tsn investor ion 12072011
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Investor PresentationTyson Foods, Inc.
December 7, 2011
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Tyson Foods is one of the worlds largest proteincompanies and the second largest foodproduction company in the Fortune500
We produce approximately one out of every fivepounds of chicken, beef and pork consumed inthe United States
Tyson is one of Americas most recognized
brands
$32 billion in revenue in 2011
61 Chicken Plants
12 Beef Plants (incl. case-ready beef and pork)
9 Pork Plants (incl. case-ready beef and pork)
23 Prepared Foods Plants
115,000 Team Members
Company Overview
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#1 OR #2 MARKET SHARE POSITION
Domestic Market Share
CHICKEN BEEF PORK
Source:Watt Poultry USA, February 2011
Tyson22%
Source:Cattle Buyers WeeklyTop 30 Beef Packers % of Capacity, 2010
Source:National Pork Board, Spring 2009(most recent available)
Smithfield28%Hormel8%
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Tysons Objectives
Be our customers Go-To Supplier Create innovative and insight-driven food solutions Help our customers succeed
Be the Best in Class protein manufacturer Optimize commodity businesses Drive efficiencies; markets do not allow inefficiencies to be passed along
Build a multinational enterprise Mexico, Brazil, China, India Worldwide sales offices
Upgrade raw materials Commercialize opportunities such as renewable energy from fat Develop other technologically-advanced platforms from materials
such as feathers
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Customer Relationships
Food Service Retail
http://www.sysco.com/home.htmlhttp://www.ruthschris.com/ -
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Sam Fentress / Courtesy HOK
Innovative Food Solutions
19 Kitchens with a total of 20,000square feet of kitchen space
40,000 square foot USDAinspected pilot production plant
40,000 square foot office spaceincluding sensory area, consumerfocus group room and meeting
space
NEED: Foodservice operators need products thatare perceived as a good value for their customers,
but without compromising quality or increasing foodcosts.SOLUTION: Tyson Foodservice launches a valueline of chicken and beef items that help operatorsappeal to the taste buds and pocketbooks of theircustomers.
NEED: Consumers want upscale flavors andrestaurant quality, but time and money are in
tighter supply.SOLUTION: Tyson Consumer Products usesconsumer insights and culinary expertise toenhance the line of Tyson Dinner Meats givingconsumers the most flavor for their dollars.
Solutions in Food Service Solutions in Retail
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Protein & Prepared Foods Capabilities
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U.S. Operations
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International Operations
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Chicken Sales by Distribution ChannelFY2011
International Chicken Sales*FY2011
Normalized operating margin range of 5-7%
Operate in all distribution channels
Vertically integrated (purchase grain, produce feed; see page 12)
Chicken Segment
International21%
Other8%
China27%Other
28%
*Includes exports and in-country production
Total: $11.0 billion Total: $2.3 billion
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Vertical Integration
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Improvements in Chicken Segment
Achieved approximately $800 million in operating efficienciesFY 2008 to FY 2011Yields
Labor and line efficienciesProduct mix changesFreight optimizationReduction in live costs
Anticipate delivering $125 million in incremental savingsin FY2012
Operating improvements generated positive earnings in
FY2011, while most other chicken models did not
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Beef Sales by Distribution Channel*FY2011
International Beef SalesFY2011
Beef Segment
Other4%
China13%
Other25%
Total: $ 13.3 billion Total: $2.1 billion
*Excludes $286 million of intersegment sales
Central& SouthAmerica
10%
Not vertically integrated
