show categories pension plan assets level fair values determined fair value hierarchy described note 13 fair value measurements classify insurance contracts level 3 limited activity less observable inputs valuation models including current interest rates estimated prepayment default recovery rates underlying portfolio structured investment vehicle insurance contracts valued using plan’s assumptions market participants would use pricing assets based best information available investment manager pricing significant changes assumptions unobservable inputs valuation level 3 instruments would significant impact consolidated financial statements b funds measured fair value using net asset value nav per share practical expedient categorized fair value hierarchy amounts presented intended permit reconciliation fair value hierarchy fair value total plan assets order determine amounts included assets liabilities consolidated balance sheets reconciliation change fair value measurement defined benefit plans’ consolidated assets using significant unobservable inputs level 3 follows contributions policy fund least minimum contribution required meet applicable federal employee benefit local tax laws sole discretion may time fund additional amounts expected contributions pension plans fiscal 2018 approximately 38 million fiscal 2017 2016 2015 funded 53 million 64 million 14 million plans respectively pension plans estimated future benefit payments following benefit payments expected paid benefit payments postretirement benefit plans expected offset medicare part subsidies fiscal 2018 benefit payments include anticipated payments plan termination within two qualified pension plans plan termination process plans began april 30 2017 full settlement expected occur fourth quarter fiscal 2018 first quarter fiscal 2019 multiemployer plans additionally participate multiemployer plan provides defined benefits certain employees covered collective bargaining agreements plans usually administered board trustees composed management participating companies labor representatives risks participating multiemployer plans different singleemployer plans assets contributed multiemployer plan one employer may used provide benefits employees participating employers participating employer stops contributing plan unfunded obligation plan may borne remaining participating employers stop participating plan may required pay plan amount based underfunded status plan referred withdrawal liability contributions pension funds excess 5 total plan contributions plan year 2017 net pension cost plan equal annual contribution determined accordance provisions negotiated labor contracts contributions plan 2 million 1 million fiscal 2017 2016 respectively assets contributed plans segregated otherwise restricted provide benefits employees future cost plan dependent number factors including funded status plan ability participating companies meet ongoing funding obligations participation multiemployer plan fiscal 2017 outlined einpension plan number column provides employer identification number ein threedigit plan number unless otherwise noted recent pension protection act ppa zone status available fiscal 2017 fiscal 2016 plans year beginning january 1 2017 2016 respectively zone status based information received plan certified plans actuaries zone status secondary classification critical declining within red zone fiscal 2017 among factors plans red zone generally less 65 percent funded plans critical declining status projected accumulated funding deficiency fiprp status column indicates plans financial improvement plan fip rehabilitation plan rp either pending implemented last column lists expiration dates collectivebargaining agreements plan subject significant changes affect comparability contributions year addition regular contributions could obligated pay additional contributions known complete partial withdrawal liabilities unfunded vested benefits renewal negotiations progress note 16 comprehensive income loss components accumulated comprehensive loss follows tax changes components comprehensive income loss follows translation loss reclassified cost sales related disposition foreign operation described note 3 acquisitions dispositions note 17 segment reporting operate four reportable segments beef pork chicken prepared foods measure segment profit operating income loss primarily includes foreign chicken production operations china india thirdparty merger integration costs corporate overhead related tyson new ventures llc june 7 2017 acquired advancepierre producer distributor valueadded convenient readytoeat sandwiches sandwich components entrées snacks advancepierres results operations subsequent acquisition closing included prepared foods chicken segments beef includes operations related processing live fed cattle fabricating dressed beef carcasses primal subprimal meat cuts caseready products marketed domestically food retailers foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments schools healthcare facilities military food processors well international export markets segment also includes sales allied products hides variety meats well logistics operations move products supply chain pork includes operations related processing live market hogs fabricating pork carcasses primal subprimal cuts caseready products marketed domestically food retailers foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments schools healthcare facilities military food processors well international export markets segment also includes live swine group related allied product processing activities logistics operations move products supply chain chicken includes domestic operations related raising processing live chickens purchasing raw materials fresh frozen valueadded chicken products well sales allied products valueadded chicken products primarily include breaded chicken strips nuggets patties readytofix fully cooked chicken parts products marketed domestically food retailers foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments schools healthcare facilities military food processors well international export markets segment also includes logistics operations move products domestic supply chain global operations chicken breeding stock subsidiary prepared foods prepared foods includes operations related manufacturing marketing frozen refrigerated food products logistics operations move products supply chain segment includes brands jimmy dean® hillshire farm® ball park® wright® state fair® vans® sara lee® chef pierre® well artisanal brands aidells® gallo salame® golden island® products primarily include readytoeat sandwiches sandwich components flamegrilled hamburgers philly steaks pepperoni bacon breakfast sausage turkey lunchmeat hot dogs pizza crusts toppings flour corn tortilla products desserts appetizers snacks prepared meals ethnic foods soups sauces side dishes meat dishes breadsticks processed meats products marketed domestically food retailers foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments schools healthcare facilities military food processors well international export markets allocate expenses related corporate activities segments except thirdparty merger integration costs 67 million 37 million 47 million fiscal 2017 2016 2015 respectively corporate overhead related tyson new ventures llc included assets additions property plant equipment relating corporate activities remain addition september 30 2017 included 3 billion goodwill associated acquisition advancepierre allocation goodwill reportable segments pending finalization expected synergies impact synergies reporting units see note 5 goodwill intangible assets description information segments reconciliation income continuing operations income taxes follows beef segment sales 386 million 327 million 351 million fiscal 2017 2016 2015 respectively transactions operating segments pork segment sales 966 million 840 million 847 million fiscal 2017 2016 2015 respectively transactions operating segments chicken segment sales 60 million 27 million 18 million fiscal 2017 2016 2015 respectively transactions operating segments aforementioned sales intersegment transactions market prices included segment sales table largest customer walmart stores inc accounted 173 175 168 consolidated sales fiscal 2017 2016 2015 respectively sales walmart stores inc included segments extended discontinuance sales customer could replaced material impact operations majority operations domiciled united states approximately 98 97 sales external customers fiscal 2017 2016 2015 respectively sourced united states approximately 216 billion 173 billion longlived assets located united states september 30 2017 october 1 2016 respectively excluding goodwill intangible assets longlived assets located united states totaled approximately 60 billion 56 billion september 30 2017 october 1 2016 respectively approximately 217 million 204 million longlived assets located foreign countries primarily brazil china european union india september 30 2017 october 1 2016 respectively excluding goodwill intangible assets longlived assets foreign countries totaled approximately 193 million 180 million september 30 2017 october 1 2016 respectively sell certain products foreign markets primarily canada central america china european union japan mexico middle east south korea taiwan export sales united states totaled 39 billion 35 billion 41 billion fiscal 2017 2016 2015 respectively substantially export sales facilitated unaffiliated brokers marketing associations foreign sales staffs sales products produced country united states less 10 consolidated sales fiscal 2017 2016 2015 note 18 supplemental cash flows information following table summarizes cash payments interest income taxes note 19 transactions related parties operating leases two wastewater facilities entity owned donald j tyson revocable trust mr john tyson chairman company trustee berry street waste water treatment plant lp 90 owned tlp sisters mr tyson total payments approximately 1 million fiscal 2017 2016 2015 paid lease facilities september 30 2017 tlp john tyson director barbara tyson general partners owned 70 million shares 99985 outstanding class b stock along members tyson family owned 62 million shares class stock giving control approximately 7078 total voting power outstanding voting stock august 2017 company committed invest 5 million 175 equity interest buchan ltd mauritian private holding company poultry operations subsaharan africa acacia foods bv committed invest 9 million buchan ltd donnie smith first quarter fiscal year 2017 chief executive officer company serves chairman acacia foods bv director buchan ltd john randal tyson son john tyson serves director buchan ltd company fiscal 2017 company provided administrative services tyson limited partnership beneficial owner 70 million shares class b stock tyson limited partnership tlp investment lp reimbursed company 03 million note 20 commitments contingencies commitments lease equipment properties certain farms total rentals approximated 186 million 172 million 165 million fiscal 2017 2016 2015 respectively leases initial terms seven years varying renewal periods significant obligations assumed terms leases upkeep facilities payments insurance property taxes minimum lease commitments noncancelable leases september 30 2017 guarantee obligations certain outside third parties consisting primarily leases debt grower loans substantially collateralized underlying assets terms underlying debt cover periods 10 years maximum potential amount future payments september 30 2017 28 million also maintain operating leases various types equipment contain residual value guarantees market value underlying leased assets end term lease remaining terms lease maturities cover periods next 10 years maximum potential amount residual value guarantees 109 million 100 million could recoverable various recourse provisions additional undeterminable recoverable amount based fair value underlying leased assets likelihood material payments guarantees considered probable september 30 2017 october 1 2016 material liabilities guarantees recorded cash flow assistance programs certain livestock suppliers participate programs pay amount livestock equivalent standard cost grow livestock periods low market sales prices amounts payments excess market sales price recorded receivables accrue interest participating suppliers obligated repay receivables balances market sales prices exceed standard cost upon termination agreement potential maximum obligation associated programs limited fair value participating livestock supplier’s net tangible assets potential maximum obligation september 30 2017 approximately 380 million receivables programs september 30 2017 2 million receivables program october 1 2016 receivable included net allowance uncollectible amounts accounts receivable consolidated balance sheets even though programs limited net tangible assets participating livestock suppliers also manage portion credit risk associated programs obtaining security interests livestock suppliers’ assets analyzing residual credit risks general market conditions allowance programs estimated uncollectible receivables september 30 2017 october 1 2016 constructing new facilities making major enhancements existing facilities occasionally enter incentive agreements local government agencies order reduce certain state local tax expenditures agreements transfer related assets various local government entities receive industrial revenue bonds immediately lease facilities local government entities option repurchase facilities nominal amount upon tendering industrial revenue bonds local government entities various predetermined dates industrial revenue bonds associated obligations leases facilities offset underlying assets remain property plant equipment september 30 2017 total amounts types arrangements totaled 505 million additionally enter future purchase commitments various items grains livestock contracts fixed grower fees september 30 2017 commitments totaled contingencies involved various claims legal proceedings routinely assess likelihood adverse judgments outcomes matters well ranges probable losses extent losses reasonably estimable record accruals matters extent conclude loss probable financial impact adverse outcome occur reasonably estimable accruals reflected company’s consolidated financial statements opinion made appropriate adequate accruals matters believe probability material loss beyond amounts accrued remote however ultimate liability matters uncertain accruals adequate adverse outcome could material effect consolidated financial condition results operations listed certain claims made company andor subsidiaries potential exposure considered material company’s consolidated financial statements believe substantial defenses claims made intend vigorously defend matters details six lawsuits involving beef pork prepared foods plants certain present past employees allege failed compensate time takes engage pre postshift activities changing protective sanitary clothing walking changing area work areas break areas violation fair labor standards act various state laws plaintiffs seek back wages liquidated damages pre postjudgment interest attorneys’ fees costs case proceeding jurisdiction • bouaphakeo fka sharp et al v tyson foods inc nd iowa february 6 2007 jury trial held involving storm lake iowa pork plant resulted jury verdict favor plaintiffs violations federal state laws pre postshift work activities trial court also awarded plaintiffs liquidated damages resulting total damages awarded amount 5784758 plaintiffs counsel also filed application attorneys fees expenses amount 2692145 appealed jurys verdict trial courts award eighth circuit court appeals appellate court affirmed jury verdict judgment august 25 2014 filed petition rehearing september 22 2014 denied filed petition writ certiorari united states supreme court granted june 8 2015 oral arguments supreme court occurred november 10 2015 march 22 2016 supreme court affirmed appellate court’s rulings remanded trial court allocate lump sum award among class participants remand trial court determined lump sum award allocated class participants according method prescribed plaintiffs’ expert trial court yet enter judgment subsequently joint notice advising court global settlement case edwards matter described consolidated murray devoss matter also described filed parties agreed settle three matters total payment 126 million inclusive wages penalties interest attorneys’ fees costs settlement administration trial court held approval hearing october 11 2017 awaiting court’s decision • edwards et al v tyson foods inc dba tyson fresh meats inc sd iowa march 20 2008 trial court case involves perry waterloo iowa pork plants decertified state law class granted pretrial motions resulted judgment favor respect plaintiffs’ claims plaintiffs filed motion modify judgment joint motion preliminary approval collective class action settlement filed july 7 2017 please see bouaphakeo description additional details global settlement • murray et al v tyson foods inc cd illinois january 2 2008 devoss v tyson foods inc dba tyson fresh meats cd illinois march 2 2011 cases involve joslin illinois beef plant preliminary stages joint notice settlement request stay proceedings filed granted court june 28 2017 please see bouaphakeo description additional details global settlement • dozier southerland et al v hillshire brands company ed north carolina september 2 2014 case involves tarboro north carolina prepared foods plant march 25 2016 parties filed joint motion settlement totaling 425000 includes plaintiffs’ attorneys’ fees costs court preliminarily approved joint motion settlement final approval hearing set december 5 2017 hillshire brands company named defendant asbestos exposure case filed mark lopez may 2014 superior court alameda county california mr lopez diagnosed mesothelioma january 2014 deceased mr lopez’s family members asserted negligence premises liability strict liability claims related mr lopez’s alleged asbestos exposure 19541986 union sugar plant betteravia california plant sold 1986 owned entities predecessorsininterest hillshire brands company august 2017 jury returned verdict approximately 13 million favor plaintiffs judgment entered intend appeal judgment september 2 2016 maplevale farms inc acting behalf putative class direct purchasers poultry products filed class action complaint us certain poultry subsidiaries well several poultry processing companies northern district illinois subsequent filing initial complaint additional lawsuits making similar claims behalf putative classes direct indirect purchasers filed united states district court northern district illinois court consolidated complaints pretrial purposes actions behalf three different putative classes direct purchasers indirect purchasersconsumers commercialinstitutional indirect purchasers three actions styled broiler chicken antitrust litigation several amended consolidated complaints filed behalf putative class currently operative complaints allege among things beginning january 2008 defendants conspired combined fix raise maintain stabilize price broiler chickens violation united states antitrust laws complaints behalf putative classes indirect purchasers also include causes action various state unfair competition laws consumer protection laws unjust enrichment common laws complaints also allege defendants “manipulated artificially inflated widely used broiler price index georgia dock” alleged defendants concealed conduct plaintiffs members putative classes plaintiffs seeking treble damages injunctive relief pre postjudgment interest costs attorneys’ fees behalf putative classes filed motions dismiss complaints court yet rule motions october 17 2016 william huser acting behalf putative class persons purchased shares tyson foods stock november 23 2015 october 7 2016 filed class action complaint tyson foods inc donnie smith dennis leatherby central district california complaint alleged among things periodic filings contained materially false misleading statements failing disclose company colluded producers manipulate supply broiler chickens order keep supply artificially low alleged broiler chicken antitrust litigation subsequent filing initial complaint additional lawsuits making similar claims filed united states district courts southern district new york western district arkansas southern district ohio cases transferred united states district court western district arkansas consolidated lead plaintiffs appointed consolidated complaint filed march 22 2017 also named additional individual defendants consolidated complaint seeks damages pre postjudgment interest costs attorneys’ fees filed motion dismiss complaint court granted july 26 2017 plaintiffs filed motion amend alter judgment submit amended complaint motion pending january 20 2017 company received subpoena securities exchange commission sec connection investigation related company august 23 2017 received written notification sec staff concluded investigation intend recommend enforcement action company based information available agency date based upon information believe investigation based upon allegations broiler chicken antitrust litigation march 1 2017 received civil investigative demand cid office attorney general department legal affairs state florida cid requests information primarily related possible anticompetitive conduct connection georgia dock chicken products pricing index formerly published georgia department agriculture cooperating attorney general’s office subsidiary hillshire brands company formerly named sara lee corporation party consolidation cases filed individual complainants republic philippines department labor employment national labor relations commission nlrc 1998 july 1999 complaint filed aris philippines inc sara lee corporation sara lee philippines inc fashion accessories philippines inc attorney cesar c cruz collectively “respondents” complaint alleges among things respondents engaged unfair labor practices connection termination manufacturing operations philippines aris philippines inc former subsidiary hillshire brands company 2006 labor arbiter ruled respondents awarded complainants php3453664710 approximately us67 million damages fees respondents appealed labor arbiters ruling subsequently set aside nlrc december 2006 subsequent nlrc’s decision parties filed numerous appeals motions reconsideration petitions review certain remained outstanding several years various appeals motions andor petitions pending hillshire brands company june 23 2014 without admitting liability filed settlement motion requesting supreme court philippines order dismissal prejudice claims certain respondents exchange payments allocated court among complainants amount exceed php342287800 approximately us67 million based part finding consideration paid complainants part settlement insufficient supreme court philippines denied respondents’ settlement motion motions reconsideration thereof supreme court philippines also set aside premature nlrc’s december 2006 ruling result cases back nlrc rule respondents’ appeals regarding labor arbiter’s 2006 ruling favor complainants meantime respondents reached settlement group comprising approximately 18 class 5984 complainants pursuant hillshire brands company would pay settling complainant php68000 approximately us1325 settlement payment made december 21 2016 nlrc responsible distributing funds settling complainant december 27 2016 respondents filed motions reconsideration nlrc asking award set aside nlrc denied respondents motions reconsideration resolution received may 5 2017 entered judgment award july 24 2017 previously may 10 2017 may 12 2017 aris philippines inc sara lee corporation sara lee philippines filed petitions certiorari requests immediate temporary restraining order writ permanent injunction philippines court appeals august 18 2017 court appeals granted temporary restraining order precluding execution nlrc judgment aris philippines inc sara lee corporation sara lee philippines inc temporary restraining order expire november 21 2017 unless extended preliminary injunction recorded accrual matter amount loss time deem probable enforceable accrual reflected company’s consolidated financial statements reflects amount significantly less amount awarded labor arbiter 2004 ie php3453664710 approximately us67 million ultimate enforceable loss uncertain accrual adequate adverse outcome could material effect consolidated financial condition results operations note 21 quarterly financial data unaudited second quarter fiscal 2017 net income included 52 million pretax impairment charge related san diego prepared foods operation third quarter fiscal 2017 net income included 77 million pretax expense advancepierre purchase accounting acquisition related costs included 24 million purchase accounting adjustment amortization fair value stepup inventory related advancepierre 35 million acquisition related costs 18 million acquisition bridge financing fees third quarter fiscal 2017 net income included post tax 26 million recognition tax benefit related expected sale nonprotein business fourth quarter fiscal 2017 net income included 150 million pretax restructuring related charges 45 million pretax impairment related expected sale nonprotein business 26 million pretax expense advancepierre purchase accounting acquisition related costs included 12 million purchase accounting adjustment amortization fair value stepup inventory related advancepierre 14 million acquisition related costs second quarter fiscal 2016 net income included post tax 12 million recognition previously unrecognized tax benefits third quarter fiscal 2016 net income included post tax 15 million recognition previously unrecognized tax benefits audit settlement fourth quarter fiscal 2016 net income included post tax 26 million recognition previously unrecognized tax benefits report independent registered public accounting firm board directors shareholders tyson foods inc opinion accompanying consolidated balance sheets related consolidated statements income comprehensive income shareholders’ equity cash flows present fairly material respects financial position tyson foods inc subsidiaries september 30 2017 october 1 2016 results operations cash flows three years period ended september 30 2017 conformity accounting principles generally accepted united states america addition opinion financial statement schedule listed index appearing item 15a2 presents fairly material respects information set forth therein read conjunction related consolidated financial statements also opinion company maintained material respects effective internal control financial reporting september 30 2017 based criteria established internal control integrated framework 2013 issued committee sponsoring organizations treadway commission coso companys management responsible financial statements financial statement schedule maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included managements annual report internal control financial reporting appearing item 9a responsibility express opinions financial statements financial statement schedule companys internal control financial reporting based integrated audits conducted audits accordance standards public company accounting oversight board united states standards require plan perform audits obtain reasonable assurance whether financial statements free material misstatement whether effective internal control financial reporting maintained material respects audits financial statements included examining test basis evidence supporting amounts disclosures financial statements assessing accounting principles used significant estimates made management evaluating overall financial statement presentation audit internal control financial reporting included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk audits also included performing procedures considered necessary circumstances believe audits provide reasonable basis opinions company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles company’s internal control financial reporting includes policies procedures pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company ii provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company iii provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate described management’s annual report internal control financial reporting management excluded advancepierre foods holdings inc assessment internal control financial reporting september 30 2017 acquired company purchase business combination fiscal 2017 also excluded advancepierre foods holdings inc audit internal control financial reporting advancepierre foods holdings inc whollyowned subsidiary whose total assets total revenues excluded management’s assessment audit internal control financial reporting represent 24 13 respectively related consolidated financial statement amounts year ended september 30 2017 pricewaterhousecoopers llp fayetteville arkansas november 13 2017 item 9item 8 financial statements supplementary data tyson foods inc consolidated statements income see accompanying notes tyson foods inc consolidated statements comprehensive income see accompanying notes tyson foods inc consolidated balance sheets see accompanying notes tyson foods inc consolidated statements shareholders’ equity 1 reclass accumulated comprehensive income retained earnings stranded tax effects resulting tax cuts jobs act tax act following adoption applicable new accounting standard fiscal year ended september 29 2018 see accompanying notes tyson foods inc consolidated statements cash flows see accompanying notes consolidated financial statements tyson foods inc note 1 business summary significant accounting policies description business tyson foods inc collectively “company” “we” “us” “our” one worlds largest food companies recognized leader protein founded 1935 john w tyson grown three generations family leadership company broad portfolio products brands including tyson® jimmy dean® hillshire farm® ball park® wright® aidells® ibp® state fair® innovate continually make protein sustainable tailor food everywhere it’s available raise world’s expectations much good food consolidation consolidated financial statements include accounts whollyowned subsidiaries well majorityowned subsidiaries exercise control applicable entities controlling financial interest variable interest entities primary beneficiary significant intercompany accounts transactions eliminated consolidation fiscal year utilize 52 53week accounting period ending saturday closest september 30 company’s accounting cycle resulted 53week year fiscal 2020 52week year fiscal 2019 fiscal 2018 cash equivalents cash equivalents consist investments shortterm highly liquid securities original maturities three months less made part cash management activity carrying values assets approximate fair values primarily utilize cash management system series separate accounts consisting lockbox accounts receiving cash concentration accounts funds moved several zerobalance disbursement accounts funding payroll accounts payable livestock procurement livestock grower payments etc result cash management system checks issued