Jon Kathol - Vice President of Investor Relations and Assistant Secretary Donnie Smith - Chief Executive Officer and President Dennis Leatherby - Chief Financial Officer and Executive Vice President James V. Lochner - Chief Operating Officer

Farha Aslam - Stephens Inc., Research Division Heather L. Jones - BB&T Capital Markets, Research Division Akshay S. Jagdale - KeyBanc Capital Markets Inc., Research Division Kenneth Goldman - JP Morgan Chase & Co, Research Division Christine McCracken - Cleveland Research Company Kenneth B. Zaslow - BMO Capital Markets U.S. Ryan Oksenhendler - BofA Merrill Lynch, Research Division Timothy S. Ramey - D.A. Davidson & Co., Research Division Diane Geissler - Credit Agricole Securities (USA) Inc., Research Division Ann H. Gurkin - Davenport & Company, LLC, Research Division Tim J. Tiberio - Miller Tabak + Co., LLC, Research Division Vincent Andrews - Morgan Stanley, Research Division Robert Moskow - Crédit Suisse AG, Research Division

Welcome to the Tyson Quarterly Investor Earnings Call. [Operator Instructions] Today's conference is being recorded. At this time, I'll turn the call over to Jon Kathol, Vice President of Investor Relations. You may begin, sir.

Good morning, and thank you for joining us today for Tyson Foods' conference call for the first quarter of our 2013 fiscal year. I need to remind you that some of the things we'll talk about today will include forward-looking statements. Those statements are based on our view of the world as we know it now, which could change. I encourage you to look at today's press release for a discussion of the risks that can affect our business. On today's call is Donnie Smith, President and Chief Executive Officer; Dennis Leatherby, Chief Financial Officer; and Jim Lochner, Chief Operating Officer. Because our shareholders' meeting is this morning, we need to end the call by 9:15 Central. [Operator Instructions] We'll answer as many of your questions as we can until 9:15. I'll now turn the call over to Donnie Smith.

Thanks, Jon. Good morning, everybody, and thanks for joining us today. $0.48 a share is a good start to the fiscal year and was a little better than our expectations. How the results broke out among the segments was a little different than we originally thought, but that's the advantage of our multi-protein, multichannel, multinational business model. Sometimes we run into some hurdles in one area, but we make up ground in others. It's a balanced approach that over time has led to, and should continue to, produce steadier, more consistent earnings growth. Our sales team has done an excellent job of getting paid for the value that we provide our customers. In our poultry business, we reduced annual fixed price contracts to less than 10% of the total, improved pricing in that segment to help make up the $170 million in additional feed cost compared to first quarter of a year ago. Looking at demand expectations for 2013. The consensus is that food service will be flat, maybe up 1%, primarily driven by population growth. With consumers burdened by sluggish job growth, the prospect of rising food costs, the loss of the payroll tax cut and uneasiness about the future, forecast could have been much worse. We believe food service demand will hold up and should stay steady this year. The foodservice categories that are expected to show growth include chain restaurants, lodging, hospitals, senior living and contract feeders. The area expected to be down slightly include convenience stores, recreation, schools due to the new guidelines, corrections, independent restaurants and small chains. Tyson is well positioned in all categories and especially among leading national and regional chains, noncommercial and large operators. Our area of concern continues to be the struggling independent operator segment. In terms of addressing consumer needs, we're finding that food bought on value menus has been declining now for 2 years. Instead, operators have been attracting patrons with new products and promotions by adding servings of breakfast sandwiches, chicken nuggets, tacos, fried chicken, sandwiches and wraps. At the same time, servings of burgers, seafood, pizza, soup and pasta have declined. Our diverse portfolio and increased flexibility give us the opportunity to take advantage of these type of swings in consumption. Overall, the need to connect the right product with the right consumer hasn't changed. We're helping our operator and distributor customers by delivering products that offer the premium quality cues that meet consumers' need for perceived value while helping restore customer margins. Retail demand forecasts are basically flat and will depend on what happens to prices at the gas pumps and the retailers' willingness to invest. For the 52-week period ending November 24, total retail fresh meat pounds sold were down 1.3%. Beef was down 4.9%, Pork was up 2.2% and Chicken was up 1.1%. Even more importantly to us, Tyson-branded fresh chicken pounds sold increased by nearly 10%, with dollar sales up almost 12%. So overall, total domestic availability would indicate 3% fewer pounds of beef and roughly 1% more pounds of pork and chicken in 2013. Now throwing a lot of demand information at you, but basically what this means to us is that we can't wait for unemployment to improve or the economy to get better to grow our business, and I assure you, that is not our plan. Our strategy is to accelerate our growth in domestic value-added poultry and Prepared Foods, as well as international poultry, and we're executing that strategy. You remember I said on our Q4 call that we expect top line sales growth of 3% to 4% annually, value-added sales growth should grow at twice that rate, or 6% to 8% and sales from international production should grow at twice that rate or 12% to 16% a year. Some of the steps we're taking to grow our domestic value-added sales include expanding 3 plants. We plan to spend more than $27 million on our Sherman, Texas; Goodlettsville, Tennessee; and Glen Allen, Virginia plants. Both the Texas and Tennessee plants produce case-ready beef and pork. The Virginia plant produces further processed chicken for national food service customers. We've also recently begun operations at our new Bruss steak-cutting operation in Jacksonville, Florida after a $13 million investment there. All 4 of these plant are great locations with an excellent workforce. These are major investments to help support key customers and they'll create as many as 490 new jobs. Turning to our progress in accelerating international chicken production, our performance in Mexico largely offset startup losses in China. That is very encouraging and gives us confidence that our international poultry operations will make the significant improvement that we expected for the year. We're making progress in building our chicken farms to supply our plants in China. We're about 1/3 of the way toward our goal of growing all of our own birds and eliminating the need to buy any market birds, which will provide more consistent, higher-quality products for our customers while allowing us to be much more efficient processor. I'm very pleased with the progress we're making in Brazil, too. Sales in pricing are up and value-added sales are improving, both domestically and with our exports from Brazil into Europe. Everything I've talked about today is part of our strategy to accelerate our growth. We feel very good about our ability to produce solid earnings this year, and there are signs of strength in the back half that make us even more optimistic than on our last call. I told our team last week that they've done a great job of building a foundation that will allow us to grow this business now and for years to come. We've been working to get our sales in this position, and it's exciting to see that happening, knowing how much potential there is. That concludes my remarks. Dennis will now give you the financial update, followed by Jim, who'll discuss our operating segment. Dennis?

