Good morning, and welcome to the Tyson Foods First Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode. Please note, this event is being recorded. I would now like to turn the conference over to Sean Cornett, Vice President, Investor Relations. Please go ahead.

Good morning, and welcome to Tyson Foods' fiscal first quarter 2024 earnings conference call. On today's call, Tyson's President and Chief Executive Officer, Donnie King, and Chief Financial Officer, John R. Tyson, will provide some prepared remarks followed by Q&A. Additionally, joining us today are Brady Stewart, Group President, Beef and Pork and Chief Supply Chain Officer; Melanie Boulden, Group President, Prepared Foods and Chief Growth Officer; Wes Morris, Group President, Poultry; and Amy Tu, President, International. 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's not related 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 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. Please note that 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. Now, I'll turn the call over to Donnie.

Thanks, Sean, and thank you to everyone for joining us this morning. As you may have seen in our press release this morning, fiscal 2024 is off to a good start with solid performance in Q1 giving us confidence in our full-year outlook. The momentum we established in the back half of last year continued in Q1, highlighted by a $175 million improvement in adjusted operating income, a 130 basis points of AOI margin expansion and near doubling of adjusted EPS, all on a sequential basis. As we begin fiscal '24, we're witnessing the benefits of our core multi-protein portfolio. Chicken and Pork are offsetting Beef headwinds, while Prepared Foods continues to generate strong profit dollars and margins. While we can't control the macro environment, our focus on what we can control has been evident in Q1. Our performance reflects a commitment to operational excellence, we are a more agile, collaborative, and disciplined business than a year ago, and we have a long runway of opportunities in front of us. I'm proud of our team members' continued efforts to enhance operational performance and want to thank all of them for their high level of engagement and their part in delivering our results in this quarter. We're controlling what we can to drive cash flow as well. Our disciplined approach to CapEx and working capital helped generate strong cash flow in the quarter. Prudent cash deployment is part of our strategy to build financial strength and will position us well when market dynamics turn in our favor. You've seen us take bold actions to improve performance, and everything remains on the table to drive operational excellence and address inefficiencies. Our plan is working, and we're seeing tangible benefits of our efforts as evidenced by improvements in Chicken and Pork. While I'm pleased by the performance in Q1, we still have more work ahead of us, and we're cautiously optimistic and laser-focused on achieving what we set out to do this year. Our brands resonate with consumers, and we're maintaining strong market share despite comparing to our record position last year and some overall category consumption softness in Q1. We will continue to support our brands through innovation, marketing, and strong customer partnerships while meeting consumers where they are. I remain highly confident in our long-term strategy based on a broad portfolio of core proteins and strong brands and I'm optimistic about our future. We're leaving no stone unturned to drive long-term value for our shareholders. Now, let's delve into an update on share position of our branded portfolio. Our Q1 pound share in our core business lines, which include product lines from our iconic brands, Tyson, Jimmy Dean, Hillshire Farm, State Fair, Aidells, and Ball Park, remains at historically high levels despite a modest decline compared to record share in Q1 last year. In fact, our core business lines have grown pound share by more than 400 basis points since Q1 of 2019. While inflation is easing, consumers are still facing high prices compared to two years ago. However, they are still willing to purchase brands they know and trust, and this is reflected in our share. We're also focused on customer elasticity and balancing with our own cost. We believe our approach is working. The value proposition of our iconic brands resonates strongly with consumers. Over the past year, nearly three out of four US households purchased a Tyson core business line product, and this penetration rate is growing. What gets me even more excited is that our product line with the highest penetration rate is only in about a third of households, leaving us plenty of room for continued growth over the long run. Moving on to segment performance, starting with Prepared Foods. Our foodservice volumes continue gaining traction as we strive to grow this business with a focus on customer diversification and margin accretive channels. Operational efficiencies and lower raw material costs drove strong adjusted operating profits and margins. Our Branded Foods business remains a strategic growth pillar, and we are committed to supporting and growing our brands through innovation, price pack architecture, high ROI marketing support and strong customer partnerships. This is critically important in an economic environment where consumers remain more discerning with their purchasing decisions. In Chicken, the momentum established in the second half of fiscal '23 continued in Q1 with a third consecutive quarter of over $100 million in sequential AOI increase. Operational improvements, including the bold actions we've taken along with improvements in live operations, yield, labor efficiency, and customer service, as well as improving market conditions, were the primary drivers in Q1. In Beef, limited cattle supply led to spread compression as we expected. Roughly half the loss in Q1 was related to an inventory valuation adjustment, which was primarily driven by highly volatile cattle futures. While spreads are expected to remain tight, our goal remains to be best-in-class operators so that we can manage the business as efficiently as possible. We have identified incremental opportunities to improve our execution and help offset some of the challenges from the current cattle cycle. Turning to Pork, better supply drove lower hog cost leading to improving spreads. Our team's focus on operational execution allowed us to capture the benefits of these favorable market dynamics, which resulted in improved profits both on a year-over-year and sequential basis. Before I hand it over to John for a financial review, let's reiterate our priorities for the year. First, we're committed to improving our financial strength and driving cash flow to support our dividend, as demonstrated in Q1. Over the past year, we announced the closure of six of our older, less-efficient plants in chicken and two of our smaller beef case-ready value-added facilities. We're already seeing the benefits of these actions and we'll continue to evaluate opportunities to drive efficiency across our segments. In Chicken, our focus on enhancing our competitiveness continues. In Prepared Foods, we want to build growth momentum behind capacity additions coming online, increase our brand household penetration, and diversify and grow our foodservice business. In Beef, we acknowledge the challenges and will be prepared for multiple outcomes during the current cattle cycle. In Pork, we're gaining momentum in operational execution and are excited for continued improvements. With that, I'll turn the call over to John to discuss our financial results and outlook.