presented banks payment may result negative book cash balances negative book cash balances included accounts payable current liabilities october 3 2020 september 28 2019 checks outstanding excess related book cash balances totaled approximately 200 million accounts receivable record accounts receivable net realizable value includes appropriate allowance estimated uncollectible accounts reflect loss anticipated accounts receivable balances charged provision doubtful accounts calculate allowance based history writeoffs level past due accounts relationships economic status customers october 3 2020 september 28 2019 allowance uncollectible accounts 26 million 21 million respectively generally collateral receivables periodically evaluate credit worthiness customers inventories processed products livestock supplies valued lower cost net realizable value cost includes purchased raw materials live purchase costs livestock growout costs primarily feed livestock grower pay catch haul costs labor manufacturing production overhead related purchase production inventories fiscal 2020 fiscal 2019 cost inventories determined either firstin firstout fifo method weightedaverage method following table reflects major components inventory october 3 2020 september 28 2019 millions property plant equipment property plant equipment stated cost generally depreciated straightline method estimated lives buildings leasehold improvements 10 33 years machinery equipment 3 12 years land improvements 3 20 years major repairs maintenance costs significantly extend useful life related assets capitalized normal repairs maintenance costs charged operations review carrying value longlived assets balance sheet date indication impairment exists recoverability assessed using undiscounted cash flows based historical results current projections earnings interest taxes depreciation amortization measure impairment excess carrying value fair value asset group fair value asset group generally measured using discounted cash flows including market participant assumptions future operating results discount rates goodwill intangible assets definite life intangibles initially recorded fair value amortized estimated period benefit brands trademarks generally amortized using straightline method 20 years less customer relationships supply arrangements generally amortized 7 30 years based pattern revenue expected generated use asset gross cost accumulated amortization intangible assets removed recorded amounts fully amortized asset longer use contract expired amortization expense generally recognized selling general administrative expense review carrying value definite life intangibles balance sheet date indication impairment exists recoverability assessed using undiscounted cash flows based historical results current projections earnings interest taxes depreciation amortization measure impairment excess carrying value fair value definite life intangible asset use various valuation techniques estimate fair value primary techniques discounted cash flows relieffromroyalty multiperiod excess earnings valuation approaches use significant unobservable inputs level 3 inputs defined fair value hierarchy valuation approaches required make estimates assumptions sales operating margins growth rates royalty rates discount rates based budgets business plans economic projections anticipated future cash flows marketplace data goodwill indefinite life intangible assets initially recorded fair value amortized reviewed impairment least annually frequently impairment indicators arise goodwill allocated reporting unit evaluated impairment first performing qualitative assessment determine whether quantitative goodwill test necessary determined based qualitative factors fair value reporting unit may likely less carrying amount significant changes macroeconomic factors related reporting unit occurred could materially impact fair value quantitative goodwill impairment test would required additionally elect forgo qualitative assessment perform quantitative test quantitative test identify potential impairment exists comparing fair value reporting unit carrying amount including goodwill carrying amount reporting unit exceeds fair value impairment loss recognized amount equal excess exceed carrying amount goodwill estimate fair value reporting units considering use various valuation techniques primary technique income approach discounted cash flow method another technique market approach guideline public company method use significant unobservable inputs level 3 inputs defined fair value hierarchy include assumptions sales operating margins growth rates discount rates valuations multiples consider budgets business plans economic projections marketplace data believed reflect market participant views would exist exit transaction assumptions also made varying perpetual growth rates periods beyond longterm business plan period generally utilize operating margin assumptions based future expectations operating margins historically realized reporting units industries industry marketplace valuation multiples inherent estimates assumptions used determining fair value reporting units outside control management including interest rates cost capital tax rates market ebitda comparables credit ratings believe made reasonable estimates assumptions calculate fair value reporting units possible material change could occur actual results consistent estimates assumptions used calculate fair value could result additional material impairments goodwill fiscal 2020 2019 2018 determined none material reporting units fair values carrying value material reporting units’ estimated fair value exceeded carrying value 20 date recent estimated fair value determination domestic chicken reporting unit 3266 million goodwill october 3 2020 indefinite life intangible assets qualitative assessment also performed determine whether existence events circumstances indicates likely intangible asset impaired similar goodwill also elect forgo qualitative test indefinite life intangible assets perform quantitative test upon performing quantitative test carrying value intangible asset exceeds fair value impairment loss recognized amount equal excess fair value indefinite life intangible assets calculated principally using multiperiod excess earnings relieffromroyalty valuation approaches use significant unobservable inputs level 3 inputs defined fair value hierarchy believed reflect market participant views would exist exit transaction valuation approaches required make estimates assumptions sales operating margins growth rates royalty rates discount rates based budgets business plans economic projections anticipated future cash flows marketplace data fiscal 2020 2019 2018 determined fair value indefinite life intangible assets exceeded carrying value indefinite life intangible assets’ estimated fair value exceeded carrying value 20 date recent estimated fair value determination leases determine agreement contains lease inception evaluating identified asset exists control period time lease exists classify finance operating lease record rightofuse rou asset corresponding lease liability lease commencement elected record leases term 12 months less consolidated balance sheets accordingly lease expense shortterm leases recognized straightline basis lease term finance lease assets presented within net property plant equipment finance lease liabilities presented within current longterm debt consolidated balance sheets finance lease disclosures omitted deemed immaterial operating rou assets presented within assets operating lease liabilities recorded within current liabilities consolidated balance sheets lease assets subject review impairment within related longlived asset group rou assets presented consolidated balance sheets based present value corresponding liabilities adjusted prepayments lease incentives received initial direct costs incurred measurement rou assets liabilities includes fixed payments variable payments based index rate variable lease payments depend index rates unknown excluded lease payments measurement rou asset lease liability accordingly recognized lease expense period obligation payments incurred present value lease payments based incremental borrowing rate according lease term information available lease commencement date lease arrangements generally provide implicit interest rate incremental borrowing rate derived using hypotheticallycollateralized borrowing cost based revolving credit facility plus country risk factor applicable consider credit rating current economic environment determining collateralized rate lease arrangements include fixed variable nonlease components common area maintenance taxes labor account lease nonlease components associated lease single lease component asset classes except production livestock grower asset classes embedded service supply agreements asset classes include significant maintenance service components account lease nonlease components agreement separately based relative standalone prices either observable estimated observable prices readily available asset classes election made separate lease nonlease components costs associated lease contract disclosed lease costs accounting companys leases may require significant judgment determining whether contract contains lease term likelihood exercising renewal termination options leases include options extend terminate use underlying assets options included lease term used determine rou assets corresponding liabilities reasonably certain exercise option additionally certain leases residual value guarantees included within operating lease liabilities considered probable lease agreements include significant restrictions covenants recognition measurement presentation expenses cash flows arising lease depend classification finance operating lease operating lease expense recognized straightline basis lease term whereas amortization finance lease assets recognized straightline basis shorter estimated useful life underlying asset lease term operating lease expense finance lease amortization presented cost sales selling general administrative consolidated statements income depending nature leased item interest expense finance lease obligations recorded lease term presented interest expense based effective interest method operating lease cash payments interest finance leases presented within net cash provided operating activities finance lease principal payments presented within net cash used financing activities consolidated statements cash flows investments joint ventures entities equity method accounting used entities exercise significant influence controlling interest variable interest primary beneficiary investments accounted using equity method readily determinable fair values qualify practical expedient measure investment using net asset value per share investments recorded using measurement alternative equity interests recorded cost less impairments adjusted observable price changes orderly transactions identical similar investment issuer reporting period assess investments continue qualify measurement alternative impairment recorded evidence expected fair value investment declined recorded cost adjustments carrying value recorded net consolidated statements income investments joint ventures entities reported consolidated balance sheets assets also investments marketable debt securities determined marketable debt securities availableforsale investments reported fair value based quoted market prices balance sheet date unrealized gains losses net tax recorded comprehensive income amortized cost debt securities adjusted amortization premiums accretion discounts maturity amortization recorded interest income cost securities sold based specific identification method realized gains losses sale debt securities declines value judged temporary recorded net basis income interest dividends securities classified availableforsale recorded interest income accrued selfinsurance use combination insurance selfinsurance mechanisms effort mitigate potential liabilities health welfare workers’ compensation auto liability general liability risks liabilities associated risks retained estimated part considering claims experience demographic factors severity factors actuarial assumptions current liabilities current liabilities october 3 2020 september 28 2019 include millions defined benefit plans recognize funded status defined pension postretirement plans consolidated balance sheets funded status measured difference fair value plan assets benefit obligation measure plan assets liabilities end fiscal year defined benefit pension plan benefit obligation projected benefit obligation defined benefit postretirement plan retiree health care plan benefit obligation accumulated postretirement benefit obligation overfunded status recognized asset underfunded status recognized liability transitional assetliability prior service cost actuarial gainloss yet recognized component net periodic cost recognized accumulated comprehensive income accumulated comprehensive income adjusted amounts subsequently recognized component net periodic benefit costs future periods derivative financial instruments purchase certain commodities grains livestock course normal operations part commodity risk management activities use derivative financial instruments primarily futures options reduce exposure various market risks related purchases well changes foreign currency exchange interest rates contract terms financial instrument qualifying hedge instrument closely mirror hedged item providing high degree risk reduction correlation contracts designated highly effective meeting risk reduction correlation criteria recorded using hedge accounting derivative instrument accounted hedge depending nature hedge changes fair value instrument either offset change fair value hedged assets liabilities firm commitments earnings recognized comprehensive income loss hedged item recognized earnings ineffective portion instrument’s change fair value recognized immediately instruments hold part risk management activities meet criteria hedge accounting marked fair value unrealized gains losses reported currently earnings changes market value derivatives used risk management activities relating inputs forward sales contracts recorded cost sales changes market value derivatives used risk management activities surrounding inventories hand anticipated purchases inventories recorded cost sales changes market value derivatives used risk management activities related interest rates recorded interest expense changes market value derivatives used risk management activities related foreign exchange contracts recorded net generally hedge anticipated transactions beyond 18 months litigation reserves variety legal proceedings pending threatened us accruals recorded probable liability incurred amount liability reasonably estimated based current law progress case opinions views legal counsel advisers experience similar matters intended response litigation amounts discounted exclusive claims third parties adjusted periodically assessment efforts progress additional information becomes available expense amounts administering litigating claims incurred accruals legal proceedings included current liabilities consolidated balance sheets revenue recognition recognize revenue mainly retail foodservice international industrial distribution channels revenues primarily result contracts customers generally short term nature delivery product single performance obligation recognize revenue sale product point time performance obligation satisfied control product transferred customer generally occurs upon shipment delivery customer based terms sale elected account shipping handling activities occur customer obtained control product fulfillment cost rather additional promised service contracts generally less one year therefore recognize costs paid third party brokers obtain contracts expenses additionally items material context contract recognized expense taxes collected behalf government authorities excluded net revenues revenue measured transaction price defined amount consideration expect receive exchange providing goods customers transaction price adjusted estimates known expected variable consideration includes consumer incentives trade promotions allowances coupons discounts rebates volumebased incentives cooperative advertising programs variable consideration related programs recorded reduction revenue based amounts expect pay base estimates current performance historical utilization projected redemption rates program review update estimates regularly incentives product returns realized impact adjustments recognized period adjustments identified many cases key sales terms pricing quantities ordered established regular basis customer arrangements related incentives duration less one year amounts billed due customers short term nature classified receivables since payments unconditional passage time required payments due additionally grant payment financing terms greater one year freight expense associated products shipped customers recognized cost sales advertising expenses advertising expense charged operations period incurred recorded selling general administrative expense advertising expense totaled 283 million 276 million 243 million fiscal 2020 2019 2018 respectively research development research development costs expensed incurred research development costs totaled 98 million 97 million 114 million fiscal 2020 2019 2018 respectively business combinations account acquired businesses using acquisition method accounting requires control business obtained 100 assets acquired liabilities assumed including amounts attributable noncontrolling interests recorded date acquisition respective fair values excess purchase price estimated fair values net assets acquired recorded goodwill acquisitionrelated expenses including transaction integration costs expensed incurred use various models determine value assets acquired net realizable value inventory cost method market approach value property relieffromroyalty multiperiod excess earnings value intangibles discounted cash flow value goodwill make estimates assumptions projected future cash flows including sales operating margins attrition rates growth rates discount rates based historical results business plans expected synergies perceived risk market place data considering perspective marketplace participants determining useful life intangible asset also requires judgment different types intangible assets different useful lives certain assets may considered indefinite useful lives use estimates consolidated financial statements prepared conformity accounting principles generally accepted united states require us make estimates assumptions affect amounts reported consolidated financial statements accompanying notes actual results could differ estimates risks uncertainties considered impact global novel coronavirus pandemic “covid19” “pandemic” consolidated financial statements addition covid19 impacts already experienced likely future impacts extent uncertain largely subject whether severity worsens duration lengthens impacts could include may limited risks uncertainty related worker availability ability operate production facilities demanddriven production facility idling shifts demand sales channels market volatility supply chain consequently may subject us future risk material goodwill intangible longlived asset impairments increased reserves uncollectible accounts adjustments inventory market volatility items subject fair value measurements derivatives investments recently issued accounting pronouncements august 2020 financial accounting standards board fasb issued guidance simplifies accounting debt conversion options revises criteria applying derivative scope exception contracts entity’s equity improves consistency calculation earnings per share guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2021 fiscal 2023 early adoption permitted annual periods interim periods within annual periods beginning december 15 2020 fiscal 2022 currently evaluating impact guidance consolidated financial statements march 2020 fasb issued guidance providing optional expedients exceptions account effects reference rate reform contracts hedging relationships transactions reference libor another reference rate expected discontinued optional guidance became effective march 12 2020 applied december 21 2022 impacted consolidated financial statements company various contracts reference libor assessing standard may applied specific contract modifications december 31 2022 december 2019 fasb issued guidance simplifies accounting income taxes removing certain exceptions general principles topic 740 clarifies general principles adding certain requirements topic 740 guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2020 fiscal 2022 early adoption permitted periods financial statements yet issued beginning fiscal 2020 entity elects early adopt amendments interim period reflect adjustments beginning annual period includes interim period application guidance requires various transition methods depending specific amendment currently evaluating impact guidance consolidated financial statements june 2016 fasb issued guidance provides decisionuseful information expected credit losses financial instruments changes loss impairment methodology guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2019 fiscal 2021 adopt guidance using modified retrospective prospective transition methods beginning first quarter fiscal 2021 expect adoption guidance material impact consolidated financial statements note 2 changes accounting principles august 2017 fasb issued guidance eases certain documentation assessment requirements hedge effectiveness modifies accounting components excluded assessment modifications included ineffectiveness derivative gainloss highly effective cash flow hedges recorded comprehensive income alignment recognition presentation effects related hedging instrument hedged item financial statements additional disclosures required cumulative basis adjustment fair value hedges effect hedging financial statement lines components excluded assessment amendment also simplified application hedge accounting certain situations permit new hedging strategies eligible hedge accounting guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2018 fiscal 2020 adopted guidance first quarter fiscal 2020 using modified retrospective transition approach material impact consolidated financial statements february 2016 fasb issued guidance created new accounting reporting guidelines leasing arrangements guidance requires lessees recognize rightofuse asset lease liability leases terms 12 months recognition measurement presentation expenses cash flows arising lease depend classification finance operating lease guidance also requires qualitative quantitative disclosures regarding amount timing uncertainty cash flows arising leases guidance effective annual reporting periods interim periods within annual reporting periods beginning december 15 2018 fiscal 2020 adopted guidance first quarter fiscal 2020 using optional transition method allows cumulativeeffect adjustment period adoption restatement prior periods elected package practical expedients available transition guidance allows us reassess prior conclusions related lease classifications existing contracts containing leases initial direct costs well practical expedient allows continued historical treatment land easements elect practical expedient use hindsight evaluating expected lease term existing leases adoption resulted recording operating lease assets operating lease liabilities 549 million 546 million respectively september 29 2019 changes finance leases difference additional lease assets lease liabilities represents existing deferred rent prepaid lease balances reclassified balance sheet adoption material impact consolidated statements income consolidated statements cash flows description lease policy refer note 1 business summary significant accounting policies quantitative lease information refer note 6 leases note 3 acquisitions dispositions acquisitions june 3 2019 acquired thai european operations brf sa thai european operations 326 million net cash acquired subject certain adjustments part growth strategy expand offerings valueadded protein global markets results subsequent acquisition closing included internationalother segment presentation purchase price allocation included 262 million net working capital including 56 million cash acquired 89 million property plant equipment 47 million goodwill 23 million intangible assets 24 million liabilities 8 million deferred income taxes 7 million noncontrolling interest intangible assets included customer relationships amortized life 7 years expect goodwill deductible income tax purposes fiscal 2020 recorded measurement period adjustments increased goodwill 46 million including reduction net working capital 45 million reduction property plant equipment 4 million decrease deferred income taxes 3 million november 30 2018 acquired outstanding common stock mfg usa holdings inc mckey luxembourg holdings sàrl “keystone foods” marfrig global foods marfrig 23 billion cash subject certain adjustments acquisition accounted using acquisition method accounting results keystone foods domestic international results subsequent acquisition closing included chicken segment internationalother respectively following table summarizes purchase price allocation keystone foods fair values assets acquired liabilities assumed acquisition date millions fair value identifiable intangible assets primarily consisted customer relationships weighted average life 25 years result acquisition recognized total 1120 million goodwill purchase price assigned assets acquired liabilities assumed based estimated fair values date acquisition excess allocated goodwill shown table goodwill represents value expect achieve implementation operational synergies growth opportunities allocated goodwill segments using acquisition method approach resulted 779 million 341 million goodwill allocated chicken segment internationalother respectively expect goodwill deductible income tax purposes used various valuation techniques determine fair value primary techniques discounted cash flow relieffromroyalty market pricing multiple multiperiod excess earnings valuation approaches use significant unobservable inputs level 3 inputs defined fair value hierarchy valuation approaches required make estimates assumptions sales operating margins growth rates attrition rates royalty rates ebitda multiples discount rates based budgets business plans economic projections anticipated future cash flows marketplace data august 20 2018 acquired assets american proteins inc ampro products inc american proteins poultry rendering blending operation 864 million part strategic expansion sustainability initiatives results subsequent acquisition closing included chicken segment purchase price allocation included 56 million net working capital 152 million property plant equipment 361 million intangible assets 308 million goodwill 13 million liabilities intangible assets primarily included 310 million assigned supply network amortized 14 years 51 million assigned customer relationships amortized weighted average 12 years goodwill acquired amortizable tax purposes fiscal 2019 settled networking capital purchase price adjustment reducing purchase price 2 million recorded measurement period adjustments increased goodwill 66 million including reduction net working capital 15 million reduction property plant equipment 3 million reduction intangible assets 50 million june 4 2018 acquired tecumseh poultry llc tecumseh vertically integrated valueadded protein business 382 million net cash acquired part strategy grow high quality branded poultry market results subsequent acquisition closing included chicken segment purchase price allocation included 13 million net working capital including 1 million cash acquired 49 million property plant equipment 227 million intangible assets 94 million goodwill intangible assets included 193 million assigned brands trademarks amortized 20 years goodwill acquired amortizable tax purposes november 10 2017 acquired original philly holdings inc original philly valueadded protein business 226 million net cash acquired part strategic expansion initiative results subsequent acquisition closing included prepared foods chicken segments purchase price allocation included 21 million net working capital including 10 million cash acquired 13 million property plant equipment 90 million intangible assets 111 million goodwill allocated 82 million 29 million goodwill prepared foods chicken segments respectively using acquisition method approach goodwill acquired amortizable tax purposes january 15 2020 acquired 40 minority interest verticallyintegrated brazilian poultry producer 122 million february 7 2020 acquired 50 interest joint venture serving worldwide fats oils market 61 million accounting investments equity method dispositions april 24 2017 announced intent sell three nonprotein businesses part strategic focus protein brands businesses part prepared foods segment included sara lee® frozen bakery kettle van’s® produce items frozen desserts waffles snack bars soups sauces sides sale also included chef pierre® bistro collection® kettle collection™ van’s® brands license use sara lee® brand various channels well tarboro north carolina fort worth texas traverse city michigan prepared foods facilities completed sale kettle business december 30 2017 received net proceeds 125 million including working capital adjustment result sale recorded pretax gain 22 million reflected cost sales consolidated statement income fiscal 2018 utilized net proceeds pay term loan debt completed sale sara lee® frozen bakery van’s® businesses july 30 2018 623 million including working capital adjustment result sale recorded pretax gain 11 million reflected cost sales consolidated statement income fiscal 2018 utilized net proceeds repay commercial paper previously fiscal 2018 recorded pretax impairment charge businesses 101 million due revised estimates businesses fair value based expected net sales proceeds time impairment charge recorded cost sales consolidated statement income primarily consisted goodwill previously classified within assets held sale first quarter fiscal 2018 made decision sell tnt crust pizza crust business also included prepared foods segment part strategic focus protein brands completed sale business september 2 2018 57 million net adjustments result sale recorded pretax gain 9 million reflected cost sales consolidated statement income fiscal 2018 utilized net proceeds repay commercial paper completed sale chicken processing facility acquired keystone foods acquisition august 31 2019 170 million net proceeds result significant gain loss note 4 property plant equipment following table reflects major categories property plant equipment accumulated depreciation october 3 2020 september 28 2019 millions approximately 1102 million necessary complete buildings equipment construction october 3 2020 note 5 goodwill intangible assets following table reflects goodwill activity fiscal 2020 2019 millions following table reflects intangible