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TSN - Tyson Foods Investor Day - Afternoon Session

EVENT DATE/TIME: DECEMBER 10, 2014 / 6:00PM GMT
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DECEMBER 10, 2014 / 6:00PM, TSN - Tyson Foods Investor Day - Afternoon Session
CORPORATE PARTICIPANTS
Donnie King Tyson Foods, Inc. - Group Leader, North American Operations &
Noel White Tyson Foods, Inc. - Group Leader, Poultry
Wes Morris Tyson Foods, Inc. - Group Leader, Prepared Foods Operations
Steve Stouffer Tyson Foods, Inc. - Group Leader, Fresh Meats
Bernie Adcock Tyson Foods, Inc. - Chief Supply Chain Officer
Tom Hayes Tyson Foods, Inc. - Group Leader, Tyson Food Service
Sara Lilygren Tyson Foods, Inc. - EVP, Corporate Affairs
Donnie Smith Tyson Foods, Inc. - President & CEO
Andy Callahan Tyson Foods, Inc. - Group Leader, Retail Consumer Brands
Sally Grimes Tyson Foods, Inc. - Group Leader, Insights, Innovation, R&D, Retail Sales, and Global Brand Strategy
CONFERENCE CALL PARTICIPANTS

Farha Aslam Stephens Inc. - Analyst
Diane Geissler CLSA Limited - Analyst
Ken Goldman JPMorgan - Analyst
Akshay Jagdale KeyBanc Capital Markets - Analyst
Rachel Nabatian Credit Suisse - Analyst
PRESENTATION
Editor
(video playing)
Donnie King - Tyson Foods, Inc. - Group Leader, North American Operations &
Well, good afternoon, everyone. I trust that everyone has had ample time to sample the products that Mario and his team have prepared for us
today, that broad portfolio of branded products. Certainly, they smell good. We haven't had an opportunity to try those just yet, but I hope you've
enjoyed that. And I hope by trying that, seeing that, and what you've seen up to this point in the presentation that you are as excited about Tyson
and Tyson 2.0 as we are as a management team.
I reference in the video that Tyson and Hillshire was much like a marriage, and in any good marriage, two become one. It doesn't mean any one
part gives up what they do best, but the two come together in order to become better, and so that's what we've done. If we have best-in-class
operations which results in lower cost, as well as we have best-in-class brand building capability plus innovation, which should give us the high
revenue.
So low cost, high revenue, is the name of the game here. And I know there are a lot of questions today about synergy and we -- obviously, we're
prepared for those things. But by definition, synergy occurs when the whole is greater than the sum of the parts. And as has been expressed here
today, something looking like 1 plus 1 equals 3 or more.
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In our model, that looks like this: Low cost plus high revenue is 3 or more. That's what we see here. So going further down that road, we have
committed to $225 million worth of synergies in 2015, and $500 million plus by 2017. So I know you've been waiting for this, so let's look at the
buckets in which those will occur. And we're going to look at 2015, 4 major broad buckets today.
Prepared foods, in terms of improvements. These are things like our footprint; these are things like those fundamental executional elements of the
manufacturing process. We believe there to be in 2015, $140 million of the $225 million there.
In terms of procurement, we anticipate $40 million plus, and this is simply how we buy packaging, corrugated, those type things.
Manufacturing and logistics, $25 million plus of the $225 million. This is where the plant is located; this is how we do what we do in terms of what
mix is in each plant. And then Dennis referenced earlier today organizational and fiduciary as being $20 million plus in 2015. That's two boards,
those type things, that we talked about. So that is 2015.
Now let's talk about 2017. Just three years, $500 million plus, and I kept them in the same buckets. Prepared foods improvements will move up to
$250 million of the $500 million. Procurement at $175 million plus, manufacturing and logistics at $50 million plus, organizational and fiduciary at
$25 million. And I realize, I realize that that $500 million is a lot of money.
I realize that that is seemingly a very daunting task, but you're talking to a management team here when grains moved up over the last few years,
in any given week you're talking about $3 million to $4 million a week. So we try to get it down into those really narrow buckets. We were at times
in grain offsetting and finding cost-saving and synergies to the tune of $10 million a week. So while this is a big number, it is a number that we're
comfortable with, one, committing to, but also with the help of Hal Carper and his IMO team of really putting good business process and accountability
around going and achieving those.
As was pointed out earlier, what is not in this number -- and if you listen to my portion of the video -- what is not in this number is what we believe
to be the value of the raw materials of pork, beef and chicken into this branded portfolio.
So that being said, I want to introduce you to the team that I have with me, which I will tell you today is the best in food. And one of the things I'd
tell you about this team is that all of them have varied experience, and we've moved this team around so they could experience different things.
To my immediate right or your left is Tom Hayes. Tom comes to us from Hillshire. Tom was responsible for supply chain, prior to that in food service.
He used to run or be responsible for Sara Lee's foodservice business. We're extremely proud to have Tom with us here today. Tom is responsible
for our foodservice business.
Next to him we have Bernie Adcock. Bernie Adcock is responsible for our supply chain. So if you saw the 1 plus 1 equals 3 or more, Bernie and the
supply chain organization is the plus. They are the ones who are looking at or enabling this raw material, this low-cost production, and marrying
that to these iconic brands in this high-revenue play that we talked about. Bernie has done a number of things in our organization running different
parts of our poultry business, running supply chain, as well as the manufacturing operations in our legacy Tyson prepared foods.
To his right is Wes Morris. Wes has worn a number of hats, but Wes' role today is responsible for our prepared foods manufacturing, and these are
the old Tyson prepared locations plus the legacy Hillshire prepared locations. And those coming together and really looking and studying those
mixes and finding out what and where we have redundancies and capabilities. But Wes has spent a great deal of time in the CPG business, retail
facing with marketing and sales in the retail level. Most recently, Wes led our retail chicken -- our retail channel, which included chicken and prepared
foods, and done a great job there. Very instrumental in the turnaround on chicken for us over the last few years.
Next to him is Steve Stouffer. Steve Stouffer is responsible for our beef business, our pork business, and our case-ready beef and pork business.
Steve is very knowledgeable, many years of experience in that area.
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And to his right, last but not least, is Noel White. Noel is responsible for our chicken business. Noel has been there for about a year. He spent a
number of years managing our beef business, our pork business from South Dakota. A lot of experience, a lot of years. So collectively up here, we
have in excess of 180 years of experience in the food space.
So with that being said, Noel, I'm going to start out because I know there are a lot of questions out here today. And I'm going to start out by asking
Noel a question, and then we'll move down the line here. But the question is, and I know it's on your mind, is what is the outlook for chicken in
2015, 2016? A lot of conversation around oversupply; can we maintain those margins. Give us your view of that, Noel.
Noel White - Tyson Foods, Inc. - Group Leader, Poultry

Well, I think as we've commented that our outlook for 2015 is that we will return with something greater than 10% return on sales. We have very
good visibility at this point as to what our input costs are going to be, as to what the pricing environment looks like as we look into 2015, as well
as some of the benefits that we're going to capture from some of the investments that we've made from a capital standpoint the last couple of
years.
So feel very, very comfortable about 2015.
As we look into 2016, I can say with nearly the same confidence level that it looks to be a continuation of something very similar to 2015. As we
mentioned this morning, poultry demand has been exceedingly strong. It is something on the 3% growth rate. We know that beef supplies will be
limited, at least for the next several years, which does in fact provide that pricing umbrella for the other proteins.
At this point, the greatest challenge that we're going to have in both 2015 and 2016 is more in sourcing the supply to satisfy our customer demands
than anything else. So 2016 looks to be a very good year, just like 2015.
Great, thank you, Noel. I know we will have further questions on that later. The next question is going to be for Wes Morris. Wes is responsible for
our prepared manufacturing. Wes, a lot of those synergies and as part of being that low-cost producer, a lot of those synergies lie within your
organization today. Tell us a little bit about what you plan to do in this new organization to deliver those synergies.
Wes Morris - Tyson Foods, Inc. - Group Leader, Prepared Foods Operations
Sure. First, let me say you met the high-revenue folks this morning, and I'm on the low-cost side of the low-cost, high-revenue equation. But my
team is very excited. It's a new calling. It's a mission to eliminate waste, execute lean manufacturing, continuous improvement. And the excitement
on my team is about what we're going to do with the dollars that we free up, reinvesting in this number-one branded portfolio, investing in
innovation. And so my team is very excited to do what Andy called fuel the growth.
So it's not just being great operators; it's being great operators with a mission. So that's a big step change. But a lot of the work around prepared
foods started last spring and summer. We did a deep dive into fundamentals of our business into the supply chain. It was a part of a bigger prepared
food strategy, but I can give you some examples.
Cattle had moved to the Upper Midwest. We were still producing roast beef in Santa Teresa, New Mexico. There is a major inefficiency in getting
the raw materials all the way there and all the way back. Direct to indirect labor ratios, and many, many other fundamentals of our business.
So you saw I'm on the hook for $140 million. Let me describe the three big buckets that that's in, and why I'm so confident in those. First of all, we
invested heavily last year in breakfast handhelds and breakfast sausage. There's no reason to continue that as we bought the number-one brand
in both of those spaces.
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The network optimization and supply chain deep dive led us to closing three facilities, one which is already closed in Cherokee, Iowa; the second
one in Buffalo, New York, which is at the end of this month; and then Santa Teresa, New Mexico at the end of January. And then the corresponding
overhead recovery that comes from moving those pounds to other facilities.
Then last but not least, the third bucket is in absolute fundamentals of our business. So we put together gap plans by location which included
capacity yield, labor, line efficiency and spend, and we're off to a good start.
Good, thanks, Wes. So the next question will go to Bernie. I referenced, Bernie, you're the plus in our model here. So why don't you give us some
examples of things that you and the supply chain organization will do to enable us to convert these low-cost raw materials into a branded portfolio.
Bernie Adcock - Tyson Foods, Inc. - Chief Supply Chain Officer

