Welcome to the Tyson Foods Quarterly Investor Earnings Call. At this time, all participants will be on a listen-only mode. After the presentation, we will conduct a question-and-answer session. This call is being recorded and if you have any objections, you may disconnect at this time. I will turn now the call over to the Vice President of Investor Relations, Jon Kathol. Sir, you may now begin.

Good morning and thank you for joining us today for Tyson Foods conference call for the first quarter of the 2016 fiscal year. On today's call are Donnie Smith, President and Chief Executive Officer; and Dennis Leatherby, Executive Vice President and Chief Financial Officer. Our remarks today include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. I encourage you to read the news release issued earlier this morning and our filings with the Securities and Exchange Commission for a discussion of the risks that can affect our business. Because of our Annual Meeting of Shareholders takes place this morning, we'll need to end the call at the top of the hour to get to the meeting on time. I ask that you limit yourself to one question and one follow-up during the Q&A portion of our call, so we can get to as many of your questions as possible. If you have additional questions, please get back in the queue and we'll get to as many of you as we can before we have to go. I'll now turn the call over to Donnie Smith. Donald J. Smith - President, Chief Executive Officer & Director: Thanks, Jon. Good morning, everyone, and thanks for joining us. Fiscal 2016 is off to a great start with record EPS of $1.15, up 49% over Q1 of 2015's adjusted results. All of our segments performed very well with Prepared Foods and Chicken producing record operating income for the quarter, Pork had its second best quarter ever, while Beef showed significant improvement over Q4 of 2015 and Q1 of 2015. In total, we produced record operating income of $776…

Thank you. And our first question comes from Mr. Brett Hundley from BB&T Capital Markets. Sir, your line is now open. Brett Michael Hundley - BB&T Capital Markets: Morning. Congratulations on what you've put together here. Donald J. Smith - President, Chief Executive Officer & Director: Thanks, Brett. Brett Michael Hundley - BB&T Capital Markets: Donnie, one question for you. A number of packaged food companies, both large and small we've seen, have talked this earnings season about the macro becoming more challenging. Snacking has been one area highlighted in particular, and then conversely it looks like U.S. frozen categories seem to be improving some. Companies are also talking without the need to up brand support spend, in an effort to contain volume deterioration. Your Prepared Foods volumes were down in the quarter, but you talked to the reasons behind that. Your profitability was solid. Can you give us your view of the packaged foods macro? You touched on it in your prepared remarks. But can you give us your view of the prepared packaged foods macro from your vantage point? And within this question, can you specifically address this Core 9 effort that you're talking about this morning? And how Core 9 insulates you, not only within the broader macro, but also within packaged meats specifically? Donald J. Smith - President, Chief Executive Officer & Director: Sure, Brett. I'm going to try to take that like from snacking through frozen into the Core 9 to kind of give you the full feel. So, not all snacking is created equal, right? What continues to grow in the snacking category is protein snacking. If I've got my numbers right, total snacking is probably growing at around 6% or so year-over-year, and as you know that's a major focus for us in…

And our next question comes from Farha Aslam from Stephens, Inc. Sir, your line is now open.

Hi. Good morning. Donald J. Smith - President, Chief Executive Officer & Director: Good morning. Dennis Leatherby - Chief Financial Officer & Executive Vice President: Good morning.

Congratulations on a great quarter. Donald J. Smith - President, Chief Executive Officer & Director: Thank you. Dennis Leatherby - Chief Financial Officer & Executive Vice President: Thank you.

