2. FORWARD-LOOKING STATEMENTS
Certain information contained in this presentation may constitute forward-looking statements, such as information
relating to expected performance. These forward-looking statements are subject to a number of factors and uncertainties that
could cause actual results and experiences to differ materially from the anticipated results and expectations expressed in such
forward-looking statements. We caution readers not to place undue reliance on any forward-looking statements, which speak
only as of the date made.
Among the factors that may cause actual results and experiences to differ from anticipated results and expectations
expressed in such forward-looking statements are the following: (i) the effect of, or changes in, general economic conditions;
(ii) fluctuations in the cost and availability of inputs and raw materials, such as live cattle, live swine, feed grains (including
corn and soybean meal) and energy; (iii) market conditions for finished products, including competition from other global and
domestic food processors, supply and pricing of competing products and alternative proteins and demand for alternative
proteins; (iv) successful rationalization of existing facilities and operating efficiencies of the facilities; (v) risks associated with
our commodity purchasing activities; (vi) access to foreign markets together with foreign economic conditions, including
currency fluctuations, import/export restrictions and foreign politics; (vii) outbreak of a livestock disease (such as avian
influenza or bovine spongiform encephalopathy), which could have an adverse effect on livestock we own, the availability of
livestock we purchase, consumer perception of certain protein products or our ability to access certain domestic and foreign
markets; (viii) changes in availability and relative costs of labor and contract growers and our ability to maintain good
relationships with employees, labor unions, contract growers and independent producers providing us livestock; (ix) issues
related to food safety, including costs resulting from product recalls, regulatory compliance and any related claims or litigation;
(x) changes in consumer preference and diets and our ability to identify and react to consumer trends; (xi) significant
marketing plan changes by large customers or loss of one or more large customers; (xii) adverse results from litigation; (xiii)
risks associated with leverage, including cost increases due to rising interest rates or changes in debt ratings or outlook; (xiv)
compliance with and changes to regulations and laws (both domestic and foreign), including changes in accounting standards,
tax laws, environmental laws, agricultural laws and occupational, health and safety laws; (xv) our ability to make effective
acquisitions or joint ventures and successfully integrate newly acquired businesses into existing operations; (xvi) effectiveness
of advertising and marketing programs; and (xvii) those factors listed under Item 1A. “Risk Factors” included in our
September 28, 2013, Annual Report filed on Form 10-K.
2
3. EXECUTIVE SUMMARY
• Tyson Foods has made a turnaround since 2009
• Producing more consistent, stable earnings
• Growth strategy implemented in 2012
– Aggressively growing international in-country production
– Growing domestic prepared foods and value-added products
• Measurable growth
– Annual 3 - 4% revenue growth
– At least 10% EPS growth over time
3
4. TODAY’S DISCUSSION
• Tyson Today
• The Global Marketplace
• Strategic Growth
• Financial Results and Outlook
• Appendix
4
7. THERE IS VALUE IN DIVERSITY
• Multi-Protein Chicken, Beef, Pork
• Multi-Channel Retail, Food Service, Exports
• Multi-National Brazil, China, India, Mexico, United States
• Broad Product Portfolio
•
•
•
•
•
•
•
Value-added Chicken
Value-added Beef & Pork
Pepperoni
Beef & Pork Pizza Toppings
Pizza Crusts
Tortillas
Bacon
•
•
•
•
•
•
•
Deli Meats
Hams
Franks
Ethnic Foods
Soups & Sides
Snacks
Sauces
•
•
•
•
•
•
•
Appetizers
Breakfast Items
Prepared Meals
Meal Kits
Fully-cooked Dinner Meats
Commodity Chicken
Commodity Beef & Pork
Tyson’s diversity provides a natural hedge against economic cycles
and a foundation for growth.
7
8. OUR APPROACH TO BUSINESS
• The Chicken segment is vertically integrated; we manage the
production process from beginning to end.
