Good morning and welcome to the Tyson Foods first quarter earnings conference call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions.

Good morning and welcome to the Tyson Foods Incorporated first quarter earnings conference call of the 2017 fiscal year. On today's call are Tom Hayes, President and Chief Executive Officer; and Dennis Leatherby, Executive Vice President and Chief Financial Officer. Slides accompanying today's prepared remarks are available as a quarterly supplemental report on the Investor Relations section of our website at ir.tyson.com. Tyson Foods issued an earnings news release this morning which has been filed with the SEC on Form 8-K and also is available on our website at ir.tyson.com. Our remarks today include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements reflect current views with respect to current events, such as Tyson's outlook for future performance on sales, margin, earnings growth and various other aspects of its business. These statements are subject to the risk and uncertainties that could cause actual results to differ materially from our expectations and projections. I encourage you to read the release issued earlier this morning and our filings with the SEC for a discussion of the risks that can affect our business. I would like to remind everyone that this call is being recorded on Monday February 6, 2017 at 9 AM Eastern Time. A replay of today's call will be available on Tyson's website approximately one hour after the conclusion of this call. This broadcast is the property of Tyson Foods and any redistribution, retransmission or rebroadcast of this call in any form without the expressed written consent of Tyson Foods is strictly prohibited. I'll now turn the call over to Tom Hayes.

Thanks, Jon. Having grown up in New England, I want to start by saying congratulation to the Super Bowl 51 Champion New England Patriots. They set some records last night and we're setting some records ourselves here today. On my first earnings call as President and CEO, I'm thrilled to share great results that Tyson Foods family delivered in the first quarter of fiscal year in 2017. It's an incredibly exciting time at Tyson as we position ourselves for the next stage of growth and I'm looking forward to leading our team as we seek to improve the value of our company for all of our stakeholders. Let's talk about our Q1, which is the best quarter in the company's history with record earnings, operating income and cash flows. Return on sales was in or above the normalized range for each of our segments and total company operating margin was a record 10.7%. In the first quarter, we capitalized on favorable market conditions in our Beef and Pork segments and the cash generated is providing fuel for growth in our value-added Chicken and Prepared Foods segments. As we outlined in our year-end 2016 call, our earnings were negatively impacted in the fourth quarter by $35 million in mark-to-market and lower cost-to-market accounting treatments. This benefited our Q1 results as we started getting this back. Synergies for the quarter were $161 million, with $40 million incremental to the Q1 of 2016. Total synergies to-date are $620 million. And now for an update on our operating results which illustrates the advantage of our balanced portfolio with strong performances across the board. We'll start with Fresh Meats. In the Beef segment, our operating income was a record $299 million, with a record operating margin of 8.5%. Volume was up 4.5%, while average price…

Thanks, Tom and good morning everyone. Q1 was our best quarter yet as we delivered record earnings due to strong results across each of our segments, particularly record results in our Beef and Pork segment. The balance of our portfolio and our ongoing investments in our businesses continue to provide consistent, stable growth as we are on track for our fifth straight record year. With record EPS, record operating income and record operating cash flows, we were able to repurchase 8.1 million shares for $520 million in Q1. First quarter revenues were up slightly to $9.2 billion, as we grew sales volume across all segments, partially offset by declining beef, pork, and raw material prices. Operating income was a record $982 million, representing a 27% increase over Q1 a year ago. Total company return on sales was a record 10.7%, as each of our segments performed within or above their normalized ranges. Our record EPS of $1.59 represents a 38% increase over $1.15 in Q1 last year. I would also like to note that our last 12 months adjusted EPS is $4.83. Our operating cash flow for the first quarter was a record $1.1 billion and we spent $200 million on capital expenditures. This outpaced our depreciation by $44 million, as we continue to invest in projects with a focus on delivering high ROIC. Our effective tax rate in the first quarter was 34.9%. Net debt to EBITDA for the past 12 months was 1.5 times. Including cash of $300 million, net debt was $5.7 billion and total liquidity was approximately $1.6 billion. Net interest expense was $56 million during Q1. For the quarter, our diluted shares outstanding were 373 million. Pre-tax ROIC for the past 12 months was 19.9%, rapidly approaching pre-acquisition levels, illustrating the strength and stability of…

Thank you, Mr. Leatherby. We will now begin the question-and-answer session And the first question will come from Heather Jones of the Vertical Group. Please go ahead.