Purchase cattle from independent producers and feedlots
ConsumerProducts
28%
FoodService
28%
CaseReady10%
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Pork Sales by Distribution Channel*FY2011
International Pork SalesFY2011
Pork Segment
Other11%
Other8%
Total: $ 4.6 billionTotal: $1.0 billion
*Excludes $816 million of intersegment sales
Not vertically integrated
Purchase hogs from independent producers
ConsumerProducts
39%
FoodService
16%
International22%
CaseReady11%
Other12%
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Beef and Pork Segments
Operating Income & Operating Margin
$ in millions Q4 FY11 Q3 FY11 Q2 FY11 Q1 FY11 Q4FY10 Q3 FY10 Q2 FY10 Q1 FY10
Beef
Income $118 $140 $94 $116 $121 $176 $126 $119
Margin 3.4% 4.0% 2.8% 3.6% 4.0% 5.6% 4.5% 4.4%
Pork
Income $113 $124 $146 $177 $125 $125 $69 $62
Margin 7.9% 8.8% 10.5% 14.3% 9.9% 10.0% 6.3% 6.5%
Operating margin Normalized Ranges*
Previous Current
Beef 1.5 - 3% 2.5 4.5%
Pork 3 - 5% 6 8%*Beef and Pork ranges raised May 2010; Pork raised again August 2011
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USDA Beef Industry Spread
$1,200
$1,250
$1,300
$1,350
$1,400
$1,450
$1,500
$1,550
$1,600
$1,650
DOLLARS
PER
HEAD
USDA BEEF TOTAL REVENUE AND CATTLE COST
USDA TOTAL
USDA CATTLE
Strong correlation between revenue and cost of cattle
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USDA Pork Industry Spread
Strong correlation between revenue and cost of hogs
$120
$140
$160
$180
$200
$220
$240
DOLLARSP
ER
HEAD
USDA PORK TOTAL REVENUE AND HOG COST
USDA TOTAL
USDA HOG
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Prepared Foods Segment
Prepared Foods Sales by Distribution ChannelFY2011
International
2%
Other
2%
Pepperoni
Beef and pork pizza toppings
Pizza crustsHams
Flour and corn tortillas and chips
Bacon
Deli Meats
Hot dogs
Fully-cooked dinner meats
Soups
Sauces
AppetizersTotal: $3.2 billion
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Global Protein Fundamentals
Profitability drives production decisions
Input cost volatility is the primary factor in profit/lossCorn and soybeans are the major input costs
Corn and soy pricing became extremely volatile; led to producer
losses in 2008-2009, 2011
Producers worldwide responded with cutbacks in herd/flockReductions in global supplies
Global demand is strong, and the U.S. is an efficient provider
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U.S. Per Capita Protein Consumption
0
20
40
60
80
100
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013P
2016P
2019P
Chicken Beef Pork Turkey
Source:USDA,February2011
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Protein Production Drivers
Contract grower
Feed conversion1.92 : 1
3.7 bushels of cornto produce 100 lbs. ofboneless skinless meat
Independent producer
Feed conversion3.5 : 1
Approx. 8 bushels of cornto produce 100 lbs. ofboneless skinless meat
Independent feedlot
Feed conversion7-9 : 1
Yearling (750 lbs.) fedbeef (300 lbs.) 11 bushelscorn to produce 100 lbs. of
boneless fed beef
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Protein Supply Chain Timelines
Pullet placed
Birth to breeding
Birth to breeding
Hogs = 20 months
Broilers = 9 months
Cattle = 39 months
Pullet Lay
Hatch
House
Birth to Breeding
Birth to Breeding
Gestation
Gestation
W
eanFinish
Wean FeedlotStocker
5 months 1.5 .75 2
8 months 14 2 4.5
13 months 10 8 3 4.5
Significant lead time to increase production
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U.S. corn Usage for Feed, Ethanol & Export
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
Feed & Residual Ethanol for Fuel ExportsSource: USDA
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Live cost ~ $0.25/lb
Live cost ~ $0.35/lb
Live cost ~ $0.45/lb
Corn Price/Live Cost Structural Shift
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Impact of Higher Feed Cost on Production
In reaction to higher feed costs, U.S. broilerproduction decreased by 3.8% from 2008 to
2009. When feed costs moderated in 2010,production quickly returned to 2008 levels.The rapid response for both cutting andadding supply was enabled by broilers shortproduction timeline.