assets type october 3 2020 september 28 2019 millions amortization expense 278 million 267 million 210 million recognized fiscal 2020 2019 2018 respectively estimate amortization expense intangible assets next five fiscal years subsequent october 3 2020 2021 261 million 2022 247 million 2023 228 million 2024 223 million 2025 214 million note 6 leases lease certain equipment buildings land related transportation distribution storage production livestock grower assets office activities lease arrangements structured standard lease agreement embedded service supply agreement primarily classified operating leases description lease accounting policy refer note 1 business summary significant accounting policies operating lease rou assets liabilities presented consolidated balance sheets follows millions components lease costs follows millions sublease income immaterial deducted operating lease cost b variable lease costs determined based volume output received flocks placed performance metrics operating lease information includes following october 3 2020 future maturities operating leases follows millions october 3 2020 leases yet commenced significant prior year lease disclosures following pertains previously disclosed information set forth companys 2019 form 10k part ii item 8 notes consolidated financial statements note 20 commitments contingencies lease equipment properties certain farms total rentals approximated 220 million 200 million fiscal 2019 2018 respectively leases initial terms seven years varying renewal periods minimum lease commitments noncancelable leases september 28 2019 millions enter agreements livestock growers fixed variable payment structures generally cancelable based flocks placed growers livestock grower fixed estimable noncancelable commitments september 28 2019 millions note 7 restructuring related charges first quarter fiscal 2020 company approved restructuring program 2020 program expected contribute company’s overall strategy financial fitness elimination overhead consolidation certain enterprise functions fourth quarter fiscal 2020 company extended 2020 program identified additional opportunities eliminate overhead optimizing organizational structures activities recognized 60 million cumulative pretax charges fiscal 2020 associated 2020 program consisting severance employee related costs part 2020 program eliminating positions across several areas job levels eliminated positions originating corporate offices springdale arkansas chicago illinois well certain production facility supply chain administrative positions majority positions already expected eliminated end fiscal 2021 fourth quarter fiscal 2017 board directors approved multiyear restructuring program “2017 program” contributed company’s overall strategy financial fitness increased operational effectiveness overhead reduction 2017 program resulted cumulative pretax charges 267 million consisted 117 million incremental costs implement new technology accelerated depreciation technology assets 53 million severance employee related costs 72 million technology impairment 25 million contract termination costs 2017 program concluded fiscal 2020 recognized restructuring related charges 77 million fiscal 2020 consisting 60 million severance team member related costs 2020 program 17 million incremental costs implement new technology 2017 program fiscal 2020 recorded 17 million cost sales 2020 program recorded 60 million selling general administrative consolidated statements income 43 million related 2020 program 17 million related 2017 program fiscal 2019 2018 restructuring related charges related 2017 program consisted 41 million 59 million respectively incremental costs implement new technology accelerated depreciation technology assets costs recorded selling general administrative consolidated statements income following table reflects pretax impact restructuring related charges fiscal 2020 2019 2018 charges date reportable segment millions anticipate future costs 2020 program significant however company continues evaluate business strategies longterm growth targets additional restructuring activities may occur restructuring liability 37 million october 3 2020 restructuring liability september 28 2019 change restructuring liability due additional charges 77 million net 40 million primarily consisting payments fiscal 2020 note 8 debt following table reflects major components debt october 3 2020 september 28 2019 millions annual maturities debt five fiscal years subsequent october 3 2020 2021 550 million 2022 2543 million 2023 431 million 2024 1269 million 2025 12 million revolving credit facility letters credit 175 billion revolving credit facility supports shortterm funding needs serves backstop commercial paper program facility mature commitments thereunder terminate march 2023 amounts available borrowing facility totaled 175 billion october 3 2020 october 3 2020 borrowings outstanding letters credit issued facility october 3 2020 101 million bilateral letters credit issued separately revolving credit facility none drawn upon letters credit issued primarily support workers’ compensation insurance programs legal obligations future subsidiaries shall guarantee material indebtedness subsidiary shall required guarantee indebtedness obligations liabilities facility commercial paper program commercial paper program may issue unsecured shortterm promissory notes commercial paper aggregate maximum principal amount 1 billion october 3 2020 commercial paper outstanding april 1 2020 repaid outstanding balance commercial paper using proceeds term loan facility due march 2022 ability access commercial paper future may limited costs increased due market conditions impacted part covid19 2020 notes fiscal 2020 extinguished 350 million outstanding balance senior notes due june 2020 400 million outstanding balance senior notes due august 2020 278 million outstanding balance senior notes due september 2020 using cash hand liquidity sources term loan facility due march 2022 march 27 2020 executed new 15 billion term loan facility refinance commercial paper program repay outstanding balances revolving credit facility general liquidity purposes term loan facility expires march 27 2022 subject prepayment certain conditions additionally term loan facility contains covenants similar contained revolving credit facility debt covenants revolving credit term loan facilities contain affirmative negative covenants among things may limit restrict ability create liens encumbrances incur debt merge dissolve liquidate consolidate make acquisitions investments dispose transfer assets change nature business engage certain transactions affiliates enter hedging transactions case subject certain qualifications exceptions addition required maintain minimum interest expense coverage maximum debttocapitalization ratios senior notes also contain affirmative negative covenants among things may limit restrict ability create liens engage certain saleleaseback transactions engage certain consolidations mergers sales assets compliance debt covenants october 3 2020 note 9 equity capital stock two classes capital stock class common stock 010 par value class stock class b common stock 010 par value class b stock holders class b stock may convert stock class stock shareforshare basis holders class b stock entitled 10 votes per share holders class stock entitled one vote per share matters submitted shareholders approval october 3 2020 tyson limited partnership tlp owned 99985 outstanding shares class b stock tlp members tyson family owned aggregate 223 outstanding shares class stock giving collectively control approximately 7106 total voting power outstanding voting stock class b stock considered participating security requiring use twoclass method computation basic earnings per share twoclass computation method period reflects cash dividends paid class stock plus amount allocated undistributed earnings losses computed using participation percentage reflects dividend rights class stock basic earnings per share computed using twoclass method periods presented shares class b stock considered participating convertible securities since shares class b stock convertible shareforshare basis shares class stock diluted earnings per share computed assuming conversion class b shares class shares beginning period dividends cash dividends cannot paid holders class b stock unless simultaneously paid holders class stock per share amount cash dividend paid holders class b stock cannot exceed 90 cash dividend simultaneously paid holders class stock pay quarterly cash dividends class b shareholders paid class dividends per share 168 150 120 fiscal 2020 2019 2018 respectively paid class b dividends per share 151 135 108 fiscal 2020 2019 2018 respectively effective november 13 2020 board directors increased quarterly dividend previously declared august 6 2020 0445 per share class stock 04005 per share class b stock increased quarterly dividend payable december 15 2020 shareholders record close business december 1 2020 share repurchases october 3 2020 189 million shares remained available repurchase companys share repurchase program fixed scheduled termination date timing extent repurchase shares depend upon among things working capital needs markets industry conditions liquidity targets limitations debt obligations regulatory requirements addition share repurchase program purchase shares open market fund certain obligations equity compensation plans summary cumulative share repurchases class stock fiscal 2020 2019 2018 follows millions note 10 income taxes detail provision benefit income taxes continuing operations consists following millions reasons difference statutory federal income tax rate effective income tax rate continuing operations follows fiscal 2020 state tax expense net federal benefit 83 million fiscal 2019 changes unrecognized tax benefits decreased tax expense 160 million state tax expense excluding changes unrecognized tax benefits net federal tax benefit 69 million fiscal 2018 domestic production deduction decreased tax expense 46 million state tax expense net federal tax benefit 90 million change federal tax rate tax act resulted tax benefit 1004 million related deferred tax remeasurement additionally favorable timing differences deductible fiscal 2018 245 blended tax rate reversing future years 21 resulted 35 million tax benefit impacts nondeductible impairment sale certain assets nonprotein businesses increased effective tax rate 31 approximately 2711 million 2332 million 2700 million income continuing operations income taxes fiscal 2020 2019 2018 respectively operations based united states december 22 2017 president trump signed law tax act tax act made significant changes us tax code including limited 1 reducing corporate federal income tax rate 35 21 effective january 1 2018 2 general elimination us federal income taxes dividends foreign subsidiaries 3 repeal domestic production activity deduction beginning fiscal 2019 4 new provisions designed tax global intangible lowtaxed income allow deduction foreignderived intangible income beginning fiscal 2019 generally accepted accounting principles us gaap specifically asc topic 740 income taxes tax effects changes tax laws must recognized period law enacted december 22 2017 tax act asc 740 also requires deferred tax assets liabilities measured enacted tax rate expected apply temporary differences realized settled thus date enactment company’s deferred taxes remeasured based upon new tax rates change deferred taxes recorded adjustment fiscal 2018 deferred tax provision recognize deferred income taxes future tax consequences attributable differences financial statement carrying amounts existing assets liabilities respective tax bases deferred tax assets liabilities measured using tax rates expected apply taxable income years temporary differences expected recovered settled tax effects major items recorded deferred tax assets liabilities october 3 2020 september 28 2019 follows millions october 3 2020 gross state tax net operating loss carryforwards approximated 799 million 747 million expire fiscal years 2021 2039 remainder expiration gross foreign net operating loss carryforwards approximated 238 million 104 million expire fiscal years 2021 2032 remainder expiration also tax credit carryforwards approximately 48 million 46 million expire fiscal years 2021 2034 remainder expiration accumulated undistributed earnings foreign subsidiaries aggregating approximately 318 million 252 million october 3 2020 september 28 2019 respectively tax act generally eliminates us federal income taxes dividends foreign subsidiaries december 31 2017 result intention excess cash held foreign subsidiaries subject regulatory restrictions repatriated net applicable withholding taxes expected immaterial remainder accumulated undistributed earnings expected indefinitely reinvested outside united states earnings distributed form dividends otherwise could subject state income taxes withholding taxes payable various foreign countries due uncertainty manner undistributed earnings would brought back united states tax laws effect time currently practicable estimate tax liability might payable repatriation foreign earnings however expect tax due material following table summarizes activity related gross unrecognized tax benefits october 3 2020 september 28 2019 september 29 2018 millions amount unrecognized tax benefits recognized would impact effective tax rate 118 million october 3 2020 116 million september 28 2019 classify interest penalties unrecognized tax benefits income tax expense october 3 2020 september 28 2019 tax benefits 51 million 46 million respectively accrued interest penalties unrecognized tax benefits october 3 2020 certain united states federal income tax returns subject examination fiscal years 2013 2019 also subject income tax examinations major state foreign jurisdictions fiscal years 2015 2019 expect material changes unrecognized tax benefits next twelve months note 11 income charges fiscal 2019 recognized 48 million net periodic pension postretirement benefit cost excluding service cost component pension plan settlements recorded consolidated statements income net recognized 20 million equity earnings joint ventures also recorded consolidated statements income net additionally sold investment 79 million net proceeds resulting pretax gain 55 million recorded consolidated statements income net fiscal 2018 recognized onetime cash bonus hourly frontline team members 109 million using incremental cash savings tax act predominantly recorded consolidated statements income cost sales additionally recorded 11 million insurance proceeds 21 million equity earnings joint ventures 1 million net foreign currency exchange gains recognized consolidated statements income net additionally accordance recently adopted accounting guidance retrospectively recognized 23 million net periodic pension postretirement benefit credit excluding service cost component fiscal 2018 recorded amount consolidated statements income net note 12 earnings per share earnings weighted average common shares used computation basic diluted earnings per share follows approximately 2 million stockbased compensation shares antidilutive fiscal 2020 approximately 1 million fiscal 2019 2018 shares included dilutive earnings per share calculation two classes capital stock class stock class b stock cash dividends cannot paid holders class b stock unless simultaneously paid holders class stock per share amount cash dividends paid holders class b stock cannot exceed 90 cash dividends paid holders class stock allocate undistributed earnings based upon 1 09 ratio per share class stock class b stock respectively allocate undistributed earnings based ratio due historical dividend patterns voting control class b shareholders contractual limitations dividends class b stock note 13 derivative financial instruments business operations give rise certain market risk exposures mostly due changes commodity prices foreign currency exchange rates interest rates manage portion risks use derivative financial instruments reduce exposure commodity price risk foreign currency risk interest rate risk management programs periodically reviewed board directors audit committee programs risks monitored senior management may revised market conditions dictate current risk management programs utilize various industrystandard models take account implicit cost hedging credit risks associated derivative contracts significant minimize counterparty exposure dealing creditworthy counterparties utilizing exchange traded instruments margin accounts letters credit additionally derivative contracts mostly shortterm duration generally make use creditriskrelated contingent features significant concentrations credit risk existed october 3 2020 following aggregated outstanding notional amounts related derivative financial instruments recognize derivative instruments either assets liabilities fair value consolidated balance sheets exception normal purchases normal sales expected result physical delivery derivative instruments designated qualify hedging instruments designate hedging instrument based upon exposure hedged ie cash flow hedge fair value hedge designate certain forward contracts follows • cash flow hedges include certain commodity forward option contracts forecasted purchases ie grains interest rate swaps locks certain foreign exchange forward contracts • fair value hedges include certain commodity forward contracts firm commitments ie livestock cash flow hedges derivative instruments designated hedges changes amount future cash flows related procurement certain commodities utilized production processes well interest rates variable rate debt derivative instruments designate qualify cash flow hedge effective portion gain loss derivative reported component comprehensive income oci reclassified earnings period periods hedged transaction affects earnings gains losses representing hedge ineffectiveness recognized earnings current period ineffectiveness related cash flow hedges significant fiscal 2020 2019 2018 october 3 2020 net pretax losses 1 million commodity contracts expected reclassified earnings within next 12 months additionally 16 million realized losses related treasury rate locks connection issuance 2026 2029 2048 notes reclassified earnings lives notes fiscal 2020 2019 2018 reclassify significant pretax gains losses earnings result discontinuance cash flow hedges following table sets forth pretax impact cash flow hedge derivative instruments comprehensive income millions fair value hedges designate certain derivative contracts fair value hedges firm commitments purchase livestock harvest objective hedges minimize risk changes fair value created fluctuations commodity prices associated fixed price livestock firm commitments derivative instruments designate qualify fair value hedge gain loss derivative well offsetting gain loss hedged item attributable hedged risk recognized earnings period include gain loss hedged items ie livestock purchase firm commitments line item cost sales offsetting gain loss related livestock forward position ineffectiveness related fair value hedges significant fiscal 2020 2019 2018 carrying amount fair value hedge assets liabilities fiscal 2020 2019 2018 follows millions undesignated positions addition designated positions also hold derivative contracts apply hedge accounting include certain derivative instruments related commodities price risk including grains livestock energy foreign currency risk mark positions fair value earnings reporting date reclassification earnings following table sets forth total amounts income expense line item presented consolidated statements income effects hedges recorded millions following table sets forth pretax impact cash flow fair value undesignated derivative instruments consolidated statements income millions amounts represent gainslosses commodity contracts designated fair value hedges firm commitments realized period presented offset corresponding gainloss underlying hedged inventory gains losses related changes fair value unrealized commodity contracts along offsetting gain loss hedged inventory also markedtomarket earnings impact net basis fair value outstanding derivative instruments consolidated balance sheets included note 14 fair value measurements note 14 fair value measurements fair value defined price would received sell asset paid transfer liability exit price principal advantageous market asset liability orderly transaction market participants measurement date fair value hierarchy contains three levels follows level 1 unadjusted quoted prices available active markets identical assets liabilities measurement date level 2 observable inputs available measurement date quoted prices included level 1 either directly indirectly including • quoted prices similar assets liabilities active markets • quoted prices identical similar assets nonactive markets • inputs quoted prices observable asset liability • inputs derived principally corroborated observable market data level 3 unobservable inputs cannot corroborated observable market data reflect use significant management judgment values generally determined using pricing models assumptions utilize management’s estimates market participant assumptions assets liabilities measured fair value recurring basis fair value hierarchy requires use observable market data available instances inputs used measure fair value fall different levels fair value hierarchy fair value measurement determined based lowest level input significant fair value measurement entirety assessment significance particular item fair value measurement entirety requires judgment including consideration inputs specific asset liability following tables set forth level within fair value hierarchy financial assets liabilities accounted fair value recurring basis according valuation techniques used determine fair values millions derivative assets liabilities presented consolidated balance sheets net basis legally enforceable master netting arrangement exists counterparty derivative contract us additionally october 3 2020 september 28 2019 16 million 95 million respectively net cash collateral posted various counterparties master netting arrangements exist held cash collateral following table provides reconciliation beginning ending balance marketable debt securities measured fair value recurring basis table used significant unobservable inputs level 3 millions following methods assumptions used estimate fair value class financial instrument derivative assets liabilities derivative financial instruments primarily include exchangetraded overthecounter contracts described note 13 derivative financial instruments record derivative financial instruments fair value using quoted market prices adjusted necessary credit nonperformance risk internal models use readily observable market inputs basis including current forward market prices rates classify instruments level 2 quoted market prices corroborated utilizing observable current forward commodity market prices active exchanges observable market transactions available sale securities investments marketable debt securities classified availableforsale reported fair value based pricing models quoted market prices adjusted credit nonperformance risk shortterm investments maturities less 12 months included current assets consolidated balance sheets primarily include certificates deposit commercial paper marketable debt securities included assets consolidated balance sheets maturities ranging 40 years classify investments us government us agency certificates deposit commercial paper debt securities level 2 fair value generally estimated using discounted cash flow models primarily industrystandard models consider various assumptions including time value yield curve well readily available relevant economic measures classify certain corporate assetbacked debt securities level 3 limited activity less observable inputs valuation models including current interest rates estimated prepayment default recovery rates underlying portfolio structured investment vehicle significant changes assumptions unobservable inputs valuation level 3 instruments would significant impact consolidated financial statements following table sets forth availableforsale securities amortized cost basis fair value unrealized gain loss significant investment category millions unrealized holding gains losses net tax excluded earnings reported oci security settled sold quarterly basis evaluate whether losses related availableforsale securities temporary nature losses equity securities recognized earnings decline value judged temporary losses related debt securities determined temporary loss would recognized earnings intend likely required sell security prior recovery debt securities intent ability hold maturity losses determined temporary would remain oci expected credit losses recognized earnings consider many factors determining whether loss temporary including length time extent fair value cost financial condition nearterm prospects issuer ability intent hold investment period time sufficient allow anticipated recovery recognized temporary impairment earnings fiscal 2020 fiscal 2019 temporary losses deferred oci october 3 2020 september 28 2019 deferred compensation assets maintain nonqualified deferred compensation plans certain executives highly compensated team members investments generally maintained within trust include money market funds mutual funds life insurance policies cash surrender value life insurance policies invested primarily mutual funds investments recorded fair value based quoted market prices included assets consolidated balance sheets classify investments observable market prices active markets level 1 generally publiclytraded mutual funds remaining deferred compensation assets classified level 2 fair value corroborated based observable market data realized unrealized gains losses deferred compensation included earnings assets liabilities measured fair value nonrecurring basis addition assets liabilities recorded fair value recurring basis record assets liabilities fair value nonrecurring basis generally assets recorded fair value nonrecurring basis result impairment charges fiscal 2019 recorded 41 million impairment charge related prepared foods business held sale due estimate business fair value based current expected net sales proceeds impairment charge recorded cost sales consolidated statement income fiscal 2019 valuation included unobservable level 3 inputs based expected sales proceeds competitive bidding process ongoing discussions potential buyers fiscal 2018 recorded 101 million impairment charges related expected sale nonprotein businesses held sale due revised estimates businesses fair value based current expected net sales proceeds time impairment charges recorded cost sales consolidated statement income primarily consisted goodwill previously classified within assets held sale valuation included unobservable level 3 inputs based expected sales proceeds competitive bidding process ongoing discussions potential buyers financial instruments fair value debt principally estimated using level 2 inputs based quoted prices similar instruments fair value carrying value debt follows millions concentrations credit risk financial instruments exposed concentrations credit risk consist primarily cash equivalents accounts receivable cash equivalents high quality securities placed major banks financial institutions concentrations credit risk respect receivables limited due large number customers dispersion across geographic areas perform periodic credit evaluations customers’ financial condition generally require collateral october 3 2020 september 28 2019 165 162 respectively net accounts receivable balance due walmart inc single customer group represented greater 10 net accounts receivable note 15 stockbased compensation issue shares stockbased compensation plans issuing class stock treasury total number shares available future grant tyson foods inc 2000 stock incentive plan incentive plan 9979081 october 3 2020 stock options shareholders approved incentive plan january 2001 incentive plan administered compensation leadership development committee board directors compensation committee incentive plan includes provisions granting incentive stock options shares class stock price less fair value date grant nonqualified stock options may granted price equal fair value class stock date option granted stock options incentive plan generally become exercisable ratably three years date grant must exercised within 10 years date grant policy recognize compensation expense straightline basis requisite service period entire award forfeitures recognized occur weighted average grantdate fair value options granted fiscal 2020 2019 2018 1677 1135 1831 respectively fair value option grant established date grant using binomial lattice method use historical volatility period time comparable expected life option determine volatility assumptions expected life calculated based contractual term grant takes account historical exercise termination behavior participants riskfree interest rates based fiveyear treasury bond rate assumptions used fair value calculation grant dates outlined following table recognized stockbased compensation expense related stock options net income taxes 16 million 16 million 13 million fiscal 2020 2019 2018 respectively related tax benefit fiscal 2020 2019 2018 4 million 3 million 6 million respectively 13 million 12 million 22 million options vest fiscal 2020 2019 2018 respectively grant date fair value 17 million 18 million 27 million respectively fiscal 2020 2019 2018 received cash 30 million 99 million 102 million respectively exercise stock options shares issued treasury stock option exercises related tax benefit realized stock options exercised fiscal 2020 2019 2018 6 million 21 million 30 million respectively total intrinsic value options exercised fiscal 2020 2019 2018 21 million 79 million 103 million respectively cash flows resulting tax deductions excess compensation cost options excess tax deductions classified financing cash flows realized 4 million 14 million 20 million related excess tax deductions fiscal 2020 2019 2018 respectively october 3 2020 21 million total unrecognized compensation cost related stock option plans recognized weighted average period 13 years restricted stock issue restricted stock market value date grant restrictions expiring periods fiscal 2023 unearned compensation recognized vesting period particular grant using straightline method october 3 2020 49 million total unrecognized compensation cost related restricted stock awards recognized weighted average period 18 years recognized stockbased compensation expense related restricted stock net income taxes 36 million 26 million 22 million fiscal 2020 2019 2018 respectively related tax benefit fiscal 2020 2019 2018 9 million 8 million 9 million respectively 06 million 05 million 06 million restricted stock awards vest fiscal 2020 2019 2018 respectively grant date fair value 34 million 29 million 27 million respectively performancebased shares award performancebased shares class stock certain team members awards typically granted year performancebased shares