Tsn investor presentation february 2016
- 2. Forward-Looking Statements Certain information contained in this presentation may constitute forward-looking statements, such as statements relating to expected performance. These forward-looking statements are subject to a number of factors and uncertainties which could cause our actual results and experiences to differ materially from the anticipated results and expectations expressed in such forward-looking statements. We wish to caution readers not to place undue reliance on any forward-looking statements, which speak only as of the date made. Among the factors that may cause actual results and experiences to differ from anticipated results and expectations expressed in such forward-looking statements are the following: (i) the effect of, or changes in, general economic conditions; (ii) fluctuations in the cost and availability of inputs and raw materials, such as live cattle, live swine, feed grains (including corn and soybean meal) and energy; (iii) market conditions for finished products, including competition from other global and domestic food processors, supply and pricing of competing products and alternative proteins and demand for alternative proteins; (iv) successful rationalization of existing facilities and operating efficiencies of the facilities; (v) risks associated with our commodity purchasing activities; (vi) access to foreign markets together with foreign economic conditions, including currency fluctuations, import/export restrictions and foreign politics; (vii) outbreak of a livestock disease (such as avian influenza (AI) or bovine spongiform encephalopathy (BSE)), which could have an adverse effect on livestock we own, the availability of livestock we purchase, consumer perception of certain protein products or our ability to access certain domestic and foreign markets; (viii) changes in availability and relative costs of labor and contract growers and our ability to maintain good relationships with employees, labor unions, contract growers and independent producers providing us livestock; (ix) issues related to food safety, including costs resulting from product recalls, regulatory compliance and any related claims or litigation; (x) changes in consumer preference and diets and our ability to identify and react to consumer trends; (xi) significant marketing plan changes by large customers or loss of one or more large customers; (xii) adverse results from litigation; (xiii) impacts on our operations caused by factors and forces beyond our control, such as natural disasters, fire, bioterrorism, pandemic or extreme weather; (xiv) risks associated with leverage, including cost increases due to rising interest rates or changes in debt ratings or outlook; (xv) compliance with and changes to regulations and laws (both domestic and foreign), including changes in accounting standards, tax laws, environmental laws, agricultural laws and occupational, health and safety laws; (xvi) our ability to make effective acquisitions or joint ventures and successfully integrate newly acquired businesses into existing operations; (xvii) failures or security breaches of our information technology systems; (xviii) effectiveness of advertising and marketing programs; and (xix) those factors listed under Item 1A. “Risk Factors” included in our Annual Report filed on Form 10-K for the period ended October 3, 2015. Tyson Foods, Inc. Investor Presentation | February 2016 |2
- 3. Highlights One of the largest food companies in the world Advantaged brands in advantaged product categories Multi-protein, multi-channel, all day parts, all meal occasions #1 or #2 brands in 13 categories #2 in U.S. frozen food with products in growing categories Strong cash flow generation Estimating annual synergies from Hillshire Brands acquisition of more than $500 million in FY16 and more than $700 million in FY17 Achieved $322 million in synergies in FY15 Tyson Foods, Inc. Investor Presentation | February 2016 |3
- 4. Tyson Foods is #8 in Total U.S. CPG Retail Sales Among branded food companies > $5B Source: IRI Total U.S. Multi-Outlet Sales, 52 weeks ending 1/24/16 $25.5 $21.8 $16.5 $13.4 $9.0 $8.5 $7.8 $7.7 $6.4 $6.2 $5.6 $5.6 $5.4 Sales in Billions Tyson Foods, Inc. Investor Presentation | February 2016 |12