U.S. pork production also declined inreaction to higher feed costs, but theresponse was slower due to the longerproduction timeline for hogs. Productiondecreased by 3.9% from 2008 to 2010, and it
will take time to rebuild the herd to 2008levels.
Sources: Informa & USDA
Sources: Informa & USDA
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Hedging Overview
Best-Practices Risk Oversight Structure
Commodity Risk Management Policy
Daily monitoring and strict enforcement
Focus hedging activities on margin management
Focus sales efforts on high strategic value / low commodity risk relationships
Use more option strategies
Shortened duration of fixed price sales contracts
Shifted to more physical hedging activities for poultry segment
Removes mark-to-market accounting
No margin money is required
Effectively transfers majority of risk to grain producer
Net Result
Less input exposure
Ability to stay closer to the market with input costs
Significantly reduced earnings volatility
Significantly reduced margin deposits
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Global Protein Consumption
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
449%Growthover50Years
MetricTons
inMillions
Source: USDA FAS and OECD. Includes Beef/Veal, Pork, Broilers, and Turkey
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Global Protein Production
0
20,000
40,000
60,000
80,000
100,000
120,000
20012002200320042005200620072008200920102011
World Pork, Beef and Broiler Production2001-2011E
000 Metric Tons
Pork
Beef
Broiler
Source: Robert A. Brown, Inc.
E
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Protein Exports a Major Factor
0%
5%
10%
15%
20%
25%
30%
35%
40%
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
million pounds % of production
Pork
Source: USDA and Robert A. Brown, Inc.November 2011
2011 and 2012 are RAB forecasts
Exports % of ProductionImports Exports
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
-
1,000
2,000
3,000
4,000
5,000
6,000
% of productionmillion pounds
Beef
Chicken
0%
5%
10%
15%
20%
25%
30%
35%
40%
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
% of productionmillion pounds
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U.S. Per Capita Protein Availability & Pricing
Source: Historical Actual Data Source, USDA 2011 and 2012 Forecast by Robert A. Brown, Inc., November 24, 2011.(1) Represents Beef, Pork, Chicken and Turkey. Based on Carcass Weight Equivalent.(2) Annual Composite Average Price is a simple average of monthly USDA retail price for beef, pork and poultry.2011E protein price represents YTD2011, updated November 30, 2011
Lower production coupled with increasing net exports resultingin reduced U.S. protein availability and increased prices
Per Capita Domestic Protein Availability(1) Annual Composite Average Price(2)
251254
261 259
266 265 263 262
270
278 277274
284280
284 283 284 283
276269
266262
255
200
220
240
260
280
300
320
340
200
210
220
230
240
250
260
270
280
290
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 E2012 E
(cents per pound)(pounds per capita)
Combined Beef, Pork, Chicken & Turkey Carcass Weight Equivalent)
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Beef Demand Planes
$90
$100
$110
$120
$130
$140
$150
$160
$170$180
$190
60.0 61.0 62.0 63.0 64.0 65.0 66.0 67.0 68.0 69.0 70.0 71.0 72.0 73.0 74.0 75.0 76.0
$/Cwt.
USA S&H Beef Disappearance Per Cap, Pounds
USA Choice Beef Cutout DemandAnnual, 1996-2012E
02
0304
05
9697
98
99
0001
0607
08
09
10
11E12E
Prepared by Robert A. Brown, Inc.November 30, 2011
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Pork Demand Planes
Prepared by Robert A. Brown, Inc.November 30, 2011
$50
$55
$60
$65
$70
$75$80
$85
$90
$95
$100
59.00 60.00 61.00 62.00 63.00 64.00 65.00 66.00 67.00 68.00 69.00 70.00
$/Cwt.