Thank you, Donnie, and good morning, everyone. As Donnie mentioned, we reported first quarter earnings of $0.48 per share. This represents a 14% increase over the $0.42 we reported a year ago. I would also like to note that on an adjusted basis, our rolling 4-quarter EPS is $1.97. Pretax return on invested capital for the past 12 months was 17.3%. Capital expenditures were $157 million for the quarter as we continue to invest in projects for both our domestic and foreign operations that result in improved productive capabilities, labor efficiencies, yields and sales mix. Operating cash flow came in at $190 million, and this includes cash outflows just over $120 million related primarily to an increase in inventory, plan to support our customers' promotional activities and volume needs. I'm pleased to say we returned more than $150 million to our shareholders during the first quarter. We acquired 5.1 million shares for $100 million under our share repurchase program. In addition to these repurchases, we also increased our regular dividend rate by 25%, and combined with a special dividend of $0.10 per share, we paid just over $50 million in dividends. Including cash of $951 million, net debt was just under $1.5 billion. Total liquidity was $1.9 billion, well above the upper end of our targeted range of $1.2 billion to $1.5 billion. Gross debt remained at just over $2.54 billion, which will continue until we retire the convertible notes coming due in October this year. At this point, we expect to pay off these notes with cash. Net debt to EBITDA for the last 12 months remained at 0.8x. On a gross debt-to-EBITDA basis, this measure was 1.4x. We reduced net interest expense by 23% compared to a year ago to $36 million. Our effective tax rate for the first quarter was 36.3%. Average diluted shares outstanding for the quarter was $362 million. This reflects the dilutive share effect of options and convertible notes of $7 million. The impact of the 5.1 million shares repurchased during the quarter will not be fully realized until subsequent quarters. But I would like to take a moment to discuss the impact of our share repurchase program. As a result of the 27.3 million shares we have repurchased since reactivating this program, our Q1 EPS was positively impacted by $0.03. On an annualized basis, we estimate the cumulative repurchases to date will impact EPS by $0.14, holding all other factors constant. Now here are some thoughts on the remainder of fiscal '13. We expect revenues of approximately $35 billion, up approximately 5% over 2012. Net interest expense should approximate $140 million. The effective tax rate should be around 35.5%, and our CapEx plan remains at $550 million, which may increase as we move through the year. Our priorities for excess cash remain intact with what was laid out during our last call, which include additional capital spending to improve and grow our existing businesses, acquisitions to fulfill our growth strategies around value-added products and our international footprint, and returning cash to shareholders the repurchases and dividends, all while maintaining plenty of liquidity. In summary, we are off to a great start in fiscal '13 to produce earnings better than last year despite any challenges we currently face. I'll now turn it over to Jim for a closer look into our operating segments. James V. Lochner: Thanks, Dennis, and good morning. Pork segment had a 9.2% return on sales and $125 million in operating income in the first fiscal quarter. Our average sales price per pound was down 5.5% on 2.2% lower volume compared to Q1 last year. USDA reported prices and hog prices were down 8.4% and 6.7%, respectively, year-over-year. Production was up about 1% and total U.S. exports were down, resulting in more pork domestic availability. Price and volumes were down as a result of balancing supply with demand; however, the Pork segment still produced very good margins in the quarter. We expect hog supplies to be flat and total exports to be lower compared to fiscal '12. We expect our Pork margins to be close to our overall fiscal '12 performance. Turning to the Prepared Foods segment. We had a 3.9% return on sales and $33 million in operating income. Our volume was up 1.8%, while average sales price per pound was down 4.1% over last year, predominately from lower raw material costs. Our costs were higher in our lunchmeat business, creating margin compression as we continue to invest in that business, which reduced the whole segment. We've talked in the past about our desire to grow sales of Prepared Foods in the convenience store channel, and in Donnie's remarks, you heard him say that we expect demand to be challenged in that particular channel of food service. That isn't a disconnect. Food traffic is expected to be down at c-stores overall, but there's still a tremendous opportunity for growth for our products simply because we're underpenetrated. Next month, Tyson will be hosting the second C-Store News Foodservice Summit to help convenience store channels enhance their prepared food offerings using our proprietary research, consumer insights and products. This is one of many ways we're accelerating value-added growth through innovation. We were very pleased with our Chicken segment in the first quarter, and we had a 3.6% return on sales and $107 million in operating income, despite $170 million in incremental feed costs. Excluding our China startup losses, return on sales was 4.3%. Average sales price per pound was up 8.2% on 1.1% less volume versus Q1 last year. Our chicken prices were higher year-over-year as we focus on getting paid for the value we provide our customers, managing our sales mix and our value-added growth. Our increased inventory was intentional in anticipation of promotional activities and volume needs of several large customers. USDA projections indicate chicken production will be relatively flat this year compared to last year. We currently expect feed cost to be approximately $600 million more than fiscal '12. The capital investments and operational improvements we made in our Chicken business, coupled with changes in our mix and pricing, have put us in a position to better handle rising feed cost, while maintaining our expected levels of profitability. In the Beef segment, we had a 1.3% return on sales and $46 million in operating income. Our average sales price per pound was up 11.7%, and our volume was down 10% compared to Q1 last year. The USDA reported cut-out was up 2.7%, while cattle costs were up 1.9% year-over-year. The fed steer and heifer slaughter was down 1.6%, while carcass weights were up 2.7%. We pull back on the number of head we processed in an effort to maintain prices and our sole position. In other words, we opted for margin, not market share. And as a result, our performance relative to USDA prices achieved a new record for our Beef division in Q1. Our boxed beef exports were up, while the estimated U.S. boxed beef total is down for the quarter. Additionally, the contribution from premium programs was up an incremental 30% -- 37%. This is an illustration of how we improve our overall mix and revenue. We expect to see a reduction of industry-feed cattle supply of 2% to 3% in fiscal '13 compared to last year, primarily in the third and fourth fiscal quarters. Although we generally expect adequate supplies in the regions where we operate our plants, there may be periods of supply and demand imbalance. We anticipated a B plant would close, likely come offline in the first half of the calendar year, and we saw that announcement in the third week of January. This helps to correct the supply imbalance between beef packing capacity and the declining fed steer and heifer availability accelerated by the past 2 years of drought. We are pleased Japan is going to open to 30 month in younger cattle. Japan was historically a good market for a variety of meats, which limited -- which was limited by the 20-month age restriction. We anticipate realizing more revenues from the Japanese rising meat market the coming months. For boxed beef products, the items Japan imported were already being exported to other countries, but this news should help overall Beef export demand in future months. Our focus will continue to be on maximizing the total revenue and managing for margin. I think our results in the first quarter and our response to market conditions demonstrate our ability to anticipate change, get plans in place and execute. I'm proud of our team and have every confidence in their ability to keep it going. That concludes our prepared remarks. Operator, we're ready to begin the Q&A.

