Good morning and welcome to the Tyson Foods Second Quarter Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Jon Kathol, Vice President of Investor Relations. Please go ahead, sir.

Good morning, and welcome to the Tyson Foods Incorporated second quarter earnings call for the 2017 fiscal year. On today's call are Tom Hayes, President and Chief Executive Officer; and Dennis Leatherby, Executive Vice President and Chief Financial Officer. Slides accompanying today's prepared remarks are available as a quarterly supplemental report on the Investor Relations section of our website at ir.tyson.com. Tyson Foods issued an earnings news release this morning which has been filed with the SEC on Form 8-K and also is available on our website at ir.tyson.com. Our remarks today include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements reflect current views with respect to future events, such as Tyson's outlook for future performance on sales, margin, earnings growth and various other aspects of its business. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. I encourage you to read the release issued earlier this morning and our filings with the SEC for a discussion of the risks that can affect our business. I would like to remind everyone that this call is being recorded on Monday, May 8, 2017 at 9 AM Eastern Time. A replay of today's call will be available on Tyson's website approximately one hour after the conclusion of this call. This broadcast is the property of Tyson Foods and any redistribution, retransmission or rebroadcast of this call in any form without the expressed written consent of Tyson Foods is strictly prohibited. I'll now turn the call over to Tom Hayes.

Thank you very much, Jon. Good morning, everybody, and thanks for joining us today. We concluded a record first half in fiscal 2017, and we're off to a strong start in the second half. Because the seasonality of our business can distort our earnings from quarter-to-quarter, we get a better indication of performance trends if we look at the fiscal year in terms of front half and back half rather than four quarters. Q1 was very strong, our best quarter in company history. We knew that Q2 would be a challenge and it was due to typical seasonality and a late Easter. There're also some unexpected challenges, which I'll explain as I dive into the segments. But both combined, Q1 and Q2, made for a record first half that saw 17% improvement year-over-year. This gives us confidence in reiterating our adjusted EPS guidance of between $4.90 and $5.05 for the current year. Integration synergies for the second quarter were $173 million with $29 million incremental to Q2 of 2016. Total synergies through Q2 were $649 million and allowing us to increase compensation for team members in our plants, invest in innovation and build our brand, so lay the groundwork for a long future of growth. So, now let's move to our operating results. In the Beef segment, operating income for the second quarter was $126 million with an operating margin of 3.6%. Sales volume was down 1.1% as we ran our plans for the margin, not for market share. As price was down 3.1%, reflecting the continued lower cut-out due to improved cattle availability. Consumer demand for beef, both domestically and internationally, has remained strong and we're seeing especially strong pull for our Open Prairie Natural and Chairman's Reserve premium Beef and Pork programs which are showing double-digit growth. With…

Thanks, Tom, and good morning, everyone. We delivered record EPS and operating income for the first half of fiscal 2017, as record results in our Beef and Pork segments are providing fuel for growth in our value-added Chicken and Prepared Foods segments. We remain on track for our fifth straight record year, as our diversified portfolio of protein-packed brands and ongoing investments in our businesses continue to provide strong, stable growth. Revenues for the first half of fiscal 2017 were flat compared to prior year, and were slightly down in our second quarter to $9.1 billion, as lower beef prices were partially offset by higher pork and chicken prices. Adjusted operating income for the first half of fiscal 2017 was a record $1.6 billion, up 8% over a strong comparable period last year. Adjusted operating income for Q2 was $623 million, which includes $23 million of costs associated with two chicken plant fires and $14 million of incremental costs from standardizing our benefits and compensation structure. Total company adjusted return on sales was a record 8.8% for the first half of the year, with our Beef, Pork, and Chicken segments all within or above their normalized ranges. Our record adjusted EPS of $2.60 for the first half of fiscal 2017 represents a 17% increase over $2.22 last year. Our operating cash flow through the first two quarters was just shy of $1 billion, and we spent $467 million on capital expenditures. This outpaced our depreciation by $153 million, as we continue to invest in projects with a focus on delivering high ROIC. During the first half of the year, we repurchased 10.2 million shares for $653 million, which includes 2.1 million shares for $133 million in Q2. Our effective tax rate in the second quarter was 34.5% on an adjusted…

Certainly. Thank you, sir. We will now begin the question-and-answer session. And your first question will come from David Palmer of RBC Capital Markets. Please go ahead.

