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Transcription:

Supplemental Information 3 rd Quarter Fiscal 2018 August 6, 2018

Today s Speakers Tom Hayes President & CEO Stewart Glendinning EVP & CFO 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

OUR STRATEGY Sustainably Feed the World With the Fastest Growing Protein Brands HOW WE WILL ACHIEVE OUR STRATEGY Grow. Our businesses through differentiated capabilities Deliver. Ongoing financial fitness through continuous improvement Sustain. Our company and our world for future generations

Q3 FY 18 Highlights Adjusted EPS 1,2 of $1.50 Record Q3 adjusted operating income 1 of $816M, up 8% from last year Strong operating cash flow of $1.9B, up 33% from last year Record Beef segment adjusted operating income 1 of $319M Realized $66M of Financial Fitness Program cost savings 1 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. 2 Includes incremental $0.20 earnings per share due to tax reform ($ in millions, except per share data) Q3 FY 18 Sales $10,051 Adjusted Operating Income 1 $816 Adjusted Operating Margin 1 8.1% Adjusted EPS 1 $1.50 ($ in millions) Q3 FY 18 Adjusted Operating Dollars ROS% Income 1 Beef $319 8.0% Pork 67 5.6% Chicken 196 6.6% Prepared Foods 249 11.7% Other (15) n/a Total $816 8.1% 5

Segment Results Beef Q3 18 Adj. Operating Income 1 ($ in millions) Dollars ROS% $319 8.0% Q3 18 Volume +2.7% Avg. Price -2.8% Adjusted Operating Margin 1 Outlook FY18 & FY19: >6% 1 Represents a non-gaap financial measure. Q3 18 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. 6

Segment Results Pork Q3 18 Adj. Operating Income 1 ($ in millions) Dollars ROS% $67 5.6% Q3 18 Volume -2.1% Avg. Price -7.4% Adjusted Operating Margin 1 Outlook FY18 & FY19: ~6% 1 Represents a non-gaap financial measure. Q3 18 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. 7

Segment Results Chicken Q3 18 Adj. Operating Income 1 ($ in millions) Dollars ROS% $196 6.6% Q3 18 Volume ~Flat Avg. Price +3.7% Adjusted Operating Margin 1 Outlook FY18 & FY19: ~8% 1 Represents a non-gaap financial measure. Q3 18 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

Segment Results Prepared Foods Q3 18 Record Adj. Operating Income 1 ($ in millions) Dollars ROS% $249 11.7% Q3 18 Volume +2.7% Avg. Price +6.8% Adjusted Operating Margin 1 Outlook FY18 & FY19: >11% 1 Represents a non-gaap financial measure. Q3 18 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

Total Company Outlook 1 Sales FY18: $40-41B FY19: $42B FY19 topline growth of ~3% over FY18 CapEx FY18: $1.2-1.3B FY19: ~$1.6B FY18 Adjusted EPS $5.70-6.00 2,3 Beef Adjusted Operating Margin FY 18 & FY19: >6% Pork Adjusted Operating Margin FY18 & FY19: ~6% Chicken Adjusted Operating Margin FY 18 & FY19: ~8% Prepared Foods Adjusted Operating Margin FY 18 & FY19: >11% 1 Does not include expected other operating loss of approximately $60 million in fiscal 2018. 2 Projected Adjusted EPS as of 8/6/18. 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. 3 Includes incremental earnings per share of ~$0.77 due to tax reform 10

Core 9 and Total Tyson Dollar Performance Dollar Sales % Chg. among top 10 branded food companies > $5B 2.6% 2.5% 2.4% 2.1% 1.8% 0.3% 0.0% Core 9 Total Total F&B -0.1% -1.0% -1.5% -1.6% -1.7% Source: IRI Total U.S. Multi-Outlet (x Costco) Volume Sales 52 weeks ending 7/01/2018 Product = Total Edible + Pet Food, Tyson = Tyson + Nature Raised Farms + AdvancePierre 11

Core 9 and Total Tyson Volume Performance Volume sales % change among top 10 branded food companies >$5B 5.1% Core 9 Total 1.1% 0.3% 0.1% Total F&B -0.3% -0.5% -0.7% -0.8% -1.3% -3.1% -5.7% -7.0% Source: IRI Total U.S. Multi-Outlet (x Costco), Volume Sales, 52 weeks ending 7/1/2018 Includes Total Edible + Pet Food, Tyson = Tyson + Nature Raised Farms + AdvancePierre 12

Innovation Protein-Packed Brands Morning Protein on the Move Take a Bite Out of Summer Breakfast Without Bread Carbs Delicious Dinner Made Simple 13

Foodservice Broadline Volume Performance Volume % Change vs. Year Ago (L52) 3.4% 2.9% = 1.2% Tyson Focus 6 Share Growth Total Broadline Focus 6 Categories Tyson Focus 6 NPD SupplyTrack data, 52 weeks ending May 2018 Excludes Large Chain and Operator Label data Focus Six = Chicken Value Added, Breakfast Sausage, Dinner Sausage, Peperoni Pizza Topping, Bacon, Philly Steak Tyson = Tyson, AdvancePierre and Original Philly 14

