Good morning, everyone, and welcome to the Tyson Foods Third Quarter 2022 Earnings Conference Call. All participants will be in a listen-only mode. Please note, today’s event is being recorded. At this time, I’d like to turn the floor over to Brandon Tucker, Senior Manager. Sir, please go ahead.

Hello, and welcome to the third quarter fiscal 2022 earnings conference call for Tyson Foods. Prepared remarks today will be provided by Donnie King, President and Chief Executive Officer; and Stewart Glendinning, EVP and Chief Financial Officer. Additionally, Shane Miller, Group President, Fresh Meats; Noelle O’Mara, Group President, Prepared Foods; David Bray, Group President, Poultry; and Chris Langholz, Group President, International, will join the live Q&A session. We have prepared presentation slides to supplement our comments, which are available on the Investor Relations section of the Tyson website and through the link to our webcast. During this call, we will make forward-looking statements regarding our expectations for the future. These 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. Please note the references to earnings per share, operating income and operating margin in our remarks are on an adjusted basis unless otherwise noted. For reconciliations of these non-GAAP measures to their corresponding GAAP measures, please refer to our earnings press release. I will now turn the call over to Donnie.

Thank you, Brandon, and thank you to everyone for joining us for the call. Earlier today, we reported solid third quarter and year-to-date results. We continue to navigate through a complex and dynamic operating environment, and I’m grateful for the hard work and dedication of our team members. Our results would not have been possible without them. At our Investor Day last year, we shared three priorities with you: winning with team members, winning with customers and consumers, and winning with execution. And I’m pleased to say that we’re making progress. For team members, our continuing investments are reducing turnover and improving staffing levels. For customers, our service levels are improving. Our execution is getting stronger, driving substantial savings and improving business results. I’m confident we’re on the right track and recognize that there is more work to do. Let me cover some highlights from the quarter. Our multi-protein portfolio enabled our business results. In the third quarter versus last year, we delivered substantially improved earnings in our Chicken segment as well as higher earnings in Prepared Foods, which partially offset a decline in Beef and Pork earnings, and we continue to accelerate our productivity actions to improve efficiency across all segments. With our iconic retail brands, Tyson, Jimmy Dean, Hillshire Farm and Ball Park, Tyson core business lines outpaced total food and beverage, up 13% in the last 13 weeks compared to pre-pandemic levels. We continue to be the market share leader in the majority of the retail core categories in which we compete. While gaining share in both bacon and breakfast sausage in 6 of the 9 core business lines, we grew share versus our second quarter. I was also pleased to see continued growth in our e-commerce channel, where approximately 1 in 5 U.S. households bought a Tyson product during the past quarter with e-commerce sales growing 15% versus last year. We’re seeing some recovery in the foodservice channel with continued gains in quarterly sales. In broadline distribution, we have seen specific strength in branded value-added chicken, breakfast sausage, and bacon. In this challenging economic environment, where our cost of goods has continued to increase, consumer demand for protein remains relatively steady. Our diverse portfolio allows us to meet customer and consumer needs across a broad range of products and price points even as consumers shift between proteins and products. Our balance sheet grew stronger, providing optionality to invest in growth across our portfolio and return cash to shareholders. We have a disciplined approach to deploying capital with a focus on total shareholder return. Our year-to-date results clearly demonstrate that our diverse portfolio supports our growth objectives, growing faster than the overall market, improving operating margins, and driving strong returns for our shareholders. Now for highlights from our financial performance. Sales improved 8% for the third quarter and 16% year-to-date compared to the prior period. Our sales gains were largely driven by higher average sales price in Chicken and Prepared Foods. Average sales price increased in these segments in response to persistent increases in the cost of goods. Prices were lower in Beef, in line with expectations, and Pork segment versus the same quarter last year. We delivered solid operating income of nearly $1 billion because of our diversified portfolio. Year-to-date, we are up 15% over the prior year. As expected, year-over-year third quarter earnings were lower as Beef margins declined relative to a year ago, but still performed well in comparison to historical results. Overall, earnings per share came in at $1.94 for the third quarter and $7.10 year-to-date. We remain confident our actions will improve our long-term volume performance. However, our total volume was down both for the quarter and year-to-date. We are focused on overcoming the supply chain challenges, running our plants full, and reducing our costs. Chicken volume is up year-to-date, driven by demand and operational improvements, but down for the quarter. Lower quarterly volumes were driven by the fiscal year ‘21 fire at our rendering plant in Hanceville, Alabama, as well as lower outside purchases of meat, chicks, and eggs. This was partially offset by increased levels of internal harvest versus the same quarter last year, and we expect internal growth to continue as we ramp up our bird supply. For the full year, we expect Chicken to deliver 1% to 2% volume growth. In Prepared Foods, volumes are down 5.5% year-to-date due to supply chain challenges, uneven food service recovery, and the impact of increased pricing. Note also that the divestiture of our