Tyson Foods Inc Class A TSN
Q4 2011 Earnings Call Transcript
Transcript Call Date 11/21/2011

Operator: I'd like to thank all participants for holding. All lines will be on listen-only until the question-and-answer portion of today's conference. I'd also like to inform participants today's call is being recorded.

I'd now like to turn the call over to Jon Kathol. Thank you. You may begin.

Jon Kathol - VP, IR and Assistant Secretary: Good morning and thank you for joining us today for Tyson Foods Conference Call for the Fourth Quarter and 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 one follow-up.

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

Donnie Smith - President and CEO: Thanks, John. Good morning, everyone, and thanks for joining us today. I'd like to welcome John to his first earnings call as our new Vice President of Investor Relations.

Our fourth quarter earnings were $0.26 a share compared to $0.57 last year on record sales of $8.4 billion. Operating income was down $219 million versus Q4 of FY '10 driven by the $223 million change year-over-year in the Chicken segment.

Now as you quickly add that our chicken business absorbed $315 million in additional input costs during Q4 versus the same quarter last year and when it does settled, the Chicken segment finished the quarter with a loss of $82 million or a negative 2.9% return on sales.

The Beef segment was in the middle of this normalized range for the quarter at 3.4% return on sales. Pork was at the top end of its range with 7.9% and Prepared Foods had a 3.4% return on sales for Q4, which is just under its normalized range.

Let's come back to the Chicken segment for a minute. We told you last quarter that we would lose money in Q4 and unfortunately that was the case, but I'd like to give you some perspective on our performance. July and August were possibly the worst months than the chicken industry has experienced in one of the worst years in industry history.

As for us here at Tyson, we dug a hole for our sales in July. August improved, but was still negative. September was better yet and we were profitable as we started Q1 and we've been positive every week since.

So, now let's review our overall results for the year. For fiscal '11, our adjusted EPS was $1.89 or $1.97 on a GAAP basis which is the second best in company history. We have record sales of $32.3 billion reflecting increased volume of 1.7%, price increases of near 12% and operating cash flows of about $1 billion. Even though these results were below last year, I'm very pleased with our results, especially considering the business environment. Demand was flat as unemployment hovered around 9% mark and of course, you are familiar with the input headwinds we faced all the year.

Our multi-protein, multi-channel, multi-national business model puts us in a unique position. While chicken was overcoming obstacles and Prepared Foods were struggling with volatile inputs, Beef and Pork performed very well and even improved their position against the USDA industry index.

As we think about 2012 and how the retail and foodservice environment will shape up, we know the Consumer Confidence Index improved slightly in September, but it declined again in October. So, consumer confidence is now dropped to the levels we saw in the '08-'09 recession over renewed concerns about business conditions, jobs and income.

We continue to address consumer concerns and their focus on price and value through our product innovation. (We took) it from scratch and healthy food options our own shoppers list of considerations, which I see is a long-term positive for our retail business given our broad portfolio of products that meet those needs. We work very closely with our retail customers to adjust the changing consumer buying habits, to maximize category sales and retailer profit. Our Tyson national brand is backed by strong regional brands and our portfolio also includes private label offerings for several strategic customers.

In foodservice, consumers are looking for value at every price point; from the drive through to full service restaurants. Tyson is helping operators deliver that value with innovative products and solutions that drive traffic while protecting their bottom line. The economics foodservice outlook for 2012 is positive, with a return to real growth. However, it's predicting only 0.3% increase. So, the economy won't be helping us grow our business, so we must rely on innovation and consumers, as consumers redefine foodservice value in terms of quality, price and the overall dining experience.

We believe 2012 will bring a renewed focus on chicken features, especially in QSRs as a strategy to deal with high ground meat prices. There is also considerable emphasis on using dark meat as an ingredient, which is not only a great value play but makes sense in the big picture of domestic availability of protein. So, when we look at global protein supply and demand, despite the economy, demand for protein around the world is growing.

With strong exports, domestic availability of protein should decline again in 2012 for the sixth year in a row, from its peak of 284 pounds per capita in 2006 to about 255 pounds per capita in 2012. According to the USDA, these domestic availability will be about 6% lower in '12 compared to '11. Chicken is expected to be down over 3%, and while pork should be up less than 1% and turkey up just over 1%, in total meat and poultry availability is projected to be down 2.1% in 2012, which should lead to higher protein prices.

Dennis will give you some of our financial expectations for fiscal '12, but I want to go ahead and talk about our CapEx plans for the year. We anticipate investing $800 million to $850 million in our business, on a variety of projects across our segment. Although, we've been investing heavily in the business for past few years, there are still opportunities for improvements that should provide good returns.

For example, in our Prepared Foods segment, we're converting a plant in Council Bluffs to pepperoni production in response to consumer demand in that category. Our team in Brazil is doing a great job growing distribution and volume, so we'll add a second shift of production in two of our Brazilian plants in 2012.

I am also happy to announce that we opened our Greenfield plant in Jiangsu, China this morning. Although it will take several quarters before we see a significant positive impact on revenues and returns, we're excited to take this step in executing our plant to become a fully integrated poultry producer in China.

We're optimistic about fiscal 2012 and we're off to a good start with all segments profitable so far in Q1. We think this should be a good year and we expect 2012 EPS to be in excess of $2.

So, that concludes my opening remarks. I'll now turn it over to Jim for a review of our segment results followed by Dennis with the financial report.

James V. Lochner - COO: Thanks, Donnie and good morning everybody. The Pork segment continued a strong performance by posting a 7.9% return on sales and an operating income of $113 million. This is at the top end of the new normalized range of 6% to 8% we announced on our previous call. For the fiscal year, Pork had a 10.3% return on sales and $560 million in operating income.

I think it's a common misperception that our pork business is performing at such a high level solely due to strong exports. Although exports have led to increased total revenue, any spread business mile increases or decreases in total revenue ultimately flow back to the producer and are reflected in the livestock cost. We are running a much more profitable pork business because we focus on our daily efficiencies, cost, our mix and our revenue index as compared to publicly reported data. We have outperformed – we have been outperforming the USDA index in Pork and in the fourth quarter we further improved our competitive position relative to industry numbers.

The 2012 outlook for pork – for our Pork segment is much the same as it was in 2011. Hog supplies should be up slightly from gains and productivity, and export should remain strong, so domestic availability of pork should not change appreciably. Based on what we know today, we don't expect any significant changes to the fundamentals of our pork business.

The Beef segment also performed well for the same reasons described in the Pork segment. Beef had a 3.4% return on sales and $118 million in operating income for the fourth quarter and 3.5% and $468 million for the year.

In recent weeks, there has been industry packer margin compression as the cutoff has not kept pace with increasing cattle cost. This happens at various times of the year. Although, our margins have compressed for the last several weeks, we continued to outperform them in the reported industry numbers and expect our Beef segment to continue to be profitable in Q1, although at lower levels than Q4.

