Important disclosures appear on the last page of this report.

Krause Fund Research Fall 2017 Consumer Staples Recommendation: BUY Analysts

Yuchen Gao Macy Lanser yuchen-gao@uiowa.edu macy-lanser@uiowa.edu

Mingfeng Huang Emily Phelps mingfeng-huang@uiowa.edu emily-phelps@uiowa.edu

Company Overview Tyson Foods, Inc. (TSN) includes Jimmy Dean®, Hillshire Farm®, Sara Lee®, Ball Park®, Wright®, Aidells®, and State Fair® and is a leading company in the meat and packaged foods industry. Their business consists of four value streams: chicken, beef, pork, and packaged foods. Stock Performance Highlights 52 week High $74.30 52 week Low $55.72 Beta Value 0.701 Average Daily Volume 2.23 m Share Highlights Market Capitalization $27.20 b Shares Outstanding 289 m Book Value per share $28.16 EPS $4.75 P/E Ratio 15.63 Dividend Yield 1.21% Dividend Payout Ratio 13.86% Company Performance Highlights ROA 7.80% ROE 18.37% Sales $36.88 b Financial Ratios Current Ratio 0.13 Debt to Equity 1.32

Tyson Foods, Inc. (NYSE: TSN)

November 10, 2017

Current Price $74.14 Target Price $84-86

Key Investment Highlights

• Increase in Healthy Eating Fuels Chicken Consumption: The consumption of chicken continues to grow due to the increase in healthy eating habits. Chicken is Tyson’s second highest source of income and continues to gain more and more of their total income. This increase can do nothing but benefit Tyson’s net income. • Industry leader: Tyson is a price-maker and is currently the industry leader, especially in its chicken product due to the large market share Tyson current owns in that segment. • Significant Customer Stability: Tyson’s most significant customer comes from Wal-Mart in which accounts for 17.5% of their total annual sales. Tyson has a stable relationship with its variety of costumers including food retailers, restaurants, hospitals, military and wholesale distributors • Consumer Movement to Green Companies: As consumers gain more knowledge of how their eating habits affect the environment they tend to avoid companies that do not consider being environmentally friendly a top priority of their corporate social responsibility. Tyson has recently settled a dispute about unlawful dumping of waste leaking into a waterway that killed a local fish population. They are also under scrutiny for the way that their employees have been accused of mistreating chickens. One Year Stock Performance

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Executive Summary Our team recommends to BUY Tyson Foods, Inc for the Krause Fund. We came to this conclusion by considering the increase in healthy eating lifestyles, that Tyson is an industry leader, and that they have high significant customer stability. Our current target price is $84-86 which is means the current price of $74.14 is undervalued by 12.8-13.3%.

Economic Outlook Gross Domestic Product Real GDP represents all the goods and services a country produces within a specific period. The growth and decline of this economic driver could well reflect the production level of a country. In addition, it directly reflects the health condition of the economy in the region. If the real GDP growth rate remains steady or exceeds expectations, consumers normally increase their consumption. In other words, the Consumer Staples sector would be rewarded if GDP Growth increases.

Source: St. Louis Fed @ 2017

The above graph shows that U.S. GDP growth has leveled off in the past few years after it fell in 2008. Historical evidence suggests that the Consumer Staples sector has been benefiting from this consistency. According to “The Conference Board Economic Forecast for the U.S Economy,” the U.S. GDP is expected to have a 2.6% growth in the second half of 20171. In addition, the Economist Intelligence Unit (EIU) forecasts a 2.1% and 2.2% growth in 2018 and 20192. Business investment gained momentum last quarter, which brings investment growth in line with higher levels of business confidence that have prevailed since the end of 2016. Equipment spending signals upward momentum for industrial production over the next few quarters. Rapid employment growth and a high level of consumer confidence will continue to contribute to the GDP

growth. The Conference Board’s Global Leading Economic Index suggests that the emerging economies are picking up some speed. All major global economies are expected to perform well in the next couple of years. Interest Rates The Interest Rates are an important tool for the Fed to achieve its monetary policy goal, due to an inverse relationship between interest rates and the unemployment rate. In addition, the lower interest rates encourage people to borrow money to stimulate the economy, which would bring up the inflation level. Investors in Consumer Staples would like to see lower interest rates for this reason. We believe in a short term (6-month period), the Fed will not raise the interest rates. According to the 2017 Economic Calendar on Bloomberg, the PMI Manufacturing Index was down five tenths from July, which results in the weakest reading since June 20163. Specifically, new orders reflected more domestic demand, while the export orders were flat. The Economic Calendar on Bloomberg also shows that the unemployment rate increased one tenth, which is higher than expected. If the Federal Reserve decides to have a rate hike in the next 6 months, the unemployment and inflation level are going to deviate from its monetary policy goals. In the long run, much of the Federal Open Market Committee (FOMC) participants are expecting to see an increasing trend of the Federal Funds Rate of 2.2% and 3.0% at the midpoints of 2018 and 20194.

Inflation The Federal Reserve’s objective in conducting monetary policy is to achieve the inflation target of 2%. This is an important economic factor because the Fed is constantly monitoring the price level of consumer spending. The FOMC Committee judges the inflation level by measuring the Personal Consumption Expenditure (PCE) index. Higher inflation rates could be beneficial for the Consumer Staples Sector. A higher price level would bring more revenue to the companies in this sector. Historical data shows that the consumption level for Tyson’s sales did not get affected by higher inflation. According to the Economist Intelligence Unit (EIU), the U.S. is expected to achieve an overall inflation level of 1.9% in 2017. In 2018 and 2019, the U.S. are predicted to reach an inflation rate of 2.0% and 2.2%,

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respectively5. EIU agrees with the expectation of the FOMC in which the inflation would rise in the medium term of 2017. In 2018, the consumer price inflation is expected to continue an upward trend but at a slowing pace.

Source: Bloomberg @ 2017

Unemployment and Labor Force Participation Rate The unemployment rate is a measure of how many eligible people are not working in the U.S. The labor force participation rate (LFPR) is a measure of how many persons are working or looking for work in the U.S. Both of these measures are used by economists to judge the state of the American job market, but LFPR is preferred. As seen by in the graph below, Consumer Staples performance is negatively correlated to LFPR. We generally think that people fall back on Consumer Staples in times of hardships because they can’t afford as much discretionary spending (cooking at home vs. eating out).

Source: Bureau of Labor Statistice @ 2017

S&P Dow Jones Indices @ 2017 We are predicting an unemployment rate of 4.5% for the next six months, but we think it will rise to 5% in the next three years. Unemployment usually increases under Republican held presidencies and we expect this trend to continue in the current administration28. Another factor that will raise unemployment rate is pressure to increase wages, which could strain the number of employees a business can keep on. The labor force participation rate is expected to drop, we are forecasting a 62.7% labor force participation rate in the next 6 months and 61.9%

by 2020. High skill sets and use of automation in manufacturing jobs are pushing people out of the labor force, whereas before workers could find plenty of jobs without the need of higher education. Grain Price Grain is used to create many food and beverage products in the form of high fructose corn syrup, wheat flour, alcohol, cereal, and several other products. It is also used to produce meat products in the form of animal feed. Prices of grain directly affect prices of consumer staples through cost of goods sold because of the wide use of grains in consumable products. When grain prices rise or become volatile the cost of staple products rise and this creates less free spending money for consumers and they will cut back to only necessities which decreases demand. So when grain prices are low, stock prices for consumer staples tend to be high and vice-versa. The future prices of the three of the most widely used grain types will affect the economic outlook the most in the consumer staple industry. These three most used grains are corn, soybeans, and wheat. Demand and yield are the two factors that affect the prices of grain and both factors are looking to be on the high side of the spectrum which balances out the price. Currently the price of grain has dropped significantly due to the bumper crop that we have had for four years which increased supply significantly. Corn prices hit an all-time high in August 2012 at $8.4375 a bushel due to a shortage but has fallen back down to $3.4875 a bushel because of the unusually high yields6. The shortage was caused by a sudden demand for ethanol. The price is looking to remain steady due to a large yield prediction for the fall 2017 harvest and a constant high demand. The price we are predicting for March 2018 is $3.7025 per bushel and the price that we are predicting for March 2019 is $4.087. Soybean Prices hit an all-time high of $17.9475 a bushel after a shortage of palm oil created a large demand for soybean oil6. The price is currently at $9.3925 and is still looking to drop due to a large yield prediction for the fall 2017 harvest. The price we are predicting for March 2018 is $9.68 per bushel and the price that we are predicting for March 2019 is $9.71257. The current wheat price is $4.3050 with a high of $10.3350 in February 2008 and a low of $1.9750 in July 1999. In December 2017 the expected price is $4.39 and in March 2018, $4.59 is the expected price per bushel7.

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As you can see from the graph below, grain prices have declined since 2012 but they have steadied in the past few years. The steady grain prices that we will continue to experience over the next couple years means that the cost of goods sold for consumer staples companies will not increase. This is a very good thing moving forward for the industry because volatile grain prices cut into profits and create price spikes for products and in turn decrease demand for some consumer staple products.

Source: University of Illinois Farmdoc @ 2017

Capital Market Outlook We think right now is a good time to invest in this area. According to forecast, the U.S. GDP is going to grow in an increasing trend, which leads to a stimulation in the U.S consumer market. In the short term (6 months), the Fed will most likely not raise the interest rate due to the economic outlook that it is not affordable to have such a rate hike. If they don't raise the interest rate, the unemployment rate should decrease and inflation level should climb back up. These consequences would benefit the Consumer Staples sector due to the potential increase in revenue. With the prediction of steady grain price in the next few years, the majority of the Consumer Staples companies would benefit from the relatively low ingredient costs. After looking at current and historical data we have concluded that the consumer staples market will outperform the rest of the market. Historically over the past 10 years, the consumer staples sector has outperformed the market by 35%. As we discussed above, the outlook for consumer staples is great due to the current conditions but we feel that there could be growth above what we expect because of consumer demand, which is hard to predict.

