Tyson Foods, Inc.

Good morning and welcome to the Tyson Foods second quarter 2020 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to John Cottle, Vice President of Investor Relations. Please go ahead.

Good morning, and welcome to the Tyson Foods Incorporated Earnings Conference call for the second quarter of fiscal 2020. On today's call are Noel White, Chief Executive Officer, Dean Banks, President, and Stuart Glenn-Dinning, our Chief Financial Officer. Lies accompanying today's prepared remarks are available as a supplemental report in the Resource Center of the Tyson Investor website at ir.tyson.com. Tyson Foods issued an earnings release this morning, which has been furnished to the SEC on Form 8K and is available on our website at ir.tyson.com. Our remarks today include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements reflect current views with respect to future events, such as Tyson's outlook for future performance on sales, margin, earnings growth, and various other aspects of its business. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. I encourage you to read the release issued earlier this morning and our filings with the SEC for a discussion of the risks that can affect our business, including those listed in our 10-Q file this morning, our most recent annual report on Form 10-K, and our current report on Form 8-K, filed March 13, 2020. I would like to remind everyone that this call is being recorded on Monday, May 4, at 9 a.m. Eastern Time. A replay of today's call will be available on our website approximately one hour after the conclusion of this call. This broadcast is the property of Tyson Foods and any redistribution, retransmission, or rebroadcast of this call in any form without the express written consent of Tyson Foods is strictly prohibited. Please note that our references to earnings per share, operating income, and operating margin in today's remarks are on an adjusted basis unless otherwise noted. For reconciliations to our GAAP results, please refer to this morning's press release. I'll now turn the call over to Noel White.

Thank you, John, and good morning, everyone. We have a lot to cover today, but I want to start by saying how proud I am of our team members and the work they're doing to help feed America during this difficult time. I'll then touch briefly on our operations and results. Dean will go into further detail about our current operations and Stuart will handle the financial update from this quarter. Day in and day out, in the midst of the challenges so many families are facing during this pandemic, Our team members are going above and beyond to help us maintain a healthy and stable food supply to our nation and the world. From the bottom of my heart, I want to say thank you to all of them. They're truly central to everything we're doing right now. Our number one priority is ensuring their health and safety. The only way we can operate this business is for our team members to feel safe, protected, and not fearful of coming to work. It's why we've put in places a host of safeguards and guidelines at all of our facilities to protect our teams. And as we've shown in the recent days, we will not hesitate to idle any plant for deep cleaning when the need arises. Simply put, we will not send anyone into our plants to work unless we are confident that it is safe. And to do that, we have transformed how we operate. Today, if you visit our facilities, you'll see state of the art health checkpoints at the entrance, and inside you'll see team members wearing proper personal protective equipment, including face masks. You'll also see tools to help with social distancing. We've installed partitions on production lines and in break rooms. And we've stepped up our efforts to clean and sterilize everything we can. Education is an important part of this effort, and we're doing our best to ensure our team members understand how they can stay safe at work and at home. Soon, team members will have onsite access to COVID-19 testing and other medical care through our new partnership with Matrix Medical Network, a leading provider of mobile health clinics. We also continue to work closely with federal, state, and local health and safety authorities. Last week, as you know, the US government recognizes the essential work our team members do by reaffirming meat and poultry processors as a critical part of America's infrastructure. The President's executive order under the Defense Production Act establishes clear lines of authority and consistent standards that will help us continue to provide American families with reliable supply of beef, pork, and poultry. I'd now like to briefly talk about the state of our operation. Over the last several weeks, we've had to idle several facilities temporarily for deep cleaning and others are not operating at full capacity due to worker shortages. Despite our slower lines and lower volumes resulting from this pandemic, we believe our core business and financial strength position us well to deliver market share and earnings growth over the long term. And while COVID-19 has been disruptive, We do not believe it changes the outlook for a strong future for Tyson Foods. Now a quick summary of the quarterly results. Second quarter sales increased to a record $10.9 billion. That's an increase of more than 4% over last year. This growth was driven by volume increases of 2.6% and price increases of 1.6%. Our adjusted earnings of 77 cents per share were driven by typical seasonality, soft-chicken pricing, and the impacts of COVID-19. In addition, we experienced $115 million in negative derivative mark-to-market adjustments that Dean will discuss in further detail. Important to note that we expect to benefit from the physical offsets associated with these transactions in future periods. From a global perspective, exports to many parts of the world performed well throughout the period. During the second quarter, We saw particular strength in exports to Japan and Mexico with double digit increases in our market share. Recent data indicates China is reopening its economy, which is encouraging signal of domestic protein disappearance. Lower levels of supply caused by African swine fever continue to present opportunities to fulfill international demand. Now let's talk about the current operating environment. The COVID-19 pandemic in the United States has had a significant impact on our channel mix with increased retail and plummeting food service demand. From a supply chain perspective, where possible, our facilities have adapted to new product mixes, which has enabled us to ship millions of pounds per week between channels and has set us apart from many of our competitors. Food service customers have also reacted, with high levels of innovation and adaptation focusing on takeout and delivery. In fact, some have only seen minimal volume loss. Supermarkets and club stores have been trying to meet heavy demand, and we've been able to convert a number of production lines from food service to retail to help meet those consumer needs. The direct impacts of the virus have created operational challenges, including absenteeism, reduced production speeds, and selected idling of plants. The scope of our operations continue to provide us with flexibility and redundancy. This is a clear benefit to our company's scale. COVID-19 related pressure has affected parts of the industry supply chain, especially pork. However, our diversity of protein provides our customers with options. In addition, our geographic diversity provided important lessons from China where we first encountered COVID-19 related issues. This includes ways to maintain health and safety of our people, opportunities to pivot to retail, and potential pathways for recovery. We expect current conditions to continue during our third quarter with a gradual recovery beginning in the fourth quarter. However, all this depends on the extent to which businesses and schools are able to reopen. We're well positioned to operate during this period and to take advantage of increasing demand during the recovery. Our balance sheet is sound and our liquidity position was strong going into the crisis. It's been further bolstered by the term loan we closed at the end of Q2 and by focusing on continuing operations and managing costs. Stuart will give you more details. We committed $13 million to support critical needs in our local communities. This includes $2 million in community grants and more than $11 million worth of food and meals donated by the company since March 11th. Over the coming days, we'll make product donations equal to an additional 100 million meals. Despite the immediate challenges from COVID-19 and its associated impacts, we're maintaining a clear focus on the long term. This includes our strategy to grow, deliver, and sustain. Global population and income growth will continue to drive an increased need for protein in our size, diversity of portfolio, and broad geographic presence will give us an advantage. In addition, there are changes which will undoubtedly remain with us after the crisis. For example, we expect continued higher levels of e-commerce for both grocery and food service. Early investments in this space have allowed us to capitalize on the growth and we expect to benefit further in the future. Our industry is heavily dependent on people, but our company is investing aggressively in automating the most difficult jobs in our processing plants. Our balance sheet, liquidity, and scale, as well as our diverse product portfolio of products and distribution channels, position Tyson to benefit from long-term industry dynamics. Now, I'd like Dean to give us a recap of our business segments.