SMITHFIELD FOODS INCSFD
SMITHFIELD FOODS INC Fair Value Disclosure
FAIR VALUE MEASUREMENTS
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We are required to consider and reflect the assumptions of market participants in fair value calculations. These factors include nonperformance risk (the risk that an obligation will not be fulfilled) and credit risk, both of the reporting entity (for liabilities) and of the counterparty (for assets).
We use, as appropriate, a market approach (generally, data from market transactions), an income approach (generally, present value techniques), and/or a cost approach (generally, replacement cost) to measure the fair value of an asset or liability. These valuation approaches incorporate inputs, such as observable, independent market data, that we believe are predicated on the assumptions market participants would use to price an asset or liability. These inputs may incorporate, as applicable, certain risks such as nonperformance risk, which includes credit risk.
The FASB has established a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The fair value hierarchy gives the highest priority to quoted market prices (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of inputs used to measure fair value are as follows:
•Level 1—Quoted prices in active markets for identical assets or liabilities accessible by the reporting entity.
•Level 2—Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
•Level 3—Unobservable for an asset or liability. Unobservable inputs should only be used to the extent observable inputs are not available.
We have classified assets and liabilities measured at fair value based on the lowest level of input that is significant to the fair value measurement. For the periods presented, we had no transfers of assets or liabilities between levels within the fair value hierarchy. The timing of any such transfers would be determined at the end of each reporting period.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following tables set forth, by level within the fair value hierarchy, our financial assets and liabilities, including assets held in rabbi trusts used to fund our non-qualified defined benefit pension plans and deferred compensation plans, that were measured at fair value on a recurring basis.
| December 28, 2025 | December 29, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| $ | 26 | $ | 2 | $ | — | $ | 28 | $ | 9 | $ | 6 | $ | — | $ | 15 | |||||||||||||||||||||||||||||||||||
| Exchange traded funds | 135 | — | — | 135 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Mutual funds (1) | 71 | — | — | 78 | 74 | — | — | 84 | ||||||||||||||||||||||||||||||||||||||||||
| Insurance contracts | — | — | — | — | — | 104 | — | 104 | ||||||||||||||||||||||||||||||||||||||||||
| Total | $ | 232 | $ | 2 | $ | — | $ | 241 | $ | 83 | $ | 110 | $ | — | $ | 202 | ||||||||||||||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||||||||||||||||||||||||||
| $ | 3 | $ | — | $ | — | $ | 3 | $ | 32 | $ | 12 | $ | — | $ | 44 | |||||||||||||||||||||||||||||||||||
| Total | $ | 3 | $ | 1 | $ | — | $ | 3 | $ | 32 | $ | 12 | $ | — | $ | 44 | ||||||||||||||||||||||||||||||||||
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(1)Institutional funds that are not publicly traded are estimated at fair value using the net asset value per share of the investment as a practical expedient and are not categorized in the fair value hierarchy. Therefore, the sum of the values categorized in the fair value hierarchy above do not agree to the total.
The following are descriptions of the valuation methodologies and key inputs used to measure financial assets and liabilities recorded at fair value on a recurring basis:
•Derivatives—Derivatives classified within Level 1 are valued using quoted market prices. In some cases where quoted market prices are not available, we value the derivatives using market-based pricing models that utilize the net present value of estimated future cash flows to calculate fair value, in which case the measurements are classified within Level 2. These valuation models make use of market-based observable inputs, including exchange traded prices and rates, yield curves, credit curves and measures of volatility. Level 3 derivatives are valued based on diesel fuel prices and use both observable and unobservable inputs. There is a lack of price transparency with respect to forward prices for diesel fuel. Such unobservable inputs are significant to the diesel fuel derivative contract valuation methodology.
•Exchange-traded funds (“ETFs”)—ETFs consist of publicly traded investment funds that are valued using quoted market prices on active exchanges and are categorized in Level 1 within the fair value hierarchy.
•Mutual funds—Mutual funds consist of publicly traded funds and other institutional funds that are not publicly traded. Publicly traded mutual funds are measured at fair value using quoted market prices and are categorized in Level 1 within the fair value hierarchy.
•Insurance contracts—Insurance contracts are valued at their cash surrender value using the daily asset unit value which is based on the quoted market price of the underlying securities and classified within Level 2.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Certain assets and liabilities are measured at fair value on a nonrecurring basis after initial recognition; that is, the assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances, for example, when there is evidence of impairment. As of December 28, 2025 and December 29, 2024, we had no significant assets or liabilities that were measured and recorded at fair value on a nonrecurring basis after initial recognition.