Thanks, Donnie. I'll start with an overview of our total company results before moving on to our individual segments. Sales in Q1 grew slightly year-over-year as an increase in Beef revenue was nearly offset by a decrease in Chicken. The decline in adjusted operating profit was driven by lower profitability in Beef, which was partially offset by growth in Chicken and Pork. It's important to note that AOI improved significantly on a sequential basis despite the modest decline versus last year. Adjusted EPS nearly doubled compared to last quarter, highlighting the ongoing improvement in our operational performance. Now, let's review our segment results starting with Prepared Foods. In Prepared Foods, Q1 revenue was flat year-over-year. Volume growth was led by benefits from the Williams acquisition and continued recovery in our foodservice business. Lower pricing primarily reflects the mix impact of the lower contribution from retail. AOI in Q1 was also in line with last year. Lower raw material costs and operational efficiencies were offset by increased brand support expenses, start-up costs associated with new capacity additions and mix. AOI dollars and margin both increased significantly on a sequential basis due to strong operational performance and great seasonal execution by the team. Moving on to Chicken. Sales in Q1 declined 5.4% year-over-year, primarily driven by the impact of lower commodity protein prices. Volume declined 1.5% due to lower production, which was partially offset by continued sell-through of finished goods inventory. Despite the decline in sales versus last year, AOI more than doubled in Q1, primarily driven by the benefits of our strategic actions and other operational efficiencies. These include lower plant spending, improved yield and better live performance. While input costs were a clear tailwind, these were largely offset by the impact of lower pricing. As Donnie mentioned, this is the third consecutive quarter of more than $100 million of AOI improvement as we were able to pull forward the benefits of closures of inefficient plants in improvements in our live operations. Now moving to Beef. In Beef, revenue increased 6.4% year-over-year in Q1, with lower head throughput more than offset by higher prices per pound. While revenue increased, AOI decreased versus last year, primarily reflecting compressed spreads, as was expected. As Donnie mentioned, in Q1, nearly half of the operating loss was driven by an unfavorable inventory valuation adjustment, which was primarily due to the rapid and significant decline in cattle futures. Moving to Pork, Q1 revenue was down modestly as volume growth was offset by lower pricing. However, AOI increased year-over-year, benefiting primarily from improved spreads driven by lower hog costs as well as better execution. And finally, a brief comment on our International business. AOI improved as we begin to lap some of the start-up costs of our newer facilities and continue to focus on improving execution despite a decline in sales, driven by macroeconomic challenges. Shifting to our financial position and capital allocation. Our commitment to building financial strength, investing in our business and returning cash to shareholders, primarily via our dividend, remains unwavering. While market conditions remain challenging, we are laser-focused on disciplined management and deployment of our capital resources to drive cash flow. Q1 showcased robust operating cash flow of $1.3 billion, above our expectations, and working capital was a solid source of cash as we continued to manage inventory levels. We were also disciplined with CapEx, which came in at just over $350 million in the quarter, below last year's exit rate. During the quarter, we returned $171 million to shareholders via dividends. Our net leverage