[Operator Instructions] Our first question comes from Farha Aslam. Farha Aslam - Stephens Inc., Research Division: , So our first question is on Chicken. You've just finished the food service contracting season. Donnie, you'd highlighted that only 10% of your contracts are now fixed. Could you just share with us how you felt about the level of pricing and flexibility you were able to get? And what gives you confidence to be able to say that Chicken should be in the normalized range in the second half?

So we're pretty satisfied as we've come through our negotiations, not necessarily just on food service side, but also in retail and pricing. It has been very important to us to continue to work down how many annual fixed price agreements we have. And as of now, coming into calendar '13, we're at 9%, which is, if you'll remember, dramatically less than where we were, say, 4 years ago. And Farha, we've also seen an increase in the amount of product that is sold, where pricing is tied to some part of the input cost, grain-based pass-throughs, those types of things, which gives us more confidence going into the year. But I'll tell you, too, our service, our quality, our innovative capabilities, all those are part of the selling story and we're getting paid for that. So we're pleased now. A lot of that pricing will be coming into play during this quarter. Some of those contracts don't roll over until first of February, first of March, those kinds of things. So we still have to work through that in this quarter. But that's what gives us a bit more confidence in our back half. Farha Aslam - Stephens Inc., Research Division: That's helpful. And then perhaps a follow-up on Beef. Since your last outlook, you've seen Cargill close a plant, you've seen Japan open up. But it in your release, your outlook on Beef was exactly what it was last quarter. Just could you share with us, is it conservatism that's keeping your outlook the same? Or is it something else?

No, it's conservatism. I mean, we somewhat anticipated that sometime during this year, we'd probably see some capacity come out. And we'll see as Japan comes on stream. We're hopeful to get a good share of that variety of meat demand in boxed beef. Maybe really just conservatism until the market shapes up and we have a better forward view. But it all looks fairly favorable going forward.

Our next question comes from Heather Jones. Heather L. Jones - BB&T Capital Markets, Research Division: Real quick question on Beef. I just wanted to confirm because you said in your prepared remarks, but I want to make sure I am clear -- or everyone's clear on this. But in your guidance on your Q4 call, you talked about being below the normalized range. So you're saying that when you gave that commentary, you had anticipated some kind of capacity rationalization?

Yes, we just had no idea for sure where that might happen. But over time, as that was starting to shape up and we started to see the steer and heifer supply diminish with the calf crops, accelerated by the drought, just knowing that history would likely repeat itself, we thought it would happen. We just didn't know where. Heather L. Jones - BB&T Capital Markets, Research Division: Okay. And then on Chicken, demand has been really strong. But if you look at the past couple of months, production has been up pretty substantially and that's even before we started seeing an expansion in the exits, and now we're starting to see some expansion in exits. Does that concern you at all? Or your outlook for chicken demand, is it so robust that you believe overall demand can absorb these kind of production increases?

Heather, this is Donnie. So I use a 6-week average. So as we look at the last 6 weeks, poultry slaughter pounds have been up 2.7%. A lot of that has been driven by weight because placements have been at about just shy of 1% other than that time period, and slaughter head has been up 1%. So we're picking up about 0.7% -- 1.7% of those slaughter pounds in weight. January is typically a pretty strong month and I think, typically, you would see weights come down during the month of January. We run a lot of Saturdays in January. It's just a good volume month. But let me give you a little bit -- and this is going to be on fresh chicken, but let me give you a little bit of recent data, which gives us some optimism going forward. If you look at the last, I'm going to go -- I'm going to start at 26 weeks, fresh chicken pounds are up 2.8%. Dollar sales are up 8.5%. If you tighten that up to a 13-week view, pounds are still up 2.7%. Dollar sales are up 9.2%. Now if you go to the last 4 weeks, fresh chicken pounds, and this would be sold at retail, is up 4.3% and dollar sales are up 10.6%. So what we're beginning to think, and it'll take a little bit more time to flesh this out and see if we're right, but what we're beginning to think is that with all of these pressures on consumers today, maybe we are now seeing a legitimate shift from red meat proteins into chicken. And if that's the case, we'll be able to absorb the 2.7% slaughter pound increase and still maintain the margins and pricing.

Our next question comes from Akshay Jagdale. Akshay S. Jagdale - KeyBanc Capital Markets Inc., Research Division: So I'm going to focus on Chicken as well. So just on your second half outlook being more positive than before, I'm trying to get to the bottom of that. So the way I see it from 3 months ago, supply has exceeded everyone's expectations. Grain costs are flat, and prices have been much better. So I mean, just what you said 2 seconds ago about pricing being stronger tells us that demand seems to be stronger than anyone had expected. So I'd love to get some color on it. I mean, you talked talk about a share shift, but we've been talking about that for 3 years and it sort of never has happened, where people are eating more chicken now because beef is too expensive. So I just want to get more color on it. And more importantly, what are the chances that supply outpaces the demand, right? So if every chicken company starts seeing that there's a positive trend, they're going to step on the accelerator and get supply up. I know you're not doing it because you're fine in the open market, but help me understand that because I think that's maybe what's driving your more positive view on demand.

