Tyson Foods, Inc.

Good morning and welcome to the Tyson first quarter fiscal 2021 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please limit yourself to one question and one follow-up. Please note this event is being recorded. I would now like to turn the conference over to Megan Britt, Vice President, Investor Relations. Please go ahead.

Hello and welcome to the first quarter fiscal 2021 earnings conference call for Tyson Foods. On the call today are Dean Banks, President and Chief Executive Officer, and Stuart Glenn Denning, EVP and Chief Financial Officer. We have prepared presentation slides to supplement our comments, which are available on the investor relations section of the Tyson website and through the link to our webcast. During this call, we'll make forward-looking statements regarding our expectations for the future. These statements are subject to risk, uncertainties, and assumptions which may cause actual results to differ materially from our current projections. please refer to our forward-looking statement disclaimers on slide two, as well as our SEC filings for additional information concerning risk factors that could cause our actual results to differ materially from our projections. Please note that references to earnings per share, operating income, and operating margin in our remarks are on an adjusted basis unless otherwise noted. For reconciliations of these non-GAAP measures to their corresponding GAAP measures, please refer to our earnings press release. I'll now turn the call over to Dean.

Thank you, Megan. We are pleased to have you as a new member of our Tyson Foods family and appreciate your leadership. I want to thank everyone listening for your interest in Tyson Foods, and I want to thank our 139,000 dedicated team members who come to work every day to help keep each other safe and feed the world. Your work is raising the world's expectations for how much good food can do. Earlier today, we released our first quarter results for fiscal 2021. We delivered strong operating earnings performance, exceeding $1 billion in operating income for the quarter. This performance was driven by higher earnings in our prepared foods, beef, and chicken segments, and demonstrates our effectiveness in addressing customer and consumer needs while continuing to manage the ongoing effects of a global pandemic. I am exceptionally proud of our global team for their contributions to this strong result. Fundamental to our results are the considerable investments that we have made to safeguard the health, safety, and wellness of our global team members. This remains our top priority. We also continue to monitor consumer trends. The pandemic spurred changes in consumer demand patterns and created new operational complexities for our team. We have risen to the challenge that these changes have created. We flexed our footprint to adapt to shifting channel demand, scaling retail production up dramatically, and innovating with attractive retail offerings. Our investments into insights, innovation, and R&D are helping us win with consumers. As demonstration, we now have delivered 10 consecutive quarters of retail volume growth across our core business lines. As we navigate continued market volatility, we are focused on operational excellence and disciplined cost management. During the quarter, we realized cost savings and progressively improved our order fulfillment results. We are also on track relative to our stated capital allocation objectives and have prioritized key growth investments to diversify our asset base. Looking forward, I am confident that our team is executing on the right priorities to meet our commitments and drive shareholder value creation. Turning to slide four, team member health and safety is and will continue to be our top priority. We have an intense focus on team member well-being as a fundamental driver of engagement and satisfaction across our enterprise. This quarter, we announced the hiring of a chief medical officer. We welcomed Dr. Claudia Copeland in January and look forward to her additional leadership in ensuring that our organization continues to remain vigilant and aggressive towards overall team member wellness. We have also hired 200 new nurses and administrative staff, bringing the total occupational health staff to almost 600 team members. With these resources, we are advancing our health and safety priorities to support our vaccine rollout and build our wellness programs. We're also opening seven pilot health clinics for team members and their families this year to increase their access to health care in the communities where we operate. I am exceptionally pleased to report that our advanced preparations and investments have allowed us to start COVID-19 vaccinations on a limited basis as vaccines have become available. We've extended our ongoing partnership with Matrix Medical, a leading clinical services provider, to prepare for broad vaccine distribution and to ensure that U.S. team members are educated across multiple languages about the COVID-19 vaccine. This is part of our ongoing effort to ensure our team members have information and access to the best protections available. In addition to supporting vaccine deployment, we continue to use testing as a major component of our COVID-19 monitoring strategy and part of our health and safety measures to protect team members. We're testing thousands of team members every week and currently estimate that we have tested more than half our workforce. Our always-on testing strategy is another proactive step in our efforts to search for and fight the virus. The result of our proactive approach has been a dramatic reduction in COVID-19 occurrence within our plants, a strong accomplishment given the surge in cases nationally. As we look forward to the prospect of recovery in the months ahead, we have an incredible opportunity through our leading position in sustainability and social responsibility to drive a more sustainable future for our company and our planet. We are excited for the upcoming publication of our annual sustainability report later this spring, which will show continued progress across our three key focus areas, including empowering people, conserving natural resources, and cultivating innovation in agriculture. As I consider our impact in these important objectives, I'm very proud of how our teams continue to drive progress in their tireless efforts towards lasting change. Since February of 2020, Tyson has donated nearly 90 million meals to aid hunger relief efforts in our communities, and we will continue to support those local communities where help is needed. We will also improve our environmental footprint as we feed the world. In fact, we were the first across our peer group to announce greenhouse gas reduction targets that were accepted by the Science-Based Targets Initiative, a bold commitment to achieving a 30% reduction in greenhouse gas emissions by 2030. We are also committed to leading in the advancement of animal welfare outcomes with transparency. To this end, we recently partnered with the University of Arkansas Division of Agriculture to fund research in animal welfare and commercial broiler farms, which will guide industry efforts to continuously improve welfare for the birds entrusted to our care. These initiatives and many more to come solidify Tyson's position as a leader within this space, and our consistent progress is being recognized. We rank number one in the food production category on the 2021 Fortune Magazine World's Most Admired Companies list. This is our fifth consecutive year in a row to receive that recognition. Turning now to slide six, while we've experienced an operating environment that has seen pockets of volatility over the past few quarters, we are starting to see consumer behavior stabilize within the retail and