- 5. Tyson Foods is #2 in Frozen Food Leads frozen poultry and breakfast foods Source: IRI U.S. Multi-Outlet frozen category sales, 52 weeks ending 1/24/2016 $7.2 $3.6 $3.2 $2.3 $2.0 $1.8 $1.8 $1.2 $1.1 Sales in Billions Tyson Foods, Inc. Investor Presentation | February 2016 |13
- 6. Multiple Areas to Grow in Large Categories 89% 76% 70% 62% 62% 55% 38% 28% 29% 8% 26% 27% 34% 23% Lunchmeat Hot Dogs Uncooked Bacon Breakfast Sausage Smoked Sausage Frozen Cooked Prepared Chicken Frozen Protein Breakfast Category HH Penetration Brand HH Penetration Source: IRI a) National Consumer Panel for 52 weeks ending 1/24/16 b) Total US Multi-Outlet for 52 weeks ending 1/24/16 Size of Category Dollar Growth (2-yr CAGR) $6.7Bn $2.6Bn $3.6Bn $2.0Bn $2.0Bn $2.6Bn $1.7Bn +3.5% +1.2% +2.8% +3.6% +6.5% -0.7% +3.5% Tyson Foods, Inc. Investor Presentation | February 2016 |14
- 7. Leading Brand Shares in Key Categories Sources: IRI, Total US Multi-Outlet, 52 weeks ending 1/24/16 *Nielsen Perishables Group, Total U.S. Fresh, 52 weeks ending 12/26/15 Market Share in Leading Categories Brand Category Share Position Fresh Chicken* #1 Frozen Cooked Chicken #1 Frozen Uncooked Chicken #1 Frozen Uncooked Cornish Chicken #1 Recipe Meats (Refrigerated Grilled & Ready Strips) #3 Stack Pack Bacon #1 Branded Bacon #3 Frozen Branded Waffles #2 Market Share in Leading Categories Brand Category Share Position Breakfast Sausage #1 Frozen Protein Breakfast #1 Smoked Sausage #1 Branded Lunchmeat #2 Hot Dogs #1 Corn Dogs #1 Super Premium Sausage #1 Tyson Foods, Inc. Investor Presentation | February 2016 |15
- 8. Brand Portfolio Participates Across Meal Occasions Tyson Foods, Inc. Investor Presentation | February 2016 |8
- 9. Reframe from Product to Brand Tyson Foods, Inc. Investor Presentation | February 2016 |9
- 10. Products Tyson Foods, Inc. Investor Presentation | February 2016 |10
- 11. New Platforms Hillshire™ Snacking Grilled Chicken Bites Small Plates Ball Park® Beef Jerky Tyson Foods, Inc. Investor Presentation | February 2016 |11
- 12. Targeting Best-in-Class Innovation Vitality Tyson Foods, Inc. Investor Presentation | February 2016 |12 % of sales dollars from products created in the previous three years FY2014 FY2015 Goal 13-15% 11.9% 12.1% Hillshire Brands Tyson Retail Brands
- 13. Tyson Foods, Inc. Investor Presentation | February 2016 |13
- 14. Market Leadership Tyson Foods produces approximately 1 out of every 5 pounds of chicken, beef and pork in the United States U.S. Chicken Production Source: Watt Poultry USA, March 2015 Based on ready-to-cook pounds Top U.S. Beef Packers Source: Cattle Buyers Weekly, % of Daily Slaughter Capacity (head), 2015 U.S. Pork Production Source: National Pork Board 2014 Quick Facts Based on estimated U.S. slaughter capacity (head per day). JBS Swift and Cargill were combined into JBS USA to reflect pro forma production resulting from the JBS acquisition of Cargill’s pork operations. Tyson Foods 22% Pilgrim’s Pride 17% Sanderson Farms 7%Perdue Farms 7% Other 47% Tyson Foods, Inc. Investor Presentation | February 2016 |14 JBS USA 19% Hormel 8% Other 30% Tyson Foods 17% Smithfield 26% Tyson Foods 24% JBS USA 22% Cargill 19% National Beef 10% Other 25%
- 15. FY15 $40.6 Billion in Adjusted Sales* Up 9% over FY14 5.5% Total Company Adjusted Return on Sales* $2.25 Billion in Adjusted Operating Income* Up 37% over FY14 $2.6 Billion in Operating Cash Flow $3.15 Adjusted EPS* Up 7% over FY14 *Represents a non-GAAP financial measure. Adjusted sales, adjusted operating income, adjusted return on sales and adjusted EPS are explained and reconciled to comparable GAAP measures in the Appendix. Tyson Foods, Inc. Investor Presentation | February 2016 |15
- 16. FY15 Adjusted Sales* – $40.6 Billion Sales by Segment Sales by Distribution Channel Tyson Foods, Inc. Investor Presentation | February 2016 |16 Chicken 27% Beef 41% Prepared Foods 19% Pork 11% Other 2% Other 4% Consumer Products 52% Food Service 31% International 13% *Represents a non-GAAP financial measure, which is explained and reconciled to a comparable GAAP measure in the Appendix.
