UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended July 2, 2022

or

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from              to            

001-14704

(Commission File Number)

______________________________________________

TYSON FOODS, INC.

(Exact name of registrant as specified in its charter)

______________________________________________

	Delaware			71-0225165
	(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
	2200 West Don Tyson Parkway,
	Springdale,	Arkansas		72762-6999
	(Address of Principal Executive Offices)			(Zip Code)
		(479)	290-4000
(Registrant’s telephone number, including area code)

Not applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities Registered Pursuant to Section 12(b) of the Act:

Title of Each Class			Trading Symbol	Name of Each Exchange on Which Registered
Class A Common Stock	Par Value	$0.10	TSN	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ☒   No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  ☒    No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	☒	Accelerated Filer	☐
Non-Accelerated Filer	☐	Smaller Reporting Company	☐
		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of July 2, 2022.

Class	Outstanding Shares
Class A Common Stock, $0.10 Par Value (Class A stock)	289,616,970
Class B Common Stock, $0.10 Par Value (Class B stock)	70,010,355

Class B stock is not listed for trading on any exchange or market system. However, Class B stock is convertible into Class A stock on a share-for-share basis.

TABLE OF CONTENTS

		PAGE
Item 1.	Financial Statements
	Consolidated Condensed Statements of Income for the Three and Nine Months Ended July 2, 2022 and July 3, 2021	1
	Consolidated Condensed Statements of Comprehensive Income for the Three and Nine Months Ended July 2, 2022 and July 3, 2021	2
	Consolidated Condensed Balance Sheets as of July 2, 2022, and October 2, 2021	3
	Consolidated Condensed Statements of Shareholders’ Equity for the Three and Nine Months Ended July 2, 2022 and July 3, 2021	4
	Consolidated Condensed Statements of Cash Flows for the Nine Months Ended July 2, 2022 and July 3, 2021	5
	Notes to Consolidated Condensed Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	35

Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3.	Defaults Upon Senior Securities	37
Item 4.	Mine Safety Disclosures	37
Item 5.	Other Information	37
Item 6.	Exhibits	37
SIGNATURES		38

PART I. FINANCIAL INFORMATION

Item 1.Financial Statements

TYSON FOODS, INC.

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(In millions, except per share data)

(Unaudited)

	Three Months Ended				Nine Months Ended
	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Sales	$	13,495	$	12,478	$	39,545	$	34,238
Cost of Sales	11,884		10,858		34,184		30,188
Gross Profit	1,611		1,620		5,361		4,050
Selling, General and Administrative	578		558		1,717		1,563
Operating Income	1,033		1,062		3,644		2,487
Other (Income) Expense:
Interest income	(4)		(2)		(10)		(6)
Interest expense	85		105		282		325
Other, net	(34)		(7)		(111)		(38)
Total Other (Income) Expense	47		96		161		281
Income before Income Taxes	986		966		3,483		2,206
Income Tax Expense	233		213		771		504
Net Income	753		753		2,712		1,702
Less: Net Income Attributable to Noncontrolling Interests	3		4		12		10
Net Income Attributable to Tyson	$	750	$	749	$	2,700	$	1,692
Weighted Average Shares Outstanding:
Class A Basic	289		293		291		293
Class B Basic	70		70		70		70
Diluted	362		366		364		365
Net Income Per Share Attributable to Tyson:
Class A Basic	$	2.14	$	2.11	$	7.64	$	4.76
Class B Basic	$	1.92	$	1.89	$	6.87	$	4.27
Diluted	$	2.07	$	2.05	$	7.42	$	4.63

See accompanying Notes to Consolidated Condensed Financial Statements.

1

TYSON FOODS, INC.

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(In millions)

(Unaudited)

	Three Months Ended				Nine Months Ended
	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Net Income	$	753	$	753	$	2,712	$	1,702
Other Comprehensive Income (Loss), Net of Taxes:
Derivatives accounted for as cash flow hedges	—		—		1		2
Investments	(1)		—		(5)		(1)
Currency translation	(112)		25		(85)		51
Postretirement benefits	2		—		6		2
Total Other Comprehensive Income (Loss), Net of Taxes	(111)		25		(83)		54
Comprehensive Income	642		778		2,629		1,756
Less: Comprehensive Income Attributable to Noncontrolling Interests	3		4		12		10
Comprehensive Income Attributable to Tyson	$	639	$	774	$	2,617	$	1,746

See accompanying Notes to Consolidated Condensed Financial Statements.

