Smithfield Foods(SFD) - 2025 Q2 - Quarterly Report

FORM 10-Q General Information Registrant Information Details Smithfield Foods, Inc.'s identification, incorporation, address, stock exchange listing, and filer status for its Q2 2025 Form 10-Q - Smithfield Foods, Inc. filed its Quarterly Report on Form 10-Q for the period ended June 29, 2025[1] Registrant Details | Detail | Value | | :--- | :--- | | Exact name of registrant | SMITHFIELD FOODS, INC. | | State of incorporation | Virginia | | Address of principal executive offices | 200 Commerce Street, Smithfield, Virginia 23430 | | Registrant's telephone number | (757) 365-3000 | | Commission file number | 001-15321 | | Trading Symbol | SFD | | Exchange Registered | The Nasdaq Global Select Market | | Filer Status | Non-accelerated filer | | Common Stock Outstanding (as of Aug 11, 2025) | 393,112,711 shares | Table of Contents The Table of Contents outlines the structure of the Form 10-Q, dividing it into Part I (Financial Information) and Part II (Other Information), with specific items and their corresponding page numbers - The report is structured into two main parts: Part I for Financial Information and Part II for Other Information, detailing specific items and their page references[4][5] PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Presents Smithfield's unaudited condensed consolidated financial statements and detailed notes on accounting policies, segment performance, and financial instruments Condensed Consolidated Statements of Income Provides a comparative overview of Smithfield's sales, gross profit, operating profit, and net income for the three and six months ended June 29, 2025, and June 30, 2024 Condensed Consolidated Statements of Income (Three Months Ended) | Metric | June 29, 2025 (in millions) | June 30, 2024 (in millions) | Change (YoY) | % Change (YoY) | | :--- | :--- | :--- | :--- | :--- | | Sales | $3,786 | $3,412 | $374 | 11.0% | | Cost of sales | $3,288 | $2,885 | $403 | 14.0% | | Gross profit | $499 | $527 | $(28) | (5.3%) | | Operating profit | $260 | $334 | $(74) | (22.2%) | | Net income attributable to Smithfield | $188 | $301 | $(113) | (37.5%) | | Basic and diluted EPS (Continuing operations) | $0.48 | $0.67 | $(0.19) | (28.4%) | | Basic and diluted EPS (Total) | $0.48 | $0.79 | $(0.31) | (39.2%) | Condensed Consolidated Statements of Income (Six Months Ended) | Metric | June 29, 2025 (in millions) | June 30, 2024 (in millions) | Change (YoY) | % Change (YoY) | | :--- | :--- | :--- | :--- | :--- | | Sales | $7,558 | $6,856 | $702 | 10.2% | | Cost of sales | $6,549 | $5,967 | $582 | 9.8% | | Gross profit | $1,008 | $889 | $119 | 13.4% | | Operating profit | $582 | $498 | $84 | 16.9% | | Net income attributable to Smithfield | $412 | $457 | $(45) | (9.8%) | | Basic and diluted EPS (Continuing operations) | $1.05 | $0.97 | $0.08 | 8.2% | | Basic and diluted EPS (Total) | $1.05 | $1.20 | $(0.15) | (12.5%) | Condensed Consolidated Statements of Comprehensive Income Details Smithfield's net income and other comprehensive income components, including foreign currency translation and hedge accounting, for the three and six months ended June 29, 2025, and June 30, 2024 Condensed Consolidated Statements of Comprehensive Income (Three Months Ended) | Metric | June 29, 2025 (in millions) | June 30, 2024 (in millions) | Change (YoY) | % Change (YoY) | | :--- | :--- | :--- | :--- | :--- | | Net income | $188 | $306 | $(118) | (38.6%) | | Foreign currency translation | $47 | $(81) | $128 | NM | | Pension accounting | $4 | $3 | $1 | 33.3% | | Hedge accounting | $(58) | $62 | $(120) | NM | | Total other comprehensive income (loss) | $(8) | $(16) | $8 | (50.0%) | | Comprehensive income attributable to Smithfield | $165 | $306 | $(141) | (46.1%) | Condensed Consolidated Statements of Comprehensive Income (Six Months Ended) | Metric | June 29, 2025 (in millions) | June 30, 2024 (in millions) | Change (YoY) | % Change (YoY) | | :--- | :--- | :--- | :--- | :--- | | Net income | $415 | $460 | $(45) | (9.8%) | | Foreign currency translation | $45 | $(87) | $132 | NM | | Pension accounting | $7 | $7 | $0 | 0.0% | | Hedge accounting | $(17) | $19 | $(36) | NM | | Total other comprehensive income (loss) | $35 | $(61) | $96 | NM | | Comprehensive income attributable to Smithfield | $432 | $412 | $20 | 4.9% | Condensed Consolidated Balance Sheets Presents Smithfield's financial position, including assets, liabilities, and equity, as of June 29, 2025, and December 29, 2024 Condensed Consolidated Balance Sheets (as of) | Asset/Liability/Equity | June 29, 2025 (in millions) | December 29, 2024 (in millions) | Change | | :--- | :--- | :--- | :--- | | ASSETS | | | | | Cash and cash equivalents | $928 | $943 | $(15) | | Accounts receivable, net | $773 | $558 | $215 | | Inventories, net | $2,288 | $2,412 | $(124) | | Total current assets | $4,292 | $4,202 | $90 | | Total assets | $11,186 | $11,054 | $132 | | LIABILITIES | | | | | Accounts payable | $444 | $777 | $(333) | | Total current liabilities | $1,339 | $1,706 | $(367) | | Long-term debt and finance lease obligations | $2,001 | $1,999 | $2 | | Total liabilities and equity | $11,186 | $11,054 | $132 | | EQUITY | | | | | Total shareholders' equity | $6,301 | $5,834 | $467 | Condensed Consolidated Statements of Cash Flows Outlines Smithfield's cash flows from operating, investing, and financing activities for the six months ended June 29, 2025, and June 30, 2024 Condensed Consolidated Statements of Cash Flows (Six Months Ended) | Cash Flow Activity | June 29, 2025 (in millions) | June 30, 2024 (in millions) | Change (YoY) | | :--- | :--- | :--- | :--- | | Net cash flows from (used in) operating activities of continuing operations | $108 | $(9) | $117 | | Net cash flows used in investing activities of continuing operations | $(171) | $(215) | $44 | | Net cash flows from (used in) financing activities of continuing operations | $38 | $(202) | $240 | | Net change in cash, cash equivalents and restricted cash | $(15) | $(467) | $452 | | Cash, cash equivalents and restricted cash at end of period | $928 | $215 | $713 | Condensed Consolidated Statements of Shareholder's Equity Details changes in Smithfield's shareholders' equity, including net income, dividends, and other comprehensive income, for the three and six months ended June 29, 2025 Changes in Shareholders' Equity (Three Months Ended June 29, 2025) | Item | Additional Paid-in Capital (in millions) | Retained Earnings (in millions) | Accumulated Other Comprehensive Loss (in millions) | Total Shareholders' Equity (in millions) | | :--- | :--- | :--- | :--- | :--- | | Balance, March 30, 2025 | $3,325 | $3,308 | $(408) | $6,225 | | Dividend | — | $(99) | — | $(99) | | Net income attributable to Smithfield | — | $188 | — | $188 | | Other comprehensive loss, net of tax | — | — | $(23) | $(23) | | Balance, June 29, 2025 | $3,335 | $3,398 | $(432) | $6,301 | Changes in Shareholders' Equity (Six Months Ended June 29, 2025) | Item | Additional Paid-in Capital (in millions) | Retained Earnings (in millions) | Accumulated Other Comprehensive Loss (in millions) | Total Shareholders' Equity (in millions) | | :--- | :--- | :--- | :--- | :--- | | Balance, December 29, 2024 | $3,102 | $3,184 | $(452) | $5,834 | | Net proceeds from issuance of common stock | $236 | — | — | $236 | | Net income attributable to Smithfield | — | $412 | — | $412 | | Other comprehensive income, net of tax | — | — | $20 | $20 | | Balance, June 29, 2025 | $3,335 | $3,398 | $(432) | $6,301 | Notes to Condensed Consolidated Financial Statements Provides detailed explanations and disclosures for significant accounting policies, segment information, and other financial statement items NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Outlines Smithfield's core business, fiscal year, consolidation principles, seasonality, and recently issued accounting pronouncements - Smithfield Foods, Inc. produces fresh pork and packaged meats, operating in a cyclical industry affected by commodity price fluctuations, and is a majority-owned subsidiary of Hong Kong-based WH Group Limited[18] - The company's fiscal year ends on the Sunday nearest to December 31, with the second quarter of 2025 and 2024 each consisting of 13 weeks, and the six-month periods consisting of 26 weeks[21] - Sales and profitability are generally higher in the fourth quarter due to holiday demand, while cash use is highest in the first quarter due to working capital needs[24] - New accounting pronouncements (ASU 2023-09, ASU 2024-03, ASU 2025-03) are effective for fiscal years 2025 and 2027, primarily impacting disclosures and presentation, but not financial position, results of operations, or cash flows[25][26][27] NOTE 2: REPORTABLE SEGMENTS Details Smithfield's three reportable segments: Packaged Meats, Fresh Pork, and Hog Production, and their sales performance - Smithfield's operations are structured into three reportable segments: Packaged Meats, Fresh Pork, and Hog Production, with 'Other' including Mexico and Bioscience operations[30] Sales by Reportable Segment (Three Months Ended) | Segment | June 29, 2025 (in millions) | June 30, 2024 (in millions) | Change (YoY) | % Change (YoY) | | :--- | :--- | :--- | :--- | :--- | | Packaged Meats | $2,079 | $1,945 | $134 | 6.9% | | Fresh Pork | $2,080 | $1,981 | $99 | 5.0% | | Hog Production | $840 | $776 | $65 | 8.4% | | Other | $120 | $119 | $1 | 1.2% | | Consolidated Sales | $3,786 | $3,412 | $374 | 11.0% | Sales by Reportable Segment (Six Months Ended) | Segment | June 29, 2025 (in millions) | June 30, 2024 (in millions) | Change (YoY) | % Change (YoY) | | :--- | :--- | :--- | :--- | :--- | | Packaged Meats | $4,103 | $3,944 | $159 | 4.0% | | Fresh Pork | $4,114 | $3,920 | $194 | 5.0% | | Hog Production | $1,772 | $1,482 | $291 | 19.6% | | Other | $224 | $233 | $(8) | (3.6%) | | Consolidated Sales | $7,558 | $6,856 | $701 | 10.2% | - Hog Production segment sales increased significantly due to a $116 million increase in grain and feed sales and $103 million in other sales to Murphy Family Farms and VisionAg in Q2 2025, despite a 24% decrease in market hogs sold[192][198] NOTE 3: DISCONTINUED OPERATIONS Explains the carve-out of Smithfield's European operations to WH Group and their presentation as discontinued operations - Smithfield completed the carve-out and distribution of its European operations to WH Group on August 26, 2024, which is now reported as discontinued operations[41] Net Income from Discontinued Operations (Three Months Ended) | Metric | June 29, 2025 (in millions) | June 30, 2024 (in millions) | | :--- | :--- | :--- | | Sales | $— | $926 | | Gross profit | $— | $143 | | Operating profit | $— | $90 | | Net income from discontinued operations | $— | $47 | Net Income from Discontinued Operations (Six Months Ended) | Metric | June 29, 2025 (in millions) | June 30, 2024 (in millions) | | :--- | :--- | :--- | | Sales | $— | $1,735 | | Gross profit | $— | $240 | | Operating profit | $— | $146 | | Net income from discontinued operations | $— | $89 | NOTE 4: ACQUISITION AND DISPOSITIONS Describes Smithfield's acquisition of a dry sausage facility and the closure of two other facilities to optimize production - Acquired a dry sausage production facility in Nashville, Tennessee, for $38 million on July 30, 2024, to grow the value-added packaged meats business[47] - Closed the Elizabeth, New Jersey dry sausage production facility on June 30, 2025, and the Altoona, Iowa ham boning facility on August 30, 2024, to consolidate production and improve manufacturing efficiencies, with associated charges being immaterial[48][49][50] NOTE 5: OPERATING GAINS AND NON-OPERATING (GAINS) LOSSES Details the components of operating gains and non-operating gains/losses, primarily from insurance recoveries and retirement plan assets Operating Gains (Three Months Ended) | Item | June 29, 2025 (in millions) | June 30, 2024 (in millions) | | :--- | :--- | :--- | | Insurance recoveries | $(29) | $(1) | | Other operating gains | $(1) | $(1) | | Total Operating gains | $(30) | $(2) | Non-operating (Gains) Losses (Three Months Ended) | Item | June 29, 2025 (in millions) | June 30, 2024 (in millions) | | :--- | :--- | :--- | | Gain on nonqualified retirement plan assets | $(8) | $(3) | | Net pension and postretirement benefits cost | $4 | $2 | | Total Non-operating (gains) losses | $(4) | $(2) | - Operating gains in Q2 2025 included a $29 million gain from a litigation insurance settlement and a $6 million gain from a 2021 fire insurance settlement in Q1 2025[52][146][147] NOTE 6: RESTRUCTURING Outlines the Hog Production Reform initiatives, including partnerships, workforce reductions, and office closures, and associated charges - Hog Production Reform involved ceasing certain farm operations, terminating agreements with underperforming contract farmers, and reducing the size of the hog production business[53] - Became a member of Murphy Family Farms LLC (25% minority interest) and VisionAg Hog Production, LLC (9% minority interest), which now supply approximately 3.2 million and 600,000 hogs annually, respectively[54][55] Hog Production Reform Charges (Six Months Ended) | Type of Cost | June 29, 2025 (in millions) | June 30, 2024 (in millions) | | :--- | :--- | :--- | | Accelerated depreciation | $1 | $— | | Contract termination costs | $— | $8 | | Employee termination benefits | $— | $2 | | Total | $1 | $10 | - Implemented a workforce reduction in Q1 2025, recognizing $9 million in employee termination benefits ($6 million in SG&A, $2 million in cost of