(d) | Exhibit |
Exhibit Number | Description |
99.1 | Press release, dated February 5, 2016, announcing the unaudited results of operations of Tyson Foods, Inc. for its first quarter ended January 2, 2016 |
TYSON FOODS, INC. | |||
Date: February 5, 2016 | By: | /s/ Dennis Leatherby | |
Name: | Dennis Leatherby | ||
Title: | Executive Vice President and | ||
Chief Financial Officer |
(in millions, except per share data) | First Quarter | ||||||
2016 | 2015 | ||||||
Sales | $ | 9,152 | $ | 10,817 | |||
Operating Income | 776 | 509 | |||||
Net Income | 461 | 310 | |||||
Less: Net Income (Loss) Attributable to Noncontrolling Interests | — | 1 | |||||
Net Income Attributable to Tyson | $ | 461 | $ | 309 | |||
Net Income Per Share Attributable to Tyson | $ | 1.15 | $ | 0.74 | |||
Adjusted¹ Operating Income | $ | 776 | $ | 564 | |||
Adjusted¹ Net Income Per Share Attributable to Tyson | $ | 1.15 | $ | 0.77 |
• | All segments' operating margins in or above normalized ranges |
• | Record operating income up 38% to $776 million compared to Q1'15 adjusted results |
• | Record total company operating margin of 8.5% |
◦ | Record Chicken segment operating margin at 13.6% |
◦ | Record Prepared Foods segment operating margin at 10.9% |
◦ | Pork segment operating margin at 13.0% |
• | Record cash flows from operations of $1.1 billion |
• | Captured $121 million in total synergies; $61 million incremental synergies over Q1'15 |
• | Repurchased 6.4 million shares for $300 million, excluding shares repurchased to offset dilution from our equity compensation plan |
• | On February 4, 2016, our Board of Directors approved an increase of 50 million shares authorized for repurchase under our share repurchase program |
Sales | ||||||||||
(for the first quarter ended January 2, 2016, and December 27, 2014) | ||||||||||
First Quarter | ||||||||||
Volume | Avg. Price | |||||||||
2016 | 2015 | Change | Change | |||||||
Chicken | $ | 2,636 | $ | 2,780 | (0.5 | )% | (4.7 | )% | ||
Beef | 3,614 | 4,391 | (3.8 | )% | (14.4 | )% | ||||
Pork | 1,213 | 1,540 | (2.2 | )% | (19.5 | )% | ||||
Prepared Foods | 1,896 | 2,133 | (7.7 | )% | (3.6 | )% | ||||
Other | 99 | 305 | (67.8 | )% | 0.6 | % | ||||
Intersegment Sales | (306 | ) | (332 | ) | n/a | n/a | ||||
Total | $ | 9,152 | $ | 10,817 | (6.8 | )% | (9.2 | )% |
Operating Income (Loss) | ||||||||||
(for the first quarter ended January 2, 2016, and December 27, 2014) | ||||||||||
First Quarter | ||||||||||
Operating Margin | ||||||||||
2016 | 2015 | 2016 | 2015 | |||||||
Chicken | $ | 358 | $ | 351 | 13.6 | % | 12.6 | % | ||
Beef | 71 | (6 | ) | 2.0 | % | (0.1 | )% | |||
Pork | 158 | 122 | 13.0 | % | 7.9 | % | ||||
Prepared Foods | 207 | 71 | 10.9 | % | 3.3 | % | ||||
Other | (18 | ) | (29 | ) | n/a | n/a | ||||
Total | $ | 776 | $ | 509 | 8.5 | % | 4.7 | % |
Adjusted Operating Income (Loss) | ||||||||||
(for the first quarter ended January 2, 2016, and December 27, 2014) | ||||||||||
First Quarter | ||||||||||
Adjusted Operating Margin | ||||||||||
2016 | 2015 | 2016 | 2015 | |||||||
Chicken | $ | 358 | $ | 351 | 13.6 | % | 12.6 | % | ||
Beef | 71 | (6 | ) | 2.0 | % | (0.1 | )% | |||
Pork | 158 | 122 | 13.0 | % | 7.9 | % | ||||
Prepared Foods | 207 | 111 | 10.9 | % | 5.2 | % | ||||
Other | (18 | ) | (14 | ) | n/a | n/a | ||||
Total | $ | 776 | $ | 564 | 8.5 | % | 5.2 | % |
• | 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 integration costs. |
• | Other operating income was adjusted for the following: |
◦ | Increase of $15 million related to merger and integration costs. |
• | Chicken - Sales volume decreased as a result of optimizing mix and our buy versus grow strategy, partially offset by an increase in rendered product sales. Average sales price decreased as feed ingredient costs declined, partially offset by mix changes. Operating income increased due to improved operational execution and lower feed ingredient costs. Feed costs decreased $60 million during the first quarter of fiscal 2016. |