The drought in the Southwest has caused cow/calf operators and stockers to push their cattle in the feedlots earlier. More calf backgrounding is occurring in feedlots which has disrupted feedlot placement patterns.

In the past, this has resulted in lighter carcass weights within these (cattler market hit) and potentially could shift normal fed cattle seasonal availability. This may create more volatility as supplies might not match seasonal demand patterns, but keep in mind that there are presently more cattle on feeds than last year.

I know some of you are concerned about the availability of cattle in 2012. These cattle have been born already and are available. Also in the past 12 months, there were nearly 180,000 more imported feeder cattle year-over-year. Therefore, we've planned to process roughly the same number in 2012 as we did in 2011.

When projecting supplies beyond our fiscal 2012, let's look at all the facts. The herd showed no signs of expanding or contracting when evaluating the percentage of heifers in the fed, steer, heifer process numbers. In the past 12 months, the percentage has been 37.4%, nearly the same as the past four years.

Although cow slaughter has been higher in the past 12 months, the percentage of Beef in the total cow slaughter has been normal at 60%. The actual beef cow year-over-year slaughter has been 136,000 more than last year, or only 0.4% of the beef cow herd.

The dairy portion of the cow slaughter has increased a 157,000 year-over-year with a combined total being up 283,000. The state implies the total beef and dairy cow herd is declining at 0.7%, which is only a slight acceleration compared to last two years.

Moving on to chicken, we're coming off one of the toughest years for the chicken industry. We had an operating loss of $82 million or negative 2.9% return on sales for the quarter. For the year, we had a 1.5% return on sales and $164 million in operating in income.

Our Chicken segment was profitable for the year because we have invested a considerable amount of time and effort along with some capital into improving our yields, our labor efficiencies and mix while staying focused on product innovation and customer service.

For the year, we overcame ($715 million) and added costs from higher grain and feed ingredients and other inputs because we refused to except we were at the mercy of the poor industry fundamentals. Without these year-over-year added costs, we would have reported an 8.3% return on sales in the Chicken can segment holding other factors equal.

Over the past several weeks, we have seen more than a 7.5% reduction in USDA egg sets and chicks placed. However, optimum growing conditions in September and October meant heavier birds and the reduction in slaughter pounds was less than a reduction in (hatch). (As we) moved into cooler weather, bird weights are declining close to last year.

For fiscal 2012, we have seen estimates of around 4% fewer productions pounds in 2011, which should support improved market pricing. Ultimately, prices need to support the increased live cost and the history certainly implies that will happen.

We expect our Chicken segment to be modestly profitable in Q1 and improved throughout fiscal '12. The Prepared Foods segment fell below its normalized operating margin range with a 3.4% return on sales and $28 million in operating income for the fourth quarter. For the year, Prepared Foods had a 3.6% return on sales with $117 million in operating income.

We believe operational improvements and increased pricing will offset expected increases in raw material cost. Because many of our contracts are formula-based or shorter term in nature, typically we are able to offset rising inputs through increased pricing. Prepared Foods profitability should pick up in fiscal 2012 as we start to see results from the improvements we made in our lunchmeat business.

As always, I want to thank our business units and their teams for their efforts and focus on margin management. The gains and efficiency in cost along with paying attention to their metrics are driving results.

That concludes my remarks and I'll turn it over to Dennis for the financial report.

Dennis Leatherby - EVP and CFO: Thank you, Jim, and good morning, everyone. As Donnie mentioned in his remarks, we reported Q4 earnings of $0.26 per share. Our reported full year fiscal 2011 earnings were for $1.97 per share, which includes $0.08 per share of adjustments related to the sale of an interest in an equity method investment and an unusual tax benefit recognized earlier in the year. Excluding these items, fiscal 2011 EPS was $1.89.

Return on invested capital for the last 12 months remained solid at 18.5%. Capital expenditures were $174 million for the quarter and $643 million for the year. This amount reflects numerous capital projects that will continue to benefit us in the future with enhanced production and labor efficiencies, improved yields, and sales mix.

Our operating cash flow remained strong at $360 million for Q4 and totaled $1 billion for the year despite higher input costs from grains, live cattle and hogs and record box, beef and pork prices which resulted in receivables and inventory being up over $400 million compared to a year ago.

Including cash, net debt was just under $1.5 billion, down just over $100 million from a year ago. Total liquidity was $1.6 billion, well above our goal of $1.2 billion and $1.5 billion, even after retiring the remaining $295 million of our 2011 notes at the end of September. Gross debt is now down to $2.2 billion as we have paid off $1.5 billion in the last two and a half years.

Gross debt to EBITDA for the year was 1.2 times, in line with our expectations. It is our goal to meet or beat 1.3 times on a normal basis to ensure sound credit measures and enhance our ability to raise cost-effective capital when needed. On a net debt-to-EBITDA basis, this measure was 0.8 times.

During the fourth quarter, we acquired 5.3 million shares for $90 million under our reactivated share repurchase program. This brings our total repurchases over the past two quarters to 9.7 million shares for $170 million under this program. We intend to continue repurchasing shares, and the timing and extent to which we make these repurchases will depend upon, among other things, market conditions, liquidity targets, debt obligations and regulatory requirements.

Our effective tax rate for fiscal 2011 was 31.8%. Excluding the unusual tax benefit recognized earlier in the year, our rate would have been 33.7%.

So, here are some thoughts on the outlook for fiscal 2012. Revenues are expected to be $34 billion, again driven largely by raw material price increases, which represents an increase of $2 billion over 2011. We expect net interest expense to be approximately $185 million, down $46 million from fiscal 2011. The effective tax rate should be about 36%.

Our average diluted shares outstanding for the fourth quarter was 375 million. This amount reflects the dilutive effect of options and convertible bonds which fluctuate depending on our stock price performance. Additionally, given the timing of the 9.7 million shares we repurchased, their benefit is only partially reflected in this past year. We will receive the full benefit in future periods which will positively impact EPS by approximately $0.05 per share on an annualized basis using our current share base.

CapEx should be around $800 million to $850 million. This reflects continued spending on improving the efficiency and competitiveness of our domestic and foreign operations, especially in China. We will use excess cash to repurchase notes when available at attractive rates as we do not have any significant debt maturities due until fiscal 2014.

In closing, 2011 was an exceptional year considering the challenges we faced. Net debt was down $100 million despite $3.7 billion of increased raw material cost, strong capital spending above depreciation, $170 million of stock repurchases and the $66 million buyout of our partner in China. This just proves our diversified business model works. Following the two best years in our Company's history, we're excited about the future and look forward to even more success. Tyson Foods is in a strong financial position with solid debt ratios, a strong liquidity position and a capital structure that will enable us to continue delivering solid results and grow our company.

This concludes our prepared remarks and I'll ask operator to begin Q&A.

Transcript Call Date 11/21/2011

Operator: Farooq Hamed, Barclays Capital.