Good morning.

Good morning.

Good morning.

Very nice quarter. I guess, my first question is on the overall growth outlook. So your raised guidance implies flat to up 5 percentage roughly EPS growth for Q2 through Q4, but you mentioned 2017 being sort of an investment year positioned for growth going forward. So I was wondering if you could help us think about how we should think about earnings growth beyond 2017.

Sure. Let me talk about growth overall, then we can talk about sort of EPS over time. You know, yes, we are going to – we will be making investments for the future of the company in terms of growth, but we are also going to deliver growth in 2017. So, you know, it's key, it's our quarter (21:13) – our fiber, it's our story. We are consistent. We want sustainable growth. That's our objective. And I'll say a few things. One, you know, we continue to invest where we want to grow and we're demonstrating growth on value-added products versus the commodity elements of our portfolio, and I'd say that's particularly in Chicken and Prepared Foods we see that very prominently. Beef and Pork are also benefiting from livestock supply and very strong markets, but I would say, Chicken and Prepared Foods is where you'll find us investing heavily. Prepared Foods is in a fantastic position to take advantage of innovation and brand strength. We've seen the results of the innovation coming through volume, and we are prepared at CAGNY to show you some pretty fantastic progress we've made on our innovation pipeline. So as it relates to, Heather, the EPS growth expectations, you know, the range that we're guiding to now puts us in the 12% to 15% for this year. Ongoing, that's, you know, where we've talked about continuing to guide as a high single digits EPS growth, and you know, I'll turn it over to Dennis for anything else you want to add there.

I think that's good, appropriate.

So high single digit EPS growth is what you feel comfortable with going forward. Did I understand that correctly?

Correct.

That's right. And think about that...

Okay.

...Heather, there would be healthy volume growth in Chicken and Prepared.

Okay. And my question is related to Prepared, because that's clearly the primary driver, expanded multiple for the shares, and so you've given us good color as to why margins are going to be pressured for the next 18 months. But beyond that, how do you think we should think about EBIT growth for that segment beyond mid-2018? I mean is a high-single digit, low double-digit EBIT growth number doable for that segment once you get beyond this investment period?

Without giving you specific guidance for 2018, I mean that's too far away for us, what I'd say is we're making the right investments for growth. If you think about the Prepared Foods business, it's really, like I said, two separate businesses. Predominantly in the legacy Tyson organization, it was a food service business and in the legacy Hillshire business, it was about 75% retail, 25% food service. The margin profiles are very different in those businesses. The assets were in different condition. And, so going forward, we want the mix to turn out to be as profitable growth – continuing profitable growth within the 10% to 12% range. However, we have some work to do as it relates to supporting those assets that serve the food service business. Growth, we feel really strong about in the long-term, and like I said, we'll talk more about that at CAGNY.

Okay. Thank you so much.

The next question will be from Ken Goldman of JPMorgan. Please go ahead.

Hi. Good morning, everybody. And, Tom, I would wish you congratulations on the Patriots, but that would be somewhat insincere on my part. I just wanted to follow up, because for a long time, management's guidance was for – again, not for a single year, but really for over the long-term, 10%-plus EPS growth. Now you're talking about high single-digits. To me, frankly, that's a more reasonable range, so I'm not grudging you for it, but I just wanted to get a little bit deeper into the reasons why you feel that that's more of a range that you're comfortable with rather than something in the low double-digit range maybe.

Ken, if we deliver low double-digits, that's going to be awesome. But we're focused on high single-digits, because for us, we believe to continue the growth algorithm of this company, we have to invest. We're going to simultaneously invest. We're going to also amp up our continuous improvement program as I talked about. That feels like the right place for us to continue to drive growth, Dennis.

