Jon Kathol - VP of Investor Relations Donnie Smith - Chief Executive Officer Tom Hayes - President Dennis Leatherby - EVP and Chief Financial Officer

Kenneth Zaslow - BMO Jeremy Scott - CLSA Adam Samuelson - Goldman Sachs Robert Moskow - Credit Suisse Kenneth Goldman - JPMorgan Farha Aslam - Stephens, Inc. Akshay Jagdale - Jefferies Michael Piken - Cleveland Research David Palmer - RBC Capital Markets

Good morning, and welcome to the Tyson Foods’ Quarterly Investor Earnings Call. All participants will be in listen-only mode [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Jon Kathol, Vice President of Investor Relations. Please go ahead, sir.

Good morning and welcome to the Tyson Foods Incorporated Fourth Quarter and 2016 Fiscal Year Earnings Conference Call. On today’s call are Donnie Smith, Chief Executive Officer; Tom Hayes, President; and Dennis Leatherby, Executive Vice President and Chief Financial Officer. Slides accompanying today’s prepared remarks are available as a quarterly supplement report on the Investor Relations section of our website at ir.tyson.com. Tyson Foods issued an earnings news release this morning, which has been filed with the SEC on Form 8-K, and also is available on of our website at ir.tyson.com. Our remarks today include Forward-Looking Statements as defined in the Private Securities Litigation Reform Act of 1995. These statements reflect current views with respect to future events, such as Tyson’s outlook for future performance on sales, margin, earnings growth and various other aspects of its business. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. I encourage you to read the release issued earlier this morning and our filings with the SEC for a discussion of the risks that can affect our business. During the call, there will be a discussion of some items that do not conform to U.S. Generally Accepted Accounting Principles or GAAP, including adjusted EPS. Tyson has reconciled these items to the most comparable GAAP measures in the earnings release and on our website at ir.tyson.com. I would like to remind everyone that this call is being recorded on Monday November 21, 2016 at 9 AM Eastern Time. A replay of today's call will be available on Tyson's website approximately one hour after the conclusion of this call. This broadcast is the property of Tyson Foods and any redistribution, re-transmission or rebroadcast of this call in any form without the expressed written consent of Tyson Foods is strictly prohibited. I'll now turn the call over to Donnie Smith.

Thanks, Jon. Good morning everyone and thanks for joining us today. Before we get into our earnings discussion, I would like to comment on this morning’s other announcement. As you may have heard, Tom Hayes will be succeeding me as CEO effective the calendar year-end. The Board and I agree that now is the excellent time to make this transition, the Company is performing exceptionally well and realizing significant growth and shareholder returns through our hybrid strategy of branded prepared foods and fresh meats. Simply put, I believe the Company has a bright future and that Tom is right leader for this next phase of our development. We have worked hard to create a strong platform that will take Tyson into the future and we have an impressive pipeline of talented management to help us to do that. We are leveraging scale, developing our brands and building value for shareholders. Since his promotion to President earlier this year, Tom has reminded me, the Board, and the rest of the management team on a daily basis exactly why we hold him in such high regard. He is a capable leader, a strategic thinker and a team player who is ready to build on what we have accomplished to-date and drive this Company forward. He has the skills to deliver on our strategic goals and complete the transition toward our hybrid model. I have committed to him I will remain available as a consultant for the next three years. As you can imagine, it’s a time of mixed emotions for me. I joined Tyson Foods 36 years ago and have spent my entire professional life here. In return, I have been given opportunities I could never have imagined. At Tyson, I have worked alongside some of the best most impressive people you could ever hope to meet and together we worked tirelessly to build a great Company. I would like to thank both the Board and the Tyson’s family for their encouragement and support without which I could have not succeeded. More than just delivering good financial results, we have been able to make a positive difference in peoples’ lives. I’m thankful for the seven years I had the opportunity to serve Tyson as its CEO, and I’m excited about its future and confident that Tom is the right leader for the next chapter. And with that, let’s now turn to the quarter. Fiscal 2016 was our fourth consecutive year of record results with record operating income, operating margin, adjusted EPS, cash flow, Pork segment margins and Prepared Foods segment margins. Adjusted EPS grew 39% versus the prior year. Using the midpoint of our fiscal 2017 guidance of $4.70 to $4.85, the projected EPS five year CAGR would be 19%, which is outstanding. Fourth quarter results were slightly below our internal expectations impacted largely by a $35 million or $0.06 a share and mark-to-market and lower cost of market accounting treatments primarily in beef and pork, our production this year in Prepared Foods and one-time factors in Chicken that Tom will go into a more details shortly. Synergies for the fourth quarter were $165 million, with $67 million incremental over Q4 of last year. Synergies for the year were $580 million, with $258 million incremental to last year and well exceeding our $500 million target. We currently expect synergies of approximately $675 million in fiscal 2017, below our previous estimate of $700 million. While we still expect to achieve at least $700 million in total, due to the timing of some projects we now expect some of the synergies to fall into fiscal 2018. We bought back 8.3 million shares of stock for $600 million in Q4, excluding repurchases to offset dilution from equity compensation. For the fiscal year, share repurchases totaled $28.2 million for $1.7 billion. We were able to repurchase this level due to our record operating cash flows of more than $2.7 billion. 2016 was a great year, beyond setting records, we made tremendous progress leveraging the combined strength of the Tyson team and we are well positioned for even more success in fiscal 2017. Now let’s go to Tom for a report on our operating segments.