declined sequentially, coming below 4 times, driven by our improved profitability and strong cash generation. We ended Q1 with more than $3.7 billion of liquidity. Our balance sheet management approach remains unchanged. We are committed to building financial strength and maintaining our investment-grade credit rating, and returning net leverage to at or below 2 times net debt to EBITDA. We remain committed to maintaining a disciplined yet opportunistic capital allocation strategy, ensuring that we deploy resources to maximize long-term shareholder value. Now, let's take a look at our updated outlook for fiscal 2024. Given the solid results in Q1, we have confidence that our financial performance in 2024 will improve versus last year. However, as it's still early in the new fiscal year and uncertainties remain, especially in our Beef segment, we have made only modest changes to our outlook. Our focus for fiscal 2024 remains to manage the business for profit and cash dollar generation, reflected in our guidance presented in dollar terms rather than margin percentages. With that in mind, we are reiterating our overall sales guidance to be roughly flat year-over-year. Moving to each of the segments. Prepared Foods had a solid start in a seasonally strong period. For the remainder of the year, we expect strong volume results as we continue our momentum in foodservice and see the benefits of our capacity additions. We remain focused on operational efficiencies while we support our brands and anticipate continued start-up costs. Taking all this into account, we're maintaining our AOI guidance to be in the range of $800 million to $1 billion. In Chicken, our operational turnaround is progressing as anticipated. For the remainder of the year, we expect to return to normal seasonality where Q2 is typically a weaker quarter. Given the strong start in Q1 and that we believe that there were more tailwinds than headwinds, we are tightening our AOI guidance range to be between $500 million and $700 million. In Beef, spreads are compressing as expected. However, uncertainty remains around how the cattle cycle will progress. Therefore, we are maintaining our full-year guidance at a loss of $400 million to breakeven. In Pork, on the back of our strong Q1 results, we're now raising our guidance to be between breakeven and $100 million. For the total company AOI, we're maintaining our guidance of between $1 billion and $1.5 billion, reflecting the portfolio nature of our segments. To round out the key P&L items, we anticipate interest expense to be roughly $400 million, and a tax rate to now be between 23% and 24%. Turning to CapEx, we're maintaining tight controls on spending in line with profitability and cash flow, and we expect CapEx to remain between $1 billion and $1.5 billion this year. Finally, on free cash flow, we're committed to managing working capital and CapEx, and we're even more confident now than we were last quarter that we will generate positive free cash flow for the year. To further help model the shape of the rest of the year, we anticipate more typical seasonality across our business. As a reminder, Q2 is seasonally our weakest quarter for AOI and cash flow, driven by Beef and Chicken. As you may be aware, this January has already been impacted by severe winter weather disrupting operations. And again, we expect start-up costs in Prepared Foods to impact Q2 as well. So, in summary, 2024 is off to a promising start and we're cautiously optimistic on our prospects for the remainder of the year as well as for the long term. Tyson is a leader in the global protein industry. We have strong brands, a broad portfolio of products, and a great team, all of which uniquely position us to win in the market. With that, I'll turn the call back over to Sean for Q&A instructions.

