(d) | Exhibit |
Exhibit Number | Description |
99.1 | Press release, dated January 30, 2015, announcing the unaudited results of operations of Tyson Foods, Inc. for its first quarter and three months ended December 27, 2014 |
TYSON FOODS, INC. | |||
Date: January 30, 2015 | By: | /s/ Dennis Leatherby | |
Name: | Dennis Leatherby | ||
Title: | Executive Vice President and | ||
Chief Financial Officer |
(in millions, except per share data) | First Quarter | ||||||
2015 | 2014 | ||||||
Sales | $ | 10,817 | $ | 8,761 | |||
Operating Income | 509 | 412 | |||||
Net Income | 310 | 252 | |||||
Less: Net Income (Loss) Attributable to Noncontrolling Interests | 1 | (2 | ) | ||||
Net Income Attributable to Tyson | $ | 309 | $ | 254 | |||
Adjusted¹ Operating Income | $ | 564 | $ | 412 | |||
Net Income Per Share Attributable to Tyson | $ | 0.74 | $ | 0.72 | |||
Adjusted¹ Net Income Per Share Attributable to Tyson | $ | 0.77 | $ | 0.72 |
• | Record sales of $10.8 billion, an increase of 23% over first quarter of prior year |
• | Record adjusted operating income up 37% to $564 million |
• | Adjusted EPS up 7% to $0.77 compared to $0.72 in first quarter of prior year |
• | Reduced total debt by $650 million during the first quarter |
• | Overall adjusted operating margin was 5.2% |
• | Chicken segment operating margins of 12.6% in first quarter |
• | Captured $60 million in synergies during the first quarter |
Sales | ||||||||||
(for the first quarter ended December 27, 2014, and December 28, 2013) | ||||||||||
First Quarter | ||||||||||
Volume | Avg. Price | |||||||||
2015 | 2014 | Change | Change | |||||||
Chicken | $ | 2,780 | $ | 2,656 | 3.1 | % | 1.5 | % | ||
Beef | 4,391 | 3,734 | (2.7 | )% | 20.9 | % | ||||
Pork | 1,540 | 1,424 | 1.1 | % | 7.0 | % | ||||
Prepared Foods | 2,133 | 907 | 89.5 | % | 24.1 | % | ||||
International | 305 | 327 | (3.8 | )% | (2.9 | )% | ||||
Other | — | — | n/a | n/a | ||||||
Intersegment Sales | (332 | ) | (287 | ) | n/a | n/a | ||||
Total | $ | 10,817 | $ | 8,761 | 7.7 | % | 14.7 | % |
Operating Income (Loss) | ||||||||||
(for the first quarter ended December 27, 2014, and December 28, 2013) | ||||||||||
First Quarter | ||||||||||
Operating Margin | ||||||||||
2015 | 2014 | 2015 | 2014 | |||||||
Chicken | $ | 351 | $ | 253 | 12.6 | % | 9.5 | % | ||
Beef | (6 | ) | 58 | (0.1 | )% | 1.6 | % | |||
Pork | 122 | 121 | 7.9 | % | 8.5 | % | ||||
Prepared Foods | 71 | 16 | 3.3 | % | 1.8 | % | ||||
International | (14 | ) | (28 | ) | (4.6 | )% | (8.6 | )% | ||
Other | (15 | ) | (8 | ) | n/a | n/a | ||||
Total | $ | 509 | $ | 412 | 4.7 | % | 4.7 | % |
Adjusted Operating Income (Loss) | ||||||||||
(for the first quarter ended December 27, 2014, and December 28, 2013) | ||||||||||
First Quarter | ||||||||||
Adjusted Operating Margin | ||||||||||
2015 | 2014 | 2015 | 2014 | |||||||
Chicken | $ | 351 | $ | 253 | 12.6 | % | 9.5 | % | ||
Beef | (6 | ) | 58 | (0.1 | )% | 1.6 | % | |||
Pork | 122 | 121 | 7.9 | % | 8.5 | % | ||||
Prepared Foods | 111 | 16 | 5.2 | % | 1.8 | % | ||||
International | (14 | ) | (28 | ) | (4.6 | )% | (8.6 | )% | ||
Other | — | (8 | ) | n/a | n/a | |||||
Total | $ | 564 | $ | 412 | 5.2 | % | 4.7 | % |
• | Prepared Foods operating income was adjusted for the following: |
◦ | Increase of $36 million of ongoing costs related to a legacy Hillshire Brands plant fire. |
◦ | Increase of $4 million related to merger and acquisition costs. |
• | Other adjusted operating income increased by $15 million related to merger and integration costs. |
• | Chicken - Sales volume grew as a result of stronger demand for chicken products. Average sales price increased as a result of market conditions and sales mix changes. Operating income increased due to higher average sales price and volumes in addition to lower feed ingredient costs which decreased $110 million during the first quarter of fiscal 2015. |
• | Beef - Sales volume decreased due to a reduction in live cattle processed. Average sales price increased due to lower domestic availability of beef products. Operating income decreased due to higher fed cattle costs and periods of reduced consumption of beef products, which made it difficult to pass along increased input costs, as well as lower sales volumes and increased operating costs. |