In the short term, we feel that the consumer staples industry will outperform the market by 3.5%. We feel that the short-term outlook is going outperform because people have lots of extra income to spend on food and beverages. In the long term, we feel that the consumer staples industry will continue to outperform the market by around 10%. We chose this percent due to the historic performance of the consumer staples industry to the market. Due to the high expectation of GDP growth, there is a larger probability that consumers will be more confident about their purchasing power. The entire society is chasing the trend of a healthy and organic lifestyle so in turn organic food retailers will benefit from this trend with boosts of sales. More specifically, Whole Foods and Trader Joe’s will see large growth because of their reputations as the healthy food retailers. Other firms in the food retail industry who are currently targeting the organic food retail market might also gain an increase in their sales and profit in the current economic environment. This puts a strain on other food retailers such as Walmart.

Industry Analysis Industry Description Food Products can be split into two different sub-industries that include packaged foods and meats and agricultural products. This industry consists of any product that you can consume. A large percentage of this industry is dominated by the companies that process and package the meat and food that gets shipped to retailers. The smaller end of the industry is the actual harvesting and selling of raw materials in the agricultural sub-industry. The large revenue stream for this industry continues to be packaged meat. Since 1961, the average amount of meat eaten per year has doubled and this trend continues due to the availability of fresh meats from providers such as Tyson. Just looking at poultry, the demand has grown considerably and the average amount that a person eats has quadrupled23.

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Recent Developments and Industry Trends The healthy food trend has changed the food product industry drastically over the past several years and by the end of 2017 sales of these products will hit $1 trillion. This has caused a $4 billion drop in traditional packaged foods which has hurt a lot of existing companies forcing them into entering the healthy option market12. As this trend continues we will see traditional packaged foods change to reflect this growing market by possibly changing ingredients or labeling. Organic food had a boost in sales last year by 11% up to $39.5 billion12. The healthy trend that we have been experiencing has also increased sales for organic products because consumers feel they are healthier than the regular food item. Although organic foods are almost always more expensive, 90% of consumers have said they are willing to pay more for quality products. Markets and Competition The packaged food industry contributes the most revenue and growth to the food industry. The forecast shows the market is expected grow consistently in the next few years16. Trends affect the meat industry drastically when consumer demands change so companies is this industry must keep up with what is going on in society. In recent years, more and more attention is being put into sustainability, which has a series of effects on packaged food companies16. They need to have the most advanced technology to meet the social and cultural trends. If the packaged food companies don’t make changes or develop new products, the customers could simply choose not to buy from them anymore. According to Porter’s 5-Forces Analysis, based on the current market situation, I would suggest that the major competitive force shaping the food product industry is purchasing power. More specifically, buyers are the major players to drive the price. Although individual consumers don’t purchase as many as business institutes, the consistent purchasing behavior can be an incredible force. Also, it doesn’t cost customers anything to switch to a rival. The leading companies in the industry are Tyson Foods, JBS S.A., Cargill Inc., and Smithfield Foods Inc. These companies hold more than 40% of the market share in the current packaged food industry.

Financial and Operating Market The market concentration in the Meat, Beef, and Poultry Processing industry is medium. Tyson has the biggest share of the market at 14%, with JBS S.A. right behind it at 12.4%, however, the next highest market share is Smithfield Foods Inc. at 5.7% share of the market. We believe that Tyson and JBS S.A. will continue to be the market leaders.

Source: IBISWorld @ 2017

The Meat Processing industry’s sales have been underwhelming in the past 3 years. JBS S.A. had a comeback year between 2015 and 2016, with a sales increase of over 27%, but TSN actually lost out on $4.5 billion worth of sales in the same year.

Yahoo Finance @ 2017

Meat processing stock YTD returns are by far the least attractive aspect of the industry. Three of the biggest companies in the industry had negative returns in the last year; JBS S.A. was the lowest at a 13.77% loss. However, this could mean that the firms have bottomed out and their stock price will begin to rise again.

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Key Factors Driving the Industry Per Capita Disposable Income Pork and beef tend to be high-priced grocery purchases. Consumers normally spend more on fresh meat when disposable incomes are high. On the other hand, when disposable income is low, canned or frozen meats tend to be more popular. Despite the upward pressure for wage growth throughout 2017, the lower unemployment rate and federal funds rate could potentially increase the disposable income level. According to IBIS World, per capita disposable income is expected to grow 2.20% this year16. Price of Feed According to IBIS World Business Environment Profiles on April 2017, this factor represented by the prices received by feed producers of all types of animals, including livestock, poultry and pets. The price of feed has decreased roughly 24% since 2013 due to the low prices of grain. The decreasing trend of feed price is going to reduce the cost of raising livestock, which would be beneficial to the meat industry16. Key Investment Positives and Negatives Positives The inflation level in the future is expected to rise, and it will increase the profitability of this industry. When the economy downturn hits, this industry tends to be a favorable defensive choice due to the size of the stocks in the industry. Negatives The Consumer Goods Sector is unattractive during a bullish market, which is a part of its defensive nature. The perception of red meat is unhealthy for many household especially in nowadays, people are more concerned about their health status than ever before. The consumption of white meat, especially chicken, and seafood has increased in the last few years as the substitute of red meat to obtain protein.

Company Specific Analysis Overview and Business Description Tyson Foods Inc. includes Jimmy Dean®, Hillshire Farm®, Sara Lee®, Ball Park®, Wright®, Aidells® and State Fair® and is a leading company in the meat and packaged foods

industry. Their business consists of four value streams: beef, pork, chicken, and packaged foods14.

Source: Tyson 10-K @ 2016

Corporate strategy Tyson’s corporate strategy is to offer higher quality for a better value to their consumers. They do this by offering accessibility, a national distribution system, and a customer support system. They are always looking for ways to increase the value of their products so their consumers can trust them to be the best14. Life Cycle Tyson’s current life cycle is at maturity because they are a well-established company that only grows with the economy. Tyson has been around for over 80 years and sells products that are used daily in households, because of this, their consumer base only grows as the population grows. Other than the organic growth that the population increase provides there isn’t a whole lot of other places to grow their business but they are constantly on the outlook for unfulfilled consumer demands that they can pursue. Financial Summary For the first 9 months of 2017, EPS is at $3.72, which is a 6% increase from the previous year. 3Q sales increased from $9,403 million to $9,850 million between 2016 and 2017. This is attributable to the synergies realized from the Hillshire brand acquisition and more money has been spent on research to improve their efficiency and innovation. Product Lines and New Products Tyson has many product lines that include Jimmy Dean®, Hillshire Farm®, Sara Lee®, Ball Park®, Wright®, Aidells® and State Fair®. Each of these brands are known for a different well-known product which includes breakfast sausage, lunch meats, bread, hot dogs, and so forth. Tyson recently released a new statement saying that by

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the end of 2017 they will no longer be using antibiotics in their chicken. This comes from the consumer demand of foods free of unnatural products. They have also eliminated nitrates in their all-beef Ball Park® hot dogs and they have released a new stuffed hashbrown product through Jimmy Dean® that is convenient and delicious. Market for the Company’s Products The market for Tyson products is middle to lower income families that are likely to shop at food retailers. Pricing and product availability shows a target to families that shop at Walmart or other middle class stores. Marketing Strategy and Customer Support Marketing strategy for Tyson is find where there are high demands for products and target that market to focus all their efforts on. Their goal is to be the preferred provider for chicken, pork, beef, and packaged foods. They do this be utilizing their internal and external processes of a national distribution system and a customer support service. Significant Customers Tyson’s most significant customer is Walmart who accounts for 17.5% of their total annual sales. Other that Walmart their biggest customers are restaurants, hospitals, food retailers and wholesale distributors. Tyson does not directly sell to consumers so they depend on other distribution systems for their sales. Manufacturing Process and Costs Tyson’s manufacturing costs include everything from farm gate to the dinner plate. That includes raising the livestock, to slaughter, to the further processing needed to cook and package the meat. The risk associated with meat packaging is keeping the animals alive and healthy until it’s time to process so that there is no loss of inventory and consumers are protected from foodborne illnesses. Distribution Tyson’s national distribution system can ship fresh, refrigerated, or frozen goods across the world. They use refrigerated rail and truck transportation and a network of cold storage warehouses to achieve this. Tyson’s customers vary greatly - including food retailers, restaurants, hotels, schools, and the military. Walmart is the only customer that represents more than 10% of Tyson’s sales at 17.5%. Any interruption in this relationship could have a majorly negative impact on

Tyson’s sales which gives Walmart more bargaining power. Suppliers and Raw Materials The raw materials needed in the chicken segment (Tyson’s largest segment) are corn and soybean meal (used for feed), and live chickens. These are supplied by independent contract growers with the support of Tyson. Also, needed for the chicken segment are cooking ingredients, packaging materials, and cryogenic agents. For the beef and pork segments, raw materials consist mainly of live cattle and hogs, respectively. These animals are obtained by buyers employed by Tyson who travel to independent producers or public auctions and are trained to purchase the highest quality animals. Competition The US foods products industry, includes both ends of growing and processing, is extremely competitive and profit margins are always low, thus avoiding loss becomes a challenge. Due to the increasing cost of production cost, it becomes more difficult to sustain the profit even with a lower margin. More specifically, the prices of electricity and fuel are growing, making the cost of processing and distribution increases a lot. In other words, the processed food industry is facing continuously low margin, more expensive energy cost and unstable consumer needs. Revenue Decomposition Companies in the Meat, Beef, and Poultry Processing Industry have different looking revenue compositions. This makes the industry players somewhat difficult to compare to each other because they will all be affected by sales and volumes changes in different ways. We find Tyson most compelling because of the diversity in its segments. Pilgrim’s pride only sells chicken products and Smithfield Foods and JBS S.A. both have segments that overwhelm the others. Tyson has a even spread between its sectors, which makes it less susceptible to specific risks each sector holds.

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Source: Company 10-Ks @ 2016

Sales Compound Annual Growth Sales Compound Annual Growth (CAGR) is calculated by taking the geometric mean of the growth in sales, specifically for five years in the graph below. Revenue is the very first line item on the income statement because it drives net income and the stock price.

Source: Company 10-Ks @ 2016

As seen in the graph above, JBS S.A. has been the most effective at increasing sales which is explained by the fact that it was the only company that hasn’t seen a decrease in sales since 2012 and they had several acquisitions in 2015 which led to a 44.34% growth in sales. Tyson is nowhere near to competing with JBS S.A.’s sales growth, which is partially due to the drop in sales they had last year. We are forecasting a steady increase in sales for Tyson over the next few years that should make them more competitive against JBS S.A. Inventory Turnover The number of times a company can turnover its inventory is especially important in meat companies because of the disease risk that is associated with old meat products. Frozen meats are fairly protected but Tyson will need to sell its refrigerated meats before they expires. The graph below shows that Tyson is very effective at managing its inventory – they were able to sell out of their inventory 11.22 times a period in 2016, which was more than their peers.

