Document and Entity Information

9 Months Ended

Jul. 1, 2017

Entity Registrant Name

TYSON FOODS INC

Entity Central Index Key

0000100493

Current Fiscal Year End Date

--09-30

Entity Filer Category

Large Accelerated Filer

Document Type

10-Q

Document Period End Date

Jul. 01, 2017

Document Fiscal Year Focus

2017

Document Fiscal Period Focus

Q3

Amendment Flag

false

Class A [Member]

Entity Common Stock, Shares Outstanding

289,267,244

Class B [Member]

Entity Common Stock, Shares Outstanding

70,010,755

Consolidated Condensed Statements Of Income (USD $)

In Millions, except Per Share data, unless otherwise specified

3 Months Ended

9 Months Ended

Jul. 1, 2017

Jul. 2, 2016

Jul. 1, 2017

Jul. 2, 2016

Sales

$ 9,850

$ 9,403

$ 28,115

$ 27,725

Cost of Sales

8,648

8,179

24,383

24,117

Gross Profit

1,202

1,224

3,732

3,608

Operating Expenses:

Selling, General and Administrative

505

457

1,482

1,361

Operating Income

697

767

2,250

2,247

Other (Income) Expense:

Interest income

(2)

(5)

Interest expense

71

60

185

191

Other, net

11

(2)

22

(6)

Total Other (Income) Expense

80 ¹

56

202 ¹

180

Income before Income Taxes

617

711

2,048

2,067

Income Tax Expense

169

226

665

687

Net Income

448

485

1,383

1,380

Less: Net income attributable to noncontrolling interest

1

3

Net Income Attributable to Tyson

$ 447

$ 484

$ 1,380

$ 1,377

Weighted Average Shares Outstanding:

Diluted, Shares

370

388

371

394

Net Income Per Share Attributable to Tyson:

Diluted (USD per share)

$ 1.21

$ 1.25

$ 3.72

$ 3.50

Class A [Member]

Weighted Average Shares Outstanding:

Basic, Shares

296

312

296

318

Net Income Per Share Attributable to Tyson:

Basic (USD per share)

$ 1.24

$ 1.29

$ 3.84

$ 3.61

Dividends Declared Per Share:

Dividends Declared (USD per share)

$ 0.225

$ 0.150

$ 0.750

$ 0.500

Class B [Member]

Weighted Average Shares Outstanding:

Basic, Shares

70

Net Income Per Share Attributable to Tyson:

Basic (USD per share)

$ 1.12

$ 1.17

$ 3.47

$ 3.28

Dividends Declared Per Share:

Dividends Declared (USD per share)

$ 0.203

$ 0.135

$ 0.675

$ 0.450

[1] Total other (income) expense includes $18 million of acquisition bridge financing fees for the three and nine months ended July 1, 2017.

Consolidated Condensed Statements of Comprehensive Income (USD $)

In Millions, unless otherwise specified

3 Months Ended

9 Months Ended

Jul. 1, 2017

Jul. 2, 2016

Jul. 1, 2017

Jul. 2, 2016

Statement of Comprehensive Income [Abstract]

Net Income

$ 448

$ 485

$ 1,383

$ 1,380

Other Comprehensive Income (Loss), Net of Taxes:

Derivatives accounted for as cash flow hedges

0

2

0

2

Investments

(1)

0

(1)

0

Currency translation

3

(2)

3

Postretirement benefits

(3)

(2)

(4)

(5)

Total Other Comprehensive Income (Loss), Net of Taxes

(1)

(2)

(7)

0

Comprehensive Income

447

483

1,376

1,380

Less: Comprehensive Income (Loss) Attributable to Noncontrolling Interests

1

3

Comprehensive Income Attributable to Tyson

$ 446

$ 482

$ 1,373

$ 1,377

Consolidated Condensed Balance Sheets (USD $)

In Millions, unless otherwise specified

Jul. 1, 2017

Oct. 1, 2016

Assets

Cash and cash equivalents

$ 231

$ 349

Accounts receivable, net

1,710

1,542

Inventories

3,248

2,732

Other current assets

238

265

Assets held for sale

861

0

Total Current Assets

6,288

4,888

Net Property, Plant and Equipment

5,545

5,170

Goodwill

9,264

6,669

Intangible Assets, net

6,372

5,084

Other Assets

594

562

Total Assets

28,063

22,373

Liabilities and Shareholders' Equity

Current debt

1,017

79

Accounts payable

1,608

1,511

Other current liabilities

1,217

1,172

Liabilities held for sale

23

0

Total Current Liabilities

3,865

2,762

Long-Term Debt

9,807

6,200

Deferred Income Taxes

2,989

2,545

Other Liabilities

1,265

1,242

Commitments and Contingencies (Note 16)

Shareholders' Equity:

Capital in excess of par value

4,361

4,355

Retained earnings

9,464

8,348

Accumulated other comprehensive loss

(52)

(45)

Treasury stock, at cost - 81 million shares at July 1, 2017 and 73 million shares at October 1, 2016

(3,700)

(3,093)

Total Tyson Shareholders' Equity

10,117

9,608

Noncontrolling Interest

20

16

Total Shareholders' Equity

10,137

9,624

Total Liabilities and Shareholders' Equity

28,063

22,373

Class A [Member]

Shareholders' Equity:

Common stock

37

36

Convertible Class B [Member]

Shareholders' Equity:

Common stock

$ 7

Consolidated Condensed Balance Sheets (Parentheticals) (USD $)

In Millions, except Per Share data, unless otherwise specified

Jul. 1, 2017

Oct. 1, 2016

Treasury Stock, shares

81

73

Class A [Member]

Common stock, par value

$ 0.10

Common stock, shares authorized

900

Common stock, shares issued

370

364

Convertible Class B [Member]

Common stock, par value

$ 0.10

Common stock, shares authorized

900

Common stock, shares issued

70

Consolidated Condensed Statements Of Cash Flows (USD $)

In Millions, unless otherwise specified

9 Months Ended

Jul. 1, 2017

Jul. 2, 2016

Cash Flows From Operating Activities:

Net Income

$ 1,383

$ 1,380

Depreciation and amortization

543

526

Deferred income taxes

(25)

61

Other, net

106

45

Net changes in operating assets and liabilities

(558)

(139)

Cash Provided by Operating Activities

1,449

1,873

Cash Flows From Investing Activities:

Additions to property, plant and equipment

(782)

(515)

Purchases of marketable securities

(47)

(30)

Proceeds from sale of marketable securities

45

28

Acquisition, net of cash acquired

(3,081)

0

Other, net

(2)

15

Cash Used for Investing Activities

(3,867)

(502)

Cash Flows From Financing Activities:

Payments on debt

(1,557)

(694)

Proceeds from Issuance of Long-term Debt

4,545

1

Borrowings on revolving credit facility

1,750

675

Payments on revolving credit facility

(2,050)

(525)

Proceeds from issuance of commercial paper

4,043

0

Repayments of commercial paper

(3,353)

0

Payment of AdvancePierre TRA Liability

(223)

0

Purchases of Tyson Class A common stock

(768)

(1,293)

Dividends

(238)

(162)

Stock options exercised

128

89

Other, net

22

42

Cash Used for Financing Activities

2,299

(1,867)

Effect of Exchange Rate Changes on Cash

1

5

Increase (Decrease) in Cash and Cash Equivalents

(118)

(491)

Cash and Cash Equivalents at Beginning of Year

349

688

Cash and Cash Equivalents at End of Period

$ 231

$ 197

Accounting Policies

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. 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 1, 2016. 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 1, 2017, and the results of operations for the three and nine months ended July 1, 2017, and July 2, 2016. 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.

Recently Issued Accounting Pronouncements

In May 2017, the Financial Accounting Standards Board ("FASB") issued guidance that clarifies which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2017, our fiscal 2019. Early adoption is permitted and the prospective transition method should be applied to awards modified on or after the adoption date. We are currently evaluating the impact this guidance will have on our consolidated financial statements.

