DESCRIPTION OF THE COMPANY

We are the world's largest meat company and the second-largest food production company in the Fortune 500 with one of the most recognized brand names in the food industry. We produce, distribute and market chicken, beef, pork, prepared foods and related allied products. Our operations are conducted in four segments: Chicken, Beef, Pork and Prepared Foods. Some of the key factors that influence our business are customer demand for our products, ability to maintain and grow relationships with customers and introduce new and innovative products to the marketplace, accessibility of international markets, market prices for our chicken, beef and pork products, cost of live cattle and hogs, raw materials and grain and operating efficiencies of our facilities.

OVERVIEW

? Chicken Segment - Fiscal 2008 operating results declined as compared to fiscal 2007 due largely to increased input costs of approximately $900 million, including increased grain costs, other feed ingredient costs and cooking ingredients. These increases were partially offset by increased average sales prices, as well as increased net gains of $127 million from our commodity risk management activities related to grain purchases, which exclude the impact from related physical purchase transactions that will impact future period operating results.
? Beef Segment - Fiscal 2008 operating results improved compared to fiscal 2007 as operating margins significantly improved in the latter half of the year, with an operating margin of 2.8% in the last six months of fiscal 2008. While sales volume was down with the closure of our Emporia, Kansas, slaughter operation, operating margins improved due to improved average sales prices and operational efficiencies.
? Pork Segment - We achieved record operating income of $280 million, an increase of $135 million as compared to fiscal 2007, due to adequate hog supplies and strong domestic and export demand.
? Prepared Foods Segment- Declines in operating income for fiscal 2008 compared to fiscal 2007 for our Prepared Foods segment were primarily due to increased raw material costs, partially offset by increased average sales prices.
? Acquisitions - In fiscal 2008, we announced the following transactions:
? In December 2007, Cobb-Vantress, Inc. (Cobb), our wholly-owned poultry breeding subsidiary, formed an alliance with Hendrix Genetics B.V. (Hendrix). This alliance will strengthen Cobb's position in the broiler breeding industry, Hendrix' position in egg layer, turkey and swine genetics, and enable Cobb and Hendrix to explore other joint venture opportunities. In July 2008, Cobb acquired the Hybro poultry breeding and genetics business from Hendrix. The acquisition included genetic lines and facilities. At the same time, Cobb and Hendrix signed a Joint Development Agreement involving their respective Research & Development in livestock genetics.
? In February 2008, we signed an agreement with the Jiangsu Jinghai Poultry Industry Group Co., Ltd., a Chinese poultry breeding company, to build a fully integrated poultry operation in Haimen City near Shanghai. The joint venture, Jiangsu Tyson Foods, will produce fresh, packaged chicken products that will be sold under the Tyson name. Jiangsu Tyson will become the first producer to deliver brand name, high quality fresh chicken to consumers in the eastern China market. We own 70 percent of the business and production is expected to begin in 2009. ? In June 2008, we announced the acquisition of 51% ownership of Godrej Foods, Ltd., a poultry processing business in India. The joint venture is called Godrej Tyson Foods. We anticipate annual sales of approximately $50 million initially, and expect operations will expand later. Godrej Foods currently sells retail fresh and further processed chicken.
? In September 2008, we announced a joint venture agreement was finalized with Shandong Xinchang Group, a vertically integrated poultry operation in eastern China. Once the agreement receives the necessary government approvals, which is expected in fiscal 2009, Tyson will have a 60% ownership. The joint venture will be called Shandong Tyson Xinchang Foods Company.
? In September 2008, we signed purchase agreements with three poultry companies in southern Brazil, each vertically integrated. These companies include Macedo Agroindustrial, Avicola Itaiopolis and Frangobras. We closed on each of these transactions subsequent to fiscal 2008.
? In June 2008, we executed a letter of intent to sell Lakeside Farm Industries (Lakeside), our Canadian beef operation, to XL Foods, Inc., a Canadian-owned beef processing business. Under the terms of the letter of intent, Tyson will sell Lakeside for $104 million and retain the finished product inventory, accounts receivable and accounts payable of Lakeside as of the closing date. XL Foods will pay an additional amount for cattle inventory, fertilizer inventory and packaging assets, estimated to approximate $82 million. The transaction remains subject to government approvals and execution of a definitive agreement by the parties. The results of Lakeside are reported as a discontinued operation. ? See Liquidity and Capital Resources for a summary of the impact of recent deterioration of credit and capital markets on our business.

