Tyson Foods Aktie

Good morning. I'm Andrew Strelzik, BMO's Agribusiness, Beverages and Restaurants Analyst. And I'm delighted to welcome everyone to our Annual Farm to Market and Chemicals Conference. The conference is now in its third decade. And this year, we have the pleasure of hosting over 100 companies and 1,000 total attendees over the course of today and tomorrow.

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And tomorrow's keynote presentation from BMO's Chief Investment Strategist, François Trahan, will focus on how investors can think about positioning portfolios for a potentially prolonged period of inflation and the impact on the consumer. We hope you come away from the conference with incremental insights and a better understanding of company strategies and outlooks, opportunities and challenges, key issues and new ideas. If you have any questions or need any help, please don't hesitate to ask. Thank you, and enjoy the conference.

We're fortunate to have Tyson kicking off our conference again this year. Under the leadership of CEO, Donnie King, Tyson has the opportunity to realize a third consecutive year of operating profit growth as its disciplined focus on controlling the controllables has materially improved performance in its Chicken business, enabled Prepared Foods to outperform peers and increased earnings contributions in Pork and International. All while navigating an increasingly challenged beef operating environment.

Donnie is joined by CFO, Curt Calaway, who continues to enhance Tyson's leadership team through his disciplined approach to managing Tyson's balance sheet, including $2 billion of debt reduction over the last 18 months and creating greater flexibility to return cash to shareholders. Donnie and Curt, thanks for joining us today.

Good morning.

Maybe I'll kick things off on the Prepared Foods side. Your performance in Prepared Foods has been a little bit different than maybe what some of the peers or the rest of the category has been experiencing from a volume growth perspective, profit growth perspective. So can you talk about what's kind of differentiated your portfolio from what we've seen from the rest of the category?

Sure. And good morning, everyone. Thanks for the question, Andrew. So -- what is it now? About 3 years ago, we talked about a multiyear strategy as it relates to Prepared Foods. And I got to tell you that multiyear strategy is working, and we're starting to see the compounding benefits from that. We just completed our second consecutive quarter of volume growth in Prepared Foods.

And if you look at peers in the Packaged Foods Group, you would find that that's -- we're one of the only companies, if not the only company that's actually growing in the space. So we're very happy about that. But there are several things that differentiate us in this area, and it starts with execution. We're executing at a very high level today in Prepared Foods. We've done a lot of great things from one end of the supply chain to the other, and it truly is an end-to-end approach in terms of eliminating waste up and down all the different functions within Prepared Foods.

So we're very proud of that. And it starts with the simple execution and this commitment to execution, whether that be inside the 4 walls of the plant. We were -- we had a lot of opportunity from a capacity utilization perspective. A lot of processes were not disciplined. We had a lot of opportunity there to be better. And so we simply began to grow our volume. And we've done that very well relative to the peers, our peer set. The operating environment out there in packaged goods and food in general is not -- it's not an easy place to play presently with inflation and the consumer under pressure and so forth.

And so just that multiyear approach, targeting customers and consumers. And I'll go back a little ways. And when I became the CEO right at 5 years ago, there were 3 things that we need to do. And remember, this is back in COVID, in the middle of COVID, there were 3 things we needed to do. And frankly, we weren't doing any of the 3 very well. The first one was winning with customers and consumers. We weren't winning. We weren't servicing them. We weren't doing the basics very well at all.

And then our team members, again, right in the middle of COVID, we're trying to staff plants, get people to work, get people back in offices, those kinds of things, but we had to win with our team members. We didn't have a chance to succeed with customers and consumers, if we didn't have our team aligned. And I'm happy to say that we do have that today.

And then execution is the third component of that. And frankly, we were not very good at all at execution in the most fundamentals of things. And so the biggest difference between now and then is that we do all those very well. We also did made a decision to just reference customers and consumers, but getting aligned with strategic customers. And that looks a lot like having multiyear deals with customers where we create this win-win relationship, whereby their shared risk in prepared foods or in chicken even, you shared risk relative to the inputs. It could be grain.

And then we owned execution and the customers in this case would own the responsibility of delivering the volume, which ultimately gave us a stable volume and at the same time, helped us absorb overhead or fixed costs. And so all that worked together. Of course, the brands have all done very, very well. We've really tightened up our focus and our execution as it relates to product innovation and how we collect information, data and analytics as it relates to the consumer.

I might add just real quick, Andrew, just to dive into Donnie's point on execution and a multiyear journey, right? We started that journey, as Donnie said, a couple of years ago, but it was really about the -- starting with the execution inside the plants, the 4 walls of the plant, right? We knew we had great opportunity there, but we got very dedicated and disciplined on making sure that we were operating with the level of intensity inside our Prepared Foods business that we did in the rest of the business.

And that really was the start of a catalyst of reshaping our cost structure and allow us -- allowing us to make some choices and investments that are what we're seeing the benefit of today relative to innovation, relative to R&D activities, right, and really meeting the consumers' needs, but it started with making sure we had a really well running and a great execution inside the plants.

You've talked about utilization rates across the business. In Prepared Foods, has anything changed with the asset base? Or are you just getting more out of what you have or have had?

Sure. The beauty of execution is this. We had to make some decisions in Prepared Foods. We did it in all businesses. But in terms of the footprint of the assets that we have. We had some that didn't make sense anymore, some that we probably held on to a little too long. Some wear products, product mix changed, that type thing. But we did that. But through the fundamentals of the business and execution, just eliminating waste.

Eliminating waste means you improve efficiencies throughout the organization. So at the time we started this, we had excess capacity in our Prepared Foods business. So goal there was to grow the business, fill the capacity and say yes more often to customers, which -- I mean, I realize that sounds a little foolish, but we literally had to do that and to fill up the plants and run more efficiently. So as you fill them up, as you get more efficient, you have more capacity and you got more room to grow and you have a better cost structure, and it just begins to compound and good stacks on top of it.

What has changed from an innovation perspective in Prepared? I mean you talked about the data and analytics and some of those things. Can you talk about how that approach has evolved?

Sure. I think the first thing is the -- is we're leading with data and analytics. And we've begun, like I'm sure many have, began to collect first-party data so that we can connect directly with the consumer. And we understand what they like, what they dislike more readily. They give us that instant feedback. So whenever you go and you shop online and you see that 1 through 5-star rating or some third parties that will describe your product about what -- how they think about that, getting all that right is really important. But you start with a more focused approach to innovation.

And we, like I'm sure many -- at one time, it was -- we can do anything. And we tried anything and everything. But what we had to do is get more targeted against those consumers. And part of our strategy was to become more targeted toward younger consumers. We were over-indexing, which is not a bad thing to older consumers, but we were under-indexing to younger consumers, and they have different perspectives in terms of what those product qualities should look like. And so engaging with them and getting more targeted.

Part of this process is using tools and analytics to -- everybody has a stage gate process. It typically takes 18 months in the packaged goods arena. Well, there's nobody that is willing to entertain an 18-month product innovation cycle. I mean the customer, frankly, is going to get somebody else to produce the product, provide product, it takes you 18 months. So you got to streamline that and do a lot of concurrent activity as opposed to doing everything sequentially.

So all those things have worked better. So we got a sharper focus on the innovation in our business, and that's working very well. We just recently launched a new high-protein line of breakfast under the Jimmy Dean brand, bowls, sandwiches and even a protein waffle, which was an expansion. All of that was driven based off those data and analytics that I just referenced, and they're all doing very, very well in the marketplace.

I think as well, during the last several years, as Donnie said, we focus on making sure what we're executing, we're executing very well. But 2 other catalysts that we're in where we condensed and brought in a number of our business units that previously had been more disaggregated, right? And the benefit of having together collectively with the business units working with one another, but also working with R&D and innovation, all together in the same place has really showed the benefits.

And you couple that with being really aligned with the business unit to make sure what we are working on are the big ticket items that are going to drive a difference and are really resonating with all the data and insights that we've gathered to make sure that each one of those investments produces a higher return.

You started the internal improvement journey in the Chicken business earlier than you did in the prepared side. Can you maybe compare the opportunity in prepared to what we've seen you execute against on the Chicken side? Is the magnitude of improvement the same? Kind of how do you think about looking at Chicken as kind of a leading indicator to what you can achieve in Prepared?

Sure. I'd first acknowledge that we have had great success in Chicken over recent years. And the playbook that we have there is very similar to the playbook that we have in Prepared Foods. And it's -- these are all simple things. They're simple, but yet challenging to do is control the controllables. And so people can get at times sidetracked by what is the cost of grain, what is the inflation, what is -- what's the price of gasoline, what's going to happen in the Strait of Hormuz, all these different things.

Well, the fact of the matter is, I don't control any of those. But what I do control is what we do inside our business. And so getting everyone focused against that has been really important. In terms of across all of our businesses. The playbook that you referenced in Chicken is the same playbook or very similar in Prepared Foods. It's very similar in our beef and pork businesses in our international business as well. It's controlling those things that we can control. It's executing with excellence. It's being aligned with customers and consumers and taking care of our people that make all this happen. And so what's the size of that order of magnitude?

Remember, our Prepared Foods business is roughly half the size of our Chicken business. But the upside for Prepared Foods and continue to growing that organically and inorganically, there's tremendous upside to this business. The -- just the multiple, the opportunity, the branded portfolio that sits inside Prepared Foods and also the Tyson brand as well is those are all really, really good things. But the playbooks are very similar. The upside would be similar in terms of order of magnitude.

It's obviously been a very inflationary environment here so far this year. So I guess I'm curious, like to what extent have the improvements been masked by that so far this year? And when I think about your assumptions on the input cost environment going forward, what have you assumed in your outlook? Are we going to see that abate and maybe some of the benefits start to increasingly come through from a profit growth perspective?

Sure. Great question. The -- looking at inflation, we think safer Prepared Foods, the raw material, beef, pork, turkey, some chicken, the inflationary effect of that, we think will persist. I don't know for how long. I don't know there's a point where you reach the point where the consumer will back away based on pricing. But inflation is real. It is persistent. We have modeled into our '26. And as we even think about '27 based on what we know now, we don't see that going down in any kind of meaningful way. So we have to manage those things very well.

You said, well, why do you think that? 7 out of the last 8 quarters, we've seen inflation in raw materials. So we think that's probably a pretty good trend. We don't like that. The consumer doesn't like that. And what we spend our time doing is trying to offset and defray those costs and try to make sure that through pricing, promotion, all those levers that we have that we make that product relevant and that we make it affordable for the customer and the consumer and while maintaining volume.

And so -- but I don't see any sign of that going. You've got gasoline prices now in our Q3, you're seeing gasoline prices go up. You've seen them go up well over $1, and that will start having impact in terms of the consumer and where they buy, where they shop, which channel they do that.

I think just to build on what Donnie said, 7 out of the last 8 quarters in Prepared Foods, we've seen commodity inflation. But you look at our performance relative to the last 3 years, it's incredibly stable, but actually growing at the bottom line, and as Donnie mentioned earlier, growing at volume, right? So we've certainly, to an earlier question you asked, demonstrated a very different performance.

But our execution, what we said at the beginning around being very efficient inside the plant gives us the capacity to make choices between investments that we're making and having the benefit of driving not only volume growth that we're talking about, but our products in retail are performing incredibly well, right?

And that allows us an opportunity to have a conversation about multiple ways to deal with increasing inflation, one of which is increased volume, right? And so it gives us multiple options based on the moves that we made and our cost structure improvements and discipline we've had for several years now.

Given some of the challenges that the rest of the category is experiencing, are you seeing changes in competitive behavior, especially with the consumer that may be more stretched? And if so, or if that were to happen, what are the levers that you have to still achieve your goals?

Sure. I would say, first and foremost, we're not comfortable in the environment that we're in. We would never be comfortable with a competitor and saying, you know what, we're good. We're as good as we can be. We believe we earn the right to serve that customer every day. That means we got to provide the right kind of quality, the right kind of service, the right kind of innovation. But what levers if there's a competitive response, there's certainly some of that goes on today. But we just have -- we have to perform better than them.

And we have vehicles to do that and process in place to do that with our customers. We talk a lot about strategic customers. Some would call it key customers. There's a number of different names, but it's those customers you intend to win with. In many cases, it's those customers that are growing and winning in the market themselves. And so what is really important to me is that you keep volume growing.

I think that is a critical indicator of your success and the strength and health of your business. And so we watch that very closely across all businesses. And so -- so in Prepared Foods specifically, we adjust those labor. We make sure that the products that whether it's pricing, promotion, those type things, keep the product on the shelf, keep it moving, making sure that the quality is there, making sure that we are best-in-class in servicing those customers and then making sure that we continue to bring new innovation for those new consumers that we want to intersect with and namely, as I referenced earlier, these younger consumers.

Can you talk a little bit more about the strategic customer relationships? Is that more of a volume benefit for the company, a visibility benefit, a margin benefit? Kind of how does that impact your business?

Well, if I look foundationally or fundamentally, those strategic customer relationships -- they're critical. They're critical to our strategy. They're critical to our success. And when I talked about becoming the CEO, there was a period where I thought we -- I believe that we were mad at the customer and kind of irritated that the customer would want us to sell them product, and we had to produce it. So we had to change that, right?

And so getting aligned with those strategic customers opens up a lot of opportunities. It is truly a win-win relationship. And so what does that do? It provides a stable volume. It provides fixed cost absorption. And it also allows us to have conversations with those customers, let's say, inflation enters in, in the raw material. What that allows us to do then is have a conversation with the customer. Instead of increasing the pricing or passing on pricing, can we offset that with incremental volume to fill up that line to offset that so that we keep our price points relevant as it relates to the consumer so that we keep that volume moving and not only for us, but also for the customer.

And so it's working there. The critical -- the strategic customers are critical to the model that we have in place. And we handle it with kid gloves and it's working very well. And we get more and more customers that we bring online where we have shared risk. And so the best part about all that is, one, you're growing, but secondly, you change all the conversations from price to how do we grow together. And we -- when our customers' business grows, we tend to grow with them. And so it's working very well.

The framework behind that as well, Andrew, right, as Donnie mentioned, is absolutely on ensuring that we're providing a quality product, right? It tastes good, right? Those elements are always there, but also around the innovation, and Donnie touched on a few elements of what innovation we have brought, but the continual evolution and new things introduced that are resonating with the customers and consumers, as I mentioned earlier, but it's service, right?

And that -- those elements of assuring our customers, right, that we're going to be there, right, with a quality product consistently delivered service on time, and we're bringing innovation creates a point of difference for us to offer up in that partnership. Great.

Shifting gears to the Chicken business. I think one of the most surprising things that we heard from you guys in the most recent quarter was the discussion around the genetics business and the profitability improvement there. Can you talk about what exactly changed? And how should we think about that evolving from here? Does that build? Does it change? If you could talk about that.

Sure. Sure. And it was brought into the conversation in the most recent earnings. And so let me start with explaining how our genetics business works inside Tyson. In our genetics business, which we've been in for a long time, it's always been a part of our Chicken business, but it has always been a service to our Domestic Chicken business. But at the same time, we sell that product, have sold that product to customers around the world, competitors included.

And so that's the way it works. It all rolls up into the Chicken segment. And so it is -- we have seen a structural change in that business. And I can give you a short history lesson, if you go back to about 2015, we primarily had one genetics -- line of genetics that service essentially chickens, live chickens that would be like 7, 7.5 pounds and down. We had a very good package for that.

If you recall back in 2015 and moving on, chicken bird weights began to get higher. We had -- we made a couple of attempts to have a line of genetics. And quite frankly, it didn't perform. It didn't perform for us. It didn't perform for customers. And so we were sitting without a line of genetics. So back to 2015, from 2015 all the way into '23, '24, we began to see the performance of the genetics business continue to decline with all those -- influenced by all those things I just referenced.

We launched a new breed, a new line of genetics that had all the characteristics of the breed that we had, but it also addressed yield and egg production for a bigger bird, that 7.5 pounds and larger. That's been in development now for some time. We've done tremendous field trials and so forth with that. We're actually harvesting -- we're early innings, but we're harvesting in our Q2. Some of those birds are, let's call it, we're about 1/4 of the way there in terms of the birds that we intend to use out of this big bird population.

But we're seeing the benefit of that from the COB or the genetics company. We're seeing the benefit on their P&L because we're selling that product. It's largely being sold to Tyson, right, our broiler division, our Domestic Chicken business. And so that has done well. You saw the benefit of that, and we called it out in our Q2.

What you haven't seen yet is those genetics flowing through the Domestic Chicken business. And we're, again, fairly early innings in that. And in terms of the population we will put on those new genetics, let's call it, mid-'27. You should see the impact of that across our business where that is -- and that has a sizable uplift in itself.

And think breast meat to live yield, which is probably one of the bigger measurements as it relates to chicken and particularly in the big bird deboning arena. And so that looks really good. So we got our genetics working. We got a genetic for a smaller bird, a larger bird, and it's performing very, very well. But that overnight success took a decade. And so it's a pretty protracted event.

Speaking of '27, probably the most frequent question I've been getting recently is about your ability to grow Chicken profits again in 2027. You've obviously had tremendous progress on the operational efficiencies or operational improvements. You have this genetic step-up. I think people are pretty worried about the kind of underlying Chicken margin environment. So how would you address that? What's your level of confidence in your ability to grow Chicken again or profits again in '27?

Sure. I think a couple of things I would point out with that. If I look at the results that we delivered, I think it's important to note that we saw a pretty significant drop in the market price for chicken breast meat, chicken wings, chicken tender lines, the whole deal in our Q2. I think industry -- I know the industry saw that as well.

So that's the first thing to point out. But I think the other thing that is most important here is our results were execution led. They weren't market-driven. That's really satisfying to me in that we control our destiny with that, controlling the controllables. And so if I think about the balance of '26, '27, and I'm certainly not guiding into '27 at this point. I think what we're doing in our Chicken business and the compounding benefit of that will continue to move into '27 and beyond.

I think we will continuously get better as we get better at every one of these -- in every part of this business. There's a Hall of Fame Coach Nick Saban used to -- would say that to be successful as a team that every person needs to win their spot. So when I talk about execution, executional excellence, it's every person up and down the supply chain winning their spot.

And so my confidence in going forward is based on this execution that we do and everybody winning their spot, not based on what the market might give or take. I won't say I'm agnostic to that, and I won't say I'm not impacted by that. But our model is we have a little insulation to that, particularly based on that customer relationship, strategic customer relationship, where we can adjust pricing and we change the narrative from pricing to volume growth and that type of thing.

I think our -- this -- our second quarter was a good proof point, right? As Donnie had said, right, commodity chicken pricing was down. And given our mix in our portfolio, right, our average price held through, right? And we grew volume, right? And that was a clear point of differential that the model that Donnie talked about between strategic partnership, execution within the plants.

And we've made a lot of hard choices over the years to set us up for much better success, and we've rededicated the capital to the right mix of projects to ensure that we have that sustainability and then connect it with the genetics business. And remember, we're end-to-end as can be between genetics all the way to rendering and everything in between sets us up with a point of difference as well.

Maybe if I could add one more point to that. So in our Chicken business, we've had 6 consecutive quarters of volume growth. In the most recent quarter, we had about -- in our Chicken business, about 2% volume growth. And across these 6 quarters I referenced, our branded value-added business has grown 3x that.

So that gives you some indication of where our focus is in growing our business. It's in the branded value-added. We are a huge player in that. We have the #1 branded chicken. And so that's where we're growing in there. It's less about commodity. It's more about branded value added on both fresh and frozen product.

And that was super helpful. On the Beef side, where things have been a bit more challenged, you have made some changes, closing a plant recently, adjusting some shifts. Originally, when you made that move, you talked about we'll get some productivity, but there's also some incremental costs. How has that played out? How is that impacting your network and your profitability having made that decision?

Yes. So as a reminder, right, the changes that we made, we announced in November, but they didn't really go into effect until our Q2, the quarter that just ended. And so it's early through that, right? But the expectation was processing within our new footprint, right, which is designed for where we felt the cattle would be available in the future, not yesterday or not today, but the right size for where it needed to be, closing one facility and taking from 2 shifts to 1 was the move for us to make.

Now that enables us to run the available cattle in the industry in an environment, where we can be absolutely competitive as anybody else. right? We're not going to control cattle costs. We're not going to control the ultimate cut out. But what we can do is operate with great efficiency inside our network. And it's early, right? But we're starting to see the benefits of that as we've moved into that footprint.

Now naturally, when you're in a transition period, while, yes, there's a date in which that happens, there's still costs associated with it is moving things around or inefficiencies as you're running that activity. And so our third quarter will be the first point in which we're operating completely in that new footprint and the expectation of being absolutely competitive in the industry is there.

Does that balance between cost and efficiency? I mean is that the point that you're making, I guess, that now we're going to see that lean a little more heavily towards the efficiency side than the cost side?

Yes. And we're seeing that today. And a lot of those costs were short term in nature as -- I mean, you this closing of a plant and going to one shift and another, we're all -- a lot of those costs associated with that were short term in nature. And essentially, we've worked through that. And those plants that we have and the footprint we have, we're operating at a very high level of efficiency or utilization, I should say, which is making us more efficient, more cost competitive, which was the intent of the moves that we made.

The guidance implied in the back half of the year, right, is another proof point in the expectation that while we're still in a loss situation, right, narrowing those losses in the back half of the year were apparent in our guidance for the back half.

You guys were one of the first, I think, to kind of call out that you were starting to see some heifer retention about a year ago. How has that evolved? Are the conditions there for an acceleration in Heifer Retention? Are we seeing it yet? Or is there any hope?

It's still, I would say, spotty and regional, right? The pace at which perhaps some had forecasted before hasn't picked up. Look, it's still going to be a tight cattle supply situation as we move through '26 and into '27. But as I said earlier, what we're controlling and back to Donnie's mission for us to make sure we're controlling controllables, that's what we did with the footprint, and that's what we're executing, and we'll manage through in '26 and into '27. And we'll still manage in a tight cattle supply.

With all the improvements in the business, we've seen the earnings trajectory really pick up as that continues to happen, as the cash flow improves, how are you thinking about incremental capital deployment? What are the priorities around that from here?

Yes. So happy to say, in addition to improving guidance for the year between $2.2 billion and $2.4 billion, we also raised free cash flow guidance for 2026 to $1.2 billion to $1.8 billion. Our CapEx has been in the range, as we said, the entire year, between $700 million and $1 billion. Our historical average is a little above that, more like, call it, $1.2 billion. But I'll hurry on to remind everybody that we spent a lot of capital over the last couple of years, right? We put a lot of capacity expansion in the network, built 4 domestic plants in the United States, built 7 internationally, and we added a lot. And we've been working on certainly filling that up and operating with excellence, as Donnie mentioned earlier, but ultimately, our long-term expectation of leverage is at or below 2x. And at the end of our Q1, we hit 2.0x.

Naturally, for us, Q1 is -- we generate a little excess cash. Q2, we use a little cash, just the normal cycle. So leverage was at 2.2x as we finished Q2. But it's very much a sweet spot for us. We have ultimate optionality and flexibility. And as you pointed out earlier in the opening comments, we've been very diligent in paying down gross debt, $300 million this quarter, $1 billion in the last year, nearly $2 billion in the last 6 quarters, right?

We've demonstrated a commitment to that, and we have a lot of optionality and flexibility. I'll just end with our return cash to shareholders as well. We've returned in the first half of the year just under $450 million through dividends and share repos. I think it's a very impressive stat.

You talked about some of the investments and capacity expansions that you've made. Are there other internal projects that as you look forward are exciting or interesting that would be kind of top of mind as you weigh that against maybe further cash returns to shareholders?

Yes, I'll start. Donnie can add anything as well. Look, we have a lot of opportunity ahead of us, right? We've -- as I said, we had a little bit lower CapEx this year. That was planned as we were fully digesting all the investments we put in the last few years. But we have a lot of runway ahead of us. And the businesses have a lot of views relative to what can continue and making those investments in the business that we see really great returns on. And we're excited about that. But the optionality and flexibility that capital structure provides us gives us a lot of opportunity.

If I could add this, I talked about these strategic customers. One of the responsibilities that go with that is to make sure that we've got capacity in front of us. So I also talked about utilization and how important that was. But our responsibility to our customers to continue to grow with them as they grow is to make sure whether it would be harvest capacity, fully cooked capacity, whatever the capacity is to keep that in front of us.

And we go to great lengths to plan that capital deployment. So it will be ready before the actual demand materializes. And so that's where the capital will be spent. There may be inorganic opportunities. There's certainly -- it's certainly a great time to be thinking about if you wanted to buy something, but Curt is pretty disciplined as it relates to capital. And so we are very disciplined in that whole approach in terms of deployment of capital.

I think I'd have to follow-up on that point. Is there -- is that a geographic kind of diversification kind of comment? Is it in any specific area that would be most interesting, I guess?

Well, if I were to -- yes, it's going to be Poultry and Prepared Foods. I mean that's where we're growing the most. That's where we see the opportunity. That's where our strategy will lead us. Consumers today are looking for food that, first and foremost, taste good, but they're looking for food that is nutritious, affordable and convenient. And when you can intersect with the consumer in that way, where all 3 of those things are important, you have a real high likelihood of success.

And maybe I'll just close with this question. When you think about all the improvements to the business over the last several years, now kind of transitioning to Prepared more recently, how far along in the business improvement journey do you feel like overall for the total company, you are? Where are we? What inning, however you want to frame it, are we in this opportunity?

I can look across all businesses, and I will tell you, we're executing as well as I've seen us execute. And I've been doing -- I've been at Tyson, since 1982. And so I'm seeing great execution across every one of our businesses. But I'd also have to look you in the eye and tell you that there's still plenty of runway ahead in terms of that.

So I don't think you will ever hear me tell you that, you know what, we have arrived. There's nothing left to go get because every rock we turn over, we find something that leads us down another path and another way to eliminate waste and improve profitability. So the journey will never be over. It's unfinished business, but our mindset is to wake up every day and be better today than we were yesterday, be better tomorrow than we are today and so forth. It is a continuous improvement mindset.

Out of time. We'll leave it there. Thank you both very much for being here.

Thank you.

Thank you.

Good morning, and welcome to the Tyson Foods' Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Jon Kathol, VP, Investor Relations. Please go ahead.

Good morning, and welcome to Tyson Foods' Second Quarter Fiscal Year 2026 Earnings Conference Call.

On today's call, Tyson Foods' President and Chief Executive Officer, Donnie King, Chief Financial Officer, Curt Calaway, and Chief Operating Officer, Devin Cole, will provide prepared remarks. Following the prepared remarks, we will have a Q&A session.

We have also provided a supplemental presentation, which may be referenced on today's call and is available on Tyson's Investor Relations website and via the link in our webcast. During today's call, we will make forward-looking statements regarding our expectations for the future. These forward-looking statements made during the call are provided pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all comments reflecting our expectations, assumptions or beliefs about future events or performance that do not relate solely to historical periods.

These forward-looking statements are subject to risks, uncertainties and assumptions, which may cause actual results to differ materially from our current projections. Please refer to our forward-looking statement disclaimers on Slide 2 as well as our SEC filings for additional information concerning risk factors that could cause our actual results to differ materially from our projections. We assume no obligation to update any forward-looking statements.

As we mentioned last quarter, segment results are presented on a segment operating income level and will be discussed on an adjusted basis. The primary difference between segment operating income and the method used in previous quarters is that we no longer allocate corporate expenses and amortization down to the segment level. We have recast previously reported quarterly results for the previous 3 fiscal years to reflect the new format.

The segment change has no impact on consolidated historical U.S. GAAP financial results. The recast financial information is accessible through the Events and Presentations section of the company's Investor Relations website at ir.tyson.com.

Please note that references to earnings per share, segment operating income, operating income and operating margin in our remarks are on an adjusted basis for our fiscal periods unless otherwise noted. For reconciliations of these non-GAAP measures to their corresponding GAAP measures, please refer to our earnings press release.

Now I will turn the call over to Donnie.

Thank you, Jon, and thanks to everyone joining us today. Overall, I'm pleased with our performance in the second quarter, and we are raising our AOI guidance for the year to incorporate better performance year-to-date and continued confidence in the future of our business. I'd like to reinforce what we're building at Tyson, a diversified protein-centric company positioned to capture growing demand for high-quality protein.

Animal protein remains top of mind for consumers and continues to gain momentum as a foundational part of a healthy diet. We are directly tied to and stand to benefit from this long-term trend. We're focused on disciplined execution, a diversified multi-protein portfolio and a balanced approach to capital allocation. Our scale and operating capabilities support cash generation across cycles, enabling us to reinvest in the business, reduce leverage over time and return capital to shareholders, consistent with our capital priorities. We remain committed to our long-term strategy that creates value for customers, consumers and shareholders and we'll continue to be transparent with our investors along the way.