Well, Donnie, when I think about supply chain in Tyson 2.0, I'm thinking about a margin-based supply chain providing end-to-end visibility to make
great margin decisions. So as we do that, we are the link between what you heard this morning with Andy and Sally, all those great brands; we
take the demand they have and we are going to start working backwards in our supply chain. So looking at our capacities all the way back through
our raw materials, the movement of plants in between, and how we deliver that low cost with Wes to these great brands.
So one of the -- a good example or an early thing that we captured was just raw material. So between our source plants and our further process
plants, as we just looked at where those networks come from as we put the two organizations together, over 67% of the further process plants
saw reductions just in freight dollars. So that was a quick win for us.
The other, we saw this jerky product that we're going to market with. We've also been able to figure out where that raw material comes from within
Steve's organization that was really kind of going into excess commodity market already. So we are already starting to see where we're taking out
raw materials and moving them up the value chain.
Thanks, Bernie. And then for Tom. Tom, food service has been flat over recent years. So why don't you tell me and the group what you're going to
do to help Tyson, the new Tyson Food Service organization, to grow both top line and bottom line at a faster rate than industry.
Tom Hayes - Tyson Foods, Inc. - Group Leader, Tyson Food Service
Great. Yes, I'll start by saying the legacy Tyson Food Service organization as well as legacy Hillshire have grown faster than the industry. Tyson Food
Service is by far the largest manufacturer in the foodservice space by volume. Our intent is to be the most important supplier to our customers. So
the way that we're going to drive a different result going forward is by making sure we are driving demand. That is our job.
Demand is a couple of buckets; satisfying the demand that's already out there. Certainly we talked about that as it relates to poultry, some of the
challenges we've had. Getting back on that track once we had supply available is key.
The second thing is driving new demand, creating demand with innovation. Sally's team does not just focus on retail. You heard her talk about
taking some of the foodservice products into retail. Our innovation and insights will be leveraged against food service in a big way.
So driving food service top line will come on the back of innovation, as well as making sure that we're leveraging the full portfolio we have. We
talk a lot about poultry in food service for sure, and that's important. We have a broad portfolio of products in food service, inclusive of pizza
toppings, pizza crust, tortilla, pies.
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There's a lot of opportunity to grow, particularly in areas that are growing with foodservice operators. So it's our job to make sure we match those
segments and products that we make money on and our customers make money on to drive to a better result. We're all about doing it. I think the
team is off to a great start and thoroughly excited about the synergy that's created by bringing these two organizations together.
Good. So Steve, last but not least, we have a lot of raw material, and we've talked about that and how to convert that. There's questions about how
we're going to do that, and we'll get into some more detail about that as we get questions from the floor, I'm sure.
But in terms of profitability for beef and cattle supply here in the near-term, why don't you give us your views around what profitability looks like
for the year for the beef segment in particular, as well as what cattle supplies look like for you here in 2015.
Steve Stouffer - Tyson Foods, Inc. - Group Leader, Fresh Meats

Well, it's always interesting when you start talking about beef supply. This has been a recurring theme that we've seen for a number of years now,
about the decline in the beef herd in the US and what does that mean for the business. My 33 years of experience in this area, in the fresh meat
area, and one of the things that I've learned over and over again is ours is a margin spread game.
We really don't care what the price of live cattle are. Our concern is whatever that value is, can we generate enough revenue on the outside on the
meat production side. Once we look at our cost of producing and the revenue side of the equation, can we build that spread, that margin in our
business to generate the margin profitability that we've seen.
Last year we were just a hair under 2% return on sales. Our expectation this year, yes, we're looking at somewhere in the vicinity 4% to 5% less beef
available as far as fed beef in the marketplace. It's a double-edged sword. We need to see that happen. We need to see the herd decline as producers
are holding back heifers, as they are holding back cows in the production, so that we can start building the herd back up.
Short-term, that creates a shorter supply base. But what we've seen happen even in 2014, in calendar 2014, is you watch the spread and you look
at the year-over-year volume generation in the beef-packing business, the percent decline that we've had and number of head that have come to
harvest, it has been around 8% here as of late.
What we end up doing to manage that is manage supply to the demand side of the equation. We've got a $2.50 of hundredweight choice cut out
right now. You go back a year ago it was at $1.99.
By rationing that supply, by lowering that volume coming into the market we are able to generate that margin spread. And that is not going to
change anytime soon. As we continue on in these tightened supply periods we're going to continue to manage margin.
And our expectation as we roll into next year is we are going to see similar type earnings as what we have seen it and that's the way our business
has developed. We continue, and one of our benefits as an organization is the fact that we talk about synergies.
We are a raw materials stream pipeline for our group here and basically our business is a business of alternatives. Where can we take these products?
Can we take them internally and margin them up there; can we take them in the export markets, can we margin them up there? Can we do all
these different things?
Right now we bring to the table in working with Bernie's group and working with Tom's group and working with Andy and Sally and Wes is analyzing
what these raw material pieces look like; what are our alternatives for them; what is the consumer demand trend telling us we want to do and then
margining up our end of that portfolio. If it means sending some products to the outside to the export market and turn around and buying some
of the commodity items that are available in the domestic market, that's great.
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If that means that we are going to take our fed cattle material that we produce and displace in our internal production facilities some of the cow
beef that right now, cow harvesting is like 15% down year-over-year, so there's less cow meat available out there. Well guess what, we can supplement
that with the fed beef that we have out there, which in turn actually supports this cutout.
We hear a lot of talk about ground beef and how ground beef people want to eat beef. Ground beef is the place for them to go right now with the
relative high prices that we are looking at.
Well guess what, cow beef is a main component of ground beef. Fed beef is now displacing and that is propping up the cutout and creating margin
opportunity for us as well.
So that's what we see happening. We are going to be very similar year-over-year. We are going to plan and we have been strategizing to stay on
the positive margin side of the ledger and we expect that to happen again this year.
Thank you, Steve. So just before we open up questions to the floor, this group, I hope you will see before this day is over, this is the right team. I
explained a little bit about our model.
We believe we have the right business model. And what you are also going to see is the passion for us to deliver the results that which we have
promised and I hope all of that comes out.
We look for better ways to try to tell our story every day. And so if you have a question, ask your questions starting now.
If we go ahead and start raising hands or get the mics to whoever would want that. And you are probably going to have more than one that's going
to answer every question but we will see what we can do. But don't leave here not knowing something that you came to understand.
QUESTIONS AND ANSWERS

Farha Aslam - Stephens Inc. - Analyst
Steve or maybe Wes, could you tell us how much of your raw materials are currently being used internally versus being sold on the outside? And
do you have a rough target of how much you think over time can be used internally and maybe what time frame that can be achieved in?
First of all, Tyson just from a muscle balance or a carcass utilization standpoint I think it's important to note that historically Tyson was heavy users
of loins through our case-ready business and very heavy users of bellies through our bacon business. Historically Hillshire was heavy users of hams
and trims, so I don't know the exact tonnage but I know it balances better than ever before.

And I would just add to that the fact that as Wes says, it depends on the business category you are talking about. It also depends on the market
conditions. There's going to be times -- it's very similar to our buy versus grow.
If we can turn around and take our raw material, our fresh meats raw materials and generate a higher revenue compared to what we can buy in a
commodity market and utilize as internal raw material sources, that's a win-win for everybody at that point. So certain market conditions allow us
to do that and allow us to flex in and out but it varies from season to season and year to year.
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I think that we would be handcuffing ourselves if we came out and said we are going to target a specific number. I think we do in certain areas
target specific numbers on specific products very specific for SKU, certain SKU categories just to make sure we have a backstop. But we certainly
want to have as much flexibility as possible to take and grab whatever opportunity arises at the time that it is available.
I think the underlying theme is we have a brand of portfolio now of brands that is not real flashy but it is a lot better carcass utilization than our
old brands.