TYSON FOODS, INC.



                                               in millions, except per share data
                                             2008           2007             2006
Net income (loss)                     $        86    $       268    $        (196 )
Net income (loss) per diluted share          0.24           0.75            (0.58 )

2008 - Net income includes the following items:
? $33 million of charges related to asset impairments, including packaging equipment, intangible assets, unimproved real property and software; ? $17 million charge related to restructuring our Emporia, Kansas, beef operation;
? $13 million charge related to closing our Wilkesboro, North Carolina, Cooked Products poultry plant;
? $13 million of charges related to flood damage at our Jefferson, Wisconsin, plant and severance charges related to the FAST initiative; and ? $18 million non-operating gain related to sale of an investment. 2007 - Net income includes the following item:
? $17 million of tax expense related to a fixed asset tax cost correction, primarily related to a fixed asset system conversion in 1999. 2006 - Net loss includes the following items:
? $63 million of costs related to beef, prepared foods and poultry plant closings;
? $19 million of charges related to our Cost Management Initiative and other business consolidation efforts which included severance expense, product rationalization costs and related intangible asset impairment expenses; ? $15 million tax expense resulting from a review of our tax account balances; and
? $5 million charge related to the cumulative effect of a change in accounting principle due to adoption of Financial Accounting Standards Board Interpretation No. 47, "Accounting for Conditional Asset Retirement Obligations," an interpretation of FASB Statement No. 143 (FIN 47).

OUTLOOK

The following elements comprise our long-term strategic plan:

? Create innovative and insight-driven food solutions: Discover and sell market-leading products and services to grow Tyson's brand equity and help our customers succeed through our commitment to joint value creation. ? Optimize commodity business models: Emphasize cost focus in operations, manage margins and maximize revenue by capitalizing on scale, yield, pricing, product mix and services.
? Build a multi-national enterprise: Accelerate expansion in cost competitive regions and markets with the greatest growth potential as well as increase and diversify United States exports.
? Revolutionize conversion of raw materials and by-products into high-margin initiatives: Commercialize opportunities outside the core business, such as renewable energy from fat and developing other technologically-advanced platforms from materials such as feathers, viscera, blood and animal waste.

Our outlook for segments in fiscal 2009 includes:

? Chicken - Export markets, credit availability and the recent strengthening dollar have negatively impacted leg quarter pricing. International leg quarter sales will be difficult at least through the beginning of fiscal 2009. We have seen grain prices drop significantly from all-time highs this past summer that if sustained, will benefit us in the long run. However, we have some grain positions that could negatively impact us depending on corn and soybean meal closing prices at the end of the first quarter fiscal 2009.
? Beef - We expect cattle supplies will be down 1-2% in fiscal 2009, but there should be ample supply to run our plants efficiently. We will continue to focus on the operational efficiencies from fiscal 2008 and expect a successful fiscal 2009.
? Pork - While we anticipate fewer hog supplies in fiscal 2009, we expect we will have an adequate supply to achieve good operating results. This segment should continue to do well in fiscal 2009, but likely not at the record amounts we had in fiscal 2008.
? Prepared Foods - High input costs will likely continue in fiscal 2009.
Demand for our products remains strong, which should provide for sales volume growth in fiscal 2009.

TYSON FOODS, INC.