I have a question on poultry. Your poultry margins were exceptional this quarter, and you spoke constructively about your outlook. Could you just give us a little bit more color about your thoughts around the second quarter? That is seasonally a bit weaker in poultry, but the macro trends around poultry are getting better. Should we think your margins for the rest of the year, you're being very conservative with your 11% guidance? Donald J. Smith - President, Chief Executive Officer & Director: So, we feel great about the second quarter. We're off to a good start. If I look at our mix, we continue to improve our value-added mix. We've got a lot of capacity to continue to grow in those areas. That gives me a lot of optimism to continue with a favorable outlook. It feels like to me that the categories, retail frozen is certainly growing. The retail frozen poultry is growing faster than frozen, and certainly that category is growing faster than food and beverage, and it feels like that we've fully overcome problems we had in the past, and that we are back in business and growing. Our volume has been good in January. So, feel good about that. And as I look forward, there's a couple of things that we still want to see. While we have quite a bit of a grain book, we don't have it all, so it's hard to paint the full picture for the year, but I do believe that the changes we've made in the portfolio, the changes we've made in the pricing strategy, certainly the advantages that our supply chain gives us are creating a long-term view of much more consistent stable earnings in our poultry business and in Prepared Foods and other parts of the business.

So kind of conservative you'd say, given the strong start in the second quarter? Donald J. Smith - President, Chief Executive Officer & Director: I like where we are, and we're off to a good start.

That's helpful. And then a follow up perhaps for Dennis, you had – and Brett's question answers your desire to repurchase shares. Could you share with us a little bit more color on M&A? And your outlook of what you're seeing in the market right now? Dennis Leatherby - Chief Financial Officer & Executive Vice President: Farha, I understand why you'd want to ask the question, but you know we can't comment on M&A.

That's fair. Just in terms of longer-term kind of areas of interest where you would look to build Tyson's position in terms of M&A in particular, if there's areas of interest? Dennis Leatherby - Chief Financial Officer & Executive Vice President: Sure, Farha. I mean, value added poultry and Prepared Foods international growth, those are the areas that we intend to focus on continuing to grow our branded presence here and internationally, that's the focus of our strategy going forward.

Great. Thank you very much. Dennis Leatherby - Chief Financial Officer & Executive Vice President: You bet.

And our next question comes from David Palmer from RBC Capital Markets. Sir, your line is now open.

Thanks. Good morning and congratulations on the quarter. Dennis Leatherby - Chief Financial Officer & Executive Vice President: Thank you, David.

Question on – good morning. The Beef segment, that was particularly impressive to us given the fact that you're perhaps entering a cycle there. How are you thinking about – perhaps go back and talk about how that margin happened with as much detail as you can? And how are you now thinking about the long-term of that differently? Is the long-term future for that business really one where you're going to be bouncing around the low end of – low single digits? Or perhaps can we think about that being a healthier margin business going forward? Thanks. Donald J. Smith - President, Chief Executive Officer & Director: So let's talk a little bit about the quarter. So if you go back as far as Q3 when the feedlots started extending the turns, if you will, and keeping cattle in the feedlot longer, coupled with the heifer retention and the reduction in cow slaughter that we saw as the beginning parts of the supply chain and the cow-calf operator began the effort to expand the herd, cattle supply dried up and strained margins. So as we moved out of Q4 into Q1 – there was some regional disparity. But overall, the feedlots began to market those cattle and become more current, if you will, with the inventory they have in the feedlots. That provided us the supply we needed to be able to improve our margins. Plus if you'll remember back at the end of Q4, right in the last couple weeks or so of the quarter, we had a lower of cost or market adjustment and a mark to market adjustment that we made. And so we got about half of that back in Q1. Now the rest of that will keep coming back to us as we progress on through the year because you had beef sold out front and then you bought live cattle futures against it to hedge it. So put all that together, we're kind of in the – well, we were at 2%, sort of towards the low end or getting towards the middle of that range. As we look forward, Q2 is always a tough quarter for us. You've got a lot of weather issues around as we're seeing this week up in the Midwest. Lent is kind of a low demand period for beef particularly. So I want to see us get through that, but then it feels like that after Easter, should see cattle supply improving, and the back half ought to improve. So, I think longer-term our beef margins should stay within that 1.5% to 3% range. Feel good about that.