Source: Company 10-Ks @ 2016

Gross Margin Gross margin is equal to gross profit as a percentage of sales and it shows us how well the company is managing its operating costs compared to the sales level it maintains. It can explain a lot about whether a company is a price-maker or price-taker because a high gross margin means sales were high and COGS were low.

Source: Company 10-Ks @ 2016

Tyson is a price-maker, especially in its chicken segment because of their large market share. They are first able to manipulate the price they buy chickens at because of their system of buying from many small farms. If an individual wants to barter for a higher price, Tyson can absolutely take their business elsewhere just because of their name. Then, Tyson can set the price that they sell their processed meats at because of their share in the market. Tyson’s gross margin is comparable to JBS S.A. and PPC (all around 12%), who are two other price-makers in the market. Hormel has a higher gross margin at 22.66%, but they are more of a price-maker in deli-meats. Porter’s Five Forces Analysis Threat of competitors: Moderate-High The comparably high volume of existing and potential consumers and suppliers, has created an intense competition market for food processing industry. On the

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other hand, due to the consistently changed consumer preference, there is no dominant leader in the industry who is able to maintain the leading position forever16. Besides, price is another key would drive the direction of the market. In other words, the cost of inputs contributes to the stable price, which makes the competition not so intense. Threat of New Entrants: Medium The major barrier to avoid new entrants is actually government regulations on food products. Policies and regulations are extremely strict and serious towards meat and poultry products, which means Tyson’s potential competitors are less possible to become real ones16. Furthermore, the need of a high capital is another factor avoid new companies entering the industry. The large amount of cost needed to be spent on marketing and distributions. Threat of Substitutes: Moderate-High The substitutes of Tyson’s products come from two sub-industries. The first one is the dried, canned food industry, which is considered as a substitute for Tyson’s packaged food because it offers more choices of flavors, and easier and more convenient to store. The second substitute, which should be considered as the major one, is the organic foods come from “healthy’ brands. Moreover, because of the increasing health concern, the existing and potential customers of Tyson may switch to alternatives which have a healthier and fresher concept16. More than one, but not the same substitute, brings the level of threat of substitutes to moderate-high. Bargaining power of suppliers: Moderate-High Because of the new strategy carried out by Tyson, “a buy-versus-grow strategy in chicken procurement’, the suppliers’ power is increased they have more force to drive the direction and the trends of the market. Although, Tyson should have several choices of where to buy chicken or materials from to have some substitutes to decrease the power of the major suppliers. On the other hand, since most of the supply-contracts have already been signed, there is not much space for the suppliers to give a push to Tyson16. Bargaining Power of Buyers: High. There are two reasons we rated bargaining power of buyers as high. The first reasons is that consumers’ preference is one of the major drivers of the market trend. For example, if consumers choose not to buy

packaged foods from Tyson because of health concerns or change of the taste, Tyson will be seriously affected and sales will be hurt greatly16. The second reason is the consistency of consumers’ purchasing power. If the packaged foods are priced too high compared with consumers’ purchasing power, the sales will experience a major decrease. Moreover, large retailers will contribute the major part of the orders which gives them a high bargaining power. If they negotiate for a lower price based on their large purchases, the company will be affected majorly. Other Topics Tyson Foods has several elements as the key of their competitive strategy. The first one is that Tyson Foods has improved its cost structure by investing in operations with good ROIC projects and by taking out more than a billion dollars in inefficiencies from the system through research and development17. They also aim to have diversified pricing mechanisms. Tyson also implemented a buy-versus-grow strategy in chicken procurement. The most aggressive and ambitious goal is to provide industry leading quality and customer service. By setting these strategies and goals, innovation becomes truly important for Tyson. “Our differentiated capabilities in both our scalable supply chain and our customer and consumer demand expertise are driving profitable growth in the marketplace,” Donnie Smith, Tyson’s CEO concluded18. Globalization is always an accessible method for companies like Tyson to expand. The interaction with global markets has a great potential to benefit both markets, since the increasing need of authentic foreign food from domestic market as well as the need of healthy and organic foods from foreign markets16. The increasing health concern drives the market, especially products to a specific stage, where more regulations and attention are drawn to sustainable production as well as other ethical issues. SWOT Analysis Strengths Market Share: The meat industry is in a mature stage, so there is a lack of growth opportunities within the industry. In addition, meat processors face more difficulty growing revenue solely by enhancing operating methods. Therefore, investors might shift in favor of a large, and more efficient operation. Tyson Foods. Inc has

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the highest market share among other major players in the industry, and it follows its definite plan to maintain its leading market share16. Tyson sold off its subsidiaries which are in Mexico and Brazil. On the other hand, the company distributed about half of its products to retailers and foodservice businesses across the United States. Integration: Tyson acquired major customer food company Hillshire Brands in August 28, 2014, which brought in several popular brand names like Jimmy Dean and Ball Park. While the company continues to benefit from the reputation these popular brand names brought to Tyson, the firm is expected to realize synergies of around $675 million by the end of 2017. Business Processing and Innovation: Tyson keeps operating costs low and ensures there is qualified supply to satisfy the company’s operation by vertically integrating business parts. For example, Tyson’s chicken business is vertically integrated from growing feed, raising poultry, food production, to transportation. Furthermore, the company gradually increases resources on research: 96 million on 2016, 75 millions on 2015, and 52 millions on 2014. The company aims to work toward the goal of bring new market-leading retail to customers more efficiently. Weaknesses Nature of the stock: Tyson is in a food product industry. As part of the defensive nature of stocks in this industry, it is unattractive to investor during bullish market. The S&P 500 has increased 14.05% since December 1st, 2016 compared to Tyson Food Inc.’s 7.98% over the period. Controversy about new plant: On September 5th, 2017, Tyson announced a plan to construct a new poultry plant near the city of Tonganoxie, Kansas. This $320 million project is scheduled to begin in mid 201917. While the new plant can potentially bring 1600 jobs to the state of Kansas, the area residents have formed the group “Citizens Against Project Sunset” with more than 4200 members on social media, to voice their opinion of “No Tyson in Tongie.18” Residents are unsatisfied with Tyson’s new project due to concerns about decreasing property values and worsened air quality. If the plant gets settled down in Tonganoxie regardless of residents’ opinions, the company might face a more severe problem down the road. If the plant gets built elsewhere in Kansas, that might not be a favorable option for Tyson; According to

Commerce secretary Jordan, “We still believe this is the best location regarding meeting the requirements Tyson has for a new location and creating additional agricultural growth in northeast Kansas.19” For now, the new plant is a weakness for Tyson. Opportunities Speed Processing Plants: Meatpackers seek to reverse the Obama administration decision to lower U.S. poultry plants’ processing speeds. Currently, the U.S. Department of Agriculture is in the process of reviewing the proposal of raising processing-line speeds by 25% to keep pace to demand. If approval is granted, Tyson will be able to increase its process line efficiency and lower its inventory cost. Worldwide Expansion: Tyson has the advanced advantage of being the world’s largest processor of chicken, beef, and pork. The company has 300 facilities across 130 countries, with 124,000 employees working under the brand16. As the per capita disposable income is expected to grow 2.20% this year, while the population growth rate is on an upward sloping trend, the consumption for meat is expected to boost Tyson’s revenue.

Source: Tyson Foods, Inc @ 2017

Threats Shift of eating habit: Nowadays, people are more concerned about their health status than ever before. Tyson’s four segments are chicken, beef, pork and prepared foods. Red meat has played an essential role for the company. However, households perceive red meat as unhealthy. The consumption of white meat and seafood has increased in the last few years as the substitute of red meat to obtain protein. Such a shift of eating habits is going to lower red meat’s competitiveness in the industry.

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Valuation Analysis Revenue Decomposition We broke down our revenue to Tyson’s stated segments of chicken, beef, pork, prepared foods, other, and intersegment sales. We then broke down every category to sales volume change, average sales price change, total revenue and year-over-year growth. We felt that this was the best way to break it down because of how Tyson prepares their financial statements and organizes their data. We used OECD Meat Consumption trends to help us decide future sales volume changes and the World Bank Commodities to help predict average sales price changes. Chicken After studying past sales trends and current industry trends we felt that initially the sales volume of chicken would grow one year, decrease the next, then increase from there on out. Consumers are eating more chicken because of healthy lifestyles and cheap prices and we felt this would increase the sales volume in the future. Beef Beef prices continue to be high which we feel will affect the sales volume negatively. We also feel that people are moving away from red meats because they are not considered as healthy as chicken. With price increasing and sales volume decreasing the affects balance creating a pretty steady revenue amount. Pork We feel that pork is the most volatile segment of Tyson’s total revenue and thus the hardest to predict. After looking at historical trends we felt that sales volume will decrease initially for next year then increase slightly for

a few years then once again decrease in volume. We also felt that the average sales price would follow a similar trend accept it will decrease in the next year. Even with these changes the revenue for pork will only change slightly. Prepared Foods, Other, and Intersegment Sales We assumed for prepared foods that the sales volume and average sales price change would remain constant for the next several years at 2.2% and 1.5% respectively. Prepared foods are hard to predict so we used a historical average to calculate these percentages. We felt that other revenue would remain somewhat constant with values between $230-290 Million because once again this revenue is hard to predict because this account for foreign chicken operations and trends in other countries are not widely available to research. We also felt that because it is such a small amount of our total revenue in the past that this should remain small in the future. We then came to the assumption that intersegment sales would also remain a steady growth of 5.6% by averaging historical year-over-year growth to account for the growth of other segments. We felt that the overlap in sales of our products would not change drastically in the forecasted years. Continuing Value Revenue Growth After calculating the total revenue of each segment by multiplying last year’s revenue by the net change of sales volume and average sales price change we can add all the revenue to calculate the CV Growth in 2022. The value that we calculated is 1% and we feel that this is adequate due to the maturity of Tyson. Cost of Goods Sold We assumed costs of goods sold (COGS) would grow at the same rate as revenue going forward into the forecasted period. We decided on doing this because historically this number has grown with revenue and decrease with revenue. Weighted Average Cost of Capital (WACC) Cost of Equity We found the cost of Tyson’s equity by using the Capital Asset Pricing Model (CAPM) which includes the inputs of the risk-free rate, equity market premium, and Beta. We used the 2.79% for our risk-free rate because we felt like the 30 year treasury rate is the closest value to a risk-free asset that we can find. We used 4.65% for our equity market premium because we felt that the best value is the difference of the geometric historical average for