Thanks a lot, Donnie. Let’s begin with Prepared Foods segment. Operating income in the fourth quarter was $133 million, with 7.2% operating margin. Average price was down 3.9% primarily reflecting the pass through of overall lower raw material costs. Adjusting for the additional week in 2015, volume compared to Q4 last year was up 2.6%. Margin in the Prepared Foods segment were lower year-over-year primarily due to a sharp increase in pork trim raw material costs in Q4 that were not passed through to customers within the quarter and increased marketing spending. In the foods service portion of Prepared Foods in Q4, we had strong results in our Bakery business, but softer than expected results in Prepared Meats. As part of our efforts to improve our production network, we closed a plant and transferred production to newer facilities. Unfortunately, this transition wasn’t seamless, causing us to incur over time in our operations and higher distribution costs in an attempt to satisfy our customers’ needs. We have since taken steps to improve production efficiency and are building additional network capacity for long-term growth. Despite these challenges, Prepared Foods had a record year and delivered plant synergies. Synergies for the segment were $119 million for the quarter and $38 million incremental to Q4 last year. For the full-year Prepared Foods synergies were $441 million with $156 million incremental to fiscal 2015. For the fiscal year, Prepared Foods operating income was $734 million with a record 10% margin. Pricing was down 3.4% on lower raw materials, adjusted volume was down 1% for the year, primarily due to the rationalization of some unprofitable ingredient meat SKUs. We are growing volume where we want to grow by focusing on strategic brands and categories to increase operating income over time. We supported our brand equities across Prepared Foods through marketing, advertising and promotional spending to grow volume and secure our position on the shelves of retailers and restaurants. For example, we increased our support behind Jimmy Dean Frozen breakfast franchise and Hillshire Farm lunchmeat. And in our fourth quarter, volume was up 9% and 28% respectively. We also grew our share by 1.5 points in the frozen protein breakfast category and by 2.3 points in lunchmeat. We expect beef and pork raw materials to be deflationary to input costs in addition to pricing 2017. We will continue to invest in innovation, new product launches and MAP to grow our brands. We are expecting margins in 2017 to be similar to those in 2016 with solid volume growth that outperforms the categories where we compete. In the Chicken segment for the fourth quarter, operating income was $220 million with a 7.8% operating margin. Adjusted volume was down 3.2% due to a planned temporary decrease in production and average price was up 3.5% as we focused on selling higher margin products. There were three factors leading to lower than expected results in the fourth quarter in chicken. First, our production forecasts are based on consumer demand and through our sales and operations planning process we received indications of lower demand in July and August. As our business model dictates, we reduced production in response to softening consumer demand. Secondly, we absorbed a sharp spike in soybean meal input cost within the quarter that affected margins in the short-term. And third, having completed the restaging of the Tyson brand, we turned MAP back on to grow point of distribution heading into the new fiscal year. As a result, our Tyson brand frozen value added chicken volume was up 6% in Q4 of 2016, and is gaining momentum or attending very strong chicken segment volume in our first quarter of 2017. Chicken segment results for the year were outstanding with an 11.9% operating margin we are just shy of last year’s record return. Operating income was $1.3 billion, adjusted volume was down 0.7% due to the reduce demand in the fourth quarter that I just spoke to. Average pricing was down for the year by 1.5% as some input cost deflation was passed on to the customers. The USDA is now projecting chicken supply to be in the U.S. increased by 2% in 2017. And our input cost should be flat. We will continue growing where we want to grow by selling more Tyson branded value added chicken. We expect the returns for the chicken segment to be at/or above the upper end of our normalized range of 9% to 11% again in fiscal 2017. Moving on to the beef segment, operating income was a $139 million in Q4 with a 4% operating margin. Adjusted volume was down slightly by 0.3% while average sales price declined 14.9% reflecting reduced cattle costs. For the fiscal year, operating income was $347 million with a 2.4% operating margin. Adjusted volume was up slightly by 0.8% while pricing declined 14.9% again on lower cattle cost. Following a rocky start to the year, the beef segment finished strong with favorable pricing environment continuing into our Q1. We are expecting our beef margins to be at the upper end of its normalized range of 1.5% to 3% in fiscal 2017, reflecting the favorable environment that we expect to continue for some time. I’ll wrap up the segment performance by recapping the Pork segment results. Operating income was $108 million with an 8.7% operating margin. Adjusted volume was up slightly at 0.4% where average pricing was up 1% in the quarter. For the year, operating income was $528 million with a record 10.8% margin. Excluding the additional week in fiscal 2015 and the divestiture of our Heinold business in Q1 of last year, pork volume was up 1.2% and average price was down 4.4% reflecting lower hog cost. In fiscal 2017, we expect the favorable operating environment to continue and are estimating operating margin of at least 10% for the year. Currently the USDA is projecting supplies of our protein categories to be up 2% to 3% next year with moderate export growth. Domestic demand for protein has been strong and we expect it will continue in a deflationary environment and we are very well positioned across all proteins and customer channels to respond to the changing demands of consumers. We are making significant investments in consumer insights, innovation, our brands, our customer relationships, our facilities and our people. In addition to $1 billion in CapEx in 2017, we are investing an improving safety, animal well being, warehousing and distribution and attracting and retaining talents throughout the organization. These investments should improve cost and turnover as well as continue to drive long-term sustainable growth. While protein demand overall is strong and growing, we are seeing a shift in how consumers spend specifically in retail. When beef prices decline, more consumers buy beef as relative price premium versus other forms of protein narrows. This interaction is especially pronouncing the dynamic between ground beef and hot dogs. While the hot dogs category overall was down in the 13 weeks ended October 2nd, we grew Ball Park volume by 11%, and increased volume share by 2.5 points. This is the great example of the power of strong leading brands like Ball Park and the consumer loyalty and strong customer support it garners. Overall, Tyson Foods is performing very well on retail. In the 13-week period roughly corresponding with our fourth quarter, our Core 9 product lines grew dollar share in all nine categories and grew volume share in eight of nine categories. In total, we grew volume 9.6%, eight points ahead of total food and beverage. If you take a look at the slides that we posted online, you will see that both the Core 9 and total Tyson at retail are outpacing growth among the top 10 branded food only companies in both sales and volume dollars. In sales volume, Tyson is only one of the three companies that posted positive volume growth. In sales dollars, we are the only Company to show a positive growth with a 4.7% in the Core 9 and 2.1% overall and that's in a deflationary protein pricing environment. I want to extend my congratulations to Andy Callahan and the entire retail package brands team for their outstanding performance. Turning to the food service channel, traffic remains roughly flat and growth is driven by average check sizes, which is up about 2%. That was a case in calendar year 2015 and thus far in 2016 and is expected to continue through 2017 and despite a lackluster environment, Tyson Foods is doing well on food service. Our insights team using data provided by NPD has developed analytic tools that give us a better look into broad line distribution sector within food service. Broad line distribution has long been an important channel to us, but now we are getting a better perspective of the role we play, the importance of value added chicken and the strength of the Tyson brand. For the 52 weeks ended in July, the most recent data available, our volume grew 3.9% more than double the category growth rate. By far, Tyson is the largest brand with 33% share in growing, the next closest competitor is private label with the 20% share and it’s worth noting, we are a substantial producer of private label value added chicken for our distributor customers. We look forward to be able to give you more and more insight into our food service business as our insights team continues to build out more analytic tools, which is a great example of the strength of our combined capabilities across our Company. We continue to be encouraged by the phase of the new product innovation, as we extend our brands in adjacencies. Sales from new products launched in the previous three years has resulted in a vitality index of 14% in retail and 21% in food service. When we think about innovation, it’s not only about new products, we really search to understand how people shop and how shopper behavior opens up new platforms renovation. Partnering with our customers to leverage the opportunities of the e-commerce space is a great example of this. We began selling Tyson Tastemakers Meal Kits through e-commerce in September. While it’s still early, we are very encouraged by the initial consumer acceptance and feedback. This platform combines our innovation capabilities, supply chain at scale and leading brands in a way no other food Company can. Expect to hear more in 2017 as we extend this platform into multiple formats in e-commerce and traditional retail. 2016 was a great year, but more importantly, we laid the foundation for 2017 and beyond, we are capitalizing on a momentum and taking a systematic approach to success. Now, I'm going to turn it over to Dennis, who will report on the fourth quarter and the year as well as our expectations for fiscal 2017.