So this is really about the capacity utilization side? And I know you have some easier comparisons in Q3, but I'm just wondering longer-term if these margins can be built upon and maintained? Is there anything about these recent developments that make you think significantly different about the longer-term for beef? Donald J. Smith - President, Chief Executive Officer & Director: No, David. So I guess my headline would be, look, the worst is over in terms of the cattle supply. We expect – I don't know – 3%, 3.5% cattle supply increase in the back half of the year, and you should see – it's a little bit hard to tell at the very beginning of a herd rebuild, but you should see something on the order of 1% to 2% more fed cattle available per year I think for the next 2 years, 3 years. And so as the supply of cattle improves then we should see our margins improve as well. So that's the reason for the confidence in our outlook that Q1 is not an aberration. Now remember, Q2 is going to be Q2, but looking at it over the year, I'm comfortable that we should be in the range – the 1.5% to 3%.

Thank you. Donald J. Smith - President, Chief Executive Officer & Director: You bet.

And our next question comes from Adam Samuelson from Goldman Sachs. Sir, your line now open. Adam L. Samuelson - Goldman Sachs & Co.: Thanks. Good morning, everyone. Donald J. Smith - President, Chief Executive Officer & Director: Morning. Dennis Leatherby - Chief Financial Officer & Executive Vice President: Good morning. Adam L. Samuelson - Goldman Sachs & Co.: I want to pick up on something, Dennis, that was at the end of your prepared remarks. You talked about this quarter being a new foundation for future performance, rather than a peak. And I wanted to maybe follow-up on Farha's question a little bit on the Chicken business in particular, because the margins here are very strong and now running well above your normalized range of 7% to 9%. And I'm trying to think about what would be the drivers of margins going back to that normalized range if you remain confident on the value-added mix and the operating momentum that you have. and maybe think about that trajectory a little bit? Thank you. Dennis Leatherby - Chief Financial Officer & Executive Vice President: Great question. We feel very good about our Chicken business. It's really set up well. It's largely a pull business, from 85%, 90% pull business. We've got our mix set up straight. We are in the position where we can grow even more, especially in the further processing side, take advantage of oversupply situations where we can buy meat really cheap, put a nice spread on it. So – and our Tray Pack business, with the conversion of our plant in South Georgia, is really starting to take off at an even higher level. And we're just going to continue to improve our value-added mix over time. Adam L. Samuelson - Goldman Sachs & Co.: All…

And the next question comes from Ken Goldman from JPMorgan. Sir, your line is now open.

Hey. Good morning, everybody. When I look at retail margins on chicken, beef, and pork, at least as implied by USDA data, they're very strong right now, kind of across the board, and we're seeing some indication, I guess, of minor slippage in those retail prices but not a whole lot. So I'm curious from your perspective, what are your expectations for meat prices on shelf going forward. Are you seeing any indication they'll really start to fall further from here which could help your volumes going ahead? Donald J. Smith - President, Chief Executive Officer & Director: It's hard, it's really hard during this time of the year to get your best feel for what retail meat prices are going to do through the year because next week we're going to enter into Lent, and it's just a difficult season to predict prices. But if you just look at the macro fundamentals, right, we've got the lowest unemployment we've had since 2008, we got really cheap gas prices, and that is returning disposable income to the consumer, and we are seeing traffic up a little bit at food service, not a lot, and we're not expecting a whole lot. But we are seeing a movement to the perimeter of the store which is where we have great strength. So I'm optimistic that the consumer will respond well to what should be fairly favorable prices. If you look at the supply of cattle coming to market, supply of hogs coming to market, supply of chickens in the market, you should have reasonable pricing structures, and certainly pricing structures that would allow us to continue to flourish, so.