Good morning, guys. The Prepared Foods profit was lighter than we had expected. You cite the foodservice sales declines in that segment. Could you talk a little bit more about the nature of those declines and the outlook for potential improvement? And I have a follow-up.

Sure. Good morning, David.

Good morning.

Yes. The sales were certainly not what we expected for sure, as foodservice channel has been a little bit lighter than retail, particularly for us I would say. And so we do have some challenges also in predominantly the legacy Tyson Prepared Foods of foodservice business. In order to get our portfolio back to where it needs to be, profitable growth and the ROS we expect, we are doing a number of things: shifting channel mix and customers to a certain degree to capture growth; leaning out SG&A, doing some manufacturing work on costs. And we feel good about where we're headed, but we do still have some challenges, and certainty, in Q2, the volume didn't help the situation as we had some under-absorbed overhead at some of those plants.

And from the guidance or in that specific guidance, you say 9% margin, which I guess implies a similar margin for the second half. Is this going to be a multi-quarter turn in the business?

It is. Like I said, the retail business continues to do very well. It's the foodservice prepared business, and we do see that's going to take some time to get that back to where it needs to be. I also said, in 2018, we believe it will be back within the range as Prepared Foods...

Yeah. Yeah.

(21:24) set up.

And speaking of 2018, I know it's a little early, but what is your early thinking about the earnings outlook for that year?

Sure. Yeah. We think 2018, at least this is the way that I see it right now that we are going to continue to grow, certainly, where we want to grow, value-added versus commodity, both on Chicken and Prepared Foods. The Core 9, as you see, continues to do really well. The perimeter of the grocery store is doing fantastic. We benefit from that. And certainly, the products that we're focused on in foodservice, the focus five products, are doing very well in broadline distribution. So we just talked about prepared beef, looks to be good next year as it is this year just about as good. 5% is where we're saying we're going to wind up. Supply is looking very strong. Pork, I'd say, we'll benefit from livestock supply, very strong export markets, and we'll deal with more slaughter capacity which we talked about in the past coming on in the industry. Still above the normalized range is where we see it. So Pork feels good. Chicken will benefit from the move to NAE. Just announced today moving towards organic in July, and we'll have a better mix. So Chicken will be within the ranges the way that we see it today. And then just as we continue to drive the acquisition synergies, I feel great about where we're going to wind up longer term with Prepared Foods. So not necessarily coming in 2018, but that normalized range I think will become something for us to take a look at because the synergies, I think, are going to be exceptional, also revenue synergies beyond costs. So I hope that answers your question.

Yes. Thank you.

Yeah.

The next question will be from Adam Samuelson of Goldman Sachs. Please go ahead. Adam Samuelson - Goldman Sachs & Co.: Yes. Thanks. Good morning, everyone. Maybe digging in a little bit more into the Chicken performance in the quarter. The profit in the segment was down $114 million year on year. I think based on all those things that were disclosed in the 10-Q, you can isolate about $80 million of that between the plant fires, feed, compensation, you alluded to higher grow-out and outside meat purchases. But you also had a pretty nice benefit from price/mix year-on-year. So I'm hoping if you could just talk about the Chicken business and maybe the part of that bridge that we're missing and maybe the impact of that as you think about the balance of the year.

Sure. Yeah. As you said, I think we had a really good quarter, but for the fires, which we don't look past. We are certainly focused on the root cause of those to make sure that that's not – so it's something (24:04) we can control it as part of our future. But Q2 ended up at 8.3%. The effect of the fires really put us in a situation where we felt like we had a great quarter running and that is not just the cost of the fires but also the volume that it cost us. That certainly impacted us. The other thing we haven't talked about much is that there was AI events during the quarter, which we just came in and out of I think with a very strong approach. So for the balance of the year I think we feel great about it in the middle of the normalized range between 9% to 11%. We expect our value-added to continue to grow, and that's both frozen and fresh, taking advantage of low-cost raw material, add equipment capacity, the capacity we just added this last year is almost full and we're in the process of adding more, our mix is improving, focused on reducing the cost structure. As I mentioned, the CII plan is continuing to drive continuous improvement, continuing to drive more and more focus on the right costs and getting waste out. And our Chicken business continues to improve or grow in the right areas. And I think we're going to see that continue to strengthen. Adam Samuelson - Goldman Sachs & Co.: Okay. That's some helpful color. And then maybe a longer term question. And, Tom, I want to go back to something you said on the AdvancePierre call a couple weeks ago that there's a new CEO, new management team, and a new strategy for Tyson and I appreciate some of the discussion at CAGNY and more recently about the sustainability efforts. But maybe talk about how investors could actually perceive that change in strategy as it impacts the financial results. And AdvancePierre, I think investors could have imagined Tyson doing that acquisition a year ago. So it's not clear that AdvancePierre is necessarily evidence of a new strategy, but maybe talk a little bit about what's really changed within the organization outside of the leadership team and how investors can look at that? Thanks.