- 17. Tyson Foods FY15 International Sales FY15 International Sales $4.6 Billion* * Based on 52 weeks. Includes all exports and as well as in-country production in China and India. In-country production sales in Mexico and Brazil are excluded as we sold these operations in FY15. Tyson Foods, Inc. Investor Presentation | February 2016 |17 South Korea 8% Canada 6% Other 31% China & Hong Kong 22% Japan 15% Mexico 13% Taiwan 5%
- 18. Tyson Foods FY15 International Sales FY15 International Chicken Sales* $1.1 Billion** * Based on 52 weeks. ** Includes exports and all in-country production in China and India. In- country production sales in Mexico and Brazil are excluded as we sold these operations in FY15. FY15 International Beef Sales* $2.4 Billion Tyson Foods, Inc. Investor Presentation | February 2016 |18 China & Hong Kong 27% Brazil 7% India 6% Mexico 5%UAE 4% Other 41% Taiwan 3% Puerto Rico 3% Russia 2% Angola 2% Other 13% China & Hong Kong 26% Japan 14% Mexico 13% South Korea 13% Taiwan 7% Italy 6% Canada 4% Vietnam 4%
- 19. Tyson Foods FY15 International Sales FY15 International Pork Sales* $938 Million FY15 International Prepared Foods Sales* $126 Million Tyson Foods, Inc. Investor Presentation | February 2016 |19 Japan 35% Mexico 23% Canada 14% Other 13% China & H.K. 9% Canada 48% Mexico 19% Puerto Rico 6% Japan 4% Other 23%S. Korea 6% * Based on 52 weeks.
- 20. Adjusted EPS* Growth *Represents a non-GAAP financial measure. Adjusted EPS is explained and reconciled to a comparable GAAP measure in the Appendix. **Projected EPS guidance as of 02.05.16 Tyson Foods, Inc. Investor Presentation | February 2016 |20 FY12 FY13 FY14 FY15 FY16 proj. $2.94 $1.97 $2.26 $3.15 $3.85-3.95**
- 21. Tyson Foods Financial Trends **Represents a non-GAAP financial measure. EBITDA is explained and reconciled in the Appendix. Sales (Bn) EBITDA** (MM) Tyson Foods, Inc. Investor Presentation | February 2016 |21 $32.0 $33.1 $34.4 $37.3 * $40.6* FY11 FY12 FY13 FY14 FY15 $1,767 $1,731 $1,818 $1,897 $2,906 FY11 FY12 FY13 FY14 FY15 *Adjusted sales represents a non-GAAP financial measure, which is explained and reconciled in the Appendix.