Our shift to segment operating income is working as intended. This change empowers our business leaders to pursue volume growth and enhance their decision-making based on a more direct view of the impacts of those decisions without corporate expenses and amortization, which are more fixed in nature. As stated previously, we will continue to focus on reducing spend and maximizing efficiencies in our corporate functions and see more runway with both initiatives.

Let me tell you more about the quarter, and Devin and Curt will elaborate. Our second quarter results, were $13.7 billion in sales and $497 million in adjusted operating income, demonstrate that our strategy is working and is gaining momentum for both Tyson Foods and our customers. We remain focused on continuous improvement, and our team is energized by the opportunities ahead.

Within Chicken, we delivered another impressive quarter with $523 million in segment operating income and a 12.2% margin, while navigating a more normalized commodity environment and typical Q2 seasonality. Strong execution on the controllables and more efficient marketing and promotional spend drove improved performance. Demand remains robust and our customer-centric approach is working. Overall year-over-year Chicken volume was up 1.7%, with retail and foodservice volumes growing nearly 3x faster than total volume, reflecting momentum with our strategic customers.

Importantly, these results were not driven by broad price increases with base pricing being slightly lower in the quarter. But rather, we saw improvements in product mix and executed well operationally. Our end-to-end Chicken business, including our Chicken genetics business is performing at a high level as we continue to deliver on our commitments, while we see ample opportunities for more improvement in growth. This is another example of power Chicken business is outperforming compared to a commodity Chicken business.

Moving to Prepared Foods. Segment operating income increased to $352 million, even as commodity costs were higher year-over-year, and our margin expanded to 14%, reflecting strong demand, share gains and disciplined execution. Sales grew 4.8% and volume grew 0.4%. Importantly, we continue to drive innovation and our brands are winning in the marketplace. In Q2, we gained share in volume, dollars and units. Our brand strength and focus on customer relationships, along with improved promotional efficiency and targeted map investments are delivering strong return on investments.

Turning to Beef. Our segment results reflected the expected volatility in the cattle cycle. We successfully completed the previously announced strategic decision to optimize our manufacturing footprint. As a result, our second quarter results reflect only a portion of these operational adjustments, which are intended to improve utilization and strengthen our cost position. Importantly, we're staying focused on the levers we can control, plant utilization, operating discipline, customer mix and execution. And we expect the benefits from these actions to build as we move through the year.

Our outlook for the remainder of the year implies lower losses in the back half than the front half of the year. We continue to expect results below historical margin levels until cattle supplies normalize.

Our Pork segment performed well in a stable operating environment. All parts of the pork value chain from hog supply, pork production through retail and foodservice customers are in relative balance, allowing for more predictable and stable operating margins. Pork's relative value to beef is likely to benefit revenue for the balance of the year.

Finally, our International segment continued its momentum and had another good quarter.

As we've discussed, there is increasing demand for protein, which helps us drive strong revenue and cash flow either through economic ups and downs. We also benefit from being a producer of several different animal proteins as the timing of these cycles can vary. This trend insulates us from an otherwise fragile macro environment. Consumer confidence recently fell to a record low, while inflation is still elevated more than 3%. At the same time, foodservice traffic rebounded in the second quarter, reinforcing the value of our diversified portfolio across retail and foodservice.

We also benefit from our scale as we can provide lower unit costs, better service levels and maintain a healthy market share as we produce approximately 1 in 5 pounds of U.S. chicken, beef and pork. Our long history and strong position in the marketplace solidifies our business for the long run.

Protein continues to be a priority for consumers. As a leading animal protein provider, we are well positioned to meet this demand with products that deliver complete nutrition, including all 9 essential amino acids. This, along with our shift to simple ingredients, like those found in your pantry, is resonating and gaining traction with consumers. Together, these factors support stronger returns through disciplined investment, expanding profitability and consistent cash return to shareholders.

Consumers are choosing protein and they're leaning into brands they trust for quality, taste and convenience. That plays directly to Tyson Foods' strengths, where we're winning in Chicken and Prepared Foods driving share, volume and margin. According to Nielsen data, total food and beverage category retail volume declined 1%, with dollars up 1.7% over the 13 weeks ending in March. In contrast, our Tyson retail branded products, which includes our national and regional brands, grew by 2.3% in volume and 3.6% in dollars, outperforming the broader categories.

We are also winning in digital. Across key retailers, our digital dollar growth is materially stronger than in-store performance, reflecting our ability to compete and win in omnichannel shopping. A few examples include Tyson-branded value-added chicken, up 6.5%. Aidells dinner sausage increased by 9.7%. Hillshire lunchmeat grew by 7.6% and Wright and Jimmy Dean bacon increased by 6.8%. Our Hillshire snack combos have also achieved double-digit growth. In addition to the volume growth, all 5 categories grew dollars and share, reinforcing that we are winning with consumers while improving the quality of our growth.

We're also performing well in foodservice with volume growth of 60 basis points.

In terms of how we're driving innovation in our portfolio, we are using AI derivative insights that sharpen how we identify emerging preferences and translate them into action. This enables us to bring on-trend, consumer-led products into the marketplace. In practice, the integration of AI allows us to better connect what consumers are telling us with what shows up on shelves and menus. The capability is accelerating our innovation pipeline, improving decisions around distribution and pricing and strengthening the effectiveness of marketing and new customer acquisition.

One example of this is in our Jimmy Dean brand. Using these insights, we are pioneering the next wave of higher protein breakfast. Our recent launch of a Jimmy Dean protein breakfast platform is off to a phenomenal start, bringing higher protein versions of consumer traditional favorites like sandwiches and bowls that are showing stronger velocity and consumer takeaway. We're pairing those core items with innovation like Jimmy Dean high-protein waffles that is the new and incremental to our Prepared Foods business.

Early consumer responses have been very positive and it's bringing new and younger consumers to the brand. We have already begun to capture meaningful share at retail, and we see a compelling runway to build on this momentum, as we expand distribution and continue to innovate.

Our retail performance remains superior to that of our primary competitors in comparable business segments across the industry. Over the past 12 months, our Prepared Foods retail business has driven strong gains in volume, market share and profitability, outpacing our peers. However, our valuation continues to reflect discount relative to those peers. Investors who recognize the value today will benefit the most. This is why Tyson Foods is uniquely situated for success in today's environment.

Demand for our products continues to grow, and we are well positioned to capture this momentum. While some companies face challenges in generating demand, our share gains demonstrate both our strength and our expectation for further growth, an essential driver of our ongoing success. Our protein-centric offerings, combined with disciplined capital allocation, enable us to capitalize on the opportunities that stem from strong performance and allow us to continue to thrive in the marketplace.

As a 90-year-old American company, we provide trust and consistency across cycles. As you heard us say many times, we're not standing still. Overall, these strengths allow us to deliver lasting value to our customers, consumers, team members and shareholders. Looking ahead, the opportunities before us are more promising than ever. and I'm very confident in our portfolio and in our strategy.

With that, I'll turn it over to Devin to take you through the segments in more detail.

Thank you, Donnie, and good morning. In the second quarter, our team made progress toward our strategic objectives. We remain committed to holding ourselves accountable to our customers and consumers' expectations. Now let's review our segment performance.

Prepared Foods delivered a strong quarter with sales up 4.8% versus last year and volume up 0.4%. Segment operating income was $352 million, up 7% year-over-year and margin expanded to 14%, reflecting continued progress on our multiyear plan to enhance profitability. We gained share in volume, dollars and units. In the quarter, volume share was up 70 basis points and dollar share was up 50 basis points, driven by strong protein demand and our disciplined execution with notable wins in bacon, lunchmeat, dinner sausage and snacking.

Volume growth reflects distribution gains, innovation and improved promotional efficiency, supported by targeted MAP investments as consumers prioritize convenient, nutritious high-protein solutions. Looking ahead, we expect continued growth in segment operating income for the full year and remain well positioned in this business for the long term.

In Chicken, we delivered segment operating income of $523 million and a margin of 12.2% despite a more normalized pricing environment and the typical seasonality we see in Q2. Sales were up 3.5% year-over-year, driven by favorable mix and volume growth with total Chicken volume up 1.7%. Retail and Foodservice volumes grew nearly 3x faster than total volume, reflecting strong consumer demand and momentum with our strategic customers.

Our diversified pricing strategies and improved mix kept average selling process stable even as base pricing was down. That stability and our bottom line results were driven by a better product mix tied to strategic customer growth and stronger operational performance. Execution continued to improve across the controllables. Live performance, yield, asset utilization, labor productivity and end-to-end supply chain discipline, supporting our sixth consecutive quarter of year-over-year volume and net sales growth and reinforcing the consistency and predictability of our chicken business.

We also wanted to highlight the success we are seeing in our Chicken genetics business, which is competing at a high level again. This has been driven by the hard work of our genetics and live production teams alongside family farmers who are the best at what they do. This business is delivering meaningful, sustainable results and creating real economic value for our customers. Combined with our shift towards a more value-added product mix, our strategic customer alignment and our Chicken Genetics business differentiates Tyson from commodity chicken competitors and strengthens the value proposition we deliver to customers and shareholders.

Growth was strong across retail and foodservice with nearly all subchannels delivering positive volume growth. We are strengthening service and quality with our strategic customers while continuing to expand our value-added and premium portfolio to meet demand for convenient, high-quality options. Taken together, our strategic customer partnerships and disciplined execution are strengthening our Chicken business model, as it becomes more consistent and predictable, we see more runway ahead.

In our Beef segment, we remain committed to disciplined execution and the actions within our control as we operate in a dynamic market environment. Beef sales increased slightly in the second quarter compared to the prior year. Our updated operational footprint is aligning with lower cattle availability, and we are seeing the benefits of a higher capacity utilization. While the quarter included variability in industry conditions, we believe the harvesting plan adjustments better position us to compete effectively this year and over the long term with a rightsized production footprint.

We expect to see increasing benefits from these actions in the coming quarters. Segment operating income declined compared to the prior year as higher cattle costs more than offset higher cutout values even as consumer demand remains strong. As we navigate the current cycle, we remain committed to operational excellence across our footprint and advancing additional initiatives that support stronger, more consistent long-term results.

In Pork, segment operating income was $41 million with a margin of 2.6%, driven by increased sales, reflecting strong consumer demand. Hog supplies for our facilities were adequate during the quarter. With reliable pork raw materials and a tighter, more integrated network, we're improving mix and lifting value in Prepared Foods by driving higher utilization across bellies, hands and trimmings. We will continue to push for higher utilization as it will improve access, quality and landed cost of our raw materials.

Overall, I'm encouraged by the incremental steps we have taken in the second quarter, and I am confident that we have room to grow and improve across the operational and controllable aspects of our business in 2026 and beyond. We are focusing on our strategic customers and consumers while delivering value to our shareholders. With animal protein remaining a clear winner in the mind of consumers, the diversity of our portfolio enables us to make investments by partnering with our strategic customers to drive category expansion.

With that, I will turn it over to Curt to walk through our financial results and outlook in more detail.

Thanks, Devin. As a large cap value company, our multi-protein multichannel portfolio, combined with our team's focus on operational execution in a dynamic macro environment performed well compared to the overall food industry during the quarter. We see more runway ahead and are confident in our performance for the remainder of the year.

Now let's get into the financial details. For the second quarter, total company sales grew 4.4% to $13.7 billion compared to prior year, led by Pork with solid contributions from Chicken and Prepared Foods, reflecting the healthy demand environment for protein. Second quarter segment operating income was $751 million, slightly higher than the prior year.

Corporate expenses and amortization were higher by $19 million compared to the same period last year. The increase was driven by a $15 million gain on a legal settlement last year as well as an $8 million loss this year related to our deferred compensation plan. Without these two items, it would have been lower than a year ago.

Total company adjusted operating income was $497 million, a margin of 3.6%. Adjusted earnings per share for the quarter were $0.87, down 5% compared to last year.

Turning to our financial position. Our approach to capital allocation remains disciplined, deliberate and forward-looking, supported by a strong balance sheet. We remain focused on maintaining financial strength, investing in the business and returning cash to shareholders. Free cash flow is critical to our strategy, and we are encouraged by the cash flow trends in the first half of the year.

Operating cash flow for the first half of the year was $829 million, and capital expenditures were $397 million, resulting in free cash flow of $432 million. We ended the quarter with $3.7 billion in liquidity and net leverage of 2.2x. We reduced our gross debt by nearly $1 billion over the past 12 months, including a reduction of nearly $300 million just this quarter.

With our strong cash flow, we continued share repurchases with $92 million in the first half of the year and including dividends paid of $353 million, we have returned $445 million to shareholders year-to-date.

Our balance sheet remains healthy as we prioritize financial strength, our investment-grade credit rating and cash management to drive long-term shareholder value.

Let's take a moment to review our outlook for fiscal 2026. As a reminder, our accounting cycle results in a 53-week year in fiscal '26 as compared to a 52-week year in fiscal '25. The 2026 outlook is based on a comparative 52-week year. We still anticipate full year sales to be up 2% to 4% year-over-year. We have increased our range for total company adjusted operating income by $100 million at the midpoint with a current range of $2.2 billion to $2.4 billion.

We anticipate interest expense of approximately $365 million, lower than previous guidance by $5 million and a tax rate of around 25%. We remain disciplined in managing cash with CapEx expected to be between $700 million and $1 billion and stronger free cash flow now in the range of $1.2 billion to $1.8 billion, which is in line with our improved financial performance.

Now to provide more color on our segment outlook. In Prepared Foods, we still expect segment operating income to be $1.25 billion to $1.35 billion. We will continue to drive operational efficiencies and make strategic investments in the remainder of the year and remain on track with our plan.

Following the strong year-to-date performance in Chicken, we are increasing our expectations of segment operating income to a range of $1.9 billion to $2.05 billion, an increase of $200 million at the midpoint. We see continued evidence that chicken will be a preferred protein in the upcoming year, and we also expect our operational execution and performance to continue at a high level.

Based on the continuation of tight cattle supply, we expect segment operating income in Beef to be a loss between $500 million and $350 million. This outlook reflects the current view of cattle availability and [ spread ] conditions partially offset by the footprint actions we implemented in the second quarter and the operating discipline we have underway. Beef remains strategically important to our multi-protein portfolio and customer relationships, and we are focused on long-term competitiveness.

Our outlook for segment operating income for Pork remains $250 million to $300 million based on adequate supply of hogs, continued productivity and operational improvement and robust consumer demand for pork.

Our International segment performed in line with expectations and our annual outlook remains $150 million to $200 million.

Corporate expenses and amortization are anticipated to be $950 million to $975 million, no change from our previous guidance.

Overall, I'm pleased with the second quarter's performance and remain confident that 2026 will be another strong year for the company. I will now turn the call back to Donnie.

Thank you, Curt. In the second quarter, we executed with discipline in a dynamic macro environment. As we enter the second half of the year, we're encouraged by our momentum and see opportunities to raise our performance. Ultimately, we provide high-quality protein that tastes good, that is nutritious, affordable and convenient. This core theme remains central to our strategy and through our long-term success and value creation. Our year-to-date performance reflects the focus and execution of our team members, and we intend to build on this momentum throughout the remainder of fiscal 2026.

With that, I'll turn the call back to Jon to begin the Q&A session.

Thank you, Donnie. We will now open the line for questions. Please note that our cautions regarding forward-looking statements and non-GAAP measures apply to both our prepared remarks and the following Q&A. Operator, please provide the Q&A instructions.

[Operator Instructions] The first question today comes from Ben Theurer with Barclays.

Donnie, Devin and Curt, first of all, congrats on very strong results and a strong first half. So particularly on Chicken. Can you maybe elaborate how sustainable the performance here is? And what role genetics played in most recent months? And if you've had any onetime gains that we should be aware of? That would be my first question.

Sure, Ben, thank you for the question. So let me start off with in this quarter, and we did what we said we would do. We grew net sales, expanded margins in Chicken and Prepared Foods and raised our full year guidance. With respect to Chicken in particular, if I look at our Q2, great performance in Q2. We had -- we beat the same or the prior year quarter by $112 million. And that really was in -- I would say it's in 3 buckets, which are really important to our overall strategy.

Operational excellence is critical in our model. Our model focuses on mix, and it's specifically branded and value-added, fresh and frozen and then strategic customer partnerships. And I'll speak today a little more about our genetics business. But in terms of overall Chicken performance, our message is consistency. We expect the second half of '26 to look much like the first half. We raised our Chicken guidance $200 million at the midpoint to $1.9 billion to $2.05 billion.

I would tell you that momentum is real. We're a better company today than we have been. We're not relying on further commodity tailwinds. This is execution, not a commodity-driven story. Our strategic customer demand plus our operational momentum gives us real conviction. We expect this fiscal year to land in line with better than 2025. And I would tell you that we're off to a great start.

And if I look at -- and I'll use this as a proxy, if I could. If I look at the beat Q2 over Q2, really is in 3 buckets of equal comparable proportion. It's our commercial model, meaning our mix. It means that our partnerships with our customers, our strategic customers. It is our genetics business. Our genetics business is showing up here. And when I speak to that at this point, and I'll go in greater detail here in just a moment, that's about 1/3 of the differential in their operations performance. This is end to end. This is not just inside the 4 walls of the plant. This is in live production inside plants from end to end is where the performance is.

As I was looking at this, if I look at how commodity markets changed in the quarter, commodity markets were off pretty substantially. And so we were able to offset those commodity markets based on our pricing models and so forth. In terms of the genetics business, well, let me answer this question first. You said are there any onetime issues that we should be aware of that drove this performance. My short answer is no, this is you're seeing our model work as it is designed. I normally would not comment on a competitor's business, but there have been a number of things written relative to a fire at Cook Foods.

Frankly, I know very little about the fire but there's been a lot of speculation that our performance was driven by picking up volume from the Cook fire. In our Q2, there is 0 volume associated with Cook fire. And if I look at the back half of the year, there could be some incremental volume associated with that because we have the capacity, but I would consider it nascent in terms of our overall volume and percentage of our branded value-added mix.

Let me pause and let you redirect me.

Just the generics piece, you said you're going to give us a little more detail, you promised.

I'm sorry. You're right, you're right. Forgive me. Our genetics business sits inside our Chicken business. It's not a separate segment. It's been there a long time. It's absolutely a strategic asset for us. Our next-generation genetics line is delivering superior live performance and rear -- real customer value. But this improvement also requires great execution, and we're doing that as well. We had a strong quarter but it wasn't -- Chicken or genetics wasn't the whole story.

A little about our genetics business in terms of where it's been, where it is now. We've had a multiyear journey relative to our genetics business where we didn't perform. We did not have genetics for a large bird. And what I'm telling you now and what you can look for in the future, I think this change is structural. Our breed that we've had in the past, targeted toward a midsized, small-sized bird had performed well historically. It's actually performing better today than it did in the past.

Our new breed is in very early stages. We've been testing and working on this breed, let's call it, 5 years. And it takes a long time for it to flow through the pyramid. But it's more targeted toward a bigger bird, large bird deboning that we participate in, not to the extent of others, but it's designed for that. And so what you're seeing out of these numbers in genetics is associated almost exclusively with the impact to the actual genetics company. You're not seeing the impact yet as it rolls through the broilers or the meat birds that we produce.

We're very early in that, and I'd say low mid-single digits that we tested this thing for a long time now. And so what do you get with that? You get better feed efficiency, you get better egg production, you get better livability and hatch performance. And you also get incremental breast meat to live on every animal. So it's a very good asset for us. It performs well. And we've had a number of quarters over the last, let's call it, the last 4 or 5 years where we've been okay there.

We haven't had a big bird. We now are in a position that we have rectified that and there's still more upside to come as this new genetics line rolls through our domestic poultry business with improved yields and improved costs and so forth.

The next question comes from Peter Galbo with Bank of America.

Maybe if I -- Donnie, just to put a finer point on the genetics piece. I mean, again, it's not a business that we often hear a lot about. Maybe you can just kind of reorient us where this business is contributing from an EBIT standpoint in the Chicken segment, even if it's in percentage terms, today versus where maybe it was 5 years ago and maybe it's as simple as they went from losing money to making money. But if you can help us kind of dimensionalize it, I think it would be very helpful for people as they try to understand it a little bit better.

Sure. Thanks, Pete. If I go back and look, and remember, this genetics business, it is -- when you make adjustments, you make collections, it is a multiyear event. And we've been doing those changes, making those adjustments and trying to -- not trying, but actually delivering a product that -- I got to tell you, we're all very excited about. Now across this timeline, a multiyear timeline, there have been periods where it's been, okay, there have been periods where we actually got to a loss in the genetics business, which sits inside our domestic poultry business.

We're now seeing the genetics business actually contribute as those genetics are sold to -- today to Tyson. And what we haven't seen yet, Pete, is the impact of those genetics flowing through the broader operations and the upside from that is pretty meaningful, really significant in terms of what the impact it will have on not only our domestic chicken business, but the segment in total. So we're very excited about that. We haven't talked about that a lot. It's been early.

If I look at, and I quoted this number earlier on a prior question, as I look at the bridge on that, about 1/3 of our improvement in the quarter is a result -- quarter-over-quarter is a result of just our genetics business. And I would tell you, as you think about how to make that math work, you also have to consider in this bridge, the downside to commodity markets. And so it is a fairly significant amount of money that is already contributing, and it will contribute more in the future. But I would tell you that our genetics business, you'd have to go back a number of years to see it perform at this level.

And I think this -- where we are today will outperform anything we've ever done in our history. But it's a structural advantage to our business.

Got it. Okay. No, that's very clear. Curt, I was hoping maybe to pivot to the Prepared Foods business. There's been some discussion with your peers, but even broader peers in packaged food just about inflation as it relates to items like not only freight, but mostly around packaging. So just curious kind of how you see the balance of the year, particularly in Prepared and around some of the input cost dynamics both from a raw material and a packaging standpoint?

Sure. Let me answer that one as well. Strong execution and disciplined pricing as we think about offsetting inflation. That's a primary mitigation lever that we have. We're seeing inflation pressures across multiple input categories. On feed, for example, grains for us were a tailwind in the first half of the year. It could be a little higher in the second half. I would tell you that's considered in our forecast. We've had strong execution in our live performance area gains -- the gains in our live performance area have offset any kind of feed pressure that we've seen.

With respect to freight, higher freight and diesel costs are up versus the prior year. But for us, freight is a service. Ultimately, it's passed through to customers. We do not subsidize this cost. Commodity raw materials and think pork beef, turkey input into our Prepared Foods are higher. For example, just to give you a number, Prepared Foods commodity costs were up $50 million in the Q2 and year-to-date $150 million. Our pricing continues to catch up with those raw materials.

But in terms of packaging, resin and packaging input costs are higher, we're managing through that with value engineering and supplier programs.

The next question comes from Leah Jordan with Goldman Sachs.

Congrats on a great quarter, and thanks so far today. Just thinking of Prepared Foods here, I mean you continue to gain market share across a number of the categories you operate in. Just seeing to provide more color on why you think that is, what you're doing differently than the peers out there? And then what are you seeing across the competitive landscape right now?

Sure. Leah, this is Donnie. Let me answer that one. In terms of that, we had a clean sweep in the quarter as it relates to share on volume, units and dollars growing across all 3 measures simultaneously. But in terms of our prepared foods, we've had strong demand and disciplined execution are driving the performance. You could almost full stop right there. And we've talked a lot about our multiyear strategy that it's working and that our business is growing. We continue to control the controllables and think pricing, promotion, distribution service.

Our volume was up 0.4% in Q2 and sales were up 4.8%. That's back to back quarters of volume growth. We outperformed the total category for the third consecutive quarter. We had share gains in lunchmeat, bacon, snacking and smoked sausage. And in terms of how we think about that going forward? I think you should think about our brands. You should think about protein. You should think about the fact that we have a pipeline of healthy, nutritious products that meet consumer demand in existing and adjacent categories.

We have the assets in place that will provide meaningful improvement in terms -- and we will provide meaningful improvement in operational excellence and have done so over the last 8 quarters. I would also point out we're the best performing in packaged, [ guys ]. I would also point out that I think we're undervalued. If you think about us trading at 8x relative to all of the CPG peers out there, I think over the recent years and the performance that has occurred, and they've come to us, we haven't moved to them. I don't think we have understood the value yet. I've done a poor job of communicating the value of our Prepared Foods in our portfolio and the absolute jewel that it is.

And so we're outperforming. It's execution. We do what we say we're going to do. We have the brands and the value added and the mix. And like I said in Chicken, these relationships with these strategic customers and those partnerships are winning every day for us. So I'll leave it at that and see if you want to redirect.

That's very helpful color and the results speak for themselves, for sure. Maybe just switching over to Pork care. You talked about a balanced market supporting that. But any more color on the confidence within that reiterated guidance range. I guess, what gets you to the upper end here. It looks like you need a pretty notable acceleration or increase in the back half?

Yes. This is Devin. Yes, it's a good point. Listen, I think a couple of things to note maybe would help as you think about the rest of the year. As you mentioned, we did reaffirm our guidance of $250 million to $300 million. And listen, we're going to have yet another very good year in our Pork business. As we think about that business, we continue to increase the use of the raw material to support the growing Prepared Foods side of our business that Donnie mentioned. And that's one of the most important facets of this for us.

If you think about, too, that the consumer demand is good relative to our fresh pork and tray pack business. It still is very much and increasingly so relative value versus beef. And so we are seeing strong demand across both foodservice and retail for those products. And if you think about maybe going back from Q1 to Q2, seasonalities influence there, certainly, Q1 has always got a stronger full schedule. We benefit from increased hog placements post the holiday, some favorable pricing. And then as you get into Q2, we just have a normal ebbs of our cycle.

I would point out a few things that maybe is helpful as you think about Q2 relative to where we go from here. We did have some influence for some higher hog cost year-over-year and then we just simply had a few discrete drivers of higher operating expenses that occurred in the quarter that we don't foresee moving ahead. We has some overstaffing is we did some contingency planning as immigration status worked its way through. We got clarification on what that looked like. We had some relocating of team members that we were able faithfully to move from our Lexington closure into some of our pork assets.

We had a handful of maintenance and repair items. And then as you've heard, we had some weather-related operational impacts but again, those are in the quarter. As we look out for the remainder of the year, very optimistic about this business in general.

The next question comes from Tom Palmer with JPMorgan.

Maybe to kick off, just an update on the beef plant closure and kind of your views on how that ultimately impacts profitability for this year, given both the higher utilization rates, but also I think there's some costs maybe to consider just in terms of moving product a bit further?

Yes, thank you for that. Yes, you're right. We did have -- really, what we considered the second quarter was really a transitional quarter for us as we moved into this new harvest footprint. And also Q2 is historically our most volatile quarter relative to that particular business. Listen, I'm encouraged by the beef business moving forward. There's no shying away from the fact that we are still in a beef cycle and the availability, cattle are the main issue. But what I see happening with that team is we put them in a position to really win.

And I'm seeing greater execution, not only with our capacity utilization, but across all of the key metrics in the end-to-end operational piece of that business. Also seeing good consumer demand. We are at a place here going into the back half of the year where cut out is even higher than it was this time last year. So it appears that the consumers as they kind of trade across that spectrum, maybe perhaps coming out of foodservice into retail and across the retail category it looks like we're going to have a very good grilling season. So that appears to be a real positive for us.

But again, the benefits that we will see is relative to the decisive decisions that we made, don't really move into the second half. We did change our forecast for the year. But the reality is even that implies quite a bit of optimism in our ability to work through available cattle and make sure that we're operating at the highest possible execution with regard to yield, labor efficiency, capacity utilization, as mentioned and most importantly, mix. But yes, it is pointing to a better second half, that's for sure.

Okay. And I did want to follow up just on the pork environment. In your response to Leah's question, you noted the higher hog costs in the quarter. I know there are seasonal factors as we move through this year, but we have heard about increased disease in the herd over the winter, the farrowing numbers and intentions have been pretty light. What's your view of the pork supply situation as we move through the back half of this year? And to what extent is that maybe a consideration as we move either kind of into the back half of the fiscal year or maybe even into the early parts of 2027 fiscal?

Yes, it's a good point. And we see some of the same reports that you referenced with higher industry disease, both with bird and CDV. Unfortunately, that's not uncommon this time of year. The good news, I can say relative to, how we're thinking about this business is that, first of all, our supply outlook looks very stable. And we have not had any interruptions relative to disease. And I would point to the great execution of biosecurity in our supply chain and the hard work there.

I think lot failing is a watch item. It's definitely not a red flag for us at this point. But I think it's something that we will continue to watch. But as we look at our forecast relative to our kill schedules and the hogs that we have committed in our supply chain, we don't see anything relative to us that will be concerning in the back half.

The next question comes from Andrew Strazik with BMO.

First one of clarification, Donnie. You closed your prepared remarks by saying you were encouraged by the momentum in the business and that you see opportunities to raise the performance. So do you mean that there's more room for earnings upside? Or can you just clarify exactly what you meant by that?