vest based upon passage time achievement performance market performance criteria ranging 0 200 determined compensation committee prior date award vesting periods awards three years review progress toward attainment performance criteria quarter vesting period probable minimum performance criteria award achieved begin recognizing expense equal proportionate share total fair value class stock price grant date total expense recognized duration performance awards equal class stock price date grant multiplied number shares ultimately awarded based level attainment performance criteria grants market performance criteria fair value determined grant date calculated using inputs expected volatility expected dividend yield riskfree rate stock options noted duration three years total expense recognized duration award equal fair value regardless market performance criteria met following table summarizes performancebased shares maximum award amounts based upon respective performance share agreements actual shares vest depend level attainment performancebased criteria recognized stockbased compensation expense related performance shares net income taxes 18 million 16 million 12 million fiscal 2020 2019 2018 respectively related tax benefit fiscal 2020 2019 2018 4 million 4 million 5 million respectively october 3 2020 33 million total unrecognized compensation based upon progress toward attainment criteria related performancebased share awards recognized weighted average period 19 years note 16 pensions postretirement benefits october 3 2020 six defined benefit pension plans consisting two frozen noncontributory funded qualified plans four unfunded nonqualified plans additionally two plans terminated fiscal 2020 residual plan assets 27 million benefit obligations october 3 2020 benefits provided plans based formula using years service either specified benefit rate compensation level nonqualified defined benefit plans certain contracted officers use formula based years service final average salary also postretirement benefit plans substantially team members may receive benefits satisfy applicable eligibility criteria postretirement healthcare plans contributory participants’ contributions adjusted deemed necessary defined contribution retirement programs various groups team members recognized expenses 103 million 97 million 84 million fiscal 2020 2019 2018 respectively use fiscal year end measurement date defined benefit plans postretirement plans recognize effect actuarial gains losses earnings immediately postretirement plans rather amortizing effect future periods postretirement benefits include postretirement medical costs life insurance fiscal 2017 issued notice intent terminate two qualified pension plans termination date april 30 2017 settlements terminated plans occurred fiscal 2019 purchased annuities incurred 19 million settlement charge final liquidation fiscal 2019 issued notice intent terminate three qualified pension plans settlements terminated plans occurred fiscal 2020 purchased annuities incurred settlement gains approximately 112 million related plan terminations significant contributions purchase annuities time settlement necessary due favorable annuity pricing time settlement approximately 52 million residual plan assets remained plan following annuity purchase portion funds transferred qualified replacement plan fiscal 2020 remaining funds transferred fiscal 2021 benefit obligations funded status following table provides reconciliation changes plans’ benefit obligations assets funded status october 3 2020 september 28 2019 millions amounts recognized consolidated balance sheets consist millions amounts recognized accumulated comprehensive income consist millions four pension plans october 3 2020 five pension plans september 28 2019 accumulated benefit obligation excess plan assets plans accumulated benefit obligations excess plan assets follows millions accumulated benefit obligation qualified pension plans 31 million 1478 million october 3 2020 september 28 2019 respectively net periodic benefit cost credit components net periodic benefit cost credit pension postretirement benefit plans recognized consolidated statements income follows millions components service cost component recorded consolidated statements income net october 3 2020 expect amounts reclassified earnings within next 12 months related net periodic benefit cost credit qualified pension plans excluding pending settlements october 3 2020 amounts expected reclassified earnings within next 12 months related net periodic benefit cost credit nonqualified pension plans postretirement benefit plans significant assumptions weighted average assumptions follows determine expected return plan assets assumption first examined historical rates return various asset classes within plans determined longterm projected rateofreturn based expected returns discount rate assumptions used account pension postretirement benefit plans reflect rates benefit obligations could effectively settled discount rates two plans settled fiscal 2020 determined using composite rate comprised annuity purchase rate lump sum conversion discount rate based portions populations purchased annuity contract insurance company versus elected lump sums respectively discount rates plans determined using cash flow matching technique whereby rates yield curve developed highquality debt securities applied benefit obligations determine appropriate discount rate periods presented pension postretirement benefit plans used rp2014 mortality tables eight postretirement benefit plans five healthcare life insurance related two plans benefit obligations totaling 16 million october 3 2020 impacted healthcare cost trend rates one consists fixed annual payments one life insurance related one healthcare plans benefit obligations less 1 million october 3 2020 impacted healthcare cost trend rates due previous plan amendments remaining two plans benefit obligations totaling 8 million 3 million october 3 2020 utilized assumed healthcare cost trend rates 70 68 respectively healthcare cost trend rates grading ultimate rate 45 50 respectively 2027 onepercentagepoint change assumed healthcare cost trend rates would significant effect postretirement benefit obligation plan assets asset allocation domestic pension plan assets october 3 2020 100 cash due intent terminate remaining domestic qualified pension plan next year additionally one foreign subsidiary pension plans 32 million plan assets held insurance trust october 3 2020 october 3 2020 7 plan assets held cash equivalents level 1 93 held insurance trust level 3 september 28 2019 36 plan assets held cash equivalents level 1 61 corporate municipal bonds level 2 3 held insurance trust level 3 contributions policy fund least minimum contribution required meet applicable federal employee benefit local tax laws sole discretion may time fund additional amounts expected contributions pension plans fiscal 2021 approximately 13 million fiscal 2020 2019 2018 funded 19 million 13 million 29 million respectively pension plans estimated future benefit payments following benefit payments expected paid millions benefit payments postretirement benefit plans expected offset medicare part subsidies fiscal 2021 multiemployer plans additionally participate three multiemployer plans provide defined benefits certain team members covered collective bargaining agreements plans usually administered board trustees composed management participating companies labor representatives risks participating multiemployer plans different singleemployer plans assets contributed multiemployer plan one employer may used provide benefits team members participating employers participating employer stops contributing plan unfunded obligation plan may borne remaining participating employers stop participating plan may required pay plan amount based underfunded status plan referred withdrawal liability net pension cost plans equal annual contributions determined accordance provisions negotiated labor contracts contributions plans 1 million fiscal 2020 2 million fiscal 2019 assets contributed plans segregated otherwise restricted provide benefits team members future cost plans dependent number factors including funded status plans ability participating companies meet ongoing funding obligations participation multiemployer plans fiscal 2020 outlined einpension plan number column provides employer identification number ein threedigit plan number unless otherwise noted recent pension protection act ppa zone status available fiscal 2020 fiscal 2019 plans year beginning january 1 2020 2019 respectively zone status based information received plan certified plans actuaries among factors plans red zone generally less 65 percent funded plans critical declining status projected accumulated funding deficiency fiprp status column indicates plans financial improvement plan fip rehabilitation plan rp either pending implemented last column lists expiration date collectivebargaining agreements plan subject fiscal 2019 part acquisition keystone foods acquired interest four multiemployer plans interest two plans subsequently disposed conjunction divestiture chicken processing facility acquired keystone foods acquisition see note 3 acquisitions divestitures additional information transactions additionally fiscal 2019 initiated withdrawal retail wholesale department store international union industry pension fund rwdsu fund result withdrawal rwdsu fund recorded 15 million termination liability received withdrawal letter rwdsu fund fiscal 2020 reduced termination liability accordingly 10 million subsequently fiscal 2020 initiated withdrawal pension fund local 227 result withdrawal pension fund local 227 recorded 1 million termination liability addition regular contributions could obligated pay additional contributions known complete partial withdrawal liabilities unfunded vested benefits renewal negotiations bakery confectionery union industry international pension fund progress note 17 comprehensive income loss components accumulated comprehensive loss follows millions tax changes components comprehensive income loss follows millions note 18 segment reporting operate four reportable segments beef pork chicken prepared foods measure segment profit operating income loss internationalother primarily includes foreign operations australia china malaysia mexico netherlands south korea thailand thirdparty merger integration costs corporate overhead related tyson new ventures llc beef includes operations related processing live fed cattle fabricating dressed beef carcasses primal subprimal meat cuts caseready products marketed domestically food retailers foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments schools healthcare facilities military food processors well international export markets segment also includes sales specialty products hides variety meats well logistics operations move products supply chain pork includes operations related processing live market hogs fabricating pork carcasses primal subprimal cuts caseready products marketed domestically food retailers foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments schools healthcare facilities military food processors well international export markets segment also includes live swine group related specialty product processing activities logistics operations move products supply chain chicken includes domestic operations related raising processing live chickens purchasing raw materials fresh frozen valueadded chicken products well sales specialty products valueadded chicken products primarily include breaded chicken strips nuggets patties readytofix fully cooked chicken parts products marketed domestically food retailers foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments schools convenience stores healthcare facilities military food processors well international export markets segment also includes logistics operations move products domestic supply chain global operations chicken breeding stock subsidiary prepared foods prepared foods includes operations related manufacturing marketing frozen refrigerated food products logistics operations move products supply chain segment includes brands jimmy dean® hillshire farm® ball park® wright® state fair® well artisanal brands aidells® gallo salame® products primarily include readytoeat sandwiches sandwich components flamegrilled hamburgers philly steaks pepperoni bacon breakfast sausage turkey lunchmeat hot dogs flour corn tortilla products appetizers snacks prepared meals ethnic foods side dishes meat dishes breadsticks processed meats products marketed domestically food retailers foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments schools convenience stores healthcare facilities military food processors well international export markets allocate expenses related corporate activities segments except thirdparty merger integration costs 5 million 36 million 26 million fiscal 2020 2019 2018 respectively included internationalother assets additions property plant equipment relating corporate activities remain internationalother additionally september 28 2019 allocated approximately 342 million goodwill internationalother result keystone foods thai european operations acquisitions refer note 5 goodwill intangible assets description information segments reconciliation income continuing operations income taxes follows millions beef segment sales 390 million 411 million 420 million fiscal 2020 2019 2018 respectively transactions operating segments pork segment sales 865 million 893 million 817 million fiscal 2020 2019 2018 respectively transactions operating segments chicken segment sales 52 million 58 million 80 million fiscal 2020 2019 2018 respectively transactions operating segments aforementioned sales intersegment transactions market prices included segment sales table largest customer walmart inc accounted 187 169 173 consolidated sales fiscal 2020 2019 2018 respectively sales walmart inc included segments extended discontinuance sales customer could replaced material impact operations majority operations domiciled united states approximately 95 96 99 sales external customers fiscal 2020 2019 2018 respectively sourced united states approximately 256 billion 248 billion longlived assets located united states october 3 2020 september 28 2019 respectively excluding goodwill intangible assets longlived assets located united states totaled approximately 85 billion 75 billion october 3 2020 september 28 2019 respectively approximately 1287 million 1107 million longlived assets located foreign locations primarily brazil china european union new zealand thailand october 3 2020 september 28 2019 respectively excluding goodwill intangible assets longlived assets foreign countries totaled approximately 648 million 506 million october 3 2020 september 28 2019 respectively sell certain products foreign markets primarily australia canada central america chile china european union united kingdom japan mexico malaysia middle east south korea taiwan thailand export sales united states totaled 40 billion 41 billion 42 billion fiscal 2020 2019 2018 respectively substantially export sales facilitated unaffiliated brokers marketing associations foreign sales staffs sales products produced country united states less 10 consolidated sales fiscal 2020 2019 2018 following tables disaggregate sales customers major distribution channels millions includes sales consumer products food retailers grocery retailers warehouse club stores internetbased retailers b includes sales foodservice distributors restaurant operators hotel chains noncommercial foodservice establishments schools convenience stores healthcare facilities military c includes sales international markets related internationally produced products export sales domestically produced products includes sales industrial food processing companies process product sell end consumers remaining sales included retail foodservice international categories note 19 supplemental cash flows information following table summarizes cash payments interest income taxes millions note 20 transactions related parties related party leases two wastewater facilities entity owned donald j tyson revocable trust mr john tyson chairman company trustee berry street waste water treatment plant lp 90 owned tyson limited partnership sisters mr tyson prior third quarter fiscal 2020 leases classified shortterm operating leases based assessment renewal leases october 3 2020 one lease classified finance lease debt balance 7 million primarily recognized longterm debt consolidated balance sheet total payments approximately 1 million fiscal 2020 2019 2018 paid lease facilities october 3 2020 tlp john tyson director barbara tyson general partners owned 70 million shares 99985 outstanding class b stock along members tyson family owned 66 million shares class stock giving control approximately 7106 total voting power outstanding voting stock august 2017 company committed invest 5 million 175 equity interest buchan ltd mauritian private holding company poultry operations subsaharan africa acacia foods bv committed invest 9 million buchan ltd donnie smith first quarter fiscal year 2017 chief executive officer company serves chairman acacia foods bv director buchan ltd john randal tyson son john tyson chief sustainability officer serves director buchan ltd company completed funding commitment fiscal 2018 fiscal 2020 2019 2018 company provided administrative services tyson limited partnership beneficial owner 70 million shares class b stock tyson limited partnership tlp investment lp reimbursed company 02 million fiscal 2020 03 million fiscal 2019 fiscal 2018 note 21 commitments contingencies commitments guarantee obligations certain outside third parties consisting primarily grower loans substantially collateralized underlying assets remaining terms underlying obligations cover periods 10 years maximum potential amount future payments october 3 2020 13 million likelihood material payments guarantees considered probable october 3 2020 september 28 2019 significant liabilities guarantees recorded cash flow assistance programs certain livestock suppliers participate programs pay amount livestock equivalent standard cost grow livestock periods low market sales prices amounts payments excess market sales price recorded receivables accrue interest participating suppliers obligated repay receivables balances market sales prices exceed standard cost upon termination agreement potential maximum obligation associated programs limited fair value participating livestock supplier’s net tangible assets potential maximum obligation october 3 2020 approximately 320 million total receivables programs 29 million 5 million october 3 2020 september 28 2019 respectively receivables included net allowance uncollectible amounts accounts receivable consolidated balance sheets even though programs limited net tangible assets participating livestock suppliers also manage portion credit risk associated programs obtaining security interests livestock suppliers’ assets analyzing residual credit risks general market conditions allowance programs estimated uncollectible receivables october 3 2020 september 28 2019 constructing new facilities making major enhancements existing facilities occasionally enter incentive agreements local government agencies order reduce certain state local tax expenditures funds generally considered restricted cash reported consolidated balance sheets assets totaled 46 million 0 october 3 2020 september 28 2019 respectively additionally certain agreements transfer related assets various local government entities receive industrial revenue bonds immediately lease facilities local government entities option repurchase facilities nominal amount upon tendering industrial revenue bonds local government entities various predetermined dates industrial revenue bonds associated obligations leases facilities offset underlying assets remain property plant equipment october 3 2020 total amounts types arrangements totaled 573 million additionally enter purchase commitments various items grains livestock contracts variable livestock grower commitments estimable october 3 2020 millions contingencies involved various claims legal proceedings routinely assess likelihood adverse judgments outcomes matters well ranges probable losses extent losses reasonably estimable record accruals companys consolidated financial statements matters extent conclude loss probable financial impact adverse outcome occur reasonably estimable additionally matters losses reasonably possible reasonable estimate possible loss range loss excess amounts accrued made among reasons proceedings preliminary stages ii specific damages sought iii damage claims unsupported andor unreasonable iv uncertainty outcome pending appeals motions v significant factual issues resolved vi novel legal issues unsettled legal theories asserted opinion made appropriate adequate accruals matters accruals reflect company’s best estimate probable loss matters dates accruals recorded amounts may differ materially actual amount losses matters listed certain claims made company andor subsidiaries potential exposure considered material company’s consolidated financial statements believe substantial defenses claims made intend vigorously defend matters september 2 2016 maplevale farms inc acting behalf putative class direct purchasers poultry products filed class action complaint us certain poultry subsidiaries well several poultry processing companies northern district illinois subsequent filing initial complaint additional lawsuits making similar claims behalf putative classes direct indirect purchasers filed united states district court northern district illinois court consolidated complaints pretrial purposes actions behalf three different putative classes direct purchasers indirect purchasersconsumers commercialinstitutional indirect purchasers consolidated actions styled broiler chicken antitrust litigation since original filing certain putative class members opted matter proceeding individual direct actions making similar claims others may future opt complaints filed transferred northern district illinois proceeding coordinated pretrial basis consolidated actions operative complaints amended throughout litigation allege among things beginning january 2008 defendants conspired combined fix raise maintain stabilize price broiler chickens violation united states antitrust laws complaints behalf putative classes indirect purchasers also include causes action various state unfair competition laws consumer protection laws unjust enrichment common laws plaintiffs also allege defendants “manipulated artificially inflated widely used broiler price index georgia dock” plaintiffs allege defendants concealed conduct plaintiffs members putative classes plaintiffs seek treble damages injunctive relief pre postjudgment interest costs attorneys’ fees behalf putative classes decisions class certification summary judgment motions likely filed defendants currently expected late calendar year 2020 2021 necessary trial occur rulings class certification summary judgment motions calendar year 2022 april 26 2019 plaintiffs notified us department justice doj antitrust division issued grand jury subpoena requesting discovery produced parties civil case june 21 2019 doj filed motion intervene sought limited stay discovery civil action court granted part subsequently received grand jury subpoena doj seeking additional documents information related chicken industry june 2 2020 grand jury district colorado returned indictment four individual executives employed two poultry processing companies charging conspiracy engage bidrigging violation federal antitrust laws june 10 2020 announced uncovered information connection grand jury subpoena previously selfreported doj fully cooperating doj part application leniency dojs corporate leniency program october 7 2020 doj announced superseding indictment adding charges six individuals charge total 10 executives employees poultry processing companies conspiracy fix prices rig bids broiler chicken products least 2012 least early 2019 partial stay previously granted court civil action lifted discovery continuing plaintiffs civil action filed complaints expressly referencing conduct doj’s indictments motions arguing bidrigging conduct encompassed prior complaints september 22 2020 court ruled bidrigging claims consolidated existing action bifurcated original supply reduction georgia dock claims original claims proceed current schedule bidrigging claims including related discovery stayed supply reduction georgia dock claims resolved commonwealth puerto rico behalf citizens also initiated civil lawsuit us certain subsidiaries several poultry processing companies alleging activities violation puerto rican antitrust laws lawsuit transferred northern district illinois coordinated pretrial proceedings july 15 2020 court ruled puerto rico could pursue claims based direct purchases defendants dismissed claims based indirect purchases puerto rico’s parens patriae status august 26 2020 puerto rico filed notice voluntary dismissal without prejudice withdrew claims defendants september 1 2020 office attorney general state new mexico filed complaint us certain poultry subsidiaries well several poultry processing companies agri stats inc santa fe county new mexico complaint alleges violations new mexico’s antitrust unfair trade practice unjust enrichment laws based allegations conspiracies manipulate georgia dock exchange information reduce supply broiler chickens march 1 2017 received civil investigative demand “cid” office attorney general department legal affairs state florida cid requests information primarily related possible anticompetitive conduct connection georgia dock chicken products pricing index formerly published georgia department agriculture cooperating florida attorney general’s office july 2019 attorney general issued subpoena broiler chicken antitrust litigation plaintiffs requesting information provided doj august 18 2019 advised broiler chicken antitrust litigation plaintiffs received cid louisiana department justice office attorney general public protection division louisiana cid requests deposition transcripts related broiler chicken antitrust litigation august 6 2020 received cid office attorney general state washington cid requests information primarily related possible anticompetitive conduct violations state consumer protection laws connection broiler chicken market cooperating washington’s attorney general’s office june 18 2018 group plaintiffs acting behalf putative class persons entities indirectly purchased pork filed class action complaint us certain pork subsidiaries well several pork processing companies united states district court district minnesota subsequent filing initial complaint additional lawsuits making similar claims behalf putative classes direct indirect purchasers also filed court consolidated complaints pretrial purposes actions behalf three different putative classes direct purchasers indirect purchasersconsumers commercialinstitutional indirect purchasers consolidated actions styled pork antitrust litigation since original filing putative class member proceeding individual direct action making similar claims others may future individual complaint filed district minnesota proceeding coordinated pretrial basis consolidated actions complaints allege among things beginning january 2009 defendants conspired combined fix raise maintain stabilize price pork products violation united states antitrust laws complaints behalf putative classes indirect purchasers also include causes action various state unfair competition laws consumer protection laws unjust enrichment common laws plaintiffs seek treble damages injunctive relief pre postjudgment interest costs attorneys’ fees behalf putative classes august 8 2019 matter dismissed without prejudice plaintiffs filed amended complaints november 6 2019 plaintiffs alleged defendants conspired combined fix raise maintain stabilize price pork products violation state federal antitrust consumer protection unjust enrichment common laws plaintiffs seeking treble damages injunctive relief pre postjudgment interest costs attorneys’ fees behalf putative classes commonwealth puerto rico behalf citizens also initiated civil lawsuit us certain subsidiaries several pork processing companies alleging activities violation puerto rican antitrust laws lawsuit transferred district minnesota amended complaint filed december 6 2019 moved dismiss amended complaints october 16 2020 court granted motion respect certain state law claims denied motion respect plaintiffs’ federal antitrust claims april 23 2019 group plaintiffs acting behalf putative class persons entities directly sold named defendants fed cattle slaughter persons transacted live cattle futures andor options traded chicago mercantile exchange another us exchange filed class action complaint us beef pork subsidiary tyson fresh meats inc well beef packer defendants united states district court northern district illinois plaintiffs allege defendants engaged conspiracy january 2015 present reduce fed cattle prices violation federal antitrust laws grain inspection packers stockyards act 1921 commodities exchange act periodically reducing slaughter volumes reduce demand fed cattle curtailing purchases slaughters cashpurchased cattle periods coordinating procurement practices fed cattle settled cash basis importing foreign cattle loss reduce domestic demand closing idling plants addition plaintiffs also allege defendants colluded manipulate live cattle futures options traded chicago mercantile exchange plaintiffs seek among things treble monetary damages punitive damages restitution pre postjudgment interest well declaratory injunctive relief complaint subsequently voluntarily dismissed refiled united states district court district minnesota similar lawsuits filed ranchers district courts actions seeking relief ranchers futures traders transferred united states district court district minnesota action consolidated pretrial proceedings cattle antitrust litigation following filing defendants’ motion dismiss matter plaintiffs filed second amended complaint october 4 2019 moved dismiss second amended complaint court granted september 28 2020 dismissal without prejudice plaintiffs permitted amend complaint december 28 2020 april 26 2019 group plaintiffs acting behalf putative class indirect purchasers beef personal use filed class action complaint us beef packers agri stats inc information services provider united states district court district minnesota plaintiffs allege packer defendants conspired reduce slaughter capacity closing idling plants limiting purchases cash cattle coordinating procurement cash cattle reducing slaughter numbers reduce beef output order artificially raise prices beef plaintiffs seek among things damages state antitrust consumer protection statutes common law approximately 30 states well injunctive relief plaintiffs filed first amended complaint claims agri stats dismissed subsequently filed second amended complaint november 22 2019 moved dismiss second amended complaint indirect consumer purchaser litigation styled peterson v jbs usa food company holdings et