Okay. Thank you. And then my other question is you are guiding to a pretty significantly bigger benefit from feed cost than you did three months ago, I think. But as I look at corn and meal, I'm not seeing much of a change over that time in spot or futures prices. I mean, there's some, but not a huge amount. So maybe you talked about this and I missed it, but I'm just curious what's driving this degree of change in your outlook for feed? Donald J. Smith - President, Chief Executive Officer & Director: Yeah, we had about a – I think, it was round numbers, wasn't it, Dennis, $100 million change from... Dennis Leatherby - Chief Financial Officer & Executive Vice President: Yeah. Donald J. Smith - President, Chief Executive Officer & Director: – from our previous quarter's guidance to this one. And it just reflect – if you look at just corn futures all Q1 long, and I think meal futures too, the market just continued to decrease. We stayed really short and were able to just basically buy it as we ship it, or price it as we ship it. And that's allowed us to have a cheaper cost structure. And when we talk about, by the way, our outlook, we're talking about what's in cost of goods. So we feel good about how our year is going to shape out. We've got quite a bit, not all but enough to feel very comfortable about our cost structure in chicken already priced throughout the year. So feel good about that.

Thank you so much. Donald J. Smith - President, Chief Executive Officer & Director: You bet. Thanks.

And our next question comes from Mr. Robert Moskow from Credit Suisse. Sir, your line is now open. Robert Moskow - Credit Suisse Securities (USA) LLC (Broker): Hi. Thank you. One of the reasons I've been skeptical on Tyson and maybe others too, and obviously very wrong, is that there's the thinking that the chicken cycle would end up turning and hurting the business. But you're seeing two things this year in your guidance, or I am, is your feed costs are better, so that's a reason to take up the number. But you're obviously benefiting from the lower chicken cost commodities as well. Can you give us a little bit of a more color on the extent to which the lower commodity chicken cost helped you in the quarter, and how that is factored into your guidance for the year? Thanks. Donald J. Smith - President, Chief Executive Officer & Director: Yeah, Rob, I'd add – you know, not knowing what chicken prices are going to do for the rest of the year, it'd be hard to quantify it for the year. But I can give you a very good feel. During Q1, we probably bought on the order of 75 loads a week of poultry raw materials, maybe more than that. But say round number is that, and we're buying that meat well below a dollar instead of selling it well below the dollar. Plus with our buy versus grow strategy, we don't have that excess leg quarters, so we are selling fewer leg quarters today, and I've been here a long time. I can't ever remember us selling fewer leg quarters than we are today. And the buy versus grow certainly plays a part of that, but with great innovative capabilities, we're finding ways to upgrade that…

And our next question comes from Akshay Jagdale from Jefferies. Your line is now open.

Good morning, and congratulations on a really outstanding quarter. Donald J. Smith - President, Chief Executive Officer & Director: Thanks, Akshay.

So let me ask about the chicken margin sustainability in a different way as well. Obviously you outperformed what the commodity markets did in our estimates by about 1,000 basis points. So I think what I'm seeing is, and just help me if I'm wrong here or if I'm reading it incorrectly, but relative to the market your portfolio is more stable, higher-margin products and that's starting to play through on the revenue line. And clearly this quarter we saw that. Right? And I think what we're seeing clearly is your big bird segment, if I may, where you're taking a lot of this cheap meat out of the big bird plants and adding value to it, that's been a great strategy. So my question really is more on the retail tray pack side of your business and potentially on the small bird side. Can you talk about the sustainability of the margins on those two sort of subcategories? Like a lot of people think your Tray Pack business is not as – it can't maintain these margins at these levels if supply increases, right. So if you look at three segments for the chicken market, it seems to me that whatever supply increase has been coming into the market, it's been on the big bird side. So what happens if and when the retail tray pack supply industrywide increases? What does that do to your margin structure? And then similarly on the small bird. I mean, I know, it's not happening right now, right? We know that there's no new capacity coming in on those two segments, but just help me think through that for a second? Donald J. Smith - President, Chief Executive Officer & Director: Yeah, sure. So first of all, as evidenced in South Georgia, we…