sales)[58] - Announced closure of Lisle, Illinois and Kansas City, Missouri satellite offices in Q2 2025, accruing $4 million in employee termination benefits in SG&A[59] NOTE 7: EMPLOYEE RETENTION TAX CREDITS Reports the recognition of employee retention tax credits under the CARES Act and their classification in cost of sales Employee Retention Tax Credits Recognized | Period | Amount (in millions) | | :--- | :--- | | Three Months Ended June 29, 2025 | $10 | | Three Months Ended June 30, 2024 | $87 | | Six Months Ended June 29, 2025 | $10 | | Six Months Ended June 30, 2024 | $87 | - The majority of these credits were classified in cost of sales, with $1 million in Q2 2024 classified in SG&A[61] NOTE 8: ACCOUNTS RECEIVABLE Provides details on the composition and changes in Smithfield's net accounts receivable Accounts Receivable, Net | Metric | June 29, 2025 (in millions) | December 29, 2024 (in millions) | | :--- | :--- | :--- | | Accounts receivable, net | $773 | $558 | | Receivables from contracts with customers | $718 | $494 | - The allowance for credit losses was not material for the periods presented[63] NOTE 9: INVENTORIES Details the composition and changes in Smithfield's net inventories, including fresh meats, livestock, and grains Inventories, Net (in millions) | Category | June 29, 2025 | December 29, 2024 | | :--- | :--- | :--- | | Fresh and packaged meats | $1,221 | $1,006 | | Livestock | $710 | $949 | | Grains | $100 | $208 | | Maintenance parts | $119 | $115 | | Manufacturing supplies | $116 | $115 | | Other | $22 | $19 | | Inventories, net | $2,288 | $2,412 | NOTE 10: DERIVATIVE FINANCIAL INSTRUMENTS Explains Smithfield's use of derivative instruments to manage commodity, interest rate, and foreign currency risks, and their fair values - Smithfield hedges commodity prices (live hogs, corn, soybean meal, wheat, fuel, energy), interest rates, and foreign exchange rates to mitigate price risk[65] Fair Values of Open Derivative Financial Instruments (in millions) | Category | June 29, 2025 (Assets) | December 29, 2024 (Assets) | June 29, 2025 (Liabilities) | December 29, 2024 (Liabilities) | | :--- | :--- | :--- | :--- | :--- | | Commodity contracts (hedge accounting) | $12 | $13 | $74 | $37 | | Commodity contracts (mark-to-market) | $1 | $2 | $16 | $7 | | Total fair value of derivative instruments | $13 | $15 | $91 | $44 | Derivative Impact on Condensed Consolidated Statements of Income (Three Months Ended) | Item | June 29, 2025 (in millions) | June 30, 2024 (in millions) | | :--- | :--- | :--- | | Total derivative loss recognized in sales | $(25) | $(5) | | Total derivative gain (loss) recognized in cost of sales | $4 | $(5) | | Total derivative loss | $(23) | $(9) | Derivative Impact on Condensed Consolidated Statements of Income (Six Months Ended) | Item | June 29, 2025 (in millions) | June 30, 2024 (in millions) | | :--- | :--- | :--- | | Total derivative loss recognized in sales | $(27) | $(17) | | Total derivative gain (loss) recognized in cost of sales | $8 | $(10) | | Total derivative loss | $(22) | $(25) | NOTE 11: EQUITY METHOD INVESTMENTS Describes Smithfield's minority interests in Murphy Family Farms and VisionAg, and the sale process for Monarch Bio Energy - Smithfield acquired a 25% minority interest in Murphy Family Farms and a 9% minority interest in VisionAg, both accounted for using the equity method[79][80] - A sale notice was delivered for Monarch Bio Energy, LLC, requiring the joint venture to pursue a sale by January 17, 2026, after which TPG may require Monarch to purchase its ownership interests[82] NOTE 12: DEBT Details Smithfield's refinanced Senior Revolving Credit Facility, Accounts Receivable Securitization Facility, and the termination of its Monetization Facility - Refinanced the $2,100 million Senior Revolving Credit Facility in February 2025, extending maturity to February 12, 2030, with no subsidiary guarantors[83] - Maintains a $225 million Accounts Receivable Securitization Facility, maturing in November 2027, with $28 million in letters of credit issued as of June 29, 2025[85] - Terminated the $250 million Accounts Receivable Monetization Facility on July 22, 2025, as it was no longer cost-effective or necessary given the company's liquidity position[89] Charges from Monetization Facility (in millions) | Period | Charges | | :--- | :--- | | Three Months Ended June 29, 2025 | $3 | | Three Months Ended June 30, 2024 | $4 | | Six Months Ended June 29, 2025 | $6 | | Six Months Ended June 30, 2024 | $7 | NOTE 13: LEASES Reports the amendment of hog farmer contracts, extending lease terms and increasing lease obligations - Amended terms of approximately 700 contracts with independent hog farmers in Q2 2025, extending the noncancellable term to three years[90] - The incremental lease obligation associated with these agreements was $58 million as of June 29, 2025, with $13 million recorded as current and the remainder as long-term[90] NOTE 14: GUARANTEES Notes Smithfield's release from its guaranty of Monarch Bio Energy, LLC's debt following refinancing - Smithfield was released from its guaranty of Monarch Bio Energy, LLC's debt in June 2025 after Monarch refinanced its debt facility[91] NOTE 15: INCOME TAXES Discusses Smithfield's effective tax rate for continuing operations and the impact of new tax legislation Effective Tax Rate Attributable to Continuing Operations | Period | June 29, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Second Quarter | 24.6% | 18.2% | | First Six Months | 24.0% | 20.5% | - The increase in the effective tax rate was driven by increased profitability, a settlement with state tax authorities, and the disallowance of certain officers' compensation[92] - The 'One Big Beautiful Bill' (Tax Relief for American Families and Workers Act of 2025) was signed into law on July 4, 2025, permanently reinstating 100% bonus depreciation, immediate expensing of R&D, and restoring EBITDA-based limitation for interest deduction; Smithfield is evaluating its impact for Q3 2025[93][94] NOTE 16: PENSION AND OTHER RETIREMENT PLANS Details the net periodic pension cost and its components for Smithfield's retirement plans Net Periodic Pension Cost (in millions) | Component | Three Months Ended June 29, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 29, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Interest cost | $25 | $25 | $50 | $49 | | Amortization | $5 | $5 | $11 | $9 | | Service cost | $3 | $3 | $6 | $6 | | Expected return on plan assets | $(26) | $(28) | $(53) | $(55) | | Net periodic pension cost | $7 | $5 | $14 | $10 | NOTE 17: REDEEMABLE NONCONTROLLING INTERESTS Explains the classification and changes in redeemable noncontrolling interests, primarily related to Altosano - Redeemable noncontrolling interests are