al additional complaints filed behalf putative class direct purchasers beef alleging violations section 1 sherman act based alleged conspiracy artificially fix raise stabilize wholesale price beef well behalf putative class commercial institutional indirect purchasers beef alleging violations section 1 sherman act various state antitrust laws unjust enrichment based alleged conspiracy artificially inflate price beef september 28 2020 court granted motion dismiss second amended complaint dismissal without prejudice plaintiffs permitted amend complaint december 28 2020 may 22 2020 received cid dojs antitrust division cid requests information related fed cattle beef packing markets cooperating dojs antitrust division respect cid august 30 2019 judy jien kieo jibidi elaisa clement acting behalf putative class nonsupervisory production maintenance employees chicken processing plants continental united states filed class action complaint us certain subsidiaries well several poultry processing companies united states district court district maryland additional complaint making similar allegations also filed emily earnest plaintiffs allege defendants directly wage survey benchmarking service exchanged information regarding labor rates effort depress fix rates wages nonsupervisory production maintenance workers violation federal antitrust laws plaintiffs seek among things treble monetary damages punitive damages restitution pre postjudgment interest well declaratory injunctive relief court consolidated jien earnest cases coordinated pretrial proceedings following consolidation two additional lawsuits filed individuals making similar allegations plaintiffs filed amended consolidated complaint containing additional allegations concerning turkey processing plants named additional defendants moved dismiss amended consolidated complaint september 16 2020 court dismissed claims tyson certain defendants without prejudice complaint improperly grouped together corporate subsidiaries court otherwise denied defendants’ motions dismiss sustained claims based alleged conspiracies fix wages exchange information five defendants court granted plaintiffs leave file amended complaint address impermissible group pleading october 16 2020 plaintiffs filed second amended complaint reasserting claims subsidiary hillshire brands company formerly named sara lee corporation party consolidation cases filed individual complainants republic philippines department labor employment national labor relations commission nlrc 1998 july 1999 complaint filed aris philippines inc sara lee corporation sara lee philippines inc fashion accessories philippines inc attorney cesar c cruz collectively “respondents” complaint alleges among things respondents engaged unfair labor practices connection termination manufacturing operations philippines 1995 aris philippines inc former subsidiary hillshire brands company late 2004 labor arbiter ruled respondents awarded complainants php3453664710 approximately us 71 million damages fees respondents appealed labor arbiters ruling subsequently set aside nlrc december 2006 subsequent nlrc’s decision parties filed numerous appeals motions reconsideration petitions review certain remained outstanding several years various appeals motions andor petitions pending hillshire brands company june 23 2014 without admitting liability filed settlement motion requesting supreme court philippines order dismissal prejudice claims certain respondents exchange payments allocated court among complainants amount exceed php342287800 approximately us 7 million based part finding consideration paid complainants part settlement insufficient supreme court philippines denied respondents’ settlement motion motions reconsideration thereof supreme court philippines also set aside premature nlrc’s december 2006 ruling result cases remanded back nlrc rule merits case december 15 2016 learned nlrc rendered decision november 29 2016 regarding respondents’ appeals regarding labor arbiter’s 2004 ruling favor complainants nlrc increased award 4922 total 5984 complainants php14858495937 approximately us 306 million however nlrc approved prior settlement reached group comprising approximately 18 class 5984 complainants pursuant hillshire brands company agreed pay settling complainant php68000 approximately us 1400 settlement payment made december 21 2016 nlrc responsible distributing funds settling complainant december 27 2016 respondents filed motions reconsideration nlrc asking award set aside nlrc denied respondents motions reconsideration resolution received may 5 2017 entered judgment award july 24 2017 aris philippines inc sara lee corporation sara lee philippines inc appealed award sought injunction preclude enforcement award philippines court appeals november 23 2017 court appeals granted writ preliminary injunction precluded execution nlrc award pendency appeal court appeals subsequently vacated nlrc’s award april 12 2018 complainants filed motions reconsideration court appeals november 14 2018 court appeals denied claimants’ motions reconsideration granted defendants’ motion release discharge preliminary injunction bond claimants since filed petitions writ certiorari supreme court philippines supreme court accepted case review continue maintain accrual matter various claims asserted company subsidiaries officers agents behalf team members claim contracted covid19 facilities note 22 quarterly financial data unaudited first quarter fiscal 2020 net income included 52 million pretax restructuring related charges 16 million pretax beef production facility fire costs net insurance proceeds second quarter fiscal 2020 net income included 110 million pretax gain pension plan terminations third quarter fiscal 2020 net income included 15 million pretax beef production facility fire insurance proceeds net costs 6 million pretax gain pension plan terminations fourth quarter fiscal 2020 net income included 23 million pretax restructuring related charges 65 million pretax income related accounting cycle resulting 53week year fiscal 2020 first quarter fiscal 2019 net income included 26 million pretax keystone foods purchase accounting acquisition related costs included 11 million purchase accounting adjustment amortization fair value stepup inventory 15 million acquisition related costs 8 million pretax restructuring related charges second quarter fiscal 2019 net income included 11 million pretax keystone foods acquisition related costs 8 million pretax restructuring related charges third quarter fiscal 2019 net income included 105 million post tax recognition previously unrecognized tax benefit 55 million pretax gain sale investment 15 million pretax restructuring related charges fourth quarter fiscal 2019 net income included 31 million pretax beef production facility fire costs 41 million pretax impairment charge related divestiture business 15 million pretax pension plan termination charge 10 million pretax restructuring related charges report independent registered public accounting firm board directors shareholders tyson foods inc opinions financial statements internal control financial reporting audited accompanying consolidated balance sheets tyson foods inc subsidiaries “company” october 3 2020 september 28 2019 related consolidated statements income comprehensive income shareholders equity cash flows three years period ended october 3 2020 including related notes schedule valuation qualifying accounts three years period ended october 3 2020 appearing item 15 collectively referred “consolidated financial statements” also audited companys internal control financial reporting october 3 2020 based criteria established internal control integrated framework 2013 issued committee sponsoring organizations treadway commission coso opinion consolidated financial statements referred present fairly material respects financial position company october 3 2020 september 28 2019 results operations cash flows three years period ended october 3 2020 conformity accounting principles generally accepted united states america also opinion company maintained material respects effective internal control financial reporting october 3 2020 based criteria established internal control integrated framework 2013 issued coso change accounting principle discussed note 2 consolidated financial statements company changed manner accounts leases september 29 2019 basis opinions companys management responsible consolidated financial statements maintaining effective internal control financial reporting assessment effectiveness internal control financial reporting included management’s annual report internal control financial reporting appearing item 9a responsibility express opinions company’s consolidated financial statements companys internal control financial reporting based audits public accounting firm registered public company accounting oversight board united states pcaob required independent respect company accordance us federal securities laws applicable rules regulations securities exchange commission pcaob conducted audits accordance standards pcaob standards require plan perform audits obtain reasonable assurance whether consolidated financial statements free material misstatement whether due error fraud whether effective internal control financial reporting maintained material respects audits consolidated financial statements included performing procedures assess risks material misstatement consolidated financial statements whether due error fraud performing procedures respond risks procedures included examining test basis evidence regarding amounts disclosures consolidated financial statements audits also included evaluating accounting principles used significant estimates made management well evaluating overall presentation consolidated financial statements audit internal control financial reporting included obtaining understanding internal control financial reporting assessing risk material weakness exists testing evaluating design operating effectiveness internal control based assessed risk audits also included performing procedures considered necessary circumstances believe audits provide reasonable basis opinions definition limitations internal control financial reporting company’s internal control financial reporting process designed provide reasonable assurance regarding reliability financial reporting preparation financial statements external purposes accordance generally accepted accounting principles company’s internal control financial reporting includes policies procedures pertain maintenance records reasonable detail accurately fairly reflect transactions dispositions assets company ii provide reasonable assurance transactions recorded necessary permit preparation financial statements accordance generally accepted accounting principles receipts expenditures company made accordance authorizations management directors company iii provide reasonable assurance regarding prevention timely detection unauthorized acquisition use disposition company’s assets could material effect financial statements inherent limitations internal control financial reporting may prevent detect misstatements also projections evaluation effectiveness future periods subject risk controls may become inadequate changes conditions degree compliance policies procedures may deteriorate critical audit matters critical audit matter communicated matter arising current period audit consolidated financial statements communicated required communicated audit committee relates accounts disclosures material consolidated financial statements ii involved especially challenging subjective complex judgments communication critical audit matters alter way opinion consolidated financial statements taken whole communicating critical audit matter providing separate opinion critical audit matter accounts disclosures relates goodwill impairment assessments domestic chicken international reporting units described notes 1 5 consolidated financial statements company’s consolidated goodwill balance 10899 million october 3 2020 included 3266 million 392 million domestic chicken international reporting units respectively disclosed management goodwill impairment test conducted first day fourth quarter year frequently impairment indicators arise management estimates fair value reporting units considering use various valuation techniques primary technique income approach discounted cash flow method another technique market approach guideline public company method determination fair value using techniques includes assumptions sales operating margins growth rates discount rates valuation multiples based budgets business plans economic projections marketplace data principal considerations determination performing procedures relating goodwill impairment assessment domestic chicken international reporting units critical audit matter significant judgment management developing fair value measurements reporting units ii high degree auditor judgment subjectivity effort performing procedures evaluating audit evidence related management’s anticipated future cash flows significant assumptions related sales operating margins growth rates discount rates valuation multiples iii audit effort involved use professionals specialized skill knowledge addressing matter involved performing procedures evaluating audit evidence connection forming overall opinion consolidated financial statements procedures included testing effectiveness controls relating management’s goodwill impairment assessment including controls valuation company’s domestic chicken international reporting units procedures also included among others testing management’s process developing fair value estimates domestic chicken international reporting units evaluating appropriateness income market valuation approaches testing completeness accuracy underlying data used fair value estimates evaluating management’s cash flow projections significant assumptions related sales operating margins growth rates discount rates valuation multiples evaluating management’s assumptions related sales operating margins growth rates discount rates valuation multiples involved evaluating whether assumptions used reasonable considering current past performance associated related reporting units ii consistency external market industry data iii whether assumptions consistent evidence obtained areas audit professionals specialized skill knowledge used assist evaluation company’s valuation methods sales operating margins growth rates discount rates valuation multiples significant assumptions pricewaterhousecoopers llp fayetteville arkansas november 16 2020 served company’s auditor since 2009 item 9 nannannannannannannannanitem 15 exhibits financial statements schedules reports form 8k exhibit index signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized tyson foods inc steven hankins steven hankins executive vice president chief financial officer november 27 2002 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities date indicated barbara allen barbara allen director november 27 2002 richard l bond richard l bond director cochief operating officer group president fresh meats retail november 27 2002 lloyd v hackley lloyd v hackley director november 27 2002 steven hankins steven hankins executive vice president chief financial officer november 27 2002 gerald johnston gerald johnston director november 27 2002 david jones david jones director november 27 2002 jim kever jim kever director november 27 2002 shelby massey shelby massey director november 27 2002 robert l peterson robert l peterson director november 27 2002 rodney pless rodney pless senior vice president controller chief accounting officer november 27 2002 jo ann r smith jo ann r smith director november 27 2002 joe f starr joe f starr director november 27 2002 leland e tollett leland e tollett director november 27 2002 barbara tyson barbara tyson director november 27 2002 tyson director november 27 2002 john h tyson john h tyson chairman board directors chief executive officer november 27 2002 donald e wray donald e wray director november 27 2002 certifications john tyson chairman chief executive officer tyson foods inc certify 1 reviewed annual report form 10k tyson foods inc 2 based knowledge annual report contain untrue statement material fact omit state material fact necessary make statements made light circumstances statements made misleading respect period covered annual report 3 based knowledge financial statements financial information included annual report fairly present material respects financial condition results operations cash flows registrant periods presented annual report 4 registrants certifying officers responsible establishing maintaining disclosure controls procedures defined exchange act rules 13a14 15d14 registrant designed disclosure controls procedures ensure material information relating registrant including consolidated subsidiaries made known us others within entities particularly period annual report prepared b evaluated effectiveness registrants disclosure controls procedures date within 90 days prior filing date annual report evaluation date c presented annual report conclusions effectiveness disclosure controls procedures based evaluation date 5 registrants certifying officers disclosed based recent evaluation registrants auditors audit committee registrants board directors persons performing equivalent function significant deficiencies design operation internal controls could adversely affect registrants ability record process summarize report financial data identified registrants auditors material weaknesses internal controls b fraud whether material involves management employees significant role registrants internal controls 6 registrants certifying officers indicated annual report whether significant changes internal controls factors could significantly affect internal controls subsequent date recent evaluation including corrective actions regard significant deficiencies material weaknesses date november 27 2002 john tyson john tyson chairman chief executive officer steven hankins executive vice president chief financial officer tyson foods inc certify 1 reviewed annual report form 10k tyson foods inc 2 based knowledge annual report contain untrue statement material fact omit state material fact necessary make statements made light circumstances statements made misleading respect period covered annual report 3 based knowledge financial statements financial information included annual report fairly present material respects financial condition results operations cash flows registrant periods presented annual report 4 registrants certifying officers responsible establishing maintaining disclosure controls procedures defined exchange act rules 13a14 15d14 registrant designed disclosure controls procedures ensure material information relating registrant including consolidated subsidiaries made known us others within entities particularly period annual report prepared b evaluated effectiveness registrants disclosure controls procedures date within 90 days prior filing date annual report evaluation date c presented annual report conclusions effectiveness disclosure controls procedures based evaluation date 5 registrants certifying officers disclosed based recent evaluation registrants auditors audit committee registrants board directors persons performing equivalent function significant deficiencies design operation internal controls could adversely affect registrants ability record process summarize report financial data identified registrants auditors material weaknesses internal controls b fraud whether material involves management employees significant role registrants internal controls 6 registrants certifying officers indicated annual report whether significant changes internal controls factors could significantly affect internal controls subsequent date recent evaluation including corrective actions regard significant deficiencies material weaknesses date november 27 2002 steven hankins steven hankins executive vice president chief financial officer report independent auditors audited accompanying consolidated balance sheets tyson foods inc september 28 2002 september 29 2001 related consolidated statements income shareholders equity cash flows three years period ended september 28 2002 audits also included financial statement schedule listed index item 14a financial statements schedule responsibility companys management responsibility express opinion financial statements schedule based audits conducted audits accordance auditing standards generally accepted united states standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement audit includes examining test basis evidence supporting amounts disclosures financial statements audit also includes assessing accounting principles used significant estimates made management well evaluating overall financial statement presentation believe audits provide reasonable basis opinion financial statements referred present fairly material respects consolidated financial position tyson foods inc september 28 2002 september 29 2001 consolidated results operations cash flows three years period ended september 28 2002 conformity accounting principles generally accepted united states also opinion related financial statement schedule considered relation basic financial statements taken whole presents fairly material respects information set forth therein little rock arkansas november 11 2002 sernst young llp ernst young llp financial statement schedule tyson foods inc schedule ii valuation qualifying accounts three years ended september 28 2002item 15 exhibits financial statements schedules reports form 8k exhibit index signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized tyson foods inc steven hankins steven hankins executive vice president chief financial officer december 15 2003 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities date indicated richard l bond richard l bond president chief operating officer december 15 2003 lloyd v hackley lloyd v hackley director december 15 2003 steven hankins steven hankins executive vice president chief financial officer december 15 2003 david jones david jones director december 15 2003 jim kever jim kever director december 15 2003 rodney pless rodney pless senior vice president controller chief accounting officer december 15 2003 jo ann r smith jo ann r smith director december 15 2003 leland e tollett leland e tollett director december 15 2003 barbara tyson barbara tyson director december 15 2003 tyson director december 15 2003 john h tyson john h tyson chairman board directors chief executive officer december 15 2003 financial statement schedule tyson foods inc schedule ii valuation qualifying accounts three years ended september 27 2003 exhibit pages 71 148 included however copies pages may obtained fee cover administrative costs request corporate officeitem 15 exhibits financial statement schedules following documents filed part report consolidated statements income three years ended october 2 2004 consolidated balance sheets october 2 2004 september 27 2003 consolidated statements shareholders equity three years ended october 2 2004 consolidated statements cash flows three years ended october 2 2004 notes consolidated financial statements report independent registered public accounting firm financial statement schedule ii valuation qualifying accounts three years ended october 2 2004 schedules omitted neither applicable required exhibits filed report listed exhibit index end item 15 exhibit index signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized tyson foods inc dennis leatherby dennis leatherby senior vice president finance treasurer interim chief financial officer december 14 2004 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities date indicated financial statement schedule tyson foods inc schedule ii valuation qualifying accounts three years ended october 2 2004 exhibit pages 85 149 included however copies pages may obtained fee cover administrative costs request corporate officeitem 15 exhibits financial statement schedules following documents filed part report consolidated statements income three years ended october 1 2005 consolidated balance sheets october 1 2005 october 2 2004 consolidated statements shareholders’ equity three years ended october 1 2005 consolidated statements cash flows three years ended october 1 2005 notes consolidated financial statements report independent registered public accounting firm report independent registered public accounting firm internal control financial reporting financial statement schedule ii valuation qualifying accounts three years ended october 1 2005 schedules omitted neither applicable required exhibits filed report listed exhibit index end item 15 tyson foods inc exhibit index tyson foods inc 48 third amendment agreement dated may 2 2001 amended restated note purchase agreements dated june 30 1993 company john hancock mutual life insurance company previously filed exhibit 49 company’s annual report form 10k fiscal year ended september 29 2001 commission file 00114704 incorporated herein reference 49 form 70 200 million note due may 1 2018 issued company indenture previously filed exhibit 41 companys quarterly report form 10q period ended march 28 1998 commission file 00114704 incorporated herein reference 410 form 70 40 million note due may 1 2018 issued company indenture previously filed exhibit 42 companys quarterly report form 10q period ended march 28 1998 commission file 00114704 incorporated herein reference 411 supplemental indenture company chase manhattan bank na trustee dated october 2 2001 supplementing company indenture relating issuance companys 750 million 7250 notes due 2006 together form 7250 note previously filed exhibit 413 company’s annual report form 10k fiscal year ended september 29 2001 commission file 00114704 incorporated herein reference 412 supplemental indenture company chase manhattan bank na trustee dated october 2 2001 supplementing company indenture relating issuance companys 1 billion 8250 notes due 2011 together form 8250 note previously filed exhibit 414 company’s annual report form 10k fiscal year ended september 29 2001 commission file 00114704 incorporated herein reference 413 indenture dated january 26 1996 ibp inc ibp bank new york ibp indenture previously filed exhibit 4 ibps registration statement form s3 filed commission november 20 1995 commission file 3364459 incorporated herein reference 414 form senior note issued ibp indenture issuance 100 million 6125 senior notes due february 1 2006 b 100 million 7125 senior notes due february 1 2026 c 300 million 795 senior notes due february 1 2010 previously filed exhibit 416 company’s annual report form 10k fiscal year ended september 29 2001 commission file 00114704 incorporated herein reference 415 form 125 million 745 senior note due june 1 2007 issued ibp indenture previously filed exhibit 417 company’s annual report form 10k fiscal year ended september 29 2001 commission file 00114704 incorporated herein reference 416 first supplemental indenture dated september 28 2001 among company lasso acquisition corporation bank new york pursuant company guaranteed notes issued ibp indenture previously filed exhibit 418 company’s annual report form 10k fiscal year ended september 29 2001 commission file 00114704 incorporated herein reference 101 amended restated receivables transfer agreement dated august 16 2002 among tyson receivables corporation transferor company collection agent guarantor jp morgan chase bank administrative agent certain persons parties thereto cp conduit purchasers committed purchasers funding agents previously filed exhibit 106 company’s annual report form 10k period ended september 28 2002 commission file 00114704 incorporated herein reference tyson foods inc 102 amendment 3 dated august 15 2003 company’s amended restated receivables transfer agreement dated august 16 2002 among tyson receivables corporation transferor company collection agent guarantor jpmorgan chase bank administrative agent certain entities parties thereto cp conduit purchasers committed purchasers funding agents previously filed exhibit 107 company’s annual report form 10k fiscal year ended september 27 2003 commission file 00114704 incorporated herein reference 103 amendment 4 waiver company’s amended restated receivables transfer agreement dated august 13 2004 among tyson receivables corporation transferor company collection agent guarantor jpmorgan chase bank administrative agent certain entities parties thereto cp conduit purchasers committed purchasers funding agents previously filed exhibit 1045 companys annual report form 10k fiscal year ended october 2 2004 commission file 00114704 incorporated herein reference 104 amendment 5 dated august 10 2005 company’s amended restated receivables transfer dated august 16 2002 amended among tyson receivables corporation transferor company collection agent guarantor jpmorgan chase bank administrative agent certain entities parties thereto cp conduit purchasers committed purchasers funding agents 9096 105 receivables purchase agreement executed connection receivables transfer agreement described exhibit 101 among company certain subsidiaries company sellers tyson receivables corporation purchaser previously filed exhibit 107 company’s annual report form 10k period ended september 28 2002 commission file 00114704 incorporated herein reference 106 amendment 1 receivables purchase agreement dated august 13 2004 among company certain subsidiaries company sellers tyson receivables corporation purchaser previously filed exhibit 1046 companys annual report form 10k fiscal year ended october 2 2004 commission file 00114704 incorporated herein reference 107 issuing paying agency agreement dated january 12 2001 company chase manhattan bank previously filed exhibit 102 companys quarterly report form 10q period ended december 30 2000 commission file 00114704 incorporated herein reference 108 commercial paper dealer agreement dated january 12 2001 company credit suisse first boston corporation previously filed exhibit 104 companys quarterly report form 10q period ended december 30 2000 commission file 00114704 incorporated herein reference 109 commercial paper dealer agreement dated january 12 2001 company merrill lynch money markets inc merrill lynch pierce fenner smith previously filed exhibit 105 companys quarterly report form 10q period ended december 30 2000 commission file 00114704 incorporated herein reference 1010 commercial paper dealer agreement dated january 12 2001 company suntrust equitable securities corporation previously filed exhibit 106 companys quarterly report form 10q period ended december 30 2000 commission file 00114704 incorporated herein reference tyson foods inc 1011 commercial paper dealer agreement dated january 12 2001 company jp morgan securities inc previously filed exhibit 107 companys quarterly report form 10q period ended december 30 2000 commission file 00114704 incorporated herein reference 1012 commercial paper dealer agreement dated january 12 2001 company chase securities inc previously filed exhibit 108 companys quarterly report form 10q period ended december 30 2000 commission file 00114704 incorporated herein