- 22. Net Debt/EBITDA* FY10-13 = ~1× FY 2014 Adjusted Pro Forma Basis = 3.0×** FY 2015 Adjusted Basis = 2.0x** *Net Debt and EBITDA are non-GAAP financial measures. EBITDA is explained and reconciled to a comparable GAAP measure in the Appendix. Net Debt to EBITDA represents the ratio of our debt, net of cash and short-term investments, to EBITDA. Net Debt to EBITDA is presented as a supplemental financial measurement in the evaluation of our business. **Adjusted Net Debt/EBITDA and Adjusted Pro Forma Net Debt/EBITDA are explained and reconciled in the Appendix. Tyson Foods, Inc. Investor Presentation | February 2016 |22
- 23. FY2016 Outlook EPS of $3.85-3.95 Represents approximately 22-25% growth over FY15 adjusted EPS* Sales of ~$37B Includes impact of divestitures and decline in beef, pork and feed prices Synergy expectations of more than $500 million Prepared Foods Segment margins near the low end of the 10-12% range Chicken Segment margins more than 11% Pork Segment above its normalized range of 6-8% margins Beef Segment should at or above the low end of its normalized range of 1.5-3.0% *Represents a non-GAAP financial measure. **Projected EPS guidance as of 02.05.16 Tyson Foods, Inc. Investor Presentation | February 2016 |23
- 24. Synergies FY15 – $322 million realized FY16 – expecting more than $500 million FY17 – expecting more than $700 million Synergy Categories: Prepared Foods Improvements Procurement Manufacturing & Logistics Organizational & Fiduciary Tyson Foods, Inc. Investor Presentation | February 2016 |24
- 25. Priorities for Cash Growing our businesses organically through operational efficiency and capital expansion projects, along with investing in innovation and brand building Acquiring businesses that support our strategic objectives Returning cash to shareholders through share repurchases and dividends while maintaining plenty of liquidity and investment- grade credit ratings and continuing to expand debt capacity “Capital allocation priorities are governed by a disciplined focus on driving long-term shareholder value.” – Dennis Leatherby, CFO Tyson Foods, Inc. Investor Presentation | February 2016 |25
- 26. Debt Maturity Profile Debt Maturity Skyline as of 1.2.16 Fiscal Year Maturities ($ in millions) Tyson Foods, Inc. Investor Presentation | February 2016 |26 • Term loans are pre-payable at par • Excludes $123MM Tangible Equity Units amortizing note, $18MM TFI senior note due 2028, and $56MM other miscellaneous debt (e.g. capital leases, foreign debt, and discount on senior notes) • $1.25 billion revolving credit facility matures FY19; outstanding balance as of 1.2.16 was $0 • Notes of $638 million coming due in second quarter of fiscal 2016 will be retired with available liquidity 0 250 500 750 1,000 1,250 1,500 1,750 '16 '17 '18 '19 '20 '21 '22 '23 '24 '33 '34 '44 TFI Bonds Hillshire Bonds Term Loans Pre-Payable Pre-Payable
- 27. Why TSN? Consistent growth Higher, more stable earnings over time Advantaged brands in advantaged categories Innovation and insights Synergies Depth and breadth of portfolio to reach consumers at all day parts, all meal occasions, at home and away from home Built for Growth Tyson Foods, Inc. Investor Presentation | February 2016 |27
- 28. Appendix
- 29. EPS Reconciliation Tyson Foods, Inc. Investor Presentation | February 2016 |29 Unaudited Adjusted net income from continuing operations per share attributable to Tyson (adjusted EPS) is presented as a supplementary financial measurement in the evaluation of our business. We believe the presentation of adjusted EPS helps investors assess our financial performance from period to period and enhance understanding of our financial performance; however, adjusted EPS may not be comparable to those of other companies in our industry, which limits the usefulness as a comparative measure. Adjusted EPS is not a measure required by or calculated in accordance with GAAP and should not be considered as a substitute for any measure of financial performance reported in accordance with GAAP. Investors should rely primarily on our GAAP results, and use non-GAAP financial measures only supplementally in making investment decisions. 