pet treats business last year drives 1.2% of the total decline. Although retail volume is down, we maintained our market leadership positions. While the foodservice channel continues to recover, volume growth remains strong in the broadline distribution led by breakfast sausage and bacon. In Beef, volumes were down year-to-date but were up 1.3% versus the same quarter last year, and we continued to increase quarter-over-quarter due to higher head throughput and carcass weight. In Pork, volumes were down year-to-date by 2.1% because of limited hog supply and lower export demand. We expect tightness in live hog inventories and declining export demand to continue to impact volumes in the fourth quarter. In the International/Other segment, volumes are up 11.7% year-to-date and 21.9% versus the same quarter last year. Investments in capacity, innovation, and brands are supporting our market share growth. Volume growth was driven by our strengthening QSR and retail performance. Overall, our International business is growing both organically and inorganically. During Q4, we signed a joint venture agreement with Tanmiah Food Company in Saudi Arabia. This partnership will enable us to better serve our large global customers as well as expand our reach to new customers in the Middle East. We’re investing in new plants and expanding existing capacity across our global network. Eight plants are being constructed, with two expected to begin operation this fiscal year and six more by the end of fiscal year ‘23. This additional capacity will enable our team to address capacity constraints, accelerate our value-added growth, and better serve growing consumer demand for protein. We continue to make significant investments to attract and retain team members, including childcare, citizenship support, transportation, free technical and college education, on-site health clinics, maternity and paternity leave, and other health benefits. Our nearside health centers in rural communities are seeing increased usage. These clinics provide team members, spouses, and dependents, comprehensive health care services at little to no cost. Investment in team members are making an impact as higher pay and enhanced benefit offerings have led to lower turnover and absenteeism in our plants, which positions Tyson for future growth. We are committed to creating a differentiated work experience for our team members. These investments we’re making in our people are part of our broader effort to evolve our business from an ESG standpoint. Over the past several years, we have made many investments to these ends. Today, we are focused on three core pillars of our ESG framework, the formula to feed the future. Those three pillars are reimagining people and community impact, driving product responsibility from farm to table, and working toward achieving net zero. Earlier this quarter, we released our sustainability report for 2021, which highlights our ambition and commitments to become the world’s most sustainable and transparent protein company. In addition to the investments in people I mentioned a few moments ago, we also highlighted in our report our efforts around animal welfare, sustainable packaging, minimizing waste, water stewardship, and working within our operations and supply chain to reduce emissions. We’re setting aggressive ESG goals and working to meet them. As we run our business better, we are making process improvements, digitalizing the supply chain, increasing automation, and aggressively managing SG&A across our operations. Our productivity program continues to deliver at the upper range of our initial projections, and we’ll realize more than $1 billion in recurring productivity savings by the end of fiscal year 2024. We’re continuing to accelerate digitalization across Tyson through supply chain planning and executional processes to better serve our customers. Automation remains a top priority for our business, and I’m very pleased with the aggressive rollout of automation technologies. And given the macroeconomic environment, we are taking action to cut cost, reduce spend, and reassess every role across the business to ensure that the work we do is value-added for our customers and consumers. Finally, as we look for new and innovative ideas that can have the greatest impact on Tyson’s productivity and sustainability objectives, we held the first-ever Tyson Demo Day. More than 100 companies were considered as presenters for the Demo Day; 20 were selected to make their pitch, and ultimately, six companies were chosen for partnership. We are committed to strengthening our position as a global protein leader and driving value creation for our shareholders. At our Investor Day, we outlined five imperatives for strengthening our position as a global protein leader. I’ve spoken about transforming our team member experience, increasing capacity, investing in digital and automation, and the strength of our balance sheet. Chicken remains a key focus for our long-term success, and we are executing against our roadmap to restore top quartile performance for this segment. This quarter, we surpassed a 6% adjusted operating margin. We expect to reach 40 million head per week by the end of this fiscal year, and to continue to grow after that, enabling us to maximize our fixed cost leverage and grow our value-added business. We are optimizing our plant network by adding fully cooked capacity, converting plants for value-added production, implementing plant flexibility, and optimizing our portfolio mix. We have come a long way and have more work to do, but I’m pleased with the progress that we are making in Chicken. As we look to address projected demand growth over the next decade, we’re using our financial strength to invest in our business. We will have invested nearly $1.9 billion in fiscal year ‘22 focused primarily on new capacity and automation objectives. Year-to-date, we returned to shareholders approximately $1.2 billion in dividends and share repurchases as we continue to prioritize shareholder return. I will now turn the call over to Stewart to walk us through more detail on our financial results for the third quarter.