reference 1013 fiveyear revolving credit agreement dated september 28 2005 among tyson foods inc borrower jpmorgan chase bank na administrative agent merrill lynch bank usa syndication agent suntrust bank cooperatieve centrale raiffeisenboerenleenbank ba “rabobank international” new york branchand bnp paribas documentation agents cobank acb us agbank fcb codocumentation agents jp morgan securities inc lead arranger sole bookrunner certain lenders party thereto previously filed exhibit 101 companys current report form 8k october 3 2005 commission file 00114704 incorporated herein reference 1014 threeyear term loan agreement dated september 28 2005 among tyson foods inc guarantor lakeside farm industries ltd borrower jpmorgan chase bank na toronto branch administrative agent merrill lynch capital canada inc syndication agent rabobank nederland canadian branch bnp paribas canada documentation agents jp morgan securities inc lead arranger sole bookrunner certain lenders party thereto previously filed exhibit 102 companys current report form 8k october 3 2005 commission file 00114704 incorporated herein reference 1015 amended restated employment agreement dated july 29 2003 john tyson company previously filed exhibit 1019 company’s annual report form 10k fiscal year ended september 27 2003 commission file 00114704 incorporated herein reference 1016 amended restated employment agreement dated july 29 2003 richard l bond company previously filed exhibit 1020 company’s annual report form 10k fiscal year ended september 27 2003 commission file 00114704 incorporated herein reference 1017 amended restated employment agreement dated july 29 2003 greg lee company previously filed exhibit 1021 company’s annual report form 10k fiscal year ended september 27 2003 commission file 00114704 incorporated herein reference 1018 form amendment employment agreements chairman chief executive officer president chief operating officer chief administrative officer president international previously filed exhibit 1050 companys annual report form 10k fiscal year ended october 2 2004 commission file 00114704 incorporated herein reference 1019 second amendment amended restated employment agreement dated february 4 2005 tyson foods inc richard l bond previously filed exhibit 101 companys quarterly report form 10q period ended january 1 2005 commission file 00114704 incorporated herein reference tyson foods inc 1020 senior executive employment agreement dated november 20 1998 company leland e tollett previously filed exhibit 1020 company’s annual report form 10k fiscal year ended october 3 1998 commission file 00114704 incorporated herein reference 1021 amendment senior executive employment agreement dated february 4 2005 tyson foods inc leland e tollett previously filed exhibit 102 companys quarterly report form 10q period ended january 1 2005 commission file 00114704 incorporated herein reference 1022 employment agreement 2004 amendment company eugene leman previously filed exhibit 101 companys current report form 8k october 15 2004 commission file 00114704 incorporated herein reference 1023 executive employment agreement company j alberto gonzalezpita dated november 15 2004 previously filed exhibit 101 companys current report form 8k november 18 2004 commission file 00114704 incorporated herein reference 1024 officer employment agreement company craig j hart dated november 12 2004 previously filed exhibit 102 companys current report form 8k november 18 2004 commission file 00114704 incorporated herein reference 1025 officer employment agreement company dennis leatherby dated november 12 2004 previously filed exhibit 103 companys current report form 8k november 18 2004 commission file 00114704 incorporated herein reference 1026 senior advisor agreement dated july 30 2004 tyson company previously filed exhibit 1043 companys annual report form 10k fiscal year ended october 2 2004 commission file 00114704 incorporated herein reference 1027 separation agreement general release dated july 30 2004 steve hankins company previously filed exhibit 1044 companys annual report form 10k fiscal year ended october 2 2004 commission file 00114704 incorporated herein reference 1028 executive employment agreement company william w lovette dated october 7 2005 previously filed exhibit 101 companys current report form 8k october 12 2005 commission file 00114704 incorporated herein reference 1029 officer employment agreement company james v lochner dated october 7 2005 previously filed exhibit 102 companys current report form 8k october 12 2005 commission file 00114704 incorporated herein reference 1030 officer employment agreement company noel w white dated october 7 2005 previously filed exhibit 103 companys current report form 8k october 12 2005 commission file 00114704 incorporated herein reference 1031 executive employment agreement company wendy p davidson dated october 10 2005 previously filed exhibit 104 companys current report form 8k october 12 2005 commission file 00114704 incorporated herein reference 1032 form indemnity agreement tyson foods inc directors certain executive officers previously filed exhibit 10t companys annual report form 10k fiscal year ended september 30 1995 commission file 03400 incorporated herein reference tyson foods inc 1033 form ibps indemnification agreement officers directors previously filed exhibit 108 ibps registration statement form s1 dated august 19 1987 file 16085 incorporated hereby reference 1034 tyson foods inc annual incentive compensation plan senior executives adopted february 4 2005 97100 1035 tyson foods inc restricted stock bonus plan effective august 21 1989 amended restated april 15 1994 amendment restricted stock bonus plan effective november 18 1994 previously filed exhibit 10l companys annual report form 10k fiscal year ended october 1 1994 commission file 03400 incorporated herein reference 1036 tyson foods inc amended restated employee stock purchase plan dated december 13 1999 previously filed exhibit 1012 companys form 10k fiscal year ended october 2 1999 commission file 00114704 incorporated herein reference 1037 amended restated executive savings plan tyson foods inc effective october 1 1997 first amendment amended restated executive savings plan tyson foods inc effective december 31 1998 previously filed exhibit 1015 companys form 10k fiscal year ended october 2 1999 commission file 00114704 incorporated herein reference 1038 tyson foods inc nonstatutory stock option plan 1982 amended restated november 18 1994 previously filed exhibit 99 companys registration statement form s8 filed commission january 30 1995 commission file 3354716 incorporated herein reference 1039 tyson foods inc 2000 stock incentive plan dated august 11 2000 previously filed exhibit 1019 companys form 10k fiscal year ended september 30 2000 commission file 00114704 incorporated herein reference 1040 ibp 1987 stock option plan previously filed exhibit 28a ibps registration statement form s8 dated january 5 1988 file 3319441 incorporated herein reference 1041 ibp officer longterm stock plan previously filed exhibit 1053 ibps annual report form 10k fiscal year ended december 25 1993 file 16085 incorporated herein reference 1042 ibp directors stock option plan previously filed exhibit 1054 ibps annual report form 10k fiscal year ended december 25 1993 file 16085 incorporated herein reference 1043 1996 officer longterm stock plan previously filed exhibit 1056 ibps annual report form 10k fiscal year ended december 28 1996 file 16085 incorporated herein reference 1044 ibp 1996 stock option plan previously filed exhibit 1057 ibps annual report form 10k fiscal year ended december 28 1996 file 16085 incorporated herein reference 1045 text retirement income plan ibp inc amended restated effective january 1 1992 amended previously filed exhibit 1028 ibps annual report form 10k fiscal year ended december 26 1992 file 16085 incorporated herein reference 1046 tyson foods inc supplemental executive retirement life insurance plan dated january 23 2004 previously filed exhibit 101 companys quarterly report form 10q period ended march 27 2004 commission file 00114704 incorporated herein reference tyson foods inc 1047 form performance stock award pursuant performance unit awards granted tyson foods inc 2000 stock incentive plan previously filed exhibit 1047 companys annual report form 10k fiscal year ended october 2 2004 commission file 00114704 incorporated herein reference 1048 form restricted stock agreement pursuant restricted stock awards granted tyson foods inc 2000 stock incentive plan previously filed exhibit 1048 companys annual report form 10k fiscal year ended october 2 2004 commission file 00114704 incorporated herein reference 1049 form stock option grant agreement pursuant stock option awards granted tyson foods inc 2000 stock incentive plan previously filed exhibit 1049 companys annual report form 10k fiscal year ended october 2 2004 commission file 00114704 incorporated herein reference 121 calculation ratio earnings fixed charges subsidiaries company 102105 consent ernst young llp 311 certification chief executive officer pursuant sec rule 13a14a15d14a adopted pursuant section 302 sarbanesoxley act 2002 312 certification interim chief financial officer pursuant sec rule 13a14a15d14a adopted pursuant section 302 sarbanesoxley act 2002 321 certification chief executive officer pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 322 certification interim chief financial officer pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 tyson foods inc signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized tyson foods inc tyson foods inc pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities date indicated richard l bond richard l bond president chief operating officer december 12 2005 scott ford scott ford director december 12 2005 lloyd v hackley lloyd v hackley director december 12 2005 craig j hart craig j hart senior vice president controller chief accounting officer december 12 2005 jim kever jim kever director december 12 2005 dennis leatherby dennis leatherby senior vice president finance treasurer interim chief financial officer december 12 2005 jo ann r smith jo ann r smith director december 12 2005 leland e tollett leland e tollett director december 12 2005 barbara tyson barbara tyson director december 12 2005 tyson director december 12 2005 john h tyson john h tyson chairman board directors chief executive officer december 12 2005 albert c zapanta albert c zapanta director december 12 2005 tyson foods inc financial statement schedule tyson foods inc schedule ii valuation qualifying accounts three years ended october 1 2005 1 fiscal 2004 company reduced portion allowance doubtful accounts respective accounts receivable balances either collected determined collectible 2 company received payments accounts previously written 3 fiscal 2003 company fully reserved certain receivables wrote full amount accounts receivable tyson foods inc exhibit pages 90 110 included however copies pages may obtained fee cover administrative costs request corporate officeitem 15 exhibits financial statement schedules following documents filed part report consolidated statements operations three years ended september 30 2006 consolidated balance sheets september 30 2006 october 1 2005 consolidated statements shareholders’ equity three years ended september 30 2006 consolidated statements cash flows three years ended september 30 2006 notes consolidated financial statements report independent registered public accounting firm report independent registered public accounting firm financial statement schedule ii valuation qualifying accounts three years ended september 30 2006 schedules omitted neither applicable required exhibits filed report listed exhibit index end item 15 tyson foods inc exhibit index tyson foods inc 49 form senior note issued ibp indenture issuance 100 million 7125 senior notes due february 1 2026 b 300 million 795 senior notes due february 1 2010 previously filed exhibit 416 company’s annual report form 10k fiscal year ended september 29 2001 commission file 00114704 incorporated herein reference 410 form 125 million 745 senior note due june 1 2007 issued ibp indenture previously filed exhibit 417 company’s annual report form 10k fiscal year ended september 29 2001 commission file 00114704 incorporated herein reference 411 first supplemental indenture dated september 28 2001 among company lasso acquisition corporation bank new york pursuant company guaranteed notes issued ibp indenture previously filed exhibit 418 company’s annual report form 10k fiscal year ended september 29 2001 commission file 00114704 incorporated herein reference 101 amended restated receivables transfer agreement dated august 16 2002 among tyson receivables corporation transferor company collection agent guarantor jp morgan chase bank administrative agent certain persons parties thereto cp conduit purchasers committed purchasers funding agents previously filed exhibit 106 company’s annual report form 10k period ended september 28 2002 commission file 00114704 incorporated herein reference 102 amendment 3 dated august 15 2003 company’s amended restated receivables transfer agreement dated august 16 2002 among tyson receivables corporation transferor company collection agent guarantor jpmorgan chase bank administrative agent certain entities parties thereto cp conduit purchasers committed purchasers funding agents previously filed exhibit 107 company’s annual report form 10k fiscal year ended september 27 2003 commission file 00114704 incorporated herein reference 103 amendment 4 waiver company’s amended restated receivables transfer agreement dated august 13 2004 among tyson receivables corporation transferor company collection agent guarantor jpmorgan chase bank administrative agent certain entities parties thereto cp conduit purchasers committed purchasers funding agents previously filed exhibit 1045 companys annual report form 10k fiscal year ended october 2 2004 commission file 00114704 incorporated herein reference 104 amendment 5 dated august 10 2005 company’s amended restated receivables transfer agreement dated august 16 2002 amended among tyson receivables corporation transferor company collection agent guarantor jpmorgan chase bank administrative agent certain entities parties thereto cp conduit purchasers committed purchasers funding agents previously filed exhibit 104 companys annual report form 10k fiscal year ended october 1 2005 commission file 00114704 incorporated herein reference 105 amendment 6 dated january 39 2006 company’s amended restated receivables transfer agreement dated august 16 2002 amended among tyson receivables corporation transferor company collection agent guarantor jpmorgan chase bank administrative agent certain entities parties thereto cp conduit purchasers committed purchasers funding agents 96102 106 amendment 7 dated july 27 2006 company’s amended restated receivables transfer agreement dated august 16 2002 amended among tyson receivables corporation transferor company collection agent guarantor jpmorgan chase bank administrative agent certain entities parties thereto cp conduit purchasers committed purchasers funding agents 103109 tyson foods inc 107 amendment 8 dated august 9 2006 company’s amended restated receivables transfer agreement dated august 16 2002 amended among tyson receivables corporation transferor company collection agent guarantor jpmorgan chase bank administrative agent certain entities parties thereto cp conduit purchasers committed purchasers funding agents 110120 108 receivables purchase agreement executed connection receivables transfer agreement described exhibit 101 among company certain subsidiaries company sellers tyson receivables corporation purchaser previously filed exhibit 107 company’s annual report form 10k period ended september 28 2002 commission file 00114704 incorporated herein reference 109 amendment 1 receivables purchase agreement dated august 13 2004 among company certain subsidiaries company sellers tyson receivables corporation purchaser previously filed exhibit 1046 companys annual report form 10k fiscal year ended october 2 2004 commission file 00114704 incorporated herein reference 1010 issuing paying agency agreement dated january 12 2001 company chase manhattan bank previously filed exhibit 102 companys quarterly report form 10q period ended december 30 2000 commission file 00114704 incorporated herein reference 1011 commercial paper dealer agreement dated january 12 2001 company credit suisse first boston corporation previously filed exhibit 104 companys quarterly report form 10q period ended december 30 2000 commission file 00114704 incorporated herein reference 1012 commercial paper dealer agreement dated january 12 2001 company merrill lynch money markets inc merrill lynch pierce fenner smith previously filed exhibit 105 companys quarterly report form 10q period ended december 30 2000 commission file 00114704 incorporated herein reference 1013 commercial paper dealer agreement dated january 12 2001 company suntrust equitable securities corporation previously filed exhibit 106 companys quarterly report form 10q period ended december 30 2000 commission file 00114704 incorporated herein reference 1014 commercial paper dealer agreement dated january 12 2001 company jp morgan securities inc previously filed exhibit 107 companys quarterly report form 10q period ended december 30 2000 commission file 00114704 incorporated herein reference 1015 commercial paper dealer agreement dated january 12 2001 company chase securities inc previously filed exhibit 108 companys quarterly report form 10q period ended december 30 2000 commission file 00114704 incorporated herein reference 1016 fiveyear revolving credit agreement dated september 28 2005 among tyson foods inc borrower jpmorgan chase bank na administrative agent merrill lynch bank usa syndication agent suntrust bank cooperatieve centrale raiffeisenboerenleenbank ba “rabobank international” new york branchand bnp paribas documentation agents cobank acb us agbank fcb codocumentation agents jp morgan securities inc lead arranger sole bookrunner certain lenders party thereto previously filed exhibit 101 companys current report form 8k october 3 2005 commission file 00114704 incorporated herein reference tyson foods inc 1017 amendment 1 dated march 2 2006 company’s fiveyear revolving credit agreement dated september 28 2005 company borrower jpmorgan chase bank na administrative agent merrill lynch bank usa syndication agent suntrust bank cooperatieve centrale raiffeisenboerenleenbank ba “rabobank international” new york branchand bnp paribas documentation agents cobank acb us agbank fcb codocumentation agents previously filed exhibit 101 companys current report form 8k march 7 2006 commission file 00114704 incorporated herein reference 1018 amendment 2 dated april 28 2006 company’s fiveyear revolving credit agreement dated september 28 2005 company borrower jpmorgan chase bank na administrative agent merrill lynch bank usa syndication agent suntrust bank cooperatieve centrale raiffeisenboerenleenbank ba “rabobank international” new york branchand bnp paribas documentation agents cobank acb us agbank fcb codocumentation agents previously filed exhibit 101 companys current report form 8k may 2 2006 commission file 00114704 incorporated herein reference 1019 amendment 3 dated july 27 2006 company’s fiveyear revolving credit agreement dated september 28 2005 amended company borrower jpmorgan chase bank na administrative agent merrill lynch bank usa syndication agent suntrust bank cooperatieve centrale raiffeisenboerenleenbank ba “rabobank international” new york branchand bnp paribas documentation agents cobank acb us agbank fcb codocumentation agents previously filed exhibit 101 companys current report form 8k july 31 2006 commission file 00114704 incorporated herein reference 1020 threeyear term loan agreement dated september 28 2005 among tyson foods inc guarantor lakeside farm industries ltd borrower jpmorgan chase bank na toronto branch administrative agent merrill lynch capital canada inc syndication agent rabobank nederland canadian branch bnp paribas canada documentation agents jp morgan securities inc lead arranger sole bookrunner certain lenders party thereto previously filed exhibit 102 companys current report form 8k october 3 2005 commission file 00114704 incorporated herein reference 1021 amendment 1 dated march 2 2006 company’s threeyear term loan agreement dated september 28 2005 lakeside borrower company guarantor jpmorgan chase bank na toronto branch administrative agent merrill lynch capital canada inc syndication agent rabobank nederland canadian branch bnp paribas canada documentation agents previously filed exhibit 102 companys current report form 8k march 7 2006 commission file 00114704 incorporated herein reference 1022 amendment 2 dated april 28 2006 company’s threeyear term loan agreement dated september 28 2005 lakeside borrower company guarantor jpmorgan chase bank na toronto branch administrative agent merrill lynch capital canada inc syndication agent rabobank nederland canadian branch bnp paribas canada documentation agents previously filed exhibit 102 companys current report form 8k may 2 2006 commission file 00114704 incorporated herein reference tyson foods inc 1023 amendment 3 dated july 27 2006 company’s threeyear term loan agreement dated september 28 2005 amended lakeside borrower company guarantor jpmorgan chase bank na toronto branch administrative agent merrill lynch capital canada inc syndication agent rabobank nederland canadian branch bnp paribas canada documentation agents previously filed exhibit 102 companys current report form 8k july 31 2006 commission file 00114704 incorporated herein reference 1024 amended restated employment agreement dated july 29 2003 john tyson company previously filed exhibit 1019 company’s annual report form 10k fiscal year ended september 27 2003 commission file 00114704 incorporated herein reference 1025 amended restated employment agreement dated july 29 2003 richard l bond company previously filed exhibit 1020 company’s annual report form 10k fiscal year ended september 27 2003 commission file 00114704 incorporated herein reference 1026 amended restated employment agreement dated july 29 2003 greg lee company previously filed exhibit 1021 company’s annual report form 10k fiscal year ended september 27 2003 commission file 00114704 incorporated herein reference 1027 form amendment employment agreements president chief executive officer chief administrative officer president international previously filed exhibit 1050 companys annual report form 10k fiscal year ended october 2 2004 commission file 00114704 incorporated herein reference 1028 second amendment amended restated employment agreement dated february 4 2005 tyson foods inc richard l bond previously filed exhibit 101 companys quarterly report form 10q period ended january 1 2005 commission file 00114704 incorporated herein reference 1029 senior executive employment agreement dated november 20 1998 company leland e tollett previously filed exhibit 1020 company’s annual report form 10k fiscal year ended october 3 1998 commission file 00114704 incorporated herein reference 1030 amendment senior executive employment agreement dated february 4 2005 tyson foods inc leland e tollett previously filed exhibit 102 companys quarterly report form 10q period ended january 1 2005 commission file 00114704 incorporated herein reference 1031 executive employment agreement company j alberto gonzalezpita dated november 15 2004 previously filed exhibit 101 companys current report form 8k november 18 2004 commission file 00114704 incorporated herein reference 1032 officer employment agreement company craig j hart dated november 12 2004 previously filed exhibit 102 companys current report form 8k november 18 2004 commission file 00114704 incorporated herein reference 1033 senior advisor agreement dated july 30 2004 tyson company previously filed exhibit 1043 companys annual report form 10k fiscal year ended october 2 2004 commission file 00114704 incorporated herein reference tyson foods inc 1034 executive employment agreement company william w lovette dated october 7 2005 previously filed exhibit 101 companys current report form 8k october 12 2005 commission file 00114704 incorporated herein reference 1035 officer employment agreement company james v lochner dated october 7 2005 previously filed exhibit 102 companys current report form 8k october 12 2005 commission file 00114704 incorporated herein reference 1036 executive employment agreement company wade miquelon dated april 13 2006 previously filed exhibit 101 companys current report form 8k april 18 2006 commission file 00114704 incorporated herein reference 1037 form indemnity agreement tyson foods inc directors certain executive officers previously filed exhibit 10t companys annual report form 10k fiscal year ended september 30 1995 commission file 03400 incorporated herein reference 1038 form ibps indemnification agreement officers directors previously filed exhibit 108 ibps registration statement form s1 dated august 19 1987 file 16085 incorporated hereby reference 1039 tyson foods inc annual incentive compensation plan senior executives adopted february 4 2005 previously filed exhibit 1034 companys annual report form 10k fiscal year ended october 1 2005 commission file 00114704 incorporated herein reference 1040 tyson foods inc restricted stock bonus plan effective august 21 1989 amended restated april 15 1994 amendment restricted stock bonus plan effective november 18 1994 previously filed exhibit 10l companys annual report form 10k fiscal year ended october 1 1994 commission file 03400 incorporated herein reference 1041 tyson foods inc amended restated employee stock purchase plan dated december 13 1999 previously filed exhibit 1012 companys form 10k fiscal year ended october 2 1999 commission file 00114704 incorporated herein reference 1042 amended restated executive savings plan tyson foods inc effective october 1 1997 first amendment amended restated executive savings plan tyson foods inc effective december 31 1998 previously filed exhibit 1015 companys form 10k fiscal year ended october 2 1999 commission file 00114704 incorporated herein reference 1043 tyson foods inc nonstatutory stock option plan 1982 amended restated november 18 1994 previously filed exhibit 99 companys registration statement form s8 filed commission january 30 1995 commission file 3354716 incorporated herein reference 1044 tyson foods inc 2000 stock incentive plan dated august 11 2000 previously filed exhibit 1019 companys form 10k fiscal year ended september 30 2000 commission file 00114704 incorporated herein reference 1045 ibp 1987 stock option plan previously filed exhibit 28a ibps registration statement form s8 dated january 5 1988 file 3319441 incorporated herein reference 1046 ibp officer longterm stock plan previously filed exhibit 1053 ibps annual report form 10k fiscal year ended december 25 1993 file 16085 incorporated herein reference tyson foods inc tyson foods inc signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized tyson foods inc tyson foods inc pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities date indicated richard l bond richard l bond president chief executive officer december 13 2006 scott ford scott ford director december 13 2006 lloyd v hackley lloyd v hackley director december 13 2006 craig j hart craig j hart senior vice president controller chief accounting officer december 13 2006 jim kever jim kever director december 13 2006 wade miquelon wade miquelon executive vice president chief financial officer december 13 2006 jo ann r smith jo ann r smith director december 13 2006 leland e tollett leland e tollett director december 13 2006 barbara tyson barbara tyson director december 13 2006 tyson director december 13 2006 john h tyson john h tyson chairman board directors december 13 2006 albert c zapanta albert c zapanta director december 13 2006 tyson foods inc financial statement schedule tyson foods inc schedule ii valuation qualifying accounts three years ended september 30 2006 1 company reduced portion allowance doubtful accounts respective accounts receivable balances either collected determined collectible 2 company received payments accounts previously written tyson foods inc exhibit pages 96 130 included however copies pages may obtained fee cover administrative costs request corporate officeitem 15 exhibits financial statement schedules following documents filed part report consolidated statements operation three years ended september 29 2007 consolidated balance sheets september 29 2007 september 30 2006 consolidated statements shareholders’ equity three years ended september 29 2007 consolidated statements cash flows three years ended september 29 2007 notes consolidated financial statements report independent registered public accounting firm report independent registered public accounting firm financial statement schedule ii valuation qualifying accounts three years ended september 29 2007 schedules omitted neither applicable required exhibits filed report listed exhibit index end item 15 tyson foods inc exhibit index tyson foods inc 101 amended restated receivables transfer agreement dated august 16 2002 among tyson receivables corporation transferor company collection agent guarantor jp morgan chase bank administrative agent certain persons parties thereto cp conduit purchasers committed purchasers funding agents previously filed exhibit 106 company’s annual report form 10k period ended september 28 2002 commission file 00114704 incorporated herein reference 102 amendment 3 dated august 15 2003 company’s amended restated receivables transfer agreement dated august 16 2002 among tyson receivables corporation transferor company collection agent guarantor jpmorgan chase bank administrative agent certain entities parties thereto cp conduit purchasers committed purchasers funding agents previously filed exhibit 107 company’s annual report form 10k fiscal year ended september 27 2003 commission file 00114704 incorporated herein reference 103 amendment 4 waiver company’s amended restated receivables transfer agreement dated august 13 2004 among tyson receivables corporation transferor company collection agent guarantor jpmorgan chase bank administrative agent certain entities parties thereto cp conduit purchasers committed purchasers funding agents previously filed exhibit 1045 companys annual report form 10k fiscal year ended october 2 2004 commission file 00114704 incorporated herein reference 104 amendment 5 dated august 10 2005 company’s amended restated receivables transfer agreement dated august 16 2002 amended among tyson receivables corporation transferor company collection agent guarantor jpmorgan chase bank administrative agent certain entities parties thereto cp conduit purchasers committed purchasers funding agents previously filed exhibit 104 companys annual report form 10k fiscal year ended october 1 2005 commission file 00114704 incorporated herein reference 105 amendment 6 dated january 39 2006 company’s amended restated receivables transfer agreement dated august 16 2002 amended among tyson receivables corporation transferor