• | Beef - Sales volume decreased due to a reduction in live cattle processed primarily due to the closure of our Denison, Iowa, facility in the fourth quarter of fiscal 2015. Average sales price decreased due to higher domestic availability of fed cattle supplies, which drove down livestock costs. Operating income increased due to more favorable market conditions associated with an increase in supply which drove down fed cattle costs. |
• | Pork - Sales volume decreased due to the divestiture of our Heinold Hog Markets business in the first quarter of fiscal 2015. Excluding the impact of the divestiture, our sales volume grew 5.5% for the first quarter of fiscal 2016, driven by better demand for our pork products. Live hog supplies increased, which drove down livestock cost and average sales price. Operating income remained strong as we maximized our revenues relative to live hog markets and due to better plant utilization associated with higher volumes. |
• | Prepared Foods - Sales volume decreased due to a change in sales mix in addition to the avian influenza impact on our turkey operations. Average sales price decreased primarily due to a decline in input costs, partially offset by a change in product mix. Operating income improved due to mix changes as well as lower input costs of approximately $125 million. Additionally, Prepared Foods operating income was positively impacted by $95 million in synergies, of which $40 million was incremental synergies in the first quarter of fiscal 2016 above the $55 million of synergies realized in the first quarter of fiscal 2015. |
• | Chicken – USDA data shows an increase in chicken production around 1-2% in fiscal 2016 compared to fiscal 2015. Based on current futures prices, we expect lower feed costs in fiscal 2016 compared to fiscal 2015 of approximately $200 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. For fiscal 2016, we now believe our Chicken segment's operating margin should be more than 11%, up from our previous estimate of more than 10%. |
• | Beef – We expect industry fed cattle supplies to be slightly higher in fiscal 2016 compared to fiscal 2015. 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 2016, we believe our Beef segment's operating margin should be at or above the low end of its normalized range of 1.5-3.0%. |
• | Pork – We expect industry hog supplies to increase around 2-3% in fiscal 2016 compared to fiscal 2015. For fiscal 2016, we now believe our Pork segment's operating margin should be above its normalized range of 6-8%, up from our previous estimate of within the range. |
• | Prepared Foods – We expect lower raw material costs of approximately $250 million in fiscal 2016. As we continue to invest heavily in innovation, new product launches and the strengthening of our brands, we believe the operating margin of our Prepared Foods segment should be near the low-end of its normalized range of 10-12% in fiscal 2016. |
• | Other – Other includes our foreign operations related to raising and processing live chickens in China and India in addition to third-party merger and integration costs. We now expect Other operating loss should be approximately $70 million in fiscal 2016. |
• | Sales – We believe sales will approximate $37 billion. This is down from our previous estimate of $41 billion due to declines in beef, pork and feed prices. |
• | Capital Expenditures – We expect capital expenditures to approximate $900 million for fiscal 2016. |
• | Net Interest Expense – We expect net interest expense to approximate $245 million for fiscal 2016, which is down from our previous estimate of $255 million due to lower estimated debt balances. |
