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Transcription:

Supplemental Information 4th Quarter Fiscal 2017 November 13, 2017

Tom Hayes President & Chief Executive Officer Dennis Leatherby Executive Vice President & Chief Financial Officer 2

Forward-Looking Statements Certain information contained in this presentation may constitute forward-looking statements, such as statements relating to expected performance and including, but not limited to, statements appearing in the Outlook section and statements relating to adjusted EPS guidance. These forward-looking statements are subject to a number of factors and uncertainties, which could cause our actual results and experiences to differ materially from the anticipated results and expectations expressed in such forward-looking statements. We wish to caution readers not to place undue reliance on any forward-looking statements, which speak only as of the date made. Among the factors that may cause actual results and experiences to differ from anticipated results and expectations expressed in such forward-looking statements are the following: (i) fluctuations in the cost and availability of inputs and raw materials, such as live cattle, live swine, feed grains (including corn and soybean meal) and energy; (ii) market conditions for finished products, including competition from other global and domestic food processors, supply and pricing of competing products and alternative proteins and demand for alternative proteins; (iii) outbreak of a livestock disease (such as avian influenza (AI) or bovine spongiform encephalopathy (BSE)), which could have an adverse effect on livestock we own, the availability of livestock we purchase, consumer perception of certain protein products or our ability to access certain domestic and foreign markets; (iv) the integration of AdvancePierre Foods Holdings, Inc.; (v) the effectiveness of our financial fitness program; (vi) the implementation of an enterprise resource planning system; (vii) access to foreign markets together with foreign economic conditions, including currency fluctuations, import/export restrictions and foreign politics; (viii) changes in availability and relative costs of labor and contract growers and our ability to maintain good relationships with employees, labor unions, contract growers and independent producers providing us livestock; (ix) issues related to food safety, including costs resulting from product recalls, regulatory compliance and any related claims or litigation; (x) changes in consumer preference and diets and our ability to identify and react to consumer trends; (xi) effectiveness of advertising and marketing programs; (xii) our ability to leverage brand value propositions; (xiii) risks associated with leverage, including cost increases due to rising interest rates or changes in debt ratings or outlook; (xiv) impairment in the carrying value of our goodwill or indefinite life intangible assets; (xv) compliance with and changes to regulations and laws (both domestic and foreign), including changes in accounting standards, tax laws, environmental laws, agricultural laws and occupational, health and safety laws; (xvi) adverse results from litigation; (xvii) cyber incidents, security breaches or other disruptions of our information technology systems; (xviii) our ability to make effective acquisitions or joint ventures and successfully integrate newly acquired businesses into existing operations; (xix) risks associated with our commodity purchasing activities; (xx) the effect of, or changes in, general economic conditions; (xxi) significant marketing plan changes by large customers or loss of one or more large customers; (xxii) impacts on our operations caused by factors and forces beyond our control, such as natural disasters, fire, bioterrorism, pandemics or extreme weather; (xxiii) failure to maximize or assert our intellectual property rights; (xxiv) our participation in a multiemployer pension plan; (xxv) the Tyson Limited Partnership s ability to exercise significant control over the Company; (xxvi) effects related to changes in tax rates, valuation of deferred tax assets and liabilities, or tax laws and their interpretation; (xxvii) volatility in capital markets or interest rates; and (xxviii) those factors listed under Item 1A. Risk Factors included in our Annual Report filed on Form 10-K for the period ended September 30, 2017. 3