Okay. So I'm going to touch on a couple of things. If you look at our Q1 -- pricing in Q1, now remember, we do a lot of price negotiations in the fall, November, December, that time period, that will kick in, in Jan, Feb, March, too, okay? So -- but in the fall, pricing covered the incremental grain of $100. I think grain was up $160, $170 in pricing, well, not necessarily just pricing, but price, volume and mix covered that, okay? So we would expect that -- or we do expect that to continue, particularly in our business. Now you mentioned that the production is up higher than what we thought, yes. But if you look at industry benchmarking services, 75% to 80% of the industry on a contribution basis is profitable. We wouldn't have thought that 4, 5 months ago either. So it does appear, from anecdotal evidence, that pricing is covering a lot of the input cost and that had to happen. One other thing about our business in particular, and you noted that the fact that we remain a buyer of raw material and now we're buying probably 45, 50 loads a week, something like that, of breast meat, or average that in Q1 anyway. But our value-added poultry business also grew round numbers, call it, 4%. And that category was probably down close to 3% in terms of center of the plate protein frozen and frozen meat snacks. So in Q1, we grew our value-added in an environment where it was down. We have a lot of promotional activity planned for subsequent quarters. And those are -- the combination of those things are what gives us confidence in the back half. And we mentioned before, we got some costs levers that we still have to pull and other things that will be coming to fruition, too. Our guys have done a great job in live production. So I better leave it there. I could go on and on. Akshay S. Jagdale - KeyBanc Capital Markets Inc., Research Division: So just one follow-up there. So basically, is it fair to say that Tyson -- you feel comfortable today that you achieved normalized margins in the back half, basically, no matter what the industry is going to do on supply, right? I mean, there's some limitations to supply increases. We know that. But do you feel comfortable saying that? I mean, it seems like it's a more price-specific confidence.

Yes, based on what we see today, absolutely.

Our next question comes from Ken Goldman. Kenneth Goldman - JP Morgan Chase & Co, Research Division: Can we talk about Prepared Foods for a second? I'm just curious, you mentioned a couple of things in there that explained why your EBIT was down year-on-year. How long should we expect those items to continue to impair the margin there? Things like investing in the lunchmeat business, for example.

Yes, I think we mentioned on the last call, we're going to make a fairly significant investment in our Houston lunchmeat plant. And hey, while that's going to take a vast investment, the equipment that we're putting in there will take a few weeks, by the way, to actually put work to happen. And so we're in the process of building up and getting our product in place so we don't have any service issues during that shutdown. That always adds some incremental costs. So I'd say over the next quarter and a half or so, call it 4 or 5 months, it's going to impact us a little bit. But the results coming out of that will be very good for our business. James V. Lochner: Yes, during the interim, we'll be less efficient than we want to be to maintain that service level.

And that lunchmeat piece in Prepared Foods, by the way, is the piece that is the drag on earnings. Kenneth Goldman - JP Morgan Chase & Co, Research Division: Okay. And just to follow up on lunchmeat as a category, it seems to be getting some good attention from some of the larger manufacturers out there, seems to be some more innovation coming. Can you talk about that category, what you're seeing there right now? Is it rational? Is there more innovation coming? Do you think it's going to be as good a category as perhaps some of your competitors do over the next year or 2?

For the year, let's go to 52-week ended, actually, lunchmeat category in dollar sales was down 1.9%. So what that means for us is innovation. And we're working on several items. Now I would spread that past just lunchmeat to, let's call it, processed meats because it may include dinner sausages and other type of Prepared Foods items. Particularly, in lunchmeat, we've got several different flavors of chicken lunchmeat, which are doing very well. And so I think you'll see some innovation in the lunchmeat, particularly. But in our Prepared Foods, don't just think lunchmeat, think a little more broadly to smoked meats and other processed meats. And we've got a lot of innovation that we're working on that we'll be bringing to market over the next 6 to 8 months or so in that category. So we feel good about that.

Our next question comes from Christine McCracken. Christine McCracken - Cleveland Research Company: Just -- you mentioned the higher weights that we've seen in Chicken here and maybe the seasonal effect, but we had an awfully warm winter last year and it didn't seem like there's a lot of stress. I'm just curious if you think that guys are moving back to larger weight, given the optimism in the chicken markets and what that might mean for pricing over the summer months.

I see no evidence of that, and I draw that conclusion from this stack. We, over the last year to 18 months, are typically about 20 points below the non-Tyson industry average on weight. And so we continue to be, over the last 6- to 8-week average, 21 points below the average non-Tyson weight. Now our average weight is up a little bit versus what we planned and that is a function of the good weather in Q1. But we're running hard now. We got really strong demand and we're, as we add Saturdays, we're pulling that weight down. So I would suspect -- that anecdotal evidence would tell me that industry weights are up because of weather, not for any other reason. Christine McCracken - Cleveland Research Company: All right. Just as a follow-up. You've got C test coming into the summer, presumably. Could spike here with the tightness in the grain specs. I'm just curious if you'd comment on your exposure to grain and where you are on that.

Our Q2 cost of goods is pretty much baked in. We've got probably, as we normally do, 3 to 4 weeks of coverage -- 2 to 3 weeks of coverage in corn, about the same on meal. We view that grains probably -- grain futures are probably going to trade somewhere like a 700, 750 range and you may have some temporary moves a little bit below that or a little bit above that. So as we move closer to the low end of that range, we add to our position. And then as we get up into the upper part of that range, we grind -- what we call we grind our coverage. And so we would continue to do that going into the spring. I think we're all looking for big plannings. And as we get closer to the end of March, that's probably going to have some psychological effect on the market. But from here on out, it's going to be weather.