Thanks Tom and good morning everyone. Fiscal 2016 was our fourth consecutive year of record earnings, as we continue to demonstrate the power of our diversified business model producing strong stable margins. We are investing our cash flows back into our business as we focus on long-term sustainable growth. Total Company return on sales was a record 7.7%, for fiscal 2016. Operating income was also a recorded at $2.8 billion, representing a 26% increase over adjusted operating income a year ago. On an adjusted basis, this represents our fourth consecutive year of growth in operating income and return on sales. Our record adjusted EPS of $4.39 represents a 39% increase over $3.15 per share last year. Our operating cash flow was a record $2.7 billion, and we have invested $695 million on capital expenditures. This outpaced our depreciation by $78 million as we continue to invest in projects with a focus on delivering high ROIC. We also used our record cash flow in fiscal 2016 to return cash to shareholders and to retire debt. We increased the dividend for fiscal 2016 by 50% from the prior year. We also have repurchased 28.2 million shares for $1.7 billion during the year. Combined, we have returned over $1.9 billion to share holders and share-repurchases and divided, and that’s after we retired some high coupon debt during the year, which further strengthened our balance sheet. In fiscal 2016, our effective tax rate was 31.8% and on an adjusted basis was 33.8%. Net debt-to-EBITDA for the past 12 months was 1.7 times. Including cash of $349 million, net debt was $5.9 billion, and total liquidity was $1.3 billion. Net interest expense was $57 million during fourth quarter and $243 million during fiscal 2016. For the quarter, average diluted shares outstanding were $381 million. ROIC was 18.1% and is approaching the pre-Hillshire acquisition level of 20.5%, which illustrates the strength and stability of our earnings, as well as our commitment to creating incremental shareholder value. Now looking forward, here are some thoughts on fiscal 2017. We expect similar revenues as we grow volume across each segment offset by the impact of lower beef prices. Net interest expense should approximate $225 million. We currently estimate our effective tax rate to be around 35%. CapEx is expected to approximate $1 billion as we focus on capacity expansion and operational improvements that create long-term shareholder value. Prior to adjusting for any additional share repurchases subsequent to this call and based on our average share price so far in Q1, we expect our average diluted shares to be around 376 million. This morning we reported our board of directors again increased our regular quarterly dividend by another 50% from $0.15 to $0.22.5 per share on our Class A common stock payable on December 15. This increase brings our dividend to $0.90 shares annually for Class A shares from $0.60. As we stated last year, we expect to increase future dividends for Class A shares by at least $0.10 per share annually. This increase and our commitment to steady future dividend increases demonstrates our confidence in the enduring strength and stability of our cash generation capabilities. We have a tremendous amount of momentum going into fiscal 2017 as we come off a year of 39% EPS growth. Our fiscal first quarter in 2017 is off to a phenomenal start, which gives us confidence in achieving annual adjusted EPS growth of 7% to 10% to a range of $4.70 to $4.85 per share. This new guidance range represents a five year adjusted compounded annual growth rate of at least 19%. While we are pleased with the growth we have achieved, we are excited about the significant increase in investments in fiscal 2017 that will drive growth for the future. In addition to a $1 billion in CapEx, we are planning heavy investments as Tom mentioned previously, while we continue to grow organically. Additionally, in fiscal 2017, we expect to return even more cash to shareholders by our announced increased dividend and additional share repurchases. We see compelling value on our shares and so far in the first quarter of fiscal year, we have repurchased another 3.4 million shares for $240 million. While some of our investments will not immediately fall to the bottom line, we are creating a sustainable blueprint for success that will allow us to grow in responsible way for the future. In closing, we take a long-term view toward investing in our people, our brands and our facilities, which will drive value and generate attractive shareholder returns. That concludes our prepared remarks. Denise we are ready to begin Q&A.