Perhaps that's a great segue for Noel, if you could share with us exactly what Tyson's buy versus grow strategy is; what percentage of meat you
are willing to buy from the outside and to meet this increased 3% demand for the next two years, how much Tyson is going to perhaps increase
or decrease their internal production of poultry? Thank you.

In our fourth quarter of 2014, we purchased on the outside about 100 loads per week, so roughly 4 million pounds per week is what the outside
purchases were. As we look into 2015/2016 like Donnie mentioned this morning we do have additional FP capacities that are coming online. We
have some that is coming online as we speak.
There is other production capacities that will be online in March. So we will have a greater need in 2015 than we had in 2014.
So as we look at what will likely be increased needs, those outside purchases are likely going to go up. To what extent I can't really say at this point
but I would say it would be fair to say that it is probably going to be fairly significant increases. I talked about the increase in demand and that is
both on the fresh side as well as on the FP side, so we need that poultry just to fulfill the demand that we see right now.
If I could add to that also, just to be clear in terms of growing chickens we can grow chickens better than anybody out there. We have proven that
time and time again.
But just growing more chickens is not our plan. Our plan is to sell more further process value added chicken.
So the ability to do that with the addition of the tray pack that we have talked about, with the addition of the further processing lines that we talk
about, we are not planning to grow more chicken. We will probably buy more chicken but we are planning to sell more value added poultry,
particularly in the value added chicken and the tray pack arena.
So if history repeats itself, think about it this way. We are going to put the chicken back together and sell the whole-bird equivalent and we're going
to buy the off parts. That demand fluctuates and so to answer your question over time it is hard but we are going to maintain good carcass utilization
and whole-body utilization of chickens and buy the parts.
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I'd like to add a bit more from kind of an end-to-end supply chain because there's lots of questions at our break from everyone about our buy versus
grow, so we went down this path of our buy versus grow strategy in about 2011. The buy versus grow was actually a transaction. This is a strategy
of how we manage our business in the real underlying strategy of that is where are we going to balance our supply and our demand.
So outside of what the outside world is doing we're going to keep ourselves balanced. What that allowed us to do is we buy raw material on the
outside we never had ourselves in a position where we are low on raw material.
So every time we sit down in a pricing negotiation with our customers we are negotiating from a position of strength in that we just didn't have
to buy that raw material and sell it to them at a loss if we didn't want to. So that was an underlying transformation of our business and from 2011
until now it has been a huge shift in our pricing structure versus what the rest of the competition is. So we have gained quite a bit of ground.
We've taken a lot of our business and tried to move it over to a more stable margin business, if you will, the first couple of years through this
transformation. And then last year we have tried to take those stable margins and just grow them.
We have also, when you think about buy versus grow, think about that as predominately breast meat and predominately big bird breast meat. So
as you think about this supply of chicken coming at us that you guys are scared to death of, we've got a large amount of our business that is in
small birds. So nobody is putting out anymore small bird businesses, so we've got a block of our business that is small bird business that is really
now balanced going into 2015 more so than it has ever been in the 10 years I have been dealing with small birds specifically.
So we are in really good shape with that piece of our business. We have got some other businesses where we have locked in some margins going
in and then we've got the ability to flex in and out. The arbitrage of buying chicken for $1 today and selling it for $1.80 next week is a transaction
of that, not the entire strategy, and I want to make sure you guys know that that is huge for us.
Don't get hung up on the transaction. I want you to understand the entire strategy.
Diane Geissler - CLSA Limited - Analyst

I just wanted to ask a couple of questions on the food service business in particular. One, could you update us on your contracting, what percentage
is now sort of cost-plus and also extended contracts to food service? I know historically they always wanted three-year contracts and you moved
away from that pretty aggressively when corn spiked back in 2006 and 2008 but can you help us out there?
And then also just in terms of your conversation with your food service customers, what are their expectations on lower gas prices? I know Don,
you talked about 3% demand growth.
In my mind demand growth is always a function of supply. So whatever gets produced will get consumed at some price. And that has always been
the tricky part for the commodity side of the business.
But could you just talk about if you are having conversations about promos or traffic or anything with regard to that demand part of the conversation?
That would be helpful. Thank you.
Tom Hayes - Tyson Foods, Inc. - Group Leader, Tyson Food Service
Sure. So as it relates to the percentages, we don't break that out on a continuing basis what percent of our business is contracted versus a straight-up
pricelist ordeal price.
What I can tell you is a lot of the conversations that we're having with customers right now is helping them through what the challenging environment
is. Over the last -- since really 2008 they have been stressed.
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So what we are living through now is trying to get them to a place where they are looking at what the menu options are in order to maximize what
consumers want to purchase. Those generally lead to -- yes, there's opportunities for poultry. We are in an excellent position to negotiate obviously
favorable terms for the Company but we don't want to do it in a way that alienates customers for the future so we are very careful about how we
manage our customer relationships.
As it relates to gas prices, that could be an enormous tailwind for sure. We know that even in the last month we have seen traffic start to uptick a
bit based on the fact that fuel prices are coming down.
If you think about -- I think there's a price out there of $2.60 on a national average basis that people are predicting for the full-year calendar 2015.
That's about $100 billion in discretionary spend Americans will have to spend on something.
I think a fair amount of that will come back to food service. That's good.
So I think that could be a real driver of our growth. However, like we said at the outset and Donnie mentioned, our expectations are we will grow
faster than the overall food service business. Hope that answers your question.
Just to add to that, Diane, I saw a number from the National Restaurant Association on the way here yesterday. In October 2013 to 2014 we saw a
1.8% increase in traffic. November to November we don't have the number yet but as Tom said, it looks very favorable so I think we are taking some
of those dollars that were being spent on gasoline and we are turning that into food eating away from home.

Diane, the other thing that I would add about the contracting is that the contracting in general started earlier this year and finished earlier this year
than what would be typical. Because much of the discussion was not necessarily around price, it was around them being able to secure the supply
that they were looking for in 2015. They wanted to make sure that they got in early to at least have a seat at the table for supply.
And they have to. They need to, want to, weren't able to in 2014 but the need to be able to promote chicken in 2015. And we are trying to give
them the supply to be able to do that.

One other interesting thing that we are seeing out there , too, in the beef equation is our breast business, which is the steak portioning operation
that we have. And just in general white tablecloth dining we are seeing the middle meat section or the rib eyes and the strips in that area of the
cutout start to show more value relative to the whole once again. We are seeing and starting to see better involvement and better utilization on
that front as well, so that's very supportive of the beef industry in particular.
Unidentified Audience Member

I guess the first question would be for Steve and perhaps Bernie. If you could just talk a little bit about structurally how you see the beef-packing
industry evolving over the next couple of years assuming that the heifer retention numbers remain higher as the industry is looking to rebuild for
2017.
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Is it your expectation that some rival processors may temporarily idle plants, or what is the current capacity utilization of the beef-packing plants
and how should we expect that to trend? And similarly given that you guys are in better position would be safe to assume you guys are unlikely
to be the Company to potentially either idle or shut down a plan?

You look at the businesses in general, you look at the evolution that we are seeing right now as far as cattle feeding goes and the fact that you look
at where our plants are located, we've got one in Texas, one in Kansas. You've got to in Nebraska. We got Iowa, we've got Illinois, we have got
Washington State.
Other than Texas and Kansas all those other states on cattle placements, cattle feeding placements are going up, so the cattle are coming to us in
our facilities. I cannot really speak to what our competitors are going to be able to do out there, or not be able to do but we certainly are seeing
that gravitation of the production going towards the Midwest.
We are positioned to take advantage of that. And we have always been an organization that has been very focused on continuous improvement
being the low cost producer.
We may not have been the first to innovate a lot of the stuff that we do but we have always been the best in executing whatever it is that needs
to be done in order to maintain that position and being the best in that arena. So from that perspective my expectation and my intention is not to
shut anything down from our end.

Specifically, if you calculate recent slaughter levels as a percent of what a 40-hour week would be it has been running about a 32-hour week, roughly
Steve, right?

32 to 34 are right in there really.

That would translate someplace whatever that mathematically is, upper 70%s, 77%, 78% of capacity on a 40-hour basis.

Okay, great. And then just as a follow-up on the fresh chicken side, I guess there's a lot of discussion out there in terms of what is the hypothetical
capacity for how much the industry can grow.
Do you have any estimates in terms of how much hatchery space is out there? And I guess specifically what is the maximum number of egg sets
we could theoretically see if everybody ran full out?
And then also, just wanted to understand about the age of the poulet flock and when we might expect to see hatchability rates improve and if
that is factored into your numbers? Thanks.
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So when I look at poulet placements, the monthly average for 2014 versus 2013 is up 2.5%. So I think the biggest number that I've seen is 208
million per egg set.
So if you put 2.5% on that I don't know that there is hatchery capacity right now to do all of that. And that would be kind of an individual week,
not a kind of an ongoing run rate, if you will.
I don't feel that there's going to be a lot more -- the 2.5% I think is all that we have in us. So you think about holding hens and hen age, people have
held hens this year as long as they possibly can.
The question came up last week so if we buy 2.5% more poulets and you expect to get 2.5% more eggs out of those, the only way you do that is
to hold them to this exact same age. So you won't be able to get both, you won't be able to get 2.5% more eggs and better hatch because you sold
them earlier. So the hatch increase if we count on the 2.5% poulets, there won't be any hatch increase.