Farooq Hamed - Barclays Capital: I just wanted to follow-up on the comments about the Chicken division being profitable as we enter Q1 and growing profitability throughout the year. I mean in this past quarter there you just reported – we saw an $82 million loss. I wanted to understand, what's the biggest difference we're seeing between this past quarter that was just reported and the current quarter as to why we're seeing an operating income this quarter? Is it more on pricing side? Is it operating improvements? Maybe you can give a breakdown of where the increase profitability is coming from.

Donnie Smith - President and CEO: This is Donnie. Let's start off talking about the last quarter a little bit. As we came in to July, you're pretty much at the peak of your live cost, and if you remember the market price you're seeing in the first month of that quarter were coming off of pretty disappointing 4 July was really, really soft, so our profitability in Q4 dug a pretty deep hole there at the beginning. So, then as you continue moving through the quarter, our live costs get getting better. Now, some of that was grain related, but a lot of that was internal to some things we were doing inside of our business. Now, one other point to add coming off the 4th of July holiday as I mentioned pretty disappointed and we started pretty aggressive cutbacks at that time. So, what we're doing at the front-end of the quarter is we're taking the cost hit, if you will, for making the adjustments in our production and then in our business, you need to wait 8 to 12 weeks or so before you get the benefit of that in future period. So, what happens to you is your quarter got front-end loaded because you've got the peak of your live calls, you're cutting back and July with it – I m telling it's – that pretty ugly month, because we got better than that in August, August was much better than July but still negative. September was much better yet. Now, one thing you've probably noticed we had a mark-to-market hit in that quarter of about $31 million. So, let me go ahead and cover that one for you too, because it's a big part of the story. When we were talking in August, corn was somewhere around up first $6 range, maybe $7. Meal was somewhere around $350 million. Then we had a rally off that, but then in the last three weeks of the quarter, corn fell $1.05 a (bush) or so. Meal was probably down $60 to $65 a ton. So, at the end of the quarter, we were long about three weeks or so worth of flat price coverage into the next quarter and all of that got mark-to-market. So, that $31 million was a pretty good slice of that $82 million that you mentioned. So, moving forward, our live cost is in better shape. We have seen some pricing help, not just market-related, but as I mentioned, I think last quarter related to our service offering, the value that we're bringing our customers, we're seeing some price. So, the real recovery into the positive Q1 has really been a mixture of every part of our business; our live cost has gotten better, we're seeing the benefit of a lot of the CapEx that we've spent in our business, and our operating efficiencies in the plants, we've seen some logistics help and some new programs we've done in logistics. So, it's coming from just about every facet of the business.

Farooq Hamed - Barclays Capital: Maybe just as a follow-up then, I noticed that in the quarter you mentioned that – in the (rates) you mentioned that fiscal 2012 grain costs are expected to be higher than fiscal 2011. So, can you comment on how you're going to see those improvements in live costs even though you're going to have higher grain costs?

Donnie Smith - President and CEO: Yeah, part of the efficiencies, frankly, come in feed conversion rates. Some of it will come in some improvements we've made in our hatcheries. So, it's really in all aspects of the live production. It's not just related to the – necessarily just to the cost of corn and soybean, Neil, but to a lot of things that we can control as well.

Operator: Lindsay Drucker Mann, Goldman Sachs.

Lindsay Drucker Mann - Goldman Sachs: I just had a quick question on pork; obviously still looking at numbers at the very high end of your normalized range, but just curious, why we saw – if you could just go a bit deeper into why we saw the sequential deterioration in margin performance, even though we're seeing a bit better availability this time of the year versus your prior quarter. Is that a fair statement?

Donnie Smith - President and CEO: In any spread business, you can have periods of time when the revenue declines and then the cost of goods or the hog cost don't decline at the same rate or vice versa. In general that's all – it wasn't a major decline, it was enough however to drive a differential compared to the prior quarters, but it was still a very strong performance. So, we didn't have any major shifts other than what I'd call kind of normal spread business margin compression and expansion, so really nothing significant.

Lindsay Drucker Mann - Goldman Sachs: I think still just trying to get our arms around how fantastic returns has been up to this point, and I know you guys have been pretty conservative; it seemed about your normalized range for pork margins since you've been putting numbers so far ahead and so, I'm just curious maybe if you could give us some anecdotes on how the business has evolved relative to last year and maybe that will help (close) into how to model margins going forward, given we're still seeing very strong exports and the industry still seems to be operating firing on all cylinders. So, any difference where we are today versus where we were last year that might explain some of the margin differential would be helpful.

James V. Lochner - COO: Yeah, I mean, there is no one – again, one single factor what it is as you continually improve on your daily efficiencies and your labor efficiencies and your cost, you continually improve on your yields, and you continually improve on your mix of sales, you continually improve on trying to beat the market pricing through a variety of different components. Generally, it doesn't happen on the livestock buy side, although the only thing we can really influence there is how well we work on yields and our (dropped) credits, et cetera. So, I know that's difficult for you to figure out on the model, but it's not one thing, it's all these little things that we continually improve. Our modern really in the businesses is, we do the same thing every day. We just try to continuously improve and (we) have these small incremental improvements over the course of months and I know that doesn't sound real profound but that's exactly how we operate all our businesses.

Lindsay Drucker Mann - Goldman Sachs: Then just maybe if you guys give a bit more detail on how your feed conversion efficiency is improving on the chicken side. What sort of stuff you're doing to improve that?

Donnie Smith - President and CEO: I'll try to give you a little insight. We have made improvements in the production process that has improved not only our feed conversions but also deliverability. Now some of that is going to be attributable to take in our weights down just it had, but we also maybe got a little bit out of line on our feed conversion in Q3 and Q4 during some of the really hot weather and then we got our out times right. We've done a good job. Our live production folks have done a great job improving the upstream processes and feed manufacturing, and in our hatcheries, that's just given as a great opportunity for improvement in the field for all of our growers. I'll again say, it's just incrementally improvements getting a little better at everything we do, it adds up.

Operator: Ken Goldman, JPMorgan.

Kenneth Goldman - JPMorgan: Two questions. First, I think – I appreciate the benefits of hedging and other forward activities, but this does mark, I think, the third straight year in which the impact of your commodity risk management has been a headwind on income. This past quarter, it hurt by $49 million, it's the most in almost three years. So, I guess my question is this, are we reading the data wrong to look at them and ask if maybe Tyson might not benefit by being a little bit closer to the market or is it just something where three straight years of kind of losses there are negative impact is just a random event and maybe it's still worth of going forward to do all that hedging and get ahead of the markets, so you can maybe price based on your cost and so forth? I'm just curious how we should think about that balance.