Thank you, Mr. Leatherby. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] And your first question will come from Ken Zaslow of BMO Capital Markets. Please go ahead.

Hi. Good morning everyone.

Hi.

Good morning.

Good morning Ken.

Donnie congratulations, it’s been a pleasure, I wish you well. And Tom congratulation on your promotion. I think with that Donnie, I would just say your timing of your retirement may not be perceived as optimal, Tyson is in the middle of a class action suit, earnings fell short of expectation on the perception that you have kind of reached peak earnings. And you are in a debate over your Georgia Dock pricing. It seems like. But let me just tackle one issue at a time. Why not hand the reins over once the dust settles a little bit. Second, how much of the earnings shortfall in the quarter will be recaptured in the first quarter. Third, if Georgia Dock prices go away, how much would Tyson’s outlook actually change? And then, Dennis just to kind of go back on the share repurchases, given that your stock seems to be probably pricing down at least 10% to 15% today, what is the expectation for share repurchases going into this first quarter?

Okay. So I’m going to take the first one of that and then Tom and Dennis will start from there. Ken, I think this is an excellent time for us to be making this transition. Company is off to a phenomenal start for quarter, we are on a very solid foundation. As we have said before, we dispute the claims, we are looking forward to our opportunity to defending ourselves in court on the litigation. So that has nothing to do with the transition. So, yes, there is not a better time, we have got a great team, Tom is a very capable leader. So in terms of all of that there couldn’t be a better time to be making this transition. Now Tom, I’ll let you start on the second, third and fourth.