• The Beef and Pork segments are not vertically integrated;
we do not carry feed cost risk. Livestock are purchased from
various producers.
• The Prepared Foods segment comprises a variety of models;
raw materials for these foods come from internal and
external sources.
Value-added beef and pork items such as pepperoni and bacon are in the Prepared
Foods segment. Value-added chicken items such as nuggets are in the Chicken segment.
8
9. MARKET LEADERSHIP
Others
29%
Tyson
17%
Hormel
8% Cargill JBS
9% Swift
11%
Source: Watt Poultry USA, March 2013
Based on ready-to-cook pounds
Source: Cattle Buyers Weekly
% of Daily Steer/Heifer Slaughter Capacity (head), 2012
Smithfield
26%
Source: National Pork Board 2013 Quick Facts
Based on Estimated Daily U.S. Slaughter Capacity
Tyson produces approximately 1 out of every 5 pounds
of chicken, beef and pork in the United States.
9
10. VALUABLE PRODUCT PORTFOLIO
Tyson offers product innovation, consumer insights and a broad portfolio of foods and brands that
provide solutions for our customers while giving us pricing power beyond commodity protein.
10
11. FOUR-YEAR PERFORMANCE:
AT A GLANCE
Tyson Foods has achieved an improved level of performance while navigating global
economic challenges, unfavorable market dynamics and often staggering input cost
increases. From FY2010 through FY2013 Tyson:
• Delivered record sales each year
• Generated $5 billion in operating cash
flows after funding $700 million in
working capital increases
• Invested $2.5 billion back into the
business to fuel continued improvement,
growth and acquisitions
• Paid down over $1 billion in debt and
reduced interest expense
• Returned $1.3 billion to shareholders via
stock repurchases and dividends
• Improved net debt to cap to 17% (Gross
debt to cap = 28%)
• Established investment grade rating profile
with Moody’s, S&P and Fitch
• Improved liquidity to $2.1 billion at the
end of fiscal 2013
• Achieved $795 million in operating
efficiencies in the chicken segment (more
than $1 billion in total since 2008)
• Averaged over $2 adjusted earnings per
share from continuing operations*
* See Appendix for non-GAAP reconciliations
“The turnaround is over. It’s time to turn it on.”
– Donnie Smith, Tyson Foods President & CEO
11
12. POSITIONED FOR SUCCESS
• Approximately 115,000
Team Members worldwide
Where we are in the U.S.
• Second largest food production
company in the Fortune 500
• Worldwide locations:
– 57 Chicken plants
– 13 Beef plants*
– 9 Pork plants*
– 25 Prepared Foods plants
• Beef and pork plants are near cattle
and hog supplies, which lowers
transportation costs and improves
availability of livestock for processing
• Chicken plants are located in regions
with a climate suitable for poultry
production and access to feed grains
* Includes three case-ready beef and pork plants
• Chicken
• Beef
• Pork
• Prepared Foods
• Case-Ready Beef & Pork
• Animal Nutrition
12
13. FarmCheck™ Responsible Sourcing
Four Guiding Principles
1. Program
Care enough to check on the farm,
in person
2. Advisory Panel
Be humble enough to seek expert
advice
3. Our Research Program
Be curious enough to find better
ways
4. Our Internal Management Teams
Be committed enough to give it our
full attention
13
14. MAKING GREAT FOOD.
MAKING A DIFFERENCE™
•
Active in the fight against hunger
since 2000.
•
Donated more than 90 million
pounds – 360 million meals – of
much needed protein to food banks.
•
Partners with Share Our Strength, Lift
Up America, Feeding America,
National Urban League and the
League of United Latin American
Citizens to raise awareness and help
feed the hungry across the nation.
•
Meals That Matter disaster relief
program begun in 2012 to support
our long-standing tradition of feeding
people during times of disaster.
