http://www.morningstar.com/earnings/21765976-tyson-foods-inc-class-a-tsn-q1-2011.aspx

Tyson Foods Inc Class A TSN
Q1 2011 Earnings Call Transcript

Transcript Call Date 02/04/2011

Operator: Welcome and thank you for standing by. At this time, all participants are in a listen-only mode. This call will be recorded. If anyone has any objections, you may disconnect at this time.

I'd now like to introduce Ms. Ruth Ann Wisener.

Ruth Ann Wisener - VP, IR and Assistant Secretary: Good morning and thank you for joining us today for Tyson Foods Conference Call for the First Quarter of our 2011 Fiscal Year.

I need to remind you that some of the things we 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; Jim Lochner, Chief Operating Officer; and Dennis Leatherby, Chief Financial Officer. To ensure we get to as many of your questions as possible, please limit yourself to only one question and then get back in the queue for additional questions.

Beware that our executives need to get to our shareholders meeting later this morning, so we cannot continue much past 9 o'clock Central.

I'll now turn the call over to Donnie Smith.

Donnie Smith - President and CEO: Thanks, Ruth Ann and good morning, everyone and thanks for joining us. If you read our press release this morning, you saw that we set a record in our first quarter of the fiscal year with GAAP earnings of $0.78 a share or $0.75 on an adjusted basis. Net sales were $7.6 billion, which is about $1 billion more than the first quarter last year. Operating income was $498 million with 6.5% return on sales. Volume was up 4.5% while prices were up almost 10%.

Our Chicken and Beef segments performed within their normalized operating margin ranges. The Pork segment was well above its normalized range and Prepared Foods was just under its range and is making steady progress.

In our press release, you'll see that we had a $51 million benefit from our grain and energy risk management activities. This included $23 million of mark-to-market gains on positions that were still open at the end of the quarter.

As I've mentioned before, we have a very conservative risk management approach, and we view these activities as a normal part of running our business. I'd like to point out, even without the mark-to-market gains, our Chicken segment would have been well within its normalized range.

To give you a quick update on our international operations, Mexico had a great quarter. Our startups in China and Brazil are showing improvement, although there is still significant amount of work to be done. India is still doing a great job and demand for our brands in India is strong.

Now, I'd like to turn our attention to our view of protein demand for the rest of the year, beginning with retail. Albeit low, consumer confidence remains at or about the same index as a year ago. Consumer's assessment of the economy and the labor market remains somewhat cautious. There are signs that the economic recovery will continue into 2011, but the pace of growth remains slow, with USDA calling for 2% to 3% food cost increases and forecast calling for gasoline prices to continue to rise, we believe consumers will continue their cautious stance and volumes at retail will remain flat versus 2010.

Read our Earnings Call Transcript disclaimer.
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