Well, in terms of all the businesses, there's room for upside in terms of performance. Just think of a continuous improvement. Think about operational excellence, end-to-end. So yes, we've made a lot of progress. We are, I think, a fundamentally different company today than we were, let's say, even a year ago, but much improved. And so all of that, in my mind, says that, yes, there's upside as it relates to margins. And more importantly, I believe that the changes and the execution are structural in nature. We've rightsized all of our footprints. We're executing with excellence. We are aligned with strategic customers. We can -- we've got 3 of the top 10 brands in protein. And we're servicing our customers on time, in time and our innovation to support growth.

One thing that we're seeing that just as a proof point is if you look at even in our Prepared Foods, our consumers, we index more to older consumers. We're now starting and beginning to index with younger consumers with some of the protein offerings and -- high protein offerings, I guess, I should say. So we're excited about that and see a whole new opportunity in a consumer base.

Now I would also tell you, Andrew, that we're performing well. But we still have capacity in our footprint across poultry and prepared to really continue to grow that business without significant capital outlay. Certainly, all that is demand driven for us, and we look forward to doing that. And we believe our volumes across poultry, prepared and then in beef and pork as well, we'll continue to see growth there. So we're excited about what we've got. We're executing very well. We do what we say we're going to do. And so I think all of that implies a structurally different outcome from a P&L perspective. And so I'm excited about that.

Okay. That's helpful. And maybe leads to my other question, and I hope it's not redundant really. But you talked about there being a lot more that you can realize in terms of benefits on the Chicken side, even with this nice step-up in performance. On Prepared, momentum appears to be gaining. You talked about the benefits of plant optimization in Beef building through the year. So I guess the question is, when you look at the total company guidance for this year, what do you think it reflects in terms of how far along you are on this internal improvement journey? It seems like things will -- only should get better from here beyond '26, not putting a date on it, but feels like there's a lot more room to go. So I guess, we're just curious to get your thoughts on that.

Sure. And I look at it and if you look at, for example, the mix of products. We had volume growth in Chicken, I think it's 1.7%. If you look at the branded value added, it grew over 3x. That's right where we want to be. So that's what we've been working on for some time. There's also a number of things that we're doing relative to simple ingredients inside that product, the quality of those products, the consumers experience with those products and if you look at what we've done from a technology standpoint and where the market is going with -- from a digital perspective, we're outpacing in-store sales with digital by a significant amount.

And so there's where a lot of growth is. And so a lot of the tools and technology that we've put in place helps us connect it first-party data and be able to communicate directly and as I referenced earlier, with those younger consumers in particular. And so all of that feels really good. If I look at Chicken, it's -- we've had 6 straight quarters of both volume and net sales growth. That's a trend to me. That is structurally different. Prepared Foods 2 consecutive quarters of volume. Third consecutive quarter of having volume growth, unit growth and share or excuse me, dollar growth with that.

So if I look across and back out a little bit, if I look at Chicken, Prepared Foods, Pork and our International business, all of those are performing very, very well. Our Beef business is performing well on the controllables. I would argue that perhaps as good as it perhaps maybe ever has been, certainly in some time. But we're in the depths of this cycle, the 75-year low cattle cycle. We can't do anything about that. I don't -- I stay awake and have stayed awake a lot of nights trying to figure out the answer to that. I don't have the answer to that.

What I do have the answer for is us controlling what we can control, and that's what we're doing. And so I feel pretty good across the spectrum about our performance and more importantly, the stickiness of that, the -- where we are as an organization in our level of execution.

The next question comes from Heather Jones with Heather Jones Research.

Both of my questions are on Chicken. And first question, I was wondering, is -- do you think it's a fair assertion that given the magnitude of your capacity and the value-added side and your vertical integration, is it fair to think that Tyson is best positioned from a cost perspective? And as a follow-on to that, the genetics as it shows up in your meat birds, should we expect that to significantly increase that competitive advantage?

Sure. Great question. In terms of our Chicken business, what my focus has been is to move the conversation about our Chicken business from a commodity chicken company to a truly branded value-added chicken company. I think our Chicken business is different. And we have proven how it is different over time relative to our commodity peers. Now I would hurry on and say what I said earlier, I don't think we get rewarded for that. We're sitting here and Chicken trading at 7.5x. That genetics business, for example, that I listed earlier, sitting inside Chicken, genetics companies trade at 20%, 25%, and 20x, 25x and so that's pretty significant. I did the math on that. That's worth about $9, $10 a share to Tyson.

So I think our genetics business, it has always been a point of difference. We've had some struggles with it based on not having a big bird genetics package. And so -- but we've got that now. Now in terms of I'll just fold in the genetics question with this, I feel good about where that is. But the sales of those genetics is what you're seeing that is different than what you've seen in recent quarters. But if I go back to, I don't know, 2015 or something like that, the genetics business would have had a higher contribution than perhaps what you've seen over the last 4 or 5 years.

So I feel good about where that is and more importantly, where it's going. Now what is yet to come, that is also upside is for our domestic chicken business is going to be when those genetics that we are placing at scale now throughout this Tyson enterprise, there's significant segment operating income that will come from that. And perhaps maybe larger than those would even consider. But we feel good about that. And -- but even in genetics business, what gives me the most confidence and conviction here is that we are taking those very same genetics, and we are executing with excellence across our genetics business as well as our domestic and live operations of our poultry business. And that working together along and you couple that with family farmers that do an outstanding job for us, I feel good about that. I feel good about where we're going.

Okay. And then thinking about the second half and just thinking about your guidance and the range it applies, in Chicken specifically, and last year, Q4 was particularly strong, and I think the growing conditions were ideal, et cetera. But this year, as you noted, you have a lot of tailwinds. So is there a scenario where it would be reasonable to think we could have year-on-year growth in Q4, just given the factors you've outlined? Or just how should we think about the cadence of the back half for Chicken specifically?

Well sure. Thank you, Heather. Short answer is we think the back half will be as good as or better than the first half. We're trending on the upper end. Remember, we just raised guide $200 million at midpoint. We're trending toward the upper end of that. So as I think about Q3 and Q4, I feel good about that. Again, in terms of -- you think about the drivers, I'll restate those. Operational excellence, our mix of value-added branded products, our strategic customer partnerships and our genetics business that will continue to flow through and provide that. We're not factoring in tailwinds from the market.

I said earlier on a question that there were some tailwinds in the first half, but those look to be a little more challenging in the back half but I feel good about our ability to execute and offset those things and continue to deliver. So I think I answered all those questions.

Heather, just to add, obviously, in the guidance range that we provided for chicken by taking it up, got us to about a could be a 52%, 48% front half, back half or 48%, 52%. So it's a balanced year. Obviously, we don't give quarterly guidance, but we'll pass it back.

This concludes our question-and-answer session. I would like to turn the conference back over to Donnie King for any closing remarks.

Thank you for your time and continued interest in Tyson Foods. We look forward to sharing our progress with you next quarter.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good morning everybody. It's good to see everybody, and appreciate you. We've had a great year, and you're going to hear the comments from myself in the business portion of the meeting and Donnie King, our CEO; and Curt Calaway, our CFO. So we'll get started from there. So thank you, and good morning.

It's my honor as Chairman of the Board of Directors of Tyson Foods to welcome you to our 63rd Annual Meeting of our Shareholders. As I said, we do appreciate you joining us today, and thanks for being here. Now that it's 10:00 on February 5, our meeting is called to order. Each year, I take the joy and the opportunity this gathering provides to reflect on our progress as a company and look forward to what is still to come.

It is a moment to recognize the 130,000-plus team members across this country, across the world that make a difference in making sure we meet the standards of the family, the standards of the leaders and the standards of this company of doing the right things in the community where we live and work. So a personal thank you to all of our Tyson team members for leading by those values and making a difference where you live and operate.

A personal thank you from me and from the Tyson family, Barbara, Cheryl, John Randall and Olivia. So we thank you all for that. When I think about it, it's 90 years since we started down over on [ Mistry ]. It's kind of come a long ways from soda shops and drug stores and things that made us who we are. But it's those values, and it's those commitments to our communities that continues to drive the success under the leadership of Donnie, under the leadership of Devin and under the leadership of the business and community.

As I said, this is our 90th or 91st year and, we've accomplished a lot through the years. Protein has, and I think we're seeing all kinds of uses for protein nowadays, protein shakes, protein toothpaste, protein chips. I kind of like our position where we start with because we start with the basic protein. And we are absolutely the leader in the protein. We do have great products. Our products are affordable because that's where our audience is. Our products taste good.

And the obligation to create a value proposition for people to have a chance to go home and eat with their families, a chance to go home and create memories with their families is part and parcel to our responsibility. We will continue that responsibility. We will work hard to create value to feed the world with products that people enjoy. As I said earlier, our core values do guide our team and it's how we operate. It's the integrity that it gives us. It allows us to continuously strive to be the best we can.

We're not perfect. We don't get it perfect. But day in and day out, those core values are the cornerstone, can we do it better each day? Can we do it better to take care of our animals? Can we do it better to take care of the environment? Can we do better to make sure our products are meeting the expectations as product interpretations are changing in the marketplace.

I can tell you, I've been here a little while, we do have the right people working on the right things, making the continuous right decisions to execute the strategy and bring forth the value to the shareholders here in this room. I want to recognize some new members to our Board of Directors. Sarah Bond from Microsoft. Sarah, thanks for joining the Board. We appreciate it. And it's a real privilege to welcome John Randall and Olivia to the Board.

And the next generation that will carry on the family values. And you can rest assured, they knew their grandfather well. They know me well. Occasionally, they'll challenge me. And that's okay, and I'm thankful for their accountability. As I said earlier, Curt and then Donnie will speak more about the performance and what we're working on and our strategic priorities for the future.

But as always, we have to go to the business portion of the company and the meeting. The bylaws of the company specify that the Chairman and the Secretary of the company are the Secretary and Chairman of the Annual Meeting of the Shareholders. With that, the Chairman recognizes our Company Secretary, who will report on the preparation for the meeting. Marissa?

Mr. Chairman, all shareholders were sent a notice of the annual meeting and proxy on or about December 17, 2025, which is evidenced by an affidavit from our mail agent, Broadridge Financial Solutions, Inc. As required by Delaware law, a certified list of shareholders as of the record date of December 8, 2025, is available for inspection in the lobby. Those who might wish to overrule their previous proxy cards or to vote if they have not already voted may do so by raising their hand and requesting a voting card.

The bylaws of the company also provide for a proxy committee of one or more persons designated by the Board of Directors. The Board of Directors has appointed John H. Tyson and Jeff K. Schomburger as members of the Proxy Committee. Mr. Chairman, I'm reporting at the direction of the Proxy Committee that of the total outstanding shares of 283,047,857 as of December 8, 2025, a clear majority of the shares were voted and represent a quorum at this meeting.

Based upon the report of the company's Secretary, I hereby declare that this shareholder meeting has properly been called, and we do have a quorum present. I do ask that any questions from shareholders be submitted in writing. If you have a question, there are note pads located on the table in the back of the room. When finished, please return the notepad to the attendant at the welcome table, and we will collect it.

You will receive a written answer as soon as practical after this meeting if relevant to the meeting business. I hereby appoint Brett Johnson as Sergeant-At-arms and authorize him to appoint deputies to enforce the rules of the meeting, which are in your program. The next item of business is the election of your directors, and each director stand when I call your name and we will give them a big round of applause because they do make my job easier and they do help this leadership team.

Les Baledge, Governor Mike Beebe, Sarah Vaughan. Maria is over in Italy with her other business, but Maria Borras, Dave Bronczek, Donnie King, Maria Martinez, Cheryl Miller, Kate Quinn, Jeff Schomburger, who will operate as your Independent Lead Director for the forthcoming year; my aunt Barbara; my lovely daughter, Olivia; my wonderful son, John Randall; Noel White; and myself, John Tyson. The slate of directors has been nominated as presented, and we thank you all for your service. And Marissa, would you report on the results of the vote?

Mr. Chairman, votes cast favoring the election of each nominee presented represented a clear majority of the votes cast.

With a clear majority of the votes cast favoring the election of the nominees, I declare the slate of your directors elected as nominated. The next item of business is a proposal to ratify the selection of PricewaterhouseCoopers as the company's independent registered public accountant for the year ending October 3, 2025. And would the Secretary read the results of that vote?

Mr. Chairman, votes cast favoring ratification of the selection of PricewaterhouseCoopers LLP as independent registered public accountant represented a clear majority of the votes cast.

Thank you. With a clear majority of the votes cast for the ratification, I declare the election of PricewaterhouseCoopers LLP as the company's independent registered public accountant for the year ending October 3, 2026, ratified. The next item of business is the proposal to approve the amendment and restatement of the Tyson Foods Stock Incentive Plan as set forth in the proxy statement. And once again, would the Secretary read the results?

Mr. Chairman, votes cast favoring this proposal represented a clear majority of the votes cast.

With a clear majority of the votes cast for this proposal, I declare that the proposal has been approved. The next item of business is a proposal to approve on a nonbinding advisory basis, the compensation of the company's named executive officer as set forth in our proxy statement. And once again, would the secretary read.

Mr. Chairman, votes cast favoring this proposal represented a clear majority of the votes cast.

With the clear majority of the votes cast for the approval of the compensation of the company's named executive directors officers, I declare that this proposal has been approved. The next item of business is a shareholder proposal regarding the disclosure of voting results based on class of shares. At the time, the Chair recognizes a representative of the proponent to present their suggestions.

Good morning, Mr. King, Mr. Tyson, Mr. Schomburger, members of the Board and fellow shareholders. My name is Yumi Narita, and I'm the Executive Director of Corporate Governance for the New York City Comptroller's Office. I'm presenting Proposal 5 on behalf of the New York City Comptroller, Mark Levine, and 4 New York City pension funds, which are long-term shareholders. Proposal 5 asks the Board to adopt a policy requesting that Tyson disclose the voting results on proposals according to the class of shares.

You wouldn't know that it was us that filed a shareholder proposal as the name of shareholder proponents are not disclosed in your proxy, a practice set standard at most companies. If we were to pull your top unaffiliated investors, you would find that this information is important to them. Proponents even have the terribly difficult job of traveling to this beautiful place to present as I have today and escape a bitterly cold New York City winter.

Starting in the fall of 2024, the New York City Pension Funds have had multiple conversations with Tyson management, highlighting the importance of this type of disclosure. As for our shareholder proposal, the disproportionate influence insider shares have had is evidenced by the following. These proposals received majority independent support at Tyson. In 2024, a vote tabulation disclosure, very much like ours, received 55% from independent investors. In 2021, a human rights due diligence proposal received 81% of support from independent shareholders and a 1 vote per share proposal received the highest support at 88%.

One of our goals in terms of this disclosure is to ensure that the concerns of independent shareholders are communicated appropriately to the Board. We were told by management that the Board has never asked for the disaggregated vote results, and we're left to wonder why. We appreciate our engagement with management this year, but urge the Board to go further to provide shareholders with more transparency. Thank you.

Thank you for your time. Thanks for the consideration and the respect. The Board of Directors' statement with respect to the shareholder proposal is set forth in the proxy statement and speaks for itself. Our disclosures comply with all requirements and provide information about our structure and ownership. We are committed and I am committed and the leadership team is committed to creating value for our shareholders, our customers, our team members and our communities. Would the Secretary once again read the results?

Mr. Chairman, votes cast favoring this shareholder proposal represented a minority of the votes cast. Votes cast against this shareholder proposal represented a clear majority of the votes cast.

With a clear majority of the votes cast against the shareholder proposal, I declare that the shareholder proposal has been defeated. Our next item of business is a shareholder proposal regarding a report on environmental and human health impacts from waste lagoons. And now the Chair recognizes a representative on this subject matter.

Good morning, Mr. King, Mr. Tyson and the rest of the Board. My name is Gail Follansbee, and I am the Senior Manager of Shareholder Engagement at As You Sow. Thank you for the opportunity to present the proposal on behalf of the Pleiades Trust. This proposal seeks the disclosure of any steps Tyson is taking to address environmental and human health harms from waste lagoons across its pork supply chain.

Failing to address such harms leaves the company susceptible to material litigation, reputational and financial risks. Waste lagoons are large open pits that hold wastewater containing urine, species, blood, antibiotics and other materials and concentrated animal feeding operations. These lagoons often overflow and leak into groundwater, releasing pollution into nearby drinking wells, causing antibiotic resistance, cancer, endocrine disruption and baby blue syndrome in nearby communities.

Noxious gases and other air pollutants from waste lagoons, especially when sprayed on fields, can also make workers and communities sick. Waste lagoon pollution drains into waterways, resulting in aquatic biodiversity loss and disruption of local economies. Major meat producers are being held accountable for contamination from waste lagoons in their supply chains with one of Tyson's major competitors agreeing to pay $97.2 million in damages to affected communities.

Shareholders are seeking assurance of proactive risk mitigation from Tyson, including its supplier expectations and oversight to minimize harm and to avoid similar costly outcomes. Tyson lags its peers, including Smithfield and Hormel in publicly reporting the steps it's taking within its supply chain to minimize harm from waste lagoons.

Shareholders seek similar reporting from Tyson to reduce exposure to litigation and fines and to avoid damaging reputational harm that can affect financial performance long into the future. With this disclosure, shareholders can be assured of the security of their investment and Tyson's ability to compete effectively with other industry leaders. We urge you yes vote on this, and thank you so much for your time.

Thank you. A complex subject matter, no doubt, as we all do the right things to make sure we're the right people in the communities. The Board of Directors' statement with respect to the shareholder proposal is set forth in the proxy statement and speaks for itself. Our core values which we say we strive each and every day to make sure we take care of each other, we take care of the animals and the environment that we're entrusted to.

I look around this room and I see the people that go out each and every day to make sure we can be the best neighbor in the neighborhood. We really have a great group of people, good people trying to improve incrementally every day with best practices, best habits and best responsibilities. And I'm proud of those set of people trying to do the right thing. But we thank you for your proposal, and we appreciate the comments. Secretary?

Mr. Chairman, votes cast favoring this shareholder proposal represented a minority of the votes cast. Votes cast against this shareholder proposal represented a clear majority of the votes cast.

With a clear majority of the votes cast against the shareholder proposal, I declare that this shareholder proposal has been defeated. The next item of business is a shareholder proposal regarding a report on the anticipated impact of recent changes in the U.S. immigration practices on the company's finances and operations. And once again, we welcome you to the microphone.

Thank you. Good morning, Tyson Board members and shareholders. My name is Magaly Licolli, and I'm here today to move Proposal 7 filed by the Sisters of St. Francis Charitable Trust and 5 co-filers. This proposal asks Tyson Foods to assess the impact of recent changes in U.S. immigration law and enforcement on the company's finances and operations. As Executive Director of Venceremos, a worker-led organization defending poultry workers' rights, I hear daily from Tyson workers living in fear because of the current administration's anti-immigrant agenda.

This fear is not abstract. It shows up on the production line in workers' homes and in their families. Tyson cannot claim to value families while remaining silent as immigrant families are torn apart. The company has built its profits on immigrant labor yet refuses to speak up when those same workers are targeted, criminalized and treated as disposable. Workers from El Salvador, many with decades at Tyson now fear losing their work authorization and their jobs after years of loyalty and sacrifice.

Tyson says this policy do not affect the company, but that is only because it is not their family-facing detention or deportation. At the same time, Tyson's failure to protect this workforce has created dangerous understaffing. Fewer workers are expected to produce more at increasingly brutal pace as production speeds continue to rise, injuries increase and workers' physical and mental health deteriorate. Also the company can maintain profits.

This is exploitation, plain and simple. Silence in the face of injustice is not neutrality. It is complexity. I urge shareholders to support Proposal 7 for transparency and accountability, and I call on Tyson to step up for the workers who make its business possible. Thank you.

Thank you for your comments. Another complex subject that all of us have thoughts on and all of us work hard to try to be the best we can be. The Board of Directors' statements with respect to this proposal is set forth in the proxy statement and speaks for itself. I will say and share again the Tyson team members work every day to make sure our places are safe, make sure we're faith-friendly, how do we create an environment of confidence?

How do we create an environment where team members know they have a chance to improve their economic welfare, and we strive to operate our company with integrity, with the ethical standards and the responsibility that's assigned to us with respect towards each other each and every day when we get up and come to work in the workplace. Would the Secretary read the results?

Mr. Chairman, votes cast favoring this shareholder proposal represented a minority of the votes cast. Votes cast against the shareholder proposal represented a clear majority of the votes cast.

With a clear majority of the votes cast against the shareholder proposal, I declare that this shareholder proposal has been defeated. This concludes the business portion of our meeting. And there being no further business, I declare the business portion of our 63rd Annual Meeting, and the first annual meeting was on Emma Street at the First State Bank and our 63rd is still here in Springdale, Arkansas, which I'm really proud of.

So we conclude this part of the shareholders' meeting. And at this time, I'll turn the podium over to Curt Calaway. And after that, Donnie, our CEO, will have some remarks, and then we'll wrap it up. Curt?

Thank you, Mr. Chairman, and thank you to everyone joining us this morning. First, let me start with a reminder that any remarks today that are not historical facts are forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. For more information on the risk factors that can affect our business, I encourage you to visit ir.tyson.com where you can find our latest 10-K and 10-Q.

We entered fiscal '25 with a clear plan to improve our operational execution and drive better financial performance. Through deliberate actions, we successfully executed this plan, resulting in a significant improvement in profitability over the prior year. Sales were $54.4 billion in 2025, up 2.1%. Based on our performance in Q1 and our full outlook for fiscal '26, we believe our performance continues to move in the right direction.

Turning to our financial position. Our approach to capital allocation remains disciplined, deliberate and forward-looking. We are focused on maintaining our financial strength, investing in our business and returning cash to shareholders. I'm pleased with how cash has trended with full year operating cash flows of $2.2 billion, significantly ahead of capital expenditures at $978 million and dividends of $697 million. We ended the year with $3.7 billion in liquidity and net leverage at 2.1x, an improvement of 0.5 turn compared to last year.

If you step back and look at our balance sheet and leverage over the last year, we've made immense progress, strengthening the financial foundation. With leverage continuing to decline and cash flows remaining strong, we returned $893 million to our shareholders through a combination of dividends and share repurchases. While dividends remain our primary way of returning cash to shareholders, we believe share repurchases represent an attractive opportunity.

Our balance sheet remains healthy as we prioritize our financial strength, our commitment to investment-grade credit rating and cash management to drive long-term shareholder value. In our most recent quarter, we paid $177 million in dividends as our Board of Directors increased the annual dividend per Class A share in fiscal '26 to an expected $2.04. This marks the 14th consecutive year of increasing our dividend per share. This increase in dividends reflects the confidence of our management team and Board have in our cash flows of the business. With that, I'd like to hand things over to our President and Chief Executive Officer, Donnie King.

Thank you, Curt. And good morning, everyone. It's always a pleasure to see so many familiar and smiling faces and team members here at Tyson on Thompson. So again, good morning. Tyson Foods is a world-class food company and a recognized leader in protein, producing 1 in every 5 pounds of chicken, beef and pork in the United States. Our purpose is to feed the world like family. This is both a unique responsibility and a privilege to provide real food that not only tastes good, but is nutritious, affordable and convenient.

This purpose is what drives us as a team, and this is the foundation of what we are building as one team, one Tyson. Demand for Tyson products continues to grow as consumers increasingly prioritize adding protein to their diets. The new U.S. dietary guidelines validate this. While we are pleased as a prioritization as a cornerstone of a healthy diet, nobody is better positioned than us to meet this demand, and we're committed to continuing to provide consumers with real food that tastes good and is made with simple ingredients that they can find in their own pantries at home.

As customer and consumer obsession is anchored in our powerful brand portfolio, we have 3 of the top 10 protein brands in the United States with Tyson, Jimmy Dean and Hillshire Farm. These iconic brands continue to gain share in both volume and dollars. In a dynamic market, protein continues to be a priority, and our branded products are outperforming the broader food category, both in retail and food service. While competitors face challenges generating demand, our consistent share gains reflect our distinct competitive advantage.

We win because of the strength of our brands and the quality of our protein products. While we are pleased with our successes, we are not satisfied and remain focused on continually improving our business and strengthening our financial position. We are committed to disciplined management of capital expenditures and working capital. We recognize that none of this progress happens without our great team, working together and united in our purpose.

Our team members and their development remain central to our culture. We are consistently strengthening our leadership pipeline, enhancing operational expertise and building the capabilities needed to succeed for the long term. It is a privilege to represent the team members of Tyson Foods and to celebrate the progress we've made together. I'm excited for the future, a future where Tyson Foods continues to define the protein industry, where our brands set the standards and where financial strength remains -- enables us to capitalize on opportunities ahead.

Thank you to our shareholders for your continued confidence and support. Thank you to our Board. Thank you to the Tyson family and to more than 133,000 team members. Thank you for everything you do to feed the world like family. It is your passion, dedication and unwavering commitment to our purpose that makes me most excited about our future. With that, Mr. Chairman, I'll turn things -- the meeting back over to you.

So I'm going off script. Would the Board of Directors and the business unit and the ELT members stand up for a moment. Then I'm going to ask you to turn around, and let's give applause to all of our Tyson team members for everything that you all do. Thank you, Donnie. Thank you, Curt, to everyone in person and online today. Thank you for your interest in Tyson Foods, a really, really wonderful and we have so much potential.

Every time I come into the office nowadays, I say to Don, gosh, we got a great company. And we do. But it's a great company because of the men and women who make up the difference and lead our company. We do have the purpose of the responsibility of taking on agricultural animals, moving them in a safe environment in a proper environment to come with a great set of products to feed the world, to feed families.

As one team and as one Tyson, we are dedicated to operating with that integrity and with that purpose and with that care. We have been proud servants of our company for 91 years. It's great to be in Springdale, Arkansas. It's great to have been here 90 years. My grandad left Kansas City and chose to stop here in this town, and we've been successful. But we wouldn't have been without each and every individual. As I said, my family and I are thankful to be stewards and be responsible to help you all grow. With that, today's meeting comes to a close. Drive safe. Thank you for investing in Tyson Foods. God bless.

Good morning, and welcome to the Tyson Foods First Quarter 2026 Earnings Conference Call.

[Operator Instructions]

Please note this event is being recorded. I would now like to turn the conference over to Jon Kathol, VP Investor Relations. Please go ahead.

Good morning, and welcome to Tyson Foods First Quarter Fiscal 2026 Earnings Conference Call. On today's call, Tyson's President and Chief Executive Officer, Donnie King, Chief Financial Officer, Curt Calaway, and Chief Operating Officer, Devin Cole, will provide prepared remarks. Following the prepared remarks, we will have a Q&A session with the participants who will be joined by our Chief Growth Officer, Kristina Lambert. We have also provided a supplemental presentation, which may be referenced on today's call and is available on the Tyson's Investor Relations website and via the link in our webcast. During today's call, we will make forward-looking statements regarding our expectations for the future. These forward-looking statements made during this call are provided pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all comments reflecting our expectations, assumptions or beliefs about future events or performance that do not relate solely to historical periods.

These forward-looking statements are subject to risks, uncertainties and assumptions, which may cause actual results to differ materially from our current projections. Please refer to our forward-looking statement disclaimers on Slide 2 as well as our SEC filings for additional information concerning risk factors that could cause our actual results to differ materially from our projections. We assume no obligation to update any forward-looking statements. Today's segment results are presented on a segment operating income level and will be discussed on an adjusted basis. The primary difference between segment operating income and the method used in previous quarters, is that we will no longer allocate corporate expenses and amortization down to the segment level.

Donnie and Curt will share more thoughts on the change in their prepared remarks. We have recast previously reported quarterly results for the previous 3 fiscal years to reflect the new format. The segment change has no impact on consolidated historical U.S. GAAP financial results. The recast financial information is accessible through the Events and Presentations section of the company's Investor Relations website at ir.tyson.com. Please note that the references to earnings per share, segment operating income, operating income and operating margin in our remarks are on an adjusted basis for our fiscal periods unless otherwise noted. For reconciliations of these non-GAAP measures to their corresponding GAAP measures, please refer to our earnings press release.

Now I will turn the call over to Donnie.

Thank you, Jon, and thanks to everyone joining us today. Before walking you through our first quarter results, I want to remind everyone of what we're building at Tyson, a diversified protein-centric company positioned to capture growing demand for high-quality protein. We're driving operational excellence, investing in our branded portfolio and innovation to capture market share and deploying our capital strategically to strengthen our competitive position. Our Q1 results with sales increasing to more than $14 billion, demonstrate our initiatives and our strategy are clearly working. We're driving operational excellence daily, and the team is energized for what's ahead.