Dennis Leatherby Stewart Glendinning 4

Q417 & FY17 Highlights FY17 Highlights Record Adjusted Operating Margin* at 8.5% Record Adjusted Operating Income* up 15% to $3.3 billion Record Adjusted EPS* of $5.31, up 21% from last year Operating Cash Flow of $2.6 billion * Represents a non-gaap financial measure. Adjusted EPS, adjusted operating income and adjusted operating margin are explained and reconciled to comparable GAAP measures in the Appendix. ($ in millions, except per share data) Q417 FY17 Sales $10,145 $38,260 Adjusted Operating Income * $902 $3,263 Adjusted Operating Margin * 8.9% 8.5% Adjusted EPS * $1.43 $5.31 ($ in millions) Q417 FY17 Adjusted Operating Dollars ROS% Dollars ROS% Income * Beef $313 8.2% $885 6.0% Pork 124 9.1% 648 12.4% Chicken 322 10.6% 1,117 9.8% Prepared Foods 152 6.7% 675 8.6% Other (9) n/a (62) n/a Total $902 8.9% $3,263 8.5% 5

Core 9 and Total Tyson Leading in Dollar Performance Dollar sales % change among top 10 branded food companies >$5B 3.2% 2.8% 2.6% 1.9% 0.8% Core 9 Total Total F&B -0.1% -0.8% -1.2% -2.5% -3.9% -4.4% -5.3% Source: IRI Total U.S. Multi-Outlet (x Costco), Dollar Sales, 52 weeks ending 10/01/2017 Includes Total Edible + Pet Food, Tyson = Tyson + Nature Raised Farms + AdvancePierre 6

Core 9 and Total Tyson Leading in Volume Performance Volume sales % change among top 10 branded food companies >$5B Core 9 Total Source: IRI Total U.S. Multi-Outlet (x Costco), Volume Sales, 52 weeks ending 10/1/2017 Includes Total Edible + Pet Food, Tyson = Tyson + Nature Raised Farms + Advance Pierre 7

Operating Segments - Beef Adjusted Operating Income * ($ in millions) Q417 FY17 Dollars ROS% Dollars ROS% $313 8.2% $885 6.0% Q417 Sales volume up 3.3% on 6.0% higher average price FY17 Sales volume up 1.8% on 0.4% higher average price FY 18 Outlook: Adjusted Operating Margin* > 5% * Represents a non-gaap financial measure. Q4 17 and FY17 Adjusted operating income and adjusted operating margin are explained and reconciled to comparable GAAP measures in the Appendix. A further explanation of providing non-gaap guidance is included in the Appendix. 8

Operating Segments - Pork Adjusted Operating Income * ($ in millions) Q417 FY17 Dollars ROS% Dollars ROS% $124 9.1% $648 12.4% Q417 Sales volume declined 1.2% on 11.7% higher average price FY17 Sales volume up 0.6% on 6.1% higher average price FY 18 Outlook: Adjusted Operating Margin* > 9% * Represents a non-gaap financial measure. Q4 17 and FY17 Adjusted operating income and adjusted operating margin are explained and reconciled to comparable GAAP measures in the Appendix. A further explanation of providing non-gaap guidance is included in the Appendix. 9

Operating Segments - Chicken Adjusted Operating Income* ($ in millions) Q417 FY17 Dollars ROS% Dollars ROS% $322 10.6% $1,117 9.8% Q417 Sales volume up 4.1% on 3.7% higher average price FY17 Sales volume up 1.2% on 3.1% higher average price FY 18 Outlook: Adjusted Operating Margin* ~ 11% with around 3% volume growth * Represents a non-gaap financial measure. Q4 17 and FY17 Adjusted operating income and adjusted operating margin are explained and reconciled to comparable GAAP measures in the Appendix. A further explanation of providing non-gaap guidance is included in the Appendix. 10

Innovation Pipeline The Innovation Pipeline for the Tyson brand is promising, with significantly more concepts showing potential for success compared to Nielsen benchmark High Risk Risky Ready Now Outstanding 86% Ready Now (incl. 36% Outstanding), compared to 30% for benchmark Tyson Nielsen Benchmark Tyson includes Tyson and Tyson Tastemakers branded Snapshot concepts fielded Jan Sept 2017 (44 total); Probability of Success at concept level is comprised of 6 factors of success Attention Catching, Need Desire, Credibility, Acceptable Cost, Distinct Proposition, and Advantage Nielsen Benchmark is based on a Nielsen Innovation Total Historical Average across 7000+ concepts and is not Tyson specific. 11 11