And I would add to that, let's start with the fact that we need at least 3% more supply just to satisfy current demand. We've mentioned that and
relative to food service and not being able to satisfy all the promotional activity that was there. That being said, if you look at the infrastructure
that's in place in chicken, it will be constrained at least for a while.
I think we are putting somewhere around 94% or so, 95% hatchery capacity which is a little misleading in that you can't set those at 100% because
-- without going real deep the hatchery style and the rotation of when you set eggs and when you deliver chicks and those type things, the capacity
is pretty close to maxed out. Now, we need the meat but then if you are able to get hatchery capacity, which I have already told you I don't think
you can, you got to go build based on a 3% growth some 2,000 chicken houses, which is almost impossible in terms of the length of time to get
permitting and so forth to do that.
And I know we have competitors in the chicken space that are building new complexes but if you go back and look at the length of time it has
taken them to do that, that is a multiyear project in order to get that done. So the building of 2,000 chicken houses a year is going to be very difficult,
which also really for us puts a lid on how fast you could expand if the demand signal was there to expand.
Ken Goldman - JPMorgan - Analyst

I have a question and a follow-up. Steve, you mentioned that you are running a spread business and that you don't care whether cattle is X or Y as
long as you can manage that spread. But historically it does seem that when cattle are more expensive it is more difficult to get a high margin, as
evidenced in the last few years when you have been running a margin a little bit below where the Company's stated long-term target is.
So you have guided some of this is in your guidance. You've talked about beef margins being lighter in 2015 than 2014 but isn't there more risk to
the downside as cattle prices continue to rise for you guys, or how do you manage that in this kind of environment? Wouldn't you still prefer cattle
prices to be lower overall?

Well if I had my preference, yes. I would want an animal behind every corn stock. There is no question about but keep in mind when you are out
there looking at historical information the thing that really skews history right now is BSE.
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2004 when BSE hit the US we lost all of our export business. So as you are going back in history and looking at beef industry earnings you've got
to take that into consideration. We have, since about 2011, we have surpassed our export volume on beef as a country compared to what we were
pre-BSE.
So that an elements and that's part of the reason that we have seen the advantages that we've been able to maintain in these margins is the fact
that those markets are now back available to us. We are able to utilize those alternatives that weren't available to us back there after post-2014
until about 2009 or 2010.
Ken Goldman - JPMorgan - Analyst

All right. And then a quick follow-up, if I can? The $225 million in cost savings, it has been talked about today back-half floated.
I just want to make sure because there's been some investor confusion about this, is that $225 million, is that the dollar amount that you are going
to save throughout the entire year, or is that the run rate you are going to be at the end of the year? And I know you have talked about this but I
just want to clarify it for some investors in case there is any confusion.

Well we said we are going to save through synergies $225 million in 2015. I would also follow up with your prior question, Ken, you talk about a
spread business and Donnie said this morning, we are not indifferent to what cattle prices are.
We are not indifferent to grain costs or what the [earn a very] market is. We are not indifferent to that.
But as we have been in beef and pork and into a large degree prepared foods, we talk buy versus grow. I think it is important that we start helping
bridge the gap in chicken when we talk buy versus grow to helping you understand that that is really a spread business on their the way we are
managing. As long as we maintain a lower internal supply and are able to buy that on the market it gives us the ability to flex up-and-down and it
really becomes a spread business, very much like beef and pork.
Akshay Jagdale - KeyBanc Capital Markets - Analyst

That's a perfect segue. The question is on chicken. So I'm just trying to understand the bottom and end of your range on the normalized margins.
First, do you believe that the cycle in the chicken industry is going to be more or less pronounced going forward? That's the first question.
Secondly, do you need it to be less pronounced to be able to deliver the margins that you have set out there. And more importantly, what is going
to get you to deliver the margins that you are promising when we know that in fiscal 2011 when the cycle was at the bottom you earned a 2%
margin. So one of the things you mentioned is buy versus grow started then so you are better at it now.
My guess is your portfolio mix is a lot higher-margin skewed and there's a lot more of your business that is stable margin as well. So can you help
us understand that dynamic?

Yes, I'd be glad to take that one. So when we talk about Tyson poultry business, there is actually four separate businesses that comprise that, which
is very different in some of our competitors.
So the first category would be in the tray pack business.
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That would end up in retail, tray pack and the IF business.
The second component would be in the big bird segment, which typically is used for deboning and further processing needs. The third segment
would be in the small bird business, which is a separate business segment. And that would typically go to some type of a rotisserie whole bird or
cut-up type customer particularly on the food service side that might use it for some type of fried chicken application.
The fourth one would be in the retail value added, which you have heard us refer to as red bag, which exists in Andy's world and Michele Bond
who manages that business for us. So when we talk about our poultry business it is actually four separate businesses that we are talking about.
The point being is that when you talk about the chicken cycle, most people look at the cyclicality. It's very profitable right now. And we will not hit
the top of the top because within the profitability segmentation right now the most profitable segments are in fact big bird and secondly tray
pack, we can tell that through agri stats.
Now at the same time when there is more poultry available and the industry may not be as profitable, we would not expect to be anywhere close
to what the bottom in that cycle would be. So to be more specifically Akshay, let's say that the industry would go to a zero margin and we know
that historically it can go to negative but it is typically for a fairly short period of time a matter of months before it goes back to zero. According to
our modeling, in our calculation, our estimates, if the industry is at zero we would expect to be at a 5% return on sales.
So we will not be at the peak. We will not be at the bottom. So we look for that stable earnings range in the middle.
Now the difference of where we are at several years ago versus where we are at today. As Dennis mentioned earlier, we have invested a lot of
money the last three to five years, particularly in our poultry business. We are generating returns, the ROIC that we targeted, which as we've said
in the past is usually we will be more than a 20% ROIC on our capital projects, so those capital projects are in fact paying off.
We will have additional FP capacities that will be coming online, which we need. And as I mentioned we do have a complex we are converting
from one business segment into the tray pack segment, which we need simply from a supply standpoint. The returns are also better in that segment.
I think it's important to remember though how chicken fits into the total protein complex. So take just a basic protein fundamental model, take
beef, pork, chicken and turkey, look at head times weight minus exports plus imports plus or minus freezer stocks and then look at the domestic
and availability of the total protein complex. And so if you do all that and you did it last year for 2014 it is going to come out around 250 pounds
per capita.
You do that same math for 2015 and you're coming out with 254, so only a slight increase in per capita availability of the total protein. What excites
me about chicken is there has been a step change in protein availability thus consumption from beef to chicken and beef cannot correct anytime
soon.
Now if you look at Bob Brown's numbers he is saying that the 3% we believe is needed by the chicken industry is not going to be there. He is saying
that head and weight is going to be up close to 3% but due to some export changes the net availability domestically is only going to be 1.8% and
we are saying we got to have at least 3% to be equal to 2014.

Looks like we've got time for one more question.
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Rachel Nabatian - Credit Suisse - Analyst
Rachel Nabatian, Credit Suisse. So my understanding (technical difficulty) that a decent size chunk of that comes from the Hillshire standalone
restructuring program through 2016. So I wanted to know is that the case, could you quantify it and could you tell us which bucket it falls into?
I'm not sure I understood your question. I couldn't hear it.

The Hillshire standalone restructuring program through 2016, the cost savings from that. Is that included in the $225 million?
Okay, I think I understand what you are talking about in terms of the synergies that are already baked into the legacy Hillshire financials are included
and rolled up in total Tyson financials. Does that answer your question?

Yes, maybe I misunderstood but I thought that the synergy target included the $145 million cost savings program from Hillshire? I just wanted to
confirm that.
Well, they are but ultimately you roll up into the financials but embedded in that $225 million I don't know that I can tell you right at this minute
which one of those buckets that would be in but it is in the $225 million.