I would agree with that entirely.

Okay.

Okay. And then a quick follow-up from me. Is there any impact to you at all from the avian flu yet? I know it's somewhat early and it doesn't sound like there's a whole lot, but I'm just curious how you're thinking about that, what you're looking at, and what your expectations are maybe, again, more from the export side, obviously?

Yeah, no, I got it, great question. We're constantly paranoid about avian influenza, because it's certainly is something that can wreak havoc on our company. What I'd say is, 2015, we amped up our bio-security. We had good bio-security to begin with, but we amped it up to an all-time high level of discipline and scrutiny, frankly, and it hasn't stopped. And so, that we feel confident about our position, and right now it appears to be, as you called out, a non-U.S. issue, but certainly we remain diligent in our efforts to make sure Tyson is protected.

And just quickly, are there any benefits to you from the exports standpoint right now in terms of more countries needing U.S. chicken, or is it – again, is it just too small an issue to really notice at this point?

Yeah, really it's too small an issue at this point.

Great. Thanks so much.

Yeah, you're welcome.

The next question will be from Jeremy Scott of CLSA. Please go ahead.

Hi. Good morning.

Good morning.

So I just wanted to ask about Hillshire and follow-up on some of your comments and maybe if we can circle in on a net synergy number. I think one of the things investors are grappling with is, what portion of that $700 million will eventually flow to the bottom line, and to what extent is the investment in innovation that you flagged just the cost of doing business? Is there a market share, whether it's in retail or food service that you're targeting, at which point we'll see that inflection in margins? I mean, the reason I ask is because it seems like Pork and Beef are going to more than cover you for 2017, but when we look out to 2018, 2019 to get to your high single digit targets, Prepared Foods is going to have to carry a larger share of the weight.

Agreed. Yeah, so, Jeremy, as we talked about synergies, the one thing we need to come back to is those numbers that we have continue to talk about, those are gross numbers and there's a lot of expenses beneath that that, you know, net out to a smaller number, and there's a significant amount of investment that we are making in the cost base for sure. The way I'd have you think about it is that, yes, predominantly those have gone to make it more attractive margin in the business, but that's something that will continue on. So as we stop the sort of synergy discussion, we're going to continue to talk about lean and continuous improvement, that's going to, you know, provide the fuel for growth for the business. Over time, we expect margin expansion. We talked about 10% being the number that we're comfortable with right now. But you should expect margin to expand toward the higher end of that range and continue to experience greater than industry growth.

Okay. And I just wanted to ask about Chicken, go ahead.

I would just add, just look at the Core 9 and the Focus 5, they have some good growth factors around them and we expect them to continue. So as the margins gap, you can expect the volume growth to contribute to that in a healthy way.

Got it. On Chicken, (29:00) your production growth estimate and feed cost outlook remains the same, but your margin guidance came in a little bit softer than last quarter, really as pricing is soft to start the year, but is there anything else structurally changing that would cause you to be more conservative or is it just the elevated supplies of competing proteins and the compensation that you flagged?

Yeah. It will be, you know, our guidance is in that upper-end of the normalized range, 9% to 11%. We expect it to be growing in both, you know, Frozen and Fresh segments. What I'd say is, you know, we're taking advantage of the low cost of raw materials right now and we've added cooking capacity, which is – we don't talk about that a lot, but that is something that we have made tremendous progress on, as we've added capacity, we've sold that capacity and so we're in a position where we're, you know, looking to add more capacity. So the mix is improving. We're focused on reducing the cost structure as you call out, but we continue to see that we're doing the right things in that business, and outside of a massive grain shock, we feel like we're in a great, great position.

Got it. Thank you.

You're welcome.

The next question will be from Adam Samuelson of Goldman Sachs. Please go ahead. Adam Samuelson - Goldman Sachs & Co.: Yes, thanks. Good morning, everyone.

