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

Feb 05, 2016 • 09:00 am ET

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

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Q & A
Operator
Operator

Thank you. [Operator Instructions] And our first question comes from Mr. Brett Hundley from BB&T Capital Markets. Sir, your line is now open.

Analyst
Brett Michael Hundley

Morning. Congratulations on what you've put together here.

Executive
Donald J. Smith

Thanks, Brett.

Analyst
Brett Michael Hundley

Donnie, one question for you. A number of packaged 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 U.S. frozen categories seem to be improving some. Companies are also talking without 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 foods 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 9 insulates you, not only within the broader macro, but also within packaged meats specifically?

Executive
Donald J. Smith

Sure, Brett. I'm going to try to take that like from snacking through frozen into the Core 9 to 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 9 brands, 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 spelled those out in the last call because they are categories in which are growing faster than other refrigerated meats and faster than total food and beverage over the long term. And then we have advantaged positions within those categories.

Analyst
Brett Michael Hundley

Very clear. Thank you. And then Dennis, I just had a follow-up question on liquidity, use of cash. You touched on it there at the end. You're driving really strong cash flow right now, you do traditionally anyway. Your