company collection agent guarantor jpmorgan chase bank administrative agent certain entities parties thereto cp conduit purchasers committed purchasers funding agents previously filed exhibit 105 companys annual report form 10k fiscal year ended september 30 2006 commission file 00114704 incorporated herein reference 106 amendment 7 dated july 27 2006 company’s amended restated receivables transfer agreement dated august 16 2002 amended among tyson receivables corporation transferor company collection agent guarantor jpmorgan chase bank administrative agent certain entities parties thereto cp conduit purchasers committed purchasers funding agents previously filed exhibit 106 companys annual report form 10k fiscal year ended september 30 2006 commission file 00114704 incorporated herein reference 107 amendment 8 dated august 9 2006 company’s amended restated receivables transfer agreement dated august 16 2002 amended among tyson receivables corporation transferor company collection agent guarantor jpmorgan chase bank administrative agent certain entities parties thereto cp conduit purchasers committed purchasers funding agents previously filed exhibit 107 companys annual report form 10k fiscal year ended september 30 2006 commission file 00114704 incorporated herein reference tyson foods inc 108 amendment 9 dated august 7 2007 company’s amended restated receivables transfer agreement dated august 16 2002 amended among tyson receivables corporation transferor company collection agent guarantor jpmorgan chase bank administrative agent certain entities parties thereto cp conduit purchasers committed purchasers funding agents 86 93 109 receivables purchase agreement executed connection receivables transfer agreement described exhibit 101 among company certain subsidiaries company sellers tyson receivables corporation purchaser previously filed exhibit 107 company’s annual report form 10k period ended september 28 2002 commission file 00114704 incorporated herein reference 1010 amendment 1 receivables purchase agreement dated august 13 2004 among company certain subsidiaries company sellers tyson receivables corporation purchaser previously filed exhibit 1046 companys annual report form 10k fiscal year ended october 2 2004 commission file 00114704 incorporated herein reference 1011 issuing paying agency agreement dated january 12 2001 company chase manhattan bank previously filed exhibit 102 companys quarterly report form 10q period ended december 30 2000 commission file 00114704 incorporated herein reference 1012 commercial paper dealer agreement dated january 12 2001 company credit suisse first boston corporation previously filed exhibit 104 companys quarterly report form 10q period ended december 30 2000 commission file 00114704 incorporated herein reference 1013 commercial paper dealer agreement dated january 12 2001 company merrill lynch money markets inc merrill lynch pierce fenner smith previously filed exhibit 105 companys quarterly report form 10q period ended december 30 2000 commission file 00114704 incorporated herein reference 1014 commercial paper dealer agreement dated january 12 2001 company suntrust equitable securities corporation previously filed exhibit 106 companys quarterly report form 10q period ended december 30 2000 commission file 00114704 incorporated herein reference 1015 commercial paper dealer agreement dated january 12 2001 company jp morgan securities inc previously filed exhibit 107 companys quarterly report form 10q period ended december 30 2000 commission file 00114704 incorporated herein reference 1016 commercial paper dealer agreement dated january 12 2001 company chase securities inc previously filed exhibit 108 companys quarterly report form 10q period ended december 30 2000 commission file 00114704 incorporated herein reference 1017 fiveyear revolving credit agreement dated september 28 2005 among company borrower jpmorgan chase bank na administrative agent merrill lynch bank usa syndication agent suntrust bank cooperatieve centrale raiffeisenboerenleenbank ba “rabobank international” new york branchand bnp paribas documentation agents cobank acb us agbank fcb codocumentation agents jp morgan securities inc lead arranger sole bookrunner certain lenders party thereto previously filed exhibit 101 companys current report form 8k filed october 3 2005 commission file 00114704 incorporated herein reference tyson foods inc 1018 amendment 1 dated march 2 2006 company’s fiveyear revolving credit agreement dated september 28 2005 company borrower jpmorgan chase bank na administrative agent merrill lynch bank usa syndication agent suntrust bank cooperatieve centrale raiffeisenboerenleenbank ba “rabobank international” new york branchand bnp paribas documentation agents cobank acb us agbank fcb codocumentation agents previously filed exhibit 101 companys current report form 8k filed march 7 2006 commission file 00114704 incorporated herein reference 1019 amendment 2 dated april 28 2006 company’s fiveyear revolving credit agreement dated september 28 2005 company borrower jpmorgan chase bank na administrative agent merrill lynch bank usa syndication agent suntrust bank cooperatieve centrale raiffeisenboerenleenbank ba “rabobank international” new york branchand bnp paribas documentation agents cobank acb us agbank fcb codocumentation agents previously filed exhibit 101 companys current report form 8k filed may 2 2006 commission file 00114704 incorporated herein reference 1020 amendment 3 dated july 27 2006 company’s fiveyear revolving credit agreement dated september 28 2005 amended company borrower jpmorgan chase bank na administrative agent merrill lynch bank usa syndication agent suntrust bank cooperatieve centrale raiffeisenboerenleenbank ba “rabobank international” new york branchand bnp paribas documentation agents cobank acb us agbank fcb codocumentation agents previously filed exhibit 101 companys current report form 8k filed july 31 2006 commission file 00114704 incorporated herein reference 1021 threeyear term loan agreement dated september 28 2005 among company guarantor lakeside farm industries ltd borrower jpmorgan chase bank na toronto branch administrative agent merrill lynch capital canada inc syndication agent rabobank nederland canadian branch bnp paribas canada documentation agents jp morgan securities inc lead arranger sole bookrunner certain lenders party thereto previously filed exhibit 102 companys current report form 8k filed october 3 2005 commission file 00114704 incorporated herein reference 1022 amendment 1 dated march 2 2006 company’s threeyear term loan agreement dated september 28 2005 lakeside borrower company guarantor jpmorgan chase bank na toronto branch administrative agent merrill lynch capital canada inc syndication agent rabobank nederland canadian branch bnp paribas canada documentation agents previously filed exhibit 102 companys current report form 8k filed march 7 2006 commission file 00114704 incorporated herein reference 1023 amendment 2 dated april 28 2006 company’s threeyear term loan agreement dated september 28 2005 lakeside borrower company guarantor jpmorgan chase bank na toronto branch administrative agent merrill lynch capital canada inc syndication agent rabobank nederland canadian branch bnp paribas canada documentation agents previously filed exhibit 102 companys current report form 8k filed may 2 2006 commission file 00114704 incorporated herein reference tyson foods inc 1024 amendment 3 dated july 27 2006 company’s threeyear term loan agreement dated september 28 2005 amended lakeside borrower company guarantor jpmorgan chase bank na toronto branch administrative agent merrill lynch capital canada inc syndication agent rabobank nederland canadian branch bnp paribas canada documentation agents previously filed exhibit 102 companys current report form 8k filed july 31 2006 commission file 00114704 incorporated herein reference 1025 second amended restated employment agreement dated december 19 2006 richard l bond company previously filed exhibit 101 company’s current report form 8k filed december 22 2006 commission file 00114704 incorporated herein reference 1026 nonqualified stock option award pursuant tyson foods inc 2000 stock incentive plan dated november 17 2006 company richard l bond previously filed exhibit 101 company’s current report form 8k filed november 22 2006 commission file 00114704 incorporated herein reference 1027 restricted stock unit agreement dated september 28 2007 company richard l bond previously filed exhibit 103 companys current report form 8k filed september 28 2007 commission file 00114704 incorporated herein reference 1028 senior executive employment agreement dated november 20 1998 company leland e tollett previously filed exhibit 1020 company’s annual report form 10k fiscal year ended october 3 1998 commission file 00114704 incorporated herein reference 1029 amendment senior executive employment agreement dated february 4 2005 company leland e tollett previously filed exhibit 102 companys quarterly report form 10q period ended january 1 2005 commission file 00114704 incorporated herein reference 1030 executive employment agreement company j alberto gonzalezpita dated november 15 2004 previously filed exhibit 101 companys current report form 8k filed november 18 2004 commission file 00114704 incorporated herein reference 1031 officer employment agreement company craig j hart dated november 12 2004 previously filed exhibit 102 companys current report form 8k filed november 18 2004 commission file 00114704 incorporated herein reference 1032 senior advisor agreement dated july 30 2004 tyson company previously filed exhibit 1043 companys annual report form 10k fiscal year ended october 2 2004 commission file 00114704 incorporated herein reference 1033 separation agreement general release company william w lovette dated november 12 2007 94 100 1034 officer employment agreement company james v lochner dated october 7 2005 previously filed exhibit 102 companys current report form 8k filed october 12 2005 commission file 00114704 incorporated herein reference 1035 executive employment agreement company wade miquelon dated april 13 2006 previously filed exhibit 101 companys current report form 8k filed april 18 2006 commission file 00114704 incorporated herein reference 1036 executive employment agreement company donnie king dated march 6 2007 101 111 1037 executive employment agreement company bernard leonard dated november 16 2006 112 122 1038 executive employment agreement company scott mcnair dated april 27 2007 123 133 1039 second executive amendment company greg lee dated april 2 2007 previously filed exhibit 101 companys current report form 8k filed april 3 2007 commission file 00114704 incorporated herein reference tyson foods inc 1040 senior executive employment agreement company greg lee dated april 3 2007 previously filed exhibit 102 companys current report form 8k filed april 3 2007 commission file 00114704 incorporated herein reference 1041 executive employment agreement company richard greubel jr dated may 3 2007 previously filed exhibit 101 company’s quarterly report form 10q period ended march 31 2007 commission file 00114704 incorporated herein reference 1042 agreement dated september 28 2007 company john tyson previously filed exhibit 101 company’s current report form 8k filed september 28 2007 commission file 00114704 incorporated herein reference 1043 indemnity agreement dated september 28 2007 company john tyson previously filed exhibit 102 company’s current report form 8k filed september 28 2007 commission file 00114704 incorporated herein reference 1044 form indemnity agreement tyson foods inc directors certain executive officers previously filed exhibit 10t companys annual report form 10k fiscal year ended september 30 1995 commission file 03400 incorporated herein reference 1045 form ibps indemnification agreement officers directors previously filed exhibit 108 ibps registration statement form s1 dated august 19 1987 file 16085 incorporated hereby reference 1046 tyson foods inc annual incentive compensation plan senior executives adopted february 4 2005 previously filed exhibit 1034 companys annual report form 10k fiscal year ended october 1 2005 commission file 00114704 incorporated herein reference 1047 goalbased bonus program company previously filed exhibit 103 company’s quarterly report form 10q period ended june 30 2007 commission file 00114704 incorporated herein reference 1048 earningsbased bonus program company previously filed exhibit 104 company’s quarterly report form 10q period ended june 30 2007 commission file 00114704 incorporated herein reference 1049 tyson foods inc restricted stock bonus plan effective august 21 1989 amended restated april 15 1994 amendment restricted stock bonus plan effective november 18 1994 previously filed exhibit 10l companys annual report form 10k fiscal year ended october 1 1994 commission file 03400 incorporated herein reference 1050 tyson foods inc amended restated employee stock purchase plan dated december 13 1999 previously filed exhibit 1012 companys form 10k fiscal year ended october 2 1999 commission file 00114704 incorporated herein reference 1051 amended restated executive savings plan tyson foods inc effective october 1 1997 first amendment amended restated executive savings plan tyson foods inc effective december 31 1998 previously filed exhibit 1015 companys form 10k fiscal year ended october 2 1999 commission file 00114704 incorporated herein reference 1052 tyson foods inc nonstatutory stock option plan 1982 amended restated november 18 1994 previously filed exhibit 99 companys registration statement form s8 filed commission january 30 1995 commission file 3354716 incorporated herein reference 1053 tyson foods inc 2000 stock incentive plan dated august 11 2000 previously filed exhibit 1019 companys form 10k fiscal year ended september 30 2000 commission file 00114704 incorporated herein reference tyson foods inc tyson foods inc signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized tyson foods inc tyson foods inc pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities date indicated richard l bond richard l bond president chief executive officer november 21 2007 scott ford scott ford director november 21 2007 lloyd v hackley lloyd v hackley director november 21 2007 craig j hart craig j hart senior vice president controller chief accounting officer november 21 2007 jim kever jim kever director november 21 2007 kevin mcnamara kevin mcnamara director november 21 2007 wade miquelon wade miquelon executive vice president chief financial officer november 21 2007 jo ann r smith jo ann r smith director november 21 2007 leland e tollett leland e tollett director november 21 2007 barbara tyson barbara tyson director november 21 2007 tyson director november 21 2007 john h tyson john h tyson chairman board directors november 21 2007 albert c zapanta albert c zapanta director november 21 2007 tyson foods inc financial statement schedule tyson foods inc schedule ii valuation qualifying accounts three years ended september 29 2007 1 reduced portion allowance doubtful accounts respective accounts receivable balances either collected determined collectible 2 received payments accounts previously written offitem 15 exhibits financial statement schedules following documents filed part report consolidated statements operation three years ended september 27 2008 consolidated balance sheets september 27 2008 september 29 2007 consolidated statements shareholders’ equity three years ended september 27 2008 consolidated statements cash flows three years ended september 27 2008 notes consolidated financial statements reports independent registered public accounting firm financial statement schedule ii valuation qualifying accounts three years ended september 27 2008 schedules omitted neither applicable required exhibits filed report listed exhibit index end item 15 tyson foods inc exhibit index tyson foods inc 101 amended restated receivable transfer agreement dated august 6 2008 among tyson receivables corporation delaware corporation tyson foods inc delaware corporation several commercial paper conduits identified therein cp conduit purchasers several financial institutions identified therein committed purchasers respective funding agents jpmorgan chase bank new york state banking corporation administrative agent benefit cp conduit purchasers committed purchasers funding agents previously filed exhibit 101 company’s current report form 8k filed august 11 2008 commission file 00114704 incorporated herein reference 102 receivables purchase agreement executed connection receivables transfer agreement described exhibit 101 among company certain subsidiaries company sellers tyson receivables corporation purchaser previously filed exhibit 107 company’s annual report form 10k period ended september 28 2002 commission file 00114704 incorporated herein reference 103 amendment 1 receivables purchase agreement dated august 13 2004 among company certain subsidiaries company sellers tyson receivables corporation purchaser previously filed exhibit 1046 companys annual report form 10k fiscal year ended october 2 2004 commission file 00114704 incorporated herein reference 104 amendment 2 receivables purchase agreement dated august 6 2008 among tyson receivables corporation delaware corporation tyson foods inc delaware corporation certain subsidiaries tyson several commercial paper conduits identified therein cp conduit purchasers several financial institutions identified therein committed purchasers respective funding agents jpmorgan chase bank new york state banking corporation administrative agent benefit cp conduit purchasers committed purchasers funding agents previously filed exhibit 102 company’s current report form 8k filed august 11 2008 commission file 00114704 incorporated herein reference 105 fiveyear revolving credit agreement dated september 28 2005 among company borrower jpmorgan chase bank na administrative agent merrill lynch bank usa syndication agent suntrust bank cooperatieve centrale raiffeisenboerenleenbank ba “rabobank international” new york branchand bnp paribas documentation agents cobank acb us agbank fcb codocumentation agents jp morgan securities inc lead arranger sole bookrunner certain lenders party thereto previously filed exhibit 101 companys current report form 8k filed october 3 2005 commission file 00114704 incorporated herein reference 106 amendment 1 dated march 2 2006 company’s fiveyear revolving credit agreement dated september 28 2005 company borrower jpmorgan chase bank na administrative agent merrill lynch bank usa syndication agent suntrust bank cooperatieve centrale raiffeisenboerenleenbank ba “rabobank international” new york branchand bnp paribas documentation agents cobank acb us agbank fcb codocumentation agents previously filed exhibit 101 companys current report form 8k filed march 7 2006 commission file 00114704 incorporated herein reference 107 amendment 2 dated april 28 2006 company’s fiveyear revolving credit agreement dated september 28 2005 company borrower jpmorgan chase bank na administrative agent merrill lynch bank usa syndication agent suntrust bank cooperatieve centrale raiffeisenboerenleenbank ba “rabobank international” new york branchand bnp paribas documentation agents cobank acb us agbank fcb codocumentation agents previously filed exhibit 101 companys current report form 8k filed may 2 2006 commission file 00114704 incorporated herein reference tyson foods inc 108 amendment 3 dated july 27 2006 company’s fiveyear revolving credit agreement dated september 28 2005 amended company borrower jpmorgan chase bank na administrative agent merrill lynch bank usa syndication agent suntrust bank cooperatieve centrale raiffeisenboerenleenbank ba “rabobank international” new york branchand bnp paribas documentation agents cobank acb us agbank fcb codocumentation agents previously filed exhibit 101 companys current report form 8k filed july 31 2006 commission file 00114704 incorporated herein reference 109 amendment 4 dated march 7 2008 companys fiveyear revolving credit agreement dated september 28 2005 amended company borrower jpmorgan chase bank na administrative agent merrill lynch bank usa syndication agent suntrust bank cooperatieve centrale raiffeisenboerenleenbank ba rabobank international new york branch bnp paribas documentation agents cobank acb us agbank fcb codocumentation agents previously filed exhibit 101 companys quarterly report form 10q period ended march 29 2008 commission file 00114704 incorporated herein reference 1010 amendment 5 dated september 10 2008 companys fiveyear revolving credit agreement dated september 28 2005 amended company borrower jpmorgan chase bank na administrative agent merrill lynch bank usa syndication agent suntrust bank cooperatieve centrale raiffeisenboerenleenbank ba “rabobank international” new york branch bnp paribas documentation agents cobank acb us agbank fcb codocumentation agents previously filed exhibit 101 companys current report form 8k filed september 12 2008 commission file 00114704 incorporated herein reference 1011 convertible note hedge transaction confirmation dated september 9 2008 jpmorgan chase bank national association company previously filed exhibit 101 companys current report form 8k filed september 15 2008 commission file 00114704 incorporated herein reference 1012 warrant transaction confirmation dated september 9 2008 jpmorgan chase bank national association company previously filed exhibit 102 companys current report form 8k filed september 15 2008 commission file 00114704 incorporated herein reference 1013 letter agreement dated september 9 2008 jpmorgan chase bank national association company previously filed exhibit 103 companys current report form 8k filed september 15 2008 commission file 00114704 incorporated herein reference 1014 convertible note hedge transaction confirmation dated september 9 2008 merrill lynch financial markets inc company previously filed exhibit 104 companys current report form 8k filed september 15 2008 commission file 00114704 incorporated herein reference 1015 warrant transaction confirmation dated september 9 2008 merrill lynch financial markets inc company previously filed exhibit 105 companys current report form 8k filed september 15 2008 commission file 00114704 incorporated herein reference 1016 letter agreement dated september 9 2008 merrill lynch financial markets inc company previously filed exhibit 106 companys current report form 8k filed september 15 2008 commission file 00114704 incorporated herein reference 1017 second amended restated employment agreement dated december 19 2006 richard l bond company previously filed exhibit 101 company’s current report form 8k filed december 22 2006 commission file 00114704 incorporated herein reference 1018 nonqualified stock option award pursuant tyson foods inc 2000 stock incentive plan dated november 17 2006 company richard l bond previously filed exhibit 101 company’s current report form 8k filed november 22 2006 commission file 00114704 incorporated herein reference tyson foods inc 1019 restricted stock unit agreement dated september 28 2007 company richard l bond previously filed exhibit 103 companys current report form 8k filed september 28 2007 commission file 00114704 incorporated herein reference 1020 senior executive employment agreement dated november 20 1998 company leland e tollett previously filed exhibit 1020 company’s annual report form 10k fiscal year ended october 3 1998 commission file 00114704 incorporated herein reference 1021 amendment senior executive employment agreement dated february 4 2005 company leland e tollett previously filed exhibit 102 companys quarterly report form 10q period ended january 1 2005 commission file 00114704 incorporated herein reference 1022 executive employment agreement company j alberto gonzalez pita dated november 15 004 previously filed exhibit 101 company’s current report form 8k filed november 18 2004 commission file 00114704 incorporated herein reference 1023 separation agreement general release company j alberto gonzalezpita dated april 29 2008 previously filed exhibit 103 companys quarterly report form 10q period ended march 29 2008 commission file 00114704 incorporated herein reference 1024 officer employment agreement company craig j hart dated november 12 2004 previously filed exhibit 102 companys current report form 8k filed november 18 2004 commission file 00114704 incorporated herein reference 1025 senior advisor agreement dated july 30 2004 tyson company previously filed exhibit 1043 companys annual report form 10k fiscal year ended october 2 2004 commission file 00114704 incorporated herein reference 1026 officer employment agreement company james v lochner dated october 7 2005 previously filed exhibit 102 companys current report form 8k filed october 12 2005 commission file 00114704 incorporated herein reference 1027 executive employment agreement company wade miquelon dated april 13 2006 previously filed exhibit 101 companys current report form 8k filed april 18 2006 commission file 00114704 incorporated herein reference 1028 voluntary separation agreement general release dated may 12 2008 company wade miquelon previously filed exhibit 101 companys current report form 8k filed may 13 2008 commission file 00114704 incorporated herein reference 1029 executive employment agreement company donnie king dated march 6 2007 previously filed exhibit 1036 companys annual report form 10k fiscal year ended september 29 2007 commission file 00114704 incorporated herein reference 1030 executive employment agreement company bernard leonard dated november 16 2006 previously filed exhibit 1037 companys annual report form 10k fiscal year ended september 29 2007 commission file 00114704 incorporated herein reference 1031 executive employment agreement company donald j smith dated may 24 2007 previously filed exhibit 101 companys quarterly report form 10q period ended december 29 2007 commission file 00114704 incorporated herein reference 1032 executive employment agreement company david l van bebber dated may 21 2008 previously filed exhibit 101 companys quarterly report form 10q period ended june 28 2008 commission file 00114704 incorporated herein reference 1033 executive employment agreement company dennis leatherby dated june 6 2008 previously filed exhibit 101 companys current report form 8k filed june 11 2008 commission file 00114704 incorporated herein reference tyson foods inc 1034 executive employment agreement company richard greubel jr dated may 3 2007 previously filed exhibit 101 company’s quarterly report form 10q period ended march 31 2007 commission file 00114704 incorporated herein reference 1035 agreement dated september 28 2007 company john tyson previously filed exhibit 101 company’s current report form 8k filed september 28 2007 commission file 00114704 incorporated herein reference 1036 indemnity agreement dated september 28 2007 company john tyson previously filed exhibit 102 company’s current report form 8k filed september 28 2007 commission file 00114704 incorporated herein reference 1037 form indemnity agreement tyson foods inc directors certain executive officers previously filed exhibit 10t companys annual report form 10k fiscal year ended september 30 1995 commission file 03400 incorporated herein reference 1038 form ibps indemnification agreement officers directors previously filed exhibit 108 ibps registration statement form s1 dated august 19 1987 file 16085 incorporated hereby reference 1039 tyson foods inc annual incentive compensation plan senior executives adopted february 4 2005 previously filed exhibit 1034 companys annual report form 10k fiscal year ended october 1 2005 commission file 00114704 incorporated herein reference 1040 tyson foods inc restricted stock bonus plan effective august 21 1989 amended restated april 15 1994 amendment restricted stock bonus plan effective november 18 1994 previously filed exhibit 10l companys annual report form 10k fiscal year ended october 1 1994 commission file 03400 incorporated herein reference 1041 amended restated tyson foods inc employee stock purchase plan dated october 1 2008 1042 restated executive savings plan tyson foods inc effective january 1 2009 1043 amended restated tyson foods inc 2000 stock incentive plan dated november 19 2004 first amendment amended restated tyson foods inc 2000 stock incentive plan dated february 2 2007 second amendment amended restated tyson foods inc 2000 stock incentive plan dated august 13 2007 1044 ibp directors stock option plan previously filed exhibit 1054 ibps annual report form 10k fiscal year ended december 25 1993 file 16085 incorporated herein reference 1045 ibp 1996 stock option plan previously filed exhibit 1057 ibps annual report form 10k fiscal year ended december 28 1996 file 16085 incorporated herein reference 1046 amended restated retirement income plan ibp inc dated august 1 2000 amendment freeze retirement income plan ibp inc dated december 31 2002 1047 amended restated tyson foods inc supplemental executive retirement life insurance premium plan dated march 1 2007 first amendment amended restated tyson foods inc supplemental executive retirement life insurance premium plan dated september 24 2007 second amendment amended restated tyson foods inc supplemental executive retirement life insurance premium plan dated february 29 2008 tyson foods inc 1048 retirement savings plan tyson foods inc dated november 3 2008 1049 form restricted stock agreement pursuant restricted stock awards granted tyson foods inc 2000 stock incentive plan previously filed exhibit 1048 companys annual report form 10k fiscal year ended october 2 2004 commission file 00114704 incorporated herein reference 1050 form stock option grant agreement pursuant stock option awards granted tyson foods inc 2000 stock incentive plan previously filed exhibit 1049 companys annual report form 10k fiscal year ended october 2 2004 commission file 00114704 incorporated herein reference 1051 form tyson foods inc performance stock award grant document pursuant performance stock awards granted tyson foods inc 2000 stock incentive plan previously filed exhibit 101 company’s current report form 8k filed october 4 2007 commission file 00114704 incorporated herein reference 121 calculation ratio earnings fixed charges 141 code conduct company previously filed exhibit 141 companys current report form 8k filed january 18 2007 commission file 00114704 incorporated herein reference subsidiaries company consent ernst young llp 311 certification chief executive officer pursuant sec rule 13a14a15d14a adopted pursuant section 302 sarbanesoxley act 2002 312 certification chief financial officer pursuant sec rule 13a14a15d14a adopted pursuant section 302 sarbanesoxley act 2002 321 certification chief executive officer pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 322 certification chief financial officer pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 tyson foods inc signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized tyson foods inc tyson foods inc pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities date indicated richard l bond richard l bond president chief executive officer november 20 2008 lloyd v hackley lloyd v hackley