Thank you, Donnie. Let me turn first to a summary of our total company financial performance. We’re pleased to report solid results in the third quarter and year-to-date. Sales were up for both the third quarter and year-to-date, benefiting from our pricing initiatives to offset the increase in cost of goods. Volumes were down both for the third quarter and year-to-date due to supply constraints and a challenging macroeconomic environment impacting consumer demand. Looking at our sales results by channel. Retail drove $173 million of top line improvement in the third quarter relative to the same quarter last year. In the third quarter, the ongoing recovery in the foodservice channel drove an increase of $165 million. Sales to international markets, including both domestically and internationally produced products, were $339 million greater than the prior year period as we leveraged our global scale to grow our business. Donnie covered our earnings and EPS results. Slide 11 bridges operating income for the third quarter, which was $374 million lower than fiscal 2021. Volumes were down 1.9% in the quarter. Our pricing actions, which partially offset the higher input costs, led to higher sales during the quarter. We saw continued increases in cost of goods across the business, in some instances, up to 15%. Notable examples were labor, feed ingredients, live animals, and freight costs. SG&A was $20 million unfavorable to the same period last year due to increased investment in advertising and promotional spend and technology-related costs, partially offset by lower commission costs incurred by selling direct to customers rather than via brokers. As Donnie said, we are assessing all of our SG&A expenses across the business to identify non-value-added spend. Savings from our productivity program initiatives continue to have a positive impact on margins. Moving to the Beef segment. Sales were approximately $5 billion for the third quarter, flat versus the same period last year, but up 15% year-to-date at nearly $15 billion. Sales in the quarter remained strong, supported by higher volume but offset by lower average sales prices driven by softer consumer demand for premium cuts of beef. Global consumer demand for beef products remains strong, and we expect volume to continue to improve in the fourth quarter as improved labor participation supports higher plant productivity. On expenses, we incurred greater costs during the third quarter versus the comparable prior year period as live cattle costs increased approximately $480 million in the quarter. We had sufficient livestock available in the quarter driven by higher herd liquidation due to drought conditions. We delivered segment operating income of $506 million in the quarter, down 55% versus the prior year comparable period. Our operating margin of 10.2% was lower than the same quarter last year but remains a strong performance. We expect to see Beef margins return closer to an expected long-term 5% to 7% average. Looking next to the Pork segment. Sales were approximately $1.6 billion for the quarter, down 6% versus the same period last year, but up 4% year-to-date at $4.8 billion. Global demand is being impacted domestically by high retail prices and internationally by the strong dollar, making U.S. pork relatively expensive as compared to alternative sources globally. For the quarter, the average sales price decreased 3.9%. Segment operating income was $25 million and $248 million for the quarter and year-to-date, respectively. While down 63% versus the comparable prior year quarter, operating income is down less than 1% year-to-date. Overall operating margins for the segment declined to 1.5% for the quarter. The operating income deterioration was driven by compressed pork margins with rising hog costs and a constrained cutout. Moving now to Prepared Foods. Sales were approximately $2.4 billion for the quarter, up 5% relative to the same period last year and up 9% year-to-date at $7.2 billion. Sales increased despite a volume decline driven by higher average sales prices. Note, part of the volume decline in the quarter was driven by the sale of our pet treats business. Our brand