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Tyson Foods Inc Class A TSN
Q2 2013 Earnings Call Transcript

Transcript Call Date 05/06/2013

Operator: Thank you for standing by and welcome to the Tyson quarterly investor earnings call. All participants are in a listen-only mode. Today's conference is being recorded. If you have any objections, you may disconnect at this time.

Now I will turn the meeting over to Jon Kathol, Vice President of Investor Relations. Thank you. You may begin.

Jon Kathol - IR: Good morning and thank you for joining us today for Tyson Foods Conference Call for the Second 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.

To ensure we get to as many of you as possible, please limit yourself to one question and one follow-up and then get back in the queue for any additional follow-ups.

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

Donnie Smith - President and CEO: Thanks, Jon. Good morning, everybody, and thanks for joining us today. About a month after our Q1 call, we announced that our second quarter was going to be tougher than we anticipated and it was. We achieved record sales for the quarter, but our earnings fell short of our expectations and (will impact) the reasons for that in a minute.

Looking at adjusted earnings for the first half of the year, we were at $0.84 compared to $0.86 last year, off by $0.02 and as you're all aware, we're predicting a strong back half of the year. We're still projecting full-year adjusted EPS better than fiscal '12, primarily due to the performance we expect from the Chicken segment. As I've said many times, I think our multi-protein, multichannel, multinational model provides for a balanced approach that enables us to take care of our customers and grow over time.

Now looking at the macro environment, according to the Perishables Group at retail, fresh meat dollar sales were up 3.5% for the 52-week period ended March 30, while pounds were flat indicating higher pricing. In Pork, prices were down 2.6%, while pounds were up 3.4%. Total Beef dollar sales increased nearly 2%, but pounds declined nearly 4%. Chicken benefited from customers move away from beef, pounds sold were up 2% or dollar sales were up 7.6%. Tyson, the number one brand in chicken in the U.S., drove category growth.

In the foodservice channel, February sales growth was negative down 1.2% for the first time in three years. NPD reports traffic was flat for Dec, Jan, Feb with QSR up slightly and full service down slightly versus a year ago. NPD's preliminary report on March indicates QSR traffic was down by 1% versus last year. Higher gas prices and payroll taxes, bad weather and economic uncertainty all weighed on consumers.

So, overall, foodservice traffic is about flat, but people are ordering fewer items when they visit a restaurant, which means volume is contracting by about a 0.5%. However, many of our core categories such as chicken, soup, tacos and wraps have gained annual servings in this flat market.

Read our Earnings Call Transcript disclaimer.
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