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both the S&P 500 return and the Treasury bond rate between 1928 and 2016. Our Beta of .70 was found using Bloomberg with the parameters of the weekly 5 year beta of Tyson against the S&P 500 index. Using these inputs in the CAPM we calculated 6.05% to be our cost of equity and we felt this was efficient for our model. Cost of Debt Our cost of debt was calculated using pre-tax cost of debt and the marginal tax rate. We used 4.10% for our pre-tax cost of debt as it is the yield for a Tyson bond maturing on 6/2/2047. Our marginal tax rate of 39.44% was found by adding the federal income tax rate, state income taxes, and foreign rate differences and valuation rate allowances and then took a 5 year average of these rates. Using these two inputs we concluded that our cost of debt is 2.49%. WACC After calculating the value of equity by multiplying the share price by the shares outstanding and finding the value of debt by adding the book value of short and long-term debt to the present value of operating leases we found the weights of equity and debt. We then took each weight and multiplied it by the corresponding cost and then added them together. This gave us a value of 5.38% for our WACC. Discounted Cash Flow & Economic Profit Models Utilizing our value drivers net operating profit less adjusted taxes (NOPLAT) and invested capital (IC) we created the discounted cash flow (DCF) and economic profit (EP) models. Using these two value drivers we create a future free cash flow (FCF) to discount to our current year to find a value of operating assets. We then take this value and add the value of non-operating assets and subtract out non-operating liabilities and this gives us a value of equity. We then take this value of equity and divide it by the shares outstanding to calculate our intrinsic stock value of $85.43 and after adjusting for our elapsed fraction of the fiscal year the adjusted price is $85.85. The adjusted stock is close to the intrinsic price due to how close we are to the end of Tyson’s fiscal year. Comparing this price to the current price shows that Tyson’s current price of $74.14 is an undervalued price by 12.8-13.3%. After taking into consideration the percentages our assumptions might be off we feel that the target price going forward is between $84-86. This target price leads

us to conclude a Buy rating for Tyson going forward for the Krause Fund. We felt that the DCF and EP models gave us the most accurate price for the conclusion of our valuation. These models consider everything that the company offers and can offer in the future. The other models only depend on one aspect or on the size of other companies which do not measure price as precisely. Discounted Dividend Model The dividend discount model (DDM) takes our estimated dividends per share and discounts them to the current year. In the CV year, we take the P/E multiple and multiply it by the CV EPS and then we also discount that future stock price to the current year. We then add those discounted dividends and stock price and add them together to calculate our intrinsic value of $63.16. We then adjust this price by the elapsed fraction of our fiscal year to an adjusted stock price of $63.47. We feel that this isn’t the best measure of our company value because Tyson pays a smaller dividend than what they can afford. We think that Tyson can afford to pay dividends of $4 per share. We came to this conclusion by taking the revenue growth and divided it by the ROE to find the retention ratio. We then found the payout ratio by taking 1 minus the retention ration and came up with .9. Taking this and multiplying it by the EPS we found the $4. Relative Price/Earnings Model In our relative P/E model we used Archer-Daniels-Midland Company, Conagra Brands Inc., Hormel Foods, Kellogg Company, Pilgrim’s Pride Corporation, and Sanderson Farms, Inc. to value Tyson Foods, Inc. We choose these companies because they make similar products and are considered Tyson’s competitors. Taking the Price and EPS for the next two forecasted years of each of these companies and calculating the P/E then averaging them to multiply against our own, we came to an implied relative value of $76.59 in 2017 and $70.98 in 2018. We feel that this is not a strong valuation for Tyson because almost all the companies used in this valuation are smaller than Tyson. This means that the relative valuation model will almost always give us a small price.

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Sensitivity Analysis Beta vs. Risk Premium Changing the Beta and Risk Premium, the main components in the calculation of WACC, shows us just how sensitive the stock price is to the Cost of Capital. While keeping the other variables we used to calculate WACC constant, a 0.1% increase in the risk premium changes our stock price from $85.85 to $84.49 while a 0.01 increase in Beta changes our stock price from $85.85 to $84.94. A small change in the assumptions that we made have a large affect in the Intrinsic Stock Price that we calculate. WACC vs. CV NOPLAT By evaluating the WACC and the CV NOPLAT we are showing the sensitivity of our stock price to changes in the cost of capital and revenue growth. We assume our CV NOPLAT to be the same as our CV growth of revenue and therefore increasing this increases revenues. Increasing WACC decreases our stock price because if the cost of capital increases, the amount of money it takes to take on new projects also increases. A .5% increase in WACC takes our intrinsic price from $85.85 to $74.91, while a .1% increase of CV NOPLAT growth takes our price from $85.85 to $87.27. COGS (% of Sales) vs. SG&A (% of Sales) The largest expenses that Tyson pays are Cost of goods sold (COGS) and selling, general and administrative (SG&A) and by increasing these as a percent of sales directly affects operating income. A 1% increase in COGS takes our intrinsic price from $85.85 to $74.91, while a .5% increase of SG&A takes our price from $85.85 to $80.53. Pre-Tax Cost of Debt vs. Marginal Tax Rate Tax rates are projected to decrease with the new presidency and we were interested to find out how sensitive our stock price is to the marginal tax rate and the pre-tax cost of debt. A .3% decrease in the marginal tax rate takes our intrinsic price from $85.85 to $85.79, while a .1% decrease of Pre-Tax Cost of Debt takes our price from $85.85 to $86.13. Risk-Free Rate vs. CV ROIC Growth Interest rates affects the WACC and therefore affect the CV ROIC Growth. Testing the sensitivity of these two assumptions shows us how our price might be affected by a predicted increase in the Risk-Free Rate. A .1%

increase in the risk-free rate takes our intrinsic price from $85.85 to $83.92, while a .1% increase of the CV ROIC Growth takes our price from $85.85 to $85.88. 2016 Capital Expenditures (in Millions) vs. 2017 Depreciation (% of Net PPE) Changing the amount used for the capital expenditures and depreciation will show us the sensitivity of our intrinsic stock price to changes in PPE. A $20 Million increase in the 2016 Capital Expenditures takes our intrinsic price from $85.85 to $85.81, while a .1% increase of Depreciation takes our price from $85.85 to $85.70.

Important Disclaimer

This report was created by students enrolled in the Applied Equity Valuation (FIN:4250) class at the University Iowa. The report was originally created to offer an internal investment recommendation for the University of Iowa Krause Fund and its advisory board. The report also provides potential employers and other interested parties an example of the students’ skills, knowledge and abilities. Members of the Krause Fund are not registered investment advisors, brokers or officially licensed financial professionals. The investment advice contained in this report does not represent an offer or solicitation to buy or sell any of the securities mentioned. Unless otherwise noted, facts and figures included in this report are from publicly available sources. This report is not a complete compilation of data, and its accuracy is not guaranteed. From time to time, the University of Iowa, its faculty, staff, students, or the Krause Fund may hold a financial interest in the companies mentioned in this report.

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Tyson Foods, Inc.Key Assumptions of Valuation Model

Ticker Symbol TSNCurrent Share Price $74.14Current Model Date 11/10/2017FY End (month/day) Sep. 30Beta 0.701Risk-Free Rate 2.79%Equity Risk Premium 4.65%CV Growth of NOPLAT 6.15%CV Growth of EPS -2.09%CV Growth of ROIC 15.90%Current Dividend Yield 1.60%Marginal Tax Rate 38.3%Effective Tax Rate 31.8%

Tyson Foods, Inc.Revenue Decompositionin millionsFiscal Years Ending Sep. 30 2014 2015 2016 2017E 2018E 2019E 2020E 2021E CV (2022)Chicken Sales Volume Change 2.6% 4.2% -2.6% 1.1% -2.2% 0.7% 1.0% 2.5% 4.3% Average Sales Price Change -1.4% -1.6% -1.5% 6.7% -0.4% -0.4% 0.0% -0.4% -0.4% Total Revenue $ 11,116 $ 11,390 $ 10,927 $ 11,779 $ 11,471 $ 11,503 $ 11,618 $ 11,860 $ 12,320 Year-Over-Year Growth -9.60% 2.46% -4.06% 7.8% -2.6% 0.3% 1.0% 2.1% 3.9%Beef Sales Volume Change -0.4% -30.0% -1.1% 0.8% 1.8% -0.2% -0.3% -0.6% -0.5% Average Sales Price Change 12.8% 6.9% -14.9% 0.5% 0.5% 0.5% 0.5% 0.5% 0.2% Total Revenue $ 16,177 $ 17,236 $ 14,513 $ 14,701 $ 15,035 $ 15,074 $ 15,102 $ 15,090 $ 15,059 Year-Over-Year Growth 12.34% 6.55% -15.80% 1.3% 2.3% 0.3% 0.2% -0.1% -0.2%Pork Sales Volume Change 0.8% -0.8% -2.5% 3.6% -1.4% 0.6% 0.5% 0.8% -0.4% Average Sales Price Change 15.7% -15.8% -4.4% -2.0% -1.0% 3.0% 5.0% 0.0% -5.0% Total Revenue $ 6,304 $ 5,262 $ 4,909 $ 4,986 $ 4,865 $ 5,040 $ 5,315 $ 5,356 $ 5,069 Year-Over-Year Growth 16.57% -16.53% -6.71% 1.6% -2.4% 3.6% 5.5% 0.8% -5.4%Prepared Foods Sales Volume Change 10.4% 70.7% -2.8% 2.2% 2.2% 2.2% 2.2% 2.2% 2.2% Average Sales Price Change 7.1% 16.7% -3.4% 1.5% 1.5% 1.5% 1.5% 1.5% 1.5% Total Revenue $ 3,927 $ 7,822 $ 7,346 $ 7,614 $ 7,892 $ 8,180 $ 8,479 $ 8,788 $ 9,109 Year-Over-Year Growth 18.21% 99.19% -6.09% 3.7% 3.7% 3.7% 3.7% 3.7% 3.7%Other Total Revenue $ 1,381 $ 879 $ 380 $ 266 $ 239 $ 251 $ 264 $ 277 $ 291 Year-Over-Year Growth 2902.17% -36.35% -56.77% -30.0% -10.0% 5.0% 5.0% 5.0% 5.0%Intersegment Sales Total Revenue $ (1,325) $ (1,216) $ (1,194) $ (1,261) $ (1,332) $ (1,407) $ (1,485) $ (1,569) $ (1,657) Year-Over-Year Growth 20.67% -8.23% -1.81% 5.6% 5.6% 5.6% 5.6% 5.6% 5.6%Total 37,580$ 41,373$ 36,881$ 38,084$ 38,170$ 38,642$ 39,292$ 39,802$ 40,191$ Year-Over-Year Growth 9.33% 10.09% -10.86% 3.3% 0.2% 1.2% 1.7% 1.3% 1.0%