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

We will now begin the question-and-answer session. The first question comes from Peter Galbo with Bank of America. Please go ahead.

Hey, guys. Good morning. Thanks for taking the question.

Hi, Peter. Good morning.

Good morning, Peter.

Donnie, I was just wondering if you could give kind of maybe a brief state of the union, I know you gave some in your prepared remarks, but across the segments. And then maybe specifically, if you could start on Prepared Foods, where unlike a lot of CPG peers, you're showing actual volume growth. Some of that may be acquired, but just some of the dynamics around foodservice there seem to be a pretty important driver. So, if you can unpack that for us would be great.

Sure, thanks, Peter. I'll begin and may invite others to join in. To start, we had a strong first quarter and are building on the momentum from the second half of 2023. Our portfolio benefits are evident, with improvements in Chicken and Pork balancing the challenges in Beef, while our Prepared Foods division continues to show robust results. We're working on enhancing our Chicken business, which has seen its third consecutive quarter of $100 million in AOI improvement, and it remains a top focus for me. We're managing the Beef sector amidst its volatility and narrowing spreads. Significant strides are being made to eliminate inefficiencies throughout the Pork supply chain. Prepared Foods is meeting expectations, although we've observed some softness in the retail channel, our brands are holding strong. Our core brand share is near-record levels, and we're recovering lost share in the foodservice sector, which I'll elaborate on shortly. We have cautious optimism for fiscal year 2024, considering our better-than-expected quarterly results alongside our initiatives for performance improvement while acknowledging the ongoing macroeconomic uncertainties. As mentioned by John in his opening remarks, the second quarter tends to be seasonally weaker and has started with several major weather events. That said, it's still early in the year, and we want to remain measured in our outlook. There’s much work ahead, and we're examining every opportunity for improvement. We're focusing on capital expenditures and working capital to enhance cash flow and support our dividends. We're addressing controllable factors and taking necessary measures, including optimizing and modernizing our operations to increase efficiencies. We're satisfied with the quarter and believe we're moving in the right direction. We look forward to the future and are committed to creating value for our shareholders. Regarding Prepared Foods, to answer your question, Peter, we had strong performance in both revenue and profits this quarter, showing significant sequential improvement from Q4 of 2023. The volume growth was balanced between retail and foodservice. We're recovering some of the market share lost during the pandemic, which we couldn't previously support, and we also benefited from the acquisition of Williams sausage in terms of volume. Our branded core business line is a key focus, and we have a competitive edge, with volume share at near-record levels and 400 basis points higher than Q1 2019. Let me pause there. Melanie, do you have anything to add?

Yeah. Donnie, I think you did a great job hitting the highlights. The only thing I'll add for you Peter is, as Donnie said, our foodservice performance was strong, and I believe you asked about this question. Our growth this quarter was up 3% and that was due to customer expansion. Look, as this channel is rebounding, it continues to be an important part of our portfolio that we are focused on because we want to be where our consumers are at. And so, we're diversifying our customer base, we're building digital capabilities to drive demand, and we are focused on profitable growth.

Great. Thanks for all that. And then just maybe quickly as a follow-up on Beef, Donnie. Look, the cattle inventory report out last week seems like maybe we're nearing a bottom or seeing potentially some improvement. But just, what's the conversation like with ranchers at this point? Like what's it going to take to get them to actually start the heifer retention process? Because I think that remains kind of the biggest linchpin in the whole chain and it doesn't seem like we have a lot of clarity there yet. Thanks very much.