In March 2017, the FASB issued guidance which shortens the amortization period for certain callable debt securities held at a premium. Specifically, the amendments require the premium to be amortized to the earliest call date. The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2018, our fiscal 2020. Early adoption is permitted and the modified retrospective transition method should be applied. We are currently evaluating the impact this guidance will have on our consolidated financial statements.

In March 2017, the FASB issued guidance which will change the presentation of net periodic benefit cost related to employer sponsored defined benefit plans and other postretirement benefits. Service cost will be included within the same income statement line item as other compensation costs arising from services rendered during the period, while other components of net periodic benefit pension cost will be presented separately outside of operating income. Additionally, only the service cost component will be eligible for capitalization when applicable. The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2017, our fiscal 2019. Early adoption is permitted and the retrospective transition method should be applied for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the income statement, and the prospective transition method should be applied, on and after the effective date, for the capitalization of the service cost component of net periodic pension cost and net periodic postretirement benefit in assets. We are currently evaluating the impact this guidance will have on our consolidated financial statements.

In November 2016, the FASB issued guidance which requires entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2017, our fiscal 2019. Early adoption is permitted and the retrospective transition method should be applied. We are currently evaluating the impact this guidance will have on our consolidated financial statements.

In October 2016, the FASB issued guidance which requires companies to recognize the income tax effects of intercompany sales and transfers of assets, other than inventory, in the period in which the transfer occurs. The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2017, our fiscal 2019. Early adoption is permitted and the modified retrospective transition method should be applied. We are currently evaluating the impact this guidance will have on our consolidated financial statements.

In August 2016, the FASB issued guidance which aims to eliminate diversity in the practice of how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2017, our fiscal 2019. Early adoption is permitted and the retrospective transition method should be applied. We are currently evaluating the impact this guidance will have on our consolidated financial statements.

In June 2016, the FASB issued guidance that provides more decision-useful information about the expected credit losses on financial instruments and changes the loss impairment methodology. The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2019, our fiscal 2021. Early adoption is permitted for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2018, our fiscal 2020. The application of the guidance requires various transition methods depending on the specific amendment. We are currently evaluating the impact this guidance will have on our consolidated financial statements.

In March 2016, the FASB issued guidance which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification of related amounts within the statement of cash flows and impact on earnings per share. The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2016, our fiscal 2018. Early adoption is permitted and the application of the guidance requires various transition methods depending on the specific amendment. The guidance requires all income tax effects of share-based payment awards to be recognized in the consolidated statements of income when the awards vest or are settled, which is a change from the current guidance that requires such activity to be recorded in capital in excess of par value within stockholders' equity. We plan to adopt this guidance prospectively which may create volatility in our effective tax rate when adopted depending largely on future events and other factors which may include our stock price, timing of stock option exercises, and the value realized upon vesting or exercise of shares compared to the grant date fair value of those shares. Under the new guidance, companies can also make an accounting policy election to either estimate forfeitures each period or to account for forfeitures as they occur. We plan to change our accounting policy to account for forfeitures as they occur using the modified retrospective transition method and expect the impact of this change on our consolidated financial statements to be immaterial. The guidance also changes the presentation of excess tax benefits from a financing activity to an operating activity in the consolidated statements of cash flows. We plan to apply this change prospectively and do not expect a material impact on our consolidated statements of cash flows. We expect to adopt this guidance in the first quarter of fiscal 2018.

In February 2016, the FASB issued guidance which created new accounting and reporting guidelines for leasing arrangements. The guidance requires lessees to recognize a right-of-use asset and lease liability for all leases with terms of more than 12 months. Recognition, measurement and presentation of expenses and cash flows arising from a lease will depend on classification as a finance or operating lease. The guidance also requires qualitative and quantitative disclosures regarding the amount, timing, and uncertainty of cash flows arising from leases. The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2018, our fiscal 2020. Early adoption is permitted, and the modified retrospective method should be applied. We are currently evaluating the impact this guidance will have on our consolidated financial statements.

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

In July 2015, the FASB issued guidance which requires management to evaluate inventory at the lower of cost and net realizable value. The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2016, our fiscal 2018. Early adoption is permitted, and the prospective transition method should be applied. We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements.

In May 2014, the FASB issued guidance changing the criteria for recognizing revenue. The guidance provides for a single five-step model to be applied to all revenue contracts with customers. The standard also requires additional financial statement disclosures that will enable users to understand the nature, amount, timing and uncertainty of revenue and cash flows relating to customer contracts. Companies have an option to use either a retrospective approach or cumulative effect adjustment approach to implement the standard. This guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2017, our fiscal 2019. Early adoption is permitted for fiscal years beginning after December 15, 2016, our fiscal 2018. We plan to adopt this guidance using the modified retrospective transition method beginning in the first quarter of fiscal 2019. We continue to evaluate the impact of the adoption of this guidance, but currently, we do not expect the new guidance to materially impact our consolidated financial statements other than additional disclosure requirements.

Changes in Accounting Principles

In January 2017, the FASB issued guidance which removes step 2 from the goodwill impairment test. As a result, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting units' fair value. The guidance is effective for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2019, our fiscal 2021. Early adoption is permitted for annual or interim goodwill impairment tests performed on testing dates after January 1, 2017, and the prospective transition method should be applied. We adopted this guidance, prospectively, in the third quarter of fiscal 2017. The adoption did not have a material impact on our consolidated financial statements.

In October 2016, the FASB issued guidance on how a reporting entity, that is the single decision maker of a variable interest entity ("VIE"), should treat indirect interests in the entity held through related parties that are under common control with the reporting entity, when determining whether it is the primary beneficiary of that VIE. This guidance is effective for annual reporting periods and interim periods within those annual reporting periods, beginning after December 15, 2016, our fiscal 2018. We were required to adopt this guidance at the same time that we adopted the amendments in ASU 2015-02; therefore, we early adopted this guidance, retrospectively, in the first quarter of fiscal 2017. The adoption did not have a material impact on our consolidated financial statements.

In April 2015, the FASB issued guidance on the recognition of fees paid by a customer for cloud computing arrangements. The guidance clarifies that if a cloud computing arrangement includes a software license, the customer should account for the software license consistent with the acquisition of other software licenses. If the arrangement does not include a software license, the customer should account for the arrangement as a service contract. The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2015, our fiscal 2017, and should be applied prospectively or retrospectively. We adopted this guidance, prospectively, in the first quarter of fiscal 2017. As a result, prior period balances were not retrospectively adjusted. The adoption did not have a material impact on our consolidated financial statements.

In February 2015, the FASB issued guidance (ASU 2015-02) changing the analysis procedures that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. All legal entities are subject to reevaluation under the revised consolidation model. The new guidance affects the following areas: (1) limited partnerships and similar legal entities, (2) evaluating fees paid to a decision maker or a service provider as a variable interest, (3) the effect of fee arrangements on the primary beneficiary determination, (4) the effect of related parties on the primary beneficiary determination, and (5) certain investment funds. This guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2015, our fiscal 2017. We adopted this guidance, retrospectively, in the first quarter of fiscal 2017. The adoption did not have a material impact on our consolidated financial statements.

Acquisition and Dispositions

ACQUISITION AND DISPOSITIONS

Acquisition

On June 7, 2017, we acquired all of the outstanding common stock of AdvancePierre Foods Holdings, Inc. ("AdvancePierre") as part of our strategy to sustainably feed the world with the fastest growing portfolio of protein-packed brands. The purchase price was equal to $40.25 per share for AdvancePierre's outstanding common stock, or approximately $3.2 billion. We funded the acquisition with existing cash on hand, net proceeds from the issuance of new senior notes and a new term loan facility, as well as borrowings under our commercial paper program (refer to Note 6: Debt). AdvancePierre's results from operations subsequent to the acquisition closing are included in the Prepared Foods and Chicken segments.

