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
Analyst
Brett Hundley

this strategy? Why the heavy share repurchase now and how might -- you talked about some of your priorities for cash. But how might your priorities for cash change in months and quarters ahead?

Executive
Dennis Leatherby

As I said in my remarks, we do have $638 million notes coming due, we'll pay that off. We have more than $300 million in cattle and hog deferrals that we'll pay -- we've already paid off. But you're right, we're throwing up a lot of cash and it leaves us a lot of options. As we've been saying for the last year or so, we want to put ourselves in kind of an enviable position in there, we wanted to maintain investment-grade ratings. We wanted to keep a really strong debt capacity for M&A, which we do when we have lots and lots of capacity for M&A.

And in the absence of that, if the right target doesn't come along, but fits our strategy, then we're going to return cash to shareholders, while still growing organically through capacity expansion projects and investing heavily in our brands and innovations. So we really like where we're at. You can see us continue that.

Operator
operator

Farha Aslam, Stephens Incorporated.

Analyst
Farha Aslam

I have a question on poultry. Your poultry margins were exceptional this quarter, and you spoke constructively about your outlook. Could you just give us a little bit more color about your thoughts around the second quarter that is seasonally a bit weaker in poultry. But the macro trends around poultry are getting better. Should we think your margins for the rest of the year, you're being very conservative with your 11% guidance?

Executive
Donald Smith

So feel great about second quarter. We're off to a good start. If I look at our mix, we continue to improve our value-added mix. We've got a lot of capacity to continue to grow in those areas. That gives me a lot of optimism to continue with the favorable outlook. It feels like to me that the categories, say, retail frozen is certainly growing. The retail frozen poultry is growing faster than frozen and certainly that category is growing faster than food and beverage. And it feels like that we fully overcome problems we had in the past and that we are back in business and growing.

Our volume has been good in January, so feel good about that. So, and as I look forward, there is a couple of things that we still want to see, while we have quite a bit of our grain book, we don't have it all, so it's hard to paint the full picture for the year. But I do believe that the changes we've made in the portfolio, the changes we've made in the pricing strategy, certainly the advantages that our supply chain gives us are creating a long-term view of much more consistent, stable earnings in our poultry business and in prepared foods and other parts of the business.

Analyst
Farha Aslam

So kind of conservative, you would say, given the