strength and category relevance have enabled continued strong performance across multiple categories. Operating margin for the segment was 7.6% or $186 million for the quarter, up versus last year. Year-to-date, operating margin is 8.9% and flat compared to the prior year at $635 million. Cost of goods continues to increase, pressuring our cost of production. To offset higher costs, we’ve executed productivity initiatives, revenue management, and optimized our spend. To support our growth aspirations, we continue to invest in marketing and trade to increase the market share of our brands. Moving into the Chicken segment’s results. Sales were $4.4 billion for the quarter, up 26%. Year-to-date, sales are up 25% at $12.3 billion. Average sales price increased in the quarter compared to the same period last year. Our shift in pricing mechanisms to more variable structures has reduced risk by allowing us to be more agile in response to increasing cost of goods. Chicken delivered adjusted operating income of $269 million in the third quarter representing an operating margin of 6.2%. Quarterly operating income increased over the same quarter last year due to higher average sales price and efficiency improvements, partially offset by increased cost of goods. For the third quarter, we experienced $145 million in higher feed ingredient costs versus the prior year, and we recognized $23 million in net derivative losses compared to $56 million of net derivative gains in the prior year. Turning to slide 16. Our healthy cash flows and improved balance sheet have continued to support our disciplined capital allocation approach. We remain focused on building financial strength, investing in our team members and business, and returning cash to shareholders. We produced $1.9 billion of operating cash flow so far during fiscal year ‘22, and that’s after funding a $1.9 billion increase in our working capital. Our leverage ratio at 1.2x net debt to adjusted EBITDA demonstrates our powerful balance sheet and our continued capital allocation optionality. Investing in our business for both organic and inorganic growth and operational efficiency will continue to be an important priority and will help Tyson increase production capacity, market capabilities, and profitability. This will support return on capital generation above the market for our shareholders. Finally, we remain committed to returning cash to shareholders through both dividends and share buybacks. Year-to-date, we’ve returned $491 million in dividends and repurchased $693 million of shares, including $170 million of shares during the third quarter. Let’s now discuss the financial outlook for the remainder of the fiscal year. Based on the strong results year-to-date, we’re maintaining our total company sales guidance at a range of $52 billion to $54 billion. We now expect total volume growth to be flat on a year-over-year basis. Looking at AOI margin target ranges for our segments. In Chicken, our operational turnaround is on track, and we expect full year margins to be between 5% and 7%, but at the lower end. Based on the current trends in retail and foodservice, we expect the full year margin in Prepared Foods to be at the lower end of the 8% to 10% range. In Beef, we expect margins to move toward our expected 5% to 7% range as the live cattle to cutout price spread continues to decline. However, we still expect to deliver a full year AOI margin of 11% to 13%. In Pork, due to margin compression from hog costs and global demand headwinds, we’re reducing our full year AOI margin outlook to be in the range of 3% to 5%. In International/Other, we anticipate slightly lower results from our foreign operations in fiscal ‘22 due to supply chain disruptions and other impacts related to COVID-19. Our expectations for CapEx and net interest expense are lowered to $1.9 billion and $350 million, respectively. Our tax rate expectation is lowered from approximately 23% to approximately 22.5%. Our net leverage is expected to remain well below 2 times net debt to adjusted EBITDA, providing optionality for inorganic investment and additional return of cash to shareholders for the remainder of the year.