Sure. Yes. I'll address that, Adam. We finished our strategic planning process as a company end of February, beginning of March time period. And part of that was to make sure that we had a razor-sharp execution of where we want to play in addition to where we don't want to play, and getting a better understanding of the role of our businesses in the portfolio, whether they're value-add or commodity. The discussion about AdvancePierre has been going on for some time, and as it relates to us being in a position after closing out our strategic focus, so it's clear to us that the perimeter of the store, convenience channel, being in proteins was something we wanted to continue to sharpen and play at a higher level. So for us, that acquisition certainly plays in all those spaces. So for us, it's about growth, growth continually. We certainly know that packaged food has had its challenges. And as we look to continue to invest in areas that consumers want, this became absolutely crystal to us, this was going to be a fantastic acquisition for Tyson. So the way to think about it, why now versus then, they've also – I mentioned this on the call when we talked about the AdvancePierre acquisition. Their team has done an amazing job of putting that company in a place where they have taken a lot of costs out. They've refocused on growth. They have continued to excel at practically everything that they're doing through a very disciplined approach. I'm really looking forward to having them join the team and help us in the areas that we don't have the prowess that they do. So for all the reasons that I mentioned, and hopefully the timing is explained there, I think this is going to be excellent for our shareholders. Adam Samuelson - Goldman Sachs & Co.: All right. I appreciate the color. Thanks.

You're welcome.

The next question will come from Ken Goldman of JPMorgan. Please go ahead.

Hi. Thanks for the question. Could you just help me clarify? I'm a little confused, and I think some investors are too, exactly what's included in guidance, and what's not, from AdvancePierre? I understand interest expense guidance includes it. It seemed from the press release like sales exclude it, but I wasn't 100% sure on what you were saying earlier about earnings. If you could just walk me through that, I would appreciate it.

Hi, Ken, this is Dennis. We are including AdvancePierre, but the way we think about it is more like one full quarter in our fourth quarter. We're not exactly sure in June when it closes. So it has a little bit of a impact there. But to be clear, it is in our forecast.

For every line item, just to be sure?

Yes.

Okay. Okay.

One thing I would call out, Ken, real quickly though, is, we will have merger and integration costs, and so we will separate those out.

No, sure, I understand that. Thanks, Dennis, for that. And then my follow-up is, I wanted to ask a little bit about going fully antibiotic-free in chicken, which I think long term is clearly the way the market's going. Some of your peers we've talked to, though, have talked about maybe some margin struggles initially when this happens, because your costs go up faster than your pricing can necessarily be taken. So first, I'm curious, is this something that you expect to happen in your business as well? And is that in guidance? And secondly, if not, I'm just curious, what would be different for you than maybe some of your smaller peers out there that have sort of expressed this concern?

Sure. Ken, of course I won't talk about our peers, but what I will say is that this is not a brand-new thing for us. We talked about how NAE has been something that we've been working on. And as we continue to improve operations, it puts us in a position where we were able to go the final step. The cost structure is anything that would be impacting the cost structure, certainly in our guidance. But I would say that Noel White and Doug Ramsey and the entire team has been pushing aggressively just to get us in a position where we can execute NAE and make sure the cost structure is as good, if not better. Now so that is – what we've learned through the process is that it continues to make us better as we push ourselves. So I can't speak to peers necessarily in our industry, but I can tell you that for us, we feel great about our cost structure and great that we're going to be NAE across the retail brand in June.

Thanks so much.

You are welcome.

The next question will be from Farha Aslam of Stephens Inc. Please go ahead.

Hi, good morning.

Good morning Farha.