Got it. Thank you.
The operational improvements embedded in Hillshire is not in my $140 million number. It's in their pro forma that came over.
But we appreciate your time today. We appreciate your questions. We will be around for a while longer today.
I would also like to announce that it is time for a break and we have dessert outside and go out and try that and give us your feedback around the
desserts. Thank you for your time and your attention.
+++presentation
(video playing)
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Sara Lilygren - Tyson Foods, Inc. - EVP, Corporate Affairs

This is great. I get the sugar high crowd. Welcome back.
You are probably wondering why someone from the corporate affairs department is addressing a group of investors and analysts after all these
great business presentations and there are really three reasons. One is if you are built for growth you've got to make sure your foundation is strong.
And a strong foundation is really the enterprise Tyson Foods, Inc. And my department's job is to protect and defend and enhance the reputation
of that corporate enterprise.
The second reason is the way we communicate today is -- some would call it hysterical -- it certainly is fast-moving information that can damage
or enhance reputations in a matter of minutes. And so reputation management for any corporation, and I would say for any celebrity or any politician
or any cause is really a more important function today than it has ever been before.
And the third reason is and this is something that you probably don't know but we wanted to tell you about a little bit today is we think that Tyson
Foods' corporate affairs practice is a competitive advantage for us. We have functions and experience that I think surpass the competition and that
is a unique advantage for us in the marketplace.
So let me talk first about that team that we have because I want you to know that we have got this. We have the best team out there for defending
and enhancing the reputation of our Company.
And we really use three major tools. We use public relations, government relations and corporate social responsibility, the good deeds, to tell our
story and to defend our reputation.
And we have a very interesting collection of experts who have competency in these three areas. And they come from the commodity business,
they come from politics, they come from this CPG world, they come from special interest groups, commercial art, journalism. So we have a really
unique team assembled to do the corporate affairs job.
And I have 34 years -- God, Steve Stouffer and I must have started at the same time -- experience in food advocacy, 29 of those years in Washington,
DC. And a lot of that time was working for a trade association where I basically represented many of our competitors. So I can speak with authority
when I tell you I know what their corporate affairs functions are and many of them are very good but Tyson Foods is better.
A little bit about why the reputation management function is so important today is because the way we communicate has changed and you guys
all know this. You know that everybody has a microphone, everybody has a website, everybody has a camera and everybody expects transparency
all the time. And I chuckle when I think about the old school and the new school.
I don't know how many of us in the room are baby boomers but baby boomers were raised in an era where soft focus lenses were expected, not
gritty reality. We accepted that Ricky and Lucy on television slept in twin beds.
So today the expectation is total transparency in entertainment and news and everything else. And we now in the entertainment industry we've
gone from Ricky and Lucy in twin beds to hear comes Honey Boo boo, Celebrity Wife Swapping, Real Housewives of New Jersey. The expectation
to know everything instantly down to the grittiest detail is remarkable.
And I would say many of us in corporate America who come out of let's call it the old-school soft focus are challenged by the demand for transparency
today. People want to know everything right now about how we did it and when we did it and not just numbers. What they really want are the
pictures.
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And I think this challenge for corporate America makes defending the reputation even more interesting. I guess the good news is, the challenge
of all this immediacy of news, technology, pictures and videos, those tools we can use ourselves to tell our story better and at Tyson that's we are
trying to do. Meet the public expectation for transparency by telling the good news about how we do things.
One of the ways that we reduce risk to the corporate reputation is through measurement. And I think Sally said earlier you cannot change behaviors
if you don't measure them. So we measure the reputation of Tyson Foods, Inc. to determine where we need to put our emphasis.
In 2012, now this is of course before our merger with Hillshire brands, we measured our reputation among our customers, our suppliers, our team
members and consumers. And the headline from that in 2012 was the people who know us best, the team members, the customers and the farmers
that supply as with the livestock love us the most. Our reputation vis-a-vis the competition was much higher.
But the consumer while they rated us highly, there was a gap between those who know us and consumers in terms of the Tyson reputation. So
our takeaway from that is our whitespace for reputation enhancement is with the consumer and one of the wonderful things about this merger
with Hillshire brands is all the consumer focus and consumer insights that comes to Tyson from a very consumer-focused business.
Another thing we do is 24/7 monitoring and we talk about the way the world communicates today and the rapid spread of information, truthful
and not and how difficult that is to manage when you are looking at your reputation. And we have a team of social and digital media experts who
are pretty much 24/7 on-call, like doctors, and they are engaging all the time with the public, correcting misinformation, responding when appropriate
and it is not always appropriate to respond and this is an interesting area of opportunity with our customers. Just because there's a lot of noise out
there about a particular issue doesn't mean that the general public cares a lot.
And one of the things we found with our survey research is the general public doesn't care about some of the issues that some of our customers
thought were really important. We use very sophisticated diagnostics to be able to sort the wheat from the chaff. So is it a bunch of noise in social
media that is an echo chamber of like-minded fringe interest group folks, or is it something that is really seeping into the consciousness of the
average consumer and we really need to address it.
Third area that we pay a lot of attention to is listening to our customers and consumers and staying very close to them. Some of you may remember
in March 2011 an issue that started very small among some bloggers and became overnight a nine-night news story on ABC Evening News, caught
a lot of folks by surprise. This was the Pink Slime episode and it costs a lot of money.
Now this is a totally healthy, legal, nutritious beef product that somebody gave a clever and unflattering name to and overnight it became a concern.
As a result of that Tyson did a very intensive listening tour with our customers, what practices, ingredients, packaging, whatever do we think we
need to be up to speed on so there are no surprises and so we Tyson or you customer are prepared to defend or explain.
And we came up with a very long list, 50-plus of controversial issues. We got a lot of stuff out on the table that was really healthy to do.
We also took a hard look at Tyson of our practices and we made some modifications where they were appropriate. But the bottom line is when
you listen you know what the concerns are, you can prepare for them and no one has any surprises.
One of the concrete outcomes of that listening tour was our 2012 announcement of our Farm Check program. We were the first in the industry to
announce we would send third-party auditors to the farms that grow the animals that supply our business.
Because our customers wanted increased accountability in the supply chain to make sure they could tell their consumers that the livestock that
went into their meat products was raised responsibly. So we started Farm Check in 2012 as a result of listening hard to our customers.
A fourth area that we work hard on is preparation. Preparation is everything and especially when you are such a large, complex company as Tyson
Foods. Speed and I am talking about the 10 minutes you have to react today versus the four hours you had to react 10 years ago.
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If you have to react in 10 minutes it's really difficult to get this big of an enterprise to move that fast. But you can do it if you have rehearsed, if you
have prepared, if everyone knows which lane they are supposed to be swimming in when the stuff hits the fan and you can make decisions quickly.
And so we do a lot of crisis management training, drills, as I said earlier preparing how to talk about sometimes very complex issues in 140 character
tweets. But preparation is everything in order to be able to move quickly. When you move quickly and you are prepared any bad stuff that happens
in a crisis is easier to manage.
We also work very hard on early warning systems. If you go back and do a postmortem on almost every crisis, you can find the early warning signs
that somebody didn't pay attention to. So nobody is ever perfect but if you work really hard on recognizing the early warning signs, you can avert
some or all of most crises.
And we always do it after the crisis what do we do right, what did we do wrong and how could we do better. So it's very important part of reputation
management at Tyson Foods.
I've talked about some of the stuff we do that deals with I will call it ick, the stuff that is tough to talk about and the tough to explain. We try to do
all of that and help our Company do all of that more easily whether it's for a consumer audience, customer audience, policymakers at the state or
national level.
But the most fun part of what my team does is sharing the good news early and often. And fortunately at Tyson we have lots of good news to share.
It's really part of the Tyson DNA going back decades and decades to do the right thing because it's the right thing to do, to take care of each other
both within the Company and within our communities and to help people who need a hand up in life, so we have lots of good things to talk about.
Bad news does happen. And my experience is for one part bad news, two parts good news can sometimes neutralize it. So we literally map out the
good news, the good stories.
We strategize to create the good news and then we sort of program it along the way so we've got it on the calendar when we know bad news is
likely to hit. One of the things we worked hard on is finding solutions to a dwindling water supply, sustainable solutions, sustainable solutions to
hunger in America, sustainable solutions to subpar agriculture in the developing world.
You probably know that hunger is Tyson's number one charity. You might not know that since 2001 we have donated nearly 100 million pounds
of food to food banks around the country. Most of that is protein, which is a little bit more difficult for them to find than other products so it's
especially appreciated.
We have also created a Tyson Foods Fellows program. We literally have people who know how to produce food from our Company travel in this
case to Tanzanian to teach smallholder farmers best practices.
And what we are learning is just small incremental changes can make the biggest difference in their lives. And I will tell you the experience of going
to work with these smallholder farmers in Sub-Saharan Africa totally changes the lives of the people from Tyson who have the opportunity to see
how much difference they could make in a developing country.
We are also big on disaster assistance. You may have heard that we have a program called Meals That Matter where we send basically a command
center that sets up shop in the middle of a disaster site, tornado, hurricane, Superstorm Sandy we were out here a few years back in New Jersey
and New York and we feed first responders and victims.
We literally cook the food and serve it to them with our own hands to help them get through the early aftermath of the storm and we have partnered
with another veterans organization called Team Rubicon. These are veterans who volunteer their time to do the cleanup of debris and etc.
post-disaster. So we've given them a truck and we set up shop next to each other to help with the aftermath of disasters.
It's an unsung job sometimes. We try to let people know about it where we can but it really makes a difference.
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We also talk to our critics. Not every big company feels comfortable talking to the critics but some of those critics actually have the same objectives
we do, they just have a different idea about how to get there.
For example, I was in Washington last week talking to the Pew Charitable Trust and some other groups about antibiotics in animal food production.
You may have noticed that we have changed our policy on antibiotics. It's on our website but we didn't hold a big news conference.
But we have stopped using antibiotics in our hatcheries and we are working very hard to drive down the use of antibiotics in our chicken production
houses. This is a great story to tell and some of our critics are surprised to hear what we're doing and our end goal objectives. And it's a wonderful
way to not only build bridges but to neutralize criticism and neutralizing criticism is a way you can protect your Company's reputation.
So whether it is antibiotics, animal welfare with farm check, other programs, we really work hard to develop the programs and relationships to
help enhance and defend and protect the reputation of Tyson Foods. So our Company is always at least neutral, at best a motivation for a sale, and
never an obstacle to doing business with the brands and all the other businesses we intend to grow going forward.
To summarize, I think you should know that we have a best-in-class corporate affairs team to support a built-for-growth organization. We have a
very smart, competent, diverse and passionate team of people working every day, 24/7 to defend the Company's reputation. We have an unflinching
commitment to listening to our customers and consumers so we don't make up this stuff.
We do the stuff to respond to needs out there whether it's in the policy community, the communities in which we live and work, our customers,
consumers, etc. We are trying to tell the story about Tyson Foods in a personable, compelling, conversational and memorable way. And I will tell
you that is a challenge in the information overload era that we live in and we are working hard to do that.
We do all of that and post-merger and we have acquired some great talent from the Hillshire Brands communications team. We've also found some
delightful synergies in the way of duplicative association dues, consultants and some other fees. So it has been a wonderful journey to get to this
place.
We look forward to continuing to protect the Company's reputation as we grow to great heights. And I would be happy to take any questions
about the corporate affairs function or any of the issues that you might find interesting. Thank you.