Our next question comes from Ken Zaslow. Kenneth B. Zaslow - BMO Capital Markets U.S.: Can you compare and contrast the implication of Cargill's closure to the closure of your Emporia facility? James V. Lochner: Yes. Specifically, on all the moving parts or just -- a little bit more on the question for clarity, just for me so I know where to focus my attention. Kenneth B. Zaslow - BMO Capital Markets U.S.: Well, I guess, when you guys closed your facility, beef packer margins from the industry standpoint moved up probably about $60 per head within 4 to 5 months and stayed pretty positive for 2 years. So I guess, what I'm trying to figure out is why that would not be the case -- or maybe it is the case and you kind of -- I know -- I sense your sense of conservatism but, again, if you compare and contrast the environment then and now, and is there the likelihood that you can have that same situation where, look, by fourth quarter this year, you guys could be back in your normalized range? Maybe you won't be there for the full year, but maybe you'll there in the fourth quarter and going into 2014. James V. Lochner: Yes, let me add a little bit more color to that. Now I clearly understand, I think, what your question is. When we did Emporia, there was excess slaughter capacity, and we had a plant in Emporia that really was deficit cattle. It was on the eastern end of the -- of that cattle feeding zone. And so we were inefficient at that plant predominantly from freight costs moving cattle. But what we did was we only closed the slaughter portion of that plant. And at that point in time, our other operations were fairly inefficient because they were trying to manage a very value-added mix, which was decreasing their daily efficiencies and their hourly efficiencies. So our boost to slaughter capacity wasn't just from the shift in capacity utilization and phases in that the region. It had as much to do with the fact that we were able to balance our value-added mix by moving certain products to Emporia to continue to add value to them through more trimming, boning and semi-portioning. And then our other plants, efficiency improved dramatically from both a daily efficiency and then hourly -- pounds per man hour efficiency. So we got a good boost in addition to that. But if you simply look at what's happened with this announcement, it was 4% of the fed steer and heifer slaughter daily capacity and it was 10% roughly, from my estimation, in plants in that greater region of about 300 miles zone from there. So it does a lot of good to try to adjust the excess slaughter capacity, particularly in that region. I'm just hesitant to put a number at this point in time on how much -- how favorable it will be. It will be favorable over the long run and so we're optimistic. But I wanted to give you a little bit more thought on -- there were more changes than just the pure slaughter capacity, capacity utilization that happened at Emporia because we were able to improve our operations dramatically in our other plants as we move product to Emporia for further processing. And Emporia was generally in the freight lane where that product was headed anyhow. So we have a lot of other gains from that. Kenneth B. Zaslow - BMO Capital Markets U.S.: And my follow-up question, which happened to be in a different division, is once you're done with the reinvestment in the Prepared Foods, why would your margins not structurally be higher? And would you be thinking about increasing your "normalized range margin" for that business? If you spend this much money, why would you think that their normalized margin in 2014 would be higher?

Well, we are optimistic about our business going forward. It'll be a lot -- it will have a lot more to do with -- we're putting $30 million into 1 of 22 locations. So that, in and of itself, is not going to change the whole game for us. But if you'll remember, we've expanded capacity in our pepperoni facilities. We continue to work this segment hard because we think there's a lot of growth there. And over time, we do expect it to not only grow, but to expand. But to link all of that to what we're doing in Houston would be a little too optimistic on that change. Jim, would you add anything there? James V. Lochner: We needed to get ourselves more efficient and more productive in that change. We expect to be fully incremental. But again, that base is so big, that's why we haven't really thought about it at this point, quantifying the total impact of the whole. And again, there's other moving parts in that Prepared Foods segment. That's a very diverse segment in our company.

Our next question comes from Ryan Oksenhendler. Ryan Oksenhendler - BofA Merrill Lynch, Research Division: Could you just talk a little bit about the export markets for each protein, and even specifically pork? Jim, I guess, I was surprised to hear you say that exports would be down in the year. It seems like there's plenty of pork in the U.S. and you keep hearing about Europe cutting significantly, maybe on the order of 5%, and that the U.S. would kind of pick up some market share in the export markets. So can you just talk about that and maybe what needs to happen for Chicken to get leg quarters above that $0.51, $0.52 level? James V. Lochner: Sure. Let you talk about all 3. Specifically, in Pork, there's a gap here you got to get into our fiscal year, which included Ardneral Dee's [ph] in '12. And that looks like, at least through November, was down and I think December will be down, keeping in mind that the prior year was so big. And then Jan, Feb, March of a year ago was a very, very strong export quarter for Pork. And you're right, Europe's production should be down. My other reasons to state that I don't think it will be as great as last year, I think it will still be a very big year, probably be the second-biggest year as the current issue on ractopamine in Pork into Russia that probably will spend some -- need some time to get resolved. But if very well, I could -- I've been very wrong on projecting exports before. But against just those 2 strong first -- our first half months last year, it looked to me like it would be difficult, sort of, to equal them or surpass them, but they'll still be very strong. So that, hopefully, gives you some color on Pork. Beef, we're very encouraged with the opening of Japan to 30 months and down, predominantly on that variety meat side. But also, we think that increases the demand over the bulk of the items in Beef that were going to other countries. And we expect to see some domestic disappearance and some increase in pricing as we go forward. On Chicken, we expect to see exports to continue. We expect to see continued diversification from Russia. We see some more interest across other parts of the world, potentially Egypt, potentially Africa, the Americas. We're not anticipating a major chicken shift into Mexico. So we would consider even though chicken exports were up 4% year-over-year on the best estimate against the calendar year last year, we don't really see anything negative going forward and might see a slight increase or potentially even more increase. Again, world supplies of chicken seem to be pulled back, particularly in South America and across some other countries. So it's very possible that we could see an increase in overall chicken exports. Ryan Oksenhendler - BofA Merrill Lynch, Research Division: All right. Jim, I appreciate that. And then just real quickly, I was surprised by the cash flow generation in the quarter despite the inventory build and the higher grain costs. If you -- could you give us a target for the year for free cash flow or cash flow from operations?

No, we don't really give any kind of guidance along those lines. You can certainly expect it to continue to be strong for the year. And we get back to what we always say about our priorities for excess cash, and that's to invest in growth through CapEx and acquisitions, still on acquisitions that might help us with our value-added strategy or international and then returning cash to shareholders.