SUMMARY OF RESULTS - CONTINUING OPERATIONS

Sales                                                in millions
                                    2008        2007        2006
Sales                           $ 26,862    $ 25,729    $ 24,589
Change in average sales price        5.1 %       5.8 %
Change in sales volume              (0.7 )%     (1.1 )%
Sales growth                         4.4 %       4.6 %

2008 vs. 2007 -
? The improvement in sales was largely due to improved average sales prices, which accounted for an increase of approximately $1.5 billion. While all segments had improved average sales prices, the majority of the increase was driven by increases in the Chicken and Beef segments. ? Sales were negatively impacted by a decrease in sales volume, which accounted for a decrease of approximately $318 million. This was primarily due to a decrease in Beef volume and the sale of two poultry production facilities in fiscal 2007, partially offset by an increase in Pork volume. 2007 vs. 2006 -
? The improvement in sales was largely due to improved average sales prices, which accounted for an increase of approximately $1.4 billion in sales. The improvement was due to better market conditions in all segments, with the majority of the increase attributable to the Chicken and Beef segments. ? Sales were negatively impacted by a slight decrease in sales volume, which accounted for a decrease of approximately $226 million. The decrease was driven by decreases in the Chicken and Prepared Foods segments, offset by improvements in the Beef and Pork segments. The decrease included planned production cuts and the closure of production facilities, offset by improvements in the beef and pork export markets and improved domestic pork demand.

Cost of Sales                                               in millions
                                             2008       2007       2006
Cost of sales                            $ 25,616   $ 24,300   $ 23,639
Gross margin                             $  1,246   $  1,429   $    950

2008 vs. 2007 -
? Cost of sales increased $1.3 billion. Cost per pound contributed to a $1.6 billion increase, offset partially by a decrease in sales volume reducing cost of sales $323 million.
? Increase of over $1.0 billion in costs in the Chicken segment, which included increased input costs of approximately $900 million, including grain costs, other feed ingredient costs and cooking ingredients. Plant costs, including labor and logistics, increased by approximately $200 million. These increases were partially offset by increased net gains of $127 million from our commodity risk management activities related to grain purchases, which exclude the impact from related physical purchase transactions that will impact future period operating results. ? Increase in average domestic live cattle costs of approximately $271 million.
? Increase in operating costs in the Beef and Pork segments of approximately $180 million.
? Decrease due to sales volume included lower Beef and Chicken sales volume, partially offset by higher Pork sales volume. ? Decrease due to net gains of $173 million from our commodity risk management activities related to forward futures contracts for live cattle and hog purchases as compared to the same period of fiscal 2007. These amounts exclude the impact from related physical purchase transactions, which will impact future period operating results. ? Decrease in average live hog costs of approximately $117 million. 2007 vs. 2006 -
? Decrease in cost of sales as a percentage of sales primarily was due to the increase in average sales prices, while average live prices and production costs did not increase at the same rate.
? Cost of sales increased by $661 million, with an increase in cost per pound contributing to an $853 million increase, offset by a decrease in sales volume reducing cost of sales by $192 million.
? Increase in net grain costs of $256 million, which included $334 million of increased grain costs, partially offset by increased net gains of $78 million from our commodity risk management activities related to grain purchases.
? Increase in average domestic live cattle and hog costs, as well as an increase in domestic pork sales volume, increased cost of sales by approximately $682 million.
? Decrease in Chicken segment sales volume decreased cost of sales by approximately $346 million, primarily due to planned production cuts, the sale of two poultry plants and the closure of a poultry plant in fiscal 2006 due to a fire.

TYSON FOODS, INC.