Yes. So, thanks Ken. And what I’ll say is the timing, I think from everybody’s perspective actually couldn’t be better given the great shape that Donnie has brought the Company to, and we are all just thrilled about the opportunities ahead of us. As it relates to the Q4 to Q1, yes there is a shortfall in Q1, and I think largely you will see it show up in the strong - Q4 show up in Q1. So the lower than normal results in Prepared Foods and chicken sort of relates to MAP spending that I spoke to. But I think we are in a great shape particularly in beef and pork, which I think shouldn’t surprise you. As it relates to the Georgia Dock, this is what we talked about before several times is that we really don’t use it that much, it’s about four or maybe a little lesser total chicken volume sales that are priced off the Georgia Dock. We have talked several times that we used a lot of different pricing mechanisms, and we are diversified, we don’t feel like it has significant impact to us. But the Georgia Dock has had very little influence on our price and strategy. Dennis I don’t know if you want to add.

As far as share repurchases go Ken on that question. Last quarter we bought $600 million worth of stock. We bought 240 million so far and we have a phenomenal quarter going which means heavy cash flow. So you can expect we will have another big quarter. I won’t get into the exact number, but we will buy quite a bit stock back.

Just to be clear. So just making sure I get the answers. How much of your earnings shortfall will come back in the first quarter and then if Georgia Dock prices go completely away, will that have any impact on Tyson’s outlook?

As far as the earnings going into this quarter, all of it will come back into the quarter from the shortfall standpoint. As far as the Georgia Dock goes, how much it will impact? It will have no impact if Georgia Dock went away.

Okay. Thank you.

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

I appreciate some of the clarity there and congratulations Donnie and Tom, I echo that, but I also echo some of surprise, maybe at the timing. Just a follow-up on the Georgia Dock. Can you repeat what percentage of your sales are tied to the Georgia Dock and then secondly, can all of your clients that are pricing on Georgia Dock without restriction or penalty opt to price on index other than Georgia Dock, theoretically right now?

So to repeat it's about maybe 3.5% to 4% of our total chicken sales off the Georgia Dock and customers can negotiate to price it off of whatever index they would like. But we have found that that's not a good proxy for cost and we have some very sophisticated buyers that tend to look more at grain inputs than they do the Georgia Dock. Certainly it's got a lot of history and it's something that's been around for a while, but we find increasingly our customers are looking to have discussions about where do they think grain is. And then, in addition to that, I would say there is a lot of discussions which we have also spoken about this, less about price than it is about everything else we offer as a Company and we are getting more and more into those discussions frankly and less and less about the absolute price of input cost. So again, I don’t know if that answers your question, but that is the way we think about, it's a very, very small part of what we do.

Okay. I just wanted to ask about chicken again, obviously a big surprise miss in the quarter, didn’t really add up to any of our models; I appreciate the three factors that you have flagged. Can you quantify them in terms of what was the impact on margins of each factor and how they will roll over into the first quarter?

Yes, I won't go through the specific impact of each one. What I will say is when the soybean meal market went up, we are probably less hedged, as we go towards the end of the year we are looking for the new crop. That is something that certainly if there are spikes, it's going to play through our numbers. As we go through our negotiations with customers, we look to capture everything that we can. I think in the last call we talked about severe run-ups, the slope of the curve is high, we have a harder time passing through those costs to our customers. So that was certainly a big impact.

And just to reiterate Jeremy, we are saying that for the year that earnings in chicken would be at or above the normalized range.

Right.

Okay, and then just lastly on the CapEx. What exactly is driving the incremental investment there? I realize you talked about some of the initiatives that you are taking, but can you break that down into pieces?

Yes. So the biggest one is we are spending quite a bit of money to expand production at our plants, we have got a lot of growth opportunities as I mentioned briefly in the prepared meat sector and food service we have some capital spending there. We have increased our spending against or increased our production capacity on cooked chicken, fully cooked chicken and we are pretty close to being well through that capacity and we need to build more. So think about the largest percentage of that would be focused on growth and in addition to that we are spending to make sure all of our process is working well, animal well being, a lot of sustainability efforts, but to answer your question on CapEx it’s predominantly focused on growth.

Okay. I’ll jump back in the queue. Thank you.

And the next question will come from Adam Samuelson of Goldman Sachs. Please go ahead.

Yes, thanks. Good morning everyone and ill echo Ken and Jeremy’s comments, Donnie congratulations and Tom congratulations as well. May be my first question in Prepared Foods and just to be clear on the margin guidance for fiscal 2017 of 10% basically flat margins year-over-year. Can you quantify both the fourth quarters, you looked over some production issues, that don’t seem to be expecting to lap. There is still about a $100 million of year-over-year synergies, you are growing your volumes strongly in your highest margin value added categories in the Core 9 and you have got some nice commodity deflation at your back. Can you talk about kind of the level of reinvestment spend in Prepared Foods that you wouldn’t expect a sharper for some better margin leverage and/or kind of earnings improvement. Thanks.