Our next question comes from Tim Ramey. Timothy S. Ramey - D.A. Davidson & Co., Research Division: Jim, thinking back to ancient history, I recall how powerful some of those variety meat sales were to Japan. I mean, it seemed to me like there was a tendon that, if you sold it, it was worth $10 a head or something like that. And so the increment on just the variety meat sales was meaningful on a per-head basis. Can you just refresh my memory on how that all works? James V. Lochner: Yes, and that's why we called out the category as a whole on variety meat because Japan, pre the closing and BSE in '03, we had very strong sales of tongues, skin tongues, leg tendons, a variety of intestine product for Japan, particularly those items were in higher demand. They were both through the -- predominantly some through the foodservice trade in Japan and some through the retail trade. But we're hopeful, particularly, that we'll see those items rebound. I think it will take a little bit of time to get those items back on the menu, back through a variety of items. Tongues, we think, will happen fairly quick. Our whole thrust during that period of time was to really try to be to the high -- get as much market share and add as much incremental value to the animal as we could. Again, try to always drive our position of being the best revenue, net cost player in the region. So I'm optimistic. And you're right, those are very good items from a contribution margin standpoint. Timothy S. Ramey - D.A. Davidson & Co., Research Division: I mean, I've forgotten about the tongue thing, but that was like $4 a pound versus $0.40 a pound. James V. Lochner: My memory's a little fuzzy, but I think they were -- skin tongue was north of $12 a pound at that time. Timothy S. Ramey - D.A. Davidson & Co., Research Division: Wow. And compared to what's the alternate... James V. Lochner: Yes, just a basic tongue would be probably -- I don't even -- I haven't checked lately so I got to guess, but I think they're under $1 a pound. But I could be wrong, I just speculate.

Our next question comes from Diane Geissler. Diane Geissler - Credit Agricole Securities (USA) Inc., Research Division: I wanted to ask you about your capital budget. I know in the last few years, there's been a -- a large percentage of your capital spend has been spent on sort of efficiencies and modernizations within your existing processing base. You probably reached the tail end of that so obviously you're doing some work in the 3 facilities on the value-add side. But could you just talk about what is your maintenance CapEx at this point and then sort of how you would break your CapEx budget by value-add, efficiencies and international?

That's a great question, Diane. As we came into the year with grains spiking late in August, Sept, we took our budget down to $550 million. As you know, Jim has recently met with all of our business leaders and approached them about going back into their capital lists and determining if they have projects that meet certain criteria, that being growing value-added, not just having a good marginal internal rate of return, but also driving that business unit's return on invested capital into the 20 range or above, which is what we're looking for, and asking them to relook at some projects and see if some of those might need to be accelerated. So there's the potential, as we go through the year, that our CapEx would be little higher than $550 million. Now I have the occasion to say, projects don't usually happen in the month that you approve the capital. A lot of those take 3, 6 months, that type of thing. So that may have a little more impact on our '14 CapEx spend than -- but it could have some effect on this year. But we continue to look of those things. It is -- we are laser focused on growing value-added poultry in our Prepared Foods business. We're -- international growth, we're trying to build chicken houses in China as fast as we possibly can. And if we get ahead of plan, we will absolutely put the capital in place to get those houses built more quickly than what we had planned to go on at the end of the year. And then as Dennis said, we still view a lot of potential in our business and that's one of those -- one of the levers we have in using our cash. But depending on how things go and what our free cash flow is, we'll continue to return cash to the shareholders as well. Does that help? Diane Geissler - Credit Agricole Securities (USA) Inc., Research Division: Could you give me an idea about your maintenance CapEx is? And then, what are the percentages for the programs?

Yes, in round numbers, $225 million, $250 million, something like that would -- that would be pretty close. James V. Lochner: Yes. That's pretty close because it ebbs and flows depending upon particularly rough projects. That would be a big mover in there and then freezer replacements. Our whole philosophy on those is we want to keep them current, but we don't want to basically pull ahead our maintenance spend. So we spend a lot of time managing capital on the planning side and balancing between the projects that require return versus those with purely maintenance. So our groups do a fantastic job of really planning their CapEx needs. So we look out all that, actually, over a 2-year period. Diane Geissler - Credit Agricole Securities (USA) Inc., Research Division: Okay. Jim, I just wanted to ask on the flow of cattle this year. I think last year, you benefited a little bit from a shift out of Texas into the northern plains, but we didn't see El Niño. So I'm just wondering if you expect to see a reversal of that this year at all. And maybe that's some of your hesitancy about kind of third and fourth quarter supply-demand and kind of what's going to flow through your plants. James V. Lochner: That key number I really watch is where the cattle placements are and what's on feeds state by state. And you are seeing numbers year-over-year down in Texas and Kansas and up in Iowa and the Pacific Northwest. So we're seeing cattle feeding shift around to some degree. I don't know how much of it is weather-related as much as it is just in combination of grain basis, cattle basis and cost to gain differentials between the regions. But that seems to be the primary driver. But you're definitely seeing some shifts when you just look at the cattle and feed by state.

Our next question comes from Ann Gurkin. Ann H. Gurkin - Davenport & Company, LLC, Research Division: I wanted to ask about just overall production outlook in the protein with the numbers down 1% instead of 2%. Is there any risk that we'll have a build and supply and maybe won't realize pricing as much as expected? Is there any kind of cap on that, potential cap on the upside in pricing?

Well -- and is that the pricing across all proteins or... Ann H. Gurkin - Davenport & Company, LLC, Research Division: Across all proteins, yes.