Donnie Smith - President and CEO: Well, for the year, our total – I'm going to use the term benefit, but the total outcome of all of the, I'm going to call it hedging activities, was about $41 million. So, when you're buying 4 million plus bushels corn a week, 40,000 tons of soybean meal a week and all the other stuff that goes with that, you add that up at $6, $7, well $758 at times on a delivered basis, $41 million, that's (lined) in our aircraft carryover a whole year. So, I would say that with the extreme volatility when corn fell from the upper $7, we were like $750 or so and at the end of the first week of September and then we're – gosh, it was below $6, somewhere about 90-ish, somewhere around that on September 30, with as much commodities as we bought haven't three weeks out front is not an excessive position. So, in general, we have a very conservative approach, we stay pretty close to the market, we're pretty close to the market right now, we feel pretty good about that, but when you've got such a vicious swing in commodity prices in the last three weeks in the quarter, you got a market stuff to market, and you use a lot, that's a pretty big number.

Kenneth Goldman - JPMorgan: Jim, you talked about how from time to time cattle prices rise more quickly than beef prices, and obviously that's true. USDA data showing some of the weakest industry gross margins right now in the last decade, and I'm just curious for some more insight there. I do appreciate cattle prices up year-on-year, but they've been up 20% year-on-year all of 2011, only recently have margins collapsed at least in the reported national numbers. So, I guess I am just curious what you're seeing there, recognize your plants are in areas where cattle are plentiful maybe not as affected by some of the dynamics right now. But if you can shed some light on that I'd appreciate it.

James V. Lochner - COO: You always got to remember in the price of cattle, you have a lot of regional issues and you can have some small regions that are tight relative to the slaughter demand, and there is the tendency to, with mandatory price reporting on the transparency price reporting, everybody and the government reports exactly with the transactions. So, there is a tendency for the short region to (fend) high prices and then kind of move the overall up and then over time what happens is, those regions (correct in) demand and the prices come back. We always go to remember as I reminded at the Beef group earlier in the week, we're coming into Thanksgiving, and as long as I've been in the industry, it's hard to move beef prices up going into Thanksgiving, and usually you'll have a little bit of boost afterwards. So, our assessment was that the volumes needed to moderate, we're pushing too much meat on a weak demand period, and that's exactly what's happened in the last couple of weeks. We've seen a correction in the USDA reported processing numbers, and that's why in my comments I really made it that margin compression happens and then the market does its job over time and they expand; if they get too big, they contract, and that's generally the market dynamics that happens in spread businesses. We put all our focus always on really trying to make sure that we're managing the mix, trying to drive the highest prices relative to the reported numbers, combinations of premium programs, combinations of formula sales, combinations of export and really focus our attention to the detail, and then we're in the market. Again, I know that that doesn't give you a real complete answer, but the market usually make those types of moves past for a long period of time, and we are pushing more meat than the market could absorb and that's what caused that margin compression.

Operator: Heather Jones, BB&T Capital Markets.

Heather Jones - BB&T Capital Markets: My question is related to your beef and pork businesses. They were strong for the quarter, and I think I'm thinking about this correctly. Typically, over the past two years, your margins in both of these businesses, on a per head basis, have been well in excess of the industry, and then generally improves in line with the industry on a sequential basis, if not, actually widening your outperformance. So this quarter, I'm looking at what you did in Q3 versus what you did in Q4, and there is actually deterioration sequentially which is while the industry margins show improvement. So I'm just trying to get a sense of what happened during the quarter that would have driven that and how should we be thinking about that going into 2012 as far as your performance related to the industry?

James V. Lochner - COO: I'm trying to put my finger on exactly a factor, but generally speaking we did not – when we look at how we index our revenue components and how we index our cattle cost components, I didn't see anything that really jumped out of the ordinary that said we missed it. Now a lot of times, particularly in (cattlety) you can run into regional differences between north, south and then the grading differences that can happen that really can sometimes really drive the interpretation of those results, and if you really understand the numbers you really always indexing yourself, but we did see the margin compression that and didn't really see anything that bothered us relative to our indexes. In fact, if anything, you looked at our index is actually improving even though we saw the results come down quarter-over-quarter in Beef. Then in Pork, we've really been in kind of the same scenario and we then really see the shift. Again we were fairly – we're very pleased with our indexes related to how we benchmark our price realizations and our procurement. We didn't have a major shift in yields. We didn't have a major shift downward and labor efficiency. We didn't have a major shift in our market share and key categories. So, we really didn't see it is what I'm trying to say.

Heather Jones - BB&T Capital Markets: Because our data is showing that (you'll did) close to 90 ahead in Q3 and 70 ahead in Q4. Now, as we go into Q1 as people have alluded to you earlier, the industry has deteriorated pretty dramatically. When we're thinking about you guys relative to your Q4 should your sequentially deterioration be less than what we're seeing for the industry benchmarks?

James V. Lochner - COO: Yeah. I mean we're nowhere near that major decline. We saw that compression again the last – about starting about four weeks ago and then it started to rebound now, but we've not been anywhere near that negative. So, we're holding on. In fact, every week thus far off these segments has remained profitable.

Operator: Diane Geissler, CLSA.

Diane Geissler - CLSA: Did you give a expectation on your range for Pork in 2012?

James V. Lochner - COO: No, we've not. This is Jim. We have not changed that. So, we did not alter it up or down for 2012.

Diane Geissler - CLSA: So, what you're saying is you expect to be in your normalized range in terms of Pork margins in 2012, is that accurate?

James V. Lochner - COO: Yeah. Yes.

Diane Geissler - CLSA: Then just on the chicken business, what's the biggest driver there year-on-year, I mean, it's got to be pricing. First of all, if I look at your total profits this year, fiscal '11, you do expect your profits in chicken in '12 to be higher than '11, correct?

James V. Lochner - COO: Yes.

Diane Geissler - CLSA: It's a biggest driver there than pricing coming from just lower supply because your commentary on foodservice suggests that the channel remains pretty weak though you do expect some product developments. So, is it really pricing driven – I mean it has to be because the grain side is worse; right?

Donnie Smith - President and CEO: Diane, let me try and give a little help. You're right on the environment. We do not view demand to be any stronger in 2012 than it was in '11, so let's call demand flat. By the way, probably both at foodservice and retail, I believe going into the year, depending on how much pricing gets passed on or absorbed into the marketplace, (not want) to keep an eye on refill demand. So, let's just call, going into the year; demand flat. Now, our business, yes, we do think that we will improve pricing, but that is not strictly where all of our benefit is going to be coming from. We'll also make mix improvements in our business. In other words, we will sell more in a value-added mix. We think that we will continue to see some live performance improvements in livability, feed conversion, those kind of things. Remember, over the last couple of years, we've spent pretty strong CapEx against our business, and a good portion of that has been against our poultry business. We've mentioned in the past that those CapEx expenditures were in what we would call good return but low risk-type projects. By low risk what we mean is, there is low risk that the return we think we'll get will actually get. That's proven to be the case. So, the money that we've spent in our business, particularly on the processing side in chicken, is paying benefits in lower conversion costs, we continue to see operational efficiencies and improvements in that size of our business. So, I think what you will see is an improvement, not only on the live side, but also in plant conversion side, and we do intend to get some improvement in pricing as well, but it won't all come from pricing.