Tyson Foods, Inc.Income Statementin millions, except per share dataFiscal Years Ending Sep. 30 2014 2015 2016 2017E 2018E 2019E 2020E 2021E CV 2022ESales 37580.00 41373.00 36881.00 38084.11 38170.29 38642.08 39292.19 39802.38 40190.80 Cost of Sales 34365.00 36745.00 31479.00 32505.89 32579.45 32982.13 33537.02 33972.48 34304.01 Depreciation 494.00 609.00 617.00 617.37 629.62 637.01 645.17 654.21 664.06 Amortization 36.00 102.00 88.00 92.43 90.75 89.10 87.48 85.89 84.33 Gross Profit 2685.00 3917.00 4697.00 4868.42 4870.47 4933.84 5022.52 5089.80 5138.40 Selling, General and Administrative 1255.00 1748.00 1864.00 1924.81 1929.16 1953.01 1985.86 2011.65 2031.28 Operating Income 1430.00 2169.00 2833.00 2943.62 2941.31 2980.83 3036.66 3078.15 3107.12 Other (Income) Expense: Interest income (7.00) (9.00) (6.00) 8.20 2.66 87.13 66.88 90.56 129.86 Interest expense 132.00 293.00 249.00 337.54 256.81 376.34 265.17 251.16 273.43Other, net 53.00 (36.00) (8.00)Total Other (Income) Expense 178.00 248.00 235.00 345.74 259.48 463.47 332.05 341.72 403.29Income from Continuing Operations before Income Taxes 1252.00 1921.00 2598.00 2597.88 2681.83 2517.36 2704.60 2736.43 2703.83Income Tax Expense 396.00 697.00 826.00 1019.41 1057.39 1001.24 1071.25 1071.31 1066.39Income from Continuing Operations 856.00 1224.00 1772.00 1578.47 1624.44 1516.12 1633.35 1665.12 1637.44Loss from Discontinued Operation, Net of Tax Net Income 856.00 1224.00 1772.00 1578.47 1624.44 1516.12 1633.35 1665.12 1637.44Less: Net Loss Attributable to Noncontrolling Interests (8.00) 4.00 4.00Net Income Attributable to Tyson 864.00 1220.00 1768.00 1578.47 1624.44 1516.12 1633.35 1665.12 1637.44Amounts Attributable to Tyson:Net Income Attributable to Tyson 864.00 1220.00 1768.00 1578.47 1624.44 1516.12 1633.35 1665.12 1637.44Weighted Average Shares Outstanding: Class A Basic 284.00 335.00 315.00 293.51 294.82 296.42 298.01 299.61 301.21Class B Basic 70.00 70.00 70.00 70.00 70.00 70.00 70.00 70.00 70.00Net Income Per Share Attributable to Tyson:Class A Basic 2.48 3.06 4.67 4.43 4.54 4.22 4.52 4.59 4.50Class B Basic 2.26 2.79 4.24 3.98 4.09 3.80 4.07 4.13 4.05Dividends Declared Per Share:Class A 0.33 0.43 0.65 0.75 0.85 0.95 1.05 1.15 1.25Class B 0.29 0.38 0.59 0.69 0.79 0.89 0.99 1.09 1.19

Tyson Foods, Inc.Balance Sheetin millions, except share and per share dataFiscal Years Ending Sep. 30 2014 2015 2016 2017E 2018E 2019E 2020E 2021E CV 2022EAssetsCurrent Assets:Cash and cash equivalents 438.00 688.00 349.00 113.38 3707.82 2846.02 3853.82 5525.91 6742.49 Accounts receivable, net 1684.00 1620.00 1542.00 1592.30 1595.91 1615.63 1642.81 1664.14 1680.38 Inventories 3274.00 2878.00 2732.00 2821.12 2827.51 2862.45 2910.61 2948.40 2977.18 Other current assets 379.00 195.00 265.00 273.64 274.26 277.65 282.33 285.99 288.78 Assets held for sale 446.00Total Current Assets 6221.00 5381.00 4888.00 4800.44 8405.49 7601.76 8689.57 10424.45 11688.83Net Property, Plant and Equipment 5130.00 5176.00 5170.00 5272.63 5334.51 5402.83 5478.50 5561.00 5649.85Goodwill 6706.00 6667.00 6669.00 6669.00 6669.00 6669.00 6669.00 6669.00 6669.00 Non-goodwill intangible Assets 5276.00 5168.00 5084.00 4991.57 4900.82 4811.72 4724.25 4638.36 4554.03Other Assets 623.00 577.00 562.00 580.33 581.65 588.84 598.74 606.52 612.44Total Assets 23956.00 22969.00 22373.00 22313.98 25891.47 25074.15 26160.06 27899.32 29174.15

Liabilities and Shareholders’ EquityCurrent Liabilities:Current debt 643.00 715.00 79.00 128.00 2359.00 285.00 10.00 411.14 428.02Accounts payable 1806.00 1662.00 1511.00 1560.29 1563.82 1583.15 1609.79 1630.69 1646.60Other current liabilities 1207.00 1158.00 1172.00 1210.23 1212.97 1227.96 1248.62 1264.84 1277.18Liabilities held for sale 141.00Total Current Liabilities 3797.00 3535.00 2762.00 2898.52 5135.79 3096.11 2868.41 3306.67 3351.80Long-Term Debt 7535.00 5975.00 6200.00 4649.33 4641.72 4647.83 4662.11 4675.36 4687.92Deferred Income Taxes 2450.00 2449.00 2545.00 2518.37 2490.75 2464.60 2436.61 2408.63 2380.77Other Liabilities 1270.00 1304.00 1242.00 1282.52 1285.42 1301.31 1323.20 1340.38 1353.46Shareholders’ Equity:Common Equity 4299.00 4349.00 4398.00 4451.94 4505.89 4559.83 4613.78 4667.72 4721.66Retained earnings 5748.00 6813.00 8348.00 9658.39 10977.28 12149.85 13401.34 14645.95 15823.93Accumulated other comprehensive loss (147.00) (90.00) (45.00) (45.00) (45.00) (45.00) (45.00) (45.00) (45.00)Treasury stock, at cost – 40 million shares in 2014 and 48 million shares in 2013 (1010.00) (1381.00) (3093.00) (3116.09) (3116.38) (3116.38) (3116.38) (3116.38) (3116.38)Total Tyson Shareholders’ Equity 8890.00 9691.00 9608.00 10949.24 12321.79 13548.30 14853.74 16152.29 17384.21Noncontrolling Interests 14.00 15.00 16.00 16.00 16.00 16.00 16.00 16.00 16.00Total Shareholders’ Equity 8904.00 9706.00 9624.00 10965.24 12337.79 13564.30 14869.74 16168.29 17400.21Total Liabilities and Shareholders’ Equity 23956.00 22969.00 22373.00 22313.98 25891.47 25074.15 26160.06 27899.32 29174.15

Tyson Foods, Inc.Cash Flow Statementin millionsFiscal Years Ending Sep. 30 2014 2015 2016Cash Flows From Operating Activities:Net income 856.00 1,224.00 1,772.00 Depreciation 494.00 609.00 617.00 Amortization 36.00 102.00 88.00 Deferred income taxes (105.00) 38.00 84.00 Convertible debt discount (92.00) Loss on early extinguishment of debt Gain on dispositions of businesses (177.00) Impairment of assets 107.00 285.00 45.00

69.00 81.00Other, net 31.00 71.00 (34.00)Increase in accounts receivable (93.00) 66.00 73.00(Increase) decrease in inventories (148.00) 220.00 148.00Increase (decrease) in accounts payable 202.00 (162.00) (130.00)Increase (decrease) in income taxes payable/receivable (133.00) 177.00 (19.00)Increase (decrease) in interest payable 5.00 (23.00) (1.00)Net changes in other working capital 18.00 71.00 (8.00)Cash Provided by Operating Activities 1,178.00 2,570.00 2,716.00

Cash Flows From Investing Activities: Additions to property, plant and equipment (632.00) (854.00) (695.00)Purchases of marketable securities (18.00) (38.00) (46.00)Proceeds from sale of marketable securities 33.00 52.00 37.00Acquisitions, net of cash acquired (8,193.00) Proceeds from sale of businesses 539.00 Other, net 10.00 31.00 20.00Cash Used for Investing Activities (8,800.00) (270.00) (684.00)

Cash Flows From Financing Activities: Payments on debt (639.00) (1,995.00) (714.00)Proceeds from issuance of long-term debt 5,576.00 501.00 1.00Borrowings on revolving credit facility 1,345.00 1,065.00Payments on revolving credit facility (1,345.00) (765.00)Proceeds from issuance of debt component of tangible equity units 205.00 Proceeds from issuance of common stock, net of issuance costs 873.00 Net proceeds from issuance of equity component of tangible equity units 1,255.00 Purchases of Tyson Class A common stock (295.00) (495.00) (1,944.00)Dividends (104.00) (147.00) (216.00)Stock options exercised 67.00 84.00 128.00Other, net (23.00) 17.00 68.00Cash Provided by (Used for) Financing Activities 6,915.00 (2,035.00) (2,377.00)Effect of Exchange Rate Change on Cash (15.00) 6.00Increase (Decrease) in Cash and Cash Equivalents (707.00) 250.00 (339.00)Cash and Cash Equivalents at Beginning of Year 1,145.00 438.00 688.00Cash and Cash Equivalents at End of Year 438.00 688.00 349.00

