Tyson Foods, Inc. (NYSE:TSN) Q1 2016 Earnings Conference Call - Final Transcript

Feb 05, 2016 • 09:00 am ET

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Tyson Foods, Inc. (NYSE:TSN) Q1 2016 Earnings Conference Call - Final Transcript

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Q & A
Operator
operator

(Operator Instructions) Brett Hundley, BB&T Capital Markets.

Analyst
Brett Hundley

Donnie, one question for you. A number of package food companies, both large and small, we've seen have talked this earnings season about the macro becoming more challenging, snacking has been one area highlighted in particular and then conversely it looks like US frozen category seem to be improving some. Companies are also talking about the need to up brand support spend in an effort to contain volume deterioration. Your prepared foods volumes were down in the quarter, but you talked to the reasons behind that. Your profitability was solid.

Can you give us your view of the packaged food macro? You touched on it in your prepared remarks, but can you give us your view of the prepared -- packaged foods macro from your vantage point. And within this question, can you specifically address this Core 9 effort that you're talking about this morning and how Core 9insulates you not only within the broader macro, but also within packaged meat specifically?

Executive
Donald Smith

Let me try to take that, like, from snacking through frozen into the Core 9to kind of give you the full feel. So not all snacking is created equal, right? What continues to grow in the snacking category is protein snacking. If I've got my numbers right, total snacking is probably growing at around 6% or so year-over-year. And as you know, that's a major focus for us in our innovation this year.

Looking on into the frozen categories, breakfast and value-added poultry are two categories that are growing faster than total frozen and total food and beverage and that's our key focus.

But also, if you look at 84% of the refrigerated categories, in which we compete, are growing. And then 87% of the fresh categories, in which we compete, are growing. And it really reinforces our statement around having advantaged brands in advantaged categories. So now let me loop over into the Core 9. So if you look at the Core 9brands or product lines really, those are so important because that's where we have the greatest value potential over the long-term. Within the core, we have the highest growth potential, we've probably got the strongest position with both consumers and customers and great margins. So that's why we focus on what we call the Core 9 and we spill those out in the last call. Because they are categories in which are growing faster than other refrigerated meat and faster than total food and beverage over the long-term and then we have advantaged positions within those categories.

Analyst
Brett Hundley

And then, Dennis, I just had a follow-up question on liquidity, use of cash, you touched on that at the end. You're driving really strong cash flow right now, you do traditional anyway. Your debt is in a very manageable position, you talked about the notes in April. But getting outside of that, you've been choosing to repurchase a lot of shares here. And then can you give us any insight into