classified outside of equity on the condensed consolidated balance sheets and are adjusted to redemption value at the end of each period[97] Changes in Redeemable Noncontrolling Interests (in millions) | Item | Six Months Ended June 29, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Beginning balance | $225 | $246 | | Attribution of net income | $4 | $2 | | Attribution of comprehensive income (loss) | $15 | $(16) | | Adjustment to redemption value | $1 | $34 | | Ending balance | $245 | $265 | NOTE 18: EQUITY Details Smithfield's stock split, IPO, equity-based incentive awards, and changes in accumulated other comprehensive loss - A 380,069.232-for-one stock split was approved and effected on January 17, 2025, retroactively adjusting all share and per share amounts[99][101] - Completed an IPO on January 29, 2025, issuing 13,043,479 shares of common stock at $20.00 per share, generating net proceeds of $236 million[102] - Granted stock options (9,822,467 shares) and RSUs (1,527,000 units) in connection with the IPO, recognizing $2 million and $4 million in compensation expense for the three and six months ended June 29, 2025, respectively[103] Accumulated Other Comprehensive Loss (in millions) | Component | June 29, 2025 | December 30, 2024 | | :--- | :--- | :--- | | Foreign Currency Translation | $21 | $(8) | | Pension Accounting | $(410) | $(418) | | Hedge Accounting | $(43) | $(26) | | Total Accumulated Other Comprehensive Loss | $(432) | $(452) | NOTE 19: EARNINGS PER SHARE Explains the calculation of basic and diluted EPS, including the impact of the IPO and stock options Weighted-Average Shares Outstanding | Metric | Three Months Ended June 29, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 29, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Basic weighted-average shares outstanding | 393,112,711 | 380,069,232 | 390,962,687 | 380,069,232 | | Diluted weighted-average shares outstanding | 393,751,294 | 380,069,232 | 391,410,859 | 380,069,232 | - Approximately 7.7 million and 6.5 million stock options were excluded from diluted EPS computation for the three and six months ended June 29, 2025, respectively, as their effect would have been anti-dilutive[116] NOTE 20: FAIR VALUE MEASUREMENTS Describes Smithfield's fair value measurements for financial instruments and the valuation of noncontrolling interests using a three-level hierarchy - Fair value measurements are categorized into a three-level hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[115][117] Assets and Liabilities Measured at Fair Value on a Recurring Basis (June 29, 2025, in millions) | Category | Level 1 | Level 2 | Level 3 | Total | | :--- | :--- | :--- | :--- | :--- | | Assets: | | | | | | Commodity derivative contracts | $5 | $8 | $— | $13 | | Mutual funds | $67 | $— | $— | $77 | | Insurance contracts | $— | $110 | $— | $110 | | Total Assets | $72 | $118 | $— | $200 | | Liabilities: | | | | | | Commodity derivative contracts | $64 | $26 | $— | $90 | | Total Liabilities | $64 | $26 | $— | $91 | Significant Unobservable Level 3 Inputs for Altosano Valuation | Unobservable Inputs | June 29, 2025 | December 29, 2024 | | :--- | :--- | :--- | | Weighted-average cost of capital | 10 % | 9 % | | Growth rate | 3 % | 3 % | | EBITDA multiple | 9.25x | 10x | | Control premium | 25 % | 25 % | Fair Value and Carrying Value of Debt (in millions) | Item | June 29, 2025 (Fair Value) | June 29, 2025 (Carrying Value) | December 29, 2024 (Fair Value) | December 29, 2024 (Carrying Value) | | :--- | :--- | :--- | :--- | :--- | | Debt | $1,882 | $1,984 | $1,821 | $1,983 | NOTE 21: REGULATION AND CONTINGENCIES Details Smithfield's contingent liabilities from litigation, including antitrust lawsuits, and insurance recoveries - Contingent liabilities related to litigation matters totaled $194 million as of June 29, 2025, an increase from $141 million at December 29, 2024[133] - Recorded $80 million in charges for litigation matters in SG&A for the three and six months ended June 29, 2025[133] - Settled all class claims in the antitrust price-fixing litigation with aggregate payments of $194 million, with 22 non-class cases currently pending that the company intends to vigorously defend against[134][135] - The Maxwell Foods litigation, involving breach of contract claims, was dismissed with prejudice on June 30, 2025, ending the litigation[144] - Received $29 million in insurance proceeds in Q2 2025 for recovery of losses from past litigation and $6 million in Q1 2025 for a 2021 fire, recognized as operating gains[146][147] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management discusses Smithfield's financial performance, condition, and operational results for Q2 and H1 2025, covering key factors, segment performance, liquidity, and non-GAAP measures Overview Describes Smithfield Foods, Inc. as an American food company with operations in Packaged Meats, Fresh Pork, and Hog Production, and a majority-owned subsidiary of WH Group - Smithfield Foods, Inc. is an American food company with approximately 32,000 employees in the U.S. and 2,500 in Mexico[149] - The company operates through three reportable segments: Packaged Meats, Fresh Pork, and Hog Production, with additional operations in Mexico and Bioscience aggregated as 'Other'[150] - The Packaged Meats segment sources approximately 80% of its raw materials from the Fresh Pork segment, while the Fresh Pork segment sourced approximately 40% of its raw materials from Hog Production in H1 2025 (down from 50% in H1 2024)[150][151] Growth Strategies Outlines Smithfield's strategies for profitable growth in Packaged Meats, enhancing Fresh Pork profitability, innovation, operational efficiency, and M&A - Key growth strategies include driving growth in the Packaged Meats segment, enhancing Fresh Pork profitability, investing in innovation, optimizing operational and supply chain efficiencies, and executing synergistic M&A[154][158] Key Factors and Recent Developments Affecting Our Results of Operations and Financial Condition Details the primary drivers influencing Smithfield's financial performance, including sales strategies, raw material costs, tariffs, litigation, tax legislation, and corporate actions Sales Drivers Explains how Smithfield drives sales in Packaged Meats through market penetration and innovation, and in Fresh Pork through global consumption and diverse channels - Packaged Meats sales are driven by increasing household penetration, consumption, price point, and product offerings, with a shift towards value-added and margin-accretive products[155] - Fresh Pork external sales are driven by consistent global pork consumption, maximizing hog value, and leveraging retail, foodservice, industrial, and export channels[157] Cost Factors Discusses raw material