You talked about it a little bit but there is so much growing concern in the US about what we put into our bodies and concern about antibiotics
and also concern about animal welfare. I feel like and you answered this a little bit, but I feel like there is almost -- it has become more antagonistic
between those who want change and some of the companies that produce food and meat in particular.
So what is Tyson doing to not only -- you talked about the antibiotics, getting rid of some of them and how you like to actually talk to your critics,
but what is Tyson doing as an industry leader to get the entire industry onboard with not necessarily making change but at least listening to the
concerns of the population? Because I imagine you guys can effect change better than some of the smaller processors out there?

You know, two answers to your question. So we participate in industry associations pretty vocally. And because of our size and scale and I think
our reputation within the industry as being among the most progressive if not the most progressive, folks listen.
Now everyone wants to follow our behavior because sometimes that might not be in their business plan. So one answer is we do participate actively
with our peers in industry groups and we are pretty much viewed as a leader.
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Second thing is, by working together with the leaders in the critic group -- here's something you need to understand, too, not everyone who is a
critic and makes a lot of noise has a lot of impact. So there is competition amongst those organizations for who can make the most noise and raise
the most dollars but not necessarily effect the most change.
So one of the challenges that sort of wheat from chaff thing is figure out who is making noise who really makes a difference. And those are the
people that you want to talk to and figure out if you can find a common understanding.
And we are working with some on some specific projects, some of them relate to labeling claims and so forth, that I think are very progressive,
reasonable and will fix part of the problem. What they won't fix is the people on the fringe that still want to make noise that have a solution that
is just way out of the realm of the possible. Does that answer your question?

I know you deal a lot with Washington and right now GMOs and labeling are a key focus. How is Tyson viewing the whole GMO debate and how
will it impact your business plan?

At this point the biggest concerns with the GMO debate have been the state initiatives, which have been defeated in most states with the exception
I believe of Vermont. Right now what we would say is if you want to eat a GMO free product, buy organic.
We used to be in the organic business. We are not right now but organic products can't contain any GMO ingredients, so a non-GMO diet is available
to consumers right now.
As far as labeling is concerned we are in the voluntary labeling camp as opposed to the mandatory labeling camp. But I have to tell you that the
issue has not been as front of mind in legacy Tyson as it probably will be in the future. Does that make sense?
Okay, thank you. And I'm going to call up because I think we have the Ask Me Anything part of the show at this point so I'm going to ask Donnie
Smith, Donnie King, Dennis Leatherby, Sally Grimes, Andy Callahan I think that is the whole group, to come up here and join me for the Ask Me
Anything segment. Thanks very much.
Donnie Smith - Tyson Foods, Inc. - President & CEO

Just to kind of kick the segment off, through the day I've taken a few notes about what I think I heard. So I thought what I would do is sort of real
quickly recap that and maybe that's a thought starter for a question that hasn't been completely answered yet or we need to circle back around
by, something like that. So I want to share with you some of my notes about what I heard today and hopefully that will open up this final Q&A
session and you can just ask us anything about anything.
So I heard that this team is very confident in our growth. I heard that we intend to grow in value added chicken and prepared foods and by combining
this great, broad, deep portfolio with this wonderful house of brands we are better capable of doing that than anyone.
Our commitment to brand building, we are number one or number two in 13 different categories. And the categories we are in a very meaningful
categories for future growth, that our well-positioned brands and our diversified portfolio unlinks us over time from the commodity cycles.
I heard the integration is going very well and I heard there are a lot of steps we are taking to get ready for 2016. So among those being synergy
capture and I hope that the help around bridging from year one to year three and some of the buckets and categories were helpful.
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Obviously we've got improvements that we can make in the Tyson consumer brands. Growing category captaincies is a meaningful step forward
that we are better together at that will help us continue to grow in the future.
Wes talked about Lean manufacturing and Lean improvements in our processes, particularly in the plants but not limited just to the plants. We
invoke Lean across all processes in the business.
We talked a lot about our buy versus growth strategy and Bernie talked about the buy versus growth transaction inside this strategy and I hope
that was helpful. We talked about the increased value added chicken production that will be coming on stream some now, some in the spring, a
new tray pack plant that will be converted from a current production facility into tray pack. That will come online late in the spring.
Another step we are taking would be the elevated -- not a step we are taking but another factor would be that the elevated beef prices are providing
a halo in which the pork, the prepared foods and the chicken prices would stay well supported in. Dennis talked about our debt reduction, talked
about high return CapEx projects and there's still plenty of those available inside the business. Interesting I thought the point that Dennis made
about increase in share price reduces the share count based on the TEUs and that will help and then by 2016 that we would be in a position to be
able to buy back stock or be in a position to grow that kind of thing.
A couple of other things Dennis shared I thought were of note, $1 billion in free cash flow plus $500 million from the sale of the Latin American
assets to rapidly delever. And that we would be about 2 times leverage by the end of our fiscal year. And he talked about raising the normalized
ranges in chicken up to 7% to 9% and then prepared foods over time by the time the synergies are all baked in into that 10% to 12% range.
Sally talked about innovation and how that will accelerate across the entire organization. She talked about the fact that the Jimmy Dean launch is
off to a great start this year and I think gave some really good insights into some of the science inside of the innovation engine and the demand
map and a lot of the capabilities that Hillshire is bringing to Tyson Foods to help continue to fuel this branded growth. She talked about identifying
good-better-best value tiers in multiple different categories and she also said that there will be growth synergies coming over time and as we get
further into the integration and get past the reorg, which incidentally we are just now this month moving into the new organization.
Think that has gone very very fast. So feel good that we will be to turn all of our attention now into these growth prospects.
Andy talked about several things, talked about growing faster than the categories that we are in. He talked about that our brands provide leading
share across several different core categories and that we have great opportunities to grow, that Tyson is growing our total points of distribution
at 5 times faster than our competition is. He talked about Jimmy Dean being more than breakfast and that our brands offer more value and less
risk over time.
Donnie King and the team shared I thought -- they did a great job talking about buy versus grow, that strategy, laying out the synergies and what
buckets they fall into. They did mention, too, that the raw material utilization benefit is not yet baked into any projections so that is an upside deal
for the latter part of 2015 and 2016 and beyond.
Bernie talked about the fact that the chicken supply increases were in line with what demand should increase so that feels really good. Noel said
that 2015 in chicken would be at least 10% return on sales and that 2016 is set up very well.
We've got a great strategy headed into that. He also said that even in the worst of outcomes for a short period of time that we would have a 5%
improvement over what industry margins would be during that call it trough cycle, short trough cycle that you might see inside of any given year.
Steve talked about the fact that in fresh meats we are the high revenue law costs player in the regions in which we compete and that there is going
to be adequate supplies, obviously a decrease in supply, but an adequate supply around our plants. Mentioned that pork expansion would be
coming and that's a good thing for us. And Sara just finished talking about the efforts that we are making in this fast-paced world to make sure
that we protect the Company's reputation, protect our brands.
21
So more than anything I think you heard a commitment on this team to finish what we started. If you go back into its call it legacy Tyson for a little
bit, Tyson Foods has made a huge change in the way we operate our business between 2010 and today.
You have seen it in the mix. You have seen it in the reduced variability in chicken margins and it has made a meaningful change.
Obviously with the acquisition of Hillshire, when Hillshire came on board they had a lot of unfinished business yet, too. And so by putting these
two teams together and bringing together these best-in-breed capabilities, if you will, I think you see that the potential is there and certainly the
commitment is there to continue to grow our business consistently and as importantly grow our earnings consistently with less volatility over time.
So higher earnings, less volatility while growing the business and we've got the capabilities to do that. So that's what I heard. Any questions from
you as we wrap up the day?