The following table summarizes the preliminary purchase price allocation and fair values of the assets acquired and liabilities assumed at the acquisition date. Certain estimated values for the acquisition, including goodwill, intangible assets, inventory, property, plant and equipment, and deferred income taxes, are not yet finalized and are subject to revision as additional information becomes available and more detailed analyses are completed.



	in millions
Cash and cash equivalents		$	126
Accounts receivable		80
Inventories		272
Other current assets		5
Property, Plant and Equipment		306
Goodwill		2,922
Intangible Assets		1,601
Current debt		(1,148		)
Accounts payable		(114		)
Other current liabilities		(90		)
Tax receivable agreement (TRA) due to former shareholders		(223		)
Long-Term Debt		(33		)
Deferred Income Taxes		(492		)
Other Liabilities		(5		)
Net assets acquired		$	3,207

The fair value of identifiable intangible assets is as follows:



			in millions
Intangible Asset Category	Type	Life in Years	Fair Value
Brands & Trademarks	Amortizable	Weighted Average of 15 years	$	380
Customer Relationships	Amortizable	Weighted Average of 17 years	1,221
Total identifiable intangible assets			$	1,601

As a result of the acquisition, we preliminarily recognized a total of $2,922 million of goodwill. The purchase price was assigned to assets acquired and liabilities assumed based on their preliminary estimated fair values as of the date of acquisition, and any excess was allocated to goodwill, as shown in the table above. Goodwill represents the value we expect to achieve through the implementation of operational synergies and growth opportunities. The allocation of goodwill to our reporting units is pending finalization of the expected synergies and the impact of the synergies to our reporting units. We do not expect the final fair value of goodwill to be deductible for U.S. income tax purposes.

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

The acquisition of AdvancePierre was accounted for using the acquisition method of accounting, and consequently, the results of operations for AdvancePierre are reported in our consolidated condensed financial statements from the date of acquisition. AdvancePierre's results from the date of the acquisition through July 1, 2017, were insignificant to our Consolidated Condensed Statements of Income.

The following unaudited pro forma information presents the combined results of operations as if the acquisition of AdvancePierre had occurred at the beginning of fiscal 2016. AdvancePierre's pre-acquisition results have been added to our historical results. The pro forma results contained in the table below include adjustments for amortization of acquired intangibles, depreciation expense, interest expense related to the financing and related income taxes. Any potential cost savings or other operational efficiencies that could result from the acquisition are not included in these pro forma results.

The nine months ended July 2, 2016, pro forma results include transaction related expenses incurred by AdvancePierre prior to the acquisition of $84 million, including items such as consultant fees, accelerated stock compensation and other deal costs; transaction related expenses incurred by the Company of $53 million, including fees paid to third parties, financing costs and other deal costs; and $36 million of expense related to the fair value inventory adjustment at the date of acquisition.

These pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the results of operations as they would have been had the acquisitions occurred on the assumed dates, nor is it necessarily an indication of future operating results.



in millions (unaudited)	Three Months Ended				Nine Months Ended
	July 1, 2017		July 2, 2016		July 1, 2017		July 2, 2016
Pro forma sales	$	10,117	$	9,769	$	29,185	$	28,861
Pro forma net income attributable to Tyson	491		530		1,434		1,313
Pro forma net income per diluted share attributable to Tyson	$	1.33	$	1.36	$	3.87	$	3.34

Dispositions

On April 24, 2017, we announced our intent to sell three non-protein businesses as part of our strategic focus on protein-packed brands. These businesses, which are all part of our Prepared Foods segment, include Sara Lee® Frozen Bakery, Kettle and Van’s® and produce items such as frozen desserts, waffles, snack bars, and soups, sauces and sides. The sale is also expected to include the Chef Pierre®, Bistro Collection®, Kettle Collection™, and Van’s® brands, a license to use the Sara Lee® brand in various channels, as well as our Tarboro, North Carolina, Fort Worth, Texas, and Traverse City, Michigan, prepared foods facilities. We anticipate we will close the transactions by the end of calendar 2017 and expect to record a net pretax gain as a result of the sale of these businesses. We have reclassified the assets and liabilities related to these businesses to assets and liabilities held for sale in our consolidated condensed balance sheet as of July 1, 2017. The Company concluded the businesses were not significant disposal groups and did not represent a strategic shift, and therefore were not classified as discontinued operations for any of the periods presented.

The following table summarizes the net assets and liabilities held for sale:



	in millions
	July 1, 2017
Assets held for sale:
Accounts receivable, net	$	3
Inventories	105
Net Property, Plant and Equipment	185
Goodwill	327
Intangible Assets	241
Total assets held for sale	$	861
Liabilities held for sale:
Accounts payable	$	2
Other current liabilities	2
Deferred Income Taxes	19
Total liabilities held for sale	$	23

Inventories

INVENTORIES

Processed products, livestock and supplies and other are valued at the lower of cost or market. Cost includes purchased raw materials, live purchase costs, growout costs (primarily feed, 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 1, 2017, 64% of the cost of inventories was determined by the first-in, first-out ("FIFO") method as compared to 61% at October 1, 2016. The remaining cost of inventories for both periods is determined by the weighted-average method.

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



	July 1, 2017		October 1, 2016
Processed products	$	1,933	$	1,530
Livestock	910		772
Supplies and other	405		430
Total inventory	$	3,248	$	2,732

Property, Plant And Equipment

PROPERTY, PLANT AND EQUIPMENT

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



	July 1, 2017		October 1, 2016
Land	$	137	$	126
Buildings and leasehold improvements	3,763		3,662
Machinery and equipment	6,943		6,789
Land improvements and other	313		300
Buildings and equipment under construction	664		290
	11,820		11,167
Less accumulated depreciation	6,275		5,997
Net property, plant and equipment	$	5,545	$	5,170

Other Current Liabilities

OTHER CURRENT LIABILITIES

Other current liabilities are as follows (in millions):



	July 1, 2017		October 1, 2016
Accrued salaries, wages and benefits	$	529	$	563
Accrued marketing, advertising and promotion expense	184		212
Other	504		397
Total other current liabilities	$	1,217	$	1,172

Debt

DEBT

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



	July 1, 2017			October 1, 2016
Revolving credit facility	$	—		$	300
Commercial paper	690			—
Senior notes:
7.00% Notes due May 2018	120			120
Notes due May 2019 (2019 Floating-Rate Notes) (1.66% at 07/01/17)	300			—
2.65% Notes due August 2019	1,000			1,000
Notes due June 2020 (2020 Floating-Rate Notes) (1.76% at 07/01/17)	350			—
4.10% Notes due September 2020	283			284
4.50% Senior notes due June 2022	1,000			1,000
3.95% Notes due August 2024	1,250			1,250
3.55% Notes due June 2027 (2027 Notes)	1,350			—
7.00% Notes due January 2028	18			18
6.13% Notes due November 2032	162			163
4.88% Notes due August 2034	500			500
5.15% Notes due August 2044	500			500
4.55% Notes due June 2047 (2047 Notes)	750			—
Discount on senior notes	(14		)	(8		)
Term loans:
Tranche B due April 2019 (2.19% at 07/01/17)	500			500
Tranche B due August 2019 (2.56% at 07/01/17)	552			552
Tranche due June 2020 (2.38% at 07/01/17)	1,455			—
Amortizing notes - tangible equity units (see Note 7: Equity)	18			71
Other	91			58
Unamortized debt issuance costs	(51		)	(29		)
Total debt	10,824			6,279
Less current debt	1,017			79
Total long-term debt	$	9,807		$	6,200

Revolving Credit Facility

In May 2017, we amended our existing credit facility which, among other things, increased our line of credit from $1.25 billion to $1.50 billion. The facility supports short-term funding needs and letters of credit and will mature and the commitments thereunder will terminate in May 2022. Amounts available for borrowing under this facility totaled $1,492 million at July 1, 2017, net of outstanding letters of credit. At July 1, 2017, we had outstanding letters of credit issued under this facility totaling $8 million, none of which were drawn upon. We had an additional $113 million of bilateral letters of credit issued separately from the revolving credit facility, none of which were drawn upon. Our letters of credit are issued primarily in support of leasing obligations and workers’ compensation insurance programs.