As Jon mentioned, we've made an important change to our segment reporting measure from adjusted operating income to segment operating income as this will allow you, the investor, to see the results in the same manner that I utilized to judge the effectiveness of our business decisions and accountability for the choices we make. This empowers our business leaders to pursue volume growth and enhance our decision-making based on a more direct view of the impacts of those decisions without corporate expenses and amortization, which are more fixed in nature.

Of course, we will continue to focus on reducing their spend and maximizing efficiencies in our corporate functions. On the businesses, Prepared Foods took another step forward this quarter with sales increasing in volume, channel mix and pass-through pricing. Segment operating income increased to $338 million. Importantly, our products are winning in the marketplace during a clearly dynamic consumer backdrop. Our Prepared Foods business is capturing more market share by volume and dollars, driven by increased brand investments and targeted MAP spending that is showing favorable returns. Our production facilities continue to make performance improvements through operational efficiencies. The Chicken segment delivered another strong quarter with $459 million in segment operating income, a margin of 10.9% and a less favorable operating environment. These positive sales and earnings gains were fueled by more efficient marketing and promotional expenses.

Results are becoming increasingly more sustainable and predictable with plenty of untapped potential in areas we can control within the business. Chicken is an affordable high-quality protein and our value-added offerings position us uniquely to serve both retail and food service customers. In the first quarter, we announced the strategic decision in our Beef business to close our Lexington, Nebraska facility and scale back operations at our Amarillo, Texas plant to a single ship. These changes were implemented in January, and as a result, our first quarter results do not reflect the impact of these operational adjustments.

We recognize the impact on people's lives, and we did not make them lightly. At the same time, we made this necessary choice to rightsize our Beef operations with a smaller and more efficient footprint, higher capacity utilization and stronger alignment with the long-term outlook for the U.S. cattle herd. These decisions position us to improve our overall beef capacity utilization and to compete more effectively in the beef business, both now and in the future. Continuing to absorb losses like we have been seeing for the past 2 years is simply unacceptable.

Looking forward, we expect cattle supplies to remain tight throughout 2026 and 2027. During this period, Chicken is likely to continue to benefit most from the changing consumer preferences, both at retail and in foodservice and we're obviously well positioned to win.

Once again, our Pork segment performed well in a stable operating environment. We continue to increase yield and revenue by developing more value-added products, all parts of the pork value chain from hog supply, pork production through retail and foodservice customers are in relative balance allow for more predictable and stable operating margins.

Finally, our International segment continued its momentum and had another good quarter. Now let me share with you why we are very well positioned relative to what's occurring in the food industry. A recent development beneficial for Tyson Foods was the release of the new U.S. dietary guidelines. As you are aware, health care costs are rising and it is important to have viable solutions to combat the challenge of obesity and inadequate nutrition. These updated guidelines and recommendations represent a historic validation of our core mission, providing high-quality essential protein to millions. By advocating for increased animal protein consumption as a leading pillar of a healthy lifestyle, the administration has underscored what we have always known.

Animal protein is a foundational building block of a nutritious diet. As a producer of 1 out of every 5 pounds of chicken, beef and pork in the United States, Tyson is uniquely positioned as the leader in this real protein space. And as the demand for protein continues to increase, Tyson will be there to meet this demand. These policy recommendations underscore how public health priorities and consumer demand for high-quality protein are moving in the same direction. And even in a dynamic economic environment, protein remains essential in the grocery card with consumers continuing to favor chicken, beef and pork. The updated guidelines also recommend limiting artificial flavors, petroleum-based dyes and artificial preservatives.

At Tyson, we have been ahead of this curve and have already proactively removed petroleum-based synthetic dye and other ingredients, including high fructose corn syrup across our U.S. branded portfolio. By simplifying our labels and using the same ingredients you could find in your pantry, we are providing consumers what they are looking for, protein. It's real food that tastes good and is good for you. And we're confident that this commitment to quality will continue to drive superior value for our customers and our shareholders.

Let me now tell you about how we are winning in the market. According to Nielsen data, total category food and beverage retail volume declined 1.8%, with dollars up 0.9% over 13 weeks ending in December. In contrast, our retail branded products, which include our national and regional brands, grew by 2.5% in volume and 3.6% in dollars significantly outperforming the broader sector. This retail growth was broad based, highlighted by strong volume performances across several national and regional brands and categories. A few examples include: Tyson National and regional branded fresh chicken, up 10.7%. Hillshire Farm lunch meats increased by 10.4%. Fuelshire snacking grew by 12.5% and Aidells sausage went up 7.2%.

In addition to the volume growth, all 4 grew dollars and share. We are also performing well in foodservice with share gains and volume growth of 27 basis points. Our ongoing investments in innovation, wider distribution and effective targeted marketing are driving growth and keeping us competitive providing substantial opportunities for further progress. As more shoppers turn to the perimeter of the store, we are meeting their demand for fresh, high-quality options. This is why it matters. Demand for Tyson Foods products continues to grow, and we are well positioned to capture this momentum. While some companies face challenges in generating demand, our share gains demonstrate both our strength in our expectation for further growth, an essential driver of our ongoing and future success. Our focus on protein-centric offerings combined with the disciplined capital allocation enables us to accelerate expansion, optimize operations and reinforce our supply chain and marketing capabilities.

As a 90-year-old American company, we provide durability, trust, and strategic continuity across cycles. These strengths allow us to deliver lasting value to our customers, consumers, team members and shareholders. Looking ahead, the opportunities before us are more promising than ever, and I'm very confident in our portfolio and in our strategy.

With that, I'll turn it over to Devin to take you through the segments in more detail.

Thank you, Donnie, and good morning. In the first quarter, our team made tangible progress toward our strategic objectives and we remain committed to delivering best-in-class performance and holding ourselves accountable to our customers and consumers' expectations.

Now let's review our segment performance. Prepared Foods delivered a strong quarter with sales up 8.1% versus last year. Growth was driven by volume, channel mix and pass-through pricing. Segment operating income was $338 million, up $16 million versus prior year, reflecting continued progress on our multiyear plan to enhance profitability in this business, and we see more ahead. Our fill rates in prepared foods remained solid, but with room to improve, reflecting the improved S&OP process and unlocking efficiencies in our plants and distribution systems.

Our retail businesses outpaced the category in volume, dollars and units leading to share growth in all 3 measures. This has enabled us to better serve our strategic customers with greater consistency and reliability. The progress we achieved in the quarter was expected and have laid the groundwork for an exciting 2026. Growth in Prepared Foods is important to us as it grows our customers' business, expands the reach of our brands and utilizes a sizable portion of our raw material availability. We see significant opportunities ahead to drive growth and improve profits. Our conviction in this multiyear opportunity to expand profitability in prepared foods remain strong. Our Chicken segment delivered a strong first quarter, in line with the prior year with a significantly more challenging operating backdrop demonstrating the resilience of our business model and disciplined execution.

Demand for Chicken remains strong. Our diversified pricing strategies and product mix kept average selling process steady, offsetting declines in commodity prices and disruptions from the temporary government shutdown. The efforts helped us overcome market volatility and achieved 3.6% year-over-year sales growth driven entirely by volume and strong consumer demand for chicken. This marks our fifth consecutive quarter of year-over-year volume and net sales gains, underscoring sustained demand for chicken and continued momentum of our strategic customer partnerships.

While the retail channel saw a strong growth across fresh and value-added products resulting in growth across nearly all retail sub-channels, we also saw strength in our foodservice business led by solid results with QSR and distribution customers as consumers increasingly opt for value-oriented protein choices. Segment operating income for the Chicken segment reached $459 million, driven by improvements in live performance, along with strong volume expansion and continued operational excellence. These factors enabled the Chicken segment to deliver consistent operating income further validating our confidence in the long-term durability and resilience of our business model. In our Beef segment, we remain focused on the factors within our control as we navigate a challenging and dynamic market environment.

Beef sales increase, reflecting continued healthy consumer demand. As Donnie mentioned in his remarks, we announced changes to rightsize our Beef business. These moves were completed after the close of our first quarter. Both moves are in response to the ongoing challenges of a tighter U.S. cattle supply and we believe these moves allow us to compete more effectively this year and over the long term, with a smaller production footprint and a higher capacity utilization. We expect to benefit in the coming quarters from the effect of the actions taken.

Segment operating income declined compared to the prior year as higher cattle costs more than offset higher cutout values and continued high consumer demand. While navigating the headwinds, we remain committed to the elements we can control, like optimizing our operational footprint as well as seeking out alternatives to improve our long-term results. In Pork, segment operating income margin increased 220 basis points to 6.7%, fueled by network optimization and operational efficiencies. Hog supplies were adequate during the quarter and projections for an ample supply appear favorable for the upcoming year. The accessibility of pork raw material for our Prepared Foods division is a key part of our end-to-end Pork strategy. We have made substantial progress in utilizing raw materials like pork bellies to supply branded bacon and the supply launch meat in [indiscernible] sausage. We will continue to push for higher utilization as we'll improve access, quality and [indiscernible] cost for our raw materials.

Overall, I am encouraged by the incremental steps we have taken in the first quarter, and I'm confident that we have room to grow and improve across the operational and controllable aspects of our business in 2026 and beyond. We are focusing on our strategic customers and consumers while delivering value to our shareholders. With protein remaining a clear winner in the mind of consumers, the diversity of our portfolio enables us to make investments by partnering with our strategic customers to drive category expansion. With that, I will turn it over to Curt to walk through our financial results and outlook in more detail.

Thanks, Devin. As mentioned earlier, our first quarter results reflect a change in financial metrics as we are now referring to segment operating income, which excludes corporate expenses and amortization at the segment level. For comparative purposes, all historical results and comparisons presented have been updated to reflect this change. As Donnie mentioned, the reason for this important change is to report results in the same manner that our decision-maker utilizes to assess business performance and allocate resources. We believe this provides investors with an increased level of transparency and it enables them to better compare our results to other food producers.

For the first quarter, total company sales grew 6.2% to $14.3 billion compared to prior year led by beef with solid contributions from Prepared Foods, chicken and pork, reflecting the healthy demand environment for protein. For comparative purposes, the sales increase was calculated excluding the effect of a $150 million legal contingency reserve that was recognized in the quarter. First quarter segment operating income was $811 million, down 12% compared to prior year, driven primarily by the decline in our Beef segment, partially offset by growth in our other businesses. Additionally, Corporate expenses and amortization were lower by $20 million or 7.7% as compared to the same period last year.

Adjusted earnings per share for the quarter were $0.97, down 15% compared to last year, some of which was driven by a higher tax rate. Our multi-protein multichannel portfolio, combined with our team's focus on operational execution and a dynamic macro environment performed well compared to the overall food industry during the quarter.

Turning to our financial position. Our approach to capital allocation remains disciplined, deliberate and forward-looking, and we have a strong balance sheet. We are focused on maintaining financial strength, investing in the business and returning cash to shareholders. Free cash flow is critical to us, and I am pleased with how cash trended in Q1. First quarter operating cash flow was $942 million, and capital expenditures were $252 million, resulting in free cash flow of just under $700 million, well ahead of dividends for the quarter, which were $177 million. We ended the quarter with $4.5 billion in liquidity and net leverage declined to 2.0x, an improvement of [ 0.1 ] since year-end.

If you step back and look at our balance sheet and leverage over the last few years, we've made immense progress strengthening our foundation. In fact, we have reduced gross debt by $1.4 billion over just the last 12 months. With leverage continuing to decline and cash flows remaining strong, we continued share repurchases of $47 million during the quarter, and we returned $224 million to shareholders through a combination of dividends and repurchases.

Our balance sheet remains healthy as we prioritize financial strength, our investment-grade credit rating and cash management to drive long-term shareholder value.

Let's take a moment to review our outlook for 2026. As a reminder, our accounting cycle results in a 53-week year in fiscal 2026 as compared to a 52-week year in 2025. The 2026 outlook is based on a comparative 52-week year. We still anticipate full year sales to be up 2% to 4% year-over-year. We expect the range for total company adjusted operating income to be between $2.1 billion to $2.3 billion. We anticipate interest expense of approximately $370 million and a tax rate of around 25%. We remain disciplined in managing cash with CapEx expected to be $700 million to $1 billion and free cash flow in the range of $1.1 billion to $1.7 billion. The improved outlook in free cash flow is mostly associated with expected improvements in working capital compared to our prior outlook.

Now to provide more color on our segment outlook. Based on the continuation of a tight cattle supply, we expect segment operating income in beef to be a loss of $500 million to $250 million. The beef outlook does not include costs related to facility closures. We anticipate segment operating income for pork to be $250 million to $300 million based on an adequate supply of hogs, continued productivity and operational improvements and robust consumer demand for pork.

We anticipate our segment operating income for chicken to be $1.65 billion to $1.9 billion. We believe chicken will be a preferred protein in the upcoming year. We also expect our operational execution and performance to continue to perform at a high level. In Prepared Foods, we expect segment operating income to be $1.25 billion to $1.35 billion. We expect a continuation of improved performance this year because of ongoing operational discipline and strategic investments in our categories.

Our International segment performed well last year by managing controllable costs, maximizing efficiencies and lowering conversion costs. We expect a continuation of these metrics in 2026 and segment operating income in International to be $150 million to $200 million. Corporate expenses and amortization are anticipated to be $950 million to $975 million. These results align with total company adjusted operating income range of $2.1 billion to $2.3 billion. Overall, I'm pleased with the first quarter's performance and confident that 2026 will be another strong year for our company. That covers our segment performance, financial highlights and outlook for 2026.

Now I will turn the call over to Donnie.

Thanks, Curt. In the first quarter, our team successfully navigated a dynamic and challenging market landscape. These achievements are a direct result of our collective dedication and we look forward to building on this momentum as we move further into 2026. I want to extend my deepest gratitude to every team member at Tyson Foods. It is your passion, dedication and unwavering commitment to our purpose that makes me most excited about our future. Together, we have the unique responsibility and privilege to feed the world like family by providing high-quality protein that not only taste good, but is nutritious, affordable and convenient. Our purpose is about more than providing food.

By providing protein, we have the ability to support good health. This shared purpose is what drives us forward and is the foundation of the future we are building together. With that, I'll turn things back over to Jon as we begin the Q&A session.

[Operator Instructions]

The first question comes from Ben Theurer with Barclays.

Donnie, Devin and Curt, congrats on a good first quarter. First question I'd like to kick it off. Obviously, the change in some of that segment reporting versus adjusted reporting. Maybe if you could explain us a little bit more the rationale behind that and like the management incentives on a per business level. And if there is any relationship from that into what the free cash flow changes, you've briefly mentioned working capital, so maybe there is something connected here. So I would like to understand the rationale behind how to manage the business and what's ultimately then driving that free cash flow revision. That would be my question.

Thanks for the question, Ben. Great question. And so let me start with the change was very intentional. It was on purpose. And let me back up a little bit and give you some some of the rationale that for why I wanted it changed. And so let's start with -- if you go back a number of quarters ago, we talked about the fact that we were going to turn over every rock in this organization to be the best-in-class in terms of food companies. And we've been doing those things. There are a lot of proof points relative to that.

One of the issues that we've had is, and particularly over the last couple of years as it relates to be is volume. So very simply, this. I would need the organization to grow this business, to grow volume in this business, grow it in our branded and value-added increased household penetration with consumers. And in order to do that, I kept bumping up against the fact that people would say things like this corporate overhead structure is, I'm uncompetitive in the marketplace on all these different things. And so here's the math very simply behind that and why we did this is this is how we run the business. But before we make the first sale every week, before we turn on the first machine at Tyson Foods every week, we're sitting with something on the order of $1 billion of amortization and corporate expenses.

Now corporate expenses make up about 80% of that; amortization, about 20%. It is largely fixed in nature. And so therefore, we start every week with about $20 million of fixed costs before we sell the first pound, produce the first pound. And so very simply, I wanted to move that -- a barrier to our organization in terms of trying to sell and grow our business. And particularly in light of the fact that there is less beef production at the same time. We're employing an ROIC mentality. But it energized our organization. And in fact, if you look at where we are at this point, we're down 8%, and we're just announcing it to you. But it gave me visibility that I needed, it gave those business leaders across the organization and function leaders to be able to see where through an activity-based process where we could manage our business better.

And very simply, it was a matter of looking at things and saying, does the shareholder want to pay for this? Does a customer want to pay for this? Are they willing to pay for it? Is the consumer willing to pay for this? So all of those type things will add into this decision. Now just changing from AOI to segment operating income doesn't change anything. But what we did was exposed of what those corporate expenses are.

And at the same time, we worked on some of those that are embedded in the cost structure and businesses as well. but it was to simplify how we look at the business and be a catalyst for us growing the business. Curt, let me see if you want to add anything to that, too.

Yes. Thanks, Donnie. And Ben, great question. I think about the change today is more the journey where we've been the last couple of years. We intentionally moved away from a return on sales percentage of a business a couple of years ago and really focused on dollar contribution of each of our businesses and we did that and certainly how we talk, but also how we provide guidance to you. While not as apparent, but Donnie mentioned it, we've, over the last couple of years also had a very renewed internal metric and focus on return on invested capital. And today's changes, as we're sharing with you, and we've changed internally this past quarter as well, is very intentional in setting us up to be very focused from a growth standpoint and a clarity standpoint.

Hopefully, that gives you a little bit of Intel. But I think the other part of your question was around improved free cash flow and perhaps whether that was included in or changed as we think about the relative segments.

So let me maybe just back up a second and talk about guidance overall and what changed and what didn't change. And let me just start with clarifying what did not change. So we did not change total company adjusted operating income, which was still $2.1 billion to $2.3 billion, sales growth still positive, up 2% to 4%. And CapEx stayed constant at $700 million to $1 billion and then adjusted tax rate still at approximately 25%. None of those changed.

We -- as you pointed out, we did change free cash flow and actually improved it now a range of $1.1 billion to $1.7 billion. And you're right, the working capital performance is a driver of that better than we had previously included in our prior forecast for free cash flow. That also aided in reducing interest expense, interest expense now on a net basis at $370 million partially from that improved free cash flow, partially from capital structure efficiencies that we put in place.

But the other changes you highlighted certainly was a new type of guidance at the segment operating income level. Prepared Foods, $1.25 billion to $1.35 billion, still a range of $100 million; Chicken, $1.65 billion to $1.9 billion, still a range of about $250 million; International, $150 million to $200 million, still a range of $50 million; Pork, we did narrow the range to $250 million to $300 million really following a good Q1 performance but also the seasonally usually a little bit better Q1 for us; and Beef, losses of $500 million to $250 million. So widened the range a little bit certainly in light of a very dynamic beef environment, we widened that loss range a little bit; and then new corporate expenses and amortization, a range of $950 million to $750 million.

But I just finish with Q1 was very much in line with our expectations. And from a total outlook, still a range of adjusted operating income at $2.1 billion to $2.3 billion.

Okay. Perfect. And then a quick follow-up on Prepared Foods. You've flagged a very strong pricing increase over last year with essentially flattish volumes. But it seems that profit margin is still somewhat under pressure. Can you help us understand where you are in the journey of price increases of some of the food -- of the input cost inflation that you've been facing, particularly from beef that goes into Prepared Foods. So where -- how much more price increases do you need to push through? And like what magnitude would that be to get a more stable profit margin versus last year.

Sure. I'll take that one. And let me start with, Ben, we -- our multiyear strategy is working. Our business is growing, which will create long-term value for the company. Our net sales were up about 8%. So let me touch on that here. The 8% increase was not pure price. The increase reflected a combination of channel mix and formula-based pass-through pricing. A large portion of the foodservice business is formula-priced and as raw materials go up, finished goods pricing follows, and there is, of course, a lag with that. So the current state, as you think about commodities, and we talked about this last quarter, our commodity cost in this quarter is up $100 million. But I would tell you that pricing is catching up, which is you're seeing it in sales price. Beef and Pork trim remains elevated and other inputs are stabilizing. So it's predominantly a foodservice driving, but I have to point out this in our -- in terms of growth in our Prepared Foods business, we grew market share, we grew volume, dollars and unit share. And this is the fifth consecutive quarter of sequential improvement. But the pricing is not pure pricing. It's our pricing particularly in foodservice, catching up with those increase in raw materials.

And the next question comes from Leah Jordan with Goldman Sachs.

Great job on a nice quarter. I understand protein demand is really elevated right now, which is helpful for you. But what -- it's really great to see is your branded portfolio across prepared and fresh continue to take share. Just what do you think you're doing differently to position your brands today. Why do you think they're resonating in the current environment, especially when the consumer backdrop has been mixed? And maybe how much do you think innovation has been a driving factor as well?

Sure, Leah, thank you for the question. Let me start out with the punchline, I thank you for recognizing that. But there's a number of things. Let's start with protein. Protein is a superstar in the story. The execution of the businesses, which -- yes, you can think about it in terms of the traditional labor yield spend, those kind of things. But in terms of using tools in the market that we have available to us, that we haven't had before. We see a number of things. For example, we're expanding our core distribution, we are -- with our customers, our strategic customers that we talk about across all segments.

We're doing that with them. We're accelerating innovation, and we continue to invest in MAP. And so those are the levers that we're using. So I would give you this statistic, which I'm very proud of from an organizational perspective, acknowledging that there's still plenty to do. Tyson was the only food company in consumer staples, growing volume and dollar share in the most recent report. The only other one was P&G, which is not in the food space. So I'm very proud of that. Our machine is working, but it's largely execution from one end of the supply chain to the other. And let me pass it over to Kristina Lambert and let her add a little more finer points to this.

Yes. Thanks, Donnie. I think you started out earlier really well talking about our commitment to growing the volume within our businesses. And what you're seeing across our brands is that continued effort to increase household penetration, focusing on younger consumers, meeting their needs in unique ways, whether it be renovation of our existing core items or innovating into new spaces to meet those unmet consumer needs. Donnie also talked about the expanded distribution. We've been able to gain increased distribution across our Tyson, Jimmy Dean, Hillshire Farm, Ball Park, all driven by that commitment with our strategic customers and our intent to grow our business and their business at the same time.

With the new dietary guidelines emphasizing protein, we're really excited about the opportunity for having 3 of the top 10 brands within the Food segment for the U.S., so Tyson, Jimmy Dean and Hillshire Farms. We are outpacing most of the channels and those strategic customers, again, in retail and foodservice. Our portfolio will allow us to meet continued needs as we go on this journey to provide food that tastes good, it's made with ingredients that consumers can find in their own pantries. They'll be nutritious, affordable and convenient, and those are our commitments. We're really excited about the opportunity for Tyson Foods.

That's very helpful. And then just switching over to Beef, given the wider guidance range there. Just more color on the trends you're seeing in that segment. Any puts and takes the potential impact from your recent capacity closures as we think about the next few quarters, I think I heard in the prepared remarks that it wasn't reflected fully in the updated guide? And just how are you thinking about capacity for the overall industry as we go forward?

Yes. This is Devin. We continue to be in a very dynamic and volatile situation with the Beef segment has been mentioned. In the quarter, there are really 4 key drivers that affect the results in this business. And we certainly have cattle costs, which we've talked a good bit about historically and continue to be a challenge just due to the general cattle availability, but also, we have cut out, we have to drop credit and the manufacturing cost structure. There's really a balance for us between all of those factors. And in this quarter, we did experience, as I mentioned, the higher cattle costs. We also had additional freight impact as we work to fill the production needs within the regional supply deficits that we saw.

And certainly, from quarter-to-quarter, we can and we'll have differences in basis derivatives that we use as the risk management business. What I'm proud of this team, despite some very difficult circumstances that we are performing well with the metrics we can control. We had heavier weights that did negatively -- in fact, cutout values due to body compositions, but they also help us with our volume. Overall, volume was slightly down, it was down 7.3% in the quarter despite these heavier weights. So there's pluses and minus with those factors as well. But really, all of these weighed into our decision to make changes to the production footprint.

We just recently completed these so that would not be anything that would be in the Q1 reporting relative to what we expect to see moving forward. I think if you think about the future of this, it's important to point out that the data that we see indicates an ultimate smaller herd as it does rebuild, which is been historically true for the last several cycles. And the strategic steps we've taken to put us in the best possible position to maximize capacity utilization and it allows us to increase our efficiencies, reduce our costs and capture value from improved yields. And really, our -- as in all of the businesses, as we've talked about, our objective is to be the most efficient and best performing company.

And so we're not only focused on the operational excellence but continue to work with strategic customers and supply partners to make sure we're optimizing the mix and find innovative ways to add value and convenience for consumers.

I think as well, just one clarification in the question. As Devin had pointed out, right, the announcement of that was obviously in Q1. The activities didn't occur until our second quarter. The comments in the prepared remarks I also referenced that our outlook would not include the cost associated with all that closure, obviously because that is adjusted out as we did in Q1 as well.

And the next question comes from Thomas Palmer with JPMorgan.

Donnie, I was curious your updated views of the chicken industry. You're telling, in recent quarters, I think, has been very constructive about supply growth being limited though in today's prepared remarks, you also referenced the weaker chicken environment in the quarter and the annual outlook was reiterated. So maybe just an update on kind of how you're seeing the market environment.

Sure, and thanks for the question. Let me start with -- begin with the end here and just tell you that, once again, we think that 2026 will be similar to what we saw in 2025. And so that's what we have modeled. But in terms of supply, just from an industry perspective, USDA projects a 1% growth in production we think is very manageable. You saw some recent excess increases, and we think that's also manageable. But the other part of that equation, the demand side that demand continues to be strong and our supply at Tyson, we're in very good balance. I think the industry is at a very good balance based on publicly available data. So we're very excited about that. But for Tyson, we think it's a constructive environment. But our confidence in last quarter, this quarter is -- it's based on the execution that we have in this business. For example, we did experience some commodity softness in the quarter. And in fact, we talked about a little bit earlier about in 2025, you saw some record recipe prices. And I would expect, and we've seen that it's possible there will be some market normalization throughout '26 and there is.

You saw mid-December prices moved down on some of the commodities and they're back up more recently. I just call this typical seasonality. I'm not concerned about that. I think I would also point out and we have in the past that at Tyson that we are not tied directly to commodity markets. And so that's also another point that you should be aware of. So we feel very good about it. And it's based on our execution and every one of our -- from hatch livability, customer relationships, but the secret sauce, if you will, around the Tyson model is that we continue to grow volume, and we continue to be aligned with strategic customers and the execution with those customers in quality service, consistency, those type of things is paying huge dividends.

And it's what we've been working on now for some time. You see the evidence of that in our volume being up 3.8%. And in fact, our volume in Q1 for poultry is an all-time record in terms of volume. But we saw it in places where we told you we wanted to see it. For example, our branded fresh business is up 9% and our branded frozen is up 12.2%. So a very nice job.

The other part of that, and it gets back to your question, our net sales were up 3.6%. That's largely mix, but our actual pricing remained flat versus the prior year. And so I'll stop or take a pause right there and see if you have a follow-up to that.

That was really helpful color. Maybe just pivot a little bit. On the -- now that we're seeing the corporate amortization for the first time, I guess, guidance would imply it's down at least 4% year-over-year, I think. What's driving that decrease?

Or your question is on amortization down year-over-year, Tom?

Sorry, the corporate plus amortization line with kind of the newly introduced line, I think guidance implies it's down at least 4% year-over-year.

Yes. Yes. I think acknowledging in the first quarter, right, we were down $20 million on a year-over-year basis. That really is driven by our focus from an overhead cost as we disclosed in the 10-Q as well that team member costs were down about $13 million versus the prior quarter. There will be a little bit of reduction as well in amortization on a year-over-year basis, but the largest contributor to that would just be team member related costs.

And the next question comes from Alexia Howard with Bernstein.

Can I ask about an update on heifer retention? And any signals that you're seeing out in the marketplace about how that's playing out. I think last quarter, you talked about how in certain regions, we start to be seeing some heifer retention in the beginnings of the resolution of a beef cycle. Is that still the case? And are you seeing it expanding?

Yes. The USDA did release their annual report on Friday, and I think a few points to note in there, it is the smallest [ herd ] since 1951, but maybe more important to today's world, it's 9% lower than it was in 2019. So capital availability continues to be the issue for the industry. However, I would say that we do continue to see some signs, early signs of a rebuild, replacement heifer in that report and did increase 1%, and there's some regionality in that, not a surprise similar to what we've been seeing. I think as we get through the winter months and into the spring, that will become more clear if that stay on course. But also, I would say, beef cow slaughter was down [ 17.7 ]% in 2025. So that's well below the historical average. And heifer feed is also down 3.1% from the prior year.

So again, there are some bright spots in there as we begin to see these early signs of hard rebuild. But bear in mind, too, as that happens, those cattle will become -- will be taken out of supply chain, and we'll go through a period here where we will have less availability in the short term as we build back this herd. I think the summary for all of those data points for us is that cattle is going to remain extremely tough of the foreseeable future than we are in these early stages. I think coming out of other side, as I mentioned, this herd, will be smaller than historical numbers post cycle, which would be indicative of recent times. And we've gone through rebuild cycle, they do come out with a lower overall number. As a result, feedlots are having to hold cattle longer, certainly with stable grain and puts, they're maximizing their weight, which is helpful from a volume standpoint to a point, as I mentioned earlier, we do have some body composition issues as they become certainly really large.