12 Months Ended October 3, 2015 September 27, 2014 September 28, 2013 September 29, 2012 EPS EPS EPS EPS Reported from Continuing Operations $ 2.95 $ 2.37 $ 2.31 $ 1.68 Less: Recognition of previously unrecognized tax benefit (0.06) (0.15) - - Insurance proceeds (net of costs) related to a legacy Hillshire Brands plant fire (0.02) - - - Gain on sale of equity securities (0.03) - - - Gain on sale of the Mexico operation (0.24) - - - Estimated impact of additional week (0.06) - - - Gain from currency translation adjustment - - (0.05) - Gain on sale of interest in an equity method investment - - - - Reversal of reserves for foreign uncertain tax positions - - - - Add: China Impairment 0.41 - - - Merger and integration costs 0.09 - - - Prepared Foods network optimization impairment charges 0.09 - - - Denison plant closure 0.02 - - - Loss related to early extinguishment of debt - - - 0.29 Brazil impairment/Mexico undistributed earnings tax - 0.16 - - Hillshire Brands acquisition, integration and costs associated with our Prepared Foods improvement plan - 0.37 - - Hillshire Brands post-closing results, purchase price accounting and costs related to a legacy Hillshire Brands plant fire - 0.07 - - Hillshire Brands acquisition financing incremental interest costs and share dilution - 0.12 - - Adjusted from Continuing Operations $ 3.15 $ 2.94 $ 2.26 $ 1.97
- 30. EBITDA Reconciliations Tyson Foods, Inc. Investor Presentation | February 2016 |30 In millions except ratio data Unaudited 12 Months Ended (b) October 3, 2015 September 27, 2014 Net income $ 1,224 $ 856 Less: Interest income (9) (7) Add: Interest expense 293 132 Add: Income tax expense 697 396 Add: Depreciation 609 494 Add: Amortization (a) 92 26 EBITDA $ 2,906 $ 1,897 Adjustments to EBITDA: Add: China impairment $ 169 $ - Add: Merger and integration costs 57 - Add: Prepared Foods network optimization impairment charges 59 - Add: Denison plant closure 12 - Add: Brazil impairment - 42 Add: Hillshire Brands purchase price accounting adjustments - 19 Add: Hillshire Brands acquisition, integration and costs associated with our Prepared Foods improvement plan - 197 Less: Insurance proceeds, net of costs related to a legacy Hillshire Brands plant fire (8) 12 Less: Gain on sale of the Mexico operation (161) - Less: Gain on sale of equity securities (21) - Total Adjusted EBITDA $ 3,013 $ 2,167 Pro forma Adjustments to EBITDA: Add: Hillshire Brands adjusted EBITDA (prior to acquisition) (c) n/a 422 Total Pro forma Adjusted EBITDA $ 3,013 $ 2,589 Total gross debt $ 6,725 $ 8,178 Less: Cash and cash equivalents (688) (438) Less: Short-term investments (2) (1) Total net debt $ 6,035 $ 7,739 Ratio Calculations: Gross debt/EBITDA 2.3x 4.3x Net debt/EBITDA 2.1x 4.1x Gross debt/Adjusted EBITDA 2.2x 3.8x Net debt/Adjusted EBITDA 2.0x 3.6x Gross debt/Pro forma Adjusted EBITDA n/a 3.2x Net debt/Pro forma Adjusted EBITDA n/a 3.0x Continued on next page
- 31. EBITDA Reconciliations Continued from previous page Tyson Foods, Inc. Investor Presentation | February 2016| (a) Excludes the amortization of debt discount expense of $10 million for the twelve months ended October 3, 2015, and September 27, 2014, respectively, as it is included in Interest expense. (b) (b) Adjusted EBITDA for fiscal 2015 was based on a 53-week year while fiscal 2014 was based on a 52-week year. (c) (c) Represents Hillshire Brands adjusted EBITDA, prior to our acquisition, for the eleven months ended August 28, 2014. This amount is added to our Adjusted EBITDA for the fiscal year ended September 27, 2014, in order for Net debt to Adjusted EBITDA to include a full twelve months of Hillshire Brands results on a pro forma basis for each of the periods presented. The pro forma adjusted EBITDA was derived from Hillshire Brand’s historical financial statements for the periods ended September 28, 2013 and June 28, 2014 as filed with the Securities and Exchange Commission, as well as amounts for the two months ended August 28, 2014, prior to the closing of the acquisition. These amounts were adjusted to remove the impact of deal costs related to Pinnacle Foods, Inc. and Tyson Foods, Inc. transactions, Storm Lake fire, and severance costs. We believe this pro forma presentation is useful and helps management, investors, and rating agencies enhance their understanding of our financial performance and to better highlight future financial trends on a comparable basis with Hillshire Brands results included for the periods presented given the significance of the acquisition to our overall results. EBITDA is defined as net income before interest, income taxes, depreciation and amortization. Net debt to EBITDA (and to Adjusted EBITDA) represents the ratio of our debt, net of cash and short-term investments, to EBITDA (and to Adjusted EBITDA). EBITDA, Adjusted EBITDA, net debt to EBITDA and net debt to Adjusted EBITDA are presented as