(d) | Exhibit |
Exhibit Number | Description |
99.1 | Press Release, dated January 31, 2014, announcing the unaudited results of operations of Tyson Foods, Inc. for its first quarter ended December 28, 2013 |
TYSON FOODS, INC. | |||
Date: January 31, 2014 | By: | /s/ Dennis Leatherby | |
Name: | Dennis Leatherby | ||
Title: | Executive Vice President and | ||
Chief Financial Officer |
(in millions, except per share data) | First Quarter | ||||||
2014 | 2013 | ||||||
Sales | $ | 8,761 | $ | 8,366 | |||
Operating Income | 412 | 304 | |||||
Income from Continuing Operations | 252 | 172 | |||||
Loss from Discontinued Operation, Net of Tax | — | (4 | ) | ||||
Net Income | 252 | 168 | |||||
Less: Net Loss Attributable to Noncontrolling Interests | (2 | ) | (5 | ) | |||
Net Income Attributable to Tyson | $ | 254 | $ | 173 | |||
Net Income Per Share from Continuing Operations Attributable to Tyson | $ | 0.72 | $ | 0.49 | |||
Net Income Per Share Attributable to Tyson | $ | 0.72 | $ | 0.48 |
• | EPS up 47% to $0.72 compared to $0.49 in first quarter of prior year |
• | Sales of $8.8 billion, an increase of 4.7% over first quarter of prior year |
• | Operating income increased 36% to $412 million |
• | Overall operating margin was 4.7% |
◦ | Record Chicken segment operating income of $225 million |
▪ | 7.5% operating margin |
◦ | Pork segment operating income of $121 million |
▪ | 8.5% operating margin |
• | Repurchased 4.6 million shares for $150 million |
• | Liquidity totaled $1.8 billion at December 28, 2013 |
Sales | ||||||||||
(for the first quarter ended December 28, 2013, and December 29, 2012) | ||||||||||
First Quarter | ||||||||||
Volume | Avg. Price | |||||||||
2014 | 2013 | Change | Change | |||||||
Chicken | $ | 2,981 | $ | 2,920 | 3.6 | % | (1.4 | )% | ||
Beef | 3,734 | 3,485 | 4.1 | % | 2.9 | % | ||||
Pork | 1,424 | 1,363 | (2.1 | )% | 6.7 | % | ||||
Prepared Foods | 907 | 841 | 3.5 | % | 4.2 | % | ||||
Other | — | 20 | n/a | n/a | ||||||
Intersegment Sales | (285 | ) | (263 | ) | n/a | n/a | ||||
Total | $ | 8,761 | $ | 8,366 | 2.5 | % | 2.4 | % |
Operating Income (Loss) | ||||||||||
(for the first quarter ended December 28, 2013, and December 29, 2012) | ||||||||||
First Quarter | ||||||||||
Operating Margin | ||||||||||
2014 | 2013 | 2014 | 2013 | |||||||
Chicken | $ | 225 | $ | 111 | 7.5 | % | 3.8 | % | ||
Beef | 58 | 46 | 1.6 | % | 1.3 | % | ||||
Pork | 121 | 125 | 8.5 | % | 9.2 | % | ||||
Prepared Foods | 16 | 33 | 1.8 | % | 3.9 | % | ||||
Other | (8 | ) | (11 | ) | n/a | n/a | ||||
Total | $ | 412 | $ | 304 | 4.7 | % | 3.6 | % |
• | Chicken - Sales volumes grew due to increased international production and mix of rendered product sales. The decrease in average sales price was primarily due to lower feed ingredient costs and volatile markets in our international operations, partially offset by mix changes. Operating income was positively impacted by increased sales volume, operational improvements and lower feed ingredient costs of $170 million. These increases were partially offset by losses of approximately $28 million in our international operations and decreased average sales price. |
• | Beef - Sales volumes increased due to better demand for our beef products. Average sales price increased due to lower domestic availability of fed cattle supplies, which drove up livestock costs. Operating income increased due to improved operational execution, less volatile live cattle markets and improved export markets, partially offset by increased operating costs. |
• | Pork - Sales volumes decreased as a result of balancing our supply with customer demand and reduced exports. Average sales price increased primarily due to mix changes and lower total hog supplies, which resulted in higher input costs. While reduced compared to prior year, operating income remained strong despite brief periods of imbalance in industry supply and customer demand. We were able to maintain strong operating margins by maximizing our revenues relative to live hog markets, partially due to operational and mix performance. |
• | Prepared Foods - Sales volumes increased as a result of improved demand for our prepared foods products and incremental volumes from the purchase of two businesses later in fiscal 2013. Average sales price grew due to better product mix and price increases associated with higher input costs. Operating income decreased, despite increases in sales volumes and average sales price, as a result of higher raw material and other input costs of approximately $40 million and additional costs incurred as we invested in our lunchmeat business and growth platforms. Because many of our sales contracts are formula based or shorter-term in nature, we are typically able to offset rising input costs through pricing. However, there is a lag time for price increases to take effect. |