2

TYSON FOODS, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS

(In millions, except share and per share data)

(Unaudited)

	July 2, 2022		October 2, 2021
Assets
Current Assets:
Cash and cash equivalents	$	1,056	$	2,507
Accounts receivable, net	2,518		2,400
Inventories	5,332		4,382
Other current assets	397		533
Total Current Assets	9,303		9,822
Net Property, Plant and Equipment	8,393		7,837
Goodwill	10,531		10,549
Intangible Assets, net	6,325		6,519
Other Assets	1,693		1,582
Total Assets	$	36,245	$	36,309
Liabilities and Shareholders’ Equity
Current Liabilities:
Current debt	$	67	$	1,067
Accounts payable	2,306		2,225
Other current liabilities	2,309		3,033
Total Current Liabilities	4,682		6,325
Long-Term Debt	8,261		8,281
Deferred Income Taxes	2,339		2,195
Other Liabilities	1,474		1,654
Commitments and Contingencies (Note 14)
Shareholders’ Equity:
Common stock ($0.10 par value):
Class A-authorized 900 million shares, issued 378 million shares	38		38
Convertible Class B-authorized 900 million shares, issued 70 million shares	7		7
Capital in excess of par value	4,536		4,486
Retained earnings	19,708		17,502
Accumulated other comprehensive gain (loss)	(255)		(172)
Treasury stock, at cost – 88 million shares at July 2, 2022 and 83 million shares at October 2, 2021	(4,679)		(4,138)
Total Tyson Shareholders’ Equity	19,355		17,723
Noncontrolling Interests	134		131
Total Shareholders’ Equity	19,489		17,854
Total Liabilities and Shareholders’ Equity	$	36,245	$	36,309

See accompanying Notes to Consolidated Condensed Financial Statements.

3

TYSON FOODS, INC.

CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In millions)

(Unaudited)

	Three Months Ended						Nine Months Ended
	July 2, 2022			July 3, 2021			July 2, 2022			July 3, 2021
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
Class A Common Stock:
Balance at beginning and end of period	378	$	38	378	$	38	378	$	38	378	$	38
Class B Common Stock:
Balance at beginning and end of period	70	7		70	7		70	7		70	7
Capital in Excess of Par Value:
Balance at beginning of period		4,510			4,443			4,486			4,433
Stock-based compensation and Other		26			21			50			31
Balance at end of period		4,536			4,464			4,536			4,464
Retained Earnings:
Balance at beginning of period		19,119			15,716			17,502			15,100
Net income attributable to Tyson		750			749			2,700			1,692
Dividends		(161)			(160)			(494)			(487)
Balance at end of period		19,708			16,305			19,708			16,305
Accumulated Other Comprehensive Income (Loss), Net of Tax:
Balance at beginning of period		(144)			(150)			(172)			(179)
Other comprehensive income (loss)		(111)			25			(83)			54
Balance at end of period		(255)			(125)			(255)			(125)
Treasury Stock:
Balance at beginning of period	86	(4,516)		83	(4,123)		83	(4,138)		83	(4,145)
Purchase of Class A common stock	2	(170)		—	(16)		8	(693)		—	(50)
Stock-based compensation	—	7		—	11		(3)	152		—	67
Balance at end of period	88	(4,679)		83	(4,128)		88	(4,679)		83	(4,128)
Total Shareholders’ Equity Attributable to Tyson		$	19,355		$	16,561		$	19,355		$	16,561
Equity Attributable to Noncontrolling Interests:
Balance at beginning of period		$	142		$	139		$	131		$	132
Net income attributable to noncontrolling interests		3			4			12			10
Distributions to noncontrolling interest		(1)			(6)			(1)			(8)
Other		(10)			(5)			(8)			(2)
Total Equity Attributable to Noncontrolling Interests		$	134		$	132		$	134		$	132
Total Shareholders’ Equity		$	19,489		$	16,693		$	19,489		$	16,693

See accompanying Notes to Consolidated Condensed Financial Statements.