Question about acquisitions. Could you just remind us exactly how much, in terms of synergies, you expect from the Hillshire transaction now and the $200 million from AdvancePierre? If we think back (31:11) generally, is there a target that you have of how much needs to be reinvested back into the business, and how much you anticipate letting fall to the bottom line?

Sure. Yeah. As it relates to Hillshire, I mean, I'll have (31:24) Dennis just talk about that real quickly, and then let me start by saying, the two are very different. We invested a lot, as you well know, in innovation, brand building, and setting ourselves up for continued growth on the Hillshire acquisition. So certainly, there was a lot of reinvestment. Don't anticipate the same for AdvancePierre. I think what we'll see is that revenue synergies will come with time, and we will be focused on getting the redundant costs out, and it's both teams. I was with the AdvancePierre team couple weeks ago and we talked about it. This is a team event for all Tyson team members, when they become Tyson team members, for us to focus on costs because it's there. But I would say, as it relates to investing that back, that was more of a Hillshire phenomenon. Dennis?

As far as the synergies go on Hillshire, we initially started at $500 million, took it up to $700 million cumulatively. We backed it down to $675 million, simply because there is going to be some more carryover into 2018. So, again, think about $675 million on a cumulative basis and more than $700 million in 2018 and beyond.

That's helpful. And then, could we go back to Chicken? You said very specifically that you expect margins to be in the normalized range into next year as well. Is there something with the plant fires that will continue? Is there a level of investment that we need to think about that will keep those margins in the normalized range, whereas before, given the low feed cost and very good pricing for commodity chicken, there was an opportunity for it to be ahead of your long-term normalized range?

Yeah. So a couple of things, Farha. One is we're not giving specific guidance as it relates to 2018 yet. What we're doing is telling you how we're feeling about how it's setting up. As it relates to 2017, the second half of our year looks to be within that range. And based on everything that we see now, we have improved our mix, we're continuing to do all the things that we want to do. But as it relates to the plant fires, that's going to be something that will be behind us. It's not any continuing expense. The team has done an amazing job putting us back in the right footing. But as we see it today, improving our mix, focusing on reducing the cost structure, taking advantage of the low-cost raw material environment, talk about our food capacity, all those give us the full confidence that between 9% to 11% is where we'll wind up for 2017.

Great. Thank you.

You're welcome.

The next question will come from Heather Jones of the Vertical Group. Please go ahead.

Good morning. Hi. I had a quick question on Beef. You all's outperformance jumped dramatically during the quarter, and just was wondering if you could give us a sense of the cause. Because if we look at beef prices during the quarter, they were up less than live cattle costs were, particularly in the Northern regions, which I know you'll tend to be more exposed to the Northern regions. So I was wondering us if you could help us understand how that drove that outperformance? And the second part of that question is your confidence with 5% margins for the year, given what we've seen in Beef margins over the last few weeks, given the rally in live cattle costs, just seems like maybe you'll are doing something different in that business. And just help us understand what's going on there?

Sure, Heather. Like we said when we were talking at the CAGNY and otherwise, Q2 is always a little bit choppy, and you never know what's going to come at you, certainly as it pertains to beef; that's true. I would say that are our team has done an incredible job. Steve Stouffer and the team in our first meats group continue to execute against the fundamentals. And without commenting against our competition, I feel good about what our team does. 2017 continues to look strong for us. As we are in the Midwest, there should be more cattle coming to market for us. We believe the margins for this year, as we said, it will be at an exceptional level. Q1 was very strong. Q2 came back a little bit. But as it looks like Q3 and Q4, they have the potential to be very good. We certainly didn't have – it wasn't without some challenges, certainly, in Q2. It's been up and down from both a supply and demand standpoint. But what I'd say is, for us, just focusing on the fundamentals and making sure that we're driving the right thing that's what continues to set us apart from our view.

And then on Pork, sort of a similar question. I noticed your volumes were down, and I mean, weights were down a little bit during the quarter, but it seems like more that your head had to have been down despite heads for the industry being up. So was wondering if this was a margin versus market share decision and if that's going to be your strategy going forward with the new slaughter capacity, if you're going to just choose margins over market share and possibly kill less just to be able to maintain that. Just if you could give us some color on that.

