Segment Reporting

9 Months Ended

Jun. 27, 2015

Segment Reporting [Abstract]

Segment Reporting

SEGMENT REPORTING

We operate in five segments: Chicken, Beef, Pork, Prepared Foods and International. We measure segment profit as operating income (loss).

Chicken: Chicken includes our domestic operations related to raising and processing live chickens into fresh, frozen and value-added chicken products, as well as sales from allied 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 logistics operations to move products through our domestic supply chain and the global operations of our chicken breeding stock subsidiary.

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.

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. Products primarily include pepperoni, bacon, sausage, beef and pork pizza toppings, pizza crusts, flour and corn tortilla products, appetizers, 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.

In fiscal 2014, we acquired Hillshire Brands, a manufacturer and marketer of branded, convenient foods which includes brands such as Jimmy Dean®, Ball Park®, Hillshire Farm®, State Fair®, Van's®, Sara Lee® frozen bakery and Chef Pierre® pies as well as artisanal brands Aidells®, Gallo Salame®, and Golden Island® premium jerky. Hillshire Brands' results from operations are included in the Prepared Foods segment.

International: International includes our foreign operations primarily related to raising and processing live chickens into fresh, frozen and value-added chicken products in Brazil, China, India and Mexico. Products are marketed in each respective country to food retailers, foodservice distributors, restaurant operators, hotel chains, noncommercial foodservice establishments and live markets, as well as to other international export markets.

In fiscal 2014, we announced our plan to sell the Brazil and Mexico operations, part of our International segment, to JBS for $575 million in cash, subject to certain adjustments. As further described in Note 2: Acquisitions and Dispositions, we sold the Brazil operation in the first quarter of fiscal 2015. The sale of the Mexico operation closed on June 29, 2015, which is in our fourth quarter of fiscal 2015.

The results from Dynamic Fuels are included in Other in fiscal 2014. We allocate expenses related to corporate activities to the segments, except for third-party merger and integration costs 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
	June 27, 2015				June 28, 2014				June 27, 2015				June 28, 2014
Sales:
Chicken	$	2,757			$	2,829			$	8,366			$	8,327
Beef	4,305				4,189				12,826				11,748
Pork	1,207				1,766				3,951				4,677
Prepared Foods	1,810				901				5,814				2,669
International	244				365				771				1,020
Other	—				—				—				—
Intersegment Sales	(252		)		(368		)		(861		)		(966		)
Total Sales	$	10,071			$	9,682			$	30,867			$	27,475
Operating Income (Loss):
Chicken	$	313			$	195			$	996			$	682
Beef	(7		)		101				(33		)		194
Pork	64				128				285				356
Prepared Foods	207			(a)	(50		)	(c)	438			(a)	(13		)	(c)
International	1				(15		)		(28		)		(73		)
Other	(15		)	(b)	(8		)	(d)	(39		)	(b)	(22		)	(d)
Total Operating Income	563				351				1,619				1,124
Total Other (Income) Expense	45			(b)	41			(d)	183			(b)	90			(d)
Income before Income Taxes	$	518			$	310			$	1,436			$	1,034

(a) Includes merger and integration costs of $1 million and $10 million for the three and nine months ended June 27, 2015, respectively, and $11 million net proceeds and $17 million net costs related to a legacy Hillshire Brands plant fire for the three and nine months ended June 27, 2015, respectively.

(b) Operating income in Other includes merger and integration costs of $15 million and $39 million for the three and nine months ended June 27, 2015, respectively, and Other (Income) Expense includes a $21 million gain on the sale of equity securities.

(c) Includes $49 million impairment charge related to the closure of three Prepared Foods plants.

(d) Operating income in Other includes $7 million related to merger and integration costs and Other (Income) Expense includes $22 million related to costs associated with bridge financing facilities, both incurred as part of the Hillshire Brands acquisition.

The Chicken segment had sales of $6 million and $2 million in the third quarter of fiscal 2015 and 2014, respectively, and sales of $13 million and $6 million in the first nine months of fiscal 2015 and 2014, respectively, from transactions with other operating segments of the Company. The Beef segment had sales of $93 million and $83 million in the third quarter of fiscal 2015 and 2014, respectively, and sales of $248 million and $213 million in the first nine months of fiscal 2015 and 2014, respectively, from transactions with other operating segments of the Company. The Pork segment had sales of $153 million and $283 million in the third quarter of fiscal 2015 and 2014, respectively, and sales of $600 million and $747 million in the first nine months of fiscal 2015 and 2014, 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.