4

TYSON FOODS, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

	Nine Months Ended
	July 2, 2022		July 3, 2021
Cash Flows From Operating Activities:
Net income	$	2,712	$	1,702
Depreciation and amortization	892		906
Deferred income taxes	149		(3)
Other, net	62		72
Net changes in operating assets and liabilities	(1,925)		(21)
Cash Provided by Operating Activities	1,890		2,656
Cash Flows From Investing Activities:
Additions to property, plant and equipment	(1,323)		(859)
Purchases of marketable securities	(29)		(57)
Proceeds from sale of marketable securities	28		55
Acquisition of equity investments	(97)		(44)
Other, net	96		122
Cash Used for Investing Activities	(1,325)		(783)
Cash Flows From Financing Activities:
Proceeds from issuance of debt	79		573
Payments on debt	(1,148)		(1,608)
Purchases of Tyson Class A common stock	(693)		(50)
Dividends	(491)		(477)
Stock options exercised	125		33
Other, net	—		(13)
Cash Used for Financing Activities	(2,128)		(1,542)
Effect of Exchange Rate Changes on Cash	(18)		11
(Decrease) Increase in Cash and Cash Equivalents and Restricted Cash	(1,581)		342
Cash and Cash Equivalents and Restricted Cash at Beginning of Year	2,637		1,466
Cash and Cash Equivalents and Restricted Cash at End of Period	1,056		1,808
Less: Restricted Cash at End of Period	—		195
Cash and Cash Equivalents at End of Period	$	1,056	$	1,613

See accompanying Notes to Consolidated Condensed Financial Statements.

5

TYSON FOODS, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1: ACCOUNTING POLICIES

Basis of Presentation

The consolidated condensed financial statements are unaudited and have been prepared by Tyson Foods, Inc. (“Tyson,” “the Company,” “we,” “us” or “our”). Certain information and accounting policies and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations of the United States Securities and Exchange Commission (the “SEC”). Although we believe the disclosures contained herein are adequate to make the information presented not misleading, these consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended October 2, 2021. Preparation of consolidated condensed financial statements requires us to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated condensed financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

We believe the accompanying consolidated condensed financial statements contain all adjustments, which are of a normal recurring nature necessary to state fairly our financial position as of July 2, 2022 and the results of operations for the three and nine months ended July 2, 2022 and July 3, 2021. Results of operations and cash flows for the periods presented are not necessarily indicative of results to be expected for the full year.

Consolidation

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

Use of Estimates

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

Risks and Uncertainties

We have considered the impact of the global novel coronavirus pandemic (“COVID-19” or “pandemic”) on our consolidated condensed financial statements. In addition to the COVID-19 impacts already experienced, there likely will be future impacts, the extent of which is uncertain and largely subject to whether the severity worsens or duration lengthens. Consequently, this may subject us to future risk of material goodwill, intangible and long-lived asset impairments, increased reserves for uncollectible accounts and adjustments for inventory and market volatility for items subject to fair value measurements such as derivatives and investments. There have been no material changes to the summary of certain accounting estimates, the description of the estimates and the levels of subjectivity and judgment they require found in our Annual Report on Form 10-K for the fiscal year ended October 2, 2021.

Recently Issued Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB”) issued guidance providing optional expedients and exceptions to account for the effects of reference rate reform to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued. The optional guidance, which became effective on March 12, 2020 and can be applied through December 31, 2022, has not impacted our consolidated financial statements. The Company has various contracts that reference LIBOR and is assessing how this standard may be applied to specific contract modifications through December 31, 2022.

Changes in Accounting Principles

In August 2020, the FASB issued guidance that simplifies the accounting for debt with conversion options, revises the criteria for applying the derivative scope exception for contracts in an entity’s own equity and improves the consistency for the calculation of earnings per share. The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2021, our fiscal 2023. Early adoption is permitted for annual periods and interim periods within those annual periods beginning after December 15, 2020, our fiscal 2022. We elected to early adopt this guidance beginning in the first quarter of fiscal 2022 and it did not have an impact on our consolidated financial statements.