director november 20 2008 craig j hart craig j hart senior vice president controller chief accounting officer november 20 2008 jim kever jim kever director november 20 2008 kevin mcnamara kevin mcnamara director november 20 2008 dennis leatherby dennis leatherby executive vice president chief financial officer november 20 2008 brad sauer brad sauer director november 20 2008 jo ann r smith jo ann r smith director november 20 2008 barbara tyson barbara tyson director november 20 2008 tyson director november 20 2008 john tyson john tyson chairman board directors november 20 2008 albert c zapanta albert c zapanta director november 20 2008 tyson foods inc financial statement schedule tyson foods inc schedule ii valuation qualifying accounts three years ended september 27 2008 1 reduced portion allowance doubtful accounts respective accounts receivable balances either collected determined collectible 2 received payments accounts previously written offitem 15 exhibits financial statement schedules following documents filed part report consolidated statements income three years ended october 3 2009 consolidated balance sheets october 3 2009 september 27 2008 consolidated statements shareholders’ equity three years ended october 3 2009 consolidated statements cash flows three years ended october 3 2009 notes consolidated financial statements reports independent registered public accounting firm financial statement schedule ii valuation qualifying accounts three years ended october 3 2009 schedules omitted neither applicable required exhibits filed report listed exhibit index end item 15 exhibit index exhibit 31 restated certificate incorporation company previously filed exhibit 31 companys annual report form 10k fiscal year ended october 3 1998 commission file 00114704 incorporated herein reference 32 fourth amended restated bylaws company previously filed exhibit 32 companys current report form 8k filed september 28 2007 commission file 00114704 incorporated herein reference 41 indenture dated june 1 1995 company chase manhattan bank na trustee “company indenture” previously filed exhibit 4 registration statement form s3 filed commission december 18 1997 registration 33342525 incorporated herein reference 42 form 70 note due january 15 2028 issued company indenture previously filed exhibit 42 companys quarterly report form 10q period ended december 27 1997 commission file 00114704 incorporated herein reference 43 form 70 note due may 1 2018 issued company indenture previously filed exhibit 41 companys quarterly report form 10q period ended march 28 1998 commission file 00114704 incorporated herein reference 44 supplemental indenture company chase manhattan bank na trustee dated october 2 2001 supplementing company indenture together form 8250 note previously filed exhibit 414 company’s annual report form 10k fiscal year ended september 29 2001 commission file 00114704 incorporated herein reference 45 form 660 senior notes due april 1 2016 issued company indenture previously filed exhibit 41 company’s current report form 8k filed march 22 2006 commission file 00114704 incorporated herein reference 46 supplemental indenture among company tyson fresh meats inc jpmorgan chase bank national association dated september 18 2006 supplementing company indenture previously filed exhibit 101 company’s current report form 8k filed september 19 2006 commission file 00114704 incorporated herein reference 47 supplemental indenture dated september 15 2008 company bank new york mellon trust company national association successor jpmorgan chase bank na formerly chase manhattan bank na trustee including form 325 convertible senior notes due 2013 supplementing company indenture previously filed exhibit 42 company’s current report form 8k filed september 15 2008 commission file 00114704 incorporated herein reference 48 indenture dated january 26 1996 ibp inc “ibp” bank new york “ibp indenture” previously filed exhibit 4 ibps registration statement form s3 filed commission november 20 1995 commission file 3364459 incorporated herein reference 49 form senior note issued ibp indenture issuance 7125 senior notes due february 1 2026 b 795 senior notes due february 1 2010 previously filed exhibit 416 company’s annual report form 10k fiscal year ended september 29 2001 commission file 00114704 incorporated herein reference 410 first supplemental indenture dated september 28 2001 among company lasso acquisition corporation bank new york supplementing ibp indenture previously filed exhibit 418 company’s annual report form 10k fiscal year ended september 29 2001 commission file 00114704 incorporated herein reference 411 indenture dated march 9 2009 among company subsidiary guarantors defined therein bank new york mellon trust company na trustee previously filed exhibit 41 company’s current report form 8k filed march 10 2009 commission file 00114704 incorporated herein reference 412 form 1050 senior note due 2014 previously filed exhibit 42 included exhibit 41 company’s current report form 8k filed march 10 2009 commission file 00114704 incorporated herein reference 101 credit agreement dated march 9 2009 among company jpmorgan chase bank na administrative agent jp morgan securities inc banc america securities llc barclays capital wachovia capital markets llc cooperatieve centrale raiffeisenboerenleenbank ba “rabobank nederland” new york branch joint bookrunners joint lead arrangers bank america na barclays capital cosyndication agents wachovia bank national association cooperatieve centrale raiffeisenboerenleenbank ba “rabobank nederland” new york branch co documentation agents certain lenders party thereto previously filed exhibit 101 company’s current report form 8k filed march 10 2009 commission file 00114704 incorporated herein reference 102 convertible note hedge transaction confirmation dated september 9 2008 jpmorgan chase bank national association company previously filed exhibit 101 companys current report form 8k filed september 15 2008 commission file 00114704 incorporated herein reference 103 warrant transaction confirmation dated september 9 2008 jpmorgan chase bank national association company previously filed exhibit 102 companys current report form 8k filed september 15 2008 commission file 00114704 incorporated herein reference 104 letter agreement dated september 9 2008 jpmorgan chase bank national association company previously filed exhibit 103 companys current report form 8k filed september 15 2008 commission file 00114704 incorporated herein reference 105 convertible note hedge transaction confirmation dated september 9 2008 merrill lynch financial markets inc company previously filed exhibit 104 companys current report form 8k filed september 15 2008 commission file 00114704 incorporated herein reference 106 warrant transaction confirmation dated september 9 2008 merrill lynch financial markets inc company previously filed exhibit 105 companys current report form 8k filed september 15 2008 commission file 00114704 incorporated herein reference 107 letter agreement dated september 9 2008 merrill lynch financial markets inc company previously filed exhibit 106 companys current report form 8k filed september 15 2008 commission file 00114704 incorporated herein reference 108 agreement dated january 16 2009 richard l bond company previously filed exhibit 101 companys quarterly report form 10q period ended december 27 2008 commission file 00114704 incorporated herein reference 109 second amended restated employment agreement dated december 19 2006 richard l bond company previously filed exhibit 101 company’s current report form 8k filed december 22 2006 commission file 00114704 incorporated herein reference 1010 restricted stock unit agreement dated september 28 2007 company richard l bond previously filed exhibit 103 companys current report form 8k filed september 28 2007 commission file 00114704 incorporated herein reference 1011 executive employment agreement dated june 5 2009 company leland e tollett previously filed exhibit 101 companys current report form 8ka filed june 5 2009 commission file 00114704 incorporated herein reference 1012 senior executive employment agreement dated november 20 1998 company leland e tollett previously filed exhibit 1020 company’s annual report form 10k fiscal year ended october 3 1998 commission file 00114704 incorporated herein reference 1013 amendment senior executive employment agreement dated february 4 2005 company leland e tollett previously filed exhibit 102 companys quarterly report form 10q period ended january 1 2005 commission file 00114704 incorporated herein reference 1014 employment agreement company craig j hart dated october 5 2009 1015 senior advisor agreement dated july 30 2004 tyson company previously filed exhibit 1043 companys annual report form 10k fiscal year ended october 2 2004 commission file 00114704 incorporated herein reference 1016 executive employment agreement company james v lochner dated october 7 2005 previously filed exhibit 102 companys current report form 8k filed october 12 2005 commission file 00114704 incorporated herein reference 1017 employment agreement company donald j smith dated august 10 2009 previously filed exhibit 101 companys current report form 8k filed august 14 2009 commission file 00114704 incorporated herein reference 1018 executive employment agreement company david l van bebber dated may 21 2008 previously filed exhibit 101 companys quarterly report form 10q period ended june 28 2008 commission file 00114704 incorporated herein reference 1019 executive employment agreement company dennis leatherby dated june 6 2008 previously filed exhibit 101 companys current report form 8k filed june 11 2008 commission file 00114704 incorporated herein reference 1020 executive employment agreement company richard greubel jr dated may 3 2007 previously filed exhibit 101 company’s quarterly report form 10q period ended march 31 2007 commission file 00114704 incorporated herein reference 1021 executive employment agreement company jeffrey webster dated december 1 2008 previously filed exhibit 101 company’s quarterly report form 10q period ended march 28 2009 commission file 00114704 incorporated herein reference 1022 employment agreement company kenneth j kimbro dated october 5 2009 1023 agreement dated september 28 2007 company john tyson previously filed exhibit 101 company’s current report form 8k filed september 28 2007 commission file 00114704 incorporated herein reference 1024 indemnity agreement dated september 28 2007 company john tyson previously filed exhibit 102 company’s current report form 8k filed september 28 2007 commission file 00114704 incorporated herein reference 1025 form indemnity agreement tyson foods inc directors certain executive officers previously filed exhibit 10t companys annual report form 10k fiscal year ended september 30 1995 commission file 03400 incorporated herein reference 1026 form ibps indemnification agreement officers directors previously filed exhibit 108 ibps registration statement form s1 dated august 19 1987 file 16085 incorporated hereby reference 1027 tyson foods inc annual incentive compensation plan senior executives adopted february 4 2005 previously filed exhibit 1034 companys annual report form 10k fiscal year ended october 1 2005 commission file 00114704 incorporated herein reference 1028 tyson foods inc restricted stock bonus plan effective august 21 1989 amended restated april 15 1994 amendment restricted stock bonus plan effective november 18 1994 previously filed exhibit 10l companys annual report form 10k fiscal year ended october 1 1994 commission file 03400 incorporated herein reference 1029 amended restated tyson foods inc employee stock purchase plan effective october 1 2008 previously filed exhibit 1041 companys annual report form 10k fiscal year ended september 27 2008 commission file 00114704 incorporated herein reference 1030 first amendment tyson foods inc employee stock purchase plans effective december 27 2009 1031 restated executive savings plan tyson foods inc effective january 1 2009 previously filed exhibit 1042 companys annual report form 10k fiscal year ended september 27 2008 commission file 00114704 incorporated herein reference 1032 first amendment executive savings plan tyson foods inc effective january 1 2009 1033 amended restated tyson foods inc 2000 stock incentive plan effective november 19 2004 first amendment amended restated tyson foods inc 2000 stock incentive plan effective february 2 2007 second amendment amended restated tyson foods inc 2000 stock incentive plan effective august 13 2007 previously filed exhibit 1043 companys annual report form 10k fiscal year ended september 27 2008 commission file 00114704 incorporated herein reference 1034 third amendment tyson foods inc 2000 stock incentive plan effective november 20 2009 1035 ibp 1996 stock option plan previously filed exhibit 1057 ibps annual report form 10k fiscal year ended december 28 1996 file 16085 incorporated herein reference 1036 amended restated retirement income plan ibp inc effective august 1 2000 amendment freeze retirement income plan ibp inc effective december 31 2002 previously filed exhibit 1046 companys annual report form 10k fiscal year ended september 27 2008 commission file 00114704 incorporated herein reference 1037 amended restated tyson foods inc supplemental executive retirement life insurance premium plan effective march 1 2007 first amendment amended restated tyson foods inc supplemental executive retirement life insurance premium plan effective september 24 2007 second amendment amended restated tyson foods inc supplemental executive retirement life insurance premium plan effective january 1 2008 previously filed exhibit 1047 companys annual report form 10k fiscal year ended september 27 2008 commission file 00114704 incorporated herein reference 1038 retirement savings plan tyson foods inc effective january 1 2008 previously filed exhibit 1048 companys annual report form 10k fiscal year ended september 27 2008 commission file 00114704 incorporated herein reference 1039 first amendment retirement savings plan tyson foods inc effective january 1 2008 1040 form restricted stock agreement pursuant restricted stock awards granted tyson foods inc 2000 stock incentive plan prior july 31 2009 previously filed exhibit 1048 companys annual report form 10k fiscal year ended october 2 2004 commission file 00114704 incorporated herein reference 1041 form restricted stock agreement pursuant restricted stock awards granted tyson foods inc 2000 stock incentive plan effective july 31 2009 1042 form stock option grant agreement pursuant stock option awards granted tyson foods inc 2000 stock incentive plan prior july 31 2009 previously filed exhibit 1049 companys annual report form 10k fiscal year ended october 2 2004 commission file 00114704 incorporated herein reference 1043 forms stock option grant agreements pursuant stock option awards granted tyson foods inc 2000 stock incentive plan effective july 31 2009 1044 form performance stock award agreement pursuant performance stock awards granted tyson foods inc 2000 stock incentive plan effective september 29 2009 121 calculation ratio earnings fixed charges 141 code conduct company previously filed exhibit 141 companys current report form 8k filed january 18 2007 commission file 00114704 incorporated herein reference 161 letter ernst young llp dated june 12 2009 previously filed exhibit 161 companys current report form 8k filed june 12 2009 commission file 00114704 incorporated herein reference subsidiaries company consent ernst young llp 311 certification chief executive officer pursuant sec rule 13a14a15d14a adopted pursuant section 302 sarbanesoxley act 2002 312 certification chief financial officer pursuant sec rule 13a14a15d14a adopted pursuant section 302 sarbanesoxley act 2002 321 certification chief executive officer pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 322 certification chief financial officer pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized tyson foods inc pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities date indicated lloyd v hackley director november 23 2009 lloyd v hackley craig j hart senior vice president controller november 23 2009 craig j hart chief accounting officer jim kever director november 23 2009 jim kever kevin mcnamara director november 23 2009 kevin mcnamara dennis leatherby executive vice president chief financial officer november 23 2009 dennis leatherby brad sauer director november 23 2009 brad sauer donnie smith president chief executive officer november 23 2009 donnie smith jo ann r smith director november 23 2009 jo ann r smith robert c thurber director november 23 2009 robert c thurber barbara tyson director november 23 2009 barbara tyson director november 23 2009 tyson john tyson chairman board directors november 23 2009 john tyson albert c zapanta director november 23 2009 albert c zapanta financial statement schedule tyson foods inc schedule ii valuation qualifying accounts three years ended october 3 2009item 15 exhibits financial statement schedules following documents filed part report consolidated statements income three years ended october 2 2010 consolidated balance sheets october 2 2010 october 3 2009 consolidated statements shareholders’ equity three years ended october 2 2010 consolidated statements cash flows three years ended october 2 2010 notes consolidated financial statements reports independent registered public accounting firms financial statement schedule ii valuation qualifying accounts three years ended october 2 2010 schedules omitted neither applicable required exhibits filed report listed exhibit index end item 15 exhibit index exhibit signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities date indicated financial statement schedule tyson foods inc schedule ii valuation qualifying accounts three years ended october 2 2010item 15 exhibits financial statement schedules following documents filed part report consolidated statements income three years ended october 1 2011 consolidated balance sheets october 1 2011 october 2 2010 consolidated statements shareholders’ equity three years ended october 1 2011 consolidated statements cash flows three years ended october 1 2011 notes consolidated financial statements reports independent registered public accounting firms financial statement schedule ii valuation qualifying accounts three years ended october 1 2011 schedules omitted neither applicable required exhibits filed report listed exhibit index end item 15 exhibit index exhibit signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities date indicated financial statement schedule tyson foods inc schedule ii valuation qualifying accounts three years ended october 1 2011item 15 exhibits financial statement schedules following documents filed part report consolidated statements income three years ended september 29 2012 consolidated balance sheets september 29 2012 october 1 2011 consolidated statements shareholders’ equity three years ended september 29 2012 consolidated statements cash flows three years ended september 29 2012 notes consolidated financial statements report independent registered public accounting firm financial statement schedule ii valuation qualifying accounts three years ended september 29 2012 schedules omitted neither applicable required exhibits filed report listed exhibit index end item 15 exhibit index exhibit signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities date indicated financial statement schedule tyson foods inc schedule ii valuation qualifying accounts three years ended september 29 2012item 15 exhibits financial statement schedules following documents filed part report consolidated statements income three years ended september 28 2013 consolidated statements comprehensive income three years ended september 28 2013 consolidated balance sheets september 28 2013 september 29 2012 consolidated statements shareholders’ equity three years ended september 28 2013 consolidated statements cash flows three years ended september 28 2013 notes consolidated financial statements report independent registered public accounting firm financial statement schedule ii valuation qualifying accounts three years ended september 28 2013 schedules omitted neither applicable required exhibits filed report listed exhibit index end item 15 exhibit index exhibit following financial information annual report form 10k year ended september 28 2013 formatted xbrl extensible business reporting language consolidated statements income ii consolidated statements comprehensive income iii consolidated balance sheets iv consolidated statements shareholders equity v consolidated statements cash flows vi notes consolidated financial statements vii financial statement schedule signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities date indicated financial statement schedule tyson foods inc schedule ii valuation qualifying accounts three years ended september 28 2013item 15 exhibits financial statement schedules following documents filed part report consolidated statements income three years ended september 27 2014 consolidated statements comprehensive income three years ended september 27 2014 consolidated balance sheets september 27 2014 september 28 2013 consolidated statements shareholders’ equity three years ended september 27 2014 consolidated statements cash flows three years ended september 27 2014 notes consolidated financial statements report independent registered public accounting firm financial statement schedule ii valuation qualifying accounts three years ended september 27 2014 schedules omitted neither applicable required exhibits filed report listed exhibit index end item 15 exhibit index exhibit signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities date indicated financial statement schedule tyson foods inc schedule ii valuation qualifying accounts three years ended september 27 2014item 15 exhibits financial statement schedules following documents filed part report 1 consolidated financial statements consolidated statements income three years ended october 1 2016 consolidated statements comprehensive income three years ended october 1 2016 consolidated balance sheets october 1 2016 october 3 2015 consolidated statements shareholders’ equity three years ended october 1 2016 consolidated statements cash flows three years ended october 1 2016 notes consolidated financial statements report independent registered public accounting firm 2 consolidated financial statement schedules financial statement schedule ii valuation qualifying accounts three years ended october 1 2016 schedules omitted neither applicable required 3 exhibits required item 601 regulation sk exhibits filed report listed exhibit index following signature pages annual report form 10k incorporated herein reference signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized tyson foods inc dennis leatherby november 21 2016 dennis leatherby executive vice president chief financial officer principal financial officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities date indicated exhibit index exhibit financial statement schedule tyson foods inc schedule ii valuation qualifying accounts three years ended october 1 2016item 15 exhibits financial statement schedules following documents filed part report 1 consolidated financial statements consolidated statements income three years ended september 29 2018 consolidated statements comprehensive income three years ended september 29 2018 consolidated balance sheets september 29 2018 september 30 2017 consolidated statements shareholders’ equity three years ended september 29 2018 consolidated statements cash flows three years ended september 29 2018 notes consolidated financial statements report independent registered public accounting firm 2 consolidated financial statement schedules financial statement schedule ii valuation qualifying accounts three years ended september 29 2018 schedules omitted neither applicable required 3 exhibits required item 601 regulation sk exhibits filed report listed exhibit index preceding signature pages annual report form 10k incorporated herein reference exhibit index exhibit following financial information annual report form 10k year ended september 29 2018 formatted xbrl extensible business reporting language consolidated statements income ii consolidated statements comprehensive income iii consolidated balance sheets iv consolidated statements shareholders equity v consolidated statements cash flows vi notes consolidated financial statements vii financial statement schedule indicates management contract compensatory plan arrangement filed herewith furnished herewith financial statement schedule tyson foods inc schedule ii valuation qualifying accounts three years ended september 29 2018 item 16 form 10k summary none signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized tyson foods inc stewart glendinning november 13 2018 stewart glendinning executive vice president chief financial officer principal financial officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities date indicateditem 15 exhibits financial statement schedules following documents filed part report 1 consolidated financial statements consolidated statements income three years ended september 28 2019 consolidated statements comprehensive income three years ended september 28 2019 consolidated balance sheets september 28 2019 september 29 2018 consolidated statements shareholders’ equity three years ended september 28 2019 consolidated statements cash flows three years ended september 28 2019 notes consolidated financial statements report independent registered public accounting firm 2 consolidated financial statement schedules financial statement schedule ii valuation qualifying accounts three years ended september 28 2019 schedules omitted neither applicable required 3 exhibits required item 601 regulation sk exhibit index exhibit financial statement schedule tyson foods inc schedule ii valuation qualifying accounts item 16 form 10k summary none signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized tyson foods inc stewart glendinning november 12 2019 stewart glendinning executive vice president chief financial officer principal financial officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities date indicateditem 15 exhibits financial statement schedules following documents filed part report 1 consolidated financial statements consolidated statements income three years ended october 3 2015 consolidated statements comprehensive income three years ended october 3 2015 consolidated balance sheets october 3 2015 september 27 2014 consolidated statements shareholders’ equity three years ended october 3 2015 consolidated statements cash flows three years ended october 3 2015 notes consolidated financial statements report independent registered public accounting firm 2 consolidated financial statement schedules financial statement schedule ii valuation qualifying accounts three years ended october 3 2015 schedules omitted neither applicable required 3 exhibits required item 601 regulation sk exhibits filed report listed exhibit index following signature pages annual report form 10k signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities date indicated exhibit index exhibit financial statement schedule tyson foods inc schedule ii valuation qualifying accounts three years ended october 3 2015item 15 exhibits financial statement schedules following documents filed part report 1 consolidated financial statements consolidated statements income three years ended september 30 2017 consolidated statements comprehensive income three years ended september 30 2017 consolidated balance sheets september 30 2017 october 1 2016 consolidated statements shareholders’ equity three years ended september 30 2017 consolidated statements cash flows three years ended september 30 2017 notes consolidated financial statements report independent registered public accounting firm 2 consolidated financial statement schedules financial statement schedule ii valuation qualifying accounts three years ended september 30 2017 schedules omitted neither applicable required 3 exhibits required item 601 regulation sk exhibits filed report listed exhibit index preceding signature pages annual report form 10k incorporated herein reference financial statement schedule tyson foods inc schedule ii valuation qualifying accounts three years ended september 30 2017 exhibit index exhibit 322 certification chief financial officer pursuant 18 usc section 1350 adopted pursuant section 906 sarbanesoxley act 2002 following financial information annual report form 10k year ended september 30 2017 formatted xbrl extensible business reporting language consolidated statements income ii consolidated statements comprehensive income iii consolidated balance sheets iv consolidated statements shareholders equity v consolidated statements cash flows vi notes consolidated financial statements vii financial statement schedule indicates management contract compensatory plan arrangement item 16 form 10k summary none signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized tyson foods inc dennis leatherby november 13 2017 dennis leatherby executive vice president chief financial officer principal financial officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities date indicateditem 15 exhibits financial statement schedules following documents filed part report 1 consolidated financial statements consolidated statements income three years ended october 3 2020 consolidated statements comprehensive income three years ended october 3 2020 consolidated balance sheets october 3 2020 september 28 2019 consolidated statements shareholders’ equity three years ended october 3 2020 consolidated statements cash flows three years ended october 3 2020 notes consolidated financial statements report independent registered public accounting firm 2 consolidated financial statement schedules financial statement schedule ii valuation qualifying accounts three years ended october 3 2020 schedules omitted neither applicable required 3 exhibits required item 601 regulation sk exhibit index exhibit following financial information annual report form 10k year ended october 3 2020 formatted ixbrl inline extensible business reporting language consolidated statements income ii consolidated statements comprehensive income iii consolidated balance sheets iv consolidated statements shareholders equity v consolidated statements cash flows vi notes consolidated financial statements vii financial statement schedule cover page interactive data file formatted ixbrl indicates management contract compensatory plan arrangement filed herewith furnished herewith financial statement schedule tyson foods inc schedule ii valuation qualifying accounts item 16 form 10k summary none signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized tyson foods inc stewart glendinning november 16 2020 stewart glendinning executive vice president chief financial officer principal financial officer phillip w thomas november 16 2020 phillip w thomas vice president controller chief accounting officer principal accounting officer pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities date indicated