I will now turn the call back over to Brandon for Q&A instructions.

We will now move on 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.

Yes. The first one I wanted to understand a little bit your commentary around the Chicken segment and obviously, on one side, improvements you have within your operations, but then at the same time, there seems to be a few headwinds arising on the industry side. So, help us frame a little bit into the final quarter, but also maybe bridging into next year, how you think about the Chicken segment? And what’s your competitive advantage on the pricing side and how you think your investments into labor, better hedgeability as well as better pricing is going to basically bring you to that 5% to 7% range, which you’re almost there already on a year-to-date basis, but how should we think about next year? Thank you.

Thank you, Ben, for your question. The turnaround we discussed over the past year is still in progress. I'm happy with the advancements we've made, as I mentioned earlier. We still have challenges ahead; there are ongoing issues with grain volatility, supply, and demand. However, the demand for chicken remains very strong, particularly for ready-to-eat chicken, and we are currently operating at full capacity in that area. We are also making investments with a new asset set to come online early next year, which will certainly help. The business has seen growth, despite some disruptions this quarter related to the Hanceville fire in the fourth quarter of 2021 that we are addressing. It's important to note that our harvest rates are improving, and we expect to see around $40 million in the fourth quarter, with further growth anticipated. I will now hand it over to David Bray, who can provide additional insights.

Yes. Good morning, Ben, and just a little bit of additional color to that. And I think it’s important to note that we’re doing what we said we would do in chicken. We are progressing, but we are far from finished. And we know where our opportunities exist. A large part of that will be uncovered as we can see that our volume grow through the Q4 timeframe. The ability for us to process more head through our facilities will help us from a cost standpoint, which will benefit us as we continue to progress through FY ‘23. As Donnie stated, we are seeing share gains, our harvest is up, and we will continue to grow share through the Q4 timeframe and into FY ‘23 as well.

I have a technical question for Stewart. On a year-to-date basis, we are still seeing a decline in consolidated volume. Is the flat guidance primarily due to the easier comparisons in Q4 for Prepared Foods, since the divestiture occurred last year during that quarter, which was where the volume impact happened? Is that the correct way to understand it?

Well, I would just say, Ben, I mean, there’s probably a few more moving parts than that. Of course, you’re looking at all parts of the business to get to flat. But of course, you’re right. I mean, the divestiture is one of those things.

So first question is around the Prepared Foods elasticity. I’m wondering if you can talk about which categories were particularly affected this time and whether you expect those trends to continue. I’m wondering where the competitive pricing dynamics are causing some pressure there. Let’s start there.

Okay. I’ll start, and then I will flip it over to Noelle to add some details. But I would start with that we are seeing some movements in the marketplace between foodservice to retail. In-home dining continues to increase in this environment, which we suspected. We’re also seeing some movement from quick service chain account type business to more in on-premise dining as COVID wanes, and people are more adventurous that they get out. And so, we’re seeing some improvement in that as well. But I would tell you overall, we are starting to see some elasticity, but I would tell you they’re below what historical elasticity you would expect. Noelle, anything you’d like to add to that?

Sure. Thanks for the question, Alexia. As I look at our prepared performance holistically, top line remains strong behind disciplined revenue management actions, and profit is above prior year’s. Pricing and productivity are partially offset by cost of goods increases. And as referenced, our prepared volumes on an organic basis are down about 5.5% year-to-date. It's really three key focus areas. The first is supply. We continue to not be able to fill all of the orders that we have across our portfolio. As capacity continues to come online and as we improve our supply capabilities, it will allow us to not only improve availability but also merchandising that’s been suppressed. So, you’ll see as those improvements continue to take shape in Q4, us investing back in merchandising. The second area is really around pricing. As Donnie referenced, while elasticity is better than historical lows, they are still impacting the business. And given the macroeconomic environment, we’re ensuring that we provide a breadth of value offerings across our portfolio, and you’ll see us launching items focused on optimum price points, as well as larger sizes that can provide consumers value. And then, the third area is really foodservice recovery. We’re focused on not only getting back volume that we lost during the pandemic but also driving portfolio offerings in many solutions that align to operator and consumer needs. So, what I feel good about is we have categories that continue to outpace total food and beverage. We have a portfolio of leading brands and a focus on continuing to innovate and meet our consumer and customer needs in an obviously very dynamic environment. Despite the continued market challenges, I’m expecting volume growth in the coming quarter driven by improved supply, commercial investments in merchandising and innovation, and continued food service recovery.

A quick follow-up. Sticking with that part of the business. Private label dynamics, it seems as though need is being particularly affected by private label. I know you make private label presumably, it may be lower margin for you. Just wondering what you’re seeing in that area as that much occurs?

As we look at private label performance, we don’t see any acceleration as we look at the past couple of periods. Where we do see share pressure in our portfolio, we also see the availability of merchandising lagging versus prior year. So, that’s why going back to our focus is on supply; our focus is on driving that volume so we can get back to availability levels as well as merchandising performance in the quarters ahead.