But I think in all of this, the point to the demand remains very robust. USDA indicates that the forecast in 2026 will be very similar to what consumption was in 2022. So no changes throughout all of this. But to me, really, what it does is it emphasizes why we've made the decisions to make the changes in our harvest footprint and really setting ourselves up for future based on the data that we can see today.

And then as a follow-up, have you quantified how much the net savings are from the beef plant closure and the shift reduction? Just trying to figure out how that affects the profitability of that segment going forward?

Yes. I think I'd just point you to the guidance that we have for the year, and we have baked into that everything that we are able to quantify today, it is early. We just recently completed this transition into our new footprint. And we do intend to not only increase our capacity utilization, but continue with all of the operational benchmarks and improvements that we see. And ultimately, we intend to run a best-in-class operation. But I don't have any other specific numbers to give you.

And the next question comes from Pooran Sharma with Stephens.

Thanks for the question. Congrats on the results here. Just wanted to maybe start off with beef here. And just trying to get a little bit more color around guidance and cadence really. I think midpoint of [ 3 75 ] signify some sort of kind of improvement from here. You've kind of spelled it out a little bit saying you're going to get some benefits from the facility closure. But I was wondering if you could help us kind of think about the margin aspect. I think beef packer margins are trending slightly worse right now than they were in 4Q.

And I was just wondering if you guys are seeing the same thing. And then in terms of the cadence, do you expect kind of just sequential improvements from here? Do you expect like a a step-up improvement next quarter because of the facility costs and then kind of normal seasonality? Or how should we think about cadence overall.

This is Curt. I'll start and Devin may have something to add here. I would certainly remind you, as you kind of highlighted, there is always generally a little bit of seasonality in the beef business with our second quarter usually having challenges not to make the least of which would be weather related. But a range is we've widened it out $50 million at a loss of $500 million to a loss of $250 million I think acknowledging our Q2 challenge and perhaps what would seasonally be a little bit better in the back half of the year as you get into grilling season, but certainly, animal availability is going to be a key determinant of that, and I'll let Devin add anything else he wants.

Yes. No. I think that's really it. I mean, you can certainly see our results in Q1, and it's many of those issues that I mentioned previously were the drivers in that as we had regional disparity and had to move some cattle around Q2. As Curt mentioned, we'll always have its fair share of challenges. But again, this is really why we've done what we've done to put ourselves not only in the back half of the year, but looking out beyond that to be in the best possible position for success with the cattle that are available to us. So again, we don't guide quarterly, but certainly, you can put those building blocks together.

Absolutely. I appreciate the color. And maybe just for the follow-up. I wanted to ask about Prepared Foods. I think in the past, you've noted that there's a little bit more seasonality in the first half of the year. But we've had some challenges with input costs in the past few quarters. So I was just wondering if as we look out into this business, do you expect to see a more evening pace throughout the year? Or how should we think about seasonality in Prepared Foods?

Thanks, Pooran. You're correct. Last year, we pointed to a more balanced front half, back half, and that was really driven by the building effect of our operational execution inside the walls of the plant that we're really giving us some benefit that kind of tilted the access a bit, if you will, I think on balance, we said that, that would probably start to revert back to a bit more normalized level.

I think the only other data point you kind of alluded to it was we did make the comment a quarter ago that some of the run-up in raw material costs didn't fully get flushed through the P&L in Q4. We still carried some of that in inventory that was the inventory we sold out, or COGS, if you will, at the beginning part of the quarter, which may alter a little bit, a little closer to 50-50, but it's a mix of those, right? I would say, generally, it's a little bit more front half loaded, but we did again carry some higher inventory into Q1 -- into this Q1.

The next question comes from Peter Galbo with Bank of America.

Curt, maybe just a housekeeping to go back to Ben Theurer's initial question. So understanding, right, no change at the consolidated sales or operating income line. I think you talked about maybe some flex within pork and beef, but the range is remaining relatively unchanged. So like should we be viewing this as ex the accounting changes were announced today, none of the segment dollar ranges really would have changed aside from maybe a little bit of tweaking at the top and bottom end just so that we're comparing kind of an apples-to-apples basis?

Yes, that's reasonable. I think as we said, $2.1 billion to $2.3 billion in total doesn't change. And hopefully, my clarity around free cash flow and the reasons why helped understand the additional components to that. But overall, right, our message is Q1 performed in line with our expectation. And on the full year, we see the year -- we see it similar as we did in November. So I think you're -- it's a reasonable push, a reasonable thesis you have. And I should have added earlier, but hopefully, it's helpful if you haven't seen it yet, we did also file an 8-K this morning with the recast historicals for '23, '24 and '25 by quarter, by segment. So you can see each of those changes, and it's available on our IR website as well. Hopefully, that gives you some really good clarity and ability to update models as well.

Yes. Maybe I'd add one thing to that, Pete. And it's this. It's the obvious. But as we separated the corporate expense and amortization, we obviously intend to manage that more closely than we have in the past. So you should expect greater efficiency and greater leverage against that what we have termed largely a fixed -- being fixed in nature. The other piece of that is you should see us growing volume across all the businesses in all the right places in order to fill capacities. So the outcome of this will be more volume, greater capacity utilization, which results in a better cost structure overall in terms of the controllable or plant cost, for example.

Got it. Okay. That's very clear. As a follow-up, if I could just ask kind of on chicken. A lot of that -- again, a lot of that accounting change, I think, kind of footed out of that segment, both from a corporate and an amortization standpoint. But historically, there's been a fair amount of seasonality in the chicken business, particularly into the second quarter. Just does anything change regarding that? Is it more accentuated now because there's other costs that have moved out? Or just any kind of nuances we should think about in chicken as it relates to 2Q specifically.

Sure. Thank you for the question. And it's -- I would tell you across all businesses, I mean, we're off to a good start in Q2 and very much in line with our guidance and our internal expectations. So I'll start with that. You'll see normal seasonality, which I referenced earlier as being typical. I think you'll continue to see that. I don't know -- I can't tell you at this point what breast meat prices, for example, will do. What I can tell you is we are -- as I said earlier, we are not immune, but we're less influenced by commodity markets. And that's essentially the biggest part of that is because of our strategic customer relationships. And at the same time, it's the makeup of our portfolio, particularly those things in the Tyson brand that obviously gives us an advantage. It gives us more consistency. And frankly, as a company across all businesses, the highs and lows of markets, whether it be inputs or finished goods and commodity market, we're looking for consistency and that provides a much more stable operating environment.

And the next question comes from Heather Jones with Heather Jones Research.

Thanks for the question. First one is going to be on chicken. And your outlook for the year, roughly similar with fiscal '25. And as we come into the year for the broader industry, we're seeing fresh pricing down fairly significantly versus last year. So I'm just wondering if you could give us a sense of how much of your confidence in the full year is related to either thinking that supply and demand is going to be more balanced for the full year than then initial indications would indicate versus how much is Tyson specific? Like you've got this really amazing breed that's kicked in, you're operating at a better level than you have in many years. And so just wondering if you could just help us parse out the factors that are driving your full year view.

Well, I mean, I mentioned earlier, Heather, and thanks for the question, is our confidence in our chicken business, not only for this quarter, but for the year and after is in our execution from one end of the supply chain to the other. So let's start with that. The other thing in terms of supply, we do not anticipate any kind of supply run away. We think the 1% increase is manageable. And I'd be so bold as to tell you, I think it will be necessary in order to meet the chicken demand in '26 and beyond. So really important.

Another factor here is USDA recently reported economic research service reported a document that says by 2030, 50% of animal protein consumption will come from chicken. And so there will be some pluses and minus across the broader sector, but chicken is a great place to be, and there's never been a better time to be in protein. And so we see the supply/demand fundamentals is good, and we like our execution, and we like our strategic customers alignment and relationships, and we like being and having the #1 brand in chicken, Tyson.

Okay. And then my follow-up was on beef. And so just for the quarter, just trying to do an apples-to-apples comparison as far as how it's reported. Your all's relative performance to some industry benchmarks that I've developed and monitor were meaningfully weaker than they have been in recent quarters. And so -- and I think one of the reasons that benchmarks were so much better is you just had a really strong downdraft in cattle prices for much of the quarter. And so I was wondering -- would it be an issue of you all for bought more of your cattle or for sold? Just trying to understand that just so have a -- how to set for projections going forward in Q2 through Q4.

Yes, Heather, sorry, I really can't, I guess, comment on your benchmarks directly. I'm just not familiar with what you're talking about, but I can kind of reiterate the issues that drove the performance in the quarter. Curt certainly had higher cattle cost. The freight impacts I've mentioned a couple of times as we really work to make sure that we got cattle moved around the fuel production needs, but also meet our customers' demand. And I think to your point that as far as I'd be willing to go is that we do have differences quarter-to-quarter in basis and derivatives. We're not speculators. And depending on circumstances, depending on commitments, depending on things that are going on in the external market, we do use different metrics to risk manage the business. So really, that's probably about as much as I can say to be helpful.

The next question comes from Saumya Jain with UBS.

Congrats on the quarter. With recent initiatives to reformulate products and remove certain additives, how do you balance these quality improvements with cost and consumer pricing sensitivity? And have you seen any measurable consumer response yet?

Thank you for the question. We're really proud of the product reformulations that we've been bringing into the market. And frankly, we've been doing for many decades as the consumer evolves and what they want and expect for their products at all. And as far as balancing with the costing, I mean, that's what we do every day to evaluate, can we make a better product and still having -- be at an affordable and convenient offering for the consumer.

So I wouldn't say that we have had any negative impact. And if anything, a positive impact, we will continue to see as packaging gets updated to some of these changes, we've reformulated ahead of some of the packaging evolution, and that's something you can do if you're just in absence of some ingredients. So consumers should continue to see these products improve in the marketplace. And I think we'll continue to see demand grow as consumers watch for opportunities to improve their nutrition in their diet.

Great. And you've highlighted a jump in retail branded volume sales and [indiscernible] peers of yours engaged in M&A to grow certain brand sales? Is M&A from that you guys would consider as well? Or could you provide more color on the capital allocation strategy going ahead?

Yes, thanks. Our capital allocation priorities, I think I said this morning in the prepared remarks are the same, very disciplined, deliberate and forward-looking on maintaining our financial strength, investing in the business and returning cash to shareholders. What we're looking for going forward is certainly from a financial strength standpoint, we like where we're at. We have optionality and flexibility. We can continue to build on our strong balance sheet and improve our financial strength. We're looking for opportunities to invest in the businesses, and we see organic growth opportunities to continue to meet our consumers' increasing desire for protein. We returned cash to shareholders about $224 million in Q1 through dividends and share repurchases, and we delivered nearly $900 million last year. With respect to M&A, I think we've demonstrated a very disciplined approach as we look at inorganic opportunities in the past. And we seek to balance growth consumer trends and ultimately, returns for our shareholders.

And the next question comes from Michael Lavery with Piper Sandler.

I just wanted to unpack the top line maybe a little bit. You talked about how the corporate costs being separated helps set up better volume incentives or visibility? And you also had a great strong 1Q start to the year, but didn't do anything to change the guidance? Is the volume lift you expect more coming further down the road? Or is there a pricing offset with it? Or how do we think about just kind of where your head is on the top line?

Sure. I think the best way for me to explain that is probably because you're looking at it in totality, I think is that, remember, chicken, Prepared, International and Pork are growing. We saw a reduction in volume as it relates to be. And the quantum of beef is very large. So I think that is probably the math that is a bit confusing. But to be very clear, we're growing the other businesses, particularly behind the brand, not only at retail but in foodservice as well.

Those brands are healthy, and we're in the protein business. And so the gains that we're seeing in volume and share is based on strong protein demand and disciplined execution. And it's -- there are a number of notable wins across the enterprise from Jimmy Dean sausage, Hillshire Farm lunchmeat, was up 10.4%, bacon ballpark hot dog, Hillshire Farm snacking was up 12.5%. I talked earlier about [indiscernible] frozen chicken across retail and foodservice being up, it was up 9% branded in fresh -- 9% branded fresh and up 12.2% in frozen. So we continue to gain share there and grow the business. So hopefully, that answers your question.

Yes, that's helpful. And just a follow-up on the plant closure. I think the cost savings rationale and approach that is all very clear. But did you expect any impact on market dynamics from it? I realize, obviously, it wouldn't change consumer demand. And if you increase capacity utilization, with the theme throughput, it wouldn't seem to impact supply realistically. But I know there can be regional or local components to the market that may be impacted. And I know it's just a couple of weeks in, but is it progressing like you expected? And what are you seeing there?

I'll start with that. And look, I think our message was clear and we're positioning our footprint for the long term relative to what we see cattle availability at. I don't have any else -- any additional comments relative to how we expected the market to react.

The next question comes from Andrew Strelzik with BMO.

First one, back on the beef topic. Can you share with us what you're seeing in terms of screw [indiscernible] in Mexico and maybe some of the signposts or milestones to watch for the border to potentially reopen there?

Yes. Thanks for the question. I mean other than what we see is publicly released relative to some of the incidents that continue to occur in Mexico, very close to the border, but thankfully, at this point, not across the border. I don't really have anything else to add. I think just some of the cold temperatures that you've seen unseasonably cold -- and you've seen an impact that certainly would benefit or maybe help help prevent some of the movement of that particular in fact around, but something we'll watch as we get into the spring, but we don't really have anything that would give us any insight as to the when the government would open the border.

Okay. And if we go back over the last several years, Tyson has obviously benefited from significant internal improvements, cost improvements you talk now about wanting to continue to work some of the corporate costs lower. I guess across your business, when you look at where you are today, where are you versus where you want to be in terms of your operations broadly? And where do you still see meaningful opportunities to realize internal improvements?

Sure. Let me take that and then anyone else can add to that. But very simply, it's across -- it's across every facet of every business and function, including corporate, and we're simply challenging challenging everything we're doing. We're obviously utilizing more technology today to help us be more efficient. And all of that is paying off. We talked early on about investing in those things. And so we're seeing the benefit of a number of those things.

There's a lot more to come relative to that. But we continue to assess everything about our business. Now that being said, I would tell you that we have a great business that is running very, very well. We have the big challenge right now as it relates to beef, and we're looking at that and looking for solutions beyond what we can control. But nevertheless, we are controlling what we can. But even with as good as the business is running. There's still ample opportunity to improve capacity utilization to grow this business to be more targeted as it relates to math and promotional spend and just everywhere we spend $1, just being better at it and making sure that dollar is working for us.

And this is the whole concept that I think Curt mentioned earlier, this ROIC mentality is what we're using. And so we have a good business. It hasn't been this good in a long time, but there's still a great deal that can be done that's within our control. I would not even come close to telling you we peaked in terms of performance.

This concludes our question-and-answer session. I would like to turn the conference back over to Donnie King for any closing remarks.

Thank you for your time and continued interest in Tyson Foods. We look forward to sharing our progress with you next quarter.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good day, and welcome to the Tyson Foods Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. I would now like to turn the conference over to Jon Kathol, Vice President of Investor Relations. Please go ahead.

Good morning, and welcome to Tyson Foods Fourth Quarter Fiscal 2025 Earnings Conference Call. On today's call, Tyson's President and Chief Executive Officer, Donnie King, Chief Financial Officer, Curt Calaway, and Chief Operating Officer, Devin Cole, will provide prepared remarks.

Following the prepared remarks, we will have a Q&A session with the participants who will be joined by our Chief Growth Officer, Kristina Lambert. We have also provided a supplemental presentation, which may be referenced on today's call and is available on Tyson's Investor Relations website and via the link in our webcast.

During today's call, we will make forward-looking statements regarding our expectations for the future. These forward-looking statements made during the call are provided pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements include all comments reflecting our expectations, assumptions or beliefs about future events or performance that do not relate solely to historical periods. These forward-looking statements are subject to risks, uncertainties and assumptions, which may cause actual results to differ materially from our current projections. Please refer to our forward-looking statement disclaimers on Slide 2 and as well as our SEC filings for any additional information concerning risk factors that could cause our actual results to differ materially from our projections.

We assume no obligation to update any forward-looking statements. Please note that references to earnings per share, operating income and operating margin in our remarks are on an adjusted basis for our fiscal periods unless otherwise noted. For reconciliations of these non-GAAP measures to their corresponding GAAP measures, please refer to our earnings press release.

Now I will turn the call over to Donnie.

Thank you, John, and thanks to everyone joining us today. I'm pleased to report that our business delivered solid progress in performance this quarter and throughout the year. Looking ahead, we see even more opportunities for growth across all our business units. .

This quarter, we achieved increases in sales, adjusted operating income and adjusted earnings per share, continuing our upward trajectory for the full year. Our annual growth in adjusted operating income was driven by the chicken, pork and prepared foods segment, along with notable contributions from our international business.

In the fourth quarter, our team executed well across our portfolio with momentum in value-added protein offerings. The Chicken segment stood out delivering $457 million in adjusted operating income, thanks to higher volumes, better operational execution and lower feed costs. These gains were partially offset by increased marketing and promotional expenses.

We believe there's still untapped potential in areas we can control within this business. Prepared Foods saw growth in both sales and adjusted operating income. Our production facilities made significant performance improvement through disciplined operational efficiency. Meanwhile, our innovation pipeline is evolving to better match consumer preferences and emerging trends. As a result, our Prepared Foods business is capturing more market share by volume and dollars driven by innovation and targeted mass spending that is showing measurable returns.

In our beef and pork segments, we are increasing yield and revenue by developing more value-added products, such as season marinated and specialty trim cuts using portions that were previously undervalued. These offerings are reaching more consumers through our branded portfolio, and we're also enhancing operational efficiencies in these areas.

As anticipated, the Beef segment remains our only soft spot. Cattle supplies are at record lows due to drought, potential herd rebuilding and the impact of new world crew warm in Mexico. These factors created market headwinds during the quarter. Despite these challenges, we are strengthening our fundamentals by prioritizing efficiency, reducing costs and introducing innovative products.

This positions us to emerge stronger and beef when market conditions improve. Looking forward, we expect cattle supplies to remain tight as we move into 2026. During this period, chicken is likely to benefit most from changing consumer preferences, both at retail and in foodservice.

2026 presents further opportunities for our chicken business. Chicken is an affordable, high-quality protein and our innovative value-added offerings position us uniquely to serve both retail and foodservice customers amid high beef prices.

While we are not satisfied with our current beef results, our diversified business model continues to build resilience and drive profitability across the company. Overall, our financial position is strong with net leverage maintained at 2.1x, a direct result of deliberate actions and disciplined capital allocation to fortify our balance sheet.

While consumers remain cautious and selective with their spending, we continue to expand our market share in both volume and dollars. Protein remains a top priority for shoppers. Despite rising prices, beef, pork and chicken are clear favorites with consumers viewing protein as an essential purchase and continuing to buy meat.

According to Nielsen data, food and beverage retail volume declined 1.5% over the 13 weeks ending in September. In contrast, our retail branded products grew by 2.4% in volume, significantly outperforming the broader sector. This growth was broad based, highlighted by strong performances across several key brands. Hillshire Farm increased by 10.3%. Hillshire Snack Kits grew by 12.5%. Tyson-branded frozen value-added chicken rose by 8.7% and JV Dean breakfast sausage advanced by 1.6%.

Our ongoing investments in innovation, wider distribution and effective marketing are driving growth and keeping us competitive providing substantial opportunities for further progress. As more shoppers turn to the perimeter of the store, we are meeting their demand for fresh, high-quality options with Tyson-branded fresh chicken volume growing 7.8% during this period.

Our retail branded products now reach nearly 72% of U.S. households a rate that exceeds both private label and other branded competitors. Although private label sales are rising, their growth comes at the expense of other brands, not Tyson, as we continue to outpace the category of both volume and performance.

We are committed to engaging consumers wherever they are, leveraging our brand strength to thoughtfully expand into new markets and opportunities. Our recent launch of Tyson high-protein chicken cuts each offering at least 30 grams of protein per serving, has achieved nationwide distribution.

This success confirms strong consumer demand for convenient protein packed options. Excitement for these products is evident across social media and at retail, reinforcing our strategy to connect our brands with consumers and deliver innovative ways to enjoy our protein-rich foods. Hillshire long trusted for lunch meat has now entered the freezer section with stuff and Chapada deli sandwiches.

These new additions offer consumers even more convenient, delicious and protein-rich meal solutions. We're also seeing growing interest from Gen Z shoppers in the frozen aisle. Our latest offerings are designed to meet their demand for convenience, bold flavors and high quality. Sales from our innovation pipeline has steadily increased over the past 3 years.

Our innovation expands all brands and segments, ensuring we address both current and future consumer needs. Tyson Foods is proud to lead the industry by developing products with simpler recognizable ingredients, just like those found in your own kitchen pantry. We recently introduced our simpler product line, now available in stores nationwide.

The preference for healthier options is clear. Last quarter, we announced that by year-end, we will remove high fructose corn syrup, sucralose, BHA, BHT and titanium dioxide from our branded products produced in the United States. As a world-class food company and a recognized leader in protein, Tyson Foods is well positioned to meet the growing demand for high-quality protein.

In the fourth quarter, we welcomed Devin Cole as our new Chief Operating Officer. Devin has over 30 years of experience in food industry leadership across both retail and food service. He has a proven track record working with our largest strategic customers worldwide and most recently led our chicken and international businesses to significant improvement last year.

Now I would like to invite Devin to share more about our segment performance.

Thank you, Donnie. I'm excited to step into the role of Chief Operating Officer. Over the past 2 months, I have taken a deep dive into our operations across the entire portfolio. my promise to you, our shareholders, is clear, we will streamline our business by reducing complexity and bureaucracy, challenging the status quo every step of the way.

Our team is committed to delivering best-in-class performance and holding ourselves accountable to our customers' expectations. Now let's review our fourth quarter segment performance. Prepared Foods delivered a strong quarter with sales up 3% versus last year or up 5.7%, excluding the effect of the product recall, primarily driven by higher pricing because of higher raw material cost recovery while continuing to enhance our product mix.

Adjusted operating income was also affected by the higher raw material cost and achieved a margin of 7.4% in the quarter. Despite the higher raw material costs, the full year adjusted operating income was up 1% reflecting continued progress on our multiyear plan to enhance profitability in this business.

Our fill rates in prepared foods were the highest since 2013. This progress is a testament to the improved S&OP process and unlocked efficiencies in our plants and distribution systems. As Donnie noted, our retail businesses delivered the strongest volume and dollar sales growth of the year in Q4, according to Nielsen syndicated data, outpacing category performance in both measures.

This has enabled us to better serve our strategic customers with greater consistency and reliability. This momentum in 2025 lays the groundwork for an exciting 2026. We see significant opportunities ahead to drive growth and improved profits. Our conviction in the multiyear opportunity to expand profitability in Prepared Foods remains strong.

In Chicken, we delivered another quarter of solid top line performance with sales up 3.8% year-over-year. Volume contributed nearly all of the increase, including a notable contribution from value-added product sales, which also drove a favorable mix reflected in price.

This is our fourth consecutive quarter of year-over-year volume growth demonstrating continued demand for chicken. Quarterly adjusted operating income for the Chicken segment was $457 million, an increase of 28%, building on a strong base in Q4 of last year. Our improved performance in chicken is a reflection of executing our strategy of operational excellence, combined with a focus on innovation and customer satisfaction.

We recognize a continued improvement as necessary and expected. Over the last year, we grew volume, net sales and adjusted operating income. We have taken the necessary steps to stabilize the margins of a substantial portion of our portfolio by providing a high level of service during the periods of market challenges for our strategic customers.

Chicken is positioned to be the best value protein for consumers as overall food inflation remains high. In our Beef segment, we continue to focus on the controllable aspects of a challenging and dynamic market. Sales in beef increased primarily due to a higher average price per pound, reflecting ongoing healthy demand.

We continue to believe we may be seeing the initial stages of half for retention. Any retention is likely to further restrict cattle supply in the short run before seeing more supply as we work our way further through the cattle cycle a few years out. Adjusted operating income declined versus the year ago period as higher cattle costs outpaced the higher sales from a strong cutout in resilient demand. Despite continued headwinds, we are focused on the pieces we can control like shifting further processing volumes back into our harvest facilities and tools to increase our ability to adapt to changing market dynamics.

Import adjusted operating income increased 70 basis points or 63% fueled by network optimization and operational efficiencies, leading to the strongest fourth quarter results since 2021. Sales were down 1.7% driven by a lower number of hogs harvested during the year. The lower volume was offset by higher prices.

The access of raw material supply for our Prepared Foods division is a key part of our end to import strategy. We have made substantial progress in utilizing raw materials like pork bellies to support our branded bacon, ham to supply lunch meat and trimming to supply sausage.

We will continue to push for higher utilization as it will improve access, quality and landing cost of our raw materials. Overall, I am encouraged by the incremental steps we have taken through the year. but I'm confident that we have room to grow and improve across the operational and controllable aspects of our business in 2026.

Despite challenging market conditions, we are driven to focus on our strategic customers and consumers while delivering value to our shareholders. With protein remaining a clear winner in the mind of consumers the diversity of our portfolio enables us to make investments by partnering with our strategic customers to drive category expansion.

With that, I will turn it over to Curt to walk through our financial results and outlook in more detail.

Thanks, Devin. For the fourth quarter, total company sales grew 4.8% to $13.9 billion compared to the prior year, led by beef with solid contributions from pork, chicken and Prepared Foods reflecting the healthy demand environment for protein. For comparative purposes, the sales increase was calculated, excluding the effect of a $355 million legal contingency reserve that was recognized in the quarter. .

Full year 2025 sales were $54.4 billion, an increase of 3.3% compared to prior year, excluding the effect of legal contingency reserves recognized during the year. Q4 adjusted operating income was $608 million, up 19% compared to prior year, driven by growth in chicken, international and pork, which more than offset the decline in beef and Prepared Foods.

For the full year, adjusted operating income was $2.3 billion, an increase of 26%. Once again, the increase was driven by the record performance in chicken. Adjusted earnings per share for the quarter were $1.15, up 25% versus last year, and full year adjusted EPS was $4.12, up 33% from the prior year.

Our multi-protein multichannel portfolio, combined with our team's focus on operational execution and a dynamic macro environment continues to deliver results. Turning to our financial position. Our approach to capital allocation remains disciplined, deliberate and forward-looking. We are focused on maintaining financial strength, investing in the business and returning cash to shareholders.

Free cash flow is critical to us, and I'm pleased with how cash has trended. Full year operating cash flow was $2.2 billion and capital expenditures were $978 million, resulting in free cash flow of $1.2 billion, well ahead of dividends, which were $697 million. We ended the year with $3.7 billion in liquidity and net leverage at 2.1x an improvement of 0.5 ton compared to last year.

If you step back and look at our balance sheet and leverage over the last few years, we've made immense progress in strengthening our foundation. With leverage continuing to decline and cash flow remaining strong, we continued share repurchases of $154 million during the quarter, and we returned $327 million to shareholders through a combination of dividends and repurchases.

And for the year, we returned a total of $893 million. While dividends remain our primary way of returning cash to shareholders. At current Tyson stock valuations we believe share repurchases represent an attractive opportunity. Our balance sheet remains healthy as we prioritize financial strength, our investment-grade credit rating and cash management to drive long-term shareholder value.

Let's take a moment to review our outlook for 2026 as our accounting cycle results in a 53-week year in fiscal 2026 as compared to a 52-week year in 2025, the 2026 outlook is based on a comparative 52-week year. We anticipate full year sales to be up 2% to 4% year-over-year. We expect a range for total company adjusted operating income to be between $2.1 billion to $2.3 billion.

We anticipate interest expense of approximately $390 million and a tax rate of around 25%. We remain disciplined in managing cash with CapEx expected to be $700 million to $1 billion and free cash flow in the range of $800 million to $1.3 billion. Now to provide more color on our segment outlook. In Prepared Foods, we expect adjusted operating income between $950 million and $1.05 billion.

We expect an improved level of performance next year, as a result of improved operational discipline and strategic investment in our categories. We anticipate our adjusted operating income for chicken to be between $1.25 billion and $1.5 billion. We believe chicken will be the primary beneficiary of higher beef costs in the upcoming year.

We also expect our operational execution to continue to perform at a high level. Based on the continuation of current variables, of tight cattle supply conditions and the potential for her retention, we expect adjusted operating income in beef to be a loss between $600 million and $400 million.

We anticipate adjusted operating income report to be $150 million to $250 million based on our ample supply of hogs and with continued emphasis on the operational metrics of our business. Our international business has performed well in 2025 by managing controllable costs, maximizing efficiencies and lowering conversion costs. We expect adjusted operating income in International Other to be $100 million to $150 million. Overall, I'm confident that 2026 will be another strong year for our company. That covers our segment performance, financial highlights and outlook for 2026.