Good morning. Adam Samuelson - Goldman Sachs & Co.: Maybe first going back to Chicken in the quarter and I just want to make sure we're thinking about kind of how the mix of business is changing and some of the profit drivers. The Chicken EBIT in the quarter was down $95 million year-over-year. You flagged the $23 million higher compensation expense. At the corporate level, you had about $20 million of higher marketing, I suspect a decent amount of that leaked into the Chicken business. Your feed costs were down. But could you help bridge some of the balance of that? Is it just declines on the Fresh or the more commodity, the values, some of the commodity items, I mean, like quarter values are actually up year-on-year. So, I'm trying to just make sure I'm understanding the margin drivers in the Chicken business correctly and the implications for the balance of the year.

Yeah, sure. You know, pricing is competitive. There's a lot of protein available, so pricing is a big effect, Adam. And, you know, that's not going to abate in the near term, and we see that being an issue that's hanging with us. We also see, as we've discussed, some of those costs rolling through. Now, as we mentioned in the prepared remarks, there's mostly the one-time nature that has rolled through, but that is something that we are investing in to make sure that the margin holds up over time. But I'd say the biggest thing that we're facing right now is just pricing as it relates to overall availability. Dennis?

And I'd add just one thing. Remember, last quarter, Q4 of 2016, operating earnings were $219 million and a 7.8% return on sales. This quarter we're up $44 million, $263 million and 9.7% return on sales, and that's what we had foreshadowed that we were moving back into the range and strengthening the business. Adam Samuelson - Goldman Sachs & Co.: Yeah. That's helpful. And then, maybe just on the guidance. I'm just trying to make sure for the balance of the year – I think it was Heather's question at the beginning, with the outlook for Beef that you've given and the already completed share repurchases, I mean, those two factors alone to me would deem to encompass all of the EBIT or the EPS growth that you've contemplated for the balance of fiscal 2017. And so I'm just trying to think about the components of the outlook that are down, I think, you're losing some heavier investments in Prepared Foods. Chicken, maybe for the next quarter or two might have some year-on-year pressures, but you still are also comping, what was a tougher fiscal fourth quarter, both in Chicken and Prepared Foods. So I'm just trying to reconcile those kind of components of the outlook in some of the areas where the investment spending might be higher for the balance of the year.

Yeah. Okay. Q2 is always a tough quarter for us to understand exactly how it's going to play out given the seasonality of our business. But I would say it's not just on the Fresh Meat side that there's tremendous seasonality as it relates to the poultry and Prepared Foods side as well. So we feel like Q2 will be challenged and we think Q3 and Q4 will be strong. Now, we're guiding to what we believe, based on what we know today, those are the numbers we feel confident about and we'll see how it plays out, but it's a lot depends on how Q2 rolls. Adam Samuelson - Goldman Sachs & Co.: Okay. And if I could just ask one clarifying question on the high-single digit EPS guidance medium-term, is that before or after the impact of capital allocation? You guys have comfortably north of $1 billion post dividend of free cash flow every year plus the balance sheet, I just want to clarify that high single digit is just an organic number.

After. Adam Samuelson - Goldman Sachs & Co.: After? Okay. Thank you.

You're welcome.

The next question will come from Rob Moskow of Credit Suisse. Please go ahead. Robert Moskow - Credit Suisse Securities (USA) LLC: Hi. Thank you for the question. Two things, just a follow-on on Adam's. Your value-added business in Chicken, you said it was up 5% and commodities were down. I guess, I would have thought that your Chicken margins would have held up better year-over-year given that type of expansion. Are you seeing a lot of competitive pricing in value-added Chicken that's causing pressure on those prices? And then the second thing on Prepared Foods, I think three months ago I think you said that Prepared Foods would have a cost benefit on input costs of $125 million, and now the forecast is flat. So does that mean that you had a big input cost benefit in first quarter, and if so, what happened to the – did that help your margin in first quarter or was it just not a factor? Thanks.