costs as the largest component of COGS, hedging strategies, and the optimization of hog production - Raw materials (feed ingredients, hogs, pork) are the largest component of cost of goods sold, with prices fluctuating based on market dynamics[158][159] - The company uses hedging transactions to mitigate commodity price risks[159] - Smithfield is optimizing hog production, reducing internal production from 17.6 million head in 2019 to an expected 11.5 million head in 2025, representing approximately 40% of Fresh Pork's processed hogs[160] Tariffs Addresses the impact of tariffs on Smithfield's export sales to China and the associated trade uncertainties - Export sales to China accounted for approximately 2% of total sales in the first six months of 2025[163] - Products exported to China face tariffs ranging from 25% to 57%, with most products subject to 57% rates[163] - Uncertainty exists regarding future tariff rates and trade relations between the U.S. and China[164] Litigation Covers Smithfield's contingent liabilities from litigation, including antitrust matters, and recent charges and insurance recoveries - Contingent liabilities related to litigation matters totaled $194 million as of June 29, 2025[167] - Recorded $80 million in litigation charges in SG&A for the three and six months ended June 29, 2025[167] - Received $29 million in insurance proceeds in Q2 2025 for recovery of losses incurred in connection with past litigation, recognized as an operating gain[169] One Big Beautiful Bill Describes the newly enacted tax legislation, "One Big Beautiful Bill," and its potential impact on Smithfield's financial reporting - The 'One Big Beautiful Bill' was signed into law on July 4, 2025, permanently reinstating 100% bonus depreciation, immediate expensing of R&D, and restoring EBITDA-based interest deduction limitations[171][175] - Smithfield is evaluating the impact of this legislation and will account for its effects in the third quarter of fiscal year 2025[171] Employee Retention Tax Credits Reports the recognition of employee retention tax credits and their classification in cost of sales Employee Retention Tax Credits Recognized (in millions) | Period | Amount | | :--- | :--- | | Second Quarter 2025 | $10 | | Second Quarter 2024 | $87 | - Substantially all credits were classified in cost of sales[172] Elizabeth, New Jersey Facility Closure Details the closure of Smithfield's Elizabeth, New Jersey dry sausage production facility to consolidate operations - Closed the Elizabeth, New Jersey dry sausage production facility on June 30, 2025, to consolidate production across its network[173] - Costs associated with the closure, primarily equipment disposal, were not material[173] Office Closures Announces Smithfield's plans to close satellite offices in Lisle, Illinois, and Kansas City, Missouri, and consolidate operations - Announced plans in Q2 2025 to close satellite offices in Lisle, Illinois, and Kansas City, Missouri, moving operations to Smithfield, Virginia[174] - Accrued $4 million in employee termination benefit costs in SG&A for personnel not expected to relocate[174] Workforce Reduction Describes Smithfield's Q1 2025 workforce reduction initiative to streamline operations and reduce expenses - Implemented a workforce reduction initiative in Q1 2025 to streamline operations and reduce operating expenses[175] - Recognized $9 million in employee termination benefit costs, with $6 million in SG&A and $2 million in cost of sales[176] Initial Public Offering Details Smithfield's January 2025 IPO, including shares issued, net proceeds, and equity-based incentive awards - Completed an IPO on January 29, 2025, issuing 13,043,479 shares of common stock at $20.00 per share, resulting in 393,112,711 total outstanding shares[177] - Received net proceeds of $236 million from the IPO[177] - Granted 9,822,467 stock options and 1,527,000 RSUs, recognizing $2 million and $4 million in compensation expense for the three and six months ended June 29, 2025, respectively[177] Altoona, Iowa Facility Closure Reports the closure of Smithfield's Altoona, Iowa ham boning facility to consolidate production and improve efficiencies - Closed the Altoona, Iowa ham boning facility on August 30, 2024, to consolidate production volume into other locations[178] - Costs associated with the closure, primarily related to operating lease assets and equipment disposal, were not material[178] European Carve-Out Explains the completion of Smithfield's European operations carve-out to WH Group and their reporting as discontinued operations - Completed the carve-out and transfer of European operations to WH Group on August 26, 2024, with no gain or loss recognized[179] - Historical results of European operations are reported as discontinued operations in the condensed consolidated financial statements[179] Dry Sausage Facility Acquisition Details Smithfield's acquisition of a dry sausage production facility in Nashville, Tennessee, to expand its value-added packaged meats business - Acquired a dry sausage production facility in Nashville, Tennessee, for $38 million on July 30, 2024[180] - The acquisition is part of a strategy to grow the value-added packaged meats business and meet demand for dry sausage products[180] Hog Production Reform Outlines Smithfield's Hog Production Reform initiatives, including partnerships and associated charges, to optimize operations - Hog Production Reform began in 2023 to optimize operations and improve cost structure, involving cessation of farm operations and termination of underperforming contract farmer agreements[181] - Became a member of Murphy Family Farms LLC (25% minority interest) and VisionAg Hog Production, LLC (9% minority interest), which now supply approximately 3.2 million and 600,000 hogs annually, respectively[182][183][184] - Recognized $10 million in charges associated with Hog Production Reform in cost of sales for the six months ended June 30, 2024[185] Results of Operations Analyzes Smithfield's consolidated and segment-specific sales, operating profit, and net income for Q2 and H1 2025 Consolidated Results of Continuing Operations Presents Smithfield's consolidated sales, gross profit, operating profit, and net income from continuing operations for Q2 and H1 2025 Consolidated Results of Continuing Operations (Three Months Ended) | Metric | June 29, 2025 (in millions) | June 30, 2024 (in millions) | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Sales | $3,786 | $3,412 | $374 | 11.0% | | Cost of sales | $3,288 | $2,885 | $403 | 14.0% | | Gross profit | $499 | $527 | $(28) | (5.4%) | | Operating profit | $260 | $334 | $(74) | (22.2%) | | Net income from continuing operations attributable to Smithfield | $188 | $256 | $(68) | (26.4%) | Consolidated Results of