I had two on beef and cattle. First, do you have any additional color on when you expect maybe the turn in the cycle, right, from the point of, we’re still in the liquidation phase to maybe that ending and heading toward a little more of a shortage than what’s ideal for you? Any more insights into how we should think about modeling that from a timing perspective?

We still are maintaining our guidance for the segment to 11% to 13% for the full year. I think our number was 10.2%. The cost increases we’re seeing on cattle are certainly impacting the spread. We’ve been talking now for a number of periods about the fact that there were going to be fewer cattle. I think we’re current now from the cattle that we’re involved in the backlog of COVID. We’re current on that. The prices of those animals have continued to increase. And so, there’s drought and all those kind of conversations. But let me flip it over to Shane, and I’ll let him give you some color around beef.

Yes. Ken, good morning, and thanks for the question. Yes. So, to Donnie’s point earlier, we, as an industry, have moved through the backlog of the COVID impact and the harvest disruptions from COVID. We are still experiencing drought, and I’d say the drought impact is still impacting over 40% of the regions where we grow cattle out in this country. So, the drought is real, and it’s still having an impact today. I think getting precise and specific on the timing of when it’s going to flip is awfully difficult to do because we’re dealing with mother nature right now. But I would say, if you look at beef demand in general, we continue to see real robust demand, not just in the United States, but globally. So, we feel real good from a demand perspective. The quality of beef that we’re still bringing to the marketplace is historically strong. Grading continues to maintain a high level. So, from a demand perspective and quality perspective, we feel good about this. But as to getting precise on the timing of when that’s going to flip, I think that’s awfully difficult to do.

If you’re not sure, then I doubt anyone else does either. However, I have a quick follow-up. In the prepared remarks, you provided some additional information on the ranges expected for the Chicken segment margin and Prepared Foods margin. The range in beef still seems quite broad. Perhaps you left it that way intentionally due to the uncertainty. It would be helpful if you could provide some guidance on how to approach that margin for the year, especially as we near the end of the year in that segment.

Yes. I’ll just reiterate what I said before, Ken, is, for the full year, 11% to 13%, we’ll see this move to, let’s call it, 6% to 8% as we’re in Q4, the latter part of Q4. And then over time, let’s talk ‘23, we’ve been saying for a couple of quarters now that we see that being a 5% to 7%, which is lower than where we’ve been over the last couple of years, but versus the historical level, what we would be seeing there is very much in line with what we’ve built into our modeling and what we would anticipate.

My first question is about Prepared Foods. I believe you mentioned that you expect the growth to be at the low end of the 8% to 10% range for the full fiscal year, which implies something below 8% for the fourth quarter. I want to clarify my understanding of the key factors affecting the margins there. I would have expected you to be in a better position regarding price and costs at this point, considering some recent pricing actions in the market. Additionally, regarding the foodservice segment, particularly those that came from the AdvancePierre acquisition, could you share how they are performing right now? It seems that the retail brands according to Nielsen are doing well and likely have better margins than the segment average. I'm interested in understanding how the foodservice segments are performing margin-wise and whether there are significant changes needed for that part of the business.

Well, I’ll just pick up the margin point quickly, and then Noelle can expand on some of the other pieces. But just look from a margin perspective, as I said, we are going to come in at the low end of the range. That gives you a little bit of flex. Certainly, that means that we would just mathematically be in the high 7s or low 8 for Q4.

Just to build on Stewart’s comment. So, when you look at industry forecasts, we do show a slowdown in ‘22. However, the industry is still expected to rebound by 2025. And this uneven recovery is due to two things: the macroeconomic landscape as well as mix shifting between channels. So, we see that, as Donnie referenced, with improved consumer mobility and comfort eating out, we see an increase in on-premise dining and a slowdown in some of the quick service restaurants that had originally led through the recovery. We’ve specifically seen some slowdown in our tortillas and pepperoni business that index against our commercial chain accounts. We gave up some of the volume through the pandemic because of the spike in the demand. So, we’re not only focused on getting back volume, but also, as I referenced, innovating and partnering with customers to ensure that we’re leading through the overall recovery.