James V. Lochner - COO: I need to clarify one. When you asked me on the Pork earlier, I talked and said we did not come out and changed our range. However, we do expect our pork business to be in and above the range, and we don't really see a material change going into 2012. Just to clarify that answer.

Diane Geissler - CLSA: Then just one follow-up on the Chicken. Where is your total production currently year-on-year in terms of head and tonnage? How much are you down?

Donnie Smith - President and CEO: Okay, we said – I think on our call, we were talking about being down somewhere in the 6% versus the Q3 run rate now versus a year ago.

Diane Geissler - CLSA: It was 6%; 6?

Donnie Smith - President and CEO: Yeah, about 6%. Our cut has actually been a little bit more than that, and that's in terms of pounds produced, okay. So, as we've tried to talk about on the last call, I've tried to – I want a lot of clarity around what we're talking about because we've seen egg sets, chicks placed down roughly 7% or 8%, but until recently we've not seen much movement – a significant movement in live wage. So, I think last weeks' slaughter pounds were at $969 million.

Dennis Leatherby - EVP and CFO: $869 million.

Donnie Smith - President and CEO: Excuse me, $869 million good cash and so when we talk to you, we'll be focused on total pounds produced, so we'll be in an excess of 6%.

Operator: Farha Aslam, Stephens, Inc.

Farha Aslam - Stephens, Inc.: First on chicken, when do you anticipate hitting your normalized range this year in chicken profitability?

Donnie Smith - President and CEO: Our best chance obviously is going to be in the back half. I feel comfortable that we will see progressive improvement throughout the year, still a bit early to be calling any specific quarter in which we think we would be back into the normalized range, but our best shot is going to be in the back half.

Farha Aslam - Stephens, Inc.: Then a follow-up on Beef, if you could just give us color on the first quarter profits? Do you expect them to be in the normalized range, half of normal, just kind of give us some more color on where you think beef profitability is in the first quarter and how you'd express that to progress as the year goes forward?

James V. Lochner - COO: Well, let me say that they won't be as strong as they were in Q4 and we're just halfway, not even quite halfway through the quarter and we're starting to see the margin picture change relative to last several weeks. So I'm going to leave it at that and not get that quantified but I feel pretty strong that we'll come through this first quarter very well in the market (or correct), and then we're going to start to see a fair amount of cattle availability as we come into January, February, which generally works in our favor relative to managing the spread.

Operator: Akshay Jagdale, KeyBanc Capital Markets.

Akshay Jagdale - KeyBanc: Just a question on chicken again. So, did I hear you correctly your pounds are going to be down 6% or 12%, is that right?

Donnie Smith - President and CEO: No. What I said was right now we're running down a little bit in excess of 6%. So, here is a way to frame that up. We always take a detailed forward look of demand. We spend a lot of energy looking at over demand. So, our production plans – we think right now our team has done a great job getting us exactly where we need to be in light of the demand we see through the first, say, four to six months of calendar 2012. As we move into Q1, we will be looking at the forward demand for the rest of our fiscal year and we will make any, if any, production decisions then, but for us it's always about balancing our supply and demand to meet our customer's expectations of our business and currently the color I can add is we're down better than 6% in the current quarter versus where we were.

Akshay Jagdale - KeyBanc: Then your expectation for 4% decline in production, can you give us a little color on that in terms of where that's coming from? Is that truly yours? Do you expect that to happen regardless of what happens with demand, and if production is down 4% which seems like a – seems more than what other industry experts are saying I would think, if that does happen, do you think the industry would be profitable or will get to normalized profitability this year?

Donnie Smith - President and CEO: I'm going to start that and then Jim might want to jump in and add a little bit of color. First of all, when we talk about the 4% number that is what we project the industry to be. Obviously, we're going to be a part of that. I don't really want to try to project what the rest of the industry is going to do or what their profitability is going to be because I don't their cost structure, I don't have the price for product, so there is no chance I am trying to project what they're going to do. I can tell you what we're going to do, and I'll let Jim add some color. We're going to balance our supply with what our view of demand is. If anything, we're going to be able to build a bit on the short side of that which gives us opportunity at times to buy parts that we need without necessarily having other parts that may or may not be the best value in the marketplace. So, that's going to be our strategy going forward, and our team is very disciplined in looking at that forward demand and then matching our supply to get there. When we get off-base a little bit, we quickly react because it's important to us to keep that supply-demand balance. Jim?

James V. Lochner - COO: Yeah, I think you always got to – when we give a number it's always against our fiscal period. So, I looked at a compositive different independent estimates and this current Q1 (indiscernible) of '11 which is our Q1 is the strongest decline. So, a number of them on average are around 5.5%. Then as you move into calendar '12, that's where you'd probably say, it's a little less because you'll start to see it start to change with Jan, Feb, March in the high 3s and then April, May June, 3%. So, you end up in a scenario when you sync that all back up with a variety of independent forecasters on average of 4% against our fiscal year, with the strong hand being right now at (indiscernible) period.

Akshay Jagdale - KeyBanc: Just a follow-up there on price realization for you guys, especially last three quarters, based on my numbers has been exceptional, which is why it seems like you're doing much better than the industry. So, you're starting off price wise, price per pound, much better than the industry in general. How do you feel about price realization in '12? I mean, give us some numbers here, if you can. I mean can you put some numbers around the price realization efficiency numbers that you've talked about in the past? I mean how much are you expecting to benefit from just pure pricing, yield efficiencies, cost programs et cetera? Can you give us some numbers so we can put that into context with the increase in grain cost and think about where profitability could end up?

Donnie Smith - President and CEO: I can't talk about the principles behind what we do. Obviously, it supported us to be a cost leader in our industry and every segment that we participate. We have a very diverse portfolio of products and so it's pretty hard to – without going into a tremendous amount of detail by bird class exactly what we expect to do, and I don't think that's probably in our best interest on the call. So what we can say is this. We continue to move our mix up the value chain. We always wanted try to add value to our customer's business and try to add value to our product mix. We will continue to do that. We believe that we lead the industry in quality, service and certainly innovative capabilities, and we believe that we bring a different value proposition to our customers and then we get paid for that. So I think you'll continue to see that as part of the spread. In each of the commodity type businesses that we're in, we've controlled our production to the point that we don't have a lot of excess sales in the marketplace that are a drag on our pricing structure, though that's a huge advantage to be in balanced in terms of our supply and demand. When you get into those situations where your supply outstrips your demand, that's when you have excess product that you have to sell in commodity markets, which are surprising structure. So if you start putting all those pieces together, I think you see and obviously you have the difference between Tyson and others, and we continue to remain very disciplined in our go-to-market strategy and how we bring value to our customers in each one of the segments.