Selling, General and Administrative             in millions
                                       2008    2007    2006
Selling, general and administrative   $ 879   $ 814   $ 930
As a percentage of sales                3.3 %   3.2 %   3.8 %

2008 vs. 2007 -
? Increase of $29 million related to unfavorable investment returns on company-owned life insurance, which is used to fund non-qualified retirement plans.
? Increase of $16 million related to advertising and sales promotions. ? Increase of $14 million due to a favorable actuarial adjustment related to retiree healthcare plan recorded in fiscal 2007.
? Increase of $9 million due to a gain recorded in fiscal 2007 on the disposition of an aircraft.
2007 vs. 2006 -
? Decrease of $39 million in advertising and sales promotion expenses. ? Decrease of $27 million due to a favorable actuarial adjustment related to retiree healthcare plan recorded in fiscal 2007 compared to an unfavorable adjustment recorded in fiscal 2006.
? Decrease of $15 million in other professional fees.
? Decrease of $18 million due to a gain recorded in fiscal 2007 on the disposition of an aircraft, as well as favorable investment returns on company-owned life insurance.
? We had various other savings recognized as part of our Cost Management Initiative. These savings are in addition to some of the decreases above and include management salaries, travel, relocation and recruiting, personnel awards, as well as other various savings.
? Increase of $18 million in earnings-based incentive compensation.

Other Charges in millions
2008 2007 2006
$ 36 $ 2 $ 70

2008 -
? Included $17 million charge related to restructuring our Emporia, Kansas, beef operation.
? Included $13 million charge related to closing our Wilkesboro, North Carolina, Cooked Products poultry plant.
? Included $6 million of severance charges related to the FAST initiative. 2006 -
? Included $47 million of charges related to closing our Norfolk and West Point, Nebraska, operations.
? Included $14 million of charges related to closing our Independence and Oelwein, Iowa, operations.
? Included $9 million of severance accruals related to our Cost Management Initiative announced in July 2006.

Interest Income in millions
2008 2007 2006
$ 9 $ 8 $ 30

2006 - Included $20 million of interest earned on the $750 million short-term investment held on deposit with a trustee used for the repayment of the 7.25% Notes maturing on October 1, 2006.

Interest Expense                               in millions
                                  2008       2007     2006
Interest expense                $  215    $   232    $ 268
Average borrowing rate             7.0 %      7.4 %    7.4 %
Change in average weekly debt     (1.7 )%   (15.9 )%

2007 vs. 2006 - The decrease in interest expense primarily was due to the $1.0 billion senior unsecured notes borrowing at the end of the second quarter of fiscal 2006. We used $750 million of the proceeds from the borrowing for the repayment of the 7.25% Notes maturing on October 1, 2006.

TYSON FOODS, INC.



Other Income, net             in millions
                     2008    2007    2006
                    $  29   $  21   $  20




   2008 -
   ?   Included $18 million non-operating gain related to the sale of an
       investment.
   2007 -
   ?   Included $14 million in foreign currency exchange gain.
   2006 -

Effective Tax Rate
                       2008     2007     2006
                       44.6 %   34.6 %   35.0 %




   2008 -
   ?   Increased the effective tax rate 5.0% due to increase in state valuation
       allowances.

TYSON FOODS, INC.

SEGMENT RESULTS

We operate in four segments: Chicken, Beef, Pork and Prepared Foods. The following table is a summary of sales and operating income (loss), which is how we measure segment income (loss).

In the fourth quarter fiscal 2008, we began to manage and report the operating results and identifiable assets of our logistics operations in the segment in which the product being moved relates. As a result, our operating segments now reflect logistics operations which were previously included in Other. All prior periods have been restated to reflect this change.

Segment results exclude the results of our discontinued operation, Lakeside.

                                                                           in millions
                               Sales                      Operating Income (Loss)
                       2008       2007         2006           2008      2007      2006
Chicken            $  8,900   $  8,210     $  7,958       $   (118 )   $ 325     $  94
Beef                 11,664     11,540       10,866            106        51      (254 )
Pork                  3,587      3,314        3,067            280       145        55
Prepared Foods        2,711      2,665        2,698             63        92        55
Total              $ 26,862   $ 25,729     $ 24,589       $    331     $ 613     $ (50 )

Chicken Segment
Results                                                                                  in millions
                                                                                            Change
                                                        Change 2008                       2007 vs.
                            2008            2007           vs. 2007            2006           2006
Sales                 $    8,900      $    8,210      $         690      $    7,958    $       252
Sales Volume Change                                            (0.4 )%                        (4.7 )%
Average Sales Price
Change                                                          8.9 %                          8.3 %