food service channels. Our diverse protein portfolio continues to be well positioned to support current consumption patterns. Consistent with our experience last year, continued strength in at-home consumption is delivering historically high retail and e-commerce sales. We continue to outperform peers with stronger retail volume growth. Our total Tyson and core business lines have posted 10 consecutive quarters of growth and four straight quarters of double-digit expansion, continuing to outpace total food and beverage. Volumes and core business lines were up nearly 14% during the latest 13 weeks and 19% during the latest 52 weeks. Our growth during these periods was driven in large part by our ability to bring incremental households into our brand and product lines. Total Tyson household penetration reached 81%, and we continue to see an increased number of shopping trips that included a Tyson product, up 11% versus a year ago. As consumers increase their reliance on low to no contact buying methods during the quarter, we experienced e-commerce sales growth of 89% in the latest 13 weeks compared to last year. This equated to approximately $330 million of sales through our e-commerce channel partners. We expect e-commerce channels to remain very relevant moving forward as consumers maintain and shift to convenient low to no contact buying methods. Food service volumes are still down relative to pre-COVID-19 levels, but our channel and category mix sets us up well for recovery as nationwide vaccination efforts are expected to drive more away-from-home protein consumption occasions. It's important to note that some food service operators have adapted very well to the current environment and have embraced drive-through and take-out. Many of these operators are not seeing the volume declines others have, and some are even outpacing historical pre-COVID-19 performance. Winning with consumers by meeting their needs is core to our strategy, and new innovations are a big part of that. Turning to slide seven, we're excited to share some new product launches that are showing signs of early success. Our air-fried chicken line has been in market for just over a year and is already showing great momentum with very strong repeat purchase rates. We're proud of how our innovation capabilities help us meet consumers' health and wellness needs and have driven new buyers to the category. Approximately 11% of volumes from the air-fried line's initial launch period were generated by new consumers. Jimmy Dean, one of our iconic billion-dollar brands, recently extended into the breakfast burrito category, a natural progression for an industry-leading product line rooted in convenient and tasty offerings across breakfast occasions. We're seeing strong incremental Jimmy Dean volumes from this product offering, as well as solid repeat purchase rates. And just last month, we launched new alternative protein offerings under the Jimmy Dean label, including the plant-based patty croissant, which is already exceeding our original demand forecast. Recognized and trusted brands like Jimmy Dean provide a powerful platform to offer plant-based options, which is an illustration of our one Tyson strategy in action. Each of these exciting product launches reaffirms Tyson's ability to bring innovative and on-trend products to market as part of our overall growth strategy. This innovation engine creates synergies across not only the retail channel, but also food service. Turning to slide eight, we are also making progress on several other key strategic areas that will create long-term shareholder value. First, a core part of Tyson's strategy is operational excellence. We strive to produce high-quality products with efficient operations and top-notch customer service. We are working aggressively to realize improvement opportunities, especially in our chicken segment. Later in the call, Stuart will share additional detail on our actions to improve operating results in the chicken segment. In general, through our ongoing financial fitness, we are pursuing significant cost savings opportunities across our business. Next, we are making the organic investments necessary to meet growing global protein demand. Our international platform increasingly provides an opportunity to grow overall sales and margins by leveraging our global production capabilities to reach an international customer base. We're using our One Tyson framework to identify synergy opportunities and to maximize the value from farm to table at the global level. Because of our existing depth of experience in protein production, brand management, and global customer relationships, we believe we have the right recipe for growth and the right to win in these attractive international markets. Overall, we estimate that approximately 60% of our capital expenditures are going toward growth objectives. An area of increased investment is value-added capacity expansion and automation technology, which will support increased sales, high-efficiency processing, and better customer service, among others. In addition, we're using technology to improve employee health and safety, animal well-being, and environmental management. Lastly, our capital allocation priorities build financial strength, allowing us to continue to invest in our business and return capital to shareholders. We have disciplined processes to ensure that investments we make optimize our returns and drive long-term shareholder value. We are also committed to return capital to shareholders. Our business performance has allowed us to increase our dividend per share each year for the last nine years. I'd like to move now to a review of our first quarter fiscal 2021 performance for the total company, which is captured on slide nine. We delivered sales of $10.5 billion in the quarter, slightly down versus the same period last year. Volumes were lower primarily due to reduced food service volumes, partially offset by higher retail volumes. Note also that the $320 million charge related to our poultry litigation accrual was recorded as a reduction to sales in the quarter. We delivered operating income of over $1 billion during the quarter, up 24% versus the same period a year ago. The company experienced strong operating income performance in beef and prepared foods, while the pork segment softened and the chicken business showed signs of improvement. Total company operating income margin was 9.5%. This strong performance resulted in $1.94 in earnings per share for the quarter, an increase of approximately 28% versus the same period last year. In line with our focus on team member health and safety, we incurred $120 million of direct incremental COVID-19 costs during the first quarter. These costs have not been adjusted out of our results and include items such as PPE, testing, medical partnerships, product downgrades, donations, as well as enhanced employee pay and benefits. Overall, our business performed well during the quarter while showing profitability and operational improvements on a year-over-year basis in key areas. Our retail business has seen continued strong performance as a result of our depth of brand and product offerings. Based on our growing share positions and increasing presence within consumer shopping carts, we believe we're well positioned for continued strength at retail. We're also partnering with our food service customers to ensure they're prepared to meet increasing channel demand as the COVID-19 vaccination rollout continues and consumers gradually become more active away from home. Finally, I'm proud of how our team and business performed, but we certainly still have growth and execution opportunities ahead that we're actively pursuing. I will now turn the call over to Stuart. He will share our detailed financial performance before I return to provide closing remarks.