Yeah. I'd say that is the case, Heather, but we'll manage our business the best that we can for Tyson. And certainly, seems to be large supply products (37:12) coming 3% to 4% more head or so. What's nice is the demand for U.S. pork continues to be extremely strong. None of us see any signs of that slowing down. And exports have been incredible. So that for us, as long as that continues, that's going to put us in a good position. So sustained demand, great hog supplies, we remain in balance in our thoughts for this year. We're feeling good. And like I said on my a prepared remarks, 2018 is looking to be very strong above the normalized range, not as good as probably as high as 2017, but above the normalized range. And so that's the way that we see it.

Okay. Thank you so much.

Yeah, you're welcome.

The next question will come from Akshay Jagdale of Jefferies. Please go ahead.

Good morning. This is actually Lubi. I am filling in for Akshay. I wanted to ask a question on your Chicken segment. So if I just look at Chicken segment margins over the last maybe 1 year, 1.5 years, it does seem like they've trended down somewhat, although that's been primarily related to looks like some execution issues maybe on this mix shift strategy towards value-added, which is obviously a key element of the future growth prospects for that business. So can you just talk maybe a little bit about what's driving? There seems to have been, I guess, a little bit more in terms of execution issues over the last couple quarters. And then does this have any impact potentially, in your view, on the long-term growth prospects for this segment? And then I have a follow-up.

Yes, so, Lubi, I would say that execution issue, the plant fires certainly are an execution issue, I guess, you could say, something that we don't certainly plan for. Tyson has been much less volatile, I would say, than the typical commodity player. Diversification of our product types, pricing models, reduced export closure really helps us stabilize margins. So, as we said, ex the fire cost, $0.04 EPS would have been added back. I think that would have put us in a great spot right within our normalized range. So the continued strong execution against our business is going to give us long-term EBIT growth. Where we will see some differences is the lack of volatility, and certainly, as it pertains to our business, that's what we play for.

Okay. And then the second question, also on Chicken. So at CAGNY, you spoke about some new products that you have planned in the Chicken segment. And you also mentioned in your prepared remarks today about ongoing mix changes in the Chicken business. Could you just talk a little bit about the progress that you've made on some of these initiatives, maybe where we are in terms of timing and rollout and, just generally, how you're thinking about the potential contribution from these new items into fiscal 2017 and 2018? Thanks.

Yeah, certainly. We continue to be very focused on conversion of dark meat into, what I call, first-run products, that's something that the team has made tremendous progress against. And so those are a number of different forums to speak to your question directly. The 100% NAE on the Tyson retail brand will be up and running by next month. So we love that because it's making a lot of progress in a very consumer relevant area. It's a bit of (40:54) issue for, certainly, consumers, but we feel that, that is going to set us apart as the world's largest NAE producer of Chicken. Also, we talked about Nature Raised Organic, so that comes in July, but that is also going to be – it's a growing space. It's much smaller for sure, but it's a growing space for us and we feel like that's going to be an important development for Tyson. Just to wrap up with ground chicken, ground poultry, predominantly Turkey, is a $1 billion space. For us, we feel like we can play there and can play effectively. And so we're extremely excited about that launch as well, and that's all – all those things that we talked about at CAGNY are on track.

Great. Thank you. I'll pass it on.

Welcome.

The next question will be from Michael Piken of Cleveland Research. Please go ahead.

Yeah. Hi. I just wanted to talk recently about some of the recent storms in Colorado and the impact that might have on cattle supplies and weights this year and how much of an impact you think that's having on packer margins over the last couple of weeks. And is there any sustainable impact from that?

Certainly. Certainly, Michael, there's been an impact. First off, I would say our hearts go out to those cattlemen for sure because, by some estimates, there were thousands of cattle lost in the storm, so we are very sensitive to that. And so we certainly want to make sure that we express that. Our plants typically have enough breadth and scale to adjust, and it looks like there's going to be certainly, some of – there has been some effect, there is some effect. Anything that we see today is built into our outlook. So again, tragic loss for the producers there, but for us we feel like we are going to be in a fine position going forward, and hopefully, something like that doesn't happen again.

Okay, great. And then switching over to Prepared Foods, just trying to understand by the time, I guess, fiscal 2018 rolls around, I mean, would you expect AdvancePierre Foods to be accretive to your Prepared Foods margin? You talked about getting back to a normalized range. Or is that something that you would expect initially, because of increased brand spending they might be a little below your normalized margin on a standalone basis and as you invest in the business that, over time, it would reach your normalized range? Thanks.

