Tyson Foods Earnings Call Insights: 2013 Guidance and Corn Prices
Kenneth Zaslow – BMO Capital Markets: I’m just kind of curious, when you guys laid out your plan of 10% growth for the next two years and 2013 numbers, can you talk about how much of the industry specific fundamentals matter, particularly on the chicken side versus how much clarity do you have on those 2013 to 2015?
Donnie Smith – President and CEO: The underlying fundamentals that would go into our plan would basically be the number you see USDA put now and we look at various analyst and then kind of average all that. So, we just use the average of what those analysts were and it’s really for us Ken, about pulling the levers that we know we can pull in our business. We mentioned an increase in operating efficiencies but, growing our value added, we are being successful in price increases. Our customers seem to understand that these higher grain prices are going to require higher prices. We continue to change the structure of a lot of our pricing agreements, our fixed priced exposure – annual fixed priced exposure’s going to be single digits after the 1st of the year. So, you combine those kind of things and Ken, that’s how we can be so confident about getting better in 2013.
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Kenneth Zaslow – BMO Capital Markets: So, if the chicken production levels kind of are modestly lower, I’m assuming – call it 0% to 1%, you see that your ability to get to normalized numbers over a two year period is high or low, I guess, my question is, it doesn’t seem like the chicken guys are cutting and if we stay in this higher feed environment like, what gets you to the normal level over the next, call it, 12 months to 18 months?
Dennis Leatherby – EVP and CFO: First of all, if you look at the last couple of quarters, you’ve had corn in excess of $7 delivered, you had soybean 450 plus close to 500 delivered in our domestic chicken business at a 5.7% return on sales in Q4, and a 5.1% for the year. So yeah, I think if you look at our 1%, 1.5% down in production, whatever the USDA number is on the 2013 and our current view of grain prices sure, we should be very comfortable, very high of confidence level in our ability to deliver these results.
Ken Goldman – JPMorgan: So thanks for giving the 2014 guidance and now you get everyone asking about 2014 and I will do the same. But I had a little bit of a different track. I’m curious because you have a situation where corn futures are suggesting much lower corn prices for your fiscal ’14. I can’t see a situation where chicken production really goes up a huge amount in that time. So I’m having a very difficult time modeling – your chicken margin in a year like that where chicken production doesn’t go up and corn goes down, modeling anything below your normalized range at all, I’m getting above it and I know everyone’s numbers are different. I’m not asking for guidance on my model but why should we expect only 10% in it? Why shouldn’t 2014 be a pretty darn good year when it comes to your chicken margin?
Donnie Smith – President and CEO: It should bake in. For us 2014 is a long time – free fall out there. If you are talking about that – yes, I mean I think at least 10% ought to be in everyone’s mind across all of our business. Remember, we got to keep remembering, we are $33 billion-dollar multi-protein Company, not a $33 billion chicken Company. But yes, I can’t argue with you.
Ken Goldman – JPMorgan: Then one question just on when I hear Tyson talking about focusing more on value-added, focusing more on international. I go back to hearing Tyson talk about this five or 10 years ago, and obviously there were some good things that came out of that push, but there were some not so good things also right, where the Company arguably took its eye off the ball in terms of efficiency in its commodity chicken, beef and pork. I’m just curious how we as outsiders gain comfort, obviously you’re a different company now and Donnie you’ve done a great job bringing cost efficiency back to the Company, but how do we get comfort that as you start to focus on value-added and international again that perhaps you don’t take your eye off the ball elsewhere?
Donnie Smith – President and CEO: That’s a great question and frankly it’s one we spend a lot of time talking about around here. I think the difference is the foundation that’s been build. When we talk about our strategy as Accelerate, Innovate, Cultivate, we always do so based on a platform of fundamental execution, fundamental executional excellence, operating efficiencies, lean thinking, the continuous improvement that type of thing and leveraging a strong balance sheet. It’s taken three long hard years to get our balance sheet back in order. During those three years, we knew that we needed to build a strong platform of functional excellence and we’ve done that. I mean there is always room to improve and we embrace lean thinking and continuous improvement. So, we will never say we’re there. But I can tell you that every person at Tyson Foods understands that we cannot ever take our eye off the ball and we’ve got to keep that firm foundation in place as we know build on it new platforms, new product offerings and the thing that gives us is an idea of the proper cost structure of that new platform because now we know what good looks like. So, great question and all I could draw you to is notice the difference in the last three years and then layer upon that good cost structure growth in value-added, not only in poultry, but also in our Prepared Foods business and I think we can start seeing a pretty bright future.
Ken Goldman – JPMorgan: One very quick one, I assume when you talk about 2013 EPS looking similar to 2012, you’re talking about a 191 base, not the 158 GAAP base right?
Donnie Smith – President and CEO: Yes.
A Closer Look: Tyson Foods Earnings Cheat Sheet>>