I mean, I really think we've got a fairly good grasp of what the fundamentals are going to look like. I mean, we have not just pricing but also mixed opportunities and growing value-added that helps us get into categories that are less price-sensitive. I think that what we're seeing coming into the year is that with the payroll tax increase, gasoline prices doing what they're doing, the consumer is feeling these effects. But they're not eating less meat, they're eating different meat now. So Jim, do you want to add anything to that? James V. Lochner: Yes, I would. Because if you -- I think, overall, proteins, we're not going to see a major shift up. We're still thinking they're down 1%. The mix is changing because beef will be down more. Pork will be flat -- up slightly and Chicken up slightly. But I think last quarter's perishable data is pretty insightful, particularly when you look at the price of beef being very high and then you look at the wholesale prices of beef being up with actually flat pounds relative because the carcass weights contributed so much to the pounds that were available. And then Chicken up, that 8.8% on price. We're 1.1% or so increase in pounds. That really starts to tell me that the price spreads will start -- are starting to be felt and noticed by the consumer and they're shifting their patterns. So Beef continues, which it's likely to increase and inflate in price with the decreased supply. And probably, the influence of exports will start to see the consumer probably continue to have some more interest in chicken. And hopefully, we'll see that pricing hold together. And then Pork, we don't really expect to see a major increase in supply, and that pricing elasticity seems to be right on target with the historical demand plans. So I'm actually -- I'm not overly bullish on price as the consumer will fight the increases, but the reality is that balance is happening.

Our next question comes from Tim Tiberio. Tim J. Tiberio - Miller Tabak + Co., LLC, Research Division: In light of relatively flat wholesale cut-out on the pork side and lean hog futures, can you perhaps walk us through why you're so confident that fresh pork margins will remain at or above your normalized range during the fiscal year? I know that just looking at the spot processing margins, there's not always a one-to-one translation, but I'm just curious of whether you're more confident that we'll see a rally in pork prices through the year or whether you're just confident that you can outsource the market from a hedging and a hog supply perspective? James V. Lochner: Let me answer that. Hedging has no real bearing on that. But if you look at the last 4 weeks, the cut-out has climbed up. Belly prices have come up. Some of the retail have been a little bit flat, but the overall cut-outs come up. But our focus is always watching the forward supply against our sole position and trying to make sure that we focus on adding as much revenue and keeping our cost in line. So it's always that slope of change equation that we really look at, trying to make sure that we're not overselling against what we think the forward supply or under selling against what we think the forward supply, so we can try to maintain that spread as best we can. And if you look just at Q1 versus a year ago, we still had a very good quarter but we had more pressure on the cut-out and it just took a little longer for the hog cost to correct. Right now, in this quarter, that's the way it started out and now it's starting to change as we come through January and into February. So I don't know. Hopefully, I didn't confuse you, but we're very confident that we can maintain our relativity to the market and keep our focus on maximizing our revenues and keeping our cost in line. And we really try to read that forward supply as best we can so we don't get ourselves out of balance. And that helps maintain our sole positions. I'll throw more color into it without having to get real precise.

Our next question comes from Vincent Andrews. Vincent Andrews - Morgan Stanley, Research Division: I just want to get a better understanding of this beef plant situation and just how it positively impacts your beef. My understanding, from what I read in the trade press, is that they're going to idle this plant and the cattle that they were processing at that plant is going to instead go to their other plants, which were running at lower utilization. So net, the demand for cattle isn't going to change. So -- and I don't believe that you have a plant that's terribly near where that plant closed, but I could be wrong about that. But so what are the dynamics that ultimately will help you out, if it's true that they're just going to shift the cattle somewhere else? James V. Lochner: First of all, we do have a plant fairly close to that and, again, I reference when you look at just where our plants are against what their USDA reported daily slaughter capacities are and then you put the factor in of what's the practical, how far, if you move cattle. Somebody has to pay the freight bill. And so that's a lot. I just took kind of a 300-mile radius, did my own research of what I've known on the area. And so that's roughly 10% of the capacity in that 300-mile zone out in kind of the greater Panhandle, West Kansas, West Texas area. So I don't know what Cargill's intention are or aren't. I just know the reality that it costs money to move cattle, and who absorbs the freight will take the hit and the loss. So it should, in theory, improve the ability of the packer or to buy a more favorable basis for a while in that area and improve the overall capacity utilization in that region for a period of time. So those are the points that just fit the overall supply-demand. Beef packing is a very regional play because, again, the limitation and the expense of moving cattle are in a great distance. So hopefully, that helps. Vincent Andrews - Morgan Stanley, Research Division: Sure. And maybe this is a follow-up. If I follow what you said correctly, you're saying they're going to be buying less cattle in that area, which will benefit you but then, presumably, they have to buy more cattle in other areas, which will... James V. Lochner: I didn't talk what they buy; I just talked about the number in the area relative to the slaughter capacity in the area, which shifted, and then -- and again -- and the practical reality of having the cost to move cattle.

Our next question comes from Robert Moskow. Robert Moskow - Crédit Suisse AG, Research Division: Regarding beef capacity and processing capacity, do you think this Cargill move is enough to get the industry back in balance? Or do you think there's other regions in your analysis that probably could have additional capacity reductions? James V. Lochner: I'll know a lot more this afternoon as -- when the census report comes up, particularly as we look at the calf crop, estimated calf crop from the spring in 2012. But with the decline we've been on and over slaughter capacity, I think it's probable that we'll see change going forward with some regional plants not being -- having sufficient supply and they'll have to deal with it. We can't replenish the herd quick enough. And then the other thing, I think, when you look at the Cattle on Feed report that we just saw, you saw that the heifer reduction and the numbers on feed was fairly sizable. So that we are seeing what I call a mild rebuild, but it will be several years out before we realize that. So I do think there's still a slight imbalance. Robert Moskow - Crédit Suisse AG, Research Division: Okay. And Jim, when we're trying to do the math around what the upside of Japan coming back online is, I quantify about 500 million pounds of a difference today between what they were buying before BSE and what they are buying now. But then, you and Tim started getting at the tongues, intestines and tendons, so... James V. Lochner: Those are the good items, yes. Robert Moskow - Crédit Suisse AG, Research Division: Yes, I mean, should I adding up all the pounds of tongues, intestines and tendons and figuring out $12 a pound? Or should I try to think through what kind of the bigger cuts of meat that would get you to that -- back to where you were before? James V. Lochner: Well, the answer is both, but I don't think we'll shoot tongues up to that because now in Japan, that demand has to be probably recreated to a degree. And we have to get back in and hopefully, the Japanese markets start to consume the product. I think there will be a reasonable shift back towards U.S. beef and increasing supplies. But I think it'd be very premature to try to quantify all that at this stage. Our whole approach is always to try to meet what the customers' expectations and get the innovation behind products -- providing products that they can use and just keep driving the overall revenue of beef up as best we can. So it's way early to try to start putting numbers behind those pounds and price relationships. And I think it's very difficult and not terribly meaningful to go back and look at what was pre-'03 because the dynamics into the Japanese demand structure have likely changed significantly.