Sure. We think about the ROS is flat for a while, what we want to make sure is that we continue to do is focus on volume. Hopefully, you will see in those charts, we are able to see those online the investments are paying off, and we have significant investment going into not the least, which is MAP in Q4 that it was a big impact in the rate. And as you look at what we are doing for preparing ourselves for the 2017, it’s all about making sure that we have a shelf space, we are driving innovation and we continue to invest and frankly lift the investment in some other categories that weren’t ready for and some of the brands weren’t ready for the MAP spending as much as they are today. So we think in terms of fourth quarter played out pretty much as we thought it would, and as we talked in the last call, we are executing that strategy that we want to be continually at 10% and we did it in 2016. With more protein on the market, next year, we wanted to make sure we are in good position that I spoke to, and we want to continue to drive category growth with our customer. So we are continuing to invest significantly and growing where we want to grow, which is in the Core 9 as we have demonstrated.

Okay that’s helpful. And may be switching gears to chicken and understanding that there were some issues in the fourth quarter that it doesn’t sound you think repeat, may be other than the MAP spending. And you have guided margins at or above the high end of the 11% normalized range. Can you talk about kind of the bigger string factors in chicken as you lookout through 2017, I mean the feed costs would, given the harvest that we just had would seem to be fairly benign. It seems like you have got good mixed tailwinds in terms of your value added business, export markets are okay. Can you talk about some of the bigger kind of drivers or variants that you think about in up or down side risks in chicken for the next 12 months?

Sure, I mean you called it as it relates to grain, we feel like that is pretty much flat, will be in the same position in 2017 as we are in 2016 as far as we known today. What we continue to do is drive the core of that business. So retail and food service, value added products can be drive to the non-core the commodity linked quarters and byproducts down. So roughly the value added products are up above 4%, the commodity products down 7%. So the net is, if you could look at the total, the chicken platform you see it’s roughly flat, but the mix in between is continuing to improve towards value added.

All right. Thank you. I’ll pass it along.

And the next question will come from Robert Moskow of Credit Suisse. Please go ahead.

Hi, thank you. I thought also one of the comments about Chicken was that you has expected Chicken demand to be down in July, August, so you reduced production and you said it was related to consumer demand and I guess that’s related to lower beef prices. Was consumer demand as weak as you thought it was for Chicken, I mean it seems to me that demand for Chicken had been a huge part of the story overall. Are you seeing any kind of weakening in that regard and then it had a follow-up on trim prices, which we track other than a little bit of a spike in July, I really didn’t see anything else for the quarter, in fact, it came down quite a bit in August and September. So I wanted to maybe get a sense of just how sharp of an increase that was for your Prepared Foods margins?

Sure. Yes, so as it relates to poultry first, the volume was off to for sure up in Q4. But we saw it come in, we have a good [Indiscernible] process, I think it probably goes with our experience and [Indiscernible] signals allows us to modify in advance of seeing that now. As Dennis has said and we talk about we have seen that come back in first quarter here. So the volume was off and it now has come back and the other thing that we want to make sure we do is we have lower inventories. We want to make sure that we don’t run into a season of high inventories and that certainly helped us towards selling through the inventory a large degree in Q1. So it was the right thing to certainly pull back in production. As it relates to trim pricing. So if you look at 72s and 42s the Prepared Foods business and particularly as it relates to hot dogs and grinding materials for sausage and so forth, the sharp spike dropped off dramatically as the trim is dropping off. It’s good for us, because costs were going down or price is up, I may shoot up. Again the slope of the change is going to cause us particularly on the food service business for reforming of price to have our raw material costs higher and our formula prices is lagging by about it is. So that was the short-term impacts, we are through that and that’s the situation there.

And why do you think Chicken demand is coming back, I mean beef prices continue to fall. So you might see more consumer demand shifting to beef, I mean what how do you know it’s not just a head take and it might get weak again?

We see that the value that we provide through for all of our customers is predominantly focused on how they grow their categories overall and when we look at Chicken, we have significant MAP spending that they want, they want us to invest in the business and continue to drive growth. We have seen certainly some share gains and that’s something that we are tremendously excited about, as we look at how chicken that the retail value added poultry or the Tyson brand at retail it’s been doing very well, we have got a lot of innovation behind it. So those are sort of the key drivers and some of the food service business that we have picked up over this summer is starting to kick-in. So there is a lot of things that - I can’t give you all the detail on it Rob, but there is lot of things that are sort of working together that give us tremendous confidence about chicken volume not just Q1 but for 2017.

Okay. Congrats again Donnie and good luck, Tom.

Okay.

Thanks.

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

Hi. And thanks for taking my question. I just wanted to make sure I understood when you are talking about all the shortfall in the fourth quarter chicken business shifting into 1Q. Can you just elaborate on what that mean? I wasn’t quite certain if you are talking profit or volume?

It’s more profit Ken.

Okay. With that in mean and thank you for that. Can you help us and I know you are getting same question in 10 different ways, so forgive me. But you help us walk us through the mechanics of that, because I’m not quite sure like the soy issues that doesn’t reverse right, MAP spending I assume it’s not coming down in the first quarter. So I guess it’s mostly fixed cost deleverage issue that gets reversed. Does that imply that volumes have to be significantly better than they usually are in 1Q. Again, you have talked about this. So I just want to make sure, I’m thinking about this in the right way.