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

2019 Floating-Rate / 2020 Floating-Rate / 2027 / 2047 Notes

In June 2017, as part of the financing for the AdvancePierre acquisition, we issued senior unsecured notes with an aggregate principal amount of $2,750 million, consisting of $300 million due May 2019, $350 million due June 2020, $1,350 million due June 2027, and $750 million due June 2047. The 2019 Floating-Rate Notes, 2020 Floating-Rate Notes, 2027 Notes and 2047 Notes carry interest rates of 3-month LIBOR plus 0.45%, 3-month LIBOR plus 0.55%, 3.55% and 4.55%, respectively. Interest payments on the 2019 Floating-Rate Notes are due quarterly February 28, May 30, August 30, and November 30. Interest payments on the 2020 Floating-Rate Notes are due quarterly March 2, June 2, September 2, and December 2. Interest payments on the 2027 Notes and 2047 Notes are due semi-annually on June 2 and December 2. After the original issue discounts of $7 million, we received net proceeds of $2,743 million. In addition, we incurred debt issuance costs of $22 million related to this issuance.

Term Loan Tranche due June 2020

In June 2017, as part of the financing for the AdvancePierre acquisition, we borrowed $1,800 million under an unsecured term loan facility, which is due June 2020. The facility will amortize at 2.5% per quarter and interest will reset based on the selected LIBOR interest period plus 1.25%. In addition, we incurred debt issuance costs of $5 million related to this borrowing. In June 2017, we also paid down the term loan by $345 million.

AdvancePierre's debt extinguishment

In June 2017, in connection with our AdvancePierre acquisition, we assumed $1,119 million of AdvancePierre's gross debt, which had an estimated fair value of approximately $1,181 million as of the acquisition date. We recorded the assumed debt at fair value and used the funds borrowed under our new senior notes and term loan to extinguish $1,146 million of the total outstanding balance. Additionally, we assumed a $223 million TRA liability due to AdvancePierre's former shareholders. The assumed debt and TRA liability were non cash investing activities.

Commercial Paper Program

In April 2017, our Board of Directors increased our commercial paper program capacity from $500 million to $1 billion. The maximum borrowing capacity under the commercial paper program is $800 million. We intend to use the net proceeds from the commercial paper program for general corporate purposes and as part of the financing for the AdvancePierre acquisition. As of July 1, 2017, we had $690 million of commercial paper outstanding at a weighted average interest rate of 1.45% with maturities of less than 45 days.

Debt Covenants

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

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

We were in compliance with all debt covenants at July 1, 2017.

Equity

EQUITY

Share Repurchases

As of July 1, 2017, 27.8 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 1, 2017			July 2, 2016			July 1, 2017			July 2, 2016
	Shares	Dollars		Shares	Dollars		Shares	Dollars		Shares	Dollars
Shares repurchased:
Under share repurchase program	1.3	$	80	7.1	$	457	12.5	$	797	22.0	$	1,235
To fund certain obligations under equity compensation plans	0.2	10		0.1	10		0.8	51		1.2	58
Total share repurchases	1.5	$	90	7.2	$	467	13.3	$	848	23.2	$	1,293

Tangible Equity Units

In fiscal 2014, we completed the public issuance of 30 million 4.75% tangible equity units (TEUs). Total proceeds, net of underwriting discounts and other expenses, were $1,454 million. Each TEU had a stated amount of $50 and was comprised of a prepaid stock purchase contract and a senior amortizing note due July 15, 2017. We allocated the proceeds from the issuance of the TEUs to equity and debt based on the relative fair values of the respective components of each TEU. The fair value of the prepaid stock purchase contracts, which was $1,295 million, was recorded in Capital in Excess of Par Value, net of issuance costs. The fair value of the senior amortizing notes, which was $205 million, was recorded in debt. Issuance costs associated with the TEU debt were recorded as deferred debt issuance cost and was amortized over the term of the instrument to July 15, 2017.

The aggregate values assigned upon issuance of each component of the TEUs, based on the relative fair value of the respective components of each TEU, were as follows (in millions, except price per TEU):



	Equity Component			Debt Component			Total
Price per TEU	$	43.17		$	6.83		$	50.00
Gross proceeds	1,295			205			1,500
Issuance cost	(40		)	(6		)	(46		)
Net proceeds	$	1,255		$	199		$	1,454

As of July 1, 2017, holders settled 22.8 million purchase contracts and, in exchange, the Company issued 24.2 million shares of its Class A stock. Upon early settlement of these purchase contracts, the corresponding amortizing notes remained outstanding and beneficially owned by the holders that settled purchase contracts early. As of July 1, 2017, 7.2 million TEUs remained outstanding.

On July 17, 2017, the Company made the final quarterly cash installment payment of $0.59 per senior amortizing note, or a total of $18 million, and issued 7.8 million shares of its Class A stock upon automatic settlement of each outstanding purchase contract.

Income Taxes

INCOME TAXES

The effective tax rate was 27.4% and 31.8% for the third quarter of fiscal 2017 and 2016, respectively, and 32.5% and 33.2% for the nine months of fiscal 2017 and 2016, respectively. The effective tax rates for the third quarter and nine months of fiscal 2017 and fiscal 2016 were impacted by such items as the domestic production deduction and state income taxes. In addition, changes in tax reserves resulting from the expiration of statutes of limitations and settlements with taxing authorities reduced the effective tax rate for the third quarter of fiscal 2017 and 2016 by 2.9% and 1.1%, respectively, and the nine months of fiscal 2016 by 1.4%. Lastly, the tax benefit recognized on the outside basis difference in an asset held for sale reduced the effective tax rate for the third quarter and the nine months of fiscal 2017 by 4.2% and 1.3%, respectively.

Unrecognized tax benefits were $311 million and $305 million at July 1, 2017, and October 1, 2016, respectively.

We estimate that during the next twelve months it is reasonably possible that unrecognized tax benefits could decrease by as much as $10 million primarily due to expiration of statutes of limitations in various jurisdictions.

Other Income And Charges

OTHER INCOME AND CHARGES

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

During the nine months of fiscal 2017, we recorded $16 million of legal cost related to a 1995 plant closure of an apparel manufacturing facility operated by a former subsidiary of The Hillshire Brands Company, which we acquired in fiscal 2014, $18 million of acquisition bridge financing fees related to the AdvancePierre acquisition, $11 million of equity earnings in joint ventures and $1 million in net foreign currency exchange gains, which were recorded in the Consolidated Condensed Statements of Income in Other, net.

During the nine months of fiscal 2016, we recorded $8 million of equity earnings in joint ventures and $3 million in net foreign currency exchange losses, which were recorded in the Consolidated Condensed Statements of Income in Other, net.

Earnings Per Share

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 1, 2017		July 2, 2016		July 1, 2017		July 2, 2016
Numerator:
Net income	$	448	$	485	$	1,383	$	1,380
Less: Net income attributable to noncontrolling interests	1		1		3		3
Net income attributable to Tyson	447		484		1,380		1,377
Less dividends declared:
Class A	66		45		217		149
Class B	14		9		47		31
Undistributed earnings	$	367	$	430	$	1,116	$	1,197

Class A undistributed earnings	$	302	$	358	$	920	$	999
Class B undistributed earnings	65		72		196		198
Total undistributed earnings	$	367	$	430	$	1,116	$	1,197
Denominator:
Denominator for basic earnings per share:
Class A weighted average shares	296		312		296		318
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	4		6		5		6
Denominator for diluted earnings per share – adjusted weighted average shares and assumed conversions	370		388		371		394

Net income per share attributable to Tyson:
Class A basic	$	1.24	$	1.29	$	3.84	$	3.61
Class B basic	$	1.12	$	1.17	$	3.47	$	3.28
Diluted	$	1.21	$	1.25	$	3.72	$	3.50

Approximately 1 million of our stock-based compensation shares were antidilutive for each of the three and nine months ended July 1, 2017. We had no stock-based compensation shares that were antidilutive for the three and nine months ended July 2, 2016.