Thank you, Donnie. I have two questions, one short term, one long term.
My short-term question is on beef. The industry has just gone through a calendar Q4 that has been -- or is going through a calendar Q4 that is
extremely difficult, your fiscal Q1.
Do industry conditions right now derail your Q1? Do they derail your fiscal 2015 guidance and maybe what has Stouffer told you or what have you
seen as far as your performance relative to the industry? Has that improved at all and does that protect you during this quarter? That's my first
question.

So we built an index for how we intend to compete or how we should compete. It's actually an annual index but we look at a quarterly versus our
competition and we are on track.
We are where we need to be to make improvements versus the competition. Yes, beef margins are challenged at the time but they do not derail
our prospects for either Q1 or 2015.
Now in our business model there's a lot of strength and frankly a lot of stabilization in the portfolio. If beef margins are challenged frankly because
of very high beef prices and a short beef supply then that is probably going to help pork margins and chicken margins. As consumers who now
have a little bit of beef that is out of reach they're reaching for a meat component.
Because the amount of money or of disposable income that a consumer spends on meat doesn't change very much over time. So I hope that
answers the short-term part, so what about your long term?

I appreciate it. The long-term question when I think about a long-term investor looking at your stock, clearly the protein play is front and center.
It's a great way to invest in not only the US consumer but eventually the global consumer moving over to protein.
I think there will always be that worry over volatility in each of these businesses no matter how much the executive team at Tyson tells us we think
we are protected. So outside of that, one of the key ways to protect earnings growth going forward isn't this raw material synergy, this growth
synergy that you guys don't want to quantify and that is fine, but do raw material and growth synergies give you a lot of confidence in earnings
growth not only next year but in four or five years ahead? Thank you.
22

That's a great question. Short answer is sure they do.
But let me address the don't want to give us the raw material and the growth synergies yet. It's not that we don't want to, it's just they haven't been
quantified. We closed the acquisition in late August and this team went to work immediately.
Here's what we wanted to do. Very important I'm sure for shareholders that we deliver 2015 very well. So the best way for us to do that was have
as many people working against the 2015 plan as possible as fast as possible.
And so what we decided as a senior team is let's put the pressure on ourselves to get the reorg done and so we moved into the new Tyson 2.0
organization December 1. There's still a little more tweaking to do and that kind of thing but we are a good 10 days into it now and nobody has
dropped the baton in the handoff in the relay race. So I feel very good that the work that this team accomplished to make sure that we were ready
to move into the reorg that quickly was done as close to flawlessly as possible.
I am seeing Mary shake her head back there, so our CHRO agrees and that is my sign to keep talking. So with that when we come into January,
obviously it's a holiday season and that kind of thing. A lot of folks are on vacation.
We come in after the holiday season we are heads down getting the game plans together on the raw material synergies and that kind of thing. So
Hillshire, as you probably know, had a much longer-term purchasing view than legacy Tyson. And so we've got long-term contracts that we'll be
working through overtime and we want to make sure that we work through and fully understand what that is worth to us over time before we talk
about it because it is very important for us to do what we say we are going to do.
Same on the growth synergies. They've already had an innovation Summit and I'm telling you I was super excited.
Dennis was about ready to jump into the innovations deal but Jan said no, Jan said no you need to stay in finance. So that is to come but that is
the engine that takes the value in these raw materials and continues to stabilize that earnings growth over time.

Okay, Donny, we have a question from a webcast viewer. And the question is, in the earlier grain commodity cost shocks you were successful at
moving many of your fixed priced food service contracts into variable or grain-based.
It would be logical now that the grain commodities are down for your customers to pressure you for more coverage in fixed priced arrangements.
How will you resist the pressure for customers to push grain risk back onto Tyson?

That's a great question, so let me leverage something that Bernie talked about in the fireside chat.
One of the key components in our buy versus growth strategy is to make sure that the raw material production is always well short of the demand
and how we are fulfilling the demand. So that alone gives us a lot of price courage to say no, that is not good for our business and by the way long
term that is probably not good for your business because you need an insured supply. And so we are not going to do that.
And having that pricing courage has been a key component to getting some of the price increases that Noel talked about that we frankly have
been very very successful in. Noel even mentioned that the contracting season was accomplished much quicker this year than in years past and I
think that alone is a telltale sign that our pricing strategy has been very effective and we will remain committed to that.
23
Donnie, would you add anything to that? Or Andy?
Well in terms of annual fixed priced to where we have been able to block in margins that have been attractive to us as well as our customers, we've
done some of that maybe a little bit more of that this year than we did in prior years. But we are looking at maintaining our margin levels in that
as well. There has been less supply of chicken and so that's enabled us to do that a little better than what we have been able to do in the past.

And remember, I think Noel said it, we don't chase that commodity peak in the summer. We are looking for long-term, consistent, stable earnings
growth and our business model is designed to deliver that. And so as we stay focused on our model then we will deliver that.
Donnie, just one other thing if I could add to that. If you look at large QSR customers, they really tried to get contracting done November, December,
January of every year because as an industry as you well know that was when there would be little access, commodity prices were typically at their
lowest and they tried to lock in a deal. The industry led by Tyson has obviously looked at doing that a little differently and that is one of the things
that we position ourselves with buy versus grow.

I have a few questions. So the first one is for Andy and Sally. So when you look at your brand portfolio today and this is long term, talking 5, 10
years from now, let's say 5, which brands can you rank the brands in terms of which ones you think have the largest absolute dollar growth potential?
Andy Callahan - Tyson Foods, Inc. - Group Leader, Retail Consumer Brands
I have a short answer and a long answer. The short answer is no. I won't rank them.
They all have cash what's most important, though, is that we stay and Sally's team stays up to speed on the consumer trends. Because what is really
going to drive growth better than anybody else is having a portfolio that is positioned better than anybody else and insights to be able to leverage
it ahead of anybody else. And that's what we do.
We manage -- we have a portfolio as a starting point that is positioned to grow better than anybody else and insights and capabilities to take
advantage of that. So whether it comes in 10 years from now is speculation on consumer trends from where it goes. What I do know is regardless
of where it goes we are positioned to grow better than anybody else.
Sally Grimes - Tyson Foods, Inc. - Group Leader, Insights, Innovation, R&D, Retail Sales, and Global Brand Strategy
Yes, and it starts with the consumer actually. Because there are multiple consumer segments with different beliefs, preferences, attitudes, behaviors
and each of our brands is linked up with a particular consumer segment in order to maximize the entire portfolio opportunity. So it's hard to pick
a favorite child here because there is such a tremendous opportunity to cross the multiple consumer segment needs.
24
Yes, the other piece of that just to build is we don't necessarily always compete where we have an idea. We compete where we can have the
opportunity to win and win and profitably win.

Okay and this one might be for both of you here but can you talk a little bit about the international strategy? Obviously there has been a few delays,
hiccups whatever you want to call that, you sold a few assets.
You have some competitors who have their hands on some of your assets and are saying they were undermanaged, if I may, those are my words.
And so can you just talk a little bit about international because I think the broader picture is you are saying chicken is an in-country play. There's
others who think otherwise.
So now you are saying it's an in-country play but we are only going to play in China. So it's a little bit -- can you just recalibrate and tell us where
your international strategy fits in?