supplemental financial measurements in the evaluation of our business. Adjusted EBITDA is a tool intended to assist our management and investors in comparing our performance on consistent basis for purposes of business decision-making by removing the impact of certain items that management believes do not directly reflect our core operations on an ongoing basis. We believe the presentation of these financial measures helps management and investors to assess our operating performance from period to period, including our ability to generate earnings sufficient to service our debt, and enhances understanding of our financial performance and highlights operational trends. These measures are widely used by investors and rating agencies in the valuation, comparison, rating and investment recommendations of companies; however, the measurements of EBITDA (and Adjusted EBITDA) and net debt to EBITDA (and to Adjusted EBITDA) may not be comparable to those of other companies, which limits their usefulness as comparative measures. EBITDA (and Adjusted EBITDA) and net debt to EBITDA (and to Adjusted EBITDA) are not measures required by or calculated in accordance with generally accepted accounting principles (GAAP) and should not be considered as substitutes for net income or any other measure of financial performance reported in accordance with GAAP or as a measure of operating cash flow or liquidity. EBITDA (and Adjusted EBITDA) is a useful tool for assessing, but is not a reliable indicator of, our ability to generate cash to service our debt obligations because certain of the items added to net income to determine EBITDA (and Adjusted EBITDA) involve outlays of cash. As a result, actual cash available to service our debt obligations will be different from EBITDA (and Adjusted EBITDA). Investors should rely primarily on our GAAP results, and use non-GAAP financial measures only supplementally, in making investment decisions.
- 32. Tyson Foods, Inc. Investor Presentation | February 2016| EBITDA Reconciliations In millions except ratio data Unaudited 2013 2012 2011 Net income $ 778 $ 576 $ 733 Less: Interest income (7) (12) (11) Add: Interest expense 145 356 242 Add: Income tax expense (a) 411 351 341 Add: Depreciation 474 443 433 Add: Amortization (b) 17 17 29 EBITDA $ 1,818 $ 1,731 $ 1,767 Total gross debt $ 2,408 $ 2,432 $ 2,182 Less: Cash and cash equivalents (1,145) (1,071) (716) Less: Short-term investments (1) (3) (2) Total net debt $ 1,262 $ 1,358 $ 1,464 Ratio calculations: Gross debt/EBITDA 1.3x 1.4x 1.2x Net debt/EBITDA 0.7x 0.8x 0.8x (a) Includes income tax expense of discontinued operation. (b) (b) Excludes the amortization of debt discount expense of $28 million, $39 million and $44 million for fiscal 2013, 2012 and 2011, respectively, as it is included in Interest expense. EBITDA represents net income, net of interest, income tax and depreciation and amortization. Net debt to EBITDA represents the ratio of our debt, net of cash and short-term investments, to EBITDA. EBITDA and net debt to EBITDA are presented as supplemental financial measurements in the evaluation of our business. We believe the presentation of these financial measures helps investors to assess our operating performance from period to period, including our ability to generate earnings sufficient to service our debt, and enhances understanding of our financial performance and highlights operational trends. These measures are widely used by investors and rating agencies in the valuation, comparison, rating and investment recommendations of companies; however, the measurements of EBITDA and net debt to EBITDA may not be comparable to those of other companies, which limits their usefulness as comparative measures. EBITDA and net debt to EBITDA are not measures required by or calculated in accordance with generally accepted accounting principles (GAAP) and should not be considered as substitutes for net income or any other measure of financial performance reported in accordance with GAAP or as a measure of operating cash flow or liquidity. EBITDA is a useful tool for assessing, but is not a reliable indicator of, our ability to generate cash to service our debt obligations because certain of the items added to net income to determine EBITDA involve outlays of cash. As a result, actual cash available to service our debt obligations will be different from EBITDA. Investors should rely primarily on our GAAP results and use non-GAAP financial measures only supplementally in making investment decisions.