• | Pork - Increased demand for our pork products drove higher average sales price and sales volume. Additionally, our average sales price increased due to lower total hog supplies which resulted in higher input costs. Operating income remained strong as we maximized our revenues relative to live hog markets, partially attributable to operational and mix performance. |
• | Prepared Foods - Sales volume increased primarily due to incremental volumes from the acquisition of Hillshire Brands as well as improved demand for our prepared foods products. Average sales price increased due to price increases associated with better product mix which was positively impacted by the acquisition of Hillshire Brands, as well as increased prices associated with higher input costs. Despite incurring $10 million of higher raw material costs related to our legacy Prepared Foods business along with $40 million of ongoing costs related to a legacy Hillshire Brands plant fire and merger and acquisition costs, operating income improved due to an increase in sales volume and average sales price mainly attributed to Hillshire Brands. Additionally, Prepared Foods operating income was positively impacted by $55 million related to profit improvement initiatives and Hillshire Brands synergies. |
• | International - Sales volume decreased due to the sale of the Brazil operation during the first quarter of fiscal 2015. Average sales price decreased due to supply imbalances associated with weak demand in China. Operating loss improved due to the sale of the Brazil operation and better market conditions in Mexico. |
• | Chicken – Current USDA data shows an increase in chicken production of 3% in fiscal 2015. More recent data indicates a greater increase in supply; however, we believe demand will more than keep pace with the supply change. Based on current futures prices, we expect lower feed costs in fiscal 2015 compared to fiscal 2014 of approximately $400 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. Based on the strong demand forecast and anticipated favorable pricing environment, we now believe our Chicken segment's operating margin will be above 11% for the remainder of fiscal 2015. |
• | Beef – We expect to see a reduction of industry fed cattle supplies of 4-5% in fiscal 2015 as compared to fiscal 2014. 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 2015, we believe our Beef segment's profitability will be slightly below fiscal 2014. |
• | Pork – We expect industry hog supplies to increase around 2-3% in fiscal 2015 compared to fiscal 2014. For fiscal 2015, we believe our Pork segment's operating margin will be in its normalized range of 6-8%. |
• | Prepared Foods – We are proceeding with the integration of Hillshire Brands. In fiscal 2015, we expect to realize in excess of $225 million of synergies from the acquisition as well as our profit improvement plan for our legacy Prepared Foods business, with the majority to be realized in our Prepared Foods segment. Also, we believe our improved brand portfolio and innovation pipeline will partially offset expected input cost inflation. We expect our fiscal 2015 operating margin will be in excess of 6%, and the long-term operating margin for this business should be between 10-12%. |
• | International – We expect to complete the sale of our Mexico chicken production operation in the second quarter of fiscal 2015. As a result, we expect our International revenues in fiscal 2015 to decrease by approximately $600-650 million as compared to fiscal 2014. Excluding any gain associated with the sale of our Mexico operations, we expect the International segment's adjusted operating loss to improve by approximately $35 million in fiscal 2015. |
• | Sales – We expect fiscal 2015 sales to approximate $42 billion as we integrate Hillshire Brands and continue to accelerate growth in domestic value-added chicken sales and Prepared Food sales. |