USA+Canada Pork Disappearance Per Cap, Pounds
USDA Pork Cutout DemandAnnual, 1996-2012E
02
03
04
0596
97
98
99
00
01060708
10
09
11E12E
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Chicken Demand Planes
Prepared by Robert A. Brown, Inc.November 30, 2011
$120
$130
$140
$150
$160
$170
$180
$190
$200
100.0 105.0 110.0 115.0 120.0 125.0
B/SC
hickenBreastPrice,
$/cwt.
Per Cap Broiler Production, pounds
B/S Chicken Breast DemandAnnual, 1998-2012E
98
99
00 01 02
03
04
05
06
07
0809
10
11E
12E
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Chicken Market Data
Source: CME Daily Livestock ReportNovember 28, 2011
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Chicken Market Data
175,000
180,000
185,000
190,000
195,000
200,000
205,000
210,000
215,000
USDA Eggs Set
Source: USDA
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Boneless Skinless Breast Prices Chicken Wing Prices
Whole Bird Prices
10
20
30
40
50
60
70(PerPound)
5YrAvg: 43.3
Current: 53.0
60
65
70
75
80
85
90
95
100( PerPound)
5YrAvg: 83.7
Current:
89.5
Source: Bloomberg, as of 11/25/11
Source: Bloomberg, as of 11/25/11Source: Bloomberg, as of 11/25/11
75
95
115
135
155
175
195
215
5-Yr Avg:151.6Current:145.0
( Per Pound )
50
75
100
125
150
175
200( PerPound)
5YrAvg:122.5
Current: 132.0
Chicken Market Data
Chicken Leg Prices
Source: Bloomberg, as of 11/25/11
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Long-term Fundamentals Generally Favorable
U.S. protein availability per capita
Declined 7% in 3 years and will likely continue to decrease
Meat exports have continued to grow and will likely stay on this trend
Global supply and demand for protein
Lower global supplies
Growing worldwide demand fueled by developing economies
Composite protein pricing has trended up
U.S. is a low-cost producer
However, grain cost volatility like to remain
Effect on production decisions and balance sheets
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Financial Benchmarks
Normalized operating margins for each segment:
Chicken 5.0 7.0%
Beef 2.5 4.5%
Pork 6.0 8.0%
Prepared Foods 4.0 6.0%
Target >20% ROIC for Acquisitions and International Joint Ventures
Profit-improvement CapEx should generate MIRR >20%
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Financial Metrics & Accomplishments
Repurchased, redeemed or retired >$1.6 billion in senior notes since Q2 FY2009
Improved capital structure and balance sheet (as of 2011 fiscal year end):
Net Debt = $1.5 billion
Gross Debt = $2.2 billion
Maintained strong liquidity: $1.6 billion (Target is $1.2 - 1.5 billion)
18.5% ROIC
Refinanced former ABL revolver with new cash flow revolver in February 2011
Obtained credit ratings upgrades from all three major rating agencies
Fitch 2/2011: Upgraded from BB+ to BBB- (Investment Grade)
S&P 2/2011: Upgraded from BB+ to BBB- (Investment Grade)
Moodys 3/2011: Upgraded from Ba2 from Ba1 (1 notch below investment grade
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$810 $638 $120 $18
$1,000
$458
2012 2013 2014 2015 2016 2017 2018 2028
Convertible Notes Senior notes Revolver
Capitalization ($ in millions)
Major Debt Maturity Schedule by Calendar Year ($ mm) As of 10/01/11
A s of 10/ 1/ 11
Revolver $1,000
Outstandings 0
Letters of Credit 158
Available Revolver $842
As of 10/1/ 11
$1.0 bn Revolving Credit Facility due 2016 -
10.50% Senior Notes due 2014 810
6.85% Senior Notes due 2016 6387.00% Notes due 2018 120
7.00% Notes due 2028 18
3.25% Convertible Senior Notes due 2013 458
GO Zone Tax-Exempt Bonds due 2033 (0.14%) 100
Discount on Senior Notes (76)
Other 114
Tot al Debt $2,182Less: Cash (716)
Net Debt $1,465
Strong Capital Structure
Liquidity Profile ($ in millions)
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Strong Financial Position Drives Plans
Continue to invest in the business
FY12 CapEx plan = $800 - $850 million
Poultry production and labor efficiencies, yield improvements and sales channel flexibility
Continuing to build out foreign operations
Continue to reduce debt
No major maturities in FY2012 or FY2013
Opportunistic repurchases
Return capital to shareholders
Reactivated share repurchase program FY2011 repurchases totaled 9.7 million shares for $170 million
12.8 million shares remain authorized for repurchase as of October 1, 2011
Sustain investment grade credit metrics
Net Debt/EBITDA, EBITDA/Interest, Liquidity
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Valuation Presents Investment Opportunity
In all market valuation ratio comparisons, Tyson Foods is significantly lowerthan the mean of its peer group, large cap and small/mid cap food companies
See disclosures on page 45
0.28
2.08
1.51
0.64
- 0.50 1.00 1.50 2.00 2.50
Tyson Foods, Inc.