Our next question comes from Akshay Jagdale. Akshay S. Jagdale - KeyBanc Capital Markets Inc., Research Division: I have 2 follow-ups, one on Chicken. Can you talk a little bit more about this inventory build? It seems significant. It looks like a 15% increase in what's in, at least from what I could tell from your Q, year-over-year increase and it's significant on a quarterly basis. I'm just -- I don't have much insight into that, so I'm concerned that maybe that's going to hit the market and impact pricing. So that's where I'm coming from on that. So if you can give us a little bit more color and basically give me confidence that it's not going to impact pricing negatively, that will be helpful.

Okay. So yes, I'll tell you what it is and I'll what it isn't. What it is promotional volume because of capacity strengths that we have to ramp up to get in -- it's a promotional build for a retail and/or food service promotion that will come in subsequent months. What it's not is leg quarters and breast meat that we couldn't sell. Our leg quarter inventory is in great shape. We're buying breast meat. And so we're not putting stuff in the freezer hoping for a better day. Those days are long past for Tyson Foods. And -- but we had to -- we've got to ramp up for some pretty good promotional activity coming our way. Akshay S. Jagdale - KeyBanc Capital Markets Inc., Research Division: Okay, that's helpful. And is that value-added or commodity, the promotion?

No. That is value-added, you bet. Akshay S. Jagdale - KeyBanc Capital Markets Inc., Research Division: Okay, great. And then just for Jim. On Pork, we recently wrote a note on this, but the cut-out on a year-over-year basis, flat to down so far in the calendar year, hog prices are showing up in the futures curve. So if all packers do what you guys do well, which is balance supply and demand to manage the spread, that would imply that either the futures price is too high or the packers are not going to be able to manage that spread, right? So my guess is the futures price for hogs today is anticipating demand that's more favorable than what we're seeing currently, perhaps exports, China, that's my guess. But is that the right way to think about it? Because we all tend to do this because the futures price is available, right? But can you help me understand that? How do you look at the futures curve on hog and your sort of spread analysis? James V. Lochner: The way we look at the futures curve, we go back and always check what the supply assumptions with pig crop report, et cetera, would imply going forward and see if they match, looking at really what the -- what that quarterly demand curve is against the total cut-out, against the domestic availability. If the supply looks like it's less and going down and if the price looks like it's right on the demand curve, obviously, your supply will drive it up. Then you have to anticipate whether or not there is a demand shift against your projected supply, what would shift it. Generally speaking, export change can have it or another dynamic. But generally, when you look at pork elasticity curves off of a cut-out as an index, there's very few times in history that you see dramatic shifts. Swine flu would have been one in '09. You would have seen some other shifts in '04, but for the most part, there's not a lot of deviations. So that how I look at it. And anticipating export shifts is the most tricky component of that because it can create a shift in domestic availability that accelerates or decelerates basis of supply that is forecast against pig crop report. It's a long answer, but that's how we look at it. Akshay S. Jagdale - KeyBanc Capital Markets Inc., Research Division: So bottom line, do you think the futures curve today for hogs is sort of overly optimistic or... James V. Lochner: It appears to me to be so, simply because I don't see the supply deficit pulling the domestic availability back down.

Our next question comes from Kenneth Zaslow. Kenneth B. Zaslow - BMO Capital Markets U.S.: Dennis, in your comments, you made an interesting point that the rolling 4-quarter number is $1.97. And I guess, my first question on this is, why reference that? And on top of that, if I go back, the rolling 4 quarters, both Beef and Chicken are not in the normalized range. So what are your implications here?

So remember on the last call, Ken, we talked about thinking -- or foreshadowing for '13 that we do at least $1.90 again, we made the case. So the best way we know how to illustrate that we're going to do that is to tell you what the last 12 months was. So that would be the first part of it. And you're right about Beef and Chicken being below the normalized range, and we're performing well and we're going to get better. Kenneth B. Zaslow - BMO Capital Markets U.S.: And I guess the last question I have is, if I look into 2014, back half of Chicken in '13 is already going to be in the normalized range. Beef seems to be potentially moving out. Which business will not be in the normalized range in 2014? It seems like all the businesses have a reasonable probability to be in the normalized range in 2014. Am I missing something?

Nope, you're right. It's time to do that and keep improving.

And we do have a question from Christine McCracken. Christine McCracken - Cleveland Research Company: Just one follow-up. Jim, you mentioned Russia has ractopamine issues and we've seen some more pushback in China and the U.S. Is there any chance the industry moves away from beta agonists? And what could that mean for industry supplies? James V. Lochner: I don't know for sure. I wish I knew. I think there's always a possibility of those things. Let's just say what happened. Obviously, the efficiency gain and the increased carcass pounds would be gone, so you'd either have a shift or a decrease in pounds of pork produced. So that would be favorable on prices. Now whether it offsets the price -- decrease offsets the loss of efficiency and how that impacts the producer will be very dependent upon the price swing accordingly and each individual producer's case on the contribution of that efficiency gain that he gets. Christine McCracken - Cleveland Research Company: And on Beef, wouldn't that exacerbate the issues that we have right now and the weight gains we've seen? James V. Lochner: Yes, same answer. And it's just how much beef supply comes off if the growth promotants from beta -- or beta agonist growth promotants went away, it would take pounds off the market.

And at this time, I'm showing no further questions.

Okay. Well, thanks, everybody, for joining us today. And as always, we're grateful for your interest in our company. We're going to cut out and head over to the shareholders' meeting now, so we hope you have a great day and a great weekend. Thanks.

Thank you. And this does conclude today's conference. We thank you for your participation. At this time, you may disconnect your lines.