Continuing Operations (Six Months Ended) | Metric | June 29, 2025 (in millions) | June 30, 2024 (in millions) | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Sales | $7,558 | $6,856 | $701 | 10.2% | | Cost of sales | $6,549 | $5,967 | $582 | 9.8% | | Gross profit | $1,008 | $889 | $119 | 13.4% | | Operating profit | $582 | $498 | $84 | 16.8% | | Net income from continuing operations attributable to Smithfield | $412 | $370 | $42 | 11.3% | Operating Profit by Segment Provides a breakdown of operating profit (loss) for Smithfield's Packaged Meats, Fresh Pork, Hog Production, and Other segments Operating Profit (Loss) by Segment (Three Months Ended) | Segment | June 29, 2025 (in millions) | June 30, 2024 (in millions) | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Packaged Meats | $301 | $330 | $(29) | (8.7%) | | Fresh Pork | $35 | $58 | $(23) | (39.3%) | | Hog Production | $22 | $(2) | $24 | NM | | Other | $7 | $7 | $1 | 8.5% | | Corporate expenses | $(26) | $(32) | $6 | 17.9% | | Unallocated | $(80) | $(27) | $(53) | (200.1%) | | Operating profit | $260 | $334 | $(74) | (22.2%) | Operating Profit (Loss) by Segment (Six Months Ended) | Segment | June 29, 2025 (in millions) | June 30, 2024 (in millions) | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Packaged Meats | $567 | $616 | $(49) | (7.9%) | | Fresh Pork | $117 | $168 | $(51) | (30.4%) | | Hog Production | $23 | $(176) | $199 | NM | | Other | $22 | $(2) | $23 | NM | | Corporate expenses | $(55) | $(64) | $9 | 13.6% | | Unallocated | $(92) | $(44) | $(47) | (106.4%) | | Operating profit | $582 | $498 | $84 | 16.8% | Sales Analysis Analyzes sales performance across Smithfield's segments, highlighting drivers such as volume, pricing, and new partnerships Sales by Segment (Three Months Ended) | Segment | June 29, 2025 (in millions) | June 30, 2024 (in millions) | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Packaged Meats | $2,079 | $1,945 | $134 | 6.9% | | Fresh Pork | $2,080 | $1,981 | $99 | 5.0% | | Hog Production | $840 | $776 | $65 | 8.4% | | Other | $120 | $119 | $1 | 1.2% | | Consolidated sales | $3,786 | $3,412 | $374 | 11.0% | - Packaged Meats sales increased by 6.9% in Q2 2025 due to a 4.5% increase in sales volume (higher holiday ham sales) and a 2.3% increase in average sales price[190] - Hog Production sales increased by 8.4% in Q2 2025, driven by a $116 million increase in grain and feed sales and $103 million in other sales to Murphy Family Farms and VisionAg, offsetting a 24% decrease in market hogs sold[192][198] - Hog Production sales increased by 19.6% in H1 2025, driven by $271 million in sales to Murphy Family Farms and VisionAg, a $189 million increase in grain and feed sales, and an 8.2% increase in average market hog sales price, offsetting a 22% decrease in market hogs sold[196][199] Cost of Sales Analysis Examines the factors influencing Smithfield's cost of sales, including raw material prices, sales volume, and employee retention tax credits Cost of Sales by Segment (Three Months Ended) | Segment | June 29, 2025 (in millions) | June 30, 2024 (in millions) | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Packaged Meats | $1,690 | $1,518 | $173 | 11.4% | | Fresh Pork | $2,005 | $1,878 | $127 | 6.8% | | Hog Production | $808 | $766 | $42 | 5.5% | | Other | $107 | $107 | $— | 0.0% | | Consolidated cost of sales | $3,288 | $2,885 | $403 | 14.0% | - Packaged Meats cost of sales increased by $173 million in Q2 2025 due to a $146 million increase in raw material costs and a $32 million decrease in employee retention tax credits[201][202] - Hog Production cost of sales increased by $42 million in Q2 2025, driven by $115 million in grain and feed sales costs and $108 million in other goods/services sales costs to Murphy Family Farms and VisionAg, partially offset by a $103 million decrease in raw material costs from reduced hog production[201][202] - Hog Production cost of sales increased by $93 million in H1 2025, driven by $260 million in sales costs to Murphy Family Farms and VisionAg and a $187 million increase in grain and feed sales costs, partially offset by a $227 million decrease in raw material costs from reduced hog production[204] Selling, General and Administrative Expenses Analysis Selling, general and administrative (SG&A) expenses increased by $74 million (38.1%) in Q2 2025 and $72 million (18.3%) in H1 2025, primarily due to an $80 million increase in litigation charges and $10 million in employee termination benefits from workforce reduction and office closures Selling, General and Administrative Expenses (in millions) | Period | June 29, 2025 | June 30, 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended | $268 | $194 | $74 | 38.1% | | Six Months Ended | $465 | $393 | $72 | 18.3% | - The increase was primarily driven by an $80 million increase in the accrual for litigation charges and $10 million in employee termination benefits for workforce reduction and office closures[207][209] Operating Gains Analysis Operating gains significantly increased to $(30) million in Q2 2025 and $(39) million in H1 2025, primarily due to insurance recoveries related to past litigation and a 2021 fire Operating Gains (in millions) | Item | Three Months Ended June 29, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 29, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Insurance recoveries | $(29) | $(1) | $(35) | $(1) | | Gain on disposal of assets | $— | $— | $(2) | $(1) | | Other operating gains | $(1) | $(1) | $(2) | $(1) | | Operating gains | $(30) | $(2) | $(39) | $(3) | - Operating gains included a $29 million gain from a litigation insurance settlement in Q2 2025 and a $6 million gain from a 2021 fire insurance settlement in Q1 2025[210] Interest Expense, Net Analysis Net interest expense decreased by $9 million (45.0%) in Q2 2025 and $13 million (37.1%) in H1 2025, primarily due to higher levels of cash and cash equivalents earning interest Interest Expense, Net (in millions) | Period | June 29, 2025 | June 30, 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended | $11 | $19 | $(9) | (45.0%) | | Six Months Ended | $22 | $35 | $(13) | (37.1%) | - The decrease was driven by higher levels of cash and cash equivalents earning interest[211] Non-operating (Gains) Losses Analysis Non-operating (gains) losses shifted to a loss of $4 million in Q2 2025 and a gain of $2 million in H1 2025, primarily influenced by gains on nonqualified retirement plan assets and net pension and postretirement benefits costs Non-operating (Gains) Losses (in millions) | Item | Three Months Ended June 29, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 29, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Gain on nonqualified retirement plan assets | $(8) | $(3) | $(6) | $(9) | | Net pension