Okay. And then just on Prepared Foods, how much of the revenue guidance cut is related to, let's say, the Prepared Foods business not doing as well as you thought previously? And then your margin guidance on Prepared Foods, although pretty solid in light of the $250 million commodity tailwind and the roughly $200 million incremental synergies seems a bit light. I think what it means is you're spending or planning on spending a lot of money on brand building. But why do that when sort of volumes, if you look historically last 12 weeks or so, haven't been as robust? Donald J. Smith - President, Chief Executive Officer & Director: Okay. So, I'm going to start kind of at the back end and work my way back up, is that the reasons the volumes haven't been as robust as we want them to be in our Prepared Foods, there's really two things in that. Number one, it depends on your view of everything that you look at in Nielsen or IRI about our data. Because there's two categories that if you do kind of a macro view of everything, Tyson and IRI, you've got two categories in there that would be IF chicken and then the UPC ground beef chubs also show up. So the one and three-pound rolls of ground beef, which is a huge portion by the way of the volume decline or a huge proportion of the volume decline, that meat is going fresh. And frankly for us, if the consumer would rather have that breast meat in a fresh tray versus having it in an IQF bag, we're going to go where the consumer is because frankly its margins is up a little bit. Same thing on ground beef, if they'd rather have it – that volume not in that UPC, but in a non-UPC tray, we're going to do that. So first of all, bear that in mind. Now backing up to your other question, the big revenue issue overall for the company really comes in three places. Beef and Pork commodity prices are down a lot, and then the other thing is the divestitures of the Mexican business, the Brazilian business and our Heinold Hog Markets business. So that is the overwhelming majority of the revenue decline quarter-over-quarter, and it's driven primarily by Beef prices, and by the way, will be for the year. So – well, we would expect it to be for the year. Does that help?

Yeah, I know that some vast majority, going from $41 billion to $37 billion is those three issues... Donald J. Smith - President, Chief Executive Officer & Director: Yeah.

...but is it fair to say Prepared Foods you're expecting lower sales than you previously were? And how much so roughly? Donald J. Smith - President, Chief Executive Officer & Director: No. I don't think it's fair to say that. Now in our Prepared Foods business, about half of it is food service, and those do use pricing formulas and the deflation in the raw materials does take some of the pricing down, but it doesn't affect the margin. If you look at the Retail business, we are seeing the response that we want to see from the pricing and the brand support that we're giving these brands. And we will continue to do that all year because we've got a great opportunity to grow.

Perfect. I'll pass it on. Thank you. Donald J. Smith - President, Chief Executive Officer & Director: Thanks.

And our next question comes from Michael Piken from Cleveland Research. Sir, your line is now open.

Thank you, and congrats on a good quarter. If we could just shift over to Pork, there's been a lot of talk about the sustainability of the Chicken margins at these levels, and just wanted to get your thoughts as we move through the year on Pork, and in particular could you stay at these elevated margins if the export markets pick up? Donald J. Smith - President, Chief Executive Officer & Director: So, we do have one eye always kind of on the export markets, and we're not seeing a lot of improvement in that yet. Could still happen, if it does, it's certainly upside. If you look at the macro picture here, you're probably going to have somewhere on the order of about 2% to 3% more hogs for the year. We should have very good capacity utilization. I feel good about where we are in terms of where the hogs are, so we should be competitive there. So I feel good about margins and certainly it's a little bit too early to predict what might happen in the back half of the year, but yeah, it feels like we've got a good pork year coming. Dennis Leatherby - Chief Financial Officer & Executive Vice President: Certainly off to a great start.

Okay. Great. Maybe if I ask it a little bit in a different manner. I mean, I guess, obviously the expert outlook is a little bit more uncertain, but just judging by how you did in the first quarter, should we sort of think about the rest of the year as being – if the hog availability is still strong, and the domestic demand kind of remains where it is, everything else, I mean, you said kind of above 6% to 8%, but I mean is it double-digits? Is 10% possible for the year? What are we sort of generally looking at because there's a lot of room between above 6% to 8% what you did in the first quarter? Thanks. Dennis Leatherby - Chief Financial Officer & Executive Vice President: Yes, there is. And I think Q1 and hogs is always strong, and I wouldn't want to predict the whole year based on Q1, but it feels very good to us that this should be a good pork year.