In December 2019, the FASB issued guidance that simplifies the accounting for income taxes by removing certain exceptions to general principles in Topic 740 and clarifies other general principles by adding certain requirements to Topic 740. The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2020, our fiscal 2022. We adopted this guidance in the first quarter of fiscal 2022 and it did not have an impact on our consolidated financial statements.

6

NOTE 2: ACQUISITIONS AND DISPOSITIONS

Acquisitions

In the fourth quarter of fiscal 2022, we entered into an agreement with Saudi Arabia-based Tanmiah Food Company, through which we will acquire a 60% equity stake in Supreme Foods Processing Company, a producer and distributor of value-added and cooked chicken and beef products, and a 15% equity stake in Agricultural Development Company, a fully integrated poultry company, for a total purchase price of approximately $70 million. The transaction is subject to customary adjustments and government approval and is expected to close in calendar year 2022.

In the third quarter of fiscal 2021, we acquired a 49% minority interest in a Malaysian producer of feed and poultry products for $44 million in addition to future contingent payments of up to approximately $65 million. We are accounting for the investment under the equity method.

Disposition

We completed the sale of our pet treats business, which was included in our Prepared Foods segment, on July 6, 2021 for $1.2 billion, subject to certain adjustments. As a result of the sale, we recorded a pretax gain of $784 million, or post tax gain of $510 million, which was reflected in Cost of Sales in our Consolidated Statement of Income in the fourth quarter of fiscal 2021. The business had a net carrying value of approximately $411 million, which included $44 million of working capital consisting of inventory, accounts receivable and accounts payable, $17 million of property, plant and equipment and $350 million of goodwill. The goodwill was not deductible for tax purposes. The Company concluded the business was not a significant disposal and did not represent a strategic shift, and therefore was not classified as a discontinued operation for any of the periods presented.

NOTE 3: INVENTORIES

Processed products, livestock and supplies and other are valued at the lower of cost or net realizable value. Cost includes purchased raw materials, live purchase costs, growout costs (primarily feed, livestock grower pay and catch and haul costs), labor and manufacturing and production overhead, which are related to the purchase and production of inventories. At July 2, 2022, the cost of inventories was determined by either the first-in, first-out method or the weighted-average method, which is consistent with the methods used at October 2, 2021.

The following table reflects the major components of inventory (in millions):

	July 2, 2022		October 2, 2021
Processed products	$	3,079	$	2,426
Livestock	1,397		1,215
Supplies and other	856		741
Total inventory	$	5,332	$	4,382

NOTE 4: PROPERTY, PLANT AND EQUIPMENT

The major categories of property, plant and equipment and accumulated depreciation are as follows (in millions): 

	July 2, 2022		October 2, 2021
Land	$	215	$	210
Buildings and leasehold improvements	5,565		5,370
Machinery and equipment	9,772		9,507
Land improvements and other	495		453
Buildings and equipment under construction	1,484		976
	17,531		16,516
Less accumulated depreciation	9,138		8,679
Net Property, Plant and Equipment	$	8,393	$	7,837

7

NOTE 5: OTHER CURRENT LIABILITIES

Other current liabilities are as follows (in millions):

	July 2, 2022		October 2, 2021
Accrued salaries, wages and benefits	$	879	$	897
Taxes payable	375		729
Accrued current legal contingencies (a)	203		567
Other	852		840
Total other current liabilities	$	2,309	$	3,033

(a) $127 million of funds held in an escrow account for litigation settlements were included as restricted cash within Other current assets in the Consolidated Condensed Balance Sheet as of October 2, 2021 and no funds were held in the escrow account as of July 2, 2022.