Akshay Jagdale - KeyBanc: So what would it take for you guys to – if it was up to you, right, so what would it take for you to come out and say you're going to be in the normalized range in margins for chicken? Like, what would have to change today for you to feel more confident about being within the normalized range in a reasonably short-term? Like, what would you have to see changed for you to feel more comfortable about that?

Donnie Smith - President and CEO: I'd say move the calendar forward about three months or so and let us get a little deeper into the fiscal year and we'll be a lot more confident about what we can say about when certain events will happen. In terms of our business model, I don't think there is anything that's needs to change and I think certainly our business team is focused on getting back to normalized margins as absolutely as fast as they can and I think they are doing everything they can do to get there as quick as they can and we'll get there.

James V. Lochner - COO: But I think if you just look again at the market fundamentals, (indiscernible) why pullback, you're starting to see some supported pricing and overall again, the big picture says domestic availability of all proteins is declining, partly from export and production, that's generally is part of a pricing and you have to factor in the economy and factor that how fast can it go, that's anybody's prediction.

Operator: Christina McGlone, Deutsche Bank.

Christina McGlone - Deutsche Bank Securities: I guess, Jim, I just wanted to dig into beef a little more. Can you explain what we're seeing in terms of the North South differential and how does that impact Tyson? If you're paying more for your more northern cattle, are you also getting more for the beef from that cattle? Then something you said worried me a little when you said the fact that you were getting a lot of cattle and feedlots and then usually they come out at lighter weights, and when they are marketed, there is more volatility and you might not match demand. How do we think about that kind of idea when we're modeling?

James V. Lochner - COO: Well, that's exactly why I put that in because your models will get a little bit different simply because you don't have some of the normal placement patterns that have occurred in the past, which is a clear observation as the Southern Plains didn't have good forage so the cattle left we pasture and pasture and went into the feedlots and began – and backgrounding. But the North South spread is always a factor that always messes up your models because you don't get that granular in the way you forecast beef margins within regions. Our job – basically we're nicely dispersed between the north and the south. Some of our competition has plants that are more concentrated in the south or some in the north. We have a good mix of north south plants close of the feedlots, and our job is always to try to maximize the revenue and try to manage that spread, but it does make it difficult for you to model in that regard. So, I don't expect to have any major shortages in any of the regions that we have cattle – or excuse me, that we have plants, because I think the cattle supply when they come out will be fine, and I know that cattle feeders will try to really balance that placement out, try to actually hit the same type of – and put weights that they have historically and try to manage to hit the typical seasonal demand pattern. It makes it more challenging when calves go in the feedlots versus yearlings. So, it's a comment just basically driven to tip you off I guess that the model sometimes will change around because we've had something very unusual with the drought in the Southern Plains.

Christina McGlone - Deutsche Bank Securities: I guess when you think about '12 and you talked about margins (within) normalized for beef, but as we close out calendar '12; so calendar, not fiscal, are we in a very tight situation where we're going to see overcapacity in beef processing? Then maybe also if you could speak to the fact that the WTO has said that that COOL is kind of a violation of agreements. Does that help or do you think there'll be any changes on origin of labeling trend?

James V. Lochner - COO: Let me address the end of calendar '12. Again, that's why I went through and pointed out the fact that even though some people will say, the beef cow processor slaughters up 4%, when you put into real perspective against 31.4 million beef cows and 9.2 million dairy cows, that accelerated decline – or the decline is not really appreciably accelerated, because there were people who were thinking that drought again in the Southern Plains had really accelerated the liquidation of the beef cow herd. When I went really back and analyze those numbers, it's up, but not as much and it's not as catastrophic as one would think. The other key component is feeder cattle imports were 180,000. That easily offset a good number of the decline that we saw in the beef cow herd throughout the last couple of years. Now, as that relates to country of origin labeling – if that gets resolved and everything went back to normal, what you'll actually see probably is the potential for more imported feeder cattle out of both Canada and Mexico, and that will impact again calendar '12 as much as it'll impact potentially '13. But the reason I put all those numbers in my prepared remarks is to really put it into context. Even though we have seen some slight increase in liquidation, it's not what I'd call a major increase above and beyond what others have been forecasting into that 1% line. So, I'm not pessimistic that we're going to have a problem having extreme overcapacity in the beef processing industry and I always got to remind everybody that we did take about 2 million (ahead) of slaughter capacity out several years ago and that balanced against where our plans are located is in pretty good balance.

Operator: Robert Moskow, Credit Suisse.

William Sawyer - Credit Suisse: This is Will Sawyer in for Rob. I wanted to talk a little bit about your international operations you're investing in your CapEx there, adding a second shift in Brazil, you bought out your partner in China. What is the margin situation in both of those areas for you? What is your outlook for demand?

Donnie Smith - President and CEO: Both of those businesses are pretty young and so the margin structure is on the live side and what we will produce in the future. As we look at demand, we feel very good about demand for both countries to talk about Brazil here quickly. We have over the last year or so kind of decided at least for the foreseeable future what our mix will be between international and domestic volume, and we've added enough capabilities to be able to provide the diversity within our product portfolio offering to be able to capitalize on some growth, both domestically and internationally. So, we feel really good about that business. All we need is time. We've got a great team down there. They're doing a great job. So, we feel very confident that every pound that we add when we (indiscernible) we've got the grower base coming along behind us or actually in front of us to be able to produce that. So, we feel very confident that we'll be able to move that at the percentage that we want to both in the domestic and international markets. So, quickly shifting to China, great opportunity there. We've got a great customer base in China. We're building a very solid team to execute not only our operating but also our selling strategies there. We're moving toward a company-owned, company-controlled live production model. We have a few company farms. Now, the birds that we have seen produced in those company farms are outstanding. We love our cost position there and we feel very good about our model going forward. It's a bit more capital intensive, but the efficiencies that we're seeing are making that (the) way to go and it helps in terms of speed to a little bit around getting our footprint as large as we can as fast as we can. When we get a build out and what we currently have available to us, our footprint will be about 3 million hit a week, that will be in 2014 and I would tell you by the time we get there, we would expect to have normalized returns in that business. So, we feel very good about our opportunities internationally.

William Sawyer - Credit Suisse: Then Donnie, can you talk a little bit about what the customer mix looks like in China for you guys or at least your plan there?

Donnie Smith - President and CEO: I simply put both foodservice QSR and a retail base. So, you need a fairly broad portfolio to build this bridge of product mix out appropriately. So, we feel really good about our customer mix. I really don't want to get into detailed customer names, but just suffice it say, foodservice QSRs, a few other foodservice customers and a good mix of retail customers.

Operator: Christine McCracken, Cleveland Research.

Christine McCracken - Cleveland Research Company: Jim, real quickly, you had suggested that you aren't seeing any signs of expansion I think. I am just curious with cow/calf returns where they are today, do you expect to see that especially in the north where those guys should have the capacity to do so?