Redeemable Noncontrolling Interest
The redemption value for the NCI in Altosano is fair value. We estimate the redemption value of Altosano using an income and a market approach. Under the income approach, fair value is estimated by using the projected discounted cash flows. Under the market approach, the fair value is estimated by reference to guideline companies that are reasonably comparable based on the valuation multiples of EBITDA. The significant unobservable inputs used in the estimation of the fair value have an inherent measurement uncertainty that if changed could result in higher or lower fair value measurements as of the reporting date. The following table provides the significant unobservable level 3 inputs used in the valuation.
| Unobservable Inputs | December 28, 2025 | December 29, 2024 | ||||||||||||
| Weighted-average cost of capital | 10 | % | 9 | % | ||||||||||
| Growth rate | 3 | % | 3 | % | ||||||||||
| EBITDA multiple | 8.75x | 10x | ||||||||||||
| Control premium | 25 | % | 25 | % | ||||||||||
Pension Plan Assets
The following table summarizes our qualified pension plan assets measured at fair value on a recurring basis (at least annually):
| December 28, 2025 | December 29, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 100 | $ | — | $ | — | $ | 100 | $ | 153 | $ | — | $ | — | $ | 153 | |||||||||||||||||||||||||||||||
| Equity securities: | |||||||||||||||||||||||||||||||||||||||||||||||
| U.S. common stock: | |||||||||||||||||||||||||||||||||||||||||||||||
| Health care | 1 | — | — | 1 | 1 | — | — | 1 | |||||||||||||||||||||||||||||||||||||||
| Financial services | 3 | — | — | 3 | 2 | (1) | — | 1 | |||||||||||||||||||||||||||||||||||||||
| Retail and consumer products | — | — | — | — | 1 | — | — | 1 | |||||||||||||||||||||||||||||||||||||||
| Information technology | 1 | — | — | 1 | 1 | — | — | 1 | |||||||||||||||||||||||||||||||||||||||
| Manufacturing and industrials | 1 | — | — | 1 | 1 | — | — | 1 | |||||||||||||||||||||||||||||||||||||||
| U.S. Equity Fund | 1 | — | — | 1 | 1 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
| International common stock | 3 | — | — | 3 | 2 | — | — | 2 | |||||||||||||||||||||||||||||||||||||||
Commingled funds: (1) | |||||||||||||||||||||||||||||||||||||||||||||||
| Global equity | — | — | — | 530 | — | — | — | 504 | |||||||||||||||||||||||||||||||||||||||
| Corporate debt securities | — | — | — | 179 | — | — | — | 166 | |||||||||||||||||||||||||||||||||||||||
| Fixed income securities: | |||||||||||||||||||||||||||||||||||||||||||||||
| Corporate debt | 262 | 1 | — | 263 | 248 | 1 | — | 250 | |||||||||||||||||||||||||||||||||||||||
| Government debt | 227 | (10) | — | 217 | 105 | (27) | — | 77 | |||||||||||||||||||||||||||||||||||||||
| Alternative investments: | |||||||||||||||||||||||||||||||||||||||||||||||
Diversified investment funds (1) | — | — | — | 2 | — | — | — | 3 | |||||||||||||||||||||||||||||||||||||||
Limited partnerships (1) | — | — | — | 280 | — | — | — | 293 | |||||||||||||||||||||||||||||||||||||||
| Total fair value | $ | 600 | $ | (9) | $ | — | $ | 1,582 | $ | 513 | $ | (27) | $ | — | $ | 1,452 | |||||||||||||||||||||||||||||||
| Unsettled transactions, net | 41 | 46 | |||||||||||||||||||||||||||||||||||||||||||||
| Total plan assets | $ | 1,623 | $ | 1,498 | |||||||||||||||||||||||||||||||||||||||||||
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(1)Assets that are measured at fair value using NAV per share as a practical expedient have not been categorized in the fair value hierarchy.
The following are descriptions of the valuation methodologies and key inputs used to measure pension plan assets recorded at fair value:
•Cash and cash equivalents—Cash equivalents include highly liquid investments with original maturities of three months or less. Due to their short-term nature, the carrying amount of these instruments approximates the estimated fair value. Actively traded money market funds are classified as Level 1 and included in cash and cash equivalents.