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

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

Derivative Financial Instruments

DERIVATIVE FINANCIAL INSTRUMENTS

Our business operations give rise to certain market risk exposures mostly due to changes in commodity prices, foreign currency exchange rates and interest rates. We manage a portion of these risks through the use of derivative financial instruments to reduce our exposure to commodity price risk, foreign currency risk and interest rate risk. Our risk management programs are periodically reviewed by our Board of Directors' Audit Committee. These programs are monitored by senior management and may be revised as market conditions dictate. Our current risk management programs utilize industry-standard models that take into account the implicit cost of hedging. Risks associated with our market risks and those created by derivative instruments and the fair values are strictly monitored, using value-at-risk and stress tests. Credit risks associated with our derivative contracts are not significant as we minimize counterparty concentrations, utilize margin accounts or letters of credit, and deal with credit worthy counterparties. Additionally, our derivative contracts are mostly short-term in duration and we generally do not make use of credit-risk-related contingent features. No significant concentrations of credit risk existed at July 1, 2017.

We had the following aggregated outstanding notional amounts related to our derivative financial instruments (in millions, except soy meal tons):



	Metric	July 1, 2017		October 1, 2016
Commodity:
Corn	Bushels	52		50
Soy meal	Tons	705,900		389,700
Live cattle	Pounds	347		28
Lean hogs	Pounds	309		158
Feeder Cattle	Pounds	97		—
Foreign currency	United States dollar	$	63	$	38

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 (i.e., cash flow hedge or fair value hedge). We designate certain forward contracts as follows:


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


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

Cash Flow Hedges

Derivative instruments are designated as hedges against changes in the amount of future cash flows related to procurement of certain commodities utilized in our production processes. For the derivative instruments we designate and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative is reported as a component of other comprehensive income (OCI) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains and losses representing hedge ineffectiveness are recognized in earnings in the current period. Ineffectiveness related to our cash flow hedges was not significant for the three and nine months ended July 1, 2017, and July 2, 2016. As of July 1, 2017, the net amounts expected to be reclassified into earnings within the next 12 months are pretax losses of $4 million. During the three and nine months ended July 1, 2017, and July 2, 2016, we did not reclassify significant pretax gains/losses into earnings as a result of the discontinuance of cash flow hedges.

The following table sets forth the pretax impact of cash flow hedge derivative instruments on the Consolidated Condensed Statements of Income (in millions):



	Gain (Loss) Recognized in OCI On Derivatives					Consolidated Condensed Statements of Income Classification	Gain (Loss) Reclassified from OCI to Earnings
	Three Months Ended						Three Months Ended
	July 1, 2017			July 2, 2016			July 1, 2017			July 2, 2016
Cash flow hedge – derivatives designated as hedging instruments:
Commodity contracts	$	(2	)	$	2	Cost of sales	$	—		$	(1	)
Foreign exchange contracts	—			—		Other income/expense	—			—
Total	$	(2	)	$	2		$	—		$	(1	)

	Gain (Loss) Recognized in OCI On Derivatives					Consolidated Condensed Statements of Income Classification	Gain (Loss) Reclassified from OCI to Earnings
	Nine Months Ended						Nine Months Ended
	July 1, 2017			July 2, 2016			July 1, 2017			July 2, 2016
Cash flow hedge – derivatives designated as hedging instruments:
Commodity contracts	$	(2	)	$	—	Cost of sales	$	(1	)	$	(3	)
Foreign exchange contracts	—			—		Other income/expense	—			—
Total	$	(2	)	$	—		$	(1	)	$	(3	)

Fair Value Hedges

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



											in millions
	Consolidated Condensed Statements of Income Classification	Three Months Ended						Nine Months Ended
	Consolidated Condensed Statements of Income Classification	July 1, 2017			July 2, 2016			July 1, 2017			July 2, 2016
Gain (Loss) on forwards	Cost of sales	$	(32	)	$	19		$	(16	)	$	58
Gain (Loss) on purchase contract	Cost of sales	32			(19		)	16			(58		)

Ineffectiveness related to our fair value hedges was not significant for the three and nine months ended July 1, 2017, and July 2, 2016.

Undesignated Positions

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

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



	Consolidated Condensed Statements of Income Classification	Gain (Loss) Recognized in Earnings						Gain (Loss) Recognized in Earnings
		Three Months Ended						Nine Months Ended
		July 1, 2017			July 2, 2016			July 1, 2017			July 2, 2016
Derivatives not designated as hedging instruments:
Commodity contracts	Sales	$	41		$	(20	)	$	117		$	(27	)
Commodity contracts	Cost of sales	(57		)	44			(103		)	36
Foreign exchange contracts	Other income/expense	—			—			—			1
Total		$	(16	)	$	24		$	14		$	10

The fair value of all outstanding derivative instruments in the Consolidated Condensed Balance Sheets are included in Note 12: Fair Value Measurements.

Fair Value Measurements

FAIR VALUE MEASUREMENTS

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

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

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


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


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


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


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

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

Assets and Liabilities Measured at Fair Value on a Recurring Basis

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

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



July 1, 2017	Level 1		Level 2		Level 3		Netting (a)			Total
Assets:
Derivative financial instruments:
Designated as hedges	$	—	$	3	$	—	$	—		$	3
Undesignated	—		43		—		8			51
Available-for-sale securities:
Current	—		3		1		—			4
Non-current	—		42		51		—			93
Deferred compensation assets	8		264		—		—			272
Total assets	$	8	$	355	$	52	$	8		$	423
Liabilities:
Derivative financial instruments:
Designated as hedges	$	—	$	32	$	—	$	(32	)	$	—
Undesignated	—		52		—		(41		)	11
Total liabilities	$	—	$	84	$	—	$	(73	)	$	11



October 1, 2016	Level 1		Level 2		Level 3		Netting (a)			Total
Assets:
Derivative financial instruments:
Designated as hedges	$	—	$	72	$	—	$	(27	)	$	45
Undesignated	—		38		—		(34		)	4
Available-for-sale securities:
Current	—		2		2		—			4
Non-current	—		38		55		—			93
Deferred compensation assets	18		236		—		—			254
Total assets	$	18	$	386	$	57	$	(61	)	$	400
Liabilities:
Derivative financial instruments:
Designated as hedges	$	—	$	1	$	—	$	(1	)	$	—
Undesignated	—		68		—		(68		)	—
Total liabilities	$	—	$	69	$	—	$	(69	)	$	—

(a) Our derivative assets and liabilities are presented in our Consolidated Condensed Balance Sheets on a net basis when a legally enforceable master netting arrangement exists between the counterparty to a derivative contract and us. Additionally, at July 1, 2017, and October 1, 2016, we had $81 million and $8 million, respectively, of cash collateral posted with various counterparties where master netting arrangements exist and held no cash collateral.

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



	Nine Months Ended
	July 1, 2017			July 2, 2016
Balance at beginning of year	$	57		$	61
Total realized and unrealized gains (losses):
Included in earnings	—			—
Included in other comprehensive income (loss)	(1		)	—
Purchases	11			12
Issuances	—			—
Settlements	(15		)	(14		)
Balance at end of period	$	52		$	59
Total gains (losses) for the nine-month period included in earnings attributable to the change in unrealized gains (losses) relating to assets and liabilities still held at end of period	$	—		$	—

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

Derivative Assets and Liabilities: Our derivative financial instruments primarily include exchange-traded and over-the-counter contracts which are further described in Note 11: Derivative Financial Instruments. We record our derivative financial instruments at fair value using quoted market prices adjusted for credit and non-performance risk and internal models that use as their basis readily observable market inputs including current and forward market prices. We classify these instruments in Level 2 when quoted market prices can be corroborated utilizing observable current and forward commodity market prices on active exchanges or observable market transactions.