14
16. OUR CHALLENGE: FEEDING THE WORLD
WORLD POPULATION GROWTH
10B
7B
2013
2050
POPULATION
GROWING
75M YEAR
ADDING A CITY
THE SIZE OF
PHILADELPHIA
WEEKLY
(UNITED NATIONS)
IT’S ESTIMATED THAT IN 40 YEARS
THE WORLD WILL NEED
100% MORE FOOD
THAN WE PRODUCE TODAY
(CENTER FOR FOOD INTEGRITY)
16
17. MARKET OPPORTUNITIES
• The world’s population is growing;
protein consumption is growing
with it.
• To feed the global demand for
protein, the U.S. is exporting more
of its protein production.
• Globally, as people enter the
middle class, they add protein to
their diets.
• U.S. protein production is flat to
declining; less protein available to
U.S. consumers resulting in higher
domestic pricing.
Global protein consumption is projected to grow more than 500% from 1960 to 2022.
Global Protein Consumption
Source: USDA FAS and OECD.
Includes Beef/Veal, Pork, Broilers, and Turkey
17
18. PROTEIN SUPPLY AND PRICE
Pounds
Combined Per Capita Domestic Meat Availability
(Beef, Pork, Chicken, Turkey; Carcass Weight Equivalent)
Cents per Pound
280
190
275
180
270
170
265
160
260
150
255
140
250
130
245
120
240
235
110
230
100
Per Capita Domestic Protein Availability(1)
Annual Composite Average Price(2)
Reduced domestic production and increased exports have resulted in less protein
on the market for U.S. consumers. Lower supplies have led to higher prices.
Source: USDA actual historical data; 2013 and 2014 forecast by Robert A. Brown, Inc.; (1) represents beef, pork, chicken and turkey carcass weight equivalent; (2) annual composite
average price is a simple average of monthly USDA wholesale price for beef, pork and poultry; 2013 data as of 10/20/2013.
18
19. PROTEIN PRODUCTION AND EXPORTS
Beef
Chicken
45,000
100.00%
40,000
90.00%
35,000
80.00%
70.00%
30,000
30,000
100.00%
90.00%
25,000
80.00%
70.00%
20,000
60.00%
60.00%
25,000
50.00%
20,000
40.00%
15,000
30.00%
10,000
20.00%
5,000
15,000
50.00%
40.00%
10,000
30.00%
10.00%
-
U.S. Production in Million Pounds
(Left Scale)
0.00%
U.S. Exports as a
% of Production
(Right Scale)
Production of the three major
proteins has been relatively flat
in recent years, while pork
exports have increased, leading
to less protein overall on the
domestic market.
10.00%
-
0.00%
Pork
25,000
100.00%
90.00%
20,000
80.00%
70.00%
15,000
60.00%
50.00%
10,000
40.00%
30.00%
5,000
20.00%
10.00%
-
Source: USDA and Robert A. Brown, Inc., November 2013
2013 and 2014 are RAB forecasts
20.00%
5,000
0.00%
19
20. CORN FUTURES AND
CHICKEN LIVE COSTS
Live Cost ~ $0.50/lb
Live Cost ~ $0.45/lb
Live Cost ~ $0.35/lb
Live Cost ~ $0.25/lb
While grain prices have been volatile in recent years, Tyson’s product innovation,
quality and service to customers has helped overcome feed cost volatility.
Sources: corn futures, DTN Prophet X; live cost, Tyson Foods. Updated Nov. 19, 2013
20
21. BEEF: HISTORICALLY THE
SPREAD MATTERS
$1,800
$1,750
USDA TOTAL REVENUE
Dollars per Head
$1,700
$1,650
$1,600
$1,550
USDA CATTLE COST
$1,500
11/9/2013
11/2/2013
OCT FY14
SEP
AUG
JUL
JUN
MAY
APR
MAR
FEB
JAN
DEC
NOV
OCT FY13
SEP
AUG
JUL
JUN
MAY
APR
MAR
FEB
JAN
DEC
NOV
$1,400
OCT FY12
$1,450
There is a strong correlation between revenue and the cost of cattle. Tyson historically has
outperformed industry indexes in the spread between revenue per head and cattle costs.