Tyson Foods, Inc.Cash Flow Statement (Forecast)in millionsFiscal Years Ending Sep. 30 2017E 2018E 2019E 2020E 2021E CV 2022ECash Flow from Operating Activities:Net Income 1578.47 1624.44 1516.12 1633.35 1665.12 1637.44 Adjustments for: +Depreciation 617.37 629.62 637.01 645.17 654.21 664.06 +Amortization 92.43 90.75 89.10 87.48 85.89 84.33 +Change in Deferred Taxes (26.63) (27.62) (26.15) (27.98) (27.98) (27.86) +Change in Accounts Payable 49.29 3.53 19.33 26.63 20.90 15.91 +Change in Other Current Liabilities 38.23 2.74 14.99 20.66 16.21 12.34 -Change in Accounts Receivable (50.30) (3.60) (19.73) (27.18) (21.33) (16.24) -Change in Inventories (89.12) (6.38) (34.95) (48.16) (37.79) (28.77) -Change in Other Current Assets (8.64) (0.62) (3.39) (4.67) (3.67) (2.79)Net Cash Flow from Operating Activities 2201.09 2312.85 2192.33 2305.31 2351.55 2338.42

Cash Flow from Investing Activities: -Capital Expenditures (720.00) (691.50) (705.33) (720.85) (736.71) (752.91) -Change in Other Assets (18.33) (1.31) (7.19) (9.91) (7.77) (5.92)Net Cash Flow from Investing Activities (738.33) (692.81) (712.52) (730.75) (744.48) (758.83)

Cash Flow from Financing Activities: +Change in Current Debt 49.00 2231.00 (2074.00) (275.00) 401.14 16.87 +Proceeds from Issuance of Long-Term Debt (1550.67) (7.61) 6.11 14.28 13.25 12.56 +Change in Other Liabilities 40.52 2.90 15.89 21.89 17.18 13.08 +Payment of Dividends (268.08) (305.55) (343.55) (381.87) (420.51) (459.47) +Proceeds from Issuance of Common Equity 53.94 53.94 53.94 53.94 53.94 53.94 +Changes in Treasury Stock (23.09) (0.29) (0.00) (0.00) (0.00) (0.00)Net Cash Flow from Financing Activities (1698.38) 1974.40 (2341.61) (566.75) 65.01 (363.01)

Increase (Decrease) in Cash and Cash Equivalents (235.62) 3594.44 (861.80) 1007.80 1672.09 1216.58Cash and Cash Equivalents at Beginning of Year 349.00 113.38 3707.82 2846.02 3853.82 5525.91Cash and Cash Equivalents at End of Year 113.38 3707.82 2846.02 3853.82 5525.91 6742.49

Tyson Foods, Inc.Common Size Income Statement

Fiscal Years Ending Sep. 30 2014 2015 2016 2017E 2018E 2019E 2020E 2021E CV 2022ESales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%Cost of Sales 91.44% 88.81% 85.35% 85.35% 85.35% 85.35% 85.35% 85.35% 85.35%Depreciation 1.31% 1.47% 1.67% 1.62% 1.65% 1.65% 1.64% 1.64% 1.65%Amortization 0.11% 0.31% 0.27% 0.28% 0.27% 0.27% 0.26% 0.26% 0.26%Gross Profit 7.14% 9.47% 12.74% 12.78% 12.76% 12.77% 12.78% 12.79% 12.79%Selling, General and Administrative 3.34% 4.22% 5.05% 5.05% 5.05% 5.05% 5.05% 5.05% 5.05%Operating Income 3.81% 5.24% 7.68% 7.73% 7.71% 7.71% 7.73% 7.73% 7.73%Other (Income) Expense: Interest income -0.02% -0.02% -0.02% 0.02% 0.01% 0.23% 0.17% 0.23% 0.32%Interest expense 0.35% 0.71% 0.68% 0.89% 0.67% 0.97% 0.67% 0.63% 0.68%Other, net 0.14% -0.09% -0.02% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Total Other (Income) Expense 0.47% 0.60% 0.64% 0.91% 0.68% 1.20% 0.85% 0.86% 1.00%Income from Continuing Operations before Income Taxes 3.33% 4.64% 7.04% 6.82% 7.03% 6.51% 6.88% 6.88% 6.73%Income Tax Expense 1.05% 1.68% 2.24% 2.68% 2.77% 2.59% 2.73% 2.69% 2.65%Income from Continuing Operations 2.28% 4.14% 4.26% 3.92% 4.16% 4.18% 4.07%Loss from Discontinued Operation, Net of Tax 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Net Income 2.28% 2.96% 4.80% 4.14% 4.26% 3.92% 4.16% 4.18% 4.07%Less: Net Loss Attributable to Noncontrolling Interests -0.02% 0.01% 0.01% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Net Income Attributable to Tyson 2.30% 2.95% 4.79% 4.14% 4.26% 3.92% 4.16% 4.18% 4.07%Amounts Attributable to Tyson: 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Net Income Attributable to Tyson 2.30% 2.95% 4.79% 4.14% 4.26% 3.92% 4.16% 4.18% 4.07%

Tyson Foods, Inc.Common Size Balance Sheet

Fiscal Years Ending Sep. 30 2014 2015 2016 2017E 2018E 2019E 2020E 2021E CV 2022EAssetsCurrent Assets:Cash and cash equivalents 1.17% 1.66% 0.95% 0.31% 10.05% 7.72% 10.45% 14.98% 18.28%Accounts receivable, net 4.48% 3.92% 4.18% 4.32% 4.33% 4.38% 4.45% 4.51% 4.56%Inventories 8.71% 6.96% 7.41% 7.65% 7.67% 7.76% 7.89% 7.99% 8.07%Other current assets 1.01% 0.47% 0.72% 0.74% 0.74% 0.75% 0.77% 0.78% 0.78%Assets held for sale 1.19% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Total Current Assets 16.55% 13.01% 13.25% 13.02% 22.79% 20.61% 23.56% 28.27% 31.69%Net Property, Plant and Equipment 13.65% 12.51% 14.02% 14.30% 14.46% 14.65% 14.85% 15.08% 15.32%Goodwill 17.84% 16.11% 18.08% 18.08% 18.08% 18.08% 18.08% 18.08% 18.08%Intangible Assets 14.04% 12.49% 13.78% 13.53% 13.29% 13.05% 12.81% 12.58% 12.35%Other Assets 1.66% 1.39% 1.52% 1.57% 1.58% 1.60% 1.62% 1.64% 1.66%Total Assets 63.75% 55.52% 60.66% 60.50% 70.20% 67.99% 70.93% 75.65% 79.10%

Liabilities and Shareholders’ EquityCurrent Liabilities:Current debt 1.71% 1.73% 0.21% 0.35% 6.40% 0.77% 0.03% 1.11% 1.16%Accounts payable 4.81% 4.02% 4.10% 4.23% 4.24% 4.29% 4.36% 4.42% 4.46%Other current liabilities 3.21% 2.80% 3.18% 3.28% 3.29% 3.33% 3.39% 3.43% 3.46%Liabilities held for sale 0.38% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Total Current Liabilities 10.10% 8.54% 7.49% 7.86% 13.93% 8.39% 7.78% 8.97% 9.09%Long-Term Debt 20.05% 14.44% 16.81% 12.61% 12.59% 12.60% 12.64% 12.68% 12.71%Deferred Income Taxes 6.52% 5.92% 6.90% 6.83% 6.75% 6.68% 6.61% 6.53% 6.46%Other Liabilities 3.38% 3.15% 3.37% 3.48% 3.49% 3.53% 3.59% 3.63% 3.67%Shareholders’ Equity:Common Equity 11.44% 10.51% 11.92% 12.07% 12.22% 12.36% 12.51% 12.66% 12.80%Retained earnings 15.30% 16.47% 22.63% 26.19% 29.76% 32.94% 36.34% 39.71% 42.91%Accumulated other comprehensive loss -0.39% -0.22% -0.12% -0.12% -0.12% -0.12% -0.12% -0.12% -0.12%Treasury stock, at cost – 40 million shares in 2014 and 48 million shares in 2013 -2.69% -3.34% -8.39% -8.45% -8.45% -8.45% -8.45% -8.45% -8.45%Total Tyson Shareholders’ Equity 23.66% 23.42% 26.05% 29.69% 33.41% 36.74% 40.27% 43.80% 47.14%Noncontrolling Interests 0.04% 0.04% 0.04% 0.04% 0.04% 0.04% 0.04% 0.04% 0.04%Total Shareholders’ Equity 23.69% 23.46% 26.09% 29.73% 33.45% 36.78% 40.32% 43.84% 47.18%Total Liabilities and Shareholders’ Equity 63.75% 55.52% 60.66% 60.50% 70.20% 67.99% 70.93% 75.65% 79.10%

Tyson Foods, Inc.Value Driver Estimationin millionsFiscal Years Ending Sep. 30 2014 2015 2016 2017E 2018E 2019E 2020E 2021E 2022ENOPLAT 2,997.35 1,462.63 2,110.41 1,863.75 1,854.30 1,867.81 1,903.15 1,940.94 1,948.23 Operating Revenues 37,580.00 41,373.00 36,881.00 38,084.11 38,170.29 38,642.08 39,292.19 39,802.38 40,190.80 -Cost of Goods Sold 34,365.00 36,745.00 31,479.00 32,505.89 32,579.45 32,982.13 33,537.02 33,972.48 34,304.01 -SGA 1,255.00 1,748.00 1,864.00 1,924.81 1,929.16 1,953.01 1,985.86 2,011.65 2,031.28 -Depreciation 494.00 609.00 617.00 617.37 629.62 637.01 645.17 654.21 664.06 + Implied Interest on Operating Leases 11.95 14.85 17.69 15.48 15.78 15.97 16.17 16.40 16.65 EBITA 1,477.95 2,285.85 2,938.69 3,051.52 3,047.84 3,085.90 3,140.31 3,180.44 3,208.10