James V. Lochner - COO: Yeah, I would – I went back and I looked at the heifer percentage of the fed, steer and heifer (peel) slaughter numbers, and it's been run right at this 37.4%, 37.2%, 37.5% about the last four years. So, we'll be really watching that carefully because I would expect with the returns that outside of kind of the drought-affected regions that there would be expansion. I think that's also why you didn't see the beef cattle liquidation when you looked at the Southern Plains that would have been fairly (massive) for that region, but the other regions had plenty of grass and all the profit signals which probably offset that number to a great degree. But that's the key number we're watching is just the percentage of heifers in the total kill to see if it drops into that low 30%, and that we'll start to see that expansion. We haven't really seen any meaningful expansion for about four to five years actually, and '07 would have been kind of that timeframe, maybe the one we saw a little bit of moderate expansion.

Christine McCracken - Cleveland Research Company: So just, a follow-up then on the Choice-Select spread being so wide now, I'd assume that the incentive there is to produce more Choice cattle. Curious if you're changing your grid at all to incentivize producers, are you seeing any move toward that and what that might mean for availability as we head into the next year?

James V. Lochner - COO: Our grid is always reflective of what the current Choice/Select spread and premium programs, et cetera, which is the term used in the industry is usually the cleanup cost reflects that component. The choice of your select spread did widen here, which is a lot of people thought might have been a decrease in grading, but when again when you look at the pure statistics, the percentage of choice cattle hadn't really materially changed year-over-year when the Choice/Select spread a year ago was much lower. So, what we're probably seeing here is perhaps that foodservice, fine dining and steakhouse demand on consumption might be up, we might be seeing a combination of Select demand for (middles) being soft, because when you look at where the Choice/Select spread difference was not unusual as it's in the middle meats, but we've seen some really widened price spreads between particularly pismos, rib eyes, and strips in the Choice/Select offering which suggest that we got food service consumption increasing slightly, but we haven't not really seen these types of spreads for a number of years. So, the market will probably do its job again and over time make that correction with more retailers or some other end users shifting to the value side than to Select in their offering. The answer to your question; our grids always adjust all constantly to where that Choice/Select spread is going.

Operator: Tim Ramey, D.A. Davidson.

Timothy Ramey - D.A. Davidson: Donnie, wondering if your investment in China looks like it might have any kind of ancillary benefits in terms of greater ability to export U.S. production there?

Donnie Smith - President and CEO: Tim, I'm going to say, probably not. Today, if you combine the antidumping duty and the countervailing duty that exists between the U.S. and exports of chicken into China, it's like 63% and even, if we started a Deputy Election today, it would – I'd tell you, it can take two, three years to change that. So, I really don't see that affecting much in terms of us being able to – as a matter of fact, one, you might go the other way. So if we're not going to be able to ship it from the U.S. into the China, let's just go over to China and grow over there.

James V. Lochner - COO: We're certainly not nagging on that, our whole focus is running real competitive Chinese production model.

Timothy Ramey - D.A. Davidson: Just listening to your comments about July and a weaker 4th of July and keeping inventories lean, it sounds like you might have gotten crossways on inventories and were carrying too much into the 4th of July holiday. Is that a fair interpretation of...

Donnie Smith - President and CEO: It was. Let me, hey, this might be way more detail and I don't know, we're going to a little long, but let me try to add a little color. So, let's go back to just before Easter. When we were in a lent season, demand was really, really, really strong. So, if you look at chicken, by the time you start to set more eggs, you get them through hatchery, you get them into the field growing out and then produce them and have them ready in inventory depending on the type of mix you've got. You've really got like 12 weeks (worse) of production that you've made in that decision. So, if you go to say mid-March, you got mid-April, mid-May, mid-June and so based on the signal we got in mid-March, we made production decisions that had a lot of meat coming out of just before the 4th of July. If you'll remember Memorial Day was less than impressive and I'm telling you 4th of July was just nothing to ride home about. So, once we saw that 4th of July was pretty disappointing and we threw the brakes on and we started backing up, and you're like unfortunately – (because) of the commodity prices you got a high-speed component of your live cost, but when you're backing out of production, you're absorbing a lot of cost early and so that just made July just a really ugly month.

Dennis Leatherby - EVP and CFO: But we did pull back hard on inventory.

Donnie Smith - President and CEO: Yeah, we did. Our inventory position through the quarter that cleared up too, I think when we ended the fiscal year, I'll tell you our inventory position is what I like to call the manageable minimum. So, we are doing a great job servicing our customers, but we're not carrying a lot of excess inventory to be able to do that to put a lot of pressure on our logistic resources as it put a lot of pressure on our plant resources, but they have stepped up to the challenge and done a great job of taking care of our customers. So, that's kind of the whole picture Tim.

Timothy Ramey - D.A. Davidson: Just one more quick one. You've been talking about feed conversion. I know you experimented with B10 versus choline chloride. I don't know if you've moved back to chloine chloride, but is there anything you can tell us about kind of the feed ration that you're specifically having an impact?

James V. Lochner - COO: Nope. I listened, that's all really proprietary stuff and here there is zero chance you're going to get any details on the feed – on how we're feeding our chickens. I appreciate the offer you just (indiscernible).

Operator: Ken Zaslow, BMO Capital Markets.

Kenneth Zaslow - BMO Capital Markets: Just two bigger picture questions. For the year, Donnie, you've always been saying roughly around $2. It sounds like you're actually more optimistic in terms of saying in excess of $2. Can you talk about what the change of language was about?

Donnie Smith - President and CEO: Yes. Listen, we're bang optimistic about our business. Over the last couple of years, we've done a lot to change our mix. We've done a ton in operating efficiency. By the way, let me mention this. This past year we were talking about $200 million in operating efficiencies that we would garner and we did, and still view that going into 2012, we have another $125 million or so in operating efficiencies that we believe that we will achieve in our poultry business. So, when you put all that together with the kind of the last two years we've had, I am very optimistic about our future. Now, you know, it's still early for us to add any more detail than that but…

Kenneth Zaslow - BMO Capital Markets: But what was the change? I mean, you've been saying around $2 and your language changes too in excess of $2. So, I am assuming something, it was just internal improvements or it was market conditions that made you get a little bit more positive?

Donnie Smith - President and CEO: It's all of it. Our beef and pork businesses are performing very, very well. Our Prepared Foods business has weathered the storm. Really for the amount of pricing that we were able to achieve to cover the raw material inputs, our Prepared Foods business has done very well. We've got to beat on a part of that business that's probably underperformed. We've got a solid action plan to improve that part of that business. Then, when you look at Chicken, we're seeing the benefit of some of the things that we've been doing in the past that just have us operating that business well. If you look at industry fundamentals, we've got a much better environment we feel that we're operating into and we're pretty strong about our chances.