Available-for-Sale Securities: Our investments in marketable debt securities are classified as available-for-sale and are reported at fair value based on pricing models and quoted market prices adjusted for credit and non-performance risk. Short-term investments with maturities of less than 12 months are included in Other current assets in the Consolidated Condensed Balance Sheets and primarily include certificates of deposit and commercial paper. All other marketable debt securities are included in Other Assets in the Consolidated Condensed Balance Sheets and have maturities ranging up to 32 years. We classify our investments in U.S. government, U.S. agency, certificates of deposit and commercial paper debt securities as Level 2 as fair value is generally estimated using discounted cash flow models that are primarily industry-standard models that consider various assumptions, including time value and yield curve as well as other readily available relevant economic measures. We classify certain corporate, asset-backed and other debt securities as Level 3 as there is limited activity or less observable inputs into valuation models, including current interest rates and estimated prepayment, default and recovery rates on the underlying portfolio or structured investment vehicle. Significant changes to assumptions or unobservable inputs in the valuation of our Level 3 instruments would not have a significant impact to our consolidated condensed financial statements.

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



	July 1, 2017						October 1, 2016
	Amortized Cost Basis		Fair Value		Unrealized Gain (Loss)		Amortized Cost Basis		Fair Value		Unrealized Gain (Loss)
Available-for-sale securities:
Debt securities:
U.S. treasury and agency	$	45	$	45	$	—	$	40	$	40	$	—
Corporate and asset-backed	52		52		—		56		57		1

Unrealized holding gains (losses), net of tax, are excluded from earnings and reported in OCI until the security is settled or sold. On a quarterly basis, we evaluate whether losses related to our available-for-sale securities are temporary in nature. Losses on equity securities are recognized in earnings if the decline in value is judged to be other than temporary. If losses related to our debt securities are determined to be other than temporary, the loss would be recognized in earnings if we intend, or more likely than not will be required, to sell the security prior to recovery. For debt securities in which we have the intent and ability to hold until maturity, losses determined to be other than temporary would remain in OCI, other than expected credit losses which are recognized in earnings. We consider many factors in determining whether a loss is temporary, including the length of time and extent to which the fair value has been below cost, the financial condition and near-term prospects of the issuer and our ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery. We recognized no other than temporary impairment in earnings for the three and nine months ended July 1, 2017, and July 2, 2016. No other than temporary losses were deferred in OCI as of July 1, 2017, and October 1, 2016.

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

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

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

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

We did not have any significant measurements of assets or liabilities at fair value on a nonrecurring basis subsequent to their initial recognition during the three and nine months ended July 2, 2016.

Other Financial Instruments

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



	July 1, 2017				October 1, 2016
	Fair Value		Carrying Value		Fair Value		Carrying Value
Total debt	$	11,188	$	10,824	$	6,698	$	6,279

Pension and Other Postretirement Benefit Plans

Pension and Other Postretirement Benefits Plans

PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS

The components of the net periodic cost for the pension and postretirement benefit plans for the three and nine months ended July 1, 2017, and July 2, 2016, are as follows (in millions):



	Pension Plans
	Three Months Ended						Nine Months Ended
	July 1, 2017			July 2, 2016			July 1, 2017			July 2, 2016

Service cost	$	4		$	4		$	10		$	11
Interest cost	16			18			48			56
Expected return on plan assets	(15		)	(16		)	(44		)	(49		)
Amortization of:
Net actuarial loss	1			2			5			5
Settlement (gain) loss (a)	—			—			2			(12		)
Net periodic cost	$	6		$	8		$	21		$	11



	Postretirement Benefit Plans
	Three Months Ended						Nine Months Ended
	July 1, 2017			July 2, 2016			July 1, 2017			July 2, 2016

Interest cost	$	—		$	1		$	1		$	3
Amortization of:
Net actuarial gain	—			(5		)	—			(14		)
Prior service credit	(6		)	(4		)	(18		)	(13		)
Net periodic cost (credit)	$	(6	)	$	(8	)	$	(17	)	$	(24	)

(a) We made lump-sum settlement payments using plan assets of $5 million and $265 million for the nine months ended July 1, 2017 and July 2, 2016, respectively, to certain deferred vested participants within our qualified pension plans.

We contributed $9 million and $1 million to our pension plans for the three months ended July 1, 2017, and July 2, 2016, respectively. We contributed $31 million and $54 million to our pension plans for the nine months ended July 1, 2017, and July 2, 2016, respectively. We expect to contribute an additional $12 million during the remainder of fiscal 2017. The amount of contributions made to pension plans in any year is dependent upon a number of factors, including minimum funding requirements in the jurisdictions in which we operate. As a result, the actual funding in fiscal 2017 may differ from the current estimate.

Other Comprehensive Income (Loss)

OTHER COMPREHENSIVE INCOME (LOSS)

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



	Three Months Ended																	Nine Months Ended
	July 1, 2017								July 2, 2016									July 1, 2017									July 2, 2016
	Before Tax			Tax		After Tax			Before Tax			Tax			After Tax			Before Tax			Tax			After Tax			Before Tax			Tax			After Tax

Derivatives accounted for as cash flow hedges:
(Gain) loss reclassified to cost of sales	$	—		$	—	$	—		$	1		$	—		$	1		$	1		$	(1	)	$	—		$	3		$	(1	)	$	2
Unrealized gain (loss)	(2		)	2		—			2			(1		)	1			(2		)	2			—			—			—			—

Investments:
Unrealized gain (loss)	(1		)	—		(1		)	(1		)	1			—			(1		)	—			(1		)	(1		)	1			—

Currency translation:
Translation adjustment	3			—		3			(2		)	—			(2		)	(2		)	—			(2		)	3			—			3

Postretirement benefits	(5		)	2		(3		)	(3		)	1			(2		)	(8		)	4			(4		)	(9		)	4			(5		)
Total other comprehensive income (loss)	$	(5	)	$	4	$	(1	)	$	(3	)	$	1		$	(2	)	$	(12	)	$	5		$	(7	)	$	(4	)	$	4		$	—

Segment Reporting

SEGMENT REPORTING

We operate in four reportable segments: Beef, Pork, Chicken, and Prepared Foods. We measure segment profit as operating income (loss). Other primarily includes our foreign chicken production operations in China and India, third-party merger and integration costs and corporate overhead related to Tyson New Ventures, LLC.

On June 7, 2017, we acquired AdvancePierre, a producer and distributor of value-added, convenient, ready-to-eat sandwiches, sandwich components and other entrées and snacks. AdvancePierre's results from operations subsequent to the acquisition closing are included in the Prepared Foods and Chicken segments.

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

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

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

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

We allocate expenses related to corporate activities to the segments, except for third-party merger and integration costs and corporate overhead related to Tyson New Ventures, LLC, which are included in Other.

Information on segments and a reconciliation to income before income taxes are as follows (in millions):



	Three Months Ended								Nine Months Ended
	July 1, 2017				July 2, 2016				July 1, 2017				July 2, 2016
Sales:
Beef	$	4,000			$	3,783			$	11,015			$	11,036
Pork	1,322				1,271				3,876				3,674
Chicken	2,870				2,743				8,374				8,116
Prepared Foods	1,944				1,809				5,590				5,509
Other	85				99				257				284
Intersegment sales	(371		)		(302		)		(997		)		(894		)
Total sales	$	9,850			$	9,403			$	28,115			$	27,725

Operating income (loss):
Beef	$	147			$	91			$	572			$	208
Pork	136				122				524				420
Chicken	294			^(a)	380				790			^(a)	1,085
Prepared Foods	174			^(b)	197				451			^(b)	601
Other	(54		)	^(c)	(23		)	^(c)	(87		)	^(c)	(67		)	^(c)
Total operating income	697				767				2,250				2,247

Total other (income) expense	80			^(d)	56				202			^(d)	180

Income before income taxes	$	617			$	711			$	2,048			$	2,067

(a) Chicken operating income includes $4 million AdvancePierre purchase accounting for the three and nine months ended July 1, 2017.