Okay. And then, I have another question for Stewart. When I examine the balance sheet trends this quarter, particularly the net debt to EBITDA, I see you bought back some stock in the fiscal third quarter. Looking ahead to the next 12 to 24 months, the balance sheet seems to align well with your leverage target. You are already making significant investments in organic capital expenditures. I'm trying to understand your comfort level with the current state of the balance sheet compared to what would be necessary for a substantial releveraging event, especially regarding a larger increase in share repurchase. I'm curious if you anticipate continued excess cash building on the balance sheet from this point forward. Any additional insights on the priority of share repurchase going forward would be appreciated.

Sure, of course. Well, look, first, I mean, we’re very pleased with the strength of our balance sheet. When you look at our leverage levels, we haven’t seen leverage levels like these since 2011, that sort of timeframe. So, we’re pleased with having come through COVID and put ourselves in a place where we’ve got a rock-solid balance sheet. With respect to capital allocation, our capital allocation approach, we’ve got a very good balanced approach. That is strengthening our balance sheet, which we’ve done, investing in our business, which you pointed out. We have ramped up our spend on CapEx, and that is good spend because it’s coming in at strong returns, helping to grow our business. Regarding your question about share buyback, last year, this time, we spent about $50 million on buybacks. This year, we’ve got almost $700 million. Part of that is catching up on the dilution that we had from last year. So, we’ll see how that goes, but we’re very pleased with where we are from a balance sheet standpoint.

I want to revisit the Chicken segment. I want to ask, when we think about kind of your new more dynamic pricing that you have in that business relative to variable costs, how should we think about the factors that create variability in the chicken margin, be that external or internal factors? And how insulated is that margin now relative to cyclicality in the industry?

Let me share a few thoughts before handing it over to David. I feel optimistic about our Chicken business, more than I have in a long time. We're making daily progress. Although we're not where we want to be yet, we have gained market share across various channels, including foodservice and retail, particularly with our branded value-added chicken. In foodservice, we increased our share by approximately 2.6 points. We did experience a slight decline in retail due to capacity issues within our branded portfolio, but we are quickly recovering that share. As we analyze the chicken business and its different components, we have resolved the challenges related to live animal livability and have established a supply chain that will support our growth and better serve our customers. We have additional fully cooked capacity coming online, which is already sold out, and we are pleased with that development. We will keep enhancing and refining our product mix and will also focus on our branded portfolio strategy. However, we are still facing some volatility in grain prices. Overall, we are positive about our current situation and the opportunities ahead. We believe our business is well-positioned, and we expect improvements as we move into Q4 and next year. David?

Yes. I think one other thing to mention to that, Ben, and it’s despite what we’re seeing from an inflationary standpoint and despite what we’re seeing from an overall grain volatility standpoint, we’re continuing to progress as planned. A large part of that was changing the way that we worked with our great customers across the country and pricing more closely to what’s going on within the market as well as inflation. We’re pricing quarterly now versus what we would have done previously from a 52-week standpoint. So, it’s given us a lot more flexibility in what we do. But again, there are a lot of other things that we are doing that will put us in a position to win. The volume unlock that we will see coming into this quarter will go a long way to help us build a much more sustainable model.

Ben, Stewart here. Just want to add one thing there. Don’t overlook in David’s model, the leverage that you’ll get from the increased volume. So you see them going up to 40 million birds this quarter. Every time he adds to those birds, they’re not coming at any increase in fixed costs. That’s already been paid for. And that’s going to be helped as P&L.

Yes. Okay, great. My second question is around beef. I appreciate the commentary around margins into next year as we navigate through the cycle. I’d be curious when thinking about that margin commentary for next year, would you characterize those margins as mid-cycle trough cycle margins kind of as we think about the up versus down in that business line, recognizing it’s hard to see exactly where we are in the cycle, that would be helpful to us, I think.

Yes. So Ben, this is Shane. I think this year we're expecting to be in the 11% to 13% range for fiscal year '22. As we move towards fewer numbers, it’s quite challenging to determine exactly when things have changed, similar to predicting the weather. I would say we are looking more towards the mid-term. Over time, we expect our Beef business to have returns in the range of 5% to 7%. Additionally, as we work on decommoditizing this business, you can see the focus on quality that I mentioned earlier. We are collaborating with some of the top cattle feeders globally. The global demand continues to grow, although we can't meet all of it at the moment due to some port disruptions. Being able to increase value through our case-ready business and our Prepared Foods and international business unit is another advantage for us. We anticipate scaling into that over the next 12 to 18 months.