Operating Segments Prepared Foods Adjusted Operating Income * ($ in millions) Q417 FY17 Dollars ROS% Dollars ROS% $152 6.7% $675 8.6% Q417 Sales volume up 9.5% on 12.5% higher average price FY17 Sales volume up 3.2% on 3.6% higher average price FY 18 Outlook: Adjusted Operating Margin* 11-12% with > 10% volume growth ** * Represents a non-gaap financial measure. Q4 17 and FY17 Adjusted operating income and adjusted operating margin are explained and reconciled to comparable GAAP measures in the Appendix. A further explanation of providing non-gaap guidance is included in the Appendix. ** Excluding impact of planned divestitures 12

Foodservice Broadline Volume Performance Volume % Change vs. PY (52 wks ending August 2017) 4.5% 1.7% 2.8% +0.3 pt = Total Broadline Total Tracked Categories Tyson in Tracked Categories Tyson Share Growth NPD SupplyTrack data, 12 Months Ending August 2017 Excludes Large Chain and Operator Label data Total Tracked Chicken (Chicken As-Is, Chicken Value Added, Chicken Stuffed, Chicken Deli) Bacon, Sausage (Breakfast Sausage, Dinner Sausage, Pizza Toppings (Pepperoni and Crumbles)), Breaded Beef, Philly Steak, FC Burger Patties Total Broadline excluding Chemicals, Disposables and Wipers 13 13

Foodservice Volume Performance Within the Broadline Distribution Channel, Tyson Focus 5 volume growth is outpacing the channel and competitors 10.4% 8.7% 5.1% 3.0% 2.6% 2.3% 2.2% 1.7% Distributor Brand Total Broadline -31.0% Focus 5 NPD SupplyTrack data, Month Ending August 2017 Excludes Large Chain and Operator Label data Focus Five = Value-Added Chicken, Breakfast Sausage, Dinner Sausage, Pepperoni, Bacon Total Broadline results excludes Chemicals, Disposables and Wipers 14 14

Tyson Added 46 Miles of Retail Shelf Space +241.6 +4.3 Avg. Linear Feet per Store 2,877.9 Total Linear Feet (000s) 49.4 5.0 15.5 3.2-0.1 30.0 5.1 54.9 19.2 12.6 1.1 3.3 42.9-0.6 3,119.5 Spring 16 JD Refrig JD Frozen Sweet Goods Vans Bacon HF HF HF BP BP Gallo Aidells Smoked Lunch Snacking Hot Frozen Sausage Meat Dogs Frozen Value Added Poultry State Fair Spring 17 Source: IRI Worldwide Custom Shelf Audit Spring 2016 vs. 2017; Total U.S. Food, Walmart and Target 15

Retail Innovation Vitality Best in Class Vitality Index = % of sales dollars from Retail Packaged Brands products created in the previous three years 14% 13% 12% Launches from: FY17 FY16 FY15 FY14 FY13 FY15 FY16 FY17* FY12 * FY17 represents 11 periods of actuals and one period of forecast 16 16

C-Store News Best New Product Awards 17 17

FY17 Highlights Record Adjusted Operating Margin* at 8.5% Record Adjusted Operating Income* up 15% to $3.3 billion Record Adjusted EPS* of $5.31, up 21% from last year Operating Cash Flow of $2.6 billion *Represents a non-gaap financial measure. Adjusted EPS, adjusted operating income and adjusted operating margin are explained and reconciled to comparable GAAP measures in the Appendix. ($ in millions, except per share data) FY17 Sales $38,260 Adjusted Operating Income * $3,263 Adjusted Operating Margin * 8.5% Adjusted EPS * $5.31 ($ in millions) FY17 Adjusted Operating Income* Dollars ROS% Beef $885 6.0% Pork 648 12.4% Chicken 1,117 9.8% Prepared Foods 675 8.6% Other (62) n/a Total $3,263 8.5% 18