Income Tax Provision 396.00 697.00 826.00 1,019.41 1,057.39 1,001.24 1,071.25 1,071.31 1,066.39 +Tax Sheild on Interest Expense 53.59 122.77 93.87 132.45 101.26 149.68 105.03 98.33 107.84 -Tax on Interest (or Investment) Income 2.84 3.77 2.26 (3.22) (1.05) (34.66) (26.49) (35.46) (51.22) +Tax Sheild on Interest on Operating Leases 4.85 6.22 6.67 6.07 6.22 6.35 6.41 6.42 6.57 Less: Adjusted Taxes 451.60 822.22 924.28 1,161.15 1,165.92 1,191.93 1,209.17 1,211.52 1,232.01

Deferred Tax Liability 2,450.00 2,449.00 2,545.00 2,518.37 2,490.75 2,464.60 2,436.61 2,408.63 2,380.77 -Previous Year Deferred Tax Liability 479.00 2,450.00 2,449.00 2,545.00 2,518.37 2,490.75 2,464.60 2,436.61 2,408.63 Plus: Deferred Taxes 1,971.00 (1.00) 96.00 (26.63) (27.62) (26.15) (27.98) (27.98) (27.86)

Invested Capital (IC) 12,800.50 12,312.51 12,156.09 11,976.52 12,202.74 12,206.45 12,227.04 12,250.77 12,277.84 Operating Current Assets: 5,692.61 5,084.51 4,888.00 4,800.44 5,058.88 5,121.40 5,207.57 5,275.18 5,326.66 Normal Cash 355.61 391.51 349.00 113.38 361.20 365.66 371.82 376.64 380.32 Accounts Receivable 1,684.00 1,620.00 1,542.00 1,592.30 1,595.91 1,615.63 1,642.81 1,664.14 1,680.38 Inventories 3,274.00 2,878.00 2,732.00 2,821.12 2,827.51 2,862.45 2,910.61 2,948.40 2,977.18 Other Current Assets 379.00 195.00 265.00 273.64 274.26 277.65 282.33 285.99 288.78 Operating Current Liabilities: 3,013.00 2,820.00 2,683.00 2,770.52 2,776.79 2,811.11 2,858.41 2,895.52 2,923.78 Accounts Payable 1,806.00 1,662.00 1,511.00 1,560.29 1,563.82 1,583.15 1,609.79 1,630.69 1,646.60 Other Current Liabilities 1,207.00 1,158.00 1,172.00 1,210.23 1,212.97 1,227.96 1,248.62 1,264.84 1,277.18 Operating Working Capital 2,679.61 2,264.51 2,205.00 2,029.92 2,282.08 2,310.29 2,349.16 2,379.66 2,402.88

Plus: Net PPE 5,130.00 5,176.00 5,170.00 5,272.63 5,334.51 5,402.83 5,478.50 5,561.00 5,649.85

Plus: PV of Operating Leases 361.89 431.00 377.09 384.58 389.09 394.08 399.60 405.61 412.09

Intangible Assets 5,276.00 5,168.00 5,084.00 4,991.57 4,900.82 4,811.72 4,724.25 4,638.36 4,554.03 Other Assets 623.00 577.00 562.00 580.33 581.65 588.84 598.74 606.52 612.44 Plus: Other Long-Term Operating Assets 5,899.00 5,745.00 5,646.00 5,571.90 5,482.47 5,400.56 5,322.99 5,244.87 5,166.47

Less: Other Long-Term Operating Liabilities 1,270.00 1,304.00 1,242.00 1,282.52 1,285.42 1,301.31 1,323.20 1,340.38 1,353.46

ROIC (NOPLAT / Beginning Invested Capital) 0.45 0.11 0.17 0.15 0.15 0.15 0.16 0.16 0.16 EP (NOPLAT - (Beginning Invested Capital * WACC)) 2,637.74 774.52 1,448.53 1,210.27 1,210.48 1,211.83 1,246.97 1,283.65 1,289.67 FCF (NOPLAT - Δ Invested Capital) (3,113.62) 1,950.62 2,266.83 2,043.32 1,628.08 1,864.10 1,882.55 1,917.22 1,921.16

Tyson Foods, Inc.Weighted Average Cost of Capital (WACC) Estimation

Cost of EquityRisk-Free Rate 2.79%Risk Premium 4.7%Beta 0.70 Cost of Equity 6.05%

Cost of DebtPre-Tax Cost of Debt 4.10%Marginal Tax Rate 39.44%After-Tax Cast of Debt 2.49%

Value of EquityShare Price $74.14Shares Outstanding 385Value of Equity $28,544

Value of DebtBV of Short-Term Debt 79BV of Long-Term Debt 6,200 PV of Operating Leases 377Value of Debt 6,656$

WeightsEquity 81.1%Debt 18.9%

WACC CalculationCost of Equity 6.05%* Weight of Equity 81.1%After-Tax Cost of Debt 2.49%*Weight of Debt 18.9%WACC 5.38%

Tyson Foods, Inc.Relative Valuation Models

EPS EPSTicker Company Price 2017E 2018E P/E 17 P/E 18ADM Archer-Daniels-Midland Company $39.93 $2.49 $2.85 16.04 14.01 CAG Conagra Brands Inc $34.80 $1.39 $1.88 25.04 18.51 HRL Hormel Foods $32.33 $1.56 $1.64 20.72 19.71 K Kellogg Company $64.70 $3.97 $4.23 16.30 15.30 PPC Pilgrim's Pride Corporation $34.53 $2.62 $2.75 13.18 12.56 SAFM Sanderson Farms, Inc. $158.51 $12.67 $11.55 12.51 13.72

Average 17.30 15.64

TSN Tyson Foods, Inc. $74.14 $ 4.43 $ 4.54 16.7 16.3

Implied Relative Value: P/E (EPS17) $ 76.59 P/E (EPS18) 70.98$

Tyson Foods, Inc.Discounted Cash Flow (DCF) and Economic Profit (EP) Valuation Models

Key Inputs: CV Growth 0.98% CV ROIC 15.90% WACC 5.38% Cost of Equity 6.05%

Fiscal Years Ending Sep. 30 2017E 2018E 2019E 2020E 2021E 2022E

DCF Model Free Cash Flow 2043.32 1628.08 1864.10 1882.55 1917.22 Continuing Value 41562.66 Future Cash Flows 2043.32 1628.08 1864.10 1882.55 1917.22 41562.66 Discount Periods 1.00 2.00 3.00 4.00 5.00 5.00 Discounted Cash Flows 1939.08 1466.21 1593.12 1526.81 1475.60 31989.07

Value of Operating Assets 39989.89 Other Assets 562.00 Current Debt (79.00) Long-Term Debt (6200.00) Other Liabilities (1242.00) PV of Operating Leases (377.09) Underfunded Post Retirement Liabilities (372.00) Contingent Lawsuit Liabilities (88.00) ESOP (481.48)Value of Equity 31712.31Shares Outstanding 371.21Intrinsic Stock Price 85.43$ Adjusted Stock Price 85.85$

EP Model Economic Profit 1210.27 1210.48 1211.83 1246.97 1283.65 Continuing Value 29311.89 Future Cash Flows 1210.27 1210.48 1211.83 1246.97 1283.65 29311.89 Discount Periods 1.00 2.00 3.00 4.00 5.00 5.00PV of Cash Flows 1148.53 1090.13 1035.67 1011.34 987.98 22560.16

PV of Economic Profit 27833.79Plus: Beginning IC 12156.09Value of Operating Assets 39989.89 Other Assets 562.00 Current Debt (79.00) Long-Term Debt (6200.00) Other Liabilities (1242.00) PV of Operating Leases (377.09) Underfunded Post Retirement Liabilities (372.00) Contingent Lawsuit Liabilities (88.00) ESOP (481.48)Value of Equity 31712.31Shares Outstanding 371.21Intrinsic Stock Price 85.43$ Adjusted Stock Price 85.85$

Tyson Foods, Inc.Dividend Discount Model (DDM) or Fundamental P/E Valuation Model

Key Assumptions CV growth 0.98% CV ROE 9.41% Cost of Equity 6.05%

Fiscal Years Ending Sep. 30 2017E 2018E 2019E 2020E 2021E 2022CVEPS $ 4.43 $ 4.54 $ 4.22 $ 4.52 $ 4.59 $ 4.50 Future Cash Flows P/E Multiple (CV Year) 17.67 EPS (CV Year) 4.50$ Future Stock Price 79.42$ Dividends Per Share 0.75$ 0.85$ 0.95$ 1.05$ 1.15$ Future Cash Flows 0.75$ 0.85$ 0.95$ 1.05$ 1.15$ 79.42$ Discount Periods 1 2 3 4 5 5 Discounted Cash Flows 0.71$ 0.76$ 0.80$ 0.83$ 0.86$ 59.21$

Intrinsic Value 63.16$ Adjusted Stock Price $63.47

Tyson Foods, Inc.Key Management Ratios

Fiscal Years Ending Sep. 30 2014 2015 2016 2017E 2018E 2019E 2020E 2021E 2022E

Liquidity RatiosCurrent Ratio = Current Assets / Current Liabilities 0.12 0.19 0.13 0.04 0.72 0.92 1.34 1.67 2.01 Quick Ratio = (Cash Equivalents + Accounts Receivables) / Current Liabilites 0.56 0.65 0.68 0.59 1.03 1.44 1.92 2.17 2.51

Activity or Asset-Management RatiosInventory Turnover = Cost of Goods Sold / Average Inventory 11.28 11.95 11.22 11.71 11.54 11.59 11.62 11.60 11.58Inventory Period = 365 / Inventory Turnover 32.35 30.55 32.52 31.18 31.64 31.48 31.42 31.47 31.52Asset Turnover = Sales / Total Assets 1.57 1.80 1.65 1.71 1.47 1.54 1.50 1.43 1.38

Financial Leverage RatiosDebt to Equity = Total Liabilities / Stockholder's Equity 1.69 1.37 1.32 1.03 1.10 0.85 0.76 0.73 0.68