and postretirement benefits cost | $4 | $2 | $8 | $3 | | Non-operating (gains) losses | $(4) | $(2) | $2 | $(6) | Income Tax Expense Analysis Income tax expense increased by $5 million (8.4%) in Q2 2025 and $38 million (39.1%) in H1 2025, primarily due to higher earnings. The effective tax rate for continuing operations increased to 24.6% in Q2 2025 and 24.0% in H1 2025, driven by increased profitability, a state tax settlement, and disallowance of certain officers' compensation Income Tax Expense (in millions) | Period | June 29, 2025 | June 30, 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended | $62 | $58 | $5 | 8.4% | | Six Months Ended | $134 | $96 | $38 | 39.1% | Effective Tax Rate Attributable to Continuing Operations | Period | June 29, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Second Quarter | 24.6% | 18.2% | | First Six Months | 24.0% | 20.5% | Loss from Equity Method Investments Analysis Loss from equity method investments increased by $3 million in Q2 2025 and $7 million in H1 2025, primarily due to losses incurred by Murphy Family Farms Loss from Equity Method Investments (in millions) | Period | June 29, 2025 | June 30, 2024 | $ Change | | :--- | :--- | :--- | :--- | | Three Months Ended | $3 | $— | $3 | | Six Months Ended | $8 | $1 | $7 | - The increase in loss was primarily due to losses incurred by Murphy Family Farms[214] Liquidity and Capital Resources Assesses Smithfield's liquidity position, credit facilities, cash flow activities, and anticipated cash requirements Overview of Liquidity Provides an overview of Smithfield's strong liquidity position, including cash and committed credit facilities - As of June 29, 2025, Smithfield had $3,225 million of available liquidity, comprising $928 million in cash and cash equivalents and $2,297 million from committed credit facilities[216][217] - The company believes its current liquidity is strong and sufficient to meet working capital needs and financial obligations for at least the next twelve months[216] Credit Facilities Details Smithfield's refinanced Senior Revolving Credit Facility and Accounts Receivable Securitization Facility, and covenant compliance - Refinanced the $2,100 million Senior Revolving Credit Facility in February 2025, extending maturity to February 12, 2030[218] - The Senior Revolving Credit Facility includes financial maintenance covenants for a maximum total consolidated leverage ratio of 0.50 to 1.00 and a minimum interest coverage ratio of 3.50 to 1.00[218] - Maintains a $225 million Accounts Receivable Securitization Facility, maturing in November 2027, with $28 million in letters of credit issued as of June 29, 2025[220][221] Monetization Facility Explains the termination of Smithfield's Accounts Receivable Monetization Facility due to sufficient liquidity and cost-effectiveness - Terminated the uncommitted $250 million Accounts Receivable Monetization Facility on July 22, 2025[224] - The termination was due to Smithfield's strong liquidity position and internal capital resources, making the facility no longer cost-effective or necessary[224] Charges from Monetization Facility (in millions) | Period | Charges | | :--- | :--- | | Three Months Ended June 29, 2025 | $3 | | Three Months Ended June 30, 2024 | $4 | | Six Months Ended June 29, 2025 | $6 | | Six Months Ended June 30, 2024 | $7 | Cash Flows From Operating Activities of Continuing Operations Net cash flows from operating activities of continuing operations significantly increased to $108 million for the six months ended June 29, 2025, from a use of $9 million in the prior year. This improvement was driven by changes in working capital, deferred taxes, and hedging activity, as well as higher earnings Net Cash Flows from Operating Activities of Continuing Operations (Six Months Ended) | Metric | June 29, 2025 (in millions) | June 30, 2024 (in millions) | | :--- | :--- | :--- | | Net income from continuing operations | $415 | $372 | | Net cash flows from (used in) operating activities of continuing operations | $108 | $(9) | - The increase was primarily driven by changes in working capital (accounts receivable increase due to sales to Murphy Family Farms and VisionAg, inventory decrease due to Hog Production Reform, accounts payable decrease due to seasonal payments, and accrued expenses decrease due to variable compensation payout and litigation accruals)[225] Cash Flows From Investing Activities of Continuing Operations Net cash flows used in investing activities of continuing operations decreased to $171 million for the six months ended June 29, 2025, from $215 million in the prior year. This was mainly due to lower capital expenditures and reduced net expenditures from breeding stock transactions Net Cash Flows Used in Investing Activities of Continuing Operations (Six Months Ended) | Metric | June 29, 2025 (in millions) | June 30, 2024 (in millions) | | :--- | :--- | :--- | | Capital expenditures | $(158) | $(173) | | Net expenditures from breeding stock transactions | $(13) | $(42) | | Net cash flows used in investing activities of continuing operations | $(171) | $(215) | - Capital expenditures primarily consisted of plant automation and improvement projects[226] Cash Flows From Financing Activities of Continuing Operations Net cash flows from financing activities of continuing operations significantly improved to $38 million for the six months ended June 29, 2025, compared to a use of $202 million in the prior year. This was primarily driven by net proceeds from the issuance of common stock (IPO) and lower principal payments on debt, partially offset by dividend payments Net Cash Flows From Financing Activities of Continuing Operations (Six Months Ended) | Metric | June 29, 2025 (in millions) | June 30, 2024 (in millions) | | :--- | :--- | :--- | | Net proceeds from issuance of common stock | $236 | $— | | Principal payments on long-term debt and finance lease obligations | $(1) | $(19) | | Payment of dividends | $(197) | $(182) | | Net cash flows from (used in) financing activities of continuing operations | $38 | $(202) | Other Anticipated or Potential Cash Requirements Outlines Smithfield's anticipated capital expenditures, dividend payments, and potential cash requirements related to investments and litigation - Anticipates capital expenditures in the range of $400 million to $500 million for 2025, including profit improvement projects like packaged meats capacity expansion and automation[228] - Announced a quarterly dividend of $0.25 per share for August 28, 2025, with an anticipated annual dividend rate of $1.00 per share for fiscal 2025[229] - TPG may require Monarch Bio Energy, LLC to purchase TPG's ownership interests if a sale of the joint venture is not consummated by January 17, 2026[230][231] - Noncontrolling