Yes. Sure. So, Ken soybean meal, yes you have seen the chart, everybody seen it, it spiked up and then it’s [Indiscernible] that was up and down enough and now it’s flatten back out, right. So, yes it has come back down and it’s being down so that is helping our cost base. And I would say it’s a relates to feed cost in Q4 is always a lag and our cost. So now that in speaking to the profit, we are going to be in a much better shape based on doing a couple of things. One is reducing the amount that we produce or inventories we are drawing down and also continuing to do what I said, which is focused on driving growth at retail through the Tyson brands and driving growth with the new food service customer places.

Okay. And then I may have missed this, but I wanted to ask about retail beef and pork prices. It really hasn’t fallen as much as wholesale and farm prices have for cattle and hogs. I know that retail prices are always much less volatile. It just seems a little more so at this time, as they are really kind of being sticky. I’m just curious what your updated thoughts are and if that changes when that might change, are you having any conversations with your grocery customers about the proper prices that they should have on the shelf at this point?

Yes. We kind of run that, we don’t influence necessarily the prices are going to be charging on the shelf, but you got to nail the dynamic is that the livestock prices have not come down faster than the retail prices has, which is allowed us to make the margins that we have right now in both beef and pork. So how that sticks to the season, I think it remains to be seen, but that is the dynamic that’s allowing us to have a very, very strong first quarter.

Okay. Thanks so much.

Okay.

And the next question will come from Farha Aslam of Stephens, Inc. Please go ahead.

Thanks. Good morning.

Good morning.

Good morning.

Again. On chicken, could you just share with us your commentary about demand declines and recovery. Is that for Tyson specific or is that the industry. And why would Tyson’s demand be different than the industry.

So Farha this is Tom, we are talking about Tyson as that’s all we can really speak to right. I mean that’s what we focus on, and it is the Tyson brand retail, significant innovation, advertising, we have been on-air with television, we are seeing the definite results of at that activity, like I mentioned up 6% heading into much stronger Q1. And speaking again need to be a broken record, but we have taken on some significant business throughout whether it's food service or retail predominantly on the Tyson brands. Certainly there are some retail private label that we plan, but it’s predominantly the Tyson brand that we are seeing increased spend.

Okay. And then, when you look at your Prepared Foods business and the operational issues that you faced during the quarter could you roughly quantify how much they were and if they are completely fixed any carryover to the first quarter?

Yes, we won’t quantify in specific terms, we will say that it was some of the down draft on Q4, there was as we closed one of our factories that produce pizza toppings, we had challenges moving to the factories that were actually increasing capacity at. So that was not our finest hour in terms of how we execute and we are in a much better position now, because the good news is we have strong customer demands and we are building capacity to meet that customer demand. And it was a onetime issue that's going to be certainly as we ramp up to serve the volume, we are going to see some continued at capacity numbers, but I would say that this predominantly due to that plant closures the affect it and so I can’t quantify for you but that's the story.

You are done with it now?

We are still going to be going through the first half of this year getting some stability against that in terms of impacting our numbers is more of an opportunity. But in order to drive the results it's getting all of the volume that we have subscribed out the door in terms of customer orders that's the biggest challenge. I would say that all of the supply chain issues would be solved for the second half of the year that's when the significant stability will come as well as our ability to serve all the order that we have on the improved demand.

That's helpful. Thank you.

You are welcome.

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

Thank you, and first congrats Donnie again on everything going out of the stock today that's been pushed aside, but congratulations on your retirement I guess. But my question is again on chicken, I just wondered is it fair to say that if you didn’t have these three one-time issues that your numbers for chicken would have been above the normalized range. I mean I know you are hesitating for some reason to quantify it, but just wanted to first understand the magnitude of the impact?

The answer to that Akshay is yes, they would have been within the normalized range that you have typically become used to and it is unfortunately a one-time occurrence that we are going good about in terms of Q1 and rest of the year.

Okay. And then just related to the guidance, obviously again on chicken you are guiding similar results like this year, which is above the normal range. But I guess the markets is not really believing that so the demand issue - so what is built into your projection, if retailers do reduce the price of beef and pork will that - I mean are you able to navigate through that and still deliver the results you are promising for next year. And then can you just elaborate a little bit more on look the demand issue was in terms of weakness and why it caught you by surprise since you gave last year guidance.

So what I can tell you is we are seven weeks into our fiscal year, and we have lot more to come, we feel great about it. But everything thing that we know in terms of beef and pork pricing and chicken business in Prepared Food it’s in our projection. So as we move through the year, we feel like we are going to be in a great shape. We are seven weeks and everything that we know is in our projections. That’s all I can say about that. In terms of demand signal, that’s what drives our [Indiscernible] the demand is sometimes when you cross the end of the year it’s certainly difficult. But at the end of the quarter I think of it as while we go to put those couple of months together or couple of quarters together to really take a good luck at what the demand is. And that is insignificant thing certainly as we are coming into the fiscal year for us here. So getting into Q1, you will see that those two things are offsetting, but certainly beef pricing - not necessarily help the other proteins, but beef pricing has been down significantly, so you see the volume up rather sharply on beef.