Large Cap Food
Small & Mid Cap Food
AgribusinessEV/Sales
6.16
13.57
15.30
9.80
- 5.00 10.00 15.00 20.00
Tyson Foods, Inc.
Large Cap Food
Small & Mid Cap Food
Agribusiness
EV/EBIT
4.42
11.14
11.76
6.83
- 2.00 4.00 6.00 8.00 10.00 12.00 14.00
Tyson Foods, Inc.
Large Cap Food
Small & Mid Cap Food
Agribusiness
EV/EBITDA
-
5.0
10.0
15.0
20.0
25.0
2011 2012
Calendar P/E
Tyson Foods, Inc. Large Cap FoodSmall & Mid Cap Food Agribusiness
Enterprise Value Multiples LTM, Bloomberg, December 2011
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Strong balance sheet and improved capital structureAs of Q411, liquidity of $1.6 billion and Gross Debt/EBITDA
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Disclosures
12 Months Ended
October 1, 2011 October 2, 2010
Net income $733 $765Less: Interest income (11) (14)
Add: Interest expense 242 347
Add: Income tax expense 341 438
Add: Depreciation 433 416
Add: Amortization (a) 29 35
EBITDA $1,767 $1,987
Total gross debt $2,182 $2,536Less: Cash and cash equivalents (716) (978)
Total net debt $1,466 $1,558
Ratio Calculations:
Gross debt/EBITDA 1.2x 1.3x
Net debt/EBITDA 0.8x 0.8x
Tyson Foods, Inc.
EBITDA Reconciliations(in millions) (unaudited)
(a) Excludes the amortization of debt discount expense of $44 million and $46 million for the 12 months ended October 1, 2011, and October 2, 2010,respectively, as it is included in Interest expense.
EBITDA represents net income, net of interest, income tax and depreciation and amortization. EBITDA is presented as a supplemental financial measurement inthe evaluation of our business. We believe the presentation of this financial measure helps investors to assess our operating performance from period to period andenhances understanding of our financial performance and highlights operational trends. This measure is widely used by investors and rating agencies in thevaluation, comparison, rating and investment recommendations of companies. However, the measurement of EBITDA may not be comparable to those of othercompanies in our industry, which limits its usefulness as a comparative measure. EBITDA is not a measure required by or calculated in accordance with GAAP andshould not be considered as a substitute for net income or any other measure of financial performance reported in accordance with GAAP or as a measure of
operating cash flow or liquidity. EBITDA is a useful tool for assessing, but is not a reliable indicator of, our ability to generate cash to service our debt obligationsbecause certain of the items added to net income to determine EBITDA involve outlays of cash. As a result, actual cash available to service our debt obligations willbe different from EBITDA. Investors should rely primarily on our GAAP results, and use non-GAAP financial measures only supplementally, in making investmentdecisions