21
22. PORK: HISTORICALLY THE
SPREAD MATTERS
$240
$220
Dollars per Head
$200
USDA TOTAL REVENUE
$180
$160
USDA HOG COST
$140
There is a strong correlation between revenue and the cost of hogs. Tyson historically has
outperformed industry indexes in the spread between revenue per head and hog costs.
22
24. GROWTH STRATEGY
Accelerate
• Grow domestic value-added chicken sales
• Grow prepared foods sales
• Grow international chicken production
Innovate
• Products and services
• Consumer insights
Cultivate
• Talent development to support Tyson’s growth and long-term future
Growth will be fueled by adding value, increasing international
production, innovation and Team Members.
24
25. IT’S ALL ABOUT TAKING ACTION
Achieve
• Grow sales, earnings and shareholder value:
– Grow international in-country production
– Develop innovative, value-added products
– Make strategic acquisitions
• Prepared foods, ethnic foods, value-added chicken
• Small regional players
• International
– Get paid for the value we provide
– Repurchase shares
– Keep operations efficient and costs under control
Focus matters.
25
26. INNOVATION DRIVES NEW PRODUCTS
AND GROWTH
Product innovation is at the core of our ability to
retain and grow our customer base.
26
27. INTRODUCING TYSON® DAY STARTS™
AND WRIGHT® BRAND SAUSAGE
Tyson® is bringing our reputation for quality proteins to
the breakfast category
27
28. INSIGHTS FUEL THE INNOVATION
PROCESS
•
•
•
•
•
•
•
•
•
•
•
Economic trends
Demographic trends
Flavor trends
Category attitude and usage studies
Consumer insights
Product testing
Macro trends
Consumer panel data
Consumer segment insights
In-store/shopping studies
Concept testing
NEW!
• Products
• Flavors
• Targets
• Packages
• Usage Occasions
Our proven approach to innovation helps us
deliver food solutions to customers and consumers.
28
30. INVESTMENT THESIS
• Strong balance sheet provides attractive options for growth:
– Reinvestment in Tyson through CapEx
– Strategic acquisitions in prepared foods and value-added chicken
– Return capital to shareholders through repurchase program and dividends
• Aggressively increase international in-country production where demand
for protein is growing
• Measurable growth:
– Annual 3 - 4% revenue growth
– At least 10% EPS growth over time
• Become the leading “solution-providing” food company – not only a
commodity protein company:
– Lean-thinking culture focused on operational excellence and continuous improvement
– Superior quality, service and innovation to be the customer’s go-to supplier
– Alternative channels such as convenience stores, dollar stores and drug store chains
Tyson strives to be the investment of choice.
30
31. BALANCE SHEET STRENGTH
• Reduced net debt by $3.4 billion from FY01 through FY13
• Decreased net debt to cap from 58% to 17% from FY01 through FY13
• Invested $558 million in FY13 CapEx
• Achieved $1.3 billion in operating cash flow in FY13, fourth consecutive
year above $1 billion
• Liquidity at the end of FY13 was $2.1 billion, well above our targeted
range of $1.2 billion to $1.5 billion
• Invested $550 million in FY13 to repurchase 21.1 million shares
• At the beginning of FY14, increased the regular quarterly dividend by
50% to $0.075 per share, following a 25% increase the previous year and
a $0.10 per share special dividend in December 2012
A strong capital structure creates opportunities.
31
32. FY13 SALES – $34.4 BILLION
Sales by Segment
Other
6%
Prepared
Foods
10%
Pork
13%
Beef
41%
Chicken
36%
Sales by
Distribution Channel
International
17%
Consumer
Products
43%
Food
Service
34%
Tyson’s multi-protein approach is supported by multi-channel distribution.