NOTE 6: DEBT

The major components of debt are as follows (in millions):

	July 2, 2022		October 2, 2021
Revolving credit facility	$	—	$	—
Commercial paper	—		—
Senior notes:
4.50% Senior notes due June 2022	—		1,000
3.90% Senior notes due September 2023	400		400
3.95% Notes due August 2024	1,250		1,250
4.00% Notes due March 2026 (“2026 Notes”)	800		800
3.55% Notes due June 2027	1,350		1,350
7.00% Notes due January 2028	18		18
4.35% Notes due March 2029 (“2029 Notes”)	1,000		1,000
6.13% Notes due November 2032	160		160
4.88% Notes due August 2034	500		500
5.15% Notes due August 2044	500		500
4.55% Notes due June 2047	750		750
5.10% Notes due September 2048 (“2048 Notes”)	1,500		1,500
Discount on senior notes	(39)		(42)
Other	184		212
Unamortized debt issuance costs	(45)		(50)
Total debt	8,328		9,348
Less current debt	67		1,067
Total long-term debt	$	8,261	$	8,281

Revolving Credit Facility and Letters of Credit

In September 2021, we amended our existing credit facility which, among other things, increased our line of credit from $1.75 billion to $2.25 billion with the option to establish incremental commitment increases of up to $500 million if certain conditions are met. The revolving credit facility supports short-term funding needs and serves as a backstop to our commercial paper program. The facility will mature and the commitments thereunder will terminate in September 2026 with options for two one-year extensions. At July 2, 2022, amounts available for borrowing under this facility totaled $2.25 billion and we had no borrowings and no outstanding letters of credit issued under this facility. At July 2, 2022, we had $101 million of bilateral letters of credit issued separately from the revolving credit facility, none of which were drawn upon. Our letters of credit are issued primarily in support of workers’ compensation insurance programs and other legal obligations. In the future, if any of our subsidiaries shall guarantee any of our material indebtedness, such subsidiary shall be required to guarantee the indebtedness, obligations and liabilities under this facility.

Commercial Paper Program

We have a commercial paper program under which we may issue unsecured short-term promissory notes. In December 2021, we amended our existing commercial paper program, which increased our maximum borrowing capacity to $1.5 billion. As of July 2, 2022, we had no commercial paper outstanding. Our ability to access commercial paper in the future may be limited or its costs increased.

8

June 2022 Notes

On March 15, 2022, we redeemed the $1 billion outstanding balance of the Senior Notes due June 2022 using cash on hand.

Debt Covenants

Our revolving credit facility contains affirmative and negative covenants that, among other things, may limit or restrict our ability to: create liens and encumbrances; incur debt; merge, dissolve, liquidate or consolidate; make acquisitions and investments; dispose of or transfer assets; change the nature of our business; engage in certain transactions with affiliates; and enter into hedging transactions, in each case, subject to certain qualifications and exceptions. In addition, we are required to maintain a minimum interest expense coverage ratio.

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

We were in compliance with all debt covenants at July 2, 2022.

NOTE 7: EQUITY

Share Repurchases

As of July 2, 2022, 12.0 million shares remained available for repurchase under our share repurchase program. The share repurchase program has no fixed or scheduled termination date and the timing and extent to which we repurchase shares will depend upon, among other things, our working capital needs, markets, industry conditions, liquidity targets, limitations under our debt obligations and regulatory requirements. In addition to the share repurchase program, we purchase shares on the open market to fund certain obligations under our equity compensation plans. A summary of share repurchases of our Class A stock is as follows (in millions):

	Three Months Ended						Nine Months Ended
	July 2, 2022			July 3, 2021			July 2, 2022			July 3, 2021
	Shares	Dollars		Shares	Dollars		Shares	Dollars		Shares	Dollars
Shares repurchased:
Under share repurchase program	1.8	$	155	—	$	—	6.9	$	587	—	$	—
To fund certain obligations under equity compensation plans	0.1	15		0.2	16		1.2	106		0.7	50
Total share repurchases	1.9	$	170	0.2	$	16	8.1	$	693	0.7	$	50

NOTE 8: INCOME TAXES

Our effective tax rate was 23.6% and 22.1% for the third quarter of fiscal 2022 and 2021, respectively and 22.1% and 22.9% for the first nine months of fiscal 2022 and 2021, respectively. The effective tax rates for the third quarter and first nine months of fiscal 2022 and 2021 were higher than the federal statutory tax rate primarily due to state taxes, partially offset by various tax benefits. The effective tax rate for the first nine months of fiscal 2022 also includes a $36 million benefit from the remeasurement of deferred income taxes, primarily due to legislation decreasing state tax rates enacted in the first quarter.