Yeah, I'm going to – I'll tackle the first one, and Dennis could probably provide some color on the second part of that, Rob. You know, the difference between last year and this year is just the pricing for us that we're into the marketplace with. I mean, it's what we're focused on as we talked repeatedly is about making sure that we're continuing to put ourselves in a position where we're growing volume. So, think about that value-added growth of 5% that comes making sure that we're entirely competitive, so that is the reason why, year over-year, you're not seeing the same margin structure, but you're seeing the maintained growth. Dennis, do you want to comment on that?

Sure. As far as the raw material question on Prepared goes, Rob, we benefited by about $100 million in Q1, but we expect the remainder of the year to be flat, to answer your question. Robert Moskow - Credit Suisse Securities (USA) LLC: Okay. And the $100 million, though, I mean your margins are flat in Prepared Foods, did you have to lower prices in sync with that $100 million?

Absolutely. Yeah, pricing pressure, think about Prepared Foods, our portfolio, it is predominantly protein and it plays in the same space, same dynamics, so absolutely we have been more aggressive for sure. Robert Moskow - Credit Suisse Securities (USA) LLC: Okay. Thanks.

You're welcome.

And the next question will be from Akshay Jagdale from Jefferies. Please go ahead.

Good morning. So, I wanted to ask about the compensation topic. So can you just tell us exactly what changed there? Obviously, it's good to see you're investing in people, but I just want to know what changed exactly and how that may be, better aligns with the shareholder interests or growth going forward?

Sure, Akshay. The way to think about it is we have to come to one system across Tyson Foods which is not a unusual thing for companies to make sure that they're doing that in a thoughtful way. As we did it, we said that the right thing to do was to get to a point where we have compelling packages for our team across the organization. For the year, we expect it's going to be about $100 million in total charges. The $58 million that hit Q1, I spoke about, about 80% of that is one-time in nature, and the costs for the rest of the year, they flow through. But I would say that the recurring cost structure increase is less than the accounting true-up for the first quarter and it does make a lot of sense for us to focus on making sure that we have a one-Tyson system as it relates to compensation.

But are the incentive drivers different or higher or what's causing the step-up?

No, it was getting to one system on holidays and vacations and because we were so different across both, that was the key issue.

Okay. And then just, you know, looking at the long-term opportunities in Prepared Foods, obviously, you've been investing in growth, and the numbers are showing in the Nielsen data. There's this issue with the legacy private label business which seems to come up every couple of years. I mean, at one point I think that business had a 5.5% margin, but for the last several years, it's been in the low-single digits. What's the opportunity there? Because I thought that as part of the combination of these two assets, Hillshire and legacy Tyson, you know, that's also a major source of synergies, right? So I thought a decent chunk of the synergies were coming from the legacy assets, and to hear that you need to make more investments, I'm just trying to understand what might have changed there, or if it's something new that's come up.

Yeah, and I think it's fair to say that the business has always been on the, as you call it, on the legacy Tyson side, it's been a challenging business from a margin perspective. If we look at the 2014 results, it was a loss maker. 2013, it was about 3%. I think the 5.5 % was one-time that was, I believe, 2012. But if you look at the business year-over-year for the legacy Tyson team, it was a business that was challenged from a margin perspective. So when you're flowing through with the addition of Hillshire, there are some – the blend-out is going to be somewhat less. As it relates to your question about the investing in the business, yes, we have continued to invest and part of that or I would say the majority of that, as it relates to synergies, have been closing some plants that were non-strategic as we consolidated volume into existing plants that we're heavily investing in. That sometimes goes really well. Sometimes it wasn't executed exactly as we had drawn up on the white board. However, what I would say is, the investments that we're making now are pointed towards growing the business and improving the margins. And so, that's as clear as I could put it, Akshay.

And just one last one on Chicken. The Focus 5, what percent of your business is that today? And I mean long-term, what's the opportunity for higher-margin value-added products as a percentage of that business, and sort of where are we today? Maybe you can just give us, like, a general sense.