Now I will turn the call over to Donnie.

Thanks Curt. In 2025, our team delivered strong results despite navigating a dynamic and challenging market landscape. These achievements are a direct result of our collective dedication and we look forward to building on this momentum as we move into 2026.

Our diverse portfolio, commitment to innovation, operational excellence and robust balance sheet empower us to allocate capital strategically and reinforce our leadership in the industry. We remain focused on meeting growing global demand for protein while delivering value to our customers, consumers and shareholders. I would especially like to thank our team members for all you do. Your unwavering dedication and hard work are the driving force behind our progress, propelling us towards even greater success and solidifying our reputation as a world-class food company and a leader in protein.

With that, I'll turn things back over to Jon as we begin the Q&A session.

Thanks, Donnie. We will now move forward to your questions. Please recall that our cautions on forward-looking statements and non-GAAP measures apply to both our prepared remarks and the following Q&A. Operator, please provide the Q&A instructions.

[Operator Instructions] The first question comes from Ben Theurer with Barclays. .

Donnie, congrats on a good finish for '25 picking up on the guidance on my first question, really on chicken, 25, you had a probably better year than even expected at the beginning. And now looking at the very strong, the $1.25 billion to $1.5 billion. Can you give us maybe your assumptions for that piece of the guidance as to the high end, the low end, that would be great. .

Ben, and thank you for the question. In 2025, we did have a great year in chicken. Let me digress a little bit and tell you that -- what we saw in '25 is a result of what I would call setting the table over the past 3 years in our Chicken business. You may remember and certain others will we had our share of issues with genetics and hatch and capacity issues as we worked over the past 3 years.

But we're now starting to see the fruit of our labor, but if I think about 2026 and some of the assumptions that we made in putting our guidance out there, we expect the operating conditions in '26 to be similar to those in FY '25. In short, we expect this to be a constructive environment for us. USDA projects chicken production to increase approximately 1% in FY '26.

We don't see a runaway chicken supply. In fact, I would caution against using September numbers and the -- obviously, the commodity price impacts of that as you do your model. But the 6% was a result of perfect growing conditions and environment, and that has now returned to normal.

And so we see a constructive environment from that standpoint. In terms of grain, we see stable grains. You can -- we're in line with forward futures markets. And then the confidence that we have in our Chicken business is based on execution. And for us, execution across every 1 of our businesses is critical to us. And so if you look at those individual components of execution in our supply chain, we believe they are sustainable.

For example, better yield. We're seeing some incredible numbers out of that capacity utilization. I talked earlier about some of the things we're growing the business, but at the same time, we've got a great footprint underneath us at this point.

Labor utilization is really good. We have ample labor, productive labor. And our live performance is kind of a standout for us. It has been all year, but it was particularly in Q4, and we're seeing some performance out of the live that we've not seen in many years. And so we've made tremendous strides in operational improvements from live operations through the plant with room to continue to improve our performance.

We're all aligned against there is more to go do. We've seen commodity chicken prices move down were just like you have and mostly because of the bird weight corrections that I mentioned in September of this year. We're somewhat insulated in our business, but we're not immune to commodity markets.

And we also continue to evolve our commercial relationships with our strategic customers to build long-term win-win partnerships. This allows us to focus on jointly growing the categories and stabilizing our earnings and the collective earnings of us and our customers.

Further evidence of that is in our Q4, our branded fresh chicken business in retail was up 7.8%, and our frozen value-added chicken was up 8.7%. These are volume numbers. And so we had higher volume and a better mix. We finished '25 with momentum in chicken, and we've seen that performance carry through in the start of '26, and we expect '26 to be another great year in chicken.

Okay. Perfect. Very clear. And then second real quick on Prepared Foods, looks like the finish was a little bit softer than expected. So first, what drove that? Was it input costs, maybe pork, beef pricing? And how should we really think as we move into '26 on the midpoint, give or take, $1 billion outlook and the expected growth here? .

Yes. Thanks, Ben. Let me first say that the fundamentals of our Prepared Foods business are very good. We did have a much better overall performance in FY '25, and that was really driven by growing distribution, optimizing our operations and winning innovation with strategic customers.

In fact, we are winning with consumers and we did grow both net sales and operating income by about 1% in FY '25. The volume gap the last year has continued to narrow in each quarter. So we're seeing good momentum there. And as mentioned, our volume and dollar share did grow retail for the first time in 2.5 years.

The miss that you referenced, it was, in fact, driven by rapid rise and commodity costs. And our pricing lags just didn't fully have time for those to flow through in the quarter. For the quarter, we had $135 million in commodity cost pressure and we had 344, I would point out for the whole year. So not insignificant.

The operational excellence that I mentioned, it is occurring inside of all of our plants, and it did really drive substantial volume value this year, and some of that was partially covered up by those higher raw material costs. We continue to have very good fill rates, the best since 2013. And so a lot of good things to talk about in this business as we go into FY '26.

As we see those raw materials stabilize, we do expect to see volume growth, market share growth, and that's really driven by our world-class innovation pipeline, continuing work with the operational excellence that I mentioned and our customer partnerships. We will drive top and bottom line growth with our strategic customers.

And I would point out that's not just in retail with much of the brand work that we've talked about. We're also seeing strength and increased distribution with food service. So what we're doing is working. We're pleased with the resilience of this business this past year, but we also acknowledge that there's more work to be done. I am confident that we have the right products, the right team, the right customer relationships to achieve the metrics that we've laid out.

The next question comes from Leah Jordan with Goldman Sachs. .

Thank you. Thanks for all the detail today, and great job on the quarter. I just wanted to switch over to beef. It came in a bit better than we were expecting in the quarter, but you're still guiding for a pretty challenging environment in 2026, which makes a ton of sense, right, with rebuilding likely underway.

I guess looking at the guide for next year, maybe you could provide more detail on how you're thinking about the underlying capital supply and costs as we move throughout the year to frame that view. And then I know you've made a lot of improvements on yields and the like. But what other opportunities do you have to mitigate the cost pressures in this business?

Sure. Thanks for the question. So let me get into that -- in terms of half retention, this is obviously something we've talked about for a while, but there are potential signs that there is have retention. What is a little bit different as we have a little bit better picture is as we see regional disparity.

For example, out West, we're not seeing anything meaningful in the South, nothing there. But in the north, Upper Midwest, we're seeing some retention. So if I look at what data or what we see is it's a lower percentage of peppers either being harvested in feed yard and then fewer feeder cats. Pepper numbers and harvest will need to remain lower for us to be able to say that pepper retention is sustainable.

And remember, more pepper retention implies the less beat in the near term. But to the second part of your question, so what are we doing about that? So with Her rebuilding, which we're all looking for, mean supply of market-rated cattle will fall before it increases in future years. We continue at Tyson to focus on the controllables and optimizing our business.

You had the macro question on the table is this, the continuing challenge of inadequate cattle availability that has been further impacted by cattle inflows from Mexico, associated with border closure related to New World crew work. Our volume was down 8.4% for the quarter and 1.9% for the full year. So certainly having an impact.

Even heavier animals, they've helped, but they've only partially offset the lack of cattle availability. In our guidance, the negative $600 million to negative $400 million is what we see relative to the market presently.

That's very helpful. For my follow-up, I wanted to ask about the CapEx guidance. The rate for next year seems somewhat wide and is notably lower than the typical level you guys do. just maybe you could talk about the main buckets of what projects you're planning for next year? What are the variables driving that range? Is it anything timing related? Or has anything changed in how you're thinking about capital allocation overall? .

Thanks, Leah. Maybe to start with just a reminder on our capital allocation approach. And I made a comment this morning around it. It remains very disciplined, deliberate but also forward-looking. We're focused on maintaining our financial strength, certainly investing in the business as you asked the question on but also returning cash to shareholders and acknowledge the range that we provided this morning for CapEx for '26 is $700 million to $1 billion. I'll hurry on to remind everyone that across the last 5 years, we've spent just over $7 billion in CapEx.

We've invested heavily across our network -- and that included a lot of capacity expansion during that time period. And where we sit today, we have the capacity to grow inside our existing network. Our range that we shared today, acknowledging it's 300, we really not that different than what we've shared over the last few years relative to a range as we start the year.

But that range is really going to -- is reflective of the pacing of the spend of our current projects, but also the timing of new projects that we'll launch in 2026. But the range does include both our maintenance spend as well as profit improvement projects that we'll execute across the year.

The next question comes from Tom Palmer with JPMorgan. .

I wanted to just follow up on the chicken commentary. You noted that you were insulated, but not immune from lower prices, and we did see the lower prices in September at an industry level, especially jumbo cuts.

I guess I'm trying to think through to what extent this flowed through in 4Q and you still put up those results versus maybe there's some timing considerations and maybe more of a call out to start out the year? .

Thanks for the question. I will tell you that, I mean, we obviously considered commodity markets and giving our guidance. But the $1.25 billion to $1.5 billion, I think, is a good starting point for us right now. We've said that we think '26 will be very similar to 2025.

I think that's still true. I think that what you're seeing in terms of pricing that has created a concern. I referenced earlier that the 6% increase in supply in September. I think it's skewing a lot of information. And some of the pricing you're seeing are very simply is just spot market or excess that was taking place is that point.

I would remind you that demand is still strong, and I believe that will continue in '26. This is a data point for you. breast meat pricing is the third highest in the last decade, and we have stable grains. So it's a pretty good environment to be in.

2026 is looking to be another good year for us. And then if you look at -- in terms of the insulated and not immune, if you look at where we're growing in the value-added and the retail and food service that value-added mix gives us the opportunity to put our -- the #1 brand of chicken on the product.

And so it provides some insulation. The fact that it's value-added provides some insulation from commodity markets, so we believe our mix in our portfolio positions us well to be very successful in 2026.

Okay. in Prepared Foods last year, at the start of the year, you noted maybe a little bit less seasonal than you might see in a typical year in terms of first half versus second half? Maybe an update just on how you're thinking about 2026. .

Yes. Thank you. Yes, you're right. FY '25, I would tell you, was a bit out of balance from historical norms, and that really was due to the raw material pressure and somewhat unseasonality that we saw there. As we think about what we can what we can determine from FY '26 currently, what the forecast look like, we do see FY '26 being more balanced in that regard.

And so we might expect a pretty big bounce back here just to start out the year to clarify? -- versus what we saw in 4Q.

We don't think. Obviously, we don't give quarterly guidance. But I think we've talked historically maybe slightly better performance in the first half. We shared the message last year being '25 in that it would be more balanced given the operational improvements -- as they built throughout the year, and I go back to Devin's comments, I think this will revert closer to a normal cadence, but certainly acknowledging we did have the run-up in raw materials as we shared earlier that impacted Q4. And that -- there's some level of that that was still in inventory as we finished the year as well. .

The next question comes from Alexia Howard with Bernstein. .

Can I start with just a broader question on the key uncertainties for fiscal '26. We know the consumer is struggling a bit in the U.S. commodities are all over place tariffs, I think, are less of an issue for you. But if you had to sort of prioritize the top 2 or 3 things that could go positively or negatively versus your forecast, what would those be? .

Kristina, why don't you take that? .

Alexia, thank you for the question. As we think about the consumer -- we definitely are seeing a continued divergence in income with higher income continuing to drive growth and others reallocating some of their nonfood dollars to food categories. .

So we do anticipate demand for protein to continue, and we are really excited about the opportunity for consumers with our chicken being a preferred choice for value and for convenience -- if we look at our extensive product portfolio, we have products that do cater to everyone, whether they're shopping in retail or our foodservice channel, ensuring that we can meet those consumer needs wherever they may be.

And as we remain positive, 1 of those reasons would be over the past years, 72% of households have purchased a Tyson Foods branded product, which helps demonstrate our strong market presence and our consumer trust. Additionally, we've increased our household penetration with younger consumers under the age of 35, which is a testament really to our ability to resonate with those new demographics.

And Donnie talked about, we grew market share in our Tyson retail value-added poultry and our fresh businesses. We also grew our market share with our prepared on a volume basis with Hillshire lunch meat really being a standout with a 10% volume growth. So I'm confident that Tyson Foods is excellently positioned for growth today and into the future. .

And as a follow-up, it sounds as though you're fairly confident that the first quarter results in Prepared Foods will come through reasonably well. Are you seeing any impact from the delay and disruption in the benefit payout as a result of the government shutdown? Or is it too early to tell on that front? And I'll pass it on. .

Yes. Thanks, Alexia. Yes. I'll continue on on that. I think it's an evolving situation on the funding for the Supplemental Nutrition Assistance Program. So we are closely monitoring it. We do see consumer spending patterns, again, changing from nonfood to more food categories, but we feel resilient and well positioned to navigate those challenges probably for 3 real reasons, one being our diverse product portfolio, we have a wide range of product offerings at different budget levels. .

And this allows us to meet the consumer needs, whether they're price-sensitive or whether they're looking for premium offerings and really do believe that our chicken and our prepared products are both going to be able to provide affordable and nutrition options for the families.

The second reason is our brand trust and loyalty. We have 3 of the top 10 brands in packaged protein with our Tyson, Jimmy Dean and Hillshire Farm. And then third, really our market adaptability. We're really committed to driving volume growth -- and so watching the challenging or changing market conditions, it's 1 of our core strengths. And so we actively watch what consumers are buying, their behaviors and adjusting our marketing and promotional strategies in order to continue to drive our volume growth.

So again, I feel really optimistic with our strategic approach, our diverse product portfolio and our strong brand loyalty that will help us continue to grow.

The next question comes from Heather Jones with Heather Jones Research. .

I want to start out with beef, and I understand the normal seasonality of that business. But given the volatility that we've -- I mean, pretty extreme volatility that we've seen in the cattle futures recently. I was wondering if we should think about the seasonality of Q1 any differently than normal? Because I think it was of '24 has some impact because there was volatility in the curve. So just curious if you could help us think about that. .

Sure. And thanks for the question. We're seeing we're seeing good retail demand here in Q1 of '26. I think that from an operational perspective, we continue to perform well. we're -- if you look at things like yield, if you look at how we're diversifying the mix into more value-added. And we have a pretty good supply right now in regions from a cattle perspective.

But we think '26, it's shaping up for us, very much in line with what we built into our guidance. We don't know, I mean, there's obviously -- we should expect volatility. I think that's going to be the order of the day as it relates to beef.

But we have considered the current future cattle costs and the estimated pricing while expecting that volatility. And -- could it be worse? I don't know. If we could Mexico and border closure and new world crew worm and the impact of that I mean, that's pretty significant for us, particularly in 1 of our plants in the region. And so we're just -- we've given you the best guidance that we know how to give you relative to those dynamics that we're dealing with presently.

Okay. And then I wanted to -- I had a clarifying question on chicken. So Donnie, it sounds like based on your comments that guidance assumes more than normal seasonal improvement in pricing. You found September to be an aberration. So as we're thinking about '26, you're expecting price appreciation from current levels higher than just normal seasonal. And I understand your commentary correctly.

Heather, there's really about 3 or 4 points relative to that. But your assumptions are generally correct. I think the first 1 is that chicken will be very much in favor in terms of protein. It's the most affordable protein on the market, and consumers are favoring that -- and so that's 1 thing. The aberration, as we've talked about it in September, that is, I think, a point in time.

I think there are physical limitations to from an industry perspective in terms of increasing supply. I've seen some headlines that talked about runaway supply. I don't see that at all. In fact, my biggest concern today is with the supply of chicken that we have is the demand that we're going to have for chicken, are we going to be tight? And could we see a little bit better market, but overall, what gives me confidence is our level of execution from 1 end of the chicken supply chain to the other.

I've been doing this a long, long time. I've not seen us, but a few times we operate at this level as 1 team, 1 Tyson across our chicken business. And a lot of people deserve credit for that. And so think of my confidence being from the execution of the business and never gets old.

Next question comes from Pooran Sharma with Stephens.

Donnie, I wanted to start out by asking about something you said on the call. You said you've taken steps to stabilize the margin stabilized margins on a substantial portion of the portfolio. Donnie, I think in the past, you've mentioned just for chicken alone, we've seen somewhere upwards of $500 million to $700 million self-improvement.

I was just wondering if you could give us an updated view on chicken. And also, if you're able to, would you be able to provide a view across the rest of the businesses just because of the work you've done in prepared foods and in pork as well.

Sure. I think let me start with with a few things here. When we were sitting here a year ago, talking about '25, we set or made a few commitments. And I would point this out. We did exactly what we said we were going to do in the year. We said we would continue to shift our mix from core protein to more branded and value-added. We did that. .

We said we were going to increase household penetration and branded and value-added and we were going to engage with the younger consumers. We have done that. We told you protein would be viewed as essential by consumers, and it is. We improved our returns on invested capital and creating shareholder value. We've done that.

We told you we would execute with excellence in all that we do, and we continue to do that, and you will see more and more of that coming as we move through '26. In Q1, we're off to a great start across all the businesses. They're very much in line with our expectations and outlook. So we feel very good about that.

In terms of some programs, I would tell you that the expectation, whether it's chicken, beef, pork or prepared foods or international. The expectation is you'd be the very best regardless of the protein at everything you do from 1 end of that supply chain to the other.

And also, that makes us from a corporate perspective, manage our costs so that what gets allocated to a business is more in line and realistic -- is more in line with what a competitor of ours in that space would be. So there's a lot of pressure put on the spend side of the business with a lot of work done relative to determining whether every activity, whether it adds value or it creates waste.

And if it creates waste, we stop it. If it's something that a shareholder, a customer or a consumer isn't willing to pay for, we're stopping doing that. And so -- that's kind of my view. I don't have a number to give you, but I would tell you, using chicken, which was a little bit of what you talked about, but it could apply to the rest of the protein is we believe there to be significant upside and improvement across the landscape.

Yes. Maybe I'll just make a couple of comments relative to your part of your question with prepared foods and pork. I would just add on to what Donnie said, what he's talking about is really a multiyear cultural shift that we've been on the journey of and -- it's not just in the facilities.

It's in everything that we do, whether that be on our investments regarding our marketing spend whether that be our sales, self-support or even things that we do here at the corporate office. It's about finding efficiency in everything.

But to the point of prepared, we talked of good about that. those plants do operate on a system of standards. And not only does it help offset the inflationary factors, but it also provides us additional capacity without having to spend CapEx. We did see achievements in that area that exceeded our goals in FY '25 and certainly see a pathway to have that progress continue in FY '26.

And maybe just touching on pork, because we don't talk a lot about that, there has been exceptional improvement in that business in this year and see that continuing. They did improve their margins by 70 basis points, and they did that through improved efficiencies and yield. They are capturing more revenue per animal.

And a lot of that has to do with the work that they're doing around special trimming, marinating, just typically adding value for our customers. But a data point here is their cost per head in FY '25 was basically the same as FY '24 on your head. So very proud of the work that has been accomplished in the pork Group and do continue to see that momentum in FY '26.

Great. Appreciate the color there. Devin and Donnie, just for my follow-up, I wanted to maybe understand he for retention a little bit better. You gave us some great commentary on the call. Donnie, I think you mentioned retention happening in the north and the Midwest versus kind of in the West and the South. I'm not quite seeing it there.

Was wondering if you could maybe share some of the reasons as to here and why is it like drought conditions better in those regions? Or are the economics better in those regions? Any color there would be appreciated.

Thanks for the question. I think I would say that the situation we're in was largely created, because of drought conditions. And there were areas that were more harmed than others. And so in terms of this, I want to talk about hipper attention, it sounds like you know all the different components that are required to actually start rebuilding the herd and the impacts of that. But that lower percent of hipper being harvested feed yards and fewer feeder. I mean we're looking at all that constantly. And so -- but I think what makes it challenging to do is the data we get to see relative to what's actually going on.

Because somebody could hold a hipper back for a short period of time, they may be taking advantage, for example, cheaper corn. And they're going to feed that and put some weight on the animal. And then they may ultimately take it to harvest. So it's not -- there's a little bit of flexibility around that. And rightfully so, that cattle rancher, they're trying to maximize their earnings through this this time period in these market conditions and certainly understand and appreciate that.

But they're making those business decisions based on what's best for them. And we're just trying to react to what that looks like.

The next question comes from Peter Galbo with Bank of America. .

Donnie, Curt, Devin and Jon. It feels like an eagle's reunion tour out here. So excited to have you guys all that together. I wanted to wanted to ask on chicken, and I know there's been a lot of discussion. But Curt, maybe you could just help us a little bit with the phasing of profitability over the course of the year. I know you don't want to give specific quarterly guidance. I am asking for it, but I'll leave it to your discretion in terms of how you want to kind of help us adjust the profit expectations for the year. .

Yes. Thanks, Pete. Certainly, as I said earlier, don't provide quarterly guidance. I think Certainly, as Donnie illustrated earlier, there'll be a little bit of volatility that we'll work our way through beef. But otherwise, I think kind of normal seasonality would play its way through each of the individual segments.

Okay. And then I wanted to ask on Prepared Foods and maybe this is a bit too granular, but on lunchmeat, specifically, there's been, I guess, a lot of different signals out of the different market participants. Some on taking pricing, someone being more competitive on pricing in terms of promotion. It seems like there's, I guess, a lot of different strategies that are going on.

And again, it seems to be impacting a little bit the profitability -- so I just -- I wanted to understand what you're seeing in the market, specifically. I know your results kind of speak for themselves. But whether the competitive activity out there in deli, specifically has been, I guess, rational is probably the word I would use in your view or if there's some other strategies that are going on that maybe are upsetting dynamics in the category. Thanks very much.

This is Devin. Listen, all this -- it's worth repeating, and I know you saw it in the notes and we've said it, but we did see strong once meat growth in the quarter, 10.3%. In fact, we saw some pretty healthy indications across several of our categories that we tell you that that we're -- we have what today is a winning combination both with the price that we have in the marketplace, but also with the targeted MAP spending with our strategic customers.

I would say, today, we have more visibility from data that we have in software investments that we've made in terms of what's working in real time and adjustments that we need to make if we do see changes with the consumer.

But we are very focused on increasing our distribution and also making sure that we not only have the the right value for the consumer, but also the right products, and that's what makes our innovation pipeline so important. 10% share is not as significant in this dynamic area.

But I'll just point out, too, is you've heard us talk a lot about this, but a large portion of our business is pass-throughs, it's got lagged relative to our portfolio that's on a price list when we do face a sustained market-based input cost pressure, we will take price action as needed. And that's really just to make sure that we can continue to do those investments in our business.

Sorry, Devin. Can you just expand a little bit, though, on competitive dynamics in the category. I think it would be helpful .

This is Kristina. I'll speak just a little bit on the distribution growth, as Devin was talking about almost every 1 of our categories, we saw distribution increases, and we also had increases in our MAP spending from first half to second half and really getting to those targeted promotional spends, reaching the consumer where they're at, whether they're shopping online or if they're shopping within the store.

So we feel pretty confident about our continued success, and we've been able to leverage platforms to get those insights real-time and adjust and pivot. And so our commitment to growing is demonstrated by that continued investment.

The next question comes from [indiscernible] with Santander. .

I just want some color on the working capital. If you could just some of the details on the free cash guidance for the next year. So it seems that you will have some cash when expected. So if you could just give some color to us in terms of what are the lines that are impacting the most? And how are you thinking about when it comes to capital .

Thanks. So our free cash flow for the year '25, very proud of finishing at $1.2 billion -- and I think part of your question there was around the free cash flow expectations and working capital and a couple of other elements -- we did guide this morning to a free cash flow range of $800 million to $1.3 billion for '26.

That's recognizing certainly the range of operating income that we shared this morning in addition to the range of CapEx. Obviously, we don't share a specific working capital expectation throughout the year. But we did provide expectation relative to sales growth. So there likely is some inflationary move on working capital as we work our way through the year, but would certainly indicate a free cash flow that exceeds our dividend up to nearly 2x our dividend rate for '26.

Great. And just 1 follow-up here on the Chicken business. If you could just remember us in terms of the exposure to the commodity market or -- if you could provide any color in terms of more chicken versus big. Everything that you could give us in terms of color to the exposure to that spot market would be appreciated.

So if I understand your question right, it's our market exposure to small bird versus big bird, right? Well, I would start with -- we obviously participate in in both the small bird and big bird program.

We have value-added products in both big and small bird. But in both cases, what we tried to do is to create -- to align with strategic customers and create these win-win relationships that grow our business and grow our customers' business. And we spend time doing that as opposed to arguing about what the price is or what the volume is going to be.

Both of us collectively spend our time on growing the collective business for both. But in terms of big bird, small bird, I don't think I would want to tell you what percentage of our share of that is presently.

But I would point out that our value-added business. And when I say value-added, I'm not just talking about chicken that is reading on it or that could be fully cooked there could be value-added fresh chicken, and we participate in all of that.

But in the year, we grew our value-added business 2x what we did commodity, the average of the commodity or the average of the segment, I should say. And so we feel very good about that. We told you we were going to do that in that we're going to do it in '25. I'm telling you in '26, we'll continue to do that.

The next question comes from Andrew Strelzik with BMO. .

I wanted to go back to specifically to the fourth quarter chicken performance. And -- you talked about growth on a strong quarter last year. If I look at relative performance to the industry even adjusted for your price lags, it seems like that took a step up as well. And I was trying to kind of decipher exactly or more precisely what drove that?

You talked about live ops, but you've been talking about that all year. You talked about lower feed costs as well in some of the value-add components. So I guess, how do you -- how do you think about what was the biggest driver there? Did you see a step function in your operational performance internally in the quarter? Any color around that would be great.

Sure. Andrew, -- there's a lot of things that I could talk to you about relative to that. And I mentioned earlier that -- and you all know this, that for about 3 years now, we've been -- we've been working on our chicken business and really doing what is necessary to improve the performance.

We have 1 goal here. It's very simple in our chicken business, is to be the best chicken company in America period. Anything that doesn't deliver that is -- or doesn't work toward that end. We obviously look at and see whether we need to be doing that, but it's better yield, it's better live performance.

And in that live performance, you'll remember we had our share of issues with genetics as well, even our old genetics, we have new genetics, but we have older genetics that are actually performing at what I would call historical top-end performance.

And then we have an answer for big bird genetics that is flowing through the pipeline today, and we feel good about that as well. Capacity utilization continues to improve for us as a company. And we made some really, really difficult decisions 2 years ago, 18 months ago around that.

And then from a cost improvement we're attacking every element of this from a cost, from a spend, from a nonvalue-added activity perspective and -- and then even to looking at what the allocation from corporate is into an individual business and addressing those things. So we're leaving no stone unturned with a clear objective, Andrew of being the best chicken company in America. .

Okay. That's helpful. And if I could just squeeze 1 more in on beef. You talked about a lot of the moving pieces for screw arm and have our attention and demand and all the other things. The 1 thing I didn't hear you talk about was imports, and that's been obviously topical in the news. How have you factored potential beef imports into the U.S. into your outlook? And how do you think about that impacting your business? .

Well, we've obviously had imports into our beef business, and that looks more like box lean, but those numbers, as you think about that exports are down about 10% for us, Andrew, imports are up about 20% and Australia is a big market for that, and we're talking boneless beef and most of which ends up in our grinds.

And so in this environment, the consumer, yes, they're trading around in proteins a little bit. But even within beef, you're seeing some trade from muscle cuts into grinds and the grind demand is very strong.

This concludes our question-and-answer session. I would like to turn the conference back over to Donnie King for any closing remarks. .

Thank you for your time and continued interest in Tyson Foods. We look forward to sharing our progress with you next quarter. .

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

[Audio Gap] Chicken, pork, beef and the company also operates a very sizable Prepared Foods business. With us today, we got Curt Calaway, company's CFO; as well as Devin Cole, recently named Chief Operating Officer.

And with that, I'd like to kick it off actually over to you, Devin. I mean, recently, just a few days ago, you got a little promotion up to Chief Operating Officer. So really, the first question is, with that more expanded role versus what you previously oversaw, what are like the key priorities you are tasked to look at for the next couple of quarters?

Yes, sure. Thank you. Thanks for the question. Listen, I should first start by saying how grateful I am for the opportunity. We have a very robust succession mechanism in place at our company. And so this is thankfully not as a complete surprise to me or others and this will give me an opportunity to have a bit more visibility directly with all of our company. I certainly been involved with our Prepared Foods and our Poultry business over the years and was actually part of Tyson back when we did the IBP acquisition in early 2000s.

So I've been around the Beef and Pork business a good bit. But to answer your question, listen, I think like as anybody should probably say in a new role, my first priority is to do no harm. We have exceptional talent at all levels of the organization, all the group presidents, all of the finance talent that we have. What I will always insist on in any organization is to make sure that we have great alignment, great clarity and great communication.