OUR STRATEGY Sustainably Feed the World With the Fastest Growing Protein Brands HOW WE WILL ACHIEVE OUR STRATEGY Grow. Our businesses through differentiated capabilities Deliver. Ongoing financial fitness through continuous improvement Sustain. Our company and our world for future generations

Appendix 3rd Quarter Fiscal 2018 Non-GAAP Reconciliations

EPS Reconciliations In millions, except per share data (Unaudited) Nine Months Ended Third Quarter June 30, 2018 Pretax Impact EPS Impact Pretax Impact EPS Impact 2018 2017 2018 2017 2018 2017 2018 2017 Reported net income per share attributable to Tyson $ 1.47 $ 1.21 $ 6.72 $ 3.72 Add: One-Time Cash Bonus to Frontline Employees - - - - 109-0.22 - Add: Restructuring and related charges 14-0.03-45 - 0.09 - Add: Impairment net of a realized gain associated with the divestiture of non-protein businesses (a) - - - - 79-0.26 - Add: San Diego Prepared Foods Operation Impairment - - - - - 52-0.09 Add: AdvancePierre purchase accounting and acquisition related costs (b) - 77-0.14-77 - 0.14 Less: Tax benefit from remeasurement of net deferred tax liabilities at lower enacted tax rates - - - - - - (2.71) - Less: Tax benefit related to expected sale of a non-protein business - - - (0.07) - - - (0.07) Adjusted net income per share attributable to Tyson $ 1.50 $ 1.28 $ 4.58 $ 3.88 (a) EPS impact for the nine months of fiscal 2018 includes $101 million of impairments related to the expected sale of a non-protein business net of a $22 million realized pretax gain associated with the sale of a non-protein business, which combined on an after-tax basis resulted in a $0.26 impact to EPS. (b) 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. 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 EPS guidance is provided on a non-gaap basis. The Company is not able to reconcile its full-year fiscal 2018 Adjusted EPS guidance to its full-year fiscal 2018 projected GAAP EPS guidance because certain information necessary to calculate such measure on a GAAP basis is 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 this measure without unreasonable effort. 17

Segment Operating Income and Operating Margin Reconciliations In millions (Unaudited) Adjusted Segment Operating Income (Loss) (for the third quarter ended June 30, 2018) Beef Pork Chicken Prepared Foods Other Intersegment Sales Total Sales $ 3,993 $ 1,197 $ 2,973 $ 2,132 $ 75 $ (319) $ 10,051 Reported operating income (loss) $ 318 $ 67 $ 189 $ 243 $ (15) $ - $ 802 Add: Restructuring and related charges 1-7 6 - - 14 Adjusted operating income (loss) $ 319 $ 67 $ 196 $ 249 $ (15) $ - $ 816 Reported operating margin % 8.0% 5.6% 6.4% 11.4% n/a n/a 8.0% Adjusted operating margin % 8.0% 5.6% 6.6% 11.7% n/a n/a 8.1% Adjusted Segment Operating Income (Loss) (for the nine months ended June 30, 2018) Beef Pork Chicken Prepared Foods Other Intersegment Sales Total Sales $ 11,560 $ 3,745 $ 8,929 $ 6,571 $ 245 $ (997) $ 30,053 Reported operating income (loss) $ 666 $ 285 $ 692 $ 627 $ (43) $ - $ 2,227 Add: One-time cash bonus to frontline employees 27 12 51 19 - - 109 Add: Restructuring and related charges $ 3 $ 1 $ 22 $ 19 $ - $ - $ 45 Add: Impairment net of a realized gain associated with the divestiture of nonprotein businesses (a) - - - 79 - - 79 Adjusted operating income (loss) $ 696 $ 298 $ 765 $ 744 $ (43) $ - $ 2,460 Reported operating margin % 5.8% 7.6% 7.8% 9.5% n/a n/a 7.4% Adjusted operating margin % 6.0% 8.0% 8.6% 11.3% n/a n/a 8.2% (a) Operating income impact for the nine months of fiscal 2018 includes $101 million of impairments related to the expected sale of a non-protein business net of a $22 million realized pretax gain associated with the sale of a non-protein business. Adjusted operating income is presented as a supplementary measure of our operating performance that is not required by, or presented in accordance with, GAAP. We use adjusted operating income as an internal performance measurement and as one criterion for evaluating our performance relative to that of our peers. We believe adjusted operating income is meaningful to our investors to enhance their understanding of our operating 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 operating income. Further, we believe that adjusted operating income is a useful measure because it improves comparability of results of operations from period to period. Adjusted operating income should not be considered as a substitute for operating income 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 operating income may not be comparable to similarly titled measures reported by other companies. 18