Kenneth Zaslow - BMO Capital Markets: So, my second question, just a little bit longer term, for the last – if 2012 comes in near where you're talking about, you'll have three years in a row in that $2 to $2 plus range. You're starting to spend aggressively again on CapEx. Is there a expectation that you guys could actually in 2013 and '14 start to develop a growth model where EPS can grow at a certain rate, and is it depending on market conditions CapEx? Can you talk about the potential for you to actually grow earnings in 2013 which clearly would be somewhat contrarian to the market expectations, but can you talk about that?

Donnie Smith - President and CEO: That is absolutely the plan. As we continue to improve our business, I think one of things that we've proved in 2011 is that our multi-protein, multi-channel, multinational business modeled gives us a bit of distinction and a little bit of differentiation in the marketplace and we intend to take all of the opportunities that that model provides us and be able to capitalize on that. So, we've got opportunities in front of us in value-added poultry. We've got opportunities in front of us in our Prepared Foods business. Some of it is broadening the product portfolio, but some of it is broadening the channels. We've got great opportunities in front of us in Brazil and in China. So, yeah, as I look forward, part of what we needed to do in '10 and '11 was to stabilize this business and get it turned around and get some operational efficiencies in place, so that we can use that in a really strong platform to launch off of into the future and we do believe the growth opportunities in front of us are meaningful and particularly the earnings opportunities in front of us are meaningful.

Kenneth Zaslow - BMO Capital Markets: So, what would you would say – I mean if I was to say 2013, what would be the incremental contributions? Where do the incremental contributions come from in 2013 relative to '12?

Donnie Smith - President and CEO: Kenneth, way too early. I'm trying not to get too far ahead of your own explain in excess of $2 in 2012.

Kenneth Zaslow - BMO Capital Markets: But nothing (of an) EPS number, but is it Brazil, is it – you're going to spend $800 million this year, I think $600 million and something in the last year in CapEx. You instructed a sign of return on that that we expect. Is it Brazil? Is it China? Is it improvement and fundament, like what is it that gets you to the growth? I'm not asking for the actual quantification, but have you kind of give us some sort of growth trajectory besides 2012.

Donnie Smith - President and CEO: Absolutely. So, we've built a pretty good foundation for our sales internationally. We will continue now to add production in our international businesses about as fast as we can. Our international team has done a great job of getting these new start-ups underneath us to the point to where we can now add incremental volume to those businesses and have it sold in the right place and improve our margins along the way. So, we're at the point now to where when we add incremental volume, it adds incremental return. That's where we need you to get. If you look at the rest of our portfolio, adding value to the raw materials that we produce is a huge, huge platform for us to grow. The two things that we have that we can leverage is raw materials and relationships, and we intend to leverage those into the future. Across the broad portfolio of our business, both in value-added poultry and our Prepared Foods businesses, taking our beef, pork raw materials and adding value to those, moving those up the value stream, putting them into new channels, expanding our customer offerings. So, I think what you're going to see is a very balanced approach to us growing our whole portfolio across the board as we move forward.

Operator: Jeff Farmer, Jefferies & Company.

Jeffrey Farmer - Jefferies & Company: Recognizing the time, I'll be brief with this one. Just a quick modeling question, looks like your absolute G&A dollars actually fell in fiscal '11. As you look forward to FY '12, what's the expectation there?

Donnie Smith - President and CEO: Probably about flat. I'll be honest with you. I look at it more as a percent of net sales, and where I think we finished the year at around 2.8% of net sales and we'll be in about that ballpark.

Jeffrey Farmer - Jefferies & Company: Then just following up on the international discussion, revenues pushing; well, actually it's more than 16% of – or internationals more than 16% of your consolidated revenue right now. So, can you provide any type of margin number on that revenue to-date? As you move forward, do you expect that margin to improve quickly? I realize there was a lot of startup investments in Brazil and China, et cetera, but any color on the margin picture on that full bucket of international revenue in FY'11 and what you're looking for in FY'12 would be helpful.

Donnie Smith - President and CEO: I appreciate that. The only color that I can really add at this time is, that at this point, it's not, I would say, a significant portion of what you see, but certainly over time, we expect it improve incrementally as we grow the business and it will become more and more significant to our results. So, that's about all the clarity I can add right now.

Operator: Ryan Oksenhendler, Bank of America.

Ryan Oksenhendler - Bank of America: I'm sorry if I missed this, I jumped on the call a little late. But did you give a number for what you think grain or feed and ingredients will be up year-over-year in fiscal '12?

Donnie Smith - President and CEO: I don't think we did.

Dennis Leatherby - EVP and CFO: No.

Ryan Oksenhendler - Bank of America: Can you?

Donnie Smith - President and CEO: I think all I would be comfortable saying at this point, because we're pretty close to the market now, which I feel very comfortable with. I would suspect that grain cost in 2012 would be at or above what we saw in '11. Ryan, the real impetus of that is if you just go back into Q1 – well, our Q1, which would be calendar Q4 of last year; corn futures, for example were in the $4, $4.25, $4.50, somewhere in that neighborhood and moving up through the quarter. Hey, we're at new crop and we're $6 plus. So, we're $1.5 or so starting the year higher than where we were a year ago, so it just stands to reason that we're going have incremental increases in our cost of corn, soybean meal and other inputs by the way going into this year which accents our need to get our pricing improvements in order to get paid for those higher raw materials.

Ryan Oksenhendler - Bank of America: Then just quickly I guess on the pricing side. You sounded a little skeptical about retail demand, guess maybe where it depending on where pricing goes, it looks like for the Georgia-dock, we're rubbing up against $0.90 a pound here. Was I reading that right? At what point do you think demand starts to drop off at the retail level?

Donnie Smith - President and CEO: I can't really pick it based on a particular market price, but I can say this. We're holding unemployment around 9% or so. My GDP number for '12 is somewhere about 1.5% or so, so I am not looking for a very robust recovery in the economy. It just stands to reason that if more and more price gets passed along to the consumer that there is an opportunity for them to back up. Now, the good news is, is that we keep a very close eye on forward demand, and our strategy is, if anything to be a little short against that demand so that we don't get caught. Let's say, like we did in July with too much inventory – or maybe not too much inventory, but excess of what we would have liked to (have) had at that time and excess production. So, we're going to keep this thing in check and we've got, I think, a very good eye on what our forward view of demand is.

Ryan Oksenhendler - Bank of America: Thanks a lot guys.

Donnie Smith - President and CEO: So, let me just close up, if we can. All I want to emphasize again how important I think our multi-protein, multi-channel, multi-national business model is. When you combine that with our strong capital structure, and, frankly, what I think is the best team in business, Tyson is uniquely differentiated from our competitors and I think we're poised to grow in 2012 and beyond. Tyson Foods is a protein company with the widest variety of products to sale in the most channels to the broadest base of customers here in the U.S. and around the world. Our diversification gives us options and opportunities. We intend to make most of them. So, thanks for your interest in our company and have a great day. Thank you.

Operator: Thank you. That does conclude the conference today. You may disconnect your phone lines at this time.