Yeah. So the – we're just getting the number, the percentage of the top of my head, I don't know what that is. You can maybe follow-up with that, Jon, to the extent that we're going to share it. What I would say is, we are making tremendous impact on our business in food service on poultry. So our Prepared or further processed business in poultry is going extremely well in food service, and we are making sure that those categories we want to play long-term are going to be healthy. Now, where that growth is going to be sourced from, there's a lot of channel shifting as I talked about. But if you think about the periphery of the grocery store, our customers are looking for solutions that are not necessarily retail packaged brands, but they are ready to consume. You might have heard this term gross around. There's a lot of – our customers that are looking to capture food service volume, we are in the sweet spot of that space, because our solutions are exactly what they're looking for and our expertise is what they want to leverage. So, I'll say, and thinking growth for the future, food service will come from the traditional channels that it does, that you know of, but I also would ask you to think about that periphery of the store being a real sweet spot for us.

Okay. I'll pass it on.

The next question will be from Farha Aslam of Stephens, Inc. Please go ahead.

Hi, good morning.

Good morning.

Good morning.

Could you go through the pizza topping business, just wanted to make sure that that recovery is still on track for the second half of this year?

Yes, yes, it is. That is going to be a part of what's going to continue to hang with us here, but we wanted to make an improvement in our network. We went down that path. We made a good decision to close a plant that was not fit for the business, but the production was transferred to the newer facilities. It was absolutely the right decision to position us for growth, and we just have more work to do. The transition wasn't seamless, like I said, but we feel like that we're on path to make that a long-term healthy strong business for us, both in terms of Prepared Foods growth and also the margin structure.

That's helpful. And then, if we could just talk about marketing investment, what do you anticipate the total company marketing investment step-up will be this year compared to last year? Have we hit a sustainable run rate? How should we think about incremental marketing for Tyson going forward in that high-single digit growth rate?

Yeah, so Farha, I won't give you the forward-looking marketing investments, but what I will tell you is we are doing two things that you should hold us accountable to. One is making sure that that investment continues to improve its return. So we are doing some fabulous work on our team to make sure ROI continues to go up on marketing investments. And so if the ROI is increasing and we're making the right moves in supporting our branded businesses, we would expect the overall to continue to go up. So, if we're getting a good return on that, we want to support the brands, and you know, it depends on which brand you're talking about, what the ultimate level is, the mix-out is going to be different depending upon what kind of traction we've got. Clearly, we're going to spending and have spent a lot more on the Tyson brands and we're going to continue to spend on the other brands that we have the number one position. So it's what's required, certainly our customers expect that. And like I said, we're going to get nice returns on those investments.

And in terms of kind of an ROI or payback period, how do you assess marketing? Because we've heard for two or three years that over the last two, three years, you're increasing marketing spend. We just want to understand how we should judge that marketing expenditure?

Okay. Let me take that as a follow-up. We'll talk to Jon to see if we can get you some more detail around that that we're willing to share. And I mean part of it we feel like we have a competitive advantage in that area and want to make sure we thread that needle correctly. But I would ask Jon to follow up with you, Farah.

Okay. Thank you.

You're welcome.

The next question will be from David Palmer of RBC Capital Markets. Please go ahead.

Thanks. Good morning. Just a follow-up on the Beef segment. Obviously, very strong quarter and your guidance for the year, while it implies a step-down from this quarter, would still be a nice step-up from last year. This seems like a long cycle segment with cattle supplies perhaps implying another strong year in 2018. I'm just wondering how we should maybe shape our models into 2018, with a segment like this that shouldn't turn on a dime. That said, it just did turn on a dime. So any help in thinking about that in the Beef segment would be super helpful.

Yeah, awesome. So, you know, I really thought we'd be going out of limb talking about 2018. What we see are, you know, certainly in the regions where we are – we'd like how it's shaping up. 2017 looks to have better numbers, let's say, cattle in our regions, which is great. Our cattle inventory, we feel like – if you look at it compared to 2011 and 2012, this year, it's similar – its improving to that level. And, you know, we feel like for our position going into 2018, it's teeing up well, but it's just too far out there to know. You know, 2018 cattle are born in 2016, and we're kind of, you know, trying to model that ourselves. But we feel great about 2018. I can't give you a view, I'm sorry.