Sure. I mean, I'll tell you we look at the same information that I'm sure you've seen and we saw the cattle on feed report that you referenced. Unfortunately, Peter, the data doesn't indicate that heifer retention is taking place and that's obviously one of the signposts we're looking for. In the quarter, we continue to see volatility and spread tightening. We expected that. As we think about our outlook, we continue to project high cattle supplies for the balance of 2024 and even beyond. And let me pause. Brady, do you want to add anything to that?

Yeah. Thanks, Donnie. And Peter, that's a great question and one that we continually are studying. I think when you unpack that cattle on feed report, there's a few comments that obviously are lending itself to the numbers that we're seeing, and part of it's relative to some slower turnover that we've seen. We've seen placements for cattle on feed from some of the drought areas as well from a geographical perspective. And as you indicated, which is the spotlight of the conversation is, we have not seen significant heifer retention to-date and continue to see those heifers move into the cattle on feed report. So, continuing to focus on a few factors relative to heifer retention, obviously, how these interest rates that we see today relative to the difference or the delta today versus some of the cycles in the past is a highlight for us to continue to watch. And then, we'll continue to evaluate and understand how weather conditions are changed and lend themselves into a more favorable heifer retention strategy for these ranchers.

Thanks very much.

The next question comes from Adam Samuelson with Goldman Sachs. Please go ahead.

Yes, thank you. Good morning, everyone.

Good morning, Adam.

Good morning. I want to revisit the Chicken segment. John, you provided some insights earlier, but could you elaborate on the profit drivers for this quarter? There has been a $170 million benefit from feed costs compared to last year, although this is somewhat balanced out by price changes. Could you explain the year-on-year profit changes in Chicken in more detail? Additionally, aside from seasonality in the fiscal second quarter, the first quarter suggests we could be on track to meet or exceed the upper range of the segment profit guidance for the year. I just want to ensure we're clear on the various factors you are considering for the remainder of fiscal '24.

Thank you for the question, Adam. I’d like to share a few points that will help clarify our outlook for 2024 in comparison to 2023. First, we have made progress with our network improvements and operational performance, which is reflected in our revised guidance, raising the lower end by about $100 million to align with our expectations for the remainder of the year. As we look ahead, I know investors are curious about our return on sales guidance. Although we are not providing specific guidance, we believe our results in the third and fourth quarters could resemble those in the first quarter, though it might be too early to make definitive statements about that. Additionally, we experienced weather-related impacts across all segments in the second quarter, including chicken. Overall, I'm sharing this information to give you a clearer picture of the year so far. We have previously discussed improvements of a couple of hundred million dollars related to network changes, which we believe we have achieved. We still have one facility in Indiana transitioning to full operation, and once that process concludes, we will be nearly complete. There are also favorable market conditions to consider. Last quarter, Donnie mentioned there are more tailwinds than headwinds, and that sentiment remains. This involves not just grain prices, but also the interplay with chicken market dynamics and supply-demand factors. Therefore, we estimate a range of $500 million to $700 million for the year, based on these considerations. I hope this provides you with some additional insight. Wes, do you have anything further to add for Adam?

Yeah, I had a couple of comments, Adam. We expect to realize our strategic change funding throughout the year. And specifically to your question on year-over-year, both grains and markets were both lower. So, we stayed focused on improving our fundamentals year-over-year, did have a little tailwind, but it's mostly the material change we made in our fundamentals. We improved our live performance, specifically hatch and livability. We have a very disciplined S&OP process that got really tight in Q1, and our sales are not only sold out position, but our forecast accuracy has allowed us to do a better job filling orders with materially less working capital.

That's very helpful information. As a follow-up, especially in the Chicken and Prepared Foods segment, do you have any insights on shifts in consumer behavior and how demand elasticity has been changing as we move into the new calendar year? I'm curious about your perspective on the state of the US consumer for the remainder of 2024.