Targets Established Net Savings FY18 ~ $200 million FY19 ~ $400 million FY20 ~ $600 million 19

FY18 Outlook * Sales of ~$41 billion ** Topline growth of ~7% as we grow volume and have full year benefit of AdvancePierre CapEx ~$1.4 billion Adjusted EPS $5.70-5.85 *** Adjusted EPS $5.70-5.85 ** ~7-10% growth over FY17 ~7-10% growth over FY17 Beef Segment adjusted operating margin > 5% Pork Segment adjusted operating margin > 9% Chicken Segment adjusted operating margin ~ 11% with around 3% volume growth Prepared Foods Segment adjusted operating margin 11-12% with >10% volume growth ** * Does not include expected other operating loss of approximately $40 million in fiscal 2018 ** Does not include sales or volume from planned divestitures *** Projected Adjusted EPS as of 11/13/17. Represents a non-gaap financial measure. Adjusted EPS is explained and reconciled to comparable GAAP measures in the Appendix. A further explanation of providing non-gaap guidance is included in the Appendix. 20

Grow. Our businesses through differentiated capabilities Deliver. Ongoing financial fitness through continuous improvement Sustain. Our company and our world for future generations

Appendix 4th Quarter Fiscal 2017 Non-GAAP Reconciliations

EPS Reconciliations In millions, except per share data (Unaudited) Fourth Quarter 12 Months Ended Pretax Impact EPS Impact Pretax Impact EPS Impact 2017 2016 2017 2016 2017 2016 2017 2016 Reported net income per share attributable to Tyson $ 1.07 $ 1.03 $ 4.79 $ 4.53 Add: AdvancePierre purchase accounting and acquisition related costs (a) $ 26 $ - 0.04 - $ 103 $ - 0.18 - Add: Restructuring and related charges $ 150 $ - 0.26 - $ 150 $ - 0.26 - Add: San Diego Prepared Foods operation impairment $ - $ - - - $ 52 $ - 0.09 - Add/Less: Impairment net of tax benefit related to the expected sale of a non-protein business (b) $ 45 $ - 0.06 - $ 45 $ - (0.01) - Less: Recognition of previously unrecognized tax benefit $ - $ - - (0.07) $ - $ - - (0.14) Adjusted net income per share attributable to Tyson $ 1.43 $ 0.96 $ 5.31 $ 4.39 (a) AdvancePierre purchase accounting and acquisition related costs includes a $24 million purchase accounting adjustment for the fair value step-up of inventory, $35 million of acquisition related costs and $18 million of acquisition bridge financing fees. (b) EPS impact of twelve months ended 2017 includes a tax benefit related to the expected sale of a non-protein business of ($0.07) recognized in the third quarter of fiscal 2017. Adjusted net income per share attributable to Tyson (Adjusted EPS) is presented as a supplementary measure of our financial performance that is not required by, or presented in accordance with, GAAP. We use Adjusted EPS as an internal performance measurement and as one criterion for evaluating our performance relative to that of our peers. We believe Adjusted EPS is meaningful to our investors to enhance their understanding of our financial performance and is frequently used by securities analysts, investors and other interested parties to compare our performance with the performance of other companies that report Adjusted EPS. Further, we believe that Adjusted EPS is a useful measure because it improves comparability of results of operations from period to period. Adjusted EPS should not be considered a substitute for net income per share attributable to Tyson or any other measure of financial performance reported in accordance with GAAP. Investors should rely primarily on our GAAP results and use non-gaap financial measures only supplementally in making investment decisions. Our calculation of Adjusted EPS may not be comparable to similarly titled measures reported by other companies. Adjusted net income per share attributable to Tyson guidance (Adjusted EPS guidance) and Adjusted operating margin guidance are provided on a non-gaap basis. The Company is not able to reconcile its full-year fiscal 2018 Adjusted EPS guidance, or Adjusted operating margin guidance, to its full-year fiscal 2018 projected GAAP EPS or GAAP operating margin, because certain information necessary to calculate such measures on a GAAP basis are unavailable or dependent on the timing of future events outside of our control. Therefore, because of the uncertainty and variability of the nature of the amount of future adjustments, which could be significant, the Company is unable to provide a reconciliation of these measures without unreasonable effort. 23