It's just that, when we look at this segment and you have these new levels being reached, is there anything about this that makes you think that the Beef range is going to be moving higher? Is there anything going on structurally that is giving you an upside bias to where Beef margins can be over the medium term?

I'll just go back and say, 2017 looks better than last year, and the Midwest, more cattle coming. We like that. We believed for the year we're at 5%, just the level that we're feeling like we'll wind up at. And it's hard to tell, but I would say, we're shaping up well. Dennis, anything?

I would say 2018 looks to be another solid year, potentially above the range again. As far as addressing the range, it's too early to do that right now.

Okay. Thank you.

You're welcome.

The next question will be from Michael Piken of Cleveland Research. Please go ahead.

Yeah, hi. I just wanted to talk about the Chicken business a little bit more. And have you seen any change in the way you're contracting some of your Prepared Foods, and some of your tray-pack business since the Georgia Dock pricing (48:11) metric was eliminated?

No. So, as I've said before, the Georgia Dock for Tyson Foods is a tempest in a teapot. It's really not something that drives a lot of our attention. Since the elimination of the mechanism last month, customers that are affected are being switched to other methods, so no impact on margin. We've told you that in the past we have various pricing mechanisms. It's really supply and demand that our customers are looking at, what's the overall protein availability, how do they feel like they have leverage. Certainly, as we're continuing to grow the branded business more of that is on a list price. We have certainly some businesses that are formula driven, but predominantly on grains, so that's what I'd ask you to think about. And the diversity of those pricing mechanisms for us tells us it's important for us, because it helps us de-risk the total margin profile. But as it relates to the Georgia Dock, no impact.

Okay, great. And then the other thing is, just related to Chicken again, I know you've given a flat feed cost outlook. Is that generally assuming a constant volume basis or does that incorporate any volume growth? And with the breast meat prices on the board trading for below $1, I guess the quarter prices are still little above $1, but with breast meat selling there, you are taking advantage and maybe opportunistically looking toward purchasing breast meat on the open market and flexing your buy versus grow strategy? Thanks.

You're welcome. Absolutely, we will continue to flex our buy versus grow strategy. We try to grow whole-bird increments to remind everybody and we buy pieces. So the parts that we need we're going to continue to buy on the market when the market is favorable, but that's our model. And that's what we feel really strong about to continue our growth is to make sure that we're making sure what we're producing internally is in whole-bird increments.

Thank you.

The next question will come from Ken Zaslow of BMO Capital Markets. Please go ahead.

Hey, good morning, everyone.

Good morning.

Hey, Ken.

I just wanted to get some clarification. How much cost in 2017 will not be repeated in 2018?

About 80% of the $58 million, so let's just round it up to about $50 million.

What about going forward? It sounds like there's more investment coming between the competition and also the network. I know you said 18 months, but there's – 18 months is obviously a year and a half, right. So there's a part of 18 months that won't get it and then there's also that. So I'm just trying to figure out, 2018, what will not repeat as a total cost?

Ken, the 2017, whatever we have teed up to invest in 2017 is in our guidance, it's in the capital plan. This is, you know, we've been working on this for some time. As it relates to rolling forward beyond 2017, simultaneously, we're amping up our continuous improvement program. So investments that we're going to make in the business, we know that there needs to be a paid for (51:24). So that is what we intend to do, so it's not going to be incremental. I would ask you to think about it as it's going to be offset by continued improvement in our continuous improvement efforts and discipline. So that's how I think about it. Dennis?

Ken, maybe I misunderstood your question, but I thought you were asking what amount of our expenses will not be repeated next year?

Right, for the total – for what's in 2017, what are your total expenses that are one-time in nature that we will not see in 2018?

About $50 million, that's about 80% of that.

Okay. There's no – so in the third and fourth quarter – second, third, and fourth quarter, we're not going to see more incremental spending that's included in your guidance that will not come in in 2018?