• | Chicken – We expect domestic chicken production to increase around 3% in fiscal 2014 compared to fiscal 2013. Based on current futures prices, we expect lower feed costs in fiscal 2014 compared to fiscal 2013 of approximately $600 million. Many of our sales contracts are formula based or shorter-term in nature, but there may be a lag time for price changes to take effect. Due to the relative value of chicken compared to other proteins, we believe demand will remain strong in fiscal 2014. We believe our Chicken segment will be in or above its normalized range of 5.0%-7.0% for fiscal 2014. |
• | Beef – We expect to see a reduction of industry fed cattle supplies of 2-3% in fiscal 2014 as compared to fiscal 2013. Although we generally expect adequate supplies in regions we operate our plants, there may be periods of imbalance of fed cattle supply and demand. For fiscal 2014, we believe our Beef segment's profitability will be similar to fiscal 2013, but could be below its normalized range of 2.5%-4.5%. |
• | Pork – We expect industry hog supplies to decrease around 3% in fiscal 2014 compared to fiscal 2013, offset by increased average live weights. For fiscal 2014, we believe our Pork segment will be in its normalized range of 6.0%-8.0%. |
• | Prepared Foods – We expect operational improvements and pricing to offset increased raw material costs. Because many of our sales contracts are formula based or shorter-term in nature, we are typically able to offset rising input costs through increased pricing. As we continue to invest heavily in our growth platforms, we believe our Prepared Foods segment could be slightly below its normalized range of 4.0%-6.0% for fiscal 2014. |
• | Sales – We expect fiscal 2014 sales to approximate $36 billion as we continue to execute our strategy of accelerating growth in domestic value-added chicken sales, prepared food sales and international chicken production. |
• | Capital Expenditures – We expect fiscal 2014 capital expenditures to approximate $700 million. |
• | Net Interest Expense – We expect net interest expense will approximate $100 million for fiscal 2014. |
• | Debt and Liquidity – We expect total liquidity, which was $1.8 billion at December 28, 2013, to be well above our goal to maintain liquidity in excess of $1.2 billion. |
• | Share Repurchases – We expect to continue repurchasing shares under our share repurchase program. As of December 28, 2013, 9.6 million shares remained authorized for repurchases. On January 30, 2014, our Board of Directors approved an increase of 25 million shares authorized for repurchase under our share repurchase program. The timing and extent to which we repurchase shares will depend upon, among other things, our working capital needs, market conditions, liquidity targets, our debt obligations and regulatory requirements. |
Three Months Ended | |||||||
December 28, 2013 | December 29, 2012 | ||||||
Sales | $ | 8,761 | $ | 8,366 | |||
Cost of Sales | 8,076 | 7,827 | |||||
Gross Profit | 685 | 539 | |||||
Selling, General and Administrative | 273 | 235 | |||||
Operating Income | 412 | 304 | |||||
Other (Income) Expense: | |||||||
Interest income | (2 | ) | (1 | ) | |||
Interest expense | 28 | 37 | |||||
Other, net | 3 | — | |||||
Total Other (Income) Expense | 29 | 36 | |||||
Income from Continuing Operations before Income Taxes | 383 | 268 | |||||
Income Tax Expense | 131 | 96 | |||||
Income from Continuing Operations | 252 | 172 | |||||
Loss from Discontinued Operation, Net of Tax | — | (4 | ) | ||||
Net Income | 252 | 168 | |||||
Less: Net Loss Attributable to Noncontrolling Interests | (2 | ) | (5 | ) | |||
Net Income Attributable to Tyson | $ | 254 | $ | 173 | |||
Amounts attributable to Tyson: | |||||||
Net Income from Continuing Operations | 254 | 177 | |||||
Net Loss from Discontinued Operation | — | (4 | ) | ||||
Net Income Attributable to Tyson | $ | 254 | $ | 173 | |||
Weighted Average Shares Outstanding: | |||||||
Class A Basic | 271 | 285 | |||||
Class B Basic | 70 | 70 | |||||
Diluted | 354 | 362 | |||||
Net Income Per Share from Continuing Operations Attributable to Tyson: | |||||||
Class A Basic | $ | 0.76 | $ | 0.51 | |||
Class B Basic | $ | 0.68 | $ | 0.46 | |||
Diluted | $ | 0.72 | $ | 0.49 | |||