interest holders in Altosano have a put option to obligate Smithfield to redeem a portion or all of their interest, valued at $245 million as of June 29, 2025[232] Risk Management Activities Describes Smithfield's exposure to market risks from commodity prices, interest rates, and foreign exchange rates, and its use of derivatives - Exposed to market risks primarily from changes in commodity prices, and to a lesser degree, interest rates and foreign exchange rates[234] - Utilizes derivative instruments to hedge exposure to changing prices and rates[234] - Changes in derivative portfolio value can impact liquidity through margin deposit requirements, with a maximum of $121 million held by brokers/counterparties over the past two fiscal years[235] Guarantees Notes Smithfield's release from its joint and several guaranty of Monarch Bio Energy, LLC's debt - Smithfield was released from its joint and several guaranty of Monarch Bio Energy, LLC's debt in June 2025 after Monarch refinanced its debt[237] Non-GAAP Measures Explains Smithfield's use of non-GAAP financial measures to provide a clearer understanding of underlying performance and debt sustainability Adjusted Net Income from Continuing Operations Attributable to Smithfield and Adjusted Net Income from Continuing Operations per Common Share Attributable to Smithfield Defines adjusted net income and EPS as non-GAAP measures that exclude unusual or infrequent items for better year-over-year comparison - Non-GAAP measures are used to exclude items that are unusual in nature, infrequent in occurrence, or stem from strategic restructuring decisions[240] Adjusted Net Income from Continuing Operations Attributable to Smithfield (in millions, except per share data) | Metric | Three Months Ended June 29, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 29, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income from continuing operations attributable to Smithfield | $188 | $256 | $412 | $370 | | Litigation charges | $73 | $— | $73 | $— | | Reduction in workforce (SG&A) | $— | $— | $6 | $— | | Reduction in workforce (Cost of sales) | $— | $— | $2 | $— | | Office closures | $4 | $— | $4 | $— | | Hog Production Reform (Cost of sales) | $— | $— | $2 | $10 | | Employee retention tax credits (Cost of sales) | $(10) | $(86) | $(10) | $(86) | | Insurance recoveries | $(29) | $(1) | $(35) | $(1) | | Adjusted net income from continuing operations attributable to Smithfield | $217 | $192 | $443 | $315 | | Adjusted net income from continuing operations attributable to Smithfield per diluted common share | $0.55 | $0.51 | $1.13 | $0.83 | EBITDA from Continuing Operations, Adjusted EBITDA from Continuing Operations and Adjusted EBITDA Margin from Continuing Operations Explains EBITDA and Adjusted EBITDA as non-GAAP measures for assessing operating performance, debt capacity, and efficiency - EBITDA from continuing operations excludes financing and investing activities to provide a comparable year-over-year analysis[242] - Adjusted EBITDA from continuing operations further excludes discontinued operations, non-operating gains/losses, and other unusual or infrequent items[242] Adjusted EBITDA from Continuing Operations (in millions, except percentages) | Metric | Three Months Ended June 29, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 29, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income from continuing operations | $188 | $259 | $415 | $372 | | Interest expense, net | $11 | $19 | $22 | $35 | | Income tax expense | $62 | $58 | $134 | $96 | | Depreciation and amortization | $82 | $83 | $165 | $165 | | EBITDA from continuing operations | $344 | $419 | $736 | $668 | | Litigation charges | $73 | $— | $73 | $— | | Employee retention tax credits | $(10) | $(86) | $(10) | $(86) | | Insurance recoveries | $(29) | $(1) | $(35) | $(1) | | Adjusted EBITDA from continuing operations | $381 | $333 | $777 | $594 | | Adjusted EBITDA margin from continuing operations | 10.1 % | 9.7 % | 10.3 % | 8.7 % | Net Debt and Ratio of Net Debt to Adjusted EBITDA from Continuing Operations Defines net debt and its ratio to adjusted EBITDA as non-GAAP measures for understanding financial position and debt sustainability - Net debt is a non-GAAP measure that helps investors understand the financial position and is used to calculate leverage ratios[246] - The ratio of net debt to adjusted EBITDA from continuing operations monitors debt sustainability and ability to take on additional debt[246] Net Debt and Ratio of Net Debt to Adjusted EBITDA from Continuing Operations (in millions, except ratios) | Metric | June 29, 2025 | December 29, 2024 | | :--- | :--- | :--- | | Total debt and finance lease obligations | $2,003 | $2,002 | | Cash and cash equivalents | $(928) | $(943) | | Net debt | $1,075 | $1,059 | | Adjusted EBITDA from continuing operations (LTM) | $1,562 | $1,379 | | Ratio of net debt to adjusted EBITDA from continuing operations | 0.7x | 0.8x | Adjusted Operating Profit and Adjusted Operating Profit Margin Explains adjusted operating profit and margin as non-GAAP measures to provide a clearer view of underlying operating results by excluding unusual items - Adjusted operating profit and margin provide a better understanding of underlying operating results by excluding unusual or infrequent items and strategic restructuring impacts[248] Adjusted Operating Profit (Loss) by Segment (Three Months Ended June 29, 2025, in millions, except percentages) | Segment | Operating profit (loss) | Litigation charges | Office closures | Employee retention tax credits | Insurance recoveries | Adjusted operating profit (loss) | Adjusted operating profit (loss) margin | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Packaged Meats | $301 | $— | $— | $(5) | $— | $296 | 14.2 % | | Fresh Pork | $35 | $— | $— | $(5) | $— | $30 | 1.4 % | | Hog Production | $22 | $— | $— | $— | $— | $22 | 2.6 % | | Other | $7 | $— | $— | $— | $— | $7 | 6.1 % | | Corporate | $(26) | $— | $— | $— | $— | $(26) | NM | | Unallocated | $(80) | $73 | $4 | $— | $(29) | $(31) | NM | | Consolidated | $260 | $73 | $4 | $(10) | $(29) | $298 | 7.9 % | Adjusted Operating Profit (Loss) by Segment (Six Months Ended June 29, 2025, in millions, except percentages) | Segment | Operating profit (loss) | Litigation charges | Workforce reduction | Office closures | Plant closure | Hog Production Reform | Employee retention tax credits | Insurance recoveries | Adjusted operating profit (loss) | Adjusted operating profit (loss) margin | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Packaged Meats | $567 | $— | $— | $— | $— | $— | $(5) | $— | $562 | 13.7 % | | Fresh Pork | $117 | $— | $— | $— | $— | $— | $(5) | $— | $112 | 2.7 % | | Hog Production | $23 | $— | $— | $— | $— | $— | $— | $— | $23 | 1.3 %