(b) Prepared Foods operating income includes $21 million AdvancePierre purchase accounting and acquisition related costs

for the three and nine months ended July 1, 2017 and a $52 million impairment charge related to our San Diego Prepared Foods operation (see Note 9: Other Income and Charges) for the nine months ended July 1, 2017.

(c) Other operating loss includes third-party merger and integration costs and corporate overhead of Tyson New Ventures, LLC of $45 million and $11 million for the three months ended July 1, 2017, and July 2, 2016, respectively, and $58 million and $29 million for the nine months ended July 1, 2017, and July 2, 2016, respectively. Third-party merger and integration costs includes $34 million of AdvancePierre acquisition related costs for the three and nine months ended July 1, 2017.

(d) Total other (income) expense includes $18 million of acquisition bridge financing fees for the three and nine months ended July 1, 2017.

The Beef segment had sales of $116 million and $90 million in the third quarter of fiscal 2017 and 2016, respectively, and sales of $276 million and $240 million in the nine months of fiscal 2017 and 2016, respectively, from transactions with other operating segments of the Company. The Pork segment had sales of $235 million and $204 million in the third quarter of fiscal 2017 and 2016, respectively, and sales of $685 million and $639 million in the nine months of fiscal 2017 and 2016, respectively, from transactions with other operating segments of the Company. The Chicken segment had sales of $20 million and $8 million in the third quarter of fiscal 2017 and 2016, respectively, and sales of $36 million and $15 million in the nine months of fiscal 2017 and 2016, respectively, from transactions with other operating segments of the Company. The aforementioned sales from intersegment transactions, which were at market prices, were included in the segment sales in the above table.

Commitments And Contingencies

COMMITMENTS AND CONTINGENCIES

Commitments

We guarantee obligations of certain outside third parties, consisting primarily of leases, debt and grower loans, which are substantially collateralized by the underlying assets. Terms of the underlying debt cover periods up to 10 years, and the maximum potential amount of future payments as of July 1, 2017, was $29 million. We also maintain operating leases for various types of equipment, some of which contain residual value guarantees for the market value of the underlying leased assets at the end of the term of the lease. The remaining terms of the lease maturities cover periods over the next 10 years. The maximum potential amount of the residual value guarantees is $108 million, of which $99 million could be recoverable through various recourse provisions and an additional undeterminable recoverable amount based on the fair value of the underlying leased assets. The likelihood of material payments under these guarantees is not considered probable. At July 1, 2017, and October 1, 2016, no material liabilities for guarantees were recorded.

We have cash flow assistance programs in which certain livestock suppliers participate. Under these programs, we pay an amount for livestock equivalent to a standard cost to grow such livestock during periods of low market sales prices. The amounts of such payments that are in excess of the market sales price are recorded as receivables and accrue interest. Participating suppliers are obligated to repay these receivables balances when market sales prices exceed this standard cost, or upon termination of the agreement. Our maximum commitment associated with these programs is limited to the fair value of each participating livestock supplier’s net tangible assets. The potential maximum commitment as of July 1, 2017, was approximately $380 million. The total receivables under these programs were $3 million and $2 million at July 1, 2017, and October 1, 2016, respectively. These receivables are included, net of allowance for uncollectible amounts, in Accounts Receivable in our Consolidated Condensed Balance Sheets. Even though these programs are limited to the net tangible assets of the participating livestock suppliers, we also manage a portion of our credit risk associated with these programs by obtaining security interests in livestock suppliers’ assets. After analyzing residual credit risks and general market conditions, we have no allowance for these programs’ estimated uncollectible receivables at July 1, 2017, and October 1, 2016.

When constructing new facilities or making major enhancements to existing facilities, we will occasionally enter into incentive agreements with local government agencies in order to reduce certain state and local tax expenditures. Under these agreements, we transfer the related assets to various local government entities and receive Industrial Revenue Bonds. We immediately lease the facilities from the local government entities and have an option to re-purchase the facilities for a nominal amount upon tendering the Industrial Revenue Bonds to the local government entities at various predetermined dates. The Industrial Revenue Bonds and the associated obligations for the leases of the facilities offset, and the underlying assets remain in property, plant and equipment. At July 1, 2017, total amounts under these type of arrangements totaled $505 million.

Contingencies

We are involved in various claims and legal proceedings. We routinely assess the likelihood of adverse judgments or outcomes to those matters, as well as ranges of probable losses, to the extent losses are reasonably estimable. We record accruals for such matters to the extent that we conclude a loss is probable and the financial impact, should an adverse outcome occur, is reasonably estimable. Such accruals are reflected in the Company’s consolidated condensed financial statements. In our opinion, we have made appropriate and adequate accruals for these matters. Unless noted otherwise below, we believe the probability of a material loss beyond the amounts accrued to be remote; however, the ultimate liability for these matters is uncertain, and if accruals are not adequate, an adverse outcome could have a material effect on the consolidated financial condition or results of operations. Listed below are certain claims made against the Company and/or our subsidiaries for which the potential exposure is considered material to the Company’s consolidated condensed financial statements. We believe we have substantial defenses to the claims made and intend to vigorously defend these matters.

Below are the details of four lawsuits involving our beef, pork and prepared foods plants in which certain present and past employees allege that we failed to compensate them for the time it takes to engage in pre- and post-shift activities, such as changing into and out of protective and sanitary clothing and walking to and from the changing area, work areas and break areas in violation of the Fair Labor Standards Act and various state laws. The plaintiffs seek back wages, liquidated damages, pre- and post-judgment interest, attorneys’ fees and costs. Each case is proceeding in its jurisdiction.

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Bouaphakeo (f/k/a Sharp), et al. v. Tyson Foods, Inc., N.D. Iowa, February 6, 2007 - A jury trial was held involving our Storm Lake, Iowa, pork plant which resulted in a jury verdict in favor of the plaintiffs for violations of federal and state laws for pre- and post-shift work activities. The trial court also awarded the plaintiffs liquidated damages, resulting in total damages awarded in the amount of $5,784,758. The plaintiffs' counsel has also filed an application for attorneys' fees and expenses in the amount of $2,692,145. We appealed the jury's verdict and trial court's award to the Eighth Circuit Court of Appeals. The appellate court affirmed the jury verdict and judgment on August 25, 2014, and we filed a petition for rehearing on September 22, 2014, which was denied. We filed a petition for a writ of certiorari with the United States Supreme Court, which was granted on June 8, 2015, and oral arguments before the Supreme Court occurred on November 10, 2015. On March 22, 2016, the Supreme Court affirmed the appellate court’s rulings and remanded to the trial court to allocate the lump sum award among the class participants. On remand, the trial court determined that the lump sum award should be allocated to class participants according to the method prescribed by plaintiffs’ expert at trial. The trial court has yet to enter a judgment. A joint notice advising the court of a global settlement of this case, the Edwards matter (described below), and the consolidated Murray and DeVoss matter (also described below) was filed on July 11, 2017. The parties agreed to settle all three matters for a total payment of $12.6 million, inclusive of wages, penalties, interest, attorneys’ fees and costs, and costs of settlement administration.