So, let's unpack that. We said $100 million for the full year, $58 million in the first quarter. Of the $58 million, about 80% of that is truing up some liabilities. And so that's going to stay at that level next year. So therefore it will not be repeated. Is that clear now?

Of the $100 million, that is going to be spent in 2017...

Yeah.

80% will not – so $80 million not repeat in 2018?

No, 80% of the $58 million that was incurred in the first quarter will not be repeated.

Okay. Are there any other incremental – I guess, I'm just trying to figure out what incremental spend and will not, but I will take this offline. I don't want to belabor there.

Yeah. I will have Jon follow-up with you. We can do the math together and...

My follow-up question is, is 2017 a base number from which to grow or is it a number from which you've got to kind of adjust to figure out what the long-term growth target will be off that number?

2017 is continuing to be a number where – we are going to grow in 2017 and we believe that, of course, it's going to be a base for us to grow into the future. But, you know, that's not – we want to make sure that we are continuing to grow while we're investing, that's a trick, and that's what we want to do for, you know, all of our stakeholders, make sure we're doing that really, really well. So I don't know...

So, you don't think 2017 is the aberrational for a EPS number, although you have strong Beef and Pork packer margins. So this number is a sustainable number, that's my question.

Absolutely.

Great. Thank you.

You're welcome.

The next question will be a follow-up from Heather Jones of the Vertical Group. Please go ahead.

Hi. Thank you for taking the follow-up. I was just wondering if you could help me to think about your input cost on Prepared Foods. So, some of your competitors, will be short bellies, long other items, but just so that we can track this and think about the impact going forward, if you could just give us a sense of any of the cuts that you may be more exposed to than others as far as from a cost perspective?

Yeah, I'd say, Heather, it's not the cuts so much as it is the businesses that, I'd say, apply to. So if you think about the retail business, it operates in a typical CPG model, where we are looking at supply/demand, the strength of the brands, elasticities to make the right calls on what's the best thing for us to do as it relates to pricing. The food service, the raw material, generally flows through on a formula price. There's always – we're looking to make sure that we have the right balance, but it's slower. There's a almost – about 70% of the raw material gets passed on. But those funds will continue to – that we – when we capture – certainly, margin momentum are going to be continuing to be focused on innovation. The particular cuts isn't so much how we think about it. Now, with the exception of bellies. Of course, bellies has been a particularly volatile raw material right now and that's something that we continue to make sure that we're doing the right thing for, the right brand, as well as our Jimmy Dean brand business. And that's probably the area that gets the most attention right now. The rest of the commodity inputs or cost inputs are something that is – we feel like we've got a pretty good handle on. Bellies are domestic. Hams, I think, as it relates to another, probably volatile, component, are export predominantly. So the rest of the trim and those items that we buy for retail and food service, food service moves typically on a formula, retail does not. There's generally a lag effect up and down.

So as it relates to your retail bacon business, we should care about bellies, but you would be working to pass those through.

Absolutely.

Okay. Thank you.

You're welcome.

And, ladies and gentlemen, this will conclude our question-and-answer session. I would like to hand the conference back over to Thomas Hayes for his closing remarks.

Great. Thanks for all the wonderful questions. Appreciate all those, and before I sign off I just wanted to say we had, of course, an excellent overall financial performance in Q1 we're thrilled by, and as a team we're continuing to raise the bar for ourselves. We have a tremendous amount of excitement about the future; precisely because we know we have a lot of opportunity and a lot of room for growth. We've got great capabilities. We play in great categories. We have a great team that knows how to win. And as you think about our business, just know that we're always thinking about value creation; it's on our minds every day. Creating shared value for all of our stakeholders, our investors and everybody in the team and it's through hard work and determination we'll get it done. So, just thanks again. Appreciate your interest in Tyson Foods and we're looking forward to growing together.

Thank you, sir. Ladies and gentlemen, the conference has concluded. Thank you for attending today's presentation. You may now disconnect.