So again, what happened with the demand being weaker, was related to beef pricing being lower. I'm just trying to understand what on demand for chicken really changed, because we just want to make our own judgments on whether that factor will continue in 2017? Thank you.

Okay, I would say beef was probably the largest sharpest up of all the proteins. We can’t say there is anyone in particular issue, there is lot of thing we got to work to drive the volume and customers are loading it at different times or the season, they are trailing up inventories. There is not a specific thing that you can fit into other than we did see certainly beef as probably the largest factor.

Thank you.

You are welcome.

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

Yes hi. Just a question on the pork segment, I mean it looks like margins for the packers are at an all time high, and just wondering if we should expect to see - I know you guided the 10% plus but it looks like potentially fiscal 2017 could even be better than 2016. Is that a fair assessment of kind of the market?

Yes, so you know it’s definitely going to be a good year for pork that we have guided to. Well above the normalized range of six to eight, we said we think it’s going to be 10 plus. So we continue to see strong demand for pork, it’s seasonal for sure, but we have very strong demand for pork. And supplies are roughly, I think in unison with demand, so it’s a good thing for us and so that’s why for us we feel like it’s going to be a good year on pork.

As you look further ahead, to the vertically integrated hog producers are adding some packing capacity, which is suppose to come online next summer. Are you guys already sort of looking at alternative suppliers or how do you see your pork utilization rates trending as these other facilities come online and how are you looking to source your hogs in the future? Thanks.

So it looks like there is going to be sufficient harvest capacity to stay ahead of the increased hog supply. Our math is showing that the supply growth and demand growth like I said are relatively balance over the next few years and so that looks good for us. We feel like as it relates to season, the carcass weights are still not high as you might think they would be, indicating the supply as relatively current. So it remaining to be seen, it will that affects us, but we are feeling we are in a great position, we feel like we are well balanced between supply and demand.

Okay. Thank you.

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

Thanks. Good morning and congrats, Tom and Donnie. First question, you noted that the Georgia Dock price is not the primary driver of chicken pricing. Perhaps you could just talk about how Tyson is getting its chicken pricing, which I believe is up 3.5% this quarter. And what your near-term outlook is for pricing in that segment?

Yes. So thank you, the Georgia Dock is one of many elements that we use, I would say that as we have talked about in the past probably the best for us is if we have something that’s tied to any industry it really the underlying grain. So if we have a customer that’s willing to block for a period of time then it’s marked for us - grain underneath to make sure we have a margin that’s blocked up. Beyond I would say we continue to see our portfolio move more and more to what I’ll call list pricing. List pricing with a promotional element on top of it, so regardless of whether its food service or retail that’s the model that we have within Prepared Foods, a lot of the chicken value add acts like Prepared Foods. So I would say that’s the predominant model beyond locking in against grain underlying input cost.

As a follow-up to that you discussed the soy spike over the summer and the impact on margins. Does this some in some way reframing the cyclical nature of margins according to feed costs, in other words, if we were to see a significant reversal in feed costs going in soy will the chicken segment margins perhaps dip below the long-term range of 9% to 11% at least on a temporary basis if that were to occur?

Yes, I think that’s fair. It depends on when they happen in the year and how steep the service and so that’s what is going to drive whether or not they are going to have a short-term impact on how [Indiscernible] going to be. So I think that’s fair.

Thank you.

Welcome.

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

Hey thanks guys for the follow-up but sure this won’t surprise you, but I have a follow-up on chicken. Just the way I calculated, based on your commentary. The shortfall in the quarter was upwards of $80 million to $120 million in chicken. And first of all, is that number somewhere in the ballpark? But secondly, when you say you will recapture that shortfall in the first quarter, you mean you will recapture the margin not necessarily a piece of that $80 million to $120 million. Are there mark-to-market losses that needs to be factoring in that will unlock in the first quarter or how should we think about that?

Yes, the mark-to-market I’ll ask Dennis to chime in here, but no its margin structure we are talking about going back to where we expect it should be and again I’ll just repeat that we have not small amount of marketing and advertising promotional investment.

As far as mark-to-market that’s not much of a factor.

Okay. Thank you.

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

Okay. Well, thank you very much. What I would like to say is A, thank you for your interest and your continued interest during this Thanks Giving Holiday season, very happy with our investors, sell side, buy side analyst continue to be interested in our stock. And certainly thanks to Donnie Smith, he has been a great partner bringing me up to speed on everything I need to know about Tyson Foods family. And as he said in his remarks, he is not going anywhere for three years, he is going to be on speed-dial for me, so I’m very happy about that. So I would just say thank you very for your attention and I appreciate it and we will be talking to you soon.

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