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Tyson Foods Q3 Conference Call Highlights

Shazir Mucklai

Tyson Foods (NYSE: TSN) reported its third quarter earnings on Monday. Shares of the company are up 3.6 percent.

Below are some key highlights and takeaways from its conference call:

• We had a record third quarter with an adjusted $0.75 a share.

Hillshire Acquisition:

• Will be more about $225 million in fiscal 2015 and should exceed $500 million by the end of year three.
• We expect the acquisition to be accretive in fiscal 2015 and substantially accretive thereafter as we generate synergies.
• We plan to continue delivering on our 10 percent EPS growth target in 2015.
• We want to use our strong cash flows to deliver the balance sheet quickly.

Individual Segments:

• The chicken segment has a 6.9 percent return on sales in Q3.
• Pricing was down 1 percent due to the untimely and unfortunate events.
• In February of this year, we experienced a fire at one of our fully-cooked processing plants.
• The mechanical repairs are now complete and the plant is back to producing normal volumes.
• Additionally, in Q3, a segment sizable fully-cooked processing plant experienced a series of operational issues.
• New equipment has been ordered and is being installed.
• These temporary disruptions and the resulting actions we took with customers have and will cost us between 1.5 percent and 2 percent return on sales in Q3 and Q4.
• In FY 2015, we'll be back to our full productive capability and we'll have additional fully cooked capacity coming on line in the spring.
• Chicken segment is expected to fully recover and deliver a 10 percent return on sales in 2015.
• Beef segment which had a 2.4 percent return on sales.
• Prepared Foods segment negative return on sales of 5.5 percent.

• Believe we'll still generate an adjusted EPS of at least $2.78 a share in FY 2014, which is more than a 20 percent growth over last year.
• FY 2015 is setting up to be another record year for sales, operating income and EPS.
• Prepared Food margins should be much stronger as we round up sound legacy business and integrate Hillshire.
• We're excited about the synergy prospect as we execute our prepared food strategy and anticipate more than $225 million in synergies in 2015 and $500 million.
• Our top line revenue growth was 11 percent over Q3 a year ago and quarterly sales again surpassed the $9 billion mark.
• Our adjusted earnings of $0.75 per share is a record for our third quarter and represents a 9 percent increase over adjusted EPS of $0.69 in Q3 of 2013.
• We spent $144 million on capital expenditures for the third quarter and $437 million for the first nine months of fiscal 2014.
• Our effective tax rate in Q3 was 16.8 percent.
• The adjusted effective tax rate should be around 34.5 percent for fiscal 2014 and is expected to be around 36 percent for fiscal 2015.

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