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Edwards, et al. v. Tyson Foods, Inc. d.b.a. Tyson Fresh Meats, Inc., S.D. Iowa, March 20, 2008 - The trial court in this case, which involves our Perry and Waterloo, Iowa, pork plants, decertified the state law class and granted other pre-trial motions that resulted in judgment in our favor with respect to the plaintiffs’ claims. The plaintiffs have filed a motion to modify this judgment. A joint motion for preliminary approval of the collective and class action settlement was filed on July 7, 2017. Please see the above Bouaphakeo description for additional details of a global settlement.

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Murray, et al. v. Tyson Foods, Inc., C.D. Illinois, January 2, 2008; and DeVoss v. Tyson Foods, Inc. d.b.a. Tyson Fresh Meats, C.D. Illinois, March 2, 2011 - This consolidated case involves our Joslin, Illinois, beef plant and is in the preliminary stages. A joint notice of settlement and a request to stay the proceedings was filed with and granted by the court on June 28, 2017. Please see the above Bouaphakeo description for additional details of a global settlement.

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Dozier, Southerland, et al. v. The Hillshire Brands Company, E.D. North Carolina, September 2, 2014 - This case involves our Tarboro, North Carolina, prepared foods plant. On March 25, 2016, the parties filed a joint motion for settlement totaling $425,000, which includes all of the plaintiffs’ attorneys’ fees and costs. The court preliminarily approved the joint motion for settlement, and the final approval hearing is set for December 5, 2017.

On September 2, 2016, Maplevale Farms, Inc., acting on behalf of itself and a putative class of direct purchasers of poultry products, filed a class action complaint against us and certain of our poultry subsidiaries, as well as several other poultry processing companies, in the Northern District of Illinois. Subsequent to the filing of this initial complaint, additional lawsuits making similar claims on behalf of putative classes of direct and indirect purchasers were filed in the United States District Court for the Northern District of Illinois. The court consolidated the complaints, for pre-trial purposes, into actions on behalf of three different putative classes: direct purchasers, indirect purchasers/consumers and commercial/institutional indirect purchasers. These three actions are styled In re Broiler Chicken Antitrust Litigation. Several amended and consolidated complaints have been filed on behalf of each putative class. The currently operative complaints allege, among other things, that beginning in January 2008 the defendants conspired and combined to fix, raise, maintain, and stabilize the price of broiler chickens in violation of United States antitrust laws. The complaints on behalf of the putative classes of indirect purchasers also include causes of action under various state unfair competition laws, consumer protection laws, and unjust enrichment common laws. The complaints also allege that defendants “manipulated and artificially inflated a widely used Broiler price index, the Georgia Dock.” It is further alleged that the defendants concealed this conduct from the plaintiffs and the members of the putative classes. The plaintiffs are seeking treble damages, injunctive relief, pre- and post-judgment interest, costs, and attorneys’ fees on behalf of the putative classes. We filed motions to dismiss these complaints; the court has yet to rule on our motions.

On October 17, 2016, William Huser, acting on behalf of himself and a putative class of persons who purchased shares of Tyson Foods' stock between November 23, 2015, and October 7, 2016, filed a class action complaint against Tyson Foods, Inc., Donnie Smith and Dennis Leatherby in the Central District of California. The complaint alleged, among other things, that our periodic filings contained materially false and misleading statements by failing to disclose that the Company has colluded with other producers to manipulate the supply of broiler chickens in order to keep supply artificially low, as alleged in In re Broiler Chicken Antitrust Litigation. Subsequent to the filing of this initial complaint, additional lawsuits making similar claims were filed in the United States District Courts for the Southern District of New York, the Western District of Arkansas, and the Southern District of Ohio. Each of those cases have now been transferred to the United States District Court for the Western District of Arkansas and consolidated, and lead plaintiffs have been appointed. A consolidated complaint was filed on March 22, 2017, (which also named additional individual defendants). The consolidated complaint seek damages, pre- and post-judgment interest, costs, and attorneys’ fees. We filed a motion to dismiss this complaint, which the court granted on July 26, 2017.

On January 20, 2017, the Company received a subpoena from the Securities and Exchange Commission in connection with an investigation related to the Company. We are cooperating with the investigation, which is at an early stage. Based upon the limited information we have, we believe the investigation is based upon the allegations in In re Broiler Chicken Antitrust Litigation.

On March 1, 2017, we received a civil investigative demand (CID) from the Office of the Attorney General, Department of Legal Affairs, of the State of Florida. The CID requests information primarily related to possible anticompetitive conduct in connection with the Georgia Dock, a chicken products pricing index formerly published by the Georgia Department of Agriculture. We are cooperating with the Attorney General’s office.

Our subsidiary, The Hillshire Brands Company (formerly named Sara Lee Corporation), is a party to a consolidation of cases filed by individual complainants with the Republic of the Philippines, Department of Labor and Employment and the National Labor Relations Commission (NLRC) from 1998 through July 1999. The complaint is filed against Aris Philippines, Inc., Sara Lee Corporation, Sara Lee Philippines, Inc., Fashion Accessories Philippines, Inc., and Attorney Cesar C. Cruz (collectively, the “respondents”). The complaint alleges, among other things, that the respondents engaged in unfair labor practices in connection with the termination of manufacturing operations in the Philippines in 1995 by Aris Philippines, Inc., a former subsidiary of The Hillshire Brands Company. In late 2004, a labor arbiter ruled against the respondents and awarded the complainants PHP3,453,664,710 (approximately US$68 million) in damages and fees. The respondents appealed the labor arbiter's ruling, and it was subsequently set aside by the NLRC in December 2006. Subsequent to the NLRC’s decision, the parties filed numerous appeals, motions for reconsideration and petitions for review, certain of which remained outstanding for several years. While various of those appeals, motions and/or petitions were pending, The Hillshire Brands Company, on June 23, 2014, without admitting liability, filed a settlement motion requesting that the Supreme Court of the Philippines order dismissal with prejudice of all claims against it and certain other respondents in exchange for payments allocated by the court among the complainants in an amount not to exceed PHP342,287,800 (approximately US$6.8 million). Based in part on its finding that the consideration to be paid to the complainants as part of such settlement was insufficient, the Supreme Court of the Philippines denied the respondents’ settlement motion and all motions for reconsideration thereof. The Supreme Court of the Philippines also set aside as premature the NLRC’s December 2006 ruling. As a result, the cases were remanded back before the NLRC to rule on the merits of the case. On December 15, 2016, we learned that the NLRC rendered its decision on November 29, 2016, regarding the respondents’ appeals regarding the labor arbiter’s 2004 ruling in favor of the complainants. The NLRC increased the award for 4,922 of the total 5,984 complainants to PHP14,858,495,937 (approximately US$294 million). However, the NLRC approved of a prior settlement reached with the group comprising approximately 18% of the class of 5,984 complainants, pursuant to which The Hillshire Brands Company agreed to pay each settling complainant PHP68,000 (approximately US$1,346). The settlement payment was made on December 21, 2016, to the NLRC, which is responsible for distributing the funds to each settling complainant. On December 27, 2016, the respondents filed motions for reconsideration with the NLRC asking that the award be set aside. The NLRC denied respondents' motions for reconsideration in a resolution received on May 5, 2017, and entered a judgment on the award on July 24, 2017. Previously, from May 10, 2017 to May 12, 2017, Aris Philippines, Inc., Sara Lee Corporation and Sara Lee Philippines each filed petitions for certiorari with requests for an immediate temporary restraining order and a writ of permanent injunction with the Philippines Court of Appeals. Those petitions are pending. We have recorded an accrual for this matter for the amount of loss that, at this time, we deem probable and enforceable. This accrual is reflected in the Company’s consolidated condensed financial statements and reflects an amount significantly less than the amount awarded by the labor arbiter in 2004 (i.e., PHP3,453,664,710 (approximately US$68 million)). The ultimate enforceable loss is uncertain, and if our accrual is not adequate, an adverse outcome could have a material effect on the consolidated financial condition or results of operations.

Accounting Policies (Policy)

Basis Of Presentation