Thanks, Adam. So, I'll start first to talk about how we're looking at it from a Prepared Foods perspective and our Branded portfolio. So generally, we're seeing elasticities returning to pre-COVID levels. And as you know, we seek to balance both price and volume growth to maximize the value of our Branded portfolio. But at the end of the day, we do understand the financial uncertainty that our consumers are faced with as inflation remains elevated, which is why we continue to leverage our strong revenue growth management capabilities in support of our brands, and we're prioritizing their health and their profitability when determining our pricing strategy. And additionally, across the board for any of our Branded business, we remain focused on understanding our category dynamics, assessing our competition and, of course, meeting our consumer needs when making pricing decisions.

Yes, Adam, I'd just add that we're seeing really good dark meat demand. We've seen a reemergence of our wing demand, and we're seeing a slight shift towards foodservice.

Thanks, Adam.

The next question comes from Ken Goldman with JPMorgan. Please go ahead.

Hi, thanks so much. I wanted to ask a little bit about competition on the Prepared Food side. Are there any of your more important categories that you're starting to feel maybe a little incremental pressure in terms of competition, whether it's on the pricing side or however you want to frame it? And I guess, how comfortable are you with your price gaps versus these competitors today just in a general sense?

In terms of competition, we face strong competitors in every area we operate. I will leave it at that for now, but I’ll let Melanie provide more specifics in various categories. For instance, we experienced strong performance in breakfast sausage and cocktails, while we encountered some challenges in our lunch meat and frozen protein breakfast segments. Melanie, would you like to add anything?

I would like to emphasize that we are operating in a challenging consumer environment, where competition is intensifying. This includes pressure not only from branded competitors but also from private label products. Despite this, we are performing well and maintaining our market position. Our focus remains on our retail business, ensuring we drive consumption, address pricing gaps, and preserve our leadership in eight of our ten categories. We are prioritizing high ROI merchandising with effective shelf features and displays. Additionally, we are enhancing our marketing investment to improve household penetration. We have exciting innovations available now and on the way that will engage consumers. Importantly, we are also refining our pricing strategies to maximize our distribution reach. We believe these initiatives are beginning to yield positive results in the marketplace, and we are confident in our outlook for the full year.

Thank you for that. And then, a follow-up is on Chicken. As we look at some of the export data, and I realize some of the monthly data is a couple of months in arrears usually. But the export data in general in terms of pounds for chicken, they've been a little bit weaker as 2023 anyway, progressed. And yet as we start into 2024, at least according to Urner Barry, leg quarter prices have done pretty well, which might be not what one might expect at first glance is seeing the trade number. So, just curious for a little bit of your thoughts on how to think about like demand for leg quarters, export demand in general. Any color there would be helpful. Thank you.

Yeah, I'll take that, Ken. Thanks. We've seen a lot of disruption in the export side. Specific to leg quarters, freezer stocks are at a really low level and demand seems to be robust enough to clear it at very attractive prices.

The next question comes from Ben Bienvenu with Stephens Inc. Please go ahead.

Hi. Thanks. Good morning.

Good morning, Ben.

I want to ask, congratulations on the quarterly results regarding Chicken. John, I wanted to delve into the second-quarter commentary you provided, acknowledging that there appear to be some operational challenges and disruptions from weather early in the year. I'm curious if, as commodity fundamentals continue to improve and grain prices remain low, the supply and demand improves enough to counterbalance the operational dynamics we experienced in the second quarter.

I believe there are reasons to think some of that could be offset. However, we're not quite ready to quantify exactly what that offset is. Let's take a step back and discuss the overall year, as I want to highlight some factors influencing our cautious outlook on chicken. This is linked to the dynamics in the total protein markets. Beef remains unpredictable. We've had some forecasts about beef prices and markets, some of which have proven accurate while others have not. There are expectations for an increase in pork availability this year. We've already discussed consumer behavior today. I want to emphasize that while we are cautiously optimistic about chicken, there remains significant uncertainty and plenty of time left in the year. Ben, I think I have addressed at least parts of your question, and I hope this is helpful.