- 33. Sales Reconciliations In millions Unaudited (a) The estimated impact of the additional week in fiscal 2015 was calculated by dividing unadjusted sales for the fourth quarter of fiscal 2015 by 14 weeks. Adjusted sales is presented as a supplementary financial measurement in the evaluation of our business. We believe the presentation of adjusted sales helps investors assess our financial performance from period to period and enhances understanding of our financial performance; however, adjusted sales may not be comparable to those of other companies in our industry, which limits the usefulness as comparative measures. Adjusted sales is not a measure required by or calculated in accordance with GAAP and should not be considered as a substitute for any measure of financial performance reported in accordance with GAAP. Investors should rely primarily on our GAAP results and use non-GAAP financial measures only supplementally in making investment decisions. Tyson Foods, Inc. Investor Presentation | February 2016| Fiscal Year 2015 2014 Reported sales $ 41,373 $ 37,580 Less: Impact of additional week (a) (750) - Less: Hillshire Brands post-closing sales - (325) Adjusted sales $ 40,623 $ 37,255
- 34. Adjusted Sales, Adjusted Operating Income (Loss), Adjusted Operating Margin Reconciliations Tyson Foods, Inc. Investor Presentation | February 2016 |34 $ In millions Unaudited (a) The estimated impact of the additional week in the 12 months of fiscal 2015 was calculated by dividing unadjusted sales for the fourth quarter of fiscal 2015 by 14 weeks. (b) Impact of additional week was calculated by using the fourth quarter of fiscal 2015 adjusted operating income (prior to the additional week impact) divided by 14 weeks. Chicken Beef Pork Prepared Foods Other Intersegment Sales Total Reported sales 11,390$ 17,236$ 5,262$ 7,822$ 879$ (1,216)$ 41,373$ Less: Estimated impact of additional week (a) (216) (315) (93) (143) (8) 25 (750) Adjusted sales 11,174$ 16,921$ 5,169$ 7,679$ 871$ (1,191)$ 40,623$ Reported operating income (loss) 1,366$ (66)$ 380$ 588$ (99)$ -$ 2,169$ Add: China impairment - - - - 169 - 169 Add: Merger and integration costs - - - 10 47 - 57 Add: Prepared Foods network optimization charges - - - 59 - - 59 Add: Denison plant closure - 12 - - - - 12 Less: Insurance proceeds (net of costs) related to a legacy Hillshire Brands plant fire - - - (8) - - (8) Less: Gain on sale of the Mexico operation - - - - (161) - (161) Adjusted operating income prior to adjustment for additional week 1,366 (54) 380 649 (44) - 2,297 Less: Estimated impact of additional week (b) (26) 1 (7) (13) 1 - (44) Adjusted operating income (loss) 1,340$ (53)$ 373$ 636$ (43)$ -$ 2,253$ Adjusted operating margin % 12.0% -0.3% 7.2% 8.3% n/a n/a 5.5% (for the 12 months ended October 3, 2015) Adjusted Sales, Adjusted Operating Income (Loss) and Adjusted Operating Margin Adjusted sales, adjusted operating income and adjusted operating margin are presented as supplementary financial measurements in the evaluation of our business. We believe the presentation of adjusted sales, adjusted operating income and adjusted operating margin helps investors assess our financial performance from period to period and enhances understanding of our financial performance; however, adjusted sales, adjusted operating income and adjusted operating margin may not be comparable to those of other companies in our industry, which limits the usefulness as comparative measures. Adjusted sales, adjusted operating income and adjusted operating margin are not measures required by or calculated in accordance with GAAP and should not be considered as substitutes for any measures of financial performance reported in accordance with GAAP. Investors should rely primarily on our GAAP results and use non-GAAP financial measures only supplementally in making investment decisions.