• | Liquidity – We expect total liquidity, which was $2.4 billion at January 2, 2016, to remain above our minimum liquidity target of $1.2 billion. Liquidity at the end of the first quarter was enhanced by cash held for payments deferred to calendar 2016 by livestock suppliers as well as cash held for the retirement of the $638 million notes due in the second quarter of fiscal 2016. |
• | Share Repurchases – In fiscal 2016, we expect to increase share repurchases under our share repurchase program. As of January 2, 2016, 13.5 million shares remain authorized for repurchases. On February 4, 2016, our Board of Directors approved an increase of 50 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. During the second quarter of fiscal 2016 to date, we repurchased approximately 3.9 million shares for $200 million, excluding shares repurchased to offset dilution from our equity compensation plans. |
Three Months Ended | |||||||
January 2, 2016 | December 27, 2014 | ||||||
Sales | $ | 9,152 | $ | 10,817 | |||
Cost of Sales | 7,951 | 9,861 | |||||
Gross Profit | 1,201 | 956 | |||||
Selling, General and Administrative | 425 | 447 | |||||
Operating Income | 776 | 509 | |||||
Other (Income) Expense: | |||||||
Interest income | (2 | ) | (2 | ) | |||
Interest expense | 67 | 77 | |||||
Other, net | (1 | ) | (1 | ) | |||
Total Other (Income) Expense | 64 | 74 | |||||
Income before Income Taxes | 712 | 435 | |||||
Income Tax Expense | 251 | 125 | |||||
Net Income | 461 | 310 | |||||
Less: Net Income (Loss) Attributable to Noncontrolling Interests | — | 1 | |||||
Net Income Attributable to Tyson | $ | 461 | $ | 309 | |||
Weighted Average Shares Outstanding: | |||||||
Class A Basic | 325 | 336 | |||||
Class B Basic | 70 | 70 | |||||
Diluted | 400 | 416 | |||||
Net Income Per Share Attributable to Tyson: | |||||||
Class A Basic | $ | 1.18 | $ | 0.77 | |||
Class B Basic | $ | 1.09 | $ | 0.71 | |||
Diluted | $ | 1.15 | $ | 0.74 | |||
Dividends Declared Per Share: | |||||||
Class A | $ | 0.200 | $ | 0.125 | |||
Class B | $ | 0.180 | $ | 0.113 | |||
Sales Growth | (15.4 | )% | |||||
Margins: (Percent of Sales) | |||||||
Gross Profit | 13.1 | % | 8.8 | % | |||
Operating Income | 8.5 | % | 4.7 | % | |||
Net Income Attributable to Tyson | 5.0 | % | 2.9 | % | |||
Effective Tax Rate | 35.2 | % | 28.8 | % |
January 2, 2016 | October 3, 2015 | ||||||
Assets | |||||||
Current Assets: | |||||||
Cash and cash equivalents | $ | 1,187 | $ | 688 | |||
Accounts receivable, net | 1,514 | 1,620 | |||||
Inventories | 2,818 | 2,878 | |||||
Other current assets | 158 | 195 | |||||
Total Current Assets | 5,677 | 5,381 | |||||
Net Property, Plant and Equipment | 5,184 | 5,176 | |||||
Goodwill | 6,669 | 6,667 | |||||
Intangible Assets, net | 5,145 | 5,168 | |||||
Other Assets | 615 | 612 | |||||
Total Assets | $ | 23,290 | $ | 23,004 | |||
Liabilities and Shareholders’ Equity | |||||||
Current Liabilities: | |||||||
Current debt | $ | 717 | $ | 715 | |||
Accounts payable | 1,781 | 1,662 | |||||
Other current liabilities | 1,170 | 1,158 | |||||
Total Current Liabilities | 3,668 | 3,535 | |||||
Long-Term Debt | 5,988 | 6,010 | |||||
Deferred Income Taxes | 2,514 | 2,449 | |||||
Other Liabilities | 1,343 | 1,304 | |||||
Total Tyson Shareholders’ Equity | 9,762 | 9,691 | |||||
Noncontrolling Interests | 15 | 15 | |||||
Total Shareholders’ Equity | 9,777 | 9,706 | |||||
Total Liabilities and Shareholders’ Equity | $ | 23,290 | $ | 23,004 |
Three Months | |||||||
January 2, 2016 | December 27, 2014 | ||||||
Cash Flows From Operating Activities: | |||||||
Net income | $ | 461 | $ | 310 | |||
Depreciation and amortization | 172 | 175 | |||||
Deferred income taxes | 69 | 11 | |||||
Other, net | (1 | ) | 6 | ||||
Net changes in operating assets and liabilities | 394 | 310 | |||||
Cash Provided by Operating Activities | 1,095 | 812 | |||||
Cash Flows From Investing Activities: | |||||||
Additions to property, plant and equipment | (188 | ) | (231 | ) | |||
Purchases of marketable securities | (12 | ) | (10 | ) | |||