You're welcome. Two things, absolutely accretive. Second thing is it's going to put us in a position, as we look long-term, to look again at what our normalized range is for Prepared Foods, because that's going to be a tremendous margin business for us. But more so, just continue to come back to growth. We are acquiring a company that has been growing, is going to support our growth, not just in the convenience channel and in the retail store perimeter, but there are capabilities that we're going to leverage for our Tyson brand that we already have in the portfolio. So as we continue to make the most out of this, it will not be reinvestment in the brands per se that AdvancePierre has all over going to support those (44:06). It's going to be really focusing on the capabilities this brings to excite consumers against where they're headed. This is the reason why we did it. Thank you.

The next question will come from Ken Zaslow of BMO Capital Markets. Please go ahead.

Hey, good morning, gentlemen.

Good morning.

Hey, Ken.

Just a couple of questions. As you evaluate the AdvancePierre acquisition, can you talk about – you did say though that the $200 million of synergies is both combined as well as individual. Did I hear that right? And can you talk about the buckets to which the synergies will come from? That's my first question. The second question is, so as you evaluate the Prepared Foods margins, what will go into the determination of where you think that will go? Because again, you started out with Hillshire as 9% to 11%, we're kind of now in that 9% region. Is there a potential where we could see 13%, 14%, 15% margins? How do you think about that?

Nothing's off the table in terms of margin upside. What I would say is, we're not going to sacrifice growth, we're going to continue to grow. So we want to make the right margins, we want to have affordable food, and we want it to continue to be growing, is what we're focused on, Ken. So, as it relates to the question on the synergy buckets, you got it right. Absolutely, it's going to come from both sides. We feel like, as we get through the integration process, we're going to find that AdvancePierre is going to make Tyson, legacy Tyson, better. The whole company is going to benefit. In terms of the specific areas, clearly, procurement, we see manufacturing, like I talked about, logistics for sure, so warehousing and transportation, clearly redundant overhead, with two publicly-traded companies. Too soon to disclose the exact size of that, but the synergies are coming from both businesses. And we are going to, on top of cost synergies, grow. So we feel very comfortable with the overall target. It's going to put us into a position of great confidence to improve the margin structure over time. And again, just emphasize, not to sacrifice growth.

Just Dennis, just one housekeeping question. What is the cost in 2017 that won't recur in 2018, aside from the fire? I just wanted to kind of aggregate them up, because you're including in your underlying performance, but I think there are some costs that may not be recurring, such as maybe...?

That's a great question. As a reminder, last quarter, we talked about vacation and holiday pay and those kinds of things, the true up both companies and the cumulative number was about $58 million, and about 80% of that was more or less a one-time event, so call it $50 million or so. And then you're right, the plant fires would be in there as well.

Perfect. Thank you.

The next question will be from Brett Andress of KeyBanc Capital Markets. Please go ahead.

Hey, good morning.

Hey, Brett.

I just wanted to go back to Chicken because, relative to 90 days ago, really the segment guidance range, I think, has been stepped down somewhat, even when you exclude the costs. And at the same time, I think the outlook for the industry, we would argue, has improved pretty meaningfully. So I was hoping you could kind of square those two and maybe provide a little bit more color as to why we shouldn't see the improvement that maybe some would have expected in Chicken as we go through the balance of the year?

So I'll come back to just kind of, Brett, tagging on to the question that Ken asked is that our margin is going to be also indicative of where we are planning to grow. So we are not going to have a margin structure that does not allow us to continue to grow and provide our products at the right prices. So for the range, I think, 9% to 11% is the range we feel comfortable about with having a growth profile. So delivering within that for the year, feel very strong about. And I will say that we are very bullish about what Chicken looks like for 2017 and for 2018, frankly. So, continuing to improve our mix, we're off to a very strong start in Chicken for Q3. May is traditionally the start of the grilling season. Margins tend to follow that. Inventories are in a good position. We're operating in a range that really puts us in line with our targets and the ability to continue to drive growth at those margin rates. That's what I'd say.

Thank you.

You're welcome.

The next question will be a follow-up from Heather Jones of the Vertical Group. Please go ahead.