• | Capital Expenditures – We expect fiscal 2015 capital expenditures to be approximately $900 million. |
• | Net Interest Expense – We expect fiscal 2015 net interest expense to be approximately $280 million. |
• | Liquidity – We expect total liquidity, which was $1.6 billion at December 27, 2014, to be above our goal to maintain liquidity in excess of $1.2 billion. |
• | Share Repurchases – We currently plan to repurchase a number of shares equivalent to the dilution expected to be realized from the current fiscal year grant under our stock-based compensation programs. |
Three Months Ended | |||||||
December 27, 2014 | December 28, 2013 | ||||||
Sales | $ | 10,817 | $ | 8,761 | |||
Cost of Sales | 9,861 | 8,076 | |||||
Gross Profit | 956 | 685 | |||||
Selling, General and Administrative | 447 | 273 | |||||
Operating Income | 509 | 412 | |||||
Other (Income) Expense: | |||||||
Interest income | (2 | ) | (2 | ) | |||
Interest expense | 77 | 28 | |||||
Other, net | (1 | ) | 3 | ||||
Total Other (Income) Expense | 74 | 29 | |||||
Income before Income Taxes | 435 | 383 | |||||
Income Tax Expense | 125 | 131 | |||||
Net Income | 310 | 252 | |||||
Less: Net Income (Loss) Attributable to Noncontrolling Interests | 1 | (2 | ) | ||||
Net Income Attributable to Tyson | $ | 309 | $ | 254 | |||
Weighted Average Shares Outstanding: | |||||||
Class A Basic | 336 | 271 | |||||
Class B Basic | 70 | 70 | |||||
Diluted | 416 | 354 | |||||
Net Income Per Share Attributable to Tyson: | |||||||
Class A Basic | $ | 0.77 | $ | 0.76 | |||
Class B Basic | $ | 0.71 | $ | 0.68 | |||
Diluted | $ | 0.74 | $ | 0.72 | |||
Dividends Declared Per Share: | |||||||
Class A | $ | 0.125 | $ | 0.100 | |||
Class B | $ | 0.113 | $ | 0.090 | |||
Sales Growth | 23.5 | % | |||||
Margins: (Percent of Sales) | |||||||
Gross Profit | 8.8 | % | 7.8 | % | |||
Operating Income | 4.7 | % | 4.7 | % | |||
Net Income Attributable to Tyson | 2.9 | % | 2.9 | % | |||
Effective Tax Rate | 28.8 | % | 34.3 | % |
December 27, 2014 | September 27, 2014 | ||||||
Assets | |||||||
Current Assets: | |||||||
Cash and cash equivalents | $ | 381 | $ | 438 | |||
Accounts receivable, net | 1,777 | 1,684 | |||||
Inventories | 3,192 | 3,274 | |||||
Other current assets | 375 | 379 | |||||
Assets held for sale | 213 | 446 | |||||
Total Current Assets | 5,938 | 6,221 | |||||
Net Property, Plant and Equipment | 5,211 | 5,130 | |||||
Goodwill | 6,700 | 6,706 | |||||
Intangible Assets, net | 5,246 | 5,276 | |||||
Other Assets | 663 | 623 | |||||
Total Assets | $ | 23,758 | $ | 23,956 | |||
Liabilities and Shareholders’ Equity | |||||||
Current Liabilities: | |||||||
Current debt | $ | 596 | $ | 643 | |||
Accounts payable | 2,147 | 1,806 | |||||
Other current liabilities | 1,157 | 1,207 | |||||
Liabilities held for sale | 54 | 141 | |||||
Total Current Liabilities | 3,954 | 3,797 | |||||
Long-Term Debt | 6,931 | 7,535 | |||||
Deferred Income Taxes | 2,473 | 2,450 | |||||
Other Liabilities | 1,263 | 1,270 | |||||
Total Tyson Shareholders’ Equity | 9,123 | 8,890 | |||||
Noncontrolling Interests | 14 | 14 | |||||
Total Shareholders’ Equity | 9,137 | 8,904 | |||||
Total Liabilities and Shareholders’ Equity | $ | 23,758 | $ | 23,956 |
Three Months Ended | |||||||
December 27, 2014 | December 28, 2013 | ||||||
Cash Flows From Operating Activities: | |||||||
Net income | $ | 310 | $ | 252 | |||
Depreciation and amortization | 175 | 127 | |||||
Deferred income taxes | 11 | (15 | ) | ||||
Convertible debt discount | — | (92 | ) | ||||
Other, net | 6 | 22 | |||||
Net changes in other working capital | 310 | 67 | |||||
Cash Provided by Operating Activities | 812 | 361 | |||||
Cash Flows From Investing Activities: | |||||||
Additions to property, plant and equipment | (231 | ) | (140 | ) | |||
Purchases of marketable securities | (10 | ) | (10 | ) | |||
Proceeds from sale of marketable securities | 7 | 9 | |||||
Proceeds from sale of businesses | 142 | — | |||||
Other, net | 3 | (3 | ) | ||||
Cash Used for Investing Activities | (89 | ) | (144 | ) | |||