And I think with this new role, that will only allow us to elevate that a bit to make sure that we're seeing across all of the proteins globally, quite honestly, with our international business as well, making sure that we have visibility to have best practices in place and to take advantage of any opportunity that we see anywhere that we have the ability to do business.

So as I will be very inquisitive over the coming weeks and months, I don't see any major changes to our business because, thankfully, we're in a very good spot. And the thing that I'll assure our team members as well as our stakeholders is that we will do nothing but accelerate the momentum that we already have and that I am very fortunate to inherit.

Okay. Good stuff. Now obviously, one of the bigger themes here at the conference has all been talking about consumer health, and we've seen a lot of like discussions about like just cautious sentiment spending somewhat under pressure. So if you look at the different major protein categories within your portfolio, what have you seen in terms of like consumer behavior here? And how do you feel overall increased priority for protein consumption has helped you short term, but also will continue to be a driver long term?

Yes, sure. It has been widely reported. We are dealing with a cautious consumer, and that's not really new news. It's just a continuation of what we've been seeing. Customers, definitely, we see restaurant traffic counts being down and more of a pivot to a bit more retail shopping and probably a bit more frequent retail shopping with a lower ring size per occurrence. And so we're aware of all those things.

I think the great news for us as a company is that, as you mentioned, protein is winning for a variety of reasons. And also protein, particularly animal protein, is seen as an essential part of people's diets more so now than ever. And so what we are seeing even at Foodservice, particularly with our Chicken portfolio is because of the value relative to the other proteins and innovation and the great partners that we have at Foodservice, we are seeing that value-added business grow. Thankfully, even with traffic counts being down. So that's great news for us.

And then as you look at our retail business, I mean, we have an exceptional innovation pipeline across every place that we do business. And we talk a lot about value-added. And I want to make sure people understand that that's not just a term that we refer to for, say, partially cooked or fully cooked, which is a big part of convenience.

But even in our fresh chicken, right, we see an opportunity throughout that category to provide better opportunities for people, maybe it's pack size, maybe it's the packaging itself, maybe it's the attributes that we offer even in fresh chicken. Our deli business is growing certainly as consumers want to have a restaurant quality experience even at home.

And luckily, we have the expertise to know how to make those products where they're easily reconstituted, whether that be in an air fryer, an oven, a microwave, however people want to utilize those pieces of equipment. We understand that, and we're creating products for them. We also have across all of our branded portfolio, particularly in Prepared Foods, we have a great innovation with breakfast with Jimmy Dean items. We have great innovation with Hillshire Farms, both in lunch meat as well as snacking occasions.

And then, of course, with our chicken offerings. I think we had 20-plus innovation items in our retail chicken this past year. We talked a lot about accelerated marketing spend. And that's not just in trade and marketing, although that's a piece of it. We also have spent a tremendous amount of money making sure we have the right quality products, making sure we have the right packaging, making sure that not only that, but we understand where that consumer is going. And when we do spend those trade dollars, we have better visibility than ever to make sure that we're spending them in the right way. It is driving the right behavior and that we're getting a return for that.

Okay. I mean along the line of these like focused spending, et cetera, you've done a lot of production improvements over the last couple of years. Anything that's still pending? I mean we've seen a few things, obviously, in chicken that clearly has started to pay off more recently. I think you've done a few things within pork. So what is it you're currently reviewing from an operations side where you see opportunities to potentially further improve?

Yes. I think what we're always mindful of and what will really create consistency in this business over a very long-time horizon is what we control. Certainly, there are inputs relative to that particular part of our business that we are mindful of. We don't see anything on the horizon there that would be disruptive.

And even in the most recent quarter, if you look at what we -- what our results were really driven by, it was our own operational excellence, and it was also making sure that we have the right innovation. So the way I think about that business is we've done some work with our footprint. We feel like we're in a very good place in terms of not only the footprint that we have, but the capacity that we have within that footprint.

And so if you think about today's construction cost, for example, obviously, we want to utilize the post or the prior investments that we've made to the utmost before we go out and spend incremental CapEx. So it's made us better, I think, investors of our capital. But it's also given us a real insight into how good these facilities can be.

And I think that we're running the best operational piece of our business that I've ever seen. But I would also tell you, we're not sitting still. It's like anything else. Everyone is improving constantly, and we recognize our leadership position. We also recognize that it only matters if we are continually getting better, and we are doing that. So I look at all of our businesses, quite frankly, with the same lens, whether that be international, whether that Beef, Pork or Prepared Foods or Chicken, what has really driven the results is our high level of execution and having visibility into how we get better from here.

I mean, clearly, chicken is currently kind of like the bright spot within the commodity piece for you. I remember you talked about like certain investments up to $100 million, if I remember right, in the Chicken business for the second fiscal half. But you still, after third fiscal quarter kind of like upped your outlook here for operating income. How are these investments coming together? Is that still on track? And is that something as we move into next year, you probably don't have that, assuming margins stay where they are, there's additional upside from where you are right now?

Yes. So we are still on track. We will, of course, wrap up here in the next few weeks, our Q4, and we'll fully have exercised our commitment against those marketing dollars, the spend dollars. And we've already set our planning in motion for FY '26 and what I would tell you is, again, going back to the visibility that we have, the analytics, the team that we have in place, the data, how we're talking to these consumers today in a new way, it's one more -- way more efficient than it's ever been in terms of our marketing dollars.

But just the visibility and the partnership that we have with our customers tells us that we are on the right track, and we see no reason to change that trajectory based on the results that we are seeing, and we will have the same discipline moving forward.

Okay. Within chicken, the value-added sales obviously has kind of like gained share internally. How sustainable is that? And where do you think there's maybe further opportunity to improve?

Yes. Listen, I'm very, very bullish on our ability to continue. We've seen some very large gains, both in volume, dollar share, household penetration, whatever metric you want to look at, across retail and Foodservice with our value-added portfolio, which only says next year, we will have to achieve that and something greater than that. And I fully believe that we will do that. And the reason I do is I have had the opportunity to have a glimpse at our innovation pipeline. And it's all those things that I've talked about.

It's not just a complete turnover of our products because one thing I would point out is that innovation can be expensive. So we're making sure when we place these bets that we are not only getting trial, but getting repeat across every day part, particularly in snacking, we've had tremendous success more recently. And it's not just line extensions, I should point out, too. It is truly a lot of white space for us.

And so I think that we will continue to grow within the category or within the segments that we're known for, but I think people will be excited and surprised to see some of the things that are in particularly the Prepared Foods pipeline for next year that they might not expect from us.

Okay. Clearly, chicken can be very volatile, very fast, and you always warn about the downside risks, no matter what. So just remind us a little bit what are you seeing in the market? What could go wrong, right? What could go wrong in chicken to kind of like reverse course and have a little more of a negative impact maybe in the next couple of months? Is it too much production because hatch issues are solved? Or what are the key things you're watching?

I think if you think about the industry sort of biomarkers that are widely talked about, it appears to us that it will continue to be a stable environment. So as I think about USDA projections on grain, yes, there's certainly some calls and puts relative to tariffs and some of the imports and exports. But I don't see anything disruptive on the grain front.

In terms of overall production, it's certainly something that we watch. We have very thankfully managed our live production footprint very well. We're confident in the breed that we use, but we're more confident in our team because at the end of the day, it really is about the execution in that part of the business and the management of it.

And so luckily, we have seen relative to the public data that's out there, a better performance on that side of the business. So I don't see a lot of numbers that are available that would tell me there's going to be a huge uptick in production next year. If you look at USDA forecast across all the proteins, it's pretty minimal, and I think the demand will more than outweigh that.

So I don't see anything from an industry perspective. But I would also tell you this, too, in our value-added Poultry business, if we did see an opportunity where the industry were to produce more than they could consume, we certainly can go take advantage of that and bring that into our operations. And so I think what I focus on is our business, how fast our business is growing and making sure that we have the right supply to take care of our customers.

The one thing I'm very proud of across prepared and poultry is that we've maintained a 98-plus percent fill rate. And so we are not only making sure we have the right quality, but it's in the right place at the right time for our customers.

So what could go wrong? Listen, this is a difficult business. And what I have confidence in is that the things that could go wrong are largely execution. And I think we're proving ourselves as being very confident in execution. But I would also tell you, I don't say that with any ego, meaning that we wake up every day realizing we need to do the same thing today or better than we did yesterday. It is about continuous improvement for us, and that is what we're focused on.

Good stuff. Obviously, opposite of the cycle kind of like great in chicken, but pretty challenging in beef still. Have you seen -- what signs have you seen over summer? Are you getting a little more, call it, excited or optimistic about some of the rebuild happening? What are like kind of the markers? And more short term, how much of an impact does it have on your business that there is this restriction from Mexican cattle because of screw room coming into the U.S.

Curt?

Yes. So certainly, start with an overview relative to beef it's been certainly limited availability, right, has been the journey we've been on. And we've seen a spread volatility during that time period as well. But I think from our business, we have continued to focus on the efficiencies within our business and controlling what we can.

We have seen, to your question, an environment where we've said for the first time, about a quarter ago, if we haven't reached the point, we could see it from where we're at, and we talked a bit more definitively last month that we believe the signs are there that herd rebuilding is in place. We've talked about the beef cow -- or the cowherd. We've talked about heifer retention, and we talked about beef cows slaughter being down year-over-year as well. All signs positive.

Certainly a number of other macroeconomic environment conditions that we've seen that we believe we're at that point, right? Now that's going to take a while. Once right, that -- once heifer retention has begun, that's going to take a cycle as it works its way through before those animals are available for us. You mentioned New World screwworm and the Mexico border currently closed, continues to present another challenge. While not hugely meaningful, it is meaningful and more meaningful to the southern part of the beef cattle processors.

But ultimately, as we work our way through the cycle, and we said that it's likely to be '28 before it gets to the point in which you can see meaningfully back to a sustainable level of a cattle herd into the processing plants. But in the meantime, we're going to continue to run our operations as efficiently as we can. We're going to continue our cost savings programs, just as Devin had illustrated, we're doing in other parts of the business.

But most importantly as well, we're going to continue to meet where the consumer is. So as the consumer continues to seek protein, they continue to seek protein from animal sources and they're looking for fresh and convenient alternatives. And we're meeting that need with not only fresh items but continuing to add season and marinated options and more convenient options for the consumer. That's going to be the difference as we manage our way through '26, '27 and beyond in '28.

Just as a follow-up on that, you said about the investment operational excellence. So as you look at it, and not just fast forward maybe towards the end of the decade, with all these investments, would you expect that on a normal availability level, profit margins are going to be better than the last time excluding the whole COVID spikes and all that kind of stuff, thinking more like 10 years ago and not so much 5 years ago.

Yes. Certainly, we've not shared a normalized range. Certainly, we've got to get through the herd cycle and see where it all settles out that. But we're very optimistic relative to what we've done within our business to control our future. And the cattle cycle will manage its way through, and it will balance over time.

Okay. We're waiting for that. And in the future then as an update. Switching gears back to prepared foods, which has been like kind of like the very strong segment over the last couple of quarters and continue to do very well with, I mean, the outlook close to about $1 billion in operating profit this year.

What is different for Tyson in that business versus some of the peers? Because obviously, we're talking -- listening to a lot of packaged food companies and a lot of them struggle, but you continue to do somewhat better. So what differentiates Tyson Foods here in the Prepared Foods business?

Yes. Listen, certainly, it's a large category with a variety of different companies involved sort of all chasing, if you will, that same consumer. I think what I see in our business and what gives me confidence or some of the things that I've mentioned, one, just the uniqueness of our offerings, both from an innovation standpoint and the ability that we have to give very high protein offerings to people in a convenient fashion.

I think in my career, the things that will never go out of a fashion with regard to consumer preference is it needs to, one, be a great value. That's not necessarily the cheapest price, but the relative pros point to the value of it, it's going to have to be convenient, and it's going to have to taste great. And we never lose sight of those things.

And so when I walk around, which I often do, the storage is to look at what's going on around us and our position in the marketplace. I am really, really confident and happy with what I see because I see so many places that people can interact with our products. I know they're going to be happy with what they get. Whether we're talking about our Jimmy Dean offerings at breakfast. And again, Hillshire during the snacking part of the day, increasingly so or at lunch. And then, of course, the Tyson branded offerings at lunch and then the dinner daypart.

And don't forget too that we have a presence around the perimeter of the store with fresh chicken and also a big presence in the deli. So it would be very difficult, if not impossible, to walk around the store and find something that didn't fit either the price, the offering, the convenience or the daypart that you're looking for, for us. So that's one piece of it.

But then the second piece of this, for me, what is different is just the confidence I have in our operational excellence. It is better than it has ever been. It will continue to get better. We have exceptional people on that business, but they also have -- they have a great strategy in place. It's not happening by accident. And so daily, they are sitting down to talk about where they are either missing or making their marks that they have set out of the strategy and what are they going to do to either improve or to expand upon the places that they're having a positive impact.

And so I see that going on, and it makes me feel very good. But again, if I think about that whole category of products, it's in a place that it hasn't been in quite some time, and I see nothing that will deter the momentum of that business in the future.

Okay. Following up through quick, I mean, obviously, we've seen a lot of like input price pressure from the raw material side within Prepared Foods, so thinking, bellies, trim [indiscernible] Clearly, you have somewhat of an integrated sourcing, you know where it's coming from. How much allows you that knowledge to kind of like anticipate needed price increases? How much have you done? And where do you think you need to kind of like shake out on the pricing side to kind of like offset that input cost pressure?

Yes. So coming out of Q3, certainly the time of the year when we tend to see the hype of those raw material markets, and we're building inventory, that will flow through. And we have a couple of different pricing mechanisms. Certainly, we have formula pricing that tends to have a lag. So you'll see that flow through. And then we have the ability certainly to change price just at the point of sale, and we've done some of that, right?

And I think the thing that I point to you the most is that we have -- we are very cautiously and very consciously watching those price points to make sure that we are staying within the realm of what I would characterize as providing value to that consumer and also within the category to make sure that we are competitive to the set. But yes, those are kind of the 2 mechanisms that we have, and we've taken advantage of both of those.

Okay. And then I remember, Devin, in the past, you kind of like vis-à-vis you were very much in charge of the international business. You didn't get that many questions in the past conference calls but going to focus on very specific international questions now for you.

Clearly, one of these segments -- the segment as well has done better, and we were seeing a lot of growth activity, there's a lot going on, on trade, right? I mean, between China, Brazil and the U.S., Australia, you name it. I mean, there's just a lot of moving pieces.

If you look at the Tyson portfolio, you look at the business of Tyson and the opportunity in international, what do you think of low-hanging fruits? And where would you like to potentially expand on opportunities to kind of keep that business going with the momentum that has been joined?

Yes. So maybe just -- we don't talk a lot about it. We don't get a lot of questions about it. And I guess from my perspective, given the number of hours and the data that it requires, we certainly don't get lot of questions, which is fine. But I'm very proud of that business.

And so really, the journey that we've embarked on over the last, call it, 18 months as we had made tremendous investment. We have amazing assets, every place that we do business around the world, which is, for those that don't know, primarily Southeast Asia, China, we have some sales offices in Europe and Latin America. We have some joint venture partners in South America and the Middle East.

And so we have the assets in place. We now have the leadership team in place. And we certainly have great customer partnerships around the world primarily Foodservice business, primarily a further processing business, but we certainly have a retail presence in certain areas of the world also.

And so I think what we've done over this time frame to get the results that we've seen is not unlike everything else that we've talked about. We took a step back and said, "Okay, where are we really and where do we want to go? What is the strategy that will get us there from a commercial lens? And also what are the opportunities and best practice sharing that we can learn from having done this a very long time in the U.S. and get to a point around the world where we have the same sort of metrics in place, the same sort of culture from an operational excellence and safety perspective that we would expect."

And one, we have made tremendous progress, and two, I would tell you, we have as much progress to make. So I'm very optimistic about the trajectory of that business moving forward. And listen, I don't want to gloss over the fact that the -- those businesses just by their sheer nature, certainly have their headwinds, if you will, right? There's all sorts of geopolitical as well as economic pressure on those businesses.

But that's true for everyone. It's not unique to us. And so what I have confidence in is that, one, we have put a leadership team in place. We support that from the U.S., but they are running these businesses in country by country. So they understand the nuances, they are closer to these conditions as they change, and we have dialogue every day, every morning, every night about what we're going to do about them. And so while those things exist, my confidence lies in the fact that now more than ever, we're in a position to both plan for those things and react to them when necessary.

Okay. Last segment, Pork, you revised that one up. So that was another positive one in the last quarter. Obviously, probably benefits from some of the down trading patterns is just a cheaper alternative to beef. As you look at -- in your specific operations within pork, where do you think you could do better in that business from a profit margin perspective because it feels it's still a little below where it could be. So what are the missing pieces here? What type of investments you're planning on getting that back to what we've seen in the past on a margin profile?

Yes. So I think I'd start with certainly acknowledging, as you said, right? We not only narrowed but raised the midpoint of the guidance. I think it's been performing very well this year, and that really is attributed to the team and their execution. They've done a phenomenal job across 2025, and we expect them to continue that as well.

But to your point, relative to a trade down, right? Certainly, in an environment where beef availability down and likely probably down a little bit as we move forward, based on the USDA data and chicken being up somewhat, right? So it will continue to have a benefit of a rather stable outlook relative to availability. And consumers are continuing to seek value. And to your point, that's another opportunity.

What we have to do, just as I mentioned in beef as well is continue with season and marinated offerings. As Devin talked about, relative to pack type, pack size and attributes that we're giving them is very important for us to continue to accelerate that business. But we're optimistic on the future for it as well and done a very nice job. We've done those operational execution things within the pork business as well.

We did make a decision a while ago that we condensed our footprint, still kept the same throughput, but minimized our overhead associated with one facility, continuing the journey as is expected of us to optimize that footprint. No changes relative to that in the future. But within the operational execution of each of those, they're continuing to operate better and meeting that consumer need.

Okay. To wrap up, just a few things on capital allocation, cash allocation. You just reopened, restarted share repurchase. So how are you going to think of executing that over the course of the next 2 years? And how do you think about buybacks versus dividends versus CapEx and/or M&A just in general, like from a priority standpoint of view?

Yes. It certainly starts with our capital allocation priorities. And as we've consistently said, our net leverage target of at or below 2x. We finished last quarter at 2.1x. So we're almost there, very close, and that gave us an opportunity to you illustrated at the beginning of the question, to reopen small degree, but reopen share repurchases, something we hadn't done since Q1 of '23.

So we had not bought back some of the equity dilution that we normally experience. So we've probably got some of that to catch up since we've been out of the market since Q1 of '23. But certainly also looking at the share price where it was at was an attractive entry point for us. We did increase last year -- or for this year, our dividend, which is the 13th consecutive year of an increase a very important metric for us as well.

And while CapEx is down a little versus historical, meaning the last few years, it's not really down much relative to a longer-term historical. We spent a high watermark near $1.9 billion a couple of years ago and back-to-back years really as we added capacity in the network and spent on new facilities, both domestically and internationally. That's not necessary as we move forward relative to that pace that we were on.

And so I would expect it to be lower relative to certainly those high watermarks, but we're very comfortable with the level of CapEx that we've shared.

And M&A is always going to be opportunistic for us. I think we've shown a very disciplined approach and would expect that to continue to be the case with expecting a high return, high confidence and most importantly, a need to meet consumer -- to meet that consumer need will be important for us in the lens to look at.

Okay. So just to confirm, it's about $1 billion in CapEx, which you would think is like kind of like a normalized level without expansion or?

Yes, that's a very reasonable number, yes.

Perfect. All right. Well, Curt, Devin, thank you very much. We do not have a breakout, but obviously, you have the opportunity to meet the team in group meetings or one-on-ones. And thanks for joining us. Congrats once again on the expanded role and hope to see you next year. Thank you very much.

Thank you.

Good morning, everyone, and welcome to the Tyson Foods Third Quarter 2025 Earnings Conference Call.

[Operator Instructions].

At this time, I'd like to turn the conference over to Sean Cornett, VP, Investor Relations. Sir, please go ahead.

Good morning, and welcome to Tyson Foods Third Quarter Fiscal Year 2025 Earnings Conference Call. On today's call, Tyson's President and Chief Executive Officer, Donnie King; and Chief Financial Officer for Callaway, will provide prepared remarks followed by Q&A.

Additionally, joining us today are Brad Stewart, Group President, Prepared Foods; [indiscernible] and Chief Supply Chain Officer; Kevin Cole, Group President, Poultry and Global Business Unit; and Christina Lambert, Chief Growth Officer. .

We have also provided a supplemental presentation, which may be referenced on today's call and is available on Tyson's Investor Relations website and via the link in our webcast. During today's call, we will make forward-looking statements regarding our expectations for the future. These forward-looking statements made during this call are provided pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, forward-looking statements include all comments reflecting our expectations, assumptions or beliefs about future events or performance that do not relate solely to historical periods.

These forward-looking statements are subject to risks, uncertainties and assumptions, which may cause actual results to differ materially from our current projections. Please refer to our forward-looking statements disclaimer on Slide 2 as well as our SEC filings for additional information concerning risk factors that could cause our actual results to differ materially from our projections. We assume no obligation to update any forward-looking statements.

Please note that references to earnings per share, operating income and operating margin in our remarks are on an adjusted basis for our fiscal periods unless otherwise noted. For reconciliations of these non-GAAP measures to their corresponding GAAP measures, please refer to our earnings press release.

Now I'll turn the call over to Don.

Thanks, Sean, and thank you to those joining us on the call. Let me begin by saying that I'm pleased with our performance this quarter, and we've driven results in line with my expectations. Sales, adjusted operating income and adjusted earnings per share all grew year-over-year. marking our fifth consecutive quarter of year-over-year growth across each of these key metrics.

This was no accident. We're driving efficiencies across all businesses while delivering growth with world-class service and value for our customers and with innovation for our consumers. Our total volume was roughly flat to last year, while Nielsen data shows that we grew retail branded volumes across Prepared Foods and Chicken. We also grew volume and dollar share in aggregate across our top 10 categories, including Tyson-branded frozen chicken, [indiscernible] Farms Snacking and Lunchmeat as well as Jimmy Dean breakfast products.

Growth in profitability versus last year was driven by our Prepared Foods, chicken and pork segments, each delivering double-digit growth in adjusted operating income. The only soft spot in our business is the beef segment, with cattle availability at record lows, we continue to experience industry market headwinds. But even in this difficult environment, we are improving our fundamentals with increased prioritization on efficiencies, reducing costs and bringing innovative new products to market. We are poised to capitalize on tremendous opportunity ahead of us as we believe [indiscernible] retention has likely now begun and cattle availability should improve in coming years. We continue to take meaningful steps forward in building our financial strength with net leverage improving year-over-year and sequentially, a direct result of deliberate actions and disciplined capital allocation. Simply put, our strategy is working, and we are finding ways to win in today's market.

As you know, consumers generally remain cautious and more selective in how they spend. Nielsen data shows food and beverage retail volume remained steady versus last year during the 13 weeks of June. However, protein continues to be the right place to play and be pork and chicken are all clear winners with consumers.

Now let's take a closer look at our branded retail performance in Q3. Volume across these products grew 1.5%, far outpacing total food and beverage. Dollar sales grew 2%. This growth was led primarily by Tyson-branded frozen value-added chicken which saw a 10% increase in volume sales driven by our brand relaunch and strong performance. We are meeting consumers where they are.

And you can see that in new innovations like our Tyson Simple Ingredient nugget, developed for those seeking high protein and simple ingredients with chicken, cheese and seasoning, a great pace without compromise. We also launched fun family-friendly products like Megadyne that are driving engagement and incremental eating occasions. Our volume share increased 130 basis points, and we're growing off a base where we are the market share leader. We're especially pleased with the momentum in our snacking portfolio, where volume grew 20% and share increased 110 basis points, led by strong performance from Hillshire Brand Snacks. Our Jimmy Dean breakfast lines and Hillshire Farm lunch meats also delivered solid volume growth in the 13-week period ending in June. Innovation, distribution gains and efficient marketing and promotional support are strengthening our brands and keeping us competitive in the marketplace. And importantly, as consumers look to the perimeter of the store, we are also offering high-quality fresh options where our Tyson-branded fresh chicken volume grew 2.3%.

As a world-class food company and recognized leader in protein, Tyson Foods is well positioned to meet the robust consumer demand for protein. Now let's walk through segment performance. Prepared Foods delivered a strong third quarter with adjusted operating income up more than 21% and margins expanding by 150 basis points. reflecting continued progress on our multiyear plan to enhance profitability in this business. Importantly, the segment returned to top line growth in the quarter, successfully navigating higher raw material costs and improved product mix within and across channels. Innovation and expanded distribution remain key pillars of our strategy, driving both top and bottom line growth. And as mentioned earlier, our Hillshire Snacking dips and spreads are contributing to volume and share gains at retail. We're also leveraging our brand equity to thoughtfully expand into new spaces.

We're launching new Hillshire Farm handhelds featuring [indiscernible] Cheese, Buffalo, chicken and Philly Cheese all designed to meet growing consumer demand for convenient high-protein options. This marks an exciting step into a new platform for the Hillshire brand and reinforces that we have our most robust innovation pipeline ever as well as our commitment to innovation across the company. Our operational execution initiatives contributed to profit growth and helped offset continued cost pressure from raw material inflation.

We have strengthened our S&OP process and unlocked efficiencies in our plants driving fill rates above 98% in the third quarter, the highest since 2019. This has enabled us to better serve our customers with greater consistency and reliability. These improvements have also helped by ensuring that we have the right product in the right place at the right time. We are working to culturize within Prepared Foods, the operational discipline that's critical in our other businesses. while adding new tools and analytics to eliminate inefficiencies and reduce waste. There's still more work to do, but we are encouraged by the progress and excited about the long runway for growth and profit improvement in Prepared Foods. Chicken delivered another quarter of solid top and bottom line growth, including our third consecutive quarter of year-over-year volume growth.

Value-added volume grew at more than 3.5x the rate of total segment volume, driving a favorable mix shift that is positively impacting both sales and earnings. Adjusted operating income rose more than 12% and building on a very strong base from Q3 last year. With grain costs roughly in line with last year, profit growth this quarter came mainly from incremental efficiencies we've unlocked across our plant network.

We have made significant strides in transforming our chicken business over the past 2 years and haven't taken our eye off the ball in driving operational excellence. In beef, as you know, we continue to navigate the cattle cycle, cattle supply is noticeably tighter than a year ago, which significantly compressed spreads in the quarter despite resilient consumer demand. We are managing this market environment with discipline, controlling what we can across the supply chain to meet customer needs. We're also seeing benefits from the network optimization efforts that shifted further processing volumes back into our harvest facilities.

At the same time, we're enhancing our value-added mix with the help of new data and analytics capabilities that support smarter, faster decision-making. These steps are helping to fortify the foundation for a more resilient and agile beef business, both today and over the long term. In pork, we delivered our strongest third quarter adjusted operating income in 4 years, reflecting the purposeful actions we've taken to improve our operations.

Like Beef, we increased our capacity utilization by optimizing our network and enhancing our value-added mix. We have improved labor and asset efficiency through operational excellence. We have built a fundamentally better pork business, and this quarter's results reflect that progress. In closing, we are executing our strategy, controlling the controllables and finding ways to win in today's market.

With that, I'll turn it over to Kurt to walk through our financial results in more detail.

Thanks, Donnie. Third quarter enterprise sales grew 4% to $13.9 billion, led by beef with solid contributions from Chicken and Prepared Foods reflecting the healthy demand environment for protein. Adjusted operating income was $505 million, up 2.9% driven by strong growth in Chicken, Prepared Foods and pork, all of which helped offset the decline in beef.

Adjusted earnings per share grew 4.6% to $0.91. And as Donnie mentioned, this is the fifth consecutive quarter of year-over-year growth across sales adjusted operating income and adjusted earnings per share. Our multi-protein multichannel portfolio, combined with our team's attention on operational execution and a dynamic macro environment continues to deliver results.

Turning to the third quarter segment performance. In Prepared Foods, sales were up 3.4% versus last year, primarily driven by progress on raw material cost recovery while continuing to enhance our product mix. Adjusted operating income increased 21% and margin improved by 150 basis points versus last year. Benefits from mix as well as continued progress on our operational execution initiatives drove the increase in profitability and more than offset ongoing net raw material cost increases.

In Chicken, we delivered another quarter of solid top line performance with sales up 3.5% year-over-year. Volume contributed 2/3 of the increase, including a notable contribution value-added product sales which also drove a favorable mix reflected in price. Adjusted operating income increased 12% as we continue to drive efficiencies in our plants and capture the benefits of top line growth. As we discussed last quarter, we increased our brand support investment both year-over-year and sequentially to continue growing our value-added product sales.