Profitability RatiosGross Margin = Gross Profit / Sales 7.14% 9.47% 12.74% 12.78% 12.76% 12.77% 12.78% 12.79% 12.79%Net Profit Margin = Net Income / Sales 2.30% 2.95% 4.79% 4.14% 4.26% 3.92% 4.16% 4.18% 4.07%Return on Assets = Net Income / Average Total Assets 4.78% 5.20% 7.80% 7.06% 6.74% 5.95% 6.38% 6.16% 5.74%Return on Equity = Net Income / Stockholder's Equity 9.70% 12.57% 18.37% 14.40% 13.17% 11.18% 10.98% 10.30% 9.41%

Payout Policy RatiosPayout Ratio = Dividends / Earnings 0.13 0.14 0.14 0.17 0.19 0.23 0.24 0.26 0.29 Total Payout Ratio =(Dividends + Repurchases) / Net Income 0.47 0.52 1.22 0.18 0.19 0.23 0.23 0.25 0.28

Present Value of Operating Lease Obligations (2016) Present Value of Operating Lease Obligations (2015) Present Value of Operating Lease Obligations (2014)

Present Value of Operating Lease Obligations (2013) Present Value of Operating Lease Obligations (2012) Present Value of Operating Lease Obligations (2011)

Operating Operating Operating

Operating Operating Operating

Fiscal Years Ending Sep. 30 Leases Fiscal Years Ending Sep. 30 Leases Fiscal Years Ending Sep. 30 Leases

Fiscal Years Ending Sep. 30 Leases Fiscal Years Ending Sep. 30 Leases Fiscal Years Ending Sep. 30 Leases

2017 118 2016 125 2015 107

2014 97 2013 101 2012 95

2018 79 2017 85 2016 68

2015 57.5 2014 59.5 2013 51

2019 79 2018 85 2017 68

2016 57.5 2015 59.5 2014 51

2020 36.5 2019 43.5 2018 34.5

2017 21.5 2016 26.5 2015 15.5

2021 36.5 2020 43.5 2019 34.5

2018 21.5 2017 26.5 2016 15.5

Thereafter 78 Thereafter 111 Thereafter 104

Thereafter 78 Thereafter 55 Thereafter 54

Total Minimum Payments 427 Total Minimum Payments 493 Total Minimum Payments 416

Total Minimum Payments 333 Total Minimum Payments 328 Total Minimum Payments 282

Less: Interest 50 Less: Interest 62 Less: Interest 54

Less: Interest 42 Less: Interest 37 Less: Interest 32

PV of Minimum Payments 377 PV of Minimum Payments 431 PV of Minimum Payments 362

PV of Minimum Payments 291 PV of Minimum Payments 291 PV of Minimum Payments 250

Effects of ESOP Exercise and Share Repurchases on Common Stock Balance Sheet Account and Number of Shares Outstanding

Number of Options Outstanding (shares): 11,191,656Average Time to Maturity (years): 7.00Expected Annual Number of Options Exercised: 1,598,808

Current Average Strike Price: 33.74$ Cost of Equity: 9.00%Current Stock Price: $74.14

2017E 2018E 2019E 2020E 2021E 2022EIncrease in Shares Outstanding: 1,598,808 1,598,808 1,598,808 1,598,808 1,598,808 1,598,808Average Strike Price: 33.74$ 33.74$ 33.74$ 33.74$ 33.74$ 33.74$ Increase in Common Stock Account: 53,943,782 53,943,782 53,943,782 53,943,782 53,943,782 53,943,782

Change in Treasury Stock 1,712,000,000 23,091,449 285,741 3,244 34 0Expected Price of Repurchased Shares: $74.14 80.81$ 88.09$ 96.01$ 104.65$ 114.07$ Number of Shares Repurchased: 23,091,449 285,741 3,244 34 0 0

Shares Outstanding (beginning of the year) 315,000,000 293,507,359 294,820,427 296,415,991 298,014,765 299,613,573Plus: Shares Issued Through ESOP 1,598,808 1,598,808 1,598,808 1,598,808 1,598,808 1,598,808Less: Shares Repurchased in Treasury 23,091,449 285,741 3,244 34 0 0 Shares Outstanding (end of the year) 293,507,359 294,820,427 296,415,991 298,014,765 299,613,573 301,212,381

VALUATION OF OPTIONS GRANTED IN ESOP

Ticker Symbol TSNCurrent Stock Price $74.14Risk Free Rate 2.79%Current Dividend Yield 1.60%Annualized St. Dev. of Stock Returns 38.80%

Average Average B-S ValueRange of Number Exercise Remaining Option of OptionsOutstanding Options of Shares Price Life (yrs) Price GrantedRange 1 11,191,656 33.74 7.00 43.02$ 481,482,255$ Total 11,191,656 33.74$ 7.00 50.20$ 481,482,255$

Tyson Foods, Inc.Key Assumptions

Share Price Share Price85.85$ 0.671 0.681 0.691 0.701 0.711 0.721 0.731 85.85$ 3.80% 3.90% 4.00% 4.10% 4.20% 4.30% 4.40%4.35% 93.00$ 92.03$ 91.08$ 90.15$ 89.23$ 88.33$ 87.44$ 39.14% 86.64$ 86.36$ 86.07$ 85.79$ 85.51$ 85.24$ 84.96$ 4.45% 91.51$ 90.55$ 89.61$ 88.68$ 87.76$ 86.86$ 85.98$ 39.24% 86.66$ 86.37$ 86.09$ 85.81$ 85.53$ 85.25$ 84.98$ 4.55% 90.07$ 89.11$ 88.17$ 87.24$ 86.33$ 85.44$ 84.56$ 39.34% 86.67$ 86.39$ 86.11$ 85.83$ 85.55$ 85.27$ 85.00$ 4.65% 88.66$ 87.71$ 86.77$ 85.85$ 84.94$ 84.05$ 83.18$ 39.44% 86.69$ 86.41$ 86.13$ 85.85$ 85.57$ 85.29$ 85.02$ 4.75% 87.29$ 86.34$ 85.41$ 84.49$ 83.59$ 82.70$ 81.83$ 39.54% 86.71$ 86.43$ 86.15$ 85.87$ 85.59$ 85.31$ 85.04$ 4.85% 85.95$ 85.01$ 84.08$ 83.16$ 82.26$ 81.38$ 80.51$ 39.64% 86.73$ 86.45$ 86.17$ 85.89$ 85.61$ 85.33$ 85.06$ 4.95% 84.65$ 83.71$ 82.78$ 81.87$ 80.98$ 80.10$ 79.23$ 39.74% 86.75$ 86.46$ 86.18$ 85.91$ 85.63$ 85.35$ 85.08$

Share Price Share Price85.85$ 3.88% 4.38% 4.88% 5.38% 5.88% 6.38% 6.88% 85.85$ 2.49% 2.59% 2.69% 2.79% 2.89% 2.99% 3.09%0.68% 130.60$ 110.00$ 94.31$ 81.95$ 71.97$ 63.74$ 56.84$ 15.60% 91.97$ 89.82$ 87.74$ 85.74$ 83.81$ 81.95$ 80.16$ 0.78% 133.93$ 112.32$ 95.98$ 83.19$ 72.91$ 64.47$ 57.41$ 15.70% 92.01$ 89.85$ 87.78$ 85.78$ 83.85$ 81.99$ 80.19$ 0.88% 137.47$ 114.77$ 97.74$ 84.49$ 73.89$ 65.22$ 58.00$ 15.80% 92.05$ 89.89$ 87.81$ 85.81$ 83.88$ 82.02$ 80.23$ 0.98% 141.26$ 117.36$ 99.59$ 85.85$ 74.91$ 66.00$ 58.60$ 15.90% 92.09$ 89.93$ 87.85$ 85.85$ 83.92$ 82.06$ 80.26$ 1.08% 145.32$ 120.11$ 101.53$ 87.27$ 75.98$ 66.81$ 59.23$ 16.00% 92.13$ 89.97$ 87.89$ 85.88$ 83.95$ 82.09$ 80.29$ 1.18% 149.68$ 123.03$ 103.58$ 88.76$ 77.09$ 67.66$ 59.88$ 16.10% 92.17$ 90.00$ 87.92$ 85.92$ 83.99$ 82.12$ 80.33$ 1.28% 154.38$ 126.14$ 105.74$ 90.32$ 78.24$ 68.53$ 60.55$ 16.20% 92.20$ 90.04$ 87.96$ 85.95$ 84.02$ 82.16$ 80.36$

Share Price Share Price85.85$ 82.35% 83.35% 84.35% 85.35% 86.35% 87.35% 88.35% 85.85$ 677 697 717 737 757 777 7973.55% 133.71$ 123.07$ 112.44$ 101.80$ 91.17$ 80.53$ 69.90$ 11.45% 86.43$ 86.38$ 86.34$ 86.30$ 86.25$ 86.21$ 86.17$ 4.05% 128.39$ 117.75$ 107.12$ 96.48$ 85.85$ 75.21$ 64.58$ 11.55% 86.28$ 86.23$ 86.19$ 86.15$ 86.10$ 86.06$ 86.02$ 4.55% 123.07$ 112.44$ 101.80$ 91.17$ 80.53$ 69.90$ 59.26$ 11.65% 86.13$ 86.08$ 86.04$ 86.00$ 85.95$ 85.91$ 85.87$ 5.05% 117.75$ 107.12$ 96.48$ 85.85$ 75.21$ 64.58$ 53.94$ 11.75% 85.98$ 85.93$ 85.89$ 85.85$ 85.81$ 85.76$ 85.72$ 5.55% 112.44$ 101.80$ 91.17$ 80.53$ 69.90$ 59.26$ 48.63$ 11.85% 85.83$ 85.78$ 85.74$ 85.70$ 85.66$ 85.61$ 85.57$ 6.05% 107.12$ 96.48$ 85.85$ 75.21$ 64.58$ 53.94$ 43.31$ 11.95% 85.68$ 85.64$ 85.59$ 85.55$ 85.51$ 85.46$ 85.42$ 6.55% 101.80$ 91.17$ 80.53$ 69.90$ 59.26$ 48.63$ 37.99$ 12.05% 85.53$ 85.49$ 85.44$ 85.40$ 85.36$ 85.31$ 85.27$

CV NOPLAT Growth CV ROIC Growth

COGS (% of Sales) 2016 Capital Expenditures (in millions)

SGA (% of Sales)2017 Depreciation (% of Net

PPE)

Beta Pre-Tax Cost of Debt

Risk Premium Marginal Tax Rate

WACC Risk-Free Rate