Thanks for taking the follow-up. I wanted to go back to guidance, and I know, in answer to someone's question, you've said that AdvancePierre is implied in all lines of guidance. So I was just curious, when the outlook language for Prepared for the full year, when you talk about it being margins approximating 9%, my gut is that comment excludes AdvancePierre, but I want to double-check on that?

No, it includes AdvancePierre; if anything, we might be modestly conservative on that.

Can you help me understand is there some – what's the word I'm looking for, some seasonality to Advance (49:40), because I mean, their margin structure is robust. And I know you're only talking about them being in there for one quarter. But still, you would think that would bring up the total pretty substantially. So can you help me understand, is there some major seasonality that Q4 is not a big margin quarter for them or something?

Certainly they have a very seasonal business as it relates to schools. And so some of that product will certainly flow through at the beginning of the school season, but then sort of into what would be our Q1. So we want to make sure that what we're doing is integrating this in the right way. And to be clear, Heather, we're not giving guidance right now. What we're talking about is how we feel about the business, and we feel like those margins are going to be certainly strong. But we have to learn more. So we'll be prepared in Q3 to talk more specifically about 2018 guidance. But the feeling right now is that, because their business does start to pick up during the school year, we got to see what that looks like as we get the two businesses together.

Okay. And one more follow-up, quickly. So, sitting back and listening to this call, my take is, you're intending to grow Prepared and Chicken on the top line pretty substantially. And so those margins may be restrained as you invest, whereas for, it sounds like your Beef and your Pork business as you intended for those to be essentially cash cows to fund that growth. So, we talked about earlier, in the Pork side, there is significant slaughter capacity coming on. My estimate is somewhere in the 10% to 15% range over the next year-and-a-half, which is going to outpace hog supply growth. So going back to that whole margin versus market share comment, in order to retain the cash cow nature of that business, I mean, should we think that you all will be willing to even close a plant if that's required to maintain the strong margins that that segment has enjoyed over the last couple of years?

Heather, we're not going to talk about those sort of things here, but what I can say is that there is going to be some level of equilibration in the industry. We see that the segment, the Pork segment will still be above its normalized range for 2018. But the other thing we just haven't talked a lot about is the export demand. Export demand remains very strong, and that should benefit us. We are a preferred pork supplier, particularly to the Pacific Rim markets. There is a lot of questions, but I would say that for us, we feel good. We feel good about, certainly, 2017 and 2018 setting up a little lighter based on some of this capacity coming on, but we still think 2018 sets up well.

Okay. Perfect. Thanks so much for taking the follow-up.

You're welcome.

And the next question will be a follow-up from Ken Goldman of JPMorgan. Please go ahead.

Hi, thanks. Yeah. Thanks so much for letting me ask one more. I know you're hesitant, I understand why, to give details on AdvancePierre's impact on this year. And I realize it's impossible to know. But most of the questions I'm getting from investors this morning, and I imagine most of the questions, my peers in this call are getting too. We are just trying to figure some of this out. So, if you can indulge me for a moment, I think of it this way, AdvancePierre generates maybe $55 million, $60 million a quarter. That's the benefit you're getting in the fourth quarter. Interest expense guidance went up by $45 million. That's the cost. You're talking a net benefit of maybe $10 million to $15 million in added (53:23) added, I guess, net income from the deal before any synergies. Is that reasonable for us to look at it that way? Or am I missing something important in that analysis?

It's pretty close, Ken. The one thing you're missing is incremental depreciation and amortization. We haven't had that valuation work done. So we don't know what that number is, so that would take a little bit off. On the interest expense side, really it depends entirely upon when we close. So is it early June? Is it late June? That's the swing there.

That's fine. Thanks, Dennis, so much.

And ladies and gentlemen, this will conclude our question-and-answer session. I would like to hand the conference back over to Tom Hayes for his closing remarks.

Thank you very much. Again, great questions. And I'll just say, again, we wrapped up an excellent first half at Tyson. We feel the second half is off to a solid start. We feel great about where we are now, and we're well positioned for fiscal 2018. And we'll continue to be as transparent as we can be on all the things that are going to help you value our company and we're really looking forward to this acquisition and making a great thing for you as investors and Tyson Foods' family. Thank you for your interest, appreciate it and have a good day.

Thank you, sir. Ladies and gentlemen, the conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.