http://www.morningstar.com/earnings/25587675-tyson-foods-inc-class-a-tsn-q2-2011.aspx

Tyson Foods, Inc. Class A TSN
Q2 2011 Earnings Call Transcript

Transcript Call Date 05/09/2011

Operator: Good morning, and thank you for standing by. At this time, all lines have been placed on a listen-only mode until we open for questions and answers. Also today's conference is being recorded. If anyone has any objections, please disconnect at this time.

I would now like to turn the call over to Ruth Ann Wisener. Ma'am, you may begin.

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

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

Donnie Smith - President and CEO: Thanks, Ruth Ann. Good morning, everyone, and thanks for joining us for our second quarter call. In our press release this morning you saw that we reported $0.42 a share, which is the same as we reported in the second quarter last year. Sales were $8 billion, which is a record, and over a $1 billion more than the second quarter of 2010. Our overall operating margin was 3.8%.

As expected (all segments) with the exception of chicken, were in or above their normalized ranges. Chicken (was profitable). We believe it will continue to be profitable in both the third and fourth quarters. Grain hedges were a factor in chicken's profitability, but not the only factor. We continue to work on operational efficiencies which played a big role.

Jim will go into more detail about that and our efforts to increase revenue in chicken in a moment during his comments on our segment performance.

In terms of domestic demand, we usually see some falloff at the beginning of lent, but we didn't see that this year. Now on the other hand, we typically get an uptick after Easter, but demand has been slowed, probably due to the bad weather experienced in much of the country. The slow economic recovery is still a factor as well.

After fairly steady increases, consumer confidence dropped in March. Rising gas and food prices continue to reduce disposable income.

According to Nielsen, consumers are likely to remain conservative and hold on to many of the behaviors they adopted in the early stages of the recession, including eating out less, value conscious shopping, and increased used of coupons. One difference we're seeing is that consumers are now making more frequent smaller retail trips to help manage cash flow. Retail beef and pork prices are very strong, and eventually they should support chicken prices.

Our chicken prices mostly increased to cover these unprecedented grain cost increases. We are seeing more feature activity in chicken this summer in both retail and food service, and chicken is still a more affordable option for people trying to feed their families in tough economic times.

Read our Earnings Call Transcript disclaimer.
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