Proceeds from sale of marketable securities | 10 | 7 | |||||
Proceeds from sale of businesses | — | 142 | |||||
Other, net | (1 | ) | 3 | ||||
Cash Used for Investing Activities | (191 | ) | (89 | ) | |||
Cash Flows From Financing Activities: | |||||||
Payments on debt | (20 | ) | (668 | ) | |||
Purchases of Tyson Class A common stock | (387 | ) | (91 | ) | |||
Dividends | (54 | ) | (37 | ) | |||
Stock options exercised | 34 | 16 | |||||
Other, net | 23 | 5 | |||||
Cash Used for Financing Activities | (404 | ) | (775 | ) | |||
Effect of Exchange Rate Changes on Cash | (1 | ) | (5 | ) | |||
Increase (Decrease) in Cash and Cash Equivalents | 499 | (57 | ) | ||||
Cash and Cash Equivalents at Beginning of Year | 688 | 438 | |||||
Cash and Cash Equivalents at End of Period | $ | 1,187 | $ | 381 |
Three Months Ended | Fiscal Year Ended (a) | Twelve Months Ended (a) | ||||||||||||
January 2, 2016 | December 27, 2014 | October 3, 2015 | January 2, 2016 | |||||||||||
Net income | $ | 461 | $ | 310 | $ | 1,224 | $ | 1,375 | ||||||
Less: Interest income | (2 | ) | (2 | ) | (9 | ) | (9 | ) | ||||||
Add: Interest expense | 67 | 77 | 293 | 283 | ||||||||||
Add: Income tax expense | 251 | 125 | 697 | 823 | ||||||||||
Add: Depreciation | 151 | 148 | 609 | 612 | ||||||||||
Add: Amortization (b) | 19 | 23 | 92 | 88 | ||||||||||
EBITDA | $ | 947 | $ | 681 | $ | 2,906 | $ | 3,172 | ||||||
Adjustments to EBITDA: | ||||||||||||||
Add: China impairment | $ | — | — | 169 | 169 | |||||||||
Add: Merger and integration costs | — | 19 | 57 | 38 | ||||||||||
Add: Prepared Foods network optimization impairment charges | — | — | 59 | 59 | ||||||||||
Add: Denison plant closure | — | — | 12 | 12 | ||||||||||
Add: Costs (insurance proceeds, net of costs) related to a legacy Hillshire Brands plant fire | — | 36 | (8 | ) | (44 | ) | ||||||||
Less: Gain on sale of the Mexico operation | — | — | (161 | ) | (161 | ) | ||||||||
Less: Gain on sale of equity securities | — | — | (21 | ) | (21 | ) | ||||||||
Total Adjusted EBITDA | $ | 947 | $ | 736 | $ | 3,013 | $ | 3,224 | ||||||
Total gross debt | $ | 6,725 | $ | 6,705 | ||||||||||
Less: Cash and cash equivalents | (688 | ) | (1,187 | ) | ||||||||||
Less: Short-term investments | (2 | ) | (2 | ) | ||||||||||
Total net debt | $ | 6,035 | $ | 5,516 | ||||||||||
Ratio Calculations: | ||||||||||||||
Gross debt/EBITDA | 2.3x | 2.1x | ||||||||||||
Net debt/EBITDA | 2.1x | 1.7x | ||||||||||||
Gross debt/Adjusted EBITDA | 2.2x | 2.1x | ||||||||||||
Net debt/Adjusted EBITDA | 2.0x | 1.7x |
(a) | Adjusted EBITDA for fiscal year ended October 3, 2015 and twelve months ended January 2, 2016 was based on 53-weeks due to an additional week in the fourth quarter of fiscal 2015. |
(b) | Excludes the amortization of debt discount expense of $2 million and $4 million for the three months ended January 2, 2016, and December 27, 2014, respectively, $10 million for the fiscal year ended October 3, 2015, and $8 million for the twelve months ended January 2, 2016, as it is included in Interest expense. |
First Quarter | |||||||||||||||
Pre-Tax Impact | EPS Impact | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Reported net income per share attributable to Tyson | $ | 1.15 | $ | 0.74 | |||||||||||
Add: Costs related to a legacy Hillshire Brands plant fire | $ | — | $ | 36 | — | 0.06 | |||||||||
Add: Merger and integration costs | $ | — | $ | 19 | — | 0.03 | |||||||||
Less: Recognition of previously unrecognized tax benefit | $ | — | $ | — | — | (0.06 | ) | ||||||||
Adjusted net income per share attributable to Tyson | $ | 1.15 | $ | 0.77 |
First Quarter | |||||||
2016 | 2015 | ||||||
Reported operating income | $ | 776 | $ | 509 | |||
Add: Merger and integration costs | — | 19 | |||||
Add: Costs related to a legacy Hillshire Brands plant fire | — | 36 | |||||
Adjusted operating income | $ | 776 | $ | 564 |
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