•Equity securities—The fair value of equity securities is based on quoted prices in active markets and classified as Level 1. Level 1 financial instruments include highly liquid instruments with quoted prices, such as equities and mutual funds traded in active markets.
•Commingled funds—The fair value of commingled funds is measured using the NAV per share practical expedient and have not been categorized in the fair value hierarchy. The NAV per share is based on the fair value of the underlying assets owned by the funds, minus its liabilities then divided by the total number of shares outstanding. Underlying assets of commingled funds primarily consist of liquid equity and fixed income securities with quoted prices in active markets.
•Fixed income—When available, the fair value of fixed income securities is based on quoted prices in active markets and classified as Level 1. Level 1 financial instruments include highly liquid instruments with quoted prices, such as equities and mutual funds traded in active markets.
If quoted prices are not available, fair values of fixed income instruments are obtained from pricing services, broker quotes or other model-based valuation techniques with observable inputs and classified as Level 2. The nature of these fixed income instruments include instruments for which quoted prices are available but traded less frequently, instruments whose fair value has been derived using a model where inputs to the model are directly observable in the market, or can be derived principally from or corroborated by observable market data and securities that are valued using other financial instruments, the parameters of which can be directly observed. Level 2 fixed income instruments include corporate debt securities.
•Alternative investments—The fair value of alternative investments is measured using the NAV per share practical expedient and have not been categorized in the fair value hierarchy. The NAV per share is based on the fair value of the underlying assets owned by the alternative investment funds, minus its liabilities then divided by the total number of shares outstanding.
•Limited partnerships—The fair value of limited partnerships is measured using the NAV practical expedient and has not been categorized in the fair value hierarchy. The NAV is based on the fair value of the underlying assets owned by the partnership, minus its liabilities then multiplied by the ownership percentage of the pension plans.
Other Financial Instruments
We determine the fair value of fixed-rate debt using Level 2 inputs based on quoted market prices. The carrying amount of all other debt approximates fair value as those instruments are based on variable interest rates. The following table presents the fair value and carrying value of total debt.
| December 28, 2025 | December 29, 2024 | ||||||||||||||||||||||
| Fair Value | Carrying Value | Fair Value | Carrying Value | ||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Total debt | $ | 1,909 | $ | 1,986 | $ | 1,821 | $ | 1,983 | |||||||||||||||
The carrying amounts of cash and cash equivalents, accounts receivable, notes payable and accounts payable approximate their fair values because of the relatively short-term maturity of these instruments.
Concentrations of Credit Risk
Our financial instruments exposed to concentrations of credit risk consist primarily of cash and cash equivalents, accounts and notes receivable and derivatives. We may be exposed to losses in the event of nonperformance by our banks, customers, brokers or other counterparties.
We have significant concentrations of credit risk associated with our cash and cash equivalents. However, our cash and cash equivalents are held by numerous major financial institutions that maintain certain minimum investment grade credit ratings.
Concentrations of credit risk with respect to accounts and notes receivable are limited due to our large number of customers. We perform periodic credit evaluations of our customers’ financial condition and generally do not require collateral. As of December 28, 2025, we had accounts and notes receivable from Murphy Family Farms and VisionAg totaling $218 million and $47 million, respectively. A portion of these balances are secured by the breeding stock and inventories owned by Murphy Family Farms and VisionAg. We have an agreement to purchase 3.2 million and 600,000 market hogs annually from Murphy Family Farms and VisionAg, respectively, which further mitigates our exposure to potential credit risk.
Additionally, as of December 28, 2025, 11% of our accounts receivable balance was due from Walmart. No other single customer or customer group represented 10% or greater of our accounts receivable.
Our derivative counterparties primarily consist of financial institutions that are investment grade. A portion of our financial instruments are exchange traded derivative contracts held with brokers and counterparties with whom we maintain margin accounts that are settled on a daily basis, thereby limiting our credit exposure to non-exchange traded derivatives. Determination of the credit quality of our counterparties is based upon a number of factors, including credit ratings and our evaluation of their financial condition. As of December 28, 2025, our gross credit exposure on non-exchange traded derivative contracts was immaterial. After taking into account the effect of netting arrangements, we had no credit exposure on non-exchange traded derivative contracts.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 24, 2026 | Showing above |
| 2024 | Mar 25, 2025 | |
| 2016 | Mar 29, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.