Segment Operating Income and Operating Margin Reconciliations In millions (Unaudited) Adjusted Segment Operating Income (Loss) (for the fourth quarter ended September 30, 2017) Beef Pork Chicken Prepared Foods Other Intersegment Sales Total Sales $ 3,808 $ 1,362 $ 3,035 $ 2,263 $ 92 $ (415) $ 10,145 Reported operating income (loss) 305 121 263 11 (19) - 681 Add: AdvancePierre purchase accounting and acquisition related costs (a) - - 3 14 9-26 Add: Restructuring and related charges 8 3 56 82 1-150 Add: Impairment related to the expected sale of non-protein business - - - 45 - - 45 Adjusted operating income (loss) 313 124 322 152 (9) - 902 Reported operating margin % 8.0% 8.9% 8.7% 0.5% n/a n/a 6.7% Adjusted operating margin % 8.2% 9.1% 10.6% 6.7% n/a n/a 8.9% Adjusted Segment Operating Income (Loss) (for the twelve months ended September 30, 2017) Beef Pork Chicken Prepared Foods Other Intersegment Sales Total Sales $ 14,823 $ 5,238 $ 11,409 $ 7,853 $ 349 $ (1,412) $ 38,260 Reported operating income (loss) 877 645 1,053 462 (106) - 2,931 Add: AdvancePierre purchase accounting and acquisition related costs (b) - - 8 34 43-85 Add: San Diego Prepared Foods operation impairment - - - 52 - - 52 Add: Restructuring and related charges 8 3 56 82 1-150 Add: Impairment related to the expected sale of a non-protein business - - - 45 - - 45 Adjusted operating income (loss) 885 648 1,117 675 (62) - 3,263 Reported operating margin % 5.9% 12.3% 9.2% 5.9% n/a n/a 7.7% Adjusted operating margin % 6.0% 12.4% 9.8% 8.6% n/a n/a 8.5% (a) AdvancePierre purchase accounting and acquisition related costs impacting operating income for the fourth quarter ended September 30, 2017, included a $12 million purchase accounting adjustment for the fair value step-up of inventory and $14 million of acquisition related costs (b AdvancePierre purchase accounting and acquisition related costs impacting operating income for the twelve months ended September 30, 2017, included a $36 million purchase accounting adjustment for the fair value step-up of inventory and $49 million of acquisition related costs. 24 Adjusted segment operating income and adjusted segment operating margin are presented as supplementary measures of our operating performance that are not required by, or presented in accordance with, GAAP. We use adjusted segment operating income and adjusted segment operating margin as internal performance measurements and as two criteria for evaluating our performance relative to that of our peers. We believe adjusted segment operating income and adjusted segment operating margin are meaningful to our investors to enhance their understanding of our operating performance and are frequently used by securities analysts, investors and other interested parties to compare our performance with the performance of other companies that report adjusted segment operating income and adjusted segment operating margin. Further, we believe that adjusted segment operating income and adjusted segment operating margin are useful measures because they improve comparability of results of operations from period to period. Adjusted segment operating income and Adjusted segment operating margin should not be considered as a substitute for segment operating income, segment operating margin or any other measure of operating performance reported in accordance with GAAP. Investors should rely primarily on our GAAP results and use non-gaap financial measures only supplementally in making investment decisions. Our calculation of adjusted segment operating income and adjusted segment operating margin may not be comparable to similarly titled measures reported by other companies.