32
33. ADJUSTED EARNINGS PER SHARE*
$3.00
$2.50
$2.26
$2.22
$1.90
$2.00
$1.97
$1.50
$1.00
$0.50
$0.00
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014E
-$0.50
-$1.00
Fiscal Year
Since FY2010, Tyson has produced more consistent, stable earnings while absorbing
approximately $1.5 billion in additional feed costs in our Chicken segment.
* From continuing operations. See Appendix for non-GAAP reconciliations.
33
34. ADJUSTED OPERATING INCOME*
$1,800
$1,600
$1,565
$1,375
$1,289
$1,400
$1,286
2011
2012
in millions
$1,200
$1,000
$800
$600
$400
$200
$0
2004
2005
2006
2007
2008
2009
2010
2013
Fiscal Year
Tyson averaged nearly $1.4 billion annually in adjusted operating income from 2010 to 2013.
* From continuing operations. See Appendix for non-GAAP reconciliations.
34
35. GROWTH EXPECTATIONS
Sales
Adjusted EPS*
FY 2010
$28.2 Billion
$2.22
FY 2011
$32.0 Billion
$1.90
FY 2012
$33.1 Billion
$1.97
FY 2013
$34.4 Billion
$2.26
FY 2014 Expectation
~ $36 Billion
~ 2HF13 x 2
FY 2015 Expectation
~ +3-4%
> 10%
• Expect top-line sales to grow about 3-4% annually
• Sales from value-added products should grow 6-8% annually
• Sales from international production should grow 12-16% annually
• EPS should grow at least 10% annually over time
“What got us here won’t get us there.”
– Donnie Smith, Tyson Foods President & CEO
* See Appendix for non-GAAP reconciliations
35
36. INTERNATIONAL GROWTH BY 2014FYE
↑50% to
3MM
bpw
↑61% to
450K
bpw
Maintain
2.7MM
bpw
↑54% to
2MM
bpw
bpw = birds per week
Tyson’s plans for international growth are focused on poultry production and
further processing in Brazil, China and India, in addition to our long-standing
poultry business in Mexico.
36
37. PRIORITIES FOR USES OF CASH
• Capital expenditures to grow existing businesses:
– Capital maintenance level approximates $250 million a year
– FY14 CapEx plan is $700 million
• Acquisitions advance growth strategies around valueadded products and international production:
– Profit improvement CapEx target greater than 20% Modified Internal Rate
of Return
– Acquisitions and joint ventures target greater than 20% Return on Invested
Capital
• Return cash to shareholders:
– Share repurchases
– Dividends
37
38. CONTINUOUS IMPROVEMENT
• Be the best-in-class operator in beef, pork and chicken
• Consistently outperform beef and pork industry indexes
• Achieved more than $1 billion in operational efficiencies
in our chicken segment since 2008
38
39. WHY TYSON?
• Tyson Foods is growing into a solution-providing food company:
– Being a commodity protein company is not our goal or our destiny
– Pursuing value-added product development
– Delivering quality, service and innovation enables us to be the
customers’ go-to supplier
– Growth into alternate channels such as convenience stores, dollar stores
and drug store chains offer opportunities
• Strong balance sheet gives Tyson options to grow
• Aggressively growing international in-country production
• Pursuing prepared foods and value-added chicken acquisitions
• Establishing a culture of lean thinking, operational excellence and
continuous improvement
• Expectations of annual 3-4% revenue growth and 10% EPS growth
over time
• Share repurchases and increased dividends
39
42. NON-GAAP RECONCILIATIONS
Adjusted operating income and adjusted net income from continuing operations per share attributable to Tyson (adjusted EPS) are presented as
supplementary financial measurements in the evaluation of our business. We believe the presentations of adjusted operating income and
adjusted EPS help investors assess our financial performance from period to period and enhance understanding of our financial performance.