Yes, so I will piggyback on what Andy just said. We don't really compete where we have an idea, we compete where we can win.
And if we are in a geography like Brazil, like Mexico where we are going to be a distant player and knowing that there's a finite amount of capital
that we can employ against value creation ideas, we need to be responsible users of your capital and employ those where we can get a good return
on our investment. So doing the math Brazil and Mexico did not make sense for us.
So we are going to compete where we can win. Still feel great about China. I understand that that's a long-term play.
I think if you look at the model, with all the food safety scares that have happened it continues to reinforce the fact that a modern, integrated
supply of chicken is important to Chinese consumers. We can provide that as effectively and efficiently as anybody. I don't know that we have ever
said that the way we are going to reach every market is in-country.
I will tell you in China there is a 63% either anti-duty or countervailing duty against US imports into China. So if you're going to be a part of that
market, if you are going to pay a 63% tax to get the product in you better be in-country. I don't know when that changes but when that changes
the way to get to China could change, or do it in some other geography, or whatever.
So we're working with our Board to develop our long-term strategy around the international focus of our business. If you look at the long-term
fundamentals and I am talking 10 years out, 20 years out, etc., there is going to be great growth outside of the US in protein consumption. Some
of that will be filled from US exports but some of that will by necessity need to be filled by domestic production in those countries.
And our intention is to be a player in the geographies where we can win and where we can drive meaningful growth for our business and our
customers, so that's our focus. You react to the dynamics of the industries and the geographies that you are in.
I think we made a very responsible choice in our Latin American business and frankly I think right now it looks like that the model we have in China
is the right model. Nobody in this room would like the economics around that to improve faster more than me but we got what we got dealt.

Just one last one, I promise. So in terms of the risk related to the execution of this deal, what are the top three risks in your mind?
25
Obviously people process product but you have come out here, you have promised what seems like a lot and maybe it's not a lot for you internally
but certainly it seems like a lot sitting on the outside. So can you just talk through the risks and maybe talk about people risk in particular because
that tends to be the biggest one.

Sure, to me the biggest risk in a transaction like this revolves around people. It was very important to us that we retain this wonderful talent that
you have all had a chance to meet today and the cultures of Hillshire and Tyson are quite complementary. The value systems are the same and the
cultures are very complementary.
The business models are different. Obviously you grow a branded business a lot differently than the food processing business.
And so the business models have been different but the cultures are quite complementary. And I would -- I think this would be maybe a great place
for me to start shutting up and Sally and Andy to pitch in a little bit about what they have seen coming into Tyson.
So obviously number one was the people risk. And I tell you getting into the new organization quickly and getting 125,000 people focused on
delivering the plan is a -- I think it's a great way to reduce that risk.
I think if there had been the risk of some economic event that's always in the back of your mind but a 30% drop in crude oil prices has kind of taken
that risk off the table for me. I think, though, risks around any kind of underlying like PED like we saw last year and that kind of thing, six months
ago I would've called that a risk but now seems like we are managing that pretty well.
So one of the reasons we feel so confident is like some of the risk that we had on the table moving into the transaction they have really come our
way and they have frankly sort of turned into tailwinds for us. So how about you guys as far as coming into Tyson, or back here on this back table,
you can give them a mic. How does it feel?
Well, it feels terrific. You asked that question earlier. You said you just presented, what has changed and I said the idea wasn't to change it was how
do you help fuel it and move it forward.
And that has been the approach and it has created a lot less focus on changing business model and more and focus how you can do more. And I
agree there is a table of leaders back that you had the opportunity to meet earlier that deserve a lot of credit and it's a testament in general of the
quality of the people we have within the new Tyson organization to be able to keep a team engaged through a significant transition and continue
to focus. And I think your terminology around unfinished business was really well.
They are motivated, they see a great opportunity, they see the value of the opportunity that is out there and they are focused on delivering it. So
it's really a testament to the people going through the team through the amount of change.
Sally Grimes - Tyson Foods, Inc. - Group Leader, Insights, Innovation, R&D, Retail Sales, and Global Brand Strategy
Yes, I think for me it has been one of the biggest surprises, how quickly we came together. The openness, the mutual respect and being able to
bring together the best of both teams, quite a surprise. It has been an amazing 100 days.
26
Donnie, you have a lot of changes you are implementing at Tyson and you are taking P&Ls and moving them around. How have you changed the
compensation structure at Tyson to make the team open and what are the key targets that the team is being measured against so that we can
watch them as well?

So each person on my -- number one, the compensation plan as we came forward or into the new organization is the former Tyson compensation,
so heavily focused on operating income. Each of the members of the senior team has the overwhelming majority of their compensation is based
on performance and then their long-term incentive is based on how we perform against the three-year plan and then how we rank in total
shareholder return against the peer group.
So that is unchanged and I would think quite motivating. Help me with -- I got a little bit lost in my answer -- help me with some of the rest of your
question.

(inaudible - microphone inaccessible)

So, is it moving around? No. Gosh I had a great thought that popped in my mind but I lost it during -- you ever do that? Lose it during the answer.
I'm going to hush for a minute and then if it comes back to me I will spit it out.
So I think it's important to know that wherever you have said in Tyson today the incentives are designed so that we have a Tyson-first approach.
So with some of the things moving around, everybody is very much in alignment with that as long as you move that cheese, if you will, that at the
end of the day if you are doing the right thing for Tyson you are putting more money in the Tyson bank account and making better decisions
commit everyone is subordinate to that. So doing Tyson first makes it a lot easier.
I think I would add to that, a great aspect of bringing the Hillshire team on these that they quickly adapted and realized that we have raw materials
from animals that we have to deal with all parts. And so they recognize the value in selling all the parts in the best possible way and so they've
adapted to it very quickly. It wasn't a challenge for them and they joined the Tyson-first philosophy that Donnie just talked about and that's really
exciting to me because it keeps shareholder value first and foremost on our minds.

I still know what I was going to say but I'm sure that was smarter than anything that would have come out of my mouth. Gary is telling me time is
up. We are done.
Thank you all so much for spending the day with us. We enjoyed it.
27
I hope you got your questions asked. Obviously if you haven't, phones work, let's stay in constant communication because we want you to follow
along in the story and we look forward to great days ahead. Thank you all.
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THOMSON REUTERS STREETEVENTS

TSN - Tyson Foods Investor Day - Afternoon Session

THOMSON REUTERS STREETEVENTS | www.streetevents.com | Contact Us

CONFERENCE CALL PARTICIPANTS

Noel White - Tyson Foods, Inc. - Group Leader, Poultry

Bernie Adcock - Tyson Foods, Inc. - Chief Supply Chain Officer

Steve Stouffer - Tyson Foods, Inc. - Group Leader, Fresh Meats

QUESTIONS AND ANSWERS

Steve Stouffer - Tyson Foods, Inc. - Group Leader, Fresh Meats

Farha Aslam - Stephens Inc. - Analyst

Noel White - Tyson Foods, Inc. - Group Leader, Poultry

Diane Geissler - CLSA Limited - Analyst

Steve Stouffer - Tyson Foods, Inc. - Group Leader, Fresh Meats

Steve Stouffer - Tyson Foods, Inc. - Group Leader, Fresh Meats

Unidentified Audience Member

Steve Stouffer - Tyson Foods, Inc. - Group Leader, Fresh Meats

Noel White - Tyson Foods, Inc. - Group Leader, Poultry

Steve Stouffer - Tyson Foods, Inc. - Group Leader, Fresh Meats

Noel White - Tyson Foods, Inc. - Group Leader, Poultry

Unidentified Audience Member

Steve Stouffer - Tyson Foods, Inc. - Group Leader, Fresh Meats

Ken Goldman - JPMorgan - Analyst

Steve Stouffer - Tyson Foods, Inc. - Group Leader, Fresh Meats

Ken Goldman - JPMorgan - Analyst

Steve Stouffer - Tyson Foods, Inc. - Group Leader, Fresh Meats

Akshay Jagdale - KeyBanc Capital Markets - Analyst

Noel White - Tyson Foods, Inc. - Group Leader, Poultry

Bernie Adcock - Tyson Foods, Inc. - Chief Supply Chain Officer

Rachel Nabatian - Credit Suisse - Analyst

Rachel Nabatian - Credit Suisse - Analyst

Rachel Nabatian - Credit Suisse - Analyst

Sara Lilygren - Tyson Foods, Inc. - EVP, Corporate Affairs

Unidentified Audience Member

Sara Lilygren - Tyson Foods, Inc. - EVP, Corporate Affairs

Unidentified Audience Member

Sara Lilygren - Tyson Foods, Inc. - EVP, Corporate Affairs

Donnie Smith - Tyson Foods, Inc. - President & CEO

Unidentified Audience Member

Donnie Smith - Tyson Foods, Inc. - President & CEO

Unidentified Audience Member

Donnie Smith - Tyson Foods, Inc. - President & CEO

Sara Lilygren - Tyson Foods, Inc. - EVP, Corporate Affairs

Donnie Smith - Tyson Foods, Inc. - President & CEO

Donnie Smith - Tyson Foods, Inc. - President & CEO

Unidentified Audience Member

Unidentified Audience Member

Donnie Smith - Tyson Foods, Inc. - President & CEO

Unidentified Audience Member

Donnie Smith - Tyson Foods, Inc. - President & CEO

Donnie Smith - Tyson Foods, Inc. - President & CEO

Farha Aslam - Stephens Inc. - Analyst

Donnie Smith - Tyson Foods, Inc. - President & CEO

Donnie Smith - Tyson Foods, Inc. - President & CEO

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