Net Loss Per Share from Discontinued Operation Attributable to Tyson: | |||||||
Class A Basic | $ | — | $ | (0.01 | ) | ||
Class B Basic | $ | — | $ | (0.01 | ) | ||
Diluted | $ | — | $ | (0.01 | ) | ||
Net Income Per Share Attributable to Tyson: | |||||||
Class A Basic | $ | 0.76 | $ | 0.50 | |||
Class B Basic | $ | 0.68 | $ | 0.45 | |||
Diluted | $ | 0.72 | $ | 0.48 | |||
Dividends Declared Per Share: | |||||||
Class A | $ | 0.100 | $ | 0.160 | |||
Class B | $ | 0.090 | $ | 0.144 | |||
Sales Growth | 4.7 | % | |||||
Margins: (Percent of Sales) | |||||||
Gross Profit | 7.8 | % | 6.4 | % | |||
Operating Income | 4.7 | % | 3.6 | % | |||
Income from Continuing Operations | 2.9 | % | 2.1 | % | |||
Effective Tax Rate for Continuing Operations | 34.3 | % | 35.8 | % |
December 28, 2013 | September 28, 2013 | ||||||
Assets | |||||||
Current Assets: | |||||||
Cash and cash equivalents | $ | 825 | $ | 1,145 | |||
Accounts receivable, net | 1,497 | 1,497 | |||||
Inventories | 2,778 | 2,817 | |||||
Other current assets | 130 | 145 | |||||
Total Current Assets | 5,230 | 5,604 | |||||
Net Property, Plant and Equipment | 4,072 | 4,053 | |||||
Goodwill | 1,907 | 1,902 | |||||
Intangible Assets | 133 | 138 | |||||
Other Assets | 502 | 480 | |||||
Total Assets | $ | 11,844 | $ | 12,177 | |||
Liabilities and Shareholders’ Equity | |||||||
Current Liabilities: | |||||||
Current debt | $ | 52 | $ | 513 | |||
Accounts payable | 1,477 | 1,359 | |||||
Other current liabilities | 1,077 | 1,138 | |||||
Total Current Liabilities | 2,606 | 3,010 | |||||
Long-Term Debt | 1,890 | 1,895 | |||||
Deferred Income Taxes | 450 | 479 | |||||
Other Liabilities | 582 | 560 | |||||
Total Tyson Shareholders’ Equity | 6,285 | 6,201 | |||||
Noncontrolling Interests | 31 | 32 | |||||
Total Shareholders’ Equity | 6,316 | 6,233 | |||||
Total Liabilities and Shareholders’ Equity | $ | 11,844 | $ | 12,177 |
Three Months Ended | |||||||
December 28, 2013 | December 29, 2012 | ||||||
Cash Flows From Operating Activities: | |||||||
Net income | $ | 252 | $ | 168 | |||
Depreciation and amortization | 127 | 130 | |||||
Deferred income taxes | (15 | ) | (9 | ) | |||
Convertible debt discount | (92 | ) | — | ||||
Other, net | 22 | 23 | |||||
Net changes in working capital | 67 | (122 | ) | ||||
Cash Provided by Operating Activities | 361 | 190 | |||||
Cash Flows From Investing Activities: | |||||||
Additions to property, plant and equipment | (140 | ) | (157 | ) | |||
Purchases of marketable securities | (10 | ) | (7 | ) | |||
Proceeds from sale of marketable securities | 9 | 8 | |||||
Other, net | (3 | ) | 4 | ||||
Cash Used for Investing Activities | (144 | ) | (152 | ) | |||
Cash Flows From Financing Activities: | |||||||
Payments on debt | (379 | ) | (35 | ) | |||
Net proceeds from borrowings | 6 | 24 | |||||
Purchases of Tyson Class A common stock | (159 | ) | (115 | ) | |||
Dividends | (25 | ) | (53 | ) | |||
Stock options exercised | 12 | 19 | |||||
Other, net | 5 | 2 | |||||
Cash Used for Financing Activities | (540 | ) | (158 | ) | |||
Effect of Exchange Rate Changes on Cash | 3 | — | |||||
Decrease in Cash and Cash Equivalents | (320 | ) | (120 | ) | |||
Cash and Cash Equivalents at Beginning of Year | 1,145 | 1,071 | |||||
Cash and Cash Equivalents at End of Period | $ | 825 | $ | 951 |
Three Months Ended | Fiscal Year Ended | Twelve Months Ended | ||||||||||||
December 28, 2013 | December 29, 2012 | September 28, 2013 | December 28, 2013 | |||||||||||
Net income | $ | 252 | $ | 168 | $ | 778 | $ | 862 | ||||||
Less: Interest income | (2 | ) | (1 | ) | (7 | ) | (8 | ) | ||||||
Add: Interest expense | 28 | 37 | 145 | 136 | ||||||||||
Add: Income tax expense (a) | 131 | 96 | 409 | 444 | ||||||||||
Add: Depreciation | 120 | 119 | 474 | 475 | ||||||||||
Add: Amortization (b) | 4 | 4 | 17 | 17 | ||||||||||
EBITDA | $ | 533 | $ | 423 | $ | 1,816 | $ | 1,926 | ||||||
Total gross debt | $ | 2,408 | $ | 1,942 | ||||||||||
Less: Cash and cash equivalents | (1,145 | ) | (825 | ) | ||||||||||
Less: Short-term investments | (1 | ) | (1 | ) | ||||||||||
Total net debt | $ | 1,262 | $ | 1,116 | ||||||||||
Ratio Calculations: | ||||||||||||||
Gross debt/EBITDA | 1.3x | 1.0x | ||||||||||||
Net debt/EBITDA | 0.7x | 0.6x |
(a) | Includes income tax expense of discontinued operation. |
(b) | Excludes the amortization of debt discount expense of $3 million and $7 million for the 3 months ended December 28, 2013, and December 29, 2012, respectively, and $28 million for the fiscal year ended September 28, 2013, as it is included in Interest expense. |