Cash Flows From Financing Activities: | |||||||
Payments on debt | (668 | ) | (379 | ) | |||
Proceeds from issuance of long-term debt | — | 6 | |||||
Purchases of Tyson Class A common stock | (91 | ) | (159 | ) | |||
Dividends | (37 | ) | (25 | ) | |||
Stock options exercised | 16 | 12 | |||||
Other, net | 5 | 5 | |||||
Cash Used for Financing Activities | (775 | ) | (540 | ) | |||
Effect of Exchange Rate Changes on Cash | (5 | ) | 3 | ||||
Decrease in Cash and Cash Equivalents | (57 | ) | (320 | ) | |||
Cash and Cash Equivalents at Beginning of Year | 438 | 1,145 | |||||
Cash and Cash Equivalents at End of Period | $ | 381 | $ | 825 |
Three Months Ended | Fiscal Year Ended | Twelve Months Ended | ||||||||||||
December 27, 2014 | December 28, 2013 | September 27, 2014 | December 27, 2014 | |||||||||||
Net income | $ | 310 | $ | 252 | $ | 856 | $ | 914 | ||||||
Less: Interest income | (2 | ) | (2 | ) | (7 | ) | (7 | ) | ||||||
Add: Interest expense | 77 | 28 | 132 | 181 | ||||||||||
Add: Income tax expense | 125 | 131 | 396 | 390 | ||||||||||
Add: Depreciation | 148 | 120 | 494 | 522 | ||||||||||
Add: Amortization (a) | 23 | 4 | 26 | 45 | ||||||||||
EBITDA | $ | 681 | $ | 533 | $ | 1,897 | $ | 2,045 | ||||||
Adjustments to EBITDA: | ||||||||||||||
Add: Ongoing costs related to a legacy Hillshire Brands plant fire | 36 | — | 12 | 48 | ||||||||||
Add: Merger and integration costs | 19 | — | 197 | 216 | ||||||||||
Add: Brazil impairment | — | — | 42 | 42 | ||||||||||
Add: Hillshire Brands purchase price accounting adjustments | — | — | 19 | 19 | ||||||||||
Total Adjusted EBITDA | $ | 736 | $ | 533 | $ | 2,167 | $ | 2,370 | ||||||
Pro forma Adjustments to EBITDA: | ||||||||||||||
Add: Hillshire Brands adjusted EBITDA (prior to acquisition) (b) | 422 | 274 | ||||||||||||
Total Pro forma Adjusted EBITDA | $ | 2,589 | $ | 2,644 | ||||||||||
Total gross debt | $ | 8,178 | $ | 7,527 | ||||||||||
Less: Cash and cash equivalents | (438 | ) | (381 | ) | ||||||||||
Less: Short-term investments | (1 | ) | (2 | ) | ||||||||||
Total net debt | $ | 7,739 | $ | 7,144 | ||||||||||
Ratio Calculations: | ||||||||||||||
Gross debt/EBITDA | 4.3x | 3.7x | ||||||||||||
Net debt/EBITDA | 4.1x | 3.5x | ||||||||||||
Gross debt/Adjusted EBITDA | 3.8x | 3.2x | ||||||||||||
Net debt/Adjusted EBITDA | 3.6x | 3.0x | ||||||||||||
Gross debt/Pro forma Adjusted EBITDA | 3.2x | 2.8x | ||||||||||||
Net debt/Pro forma Adjusted EBITDA | 3.0x | 2.7x |
(a) | Excludes the amortization of debt discount expense of $4 million and $3 million for the three months ended December 27, 2014, and December 28, 2013, respectively, $10 million for the fiscal year ended September 27, 2014, and $11 million for twelve months ended December 27, 2014, as it is included in Interest expense. |
(b) | Represents Hillshire Brands adjusted EBITDA, prior to our acquisition, for the eleven months and eight months ended August 28, 2014, respectively. These amounts are added to our Adjusted EBITDA for the fiscal year ended September 27, 2014 and the twelve months ended December 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 March 29, 2014 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. |
First Quarter | ||||||||||||||
Impact | ||||||||||||||
Pre-Tax | Net Income | 2015 | 2014 | |||||||||||
Reported net income per share attributable to Tyson | $ | 0.74 | $ | 0.72 | ||||||||||
Add: Ongoing costs related to a legacy Hillshire Brands plant fire | $ | 36 | $ | 23 | 0.06 | — | ||||||||
Add: Merger and integration costs | $ | 19 | $ | 13 | 0.03 | — | ||||||||
Less: Recognition of previously unrecognized tax benefit | $ | — | $ | (26 | ) | (0.06 | ) | — | ||||||
Adjusted net income per share attributable to Tyson | $ | 0.77 | $ | 0.72 |
First Quarter | |||||||
2015 | 2014 | ||||||
Reported operating income | $ | 509 | $ | 412 | |||
Add: Ongoing costs related to a legacy Hillshire Brands plant fire | 36 | — | |||||
Add: Merger and integration costs | 19 | — | |||||
Adjusted operating income | $ | 564 | $ | 412 | |||
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