Operating Income
(Loss)                $     (118 )    $      325         $     (443 )    $       94    $       231
Operating Margin            (1.3 )%          4.0 %                              1.2 %

2008 - Operating loss included $26 million of charges related to: plant closings; impairments of unimproved real property and software; and severance. 2007 - Operating income included a $10 million gain on the sale of two poultry plants and related support facilities.
2006 - Operating income included $9 million of charges related to our Cost Management Initiative, other business consolidation efforts and plant closing costs.

2008 vs. 2007 -
? Sales and Operating Income (Loss) - Sales increased as a result of an increase in average sales prices, partially offset by a decrease in sales volume due to the sale of two poultry plants in fiscal 2007. Operating results were adversely impacted by increased input costs of approximately $900 million, including grain costs, other feed ingredient costs and cooking ingredients. Plant costs, including labor and logistics, increased by approximately $200 million. This was partially offset by increased net gains of $127 million from our commodity trading risk management activities related to grain purchases, which exclude the impact from related physical purchase transactions that will impact future period operating results. Operating results were also negatively impacted by increased selling, general and administrative expenses of $43 million. 2007 vs. 2006 -
? Sales and Operating Income - Sales and operating income increased due to an increase in average sales prices, partially offset by a decrease in sales volume. The decrease in sales volume was due to planned production cuts, the sale of two poultry plants and the closure of a poultry plant in fiscal 2006 due to a fire. The increase in average sales prices contributed to improved operating income, partially offset by an increase in net grain costs of $256 million. The increase of net grain costs includes $334 million of increased grain costs, partially offset by increased net gains of $78 million from our commodity risk management activities related to grain purchases. Additionally, operating income improved due to a decrease in selling, general and administrative expenses.

TYSON FOODS, INC.



Beef Segment
Results                                                                                 in millions
                                                                                           Change
                                                       Change 2008                       2007 vs.
                            2008           2007           vs. 2007            2006           2006
Sales                 $   11,664     $   11,540      $         124      $   10,866    $       674
Sales Volume Change                                           (4.6 )%                         0.9 %
Average Sales Price
Change                                                         5.9 %                          5.3 %

Operating Income
(Loss)                $      106     $       51         $       55      $     (254 )  $       305
Operating Margin             0.9 %          0.4 %                             (2.3 )%

2008 - Operating income included $35 million of charges related to: plant restructuring; impairments of packaging equipment and intangible assets; and severance.
2006 - Operating loss included $52 million of charges related to plant closings, our Cost Management Initiative and other business consolidation efforts.

2008 vs. 2007 -
? Sales and Operating Income - Sales and operating income were impacted positively by higher average sales prices and improved operational efficiencies, partially offset by decreased sales volume due primarily to closure of the Emporia, Kansas, slaughter operation. Operating results were also negatively impacted by higher operating costs. Fiscal 2008 operating results include realized and unrealized net gains of $53 million from our commodity risk management activities related to forward futures contracts for live cattle, excluding the related impact from the physical sale and purchase transactions, compared to realized and unrealized net losses of $2 million recorded in fiscal 2007. Operating results were positively impacted by an increase in average sales prices exceeding the increase in average live prices.
2007 vs. 2006 -
? Sales and Operating Income (Loss) - Sales and operating income increased due to higher average sales prices, as well as higher sales volume. Operating results improved due to operating cost efficiencies and yield improvements, partially offset by an increase in average live prices. Also, operating results improved significantly from a decrease in selling, general and administrative expenses. Fiscal 2007 operating results included realized and unrealized net losses of $2 million from our commodity risk management activities related to forward futures contracts for live cattle, excluding the related impact from the physical sale and purchase transactions, compared to realized and unrealized net losses of $40 million recorded in fiscal 2006.

TYSON FOODS, INC.



Pork Segment
Results                                                                                  in millions
. . .