Okay. Thank you very much. Dennis Leatherby - Chief Financial Officer & Executive Vice President: You bet.

And our next question comes from Patrick Chen from BMO Capital Markets. Sir, your line is open.

Hi. This is Patrick in for Ken. Just a question about Prepared Foods. Just wondering how long will the reinvestment of all the synergies will go on? It seems like it's been, I guess, holding your margins back, I'm just try to figure out what the timing is as to when margins will improve from these levels, especially with chicken margins kind of potentially doing better than Prepared Foods this year. Thank you. Dennis Leatherby - Chief Financial Officer & Executive Vice President: Yeah, so with advantaged brands and advantaged categories, we're really built for growth. We've got a great innovation pipeline that we're investing in for the long-term, and so there's always a balance, right, between margin and growth. And our intent is to make sure that with the advantages that we have, that we continue to grow. Frankly, the retailers depend on us to grow these categories, and we're going to continue with strong brand support. We spend a lot of time understanding the consumer and using those insights to build the right kind of innovation pipeline for the future. And so we will always balance growth and margin. Obviously in Q1 we didn't get the growth that we wanted, and the reason we didn't get the volume, growth we wanted, we didn't get the prices reflected on the shelves in the time period that we had predicted, so that our price caps would be right. That is now fixed, or pretty much fixed. And I think you're going to see the volume growth that will support the overall dollar of margin growth over time. Donald J. Smith - President, Chief Executive Officer & Director: Patrick, from my perspective, what I like that I'm seeing is our vitality index numbers are really strong and that's a good sign for volume growth in the years ahead that really excites us to keep that margin solid and growing.

Great. Thank you.

And our last question comes from Ms. Diane Geissler from CLSA. Ma'am, your line is now open.

Good morning. Donald J. Smith - President, Chief Executive Officer & Director: Good morning, Diane.

Congratulations on your quarter. Donald J. Smith - President, Chief Executive Officer & Director: Thank you.

I have a question, so the guidance range for this year if we exclude the extra week last year, is sort of 22% to 25%. And I guess when I look at it, I mean, look, breast meat is at $1, leg quarters are at $0.25. You're going to have margins in the Chicken segment above the, way above the top end of your normalized range. So as we look into fiscal 2017, appreciate we don't know what's going to go with pricing, et cetera, but it seems to me that with the way the Chicken business is set up now, you should be able to sustain margins above the top end of the normalized range, and therefore earnings next year should be up 10% plus. Am I thinking about that wrong? Donald J. Smith - President, Chief Executive Officer & Director: Diane, we are very optimistic about this year and the foundation that we've built for next. If you look at it, next year we've got more synergies coming. I think we're going to prove decidedly in the next few weeks in the quarter or so that we've got great brands that are well positioned. I think protein demand is going to remain pretty strong. I know we have great consumer relevance. It's really hard to predict what input prices will be a year from now or whatever, but if you just look at the macro view, it feels pretty good that they'll be reasonable and certainly within our ability to manage, should have plentiful supply of livestock. We've got a great innovation pipeline, great cash flow as Dennis talked about. If I look at – anyway, so yeah, we're really optimistic.

Okay. So I guess the short answer is we can make money when breast meat is at $1 and we can also make money when breast meat is at $2? Donald J. Smith - President, Chief Executive Officer & Director: Yes, we can.

Is that the takeaway? Donald J. Smith - President, Chief Executive Officer & Director: That is the takeaway.

Okay. Great. Thank you. Donald J. Smith - President, Chief Executive Officer & Director: Thank you.

So, listen, we appreciate your interest. We certainly appreciate your involvement in our company. We plan to carry this momentum generated in Q1 through the rest of this year and on into 2017. We're off to the shareholders meeting now. Hope you have a great weekend. See you.

And that concludes today's conference. Thank you so much for your participation. You may disconnect at this time.