That's great. Sorry.

If I could add one thing or a couple of things to that as it relates to Chicken. Those operational improvements that all of us have talked about in Chicken continue. And those fundamentals, while we are improved, there's still a lot of work left to do there. And we got a really good team working against those things. But keep that in mind as you are looking at Q2 and the balance of the year as well.

Okay. Very good. Thinking about the cash flow statement, John Randal, you guys came into fiscal '24, bringing down your CapEx budget materially. You've sustained the range again this quarter. Is there yet still room to tighten that budget as we move through the year, or do you think that number is more set in stone with potentially improvements coming into 2025?

That's a great question. I think there's probably room to tighten it a little bit, but let me kind of talk about the total picture. When we gave guidance in the first quarter, we talked about striving to be free cash flow positive that we would pay attention to our ability to manage the business and working capital as well as our operational results, and that would influence our thinking in terms of the total spend. If you just extrapolate where we are in Q1, that would take you towards a higher end of that $1.5 billion range. But that's really just a product of a lot of good projects in flight that we have, our efforts to slow down from the spend that was projected in north of $2 billion in recent years. And I would just say we're not trending to that higher end because, 'Hey, we've made some adjustment in our opening up the capital floodgates again,' we remain very committed to getting that spend down to the midpoint of our range or below as we move through the balance of this year and next year. So that's what I want you to take away from a CapEx guidance standpoint.

Great. Thanks so much.

Thanks, Ben.

The next question comes from Andrew Strelzik with BMO. Please go ahead.

Hey, good morning. Thanks for taking the questions. My first one is actually on the Pork segment and the outlook there. If I look at the performance in the quarter, and it seems like some solid performance is probably continuing into the second quarter. It doesn't seem like there's much baked into the back part of the year. So I guess, how are you thinking about pork margins from here evolving through the year and kind of the puts and takes as we get into the back part of the year?

Let me begin, and then I will pass it to Brady to discuss Pork. The supply of hogs has led to lower hog prices, resulting in improved profit margins. We are experiencing several advantages from better operations in Pork, and we have built a very capable team in our Pork division led by Kyle Narron. He and his team have effectively eliminated inefficiencies from procurement to the customer, and I am very proud of their efforts. However, I should also mention that there is still potential for further improvements. We consistently uncover new opportunities for enhancement. Brady, do you have any additional insights that I may have missed?

No. Thanks, Donnie. And Q1, obviously, is seasonally the strongest quarter of the year. And we'd expect to see some typical seasonality as we move through specifically the latter part of this year as well. The team understands it's their responsibility to control the controllables. And as Donnie indicated, done a really good job of being able to take advantage of some of the spreads we have seen in Q1 and certainly expect those improvements to continue through the course of the year as well. Really seeing some increased operational efficiencies, and the team has done a great job increasing the true business performance through the data and analytics platforms that they've stood up that allow us for better decision-making and really adaptation of some of these market trends in the current conditions.

Okay. Great. That's helpful. And then, on the Beef side, I guess, when I look at the typical seasonality and I look at kind of the performance in the first quarter and then the commentary around the second quarter, it seems like you would need to have pretty solid improvement in the back part of the year, not to be kind of towards the lower end of that range. I know there's seasonality involved there as well. I guess I'm just curious, can you talk about maybe what would get you to the high and low end of that range? I understand certainly that there's a lot of uncertainty as we move through the year. And then, maybe can you clarify also when we think about the second quarter, are you thinking about sequentially lower off the number that you reported adjusted operating income in the first quarter, or is that kind of once you back out the inventory adjustment? Thanks.