Unrecognized tax benefits were $160 million and $152 million at July 2, 2022 and October 2, 2021, respectively. We do not expect material changes to our unrecognized tax benefits during the next twelve months.

In December 2021, we received an assessment from the Mexican tax authorities related to the 2015 sale of our direct and indirect equity interests in subsidiaries which held our Mexico operations. At that time, the assessment totaled approximately $380 million (7.8 billion Mexican pesos), which includes tax, inflation adjustment, interest and penalties. We believe the assertions made in the assessment letter have no merit and will defend our positions through the Mexican administrative appeal process and litigation, if necessary. Based on our analysis of this assessment in accordance with FASB guidance related to unrecognized tax benefits, we have not recorded a liability related to the issue.

9

NOTE 9: EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share (in millions, except per share data): 

	Three Months Ended				Nine Months Ended
	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Numerator:
Net income	$	753	$	753	$	2,712	$	1,702
Less: Net income attributable to noncontrolling interests	3		4		12		10
Net income attributable to Tyson	750		749		2,700		1,692
Less dividends declared:
Class A	132		132		406		401
Class B	29		28		88		86
Undistributed earnings	$	589	$	589	$	2,206	$	1,205
Class A undistributed earnings	$	484	$	485	$	1,813	$	992
Class B undistributed earnings	105		104		393		213
Total undistributed earnings	$	589	$	589	$	2,206	$	1,205
Denominator:
Denominator for basic earnings per share:
Class A weighted average shares	289		293		291		293
Class B weighted average shares, and shares under the if-converted method for diluted earnings per share	70		70		70		70
Effect of dilutive securities:
Stock options, restricted stock and performance units	3		3		3		2
Denominator for diluted earnings per share – adjusted weighted average shares and assumed conversions	362		366		364		365
Net income per share attributable to Tyson:
Class A basic	$	2.14	$	2.11	$	7.64	$	4.76
Class B basic	$	1.92	$	1.89	$	6.87	$	4.27
Diluted	$	2.07	$	2.05	$	7.42	$	4.63
Dividends Declared Per Share:
Class A	$	0.460	$	0.445	$	1.395	$	1.360
Class B	$	0.414	$	0.400	$	1.256	$	1.224

Approximately 2 million of our stock-based compensation shares were antidilutive for the three and nine months ended July 2, 2022. Approximately 2 million and 4 million of our stock-based compensation shares were antidilutive for the three and nine months ended July 3, 2021, respectively. These shares were not included in the diluted earnings per share calculation.

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

We allocate undistributed earnings based upon a 1.0 to 0.9 ratio per share to Class A stock and Class B stock, respectively. We allocate undistributed earnings based on this ratio due to historical dividend patterns, voting control of Class B shareholders and contractual limitations of dividends to Class B stock.

10

NOTE 10: DERIVATIVE FINANCIAL INSTRUMENTS

Our business operations give rise to certain market risk exposures mostly due to changes in commodity prices, foreign currency exchange rates and interest rates. We manage a portion of these risks through the use of derivative financial instruments to reduce our exposure to commodity price risk, foreign currency risk and interest rate risk. Our risk management programs are periodically reviewed by our Board of Directors’ Audit Committee. These programs and risks are monitored by senior management and may be revised as market conditions dictate. Our current risk management programs utilize various industry-standard models that take into account the implicit cost of hedging. Credit risks associated with our derivative contracts are not significant as we minimize counterparty exposure by dealing with credit-worthy counterparties and utilizing exchange traded instruments, margin accounts or letters of credit. Additionally, our derivative contracts are mostly short-term in duration and we generally do not make use of credit-risk-related contingent features. No significant concentrations of credit risk related to our derivative financial instruments existed at July 2, 2022.

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

in millions, except soybean meal tons	Metric	July 2, 2022		October 2, 2021
Commodity:
Corn	Bushels	27		37
Soybean Meal	Tons	503,500		1,026,733
Live Cattle	Pounds	213		417
Lean Hogs	Pounds	278		413
Foreign Currency	United States dollar	$	221	$	130

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

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

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