Sales in beef increased primarily due to a higher average price per pound reflecting ongoing healthy demand. This offset lower harvest volume from an increasingly tight cattle supply. Adjusted operating income declined as spreads compressed noticeably versus last year, driven primarily by higher cattle costs. In pork, sales were roughly flat, excluding the impact of a legal contingency accrual taken in the third quarter last year. Adjusted operating income increased 64% and highlighting the benefits from network optimization and operational efficiencies, leading to the strongest third quarter results since 2021.

Turning to our financial position. Our approach to capital allocation remains disciplined and deliberate. We are focused on maintaining financial strength, investing in the business and returning cash to shareholders. Year-to-date operating cash flow was $1.6 billion, and capital expenditures were $691 million, resulting in free cash flow of $929 million, well ahead of year-to-date dividends which were $524 million.

We ended the quarter with $4 billion in liquidity and net leverage at 2.1x. We have successfully reduced net leverage by nearly a full turn over the past year, with leverage continuing to decline and cash flows remaining strong, we restarted open market share repurchases under our share repurchase program late in the quarter, the first since Q1 of 2023. In fact, we returned $201 million to shareholders through dividends and repurchases this quarter. While dividends remain our primary way of returning cash to shareholders, At current valuation, we believe share repurchases represent a very attractive opportunity. Our balance sheet remains healthy as we prioritize financial strength, our investment-grade credit rating and cash management to drive long-term shareholder value. Now let's take a moment to review our updated outlook for 2025. We are raising our overall guidance based on our year-to-date performance and a solid outlook for the fourth quarter. We now anticipate full year sales to be up 2% to 3% year-over-year.

We are raising the midpoint and narrowing the range for total company adjusted operating income, which we expect to be between $2.1 billion to $2.3 billion, delivering significant growth versus last year across the entire range. We still anticipate expense of approximately $375 million, tax rate of around 25%. We remain disciplined in managing cash with CapEx expected to be at or below and free cash flow in the range of $1 billion to $1.3 billion. Now to provide more color on our segment outlook.

In Prepared Foods, we expect adjusted operating income in the range of $925 million to $1 billion. Our improvement plan is delivering results and offsetting significantly higher raw material costs. We are raising our adjusted operating income guidance for chicken to $1.3 billion to $1.4 billion, highlighting significant year-over-year growth of 33% at the midpoint.

Based on year-to-date performance and the tight cattle supply conditions, we now expect adjusted operating income in beef to be between a loss of $475 million and $375 million. We are tightening the guidance report to the high end of the range, anticipating $175 million to $200 million. Our international business has performed well this year, driven by effectively managing controllable costs, maximizing efficiencies and lowering conversion costs.

We now expect adjusted operating income in International Other to be roughly $125 million. That covers our segment performance and financial highlights. Now I'll turn the call over to Don.

Thanks, Kurt. I'm pleased with what we have accomplished, driven by the dedication of our team and encouraged about our future. Our diverse protein portfolio, commitment to innovation focused on operational excellence and a healthy balance sheet continue to position us as a leader, meeting the growing market demand for protein while delivering value to our customers, consumers and shareholders. Thank you to our team members for all you do and of course, to those on the call for your ongoing support of Tyson Foods.

Now I'll hand things back to Sean as we move to Q&A.

Thanks, Donnie. We will now move forward to your questions. Please recall that our cautions on forward-looking statements and non-GAAP measures apply to both our prepared remarks and the following Q&A.

Operator, please provide the Q&A instruction.

[Operator Instructions] And our first question today comes from Leah Jordan from Goldman Sachs.

Given the lowered AOI guidance for beef in your comments earlier on the call, indicating that hyper retention has begun, seeing if you could provide more detail on how you're thinking about cattle supply and cost for that segment in the near term and as we move through this here building phase.

Thank you, Leah, for the question. I'll start out and make a few comments, and then I'll let Brady add a little color to it as well. But cattle supplies are tightening creating compression spread, as was noted in the remarks earlier. We anticipate that. We think that temper retention has begun. For example, if you look at beef cow slaughter was down 16% from January to June.

And so that's an early indicator of EPR retention beginning. In terms of beyond that, we think herd rebuilding will begin in earnest in 2026, and we think that will through the next couple of years after that. So that's when we will get back. Let's call it 2028 is when we see herd rebuild and seeing the benefit from that and holding back ever for reading purposes. Brady, anything you want to add to that?

Thanks, Donnie. And I would just just indicate that we're confident in our ability to manage through competitively through this challenging economic time. The Beef business continues to manage through this tightened supply with the record high cut-out values as well. Teams really dialed into a strategy where we continue to use data and digital to make the best decisions, understanding the market dynamics that are in place today. We made some pivots to the last several months relative to how we manage our business. We've reduced some of our line speeds to allow us to capitalize on the highest possible yield performance in our plants, and we like that strategy moving forward. And then we'll continue to add value to our products and go to market where we see consumers going in the future, which is convenience and protein. And so by using those strategic pillars, we remain confident that we'll continue to manage through this cycle in a very competitive structure.

That's very helpful. And then for my follow-up, I wanted to switch to prepared foods. You had a nice profit improvement in the quarter, but you did narrow your AOI guidance for that segment and the midpoint is now kind of slightly lower than it was before. Just if you could provide more detail on the input cost pressure you're seeing in that business and how we should think about the flow-through of further pricing from here?

Yes. Let me start with that. we have seen significant increase in raw material. In fact, it's been going on all year. And in fact, we talked about some of the recapturing of the raw material increase as those contracts where there's a lag to the market, we're starting to seeing some of the benefit of that. But we're managing that very well. I think there was roughly $60 million of fund planned raw material increase in the quarter. And the team was able to offset that by really several things. But let's talk about our -- from an operational execution perspective, our Prepared Foods business is performing better than than in my opinion, and I've been around here a long time, and it's ever performed. Just the fundamentals of the business innovation pipeline is extremely robust, and we're being successful with that innovation that we're bringing to market. We think -- and we talked about in the last quarter, I believe, or maybe 2 quarters ago, that we were on a multiyear journey to improve the profitability of our Prepared Foods business. And we're on that road. We had the best Q3 that we never had I think at midpoint, if you look at our 2025, I think it will be the best prepared foods year that we had as a company. And so A lot of good things relative to Prepared Foods. Brady, any adders to that.

I think you covered it really well, Donnie. I would just reiterate what you said. We're extremely excited about Prepared Foods within the quarter with having our best quarter ever. We're really excited about the future as well and the foundation we're setting just relative to maybe adding some context to your question specifically, Leah, I would just assert that at the end of our fiscal Q3 is when typically we will see seasonally high raw material costs. When you think about pork trimmings, beef trim that goes into some of our prepared foods products, hands and bellies is rarely where we peak from a year. So that rolls into our COGS from an inventory build perspective and it certainly is part of how we guide into Q4 as well.

Lee, just to add really quick. I think at the midpoint of what we shared for Prepared Foods, that would indicate a very nice performance in Q4 versus prior year. And as Donnie said on the year, a very attractive improvement on year-over-year for all the reasons that Donnie and Brady both pointed out. .

And our next question today comes from Peter Galbo from Bank of America.

Brady, I wanted to actually touch back on beef. Look, in the context of EPR retention beginning, that's obviously a positive, but it was pretty notable I think the relatively large impairment taken in the quarter on the beef business and potentially that's a pushout relative to prior expectations on recovery. So maybe you can just compare and contrast what you're seeing again in the market today on a tension relative to the elongation of recovery that kind of triggered the impairment on the business.

Sure. Thanks for the question, Peter. First and foremost, I think it's important to understand that this cycle has been different than cycles of the past and has created some dynamics that have been more challenging to forecast as we roll through it.

So obviously, relative to the fact that we had a prolonged drought period at the midst of the beef cycle we have moved into a period that has been more prolonged than the previous cycles over the last several decades as well. Relative to what we're seeing from a data perspective that supports Donnie referenced the beef Cal harvest being down year-over-year significantly as well, which provides stability from a Cal production perspective. The other real data point that we're looking at is feeder cap receipts into feedyards as well and seeing some change in some pivot relative to the amount of hers versus steers that are going into those speed yards as well. So that certainly sets the base for us to move forward and have increased supplies into the future as well, all kick it over to Kirk here to reference the impairment.

Maybe just a couple of other things to think about relative to taking the beef impairment this quarter. We had shared in previous 10-Ks and 10-Qs that are cushion for the fair value exceeding carrying value was less than 10% for that business. And we also detailed in addition to what you talked about in our 10-Q this quarter, we detailed that as cattle costs have continued to rise, that also caused the carrying value of the beef reporting unit to increase as well. And all those were contributing factors in the ultimate recognition of impairment this quarter.

Great. And maybe as a follow-up as well on prepared, and I'm not sure if Kyle is on as well, maybe it would be helpful to hear from him. But 2 questions. One, just the elasticity that you're seeing so far as you put through some of the pricing on some of those items? And maybe secondly, just it's a category that sometimes has odd competitive behavior. So just what are you seeing out of the competitive set across kind of prepared foods and are folks kind of all behaving rationally?

Thanks for the question, Peter. And I would just say this. Number one is our ability to manage through these cost pressures that we see from a raw material, we're highly confident in our ability to do that. We're leveraging our strong brands. We have a fantastic innovation pipeline that continues to deliver for us. everything from Jimmy Dean, Grille Cakes, [indiscernible] Jimmy Dean chicken biscuit, our Hillshire Farm snacking portfolio continues to see significant growth. And then on bacon, we're seeing growth as well. So our ability to manage through, we have an extreme amount of confidence on it.

From an elasticity perspective, we continue to track closely. We have a significant amount of data and great expertise sitting behind our ability to understand how consumers are behaving with any price increases that they certainly see at point of sale. And so no real material changes in '25 so far. We do see consumers continuing to prioritize protein, which we believe is pro Tyson. And protein typically has lower elasticity than other categories within the food space as well. So we'll continue to leverage that multi-protein and multi value-added portfolio and believe it's advantageous as we roll forward.

Our next question comes from Ben Theurer from Barclays.

One quick on the Chicken segment. So clearly, you've called out in the last call that you're doing a couple of investments into the business, and that's why you were initially I would say, hesitant on raising the guidance despite already as of the first 6 months having had a very strong performance. Now looking into what you've been able to accomplish in the third quarter and what the slight guidance for the fourth quarter, it really looks solid here. So just wanted to understand of these investments, are they still coming together as expected? Are you basically able to offset these costs right away. Just if you could share a little bit more thoughts and ideas around the investments and what you expect from them then as we move into 2026.

One. Let me start off, and then I will flip it to Devon, and he can add some finer points to it. But the chicken business is running efficiently and consistently delivering solid growth across the top and bottom line. In terms of the inputs and let's think grain. Grain is relatively stable year-over-year. That's a bit of how we see it going forward. But in terms of the $100 million, we've talked about that investment, and we will wrap up that investment here in the balance of the year in our Q4.

But this business, we're driving operational efficiencies and winning innovation. We talked earlier about the success and the relaunch of the Tyson brand. And we've also talked about the new product on the script that the cheese nugget, the simple ingredients with cheese and chicken and seasoning. That's doing very well for us. But strategic partnerships are critical to us, and that is a decision we have taken, and we're seeing the benefit of that. Now our business is running better than perhaps I've ever seen it run. Certainly would be in the top 1 or 2 kind of performance as I've seen in this business. And I've been around, as you know, many, many years watching this. But our chicken business, let's just say it this way, we are back in the chicken business and executing at a very high level. and we have momentum.

We see that momentum. We saw the momentum in Q3. We're seeing it in Q4, and we think it continues from this point forward. So with that, Devin, do you want to add to...

Yes. Thanks. Maybe just a couple of comments. We are continuing to reinvest in this business, and we will continue to do so. I think we're seeing that we're doing a better job of managing, making sure that, that investment is driving the volume and the sort of returns that we want across the business. Just maybe recap a couple of points that proved that branded chicken did grow. But in total, value-added grew 8.8% for us in the quarter, and that's really across all of our channels and categories. And so going forward, I think you see very similar strategies from us. relative to innovation and how we support that in the marketplace. But maybe I'll just ask Christina to talk a little bit about the innovation pipeline and how we're thinking about that.

Yes. Thanks, Devin. I'm really thrilled with how the Tyson retail value-added poultry business is performing under the Tyson brand. right, that double-digit volume growth is really coming from increased household penetration, which was led by our innovation. We had over 20 new items that we have been launching over the past year. a lot of those coming into marketplace now. So we'll start seeing that expanded distribution and velocity continue our momentum along with the product quality improvements and renovations that we've already made in our products and our packaging, the innovation and the marketing support behind that will help us continue to grow. Really proud of the business.

Perfect. And then one real quick 1 for Kurt, I guess. As we look into over part of the guidance, significantly lowered the CapEx number versus what was previous out there, but at the same time, you're also down the free cash flow guidance. Can you help us reconcile how despite lower CapEx, free cash flow kind of like narrowed at the lower end and also considering you're already at almost $1 billion anyway as the 9 months period. So what are your expectations here for the last quarter? .

Yes. Thanks. So I would start by the run rate that we're on for CapEx is a little under $700 million. That's really on a pace of where we were through the first half of the year. So while we had a range of 1.2%. I think we shared as well with you that we were probably at the lower end of the range from a CapEx perspective. So I would characterize that as not really much of a change in expectations of where we were supposed to be recognizing on a year-to-date basis, we're a little over $900 million in free cash flow, and we narrowed the range from $1 million to $1.3 million. The real delta in that, I think, is the level of working capital investment as we continue to see top line growth as well as some investments in working capital for things such as higher cattle costs running through.

Our next question comes from Heather Jones from Heather Jones Research.

Congratulations on the quarter. I want to start the Beef segment. So in the last couple of quarters, I have noticed a pretty sizable step-up in the amount of cattle that you have hedged? Wondering if I assume that was because your guidance was better than I was expecting given the backdrop. So wondering how much of that is a factor that did you have a significant chunk of your Q4 covered, is this a new strategy? And if this is a new strategy going forward to just consistently have a large portion of your knees hedged on the forward look.

Thanks for the question, Heather. I would just say this, we continue to manage our entire supply chain, whether it be hedging or whether it be live cattle purchases along with forward pricing, export sales and in aligning with our strategic customers in an integrated fashion. Appreciate you giving us the opportunity to talk to it. tariff impacts, both on the export side and the import side, obviously, have a signing amount of timing associated with it. So when [indiscernible] actually are imposed relative to the time that product actually hit shelf. There's a significant delay, especially with supply chain challenges from some of our imports on lean beef coming from the Southern Hemisphere as well. So I'm not sure we've actually seen the opportunity for that to hit retail yet. And then we are in a dynamic market where we've seen significant inflation in interim prices, specifically on farm within beef as well that's creating some changes in the dynamics from that beef complex as well. So we'll continue to monitor that and watch that as timing really hits the point we'll hit really POS.. .

Our next question comes from Alexia Howard from Bernstein.

So two questions. Can I start with the best side of things? And how significant the threat from new world screw one is? I know that the board has been shut down with Mexico, but could this deter farmers from wanting to rebuild the herd. And maybe what happens practically deforming castration can't happen in the region. Does that meaningfully reduce productivity? Is it just infected animals that have to be called? I'm just curious about how you're thinking about what that could mean if it continues to progress [indiscernible]

Sure. And that's a great question, Alexia. And one that we continue to monitor. And first and foremost, I think it's really important to indicate our support of the USDA and the actions that have been taken to protect livestock in the United States from New World crew. So I appreciate all of the efforts and forward-looking thoughts that the USD has taken to protect the U.S. herd impacts to our business in general, I'm referring to the U.S. industry from a beef business perspective, we've had around 500,000 less head imported from Mexico this year so far.

And so there has been a supply impact. It's been caused by the border closure. And I expect some of that tightening to occur basis those feeder cap placement losses here into the quarter as well. From a actual producer decision-making standpoint, we certainly have not heard any decisions that have been made from a U.S. producer standpoint that indicates they're making a decision to retain hoppers or retain cows relative to a threat of New World screwed. I think there is good confidence that the actions that are being taken by the USDA and working with Mexico will curtail any additional Northern movement.

And then as a follow-up, can I move on to the proposed renewable fuel standard that I think is to be voted on at the end of October. It's around biodiesel and sustainable aviation fuel could be fairly meaningful. If that is approved, and it leads to increased coal prices, but fairly a decrease in soybean meal prices. On the chicken side of the business, are you able to significantly shift the mix of feed into soybean meal to take advantage of that over the next couple of years? Or is it a fairly fixed ratio?

It is a fairly fixed ratio in terms of trying to get the cards and the protein in and between corn and soybean mill, there are other it's primarily all that's in the formulation and chicken feed a few vitamins. But it's fairly fixed. I mean, you can have -- depending on where you are, I mean, we've used different different car sources at times. But we're looking at the entire caloric intake and per ton.

And so I don't see any significant change in that. But I would also say, at least based on what we see right now, the grain prices. We think -- we see them as being very steady. We have a potentially really high U.S. corn crop coming in. So the -- all the thought process is around why you might make a substitution I don't think will come into play at this point.

Our next question comes from Pooran Sharma from Stephens, Inc.

And thanks for the question. Just wanted to ask about pork here. noted strong performance. But I just wanted to get a better understanding of the backdrop. I think if you look at the last couple of hogs and Pigs report, a little bit disappointing when it comes to the forward look on supply. Except for the most recent one, I think we've got a little bit of green shoots. And so just wanted to get your thoughts on when you expect to kind of see a supply recovery. I think in the past, we had said that we expected to see something in the back half of the year. But I think this has just gotten shifted out a tad bit I just love to hear your thoughts on pork.

Let me remind you of this. And if you look at our performance in Q3, and it's largely true throughout the year, it's the strong execution that's driving the profitability. In fact, in Q3, you will see based on you'll see some tightening of spreads in there, but we were able to offset that based on operational efficiencies, mix improvement. There were some higher carcass weights and we also had fewer intercompany sales. But from a USDA perspective, for '25, we are projecting 0.9% increase in pork production.

And then for 2026, we're seeing from USDA 1.6% in 2026. So Brad, anything to add to that?

No, I just think we got a question on pork because we're really excited about all of the progress that has been made in that business over the last 2.5 years. I really want to thank the team for all of their work in moving that business forward in a very sustainable manner. Just relative to the supply question, I think there's a few points that are really important. Number one is if you use the Iowa State University profitability model, we've reached a point here where the last 13 months, has been positive. And the expectation basis, some futures implied pricing would indicate the next year is also profitable. And so that really sets the foundation for some expansion. Now the opportunity relative to a headwind for pork expansion just rides simply in the fact that to build additional pork housing in the future for live production housing, there's been some inflationary costs. And so I think the producers are really looking for plenty of sunshine ahead before they make those investments. But continue to feel very comfortable with adequate supply with continued improvements from a genetics and productivity standpoint we see from the industry.

Appreciate the color there. I guess my follow-up was just kind of be on chicken. Obviously, you've made kind of improvement over the past couple of years in the business. As we look ahead, how should investors view kind of what a normalized operating margin should be? Do you think we've reached somewhat near a peak? Or do you think there's a lot of room to go further in terms of operating margin improvement?

So what I would mention to you this morning is that from a and I'll get to it has chicken profitability peak. If you look at the results that we saw in Q3, it was strongly driven from execution with better fill rates, yield improvements, labor management and S&OP process. We had strategic alignments, we've made some conscious decisions to align with strategic customers and partnerships in a more meaningful way than we had in the past. That's been a 2-year process for us.

But our chicken business is running well. execution as well. We have capacity to add, to produce more value-added branded products within our portfolio, and it's setting up very well. I would tell you that the improvements that are made. And let me add that if you look at the supply picture we've had for '25 thus far, I think it is about the right size. I think you have to remember that meat is essential as viewed by the customer and the consumer. So high protein, it's a priority for them.

It's a nutrient-dense option for them, and they're choosing protein more often than they had before. But back to chicken, I don't think we peaked in chicken as a matter of fact, we've had a generally positive operating environment this year. There are things that are cyclical in nature. For example, you see higher-priced breast speed the lower-priced wins. But in the total, they're fine. We're executing and we'll continue to execute against our manufacturing efficiencies, growing our business continue with innovation that our customers and our consumers prefer. We'll continue to grow these strategic partnerships that I talked about. We'll continue to shift our mix to value-added and branded within the poultry complex and have higher value offerings. We're excited about where we are. Our foundation is in good shape as it relates to chicken. And we look at the balance of '25 even into '26 and feel very comfortable with our business and the ability for this business to not only perform through the balance of 25, but even through '26 and beyond.

Our next question comes from Michael Lavery from Piper Sandler.

Just wanted to come back to Prepared Foods. You got a strong price lift or I guess, price mix, maybe it's just a lot more robust than what we're seeing with a lot of other packaged food companies having to give back on price in many cases. Can you just maybe talk to how much is mix driven. And what's behind it? Is it really just the protein demand? Is there just a mix lift that's a big part of that. How do we think about the momentum there? .

Yes, Michael, thanks for the question. Again, we're really excited about our progress in prepared foods. And we laid out a strategy last year relative to how we're going to move forward and make sure that we were focused and executed on our value-added platforms within Prepared Foods as well, which tailors very, very nicely into your question on mix. And so you're exactly right. The price lift is really a combination of a favorable channel mix and is also driven by the strength of our retail business and the strength of the brands that we have within these specific categories in the portfolio as well.

Now compounding on top of that is the fact that we have seen some raw material inflation and we have formulas with a lot of our customers and customer base. And so that certainly flows through from a pricing perspective as well. Last point is we do continue to lag pricing. As I mentioned, we walked out of Q3 with really the highest raw material pricing of the year, but we'll continue to operate the business in a very rational manner and understand where those elasticities are and use data to drive the right decision for the business. but continue to expect to grow both top line and bottom line as well into the future on Prepared Foods.

So maybe a couple of things to add to that, Brady. And I mentioned this earlier that meat is viewed as essential being a nutrient rick option. Consumers are continuing to prioritize protein. And so for example, the way that manifests itself when a consumer goes to a grocery store, they're not looking for the nonessential stuff. They're looking for protein and food, and we happen to offer chicken beef, pork and prepared. So we're we believe protein is the right place to play, and we're certainly doing that. One thing I need to point out as it relates to our Prepared Foods business, I could not be prouder of our Prepared Foods team. They've been on this journey that Brady just referenced, and I referenced earlier today, but they are absolutely performing across every phase of the game from innovation and successful innovation and also in terms of shifting their mix to more valuable products.

You talked about the pricing, well, the benefit from an AOI perspective, yes, there was some price recovery that we had already incurred. But the operational execution across this business, I've not seen that. at this level in our business. And there's so much more that we can go do and are going to do in this multiyear journey. So a lot of upside to Prepared Foods, not only for the balance of the year, but as we continue to move further.

Our next question comes from Sumayya Jain from UBS.

So your leverage continues to drop now at around 2.1%. Could you elaborate on how we should expect to see that going forward, should we expect more excess cash going to shareholders? Or how is management thinking about capital allocation going ahead?

Thanks for the question. I think you should continue to expect us to follow our capital allocation priorities. I think a significant. Just call out, right, the significant improvement we made from where we were not only a year ago, but 2 years ago, as leverage had peaked at 4.1x. And so tremendous execution by the team, absolutely disciplined in following our capital allocation priorities, and they would remain unchanged.

We'll look to continue to maintain our financial strength, invest in the business and return cash to shareholders. I would note as I made a comment earlier at the opening that we did start restart our share repurchase program, although at a very small pace. The first time we restarted that since Q1 of '23.

Got it. And then international margins continue to be strong. What are the key factors driving that? And do you see those drivers continuing over the rest of the year? Or what are the key risks of that segment in the near term?

Yes, this is Devin. Thank you for that question. I would just mention at the very onset that much of the strategy that we've talked about in other parts of our business domestically, we have employed with our international business over the last year or so. And I think the results that you're seeing are certainly from things that we control primarily. So operational excellence has been one of the key tenets for us. We've got very specific initiatives that have achieved better efficiency, lowered our conversion cost.

And also, we're actively managing the controllable costs within that business Certainly, it's a dynamic situation, both geopolitically and some of the economies that we operate in around the globe. But that team is working very well together. We expect to have a very good year and quite frankly, all of the things that we put in place and the momentum that we're seeing should translate into going into FY '26 as well.

[Operator Instructions] Our next question comes from Andrew Strelzik from BMO.

I wanted to go back to the beef side to start now that we are seeing the start of the hypertension and maybe have a time line to think about on profit recovery. Can you talk about your expectations for the magnitude of the herd recovery or maybe compare what your expectations are for this herd recovery versus prior cycles? And how does that inform your view of the beef profit potential in 2028 and beyond?

Thanks for the question, Andrew. I think you probably probably highlighted when we really see that turnaround into the future as well. And so it's been challenging to really get a forecasted read here as we've moved through the last 2 years just because what we've seen from a supply perspective has not necessarily managed what we've seen from a demand perspective on the packer side as well.

So we've moved into more of a prolonged period of time. The good part is, as we move forward, we definitely have a tailwind relative to drought that we probably haven't focused enough on relative to some of the commentary as well. And so that has certainly provided a great opportunity for us to get some rebuild momentum across the industry as well. Outside of that, again, it's been a very dynamic environment. we're seeing historic highs relative to beef and beef demand.

The consumer has been extremely resilient in their demand for beef and how we rationalize the entire supply chain of beef from feeding and cal production into feeding into packers. We'll continue to monitor that as we move through the next couple of years as well.

So maybe I guess what I'm -- sure, go ahead.

Yes. I just want to add one comment on the -- and just to call out to our Beef team is -- this has been very challenging, as you well know. And we talk about this in terms of controlling what we can, and we've done that. I would tell you that our beef assets are running better than they ever have before. And that's not just my assessment. That's the assessment from the people who are in our organization who've been in our Beef business for a long time.

In fact, they removed over $100 million of controllable costs out of our beef segment this year. And so we're obviously very proud of that. We're trying to do what we can, what we have right now. And we look forward to herd rebuild and to a better day in our Beef business. I guess what I'm trying to get at there, and I appreciate those comments very much. But is there anything that you're seeing that would lead you to believe your normalized or mid-cycle or what have you, be profits are different in this cycle than in prior cycles?

I'd just say that we continue to analyze where we walk out of the cycle and gauge where we'll end up from a mid-cycle profitability perspective. So if you looked at the last 60 cycles inclusive of this current cycle, there are some differences in it. Again, the prolonged drought that we saw right at the bottom of the cycle, created this elongated bottom of the cycle, and that has created some challenges just relative to forecasting a very dynamic environment relative to the supply of cattle.

Traditionally, we've seen more changes or pivots from a demand perspective than we have the cycle as well. So those 2 pieces will come together and really shape where we end up as we move into the midpoint in the years to come.

Got it. Okay. If I could just squeeze 1 other quick one. In the past couple of quarters, I think you've quantified the efficiencies that you've gotten in Prepared Foods. So I was hoping you could maybe give us an update there. And then maybe if we could think about the size or you could help us think about the size of some of the incremental efficiencies you're talking about in chicken, that would be helpful as well.

Thanks for the question. Just relatively prepared, Donnie did a great job earlier of framing up all of the advancements we've made from a prepared operations perspective. And there are certainly a number of dynamics that go into these calculations, raw material increase, packaging ingredient increases as well. labor inflation, how you monetize that with and without these particular inflationary factors. Here's what I'll tell you today is there's a sustained process with audits in place to make sure that the advancements we're making from a manufacturing efficiency perspective in Prepared Foods, is here to stay, and we're seeing those advancements really hit the bottom line significantly from a prepared food standpoint.

Yes. And Andrew, let me add this. If you think about this one of best say this applies to chicken, beef, pork and our international business. And every function in activity we had at Tyson Foods, we are focused on operational excellence what does that mean is scaling the enterprise, leveraging all the assets and capability of this multi-protein hemo that we have, driving cost savings across the enterprise addressing inefficiencies and eliminating that where they exist, but also being aligned with customers and in terms of those relationships and what we've characterized as partnerships. And we've got more of that today than we've ever had. And then from a consumer perspective, just the constant innovation, and we've got the robust pipeline we've ever had. And then you can layer underneath all of that or on top of all that, things like data and digital delivery. Our tools are such today that we're able to make better, smarter decisions across this enterprise. And of course, the disciplined capital allocation and prioritizing cash flow, which has made up the CapEx and working capital specifically. So that discipline we have exercised across this entire enterprise. And so I'll just leave you with that. .

And ladies and gentlemen, with that, we'll be concluding today's question-and-answer session. I'd like to turn the floor back over to Donnie King for any closing remarks. .

Thank you for your time and continued interest in Tyson Foods. We look forward to sharing our progress with you next quarter. .

And ladies and gentlemen, that will conclude today's conference call and presentation. We do thank you for attending. You may now disconnect your lines.