However, adjusted operating income and adjusted EPS may not be comparable to those of other companies in our industry, which limits the
usefulness as comparative measures. Adjusted operating income and adjusted EPS are not measures required by or calculated in accordance with
GAAP and should not be considered as substitutes for any measures of financial performance reported in accordance with GAAP. Investors should
rely primarily on our GAAP results, and use non-GAAP financial measures only supplementally in making investment decisions.
(in millions, except per share data)
Reported from Continuing Operations
12 Months Ended
September 29, 2012
October 1, 2011
October 2, 2010
October 3, 2009
September 28, 2013
Operating
Operating
Operating
Operating
Operating
Income
EPS
Income
EPS
Income
EPS
Income
EPS
Income
EPS
$
Less:
Gain from currency translation
adjustment
Gain from insurance proceeds
Gain on sale of interest in an equity
method investment
Reversal of reserves for foreign
uncertain tax positions
Add:
Charges to plant closing
Impairment of goodwill
Impairment of equity method
investment
Loss related to early extinguishment of
debt
Losses related to note repurchases
Adjusted from Continuing Operations
$
1,375
$
—
—
2.31
$
(0.05)
—
1,286
$
1.68
$
1,289
$
1.98
$
1,574
$
2.09
$
(215)
$
(1.47)
—
—
—
—
—
—
—
—
—
(38)
—
(0.06)
—
—
—
—
—
—
—
—
—
(0.03)
—
—
—
—
—
—
—
—
—
(0.05)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
29
—
0.07
15
560
0.02
1.50
—
—
—
—
—
—
—
0.03
—
—
—
—
1,375
—
—
2.26
—
—
1,286
0.29
—
1.97
—
—
1,289
—
—
1.90
—
—
1,565
—
0.09
2.22
—
—
360
—
—
0.05
$
$
$
$
$
$
$
$
$
42
43. NON-GAAP RECONCILIATIONS
(in millions, except per share data)
Reported from Continuing Operations
$
Less:
Gain on sale of an investment
Gain on sales of assets
Gain on sale of remaining interest in
Specialty Brands, Inc.
Income related to vitamin antitrust
litigation
Tax adjustments
Add:
Charges related to BSE
Charges related to flood damage
Charges related to plant closings
Cumulative effect of change in accounting
principles
Impairment of assets
Impairment of intangible assets
Live swine legal settlement
Loss related to Hurricane Katrina
Severance and restructuring charges
Tax adjustments
Write off of obsolete inventory
Adjusted from Continuing Operations
$
331
$
—
—
0.24
12 Months Ended
September 30, 2006
Operating
Income
EPS
September 29, 2007
Operating
Income
EPS
September 27, 2008
Operating
Income
EPS
$
(0.03)
—
613
$
—
(19)
0.75
CONTINUED
$
(0.58) $
655
—
—
—
(0.03)
(50) $
October 1, 2005
Operating
Income
EPS
—
—
$
—
—
1.04
October 2, 2004
Operating
Income
EPS
$
—
—
733
$
1.13
—
—
—
—
—
—
—
—
—
—
—
(0.01)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(12)
—
(0.02)
(0.04)
—
—
—
—
—
7
13
—
0.01
0.02
—
—
—
—
—
—
—
—
63
—
—
0.11
—
—
14
—
—
0.02
61
—
40
0.11
—
0.07
—
23
10
—
—
23
—
—
407
—
0.04
0.02
—
—
0.04
—
—
0.34
—
5
7
—
—
—
—
—
606
—
0.01
0.01
—
—
—
—
—
0.74
—
—
3
—
—
9
—
7
32
—
—
—
33
8
—
—
—
698
—
—
—
0.06
0.01
—
—
—
1.06
—
21
25
—
—
—
—
—
880
—
0.04
0.04
—
—
—
—
—
1.39
$
$
$
$
$
0.02
—
0.01
—
—
0.02
0.04
0.01
(0.37) $
$
$
$
43