Just two really quick ones for me. Shane and Donnie, maybe just to stick on the beef topic, and I know we’ve covered a lot of ground there. But one of the questions we’ve gotten, just given the level of liquidation you’ve seen this year, realizing the 5% to 7% kind of medium-term margin target, like what’s the possibility though that next year comes in somewhat below that just because you’re dealing with such a high level of liquidation this year that’s relatively unprecedented?

Thank you for the question. As mentioned earlier, we are still experiencing significant cattle liquidation. To elaborate, we have not yet seen any substantial increase in heifer retention. If you consider the timeline for rebuilding the cattle population, this will likely take 2 to 3 years. Regarding the 5% to 7% margin target, we believe we are in a good position. Unfortunately, we are at the mercy of weather conditions, particularly the drought we are currently facing. Further liquidation is still likely, and predicting exactly when this will end and when we will see an increase in heifer retention is quite difficult. Recent cattle on feed figures indicate the third-highest amount as of July 1st. We currently have enough cattle to get us through this quarter and into the first quarter of fiscal year '23. Overall, I remain optimistic about our position within the 5% to 7% margin range.

I just want to follow up on just Rob’s question real quick. Where do you think chicken production will be in 2023, where do you think beef production will be in 2023? Just trying to get a flavor for that.

Based on what was quoted in the prior call, USDA is reporting a flat to 1% increase on chicken production, which I think is probably realistic. I think our demand is going to be stronger than that as we go into ‘23. From a beef perspective, with the herd liquidation, there’s going to be fewer cattle in the harvest. More packers will be chasing those heads, particularly those with better genetics that grade better and provide additional revenue and margin opportunity. It’s going to become very tight, and as we move into ‘23 and 2024, beef is going to see some higher cutouts and higher-priced cattle in the marketplace.

In the prepared remarks, it was mentioned that there were supply chain issues in Prepared Foods. You talked about the margin, and I may have missed it, but are there options for improving your supply chain? What actions are you taking, and will this significantly impact 2023 and 2024? I'm not referring to pricing, but I thought there might be some opportunities in the supply chain. Can you discuss that?

Let me say a couple of things about that, Ken, and then I will flip it to Noelle. What we’re talking about there is a big portion of that, for example, is in the first half, particularly in the first quarter. You may remember that we had a resurgence in COVID at that point. We got a little bit behind as we started the year or in our second quarter. But we’ve been out of capacity on a few categories that we’re seeing now come online. We have more capacity coming online next year for Prepared Foods. While demand has been impacted a little bit in some key categories around pricing, it's still less elastic than even our models would have indicated, but we’re still seeing some elasticity. We expect the volume to grow. We expect to put forth a great deal of effort in our supply chain. Those things that we can control, the productivity program, for example, is huge for us in the way of automation and technology. We’ve been investing now for over a year, and we’re starting to see some of those things bear fruit, not only for this quarter but as we move forward. Those investments are paying off. In many cases or in most cases, we are staffed completely, but we’re looking for opportunities to continue to get better. But supply chain is improving, we’re running it right, and we are seeing some positive changes. Noelle, anything you want to add to that?

I think you covered it well, Donnie. To your point, we have made significant traction from a labor perspective as we think about automation within our facilities, digitization, the complexity reduction, and flexibility that we’ve created in our network. All of those improvements are leading to a better supply picture as we’ve continued to progress through this year and are expected to progress through Q4.

Okay. Thank you. Thank you, everyone, for joining our conference call today. We have a powerful and diverse portfolio across proteins, channels, and geographies, improving operational efficiency and a team that is positioned to take advantage of the opportunities in front of us. For these reasons, we are confident we will maintain strong volume and profitability in the short term and have future long-term growth ahead of us. At Tyson, we’re focused on making food affordable, accessible, and nutritious for our customers and consumers around the world. Thanks again for your interest in Tyson Foods. We look forward to speaking to you again soon.

Ladies and gentlemen, with that, we’ll conclude today’s conference call and presentation. We thank you for joining. You may now disconnect your lines.