Well, thanks for the question. And as you pointed out there, I think it's really important to emphasize what both John and Donnie indicated in the opening remarks, which was, in Q1, we saw that rapid decline in cattle futures and that was the driver for that inventory valuation adjustment, that was roughly $56 million in the first quarter. And really, as we look at the first quarter, obviously, we saw some headwinds relative to some decreased value in the drop. We saw the spread compression. And obviously, with lower supply, not only in Q1, but as we move through the rest of the year, we see that lower opportunity for cost dilution of our overhead structure relative to these volumes. But let me be really clear, we see a path to improvement as well. And from an operational excellence perspective, how we manage the business today versus the past in a different economic cycle is very important. Focus on efficiency, yield and really balancing supply and demand, not only by a cut-by-cut basis and through our grinds complex, but also in terms of yield and efficiency is going to be paramount and important to the team, and they're dialed in on that as well. We've made changes that certainly provide us opportunity in the future as well as we mentioned last quarter. We've right-sized our Beef value-added business really to match our customer needs and what we're seeing from a supply perspective as we move through this. And again, as I've mentioned before, we have a well-capitalized asset base, and believe we're really able to manage through a variety of headwinds and market conditions that we expect to see as we move through this cattle cycle.

Great. Thank you very much.

Thank you.

The next question comes from Ben Theurer with Barclays. Please go ahead.

Hi, good morning, Donnie, John. Thanks for taking my question.

Good morning.

So, just wanted to kind of understand a little bit some of the dynamics as it relates to the export business, because if I remember right, that used to be some sort of a headwind also in Beef. So, if we look into the details on sales into the international channels, particularly Beef, which kind of contrary to the rest of it, was actually even down in the sales. Could you elaborate a little bit on the dynamics in the export markets as it relates to Beef in particular, but also if you could just mention briefly what you're seeing on exports for Chicken and Pork? That would be my first question. Thank you.

Thank you for the question. It's important to note that we have been dealing with historically high rates from a beef product perspective. The current arbitrage opportunity between domestic and export sales puts the domestic beef industry at a disadvantage. Large supplies from competing countries in the southern hemisphere, which are on a different production cycle than we are, have increased their opportunities while decreasing ours in the U.S. Nevertheless, strong domestic demand for beef has maintained cut-out values at a historically high level.

Yeah. And Ben, this is Wes. I'll touch briefly on Chicken. As I said earlier, parts have been interrupted due to the weather. And on leg quarters, we're seeing frozen inventory in the US at almost record lows. Our inventory continues to be in check, and the pricing has been very good going forward.

The next question comes from Tom Palmer with Citi. Please go ahead.

Good morning, and thanks for the question. Maybe I could ask on feed costs. Just how locked in is your exposure this year? And then, when you look at the downward moves over the past few months, does this benefit your current fiscal year? Or if it continues, is this more of a 2025 flow-through? Because it does seem like there's some incremental favorability.

Yeah, Tom, this is Wes. I'll touch on that. We have a very diverse commodity risk management group. We also have different pricing mechanisms with customers in which some of the grains flow-through through pricing. I would tell you it's moderate and in the back half of the year.

Okay. Thank you. And then, I wanted to follow up on the Prepared Food side, maybe going back to Peter Galbo's question just on the new customer wins. Are there particular products that you're seeing these wins greatest in or particular channels within foodservice? Thanks.

Melanie?

I would say that in terms of customer expansion, we are making significant progress in the foodservice sector. On the retail side, we are experiencing strong distribution growth with our current customers related to our core business. Additionally, there is enthusiasm surrounding many of our new innovations. Specifically, I want to mention our Jimmy Dean Maple Griddle Cake, which was successfully launched last year, and we plan to introduce an extension of that product in a couple of months. Does that help, Tom?

Yes. Thank you.

Okay. I want to say thank you to all 139,000 of our team members. We are here today and have a good story to tell because of those team members who contribute to us each and every day. Their efforts drive this business forward. Our strategy is working. We have the right leadership team in place to deliver, and we are poised to drive long-term opportunity and shareholder value. We have made progress, but there is still a lot of work to do. Thank you for your continued interest in Tyson Foods, and we look forward to speaking with you again soon.

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