Tyson Off to a Good Start in Fiscal 2013; EPS Up 14% Over Prior Year

Tyson Off to a Good Start in Fiscal 2013; EPS Up 14% Over Prior Year

SPRINGDALE, Ark., Feb. 1, 2013 (GLOBE NEWSWIRE) -- Tyson Foods, Inc.
(NYSE:TSN), today reported the following results:

(in millions, except per share data)                   First Quarter
                                                       2013     2012
Sales                                                   $ 8,402  $ 8,329
Operating Income                                       300      278
                                                                 
Net Income                                             168      156
Less: Net Loss Attributable to Noncontrolling Interest (5)      —
Net Income Attributable to Tyson                        $ 173    $ 156
                                                                 
Net Income Per Share Attributable to Tyson              $ 0.48   $ 0.42

First Quarter Highlights

  * EPS was $0.48 compared to $0.42 last year
  * Overall operating margin was 3.6%
  * Net interest expense was $36 million, down 23% compared to last year
  * Returned $153 million to shareholders

  -- Repurchased 5.1 million shares for $100 million

  --   Paid $53 million in dividends, which included a $0.10 per share special
  dividend and 25% increase to quarterly dividend rate

  * Liquidity totaled $1.9 billion at December 29, 2012

"Fiscal 2013 is off to a good start," said Donnie Smith, president and chief
executive officer of Tyson Foods. "With earnings of $0.48 per share in the
first quarter, we are on our way to producing earnings this year better than
fiscal 2012. We knew we'd face headwinds, and that has certainly been the
case; however, we're not simply holding our own. We're producing solid results
while preparing for growth.

"We are being both methodical and innovative in our approach to managing the
challenges that come in this business, and our approach is working. I have
every confidence in our team's ability to execute their plans and meet their
goals. This is an exciting time at Tyson, and while we're pleased with the
progress we've made, we feel like we're just getting started."

Segment Performance Review (in millions)

 
Sales
(for the first quarter ended December 29, 2012, and December 31, 2011)
                    First Quarter
                    2013      2012     Volume Change Avg. Price Change
Chicken              $ 2,956   $ 2,762  (1.1)%        8.2%
Beef                 3,485     3,467    (10.0)%       11.7%
Pork                 1,363     1,475    (2.2)%        (5.5)%
Prepared Foods       841       861      1.8%          (4.1)%
Other                20        54      n/a           n/a
Intersegment Sales   (263)     (290)   n/a           n/a
Total                $ 8,402   $ 8,329 (3.3)%        4.7%
                                                      
 
Operating Income (Loss)
(for the first quarter ended December 29, 2012, and December 31, 2011)
                    First Quarter
                                       Operating Margin
                    2013      2012     2013          2012
Chicken              $ 107     $ 32    3.6%          1.2%
Beef                 46        31      1.3%          0.9%
Pork                 125       165     9.2%          11.2%
Prepared Foods       33        51      3.9%          5.9%
Other                (11)      (1)     n/a           n/a
Total                $ 300     $ 278   3.6%          3.3%

  * Chicken - Despite increased domestic and international production, total
    sales volumes decreased in the first quarter of fiscal 2013 due to reduced
    open-market meat purchases, planned inventory build to meet forecasted
    customer demand and mix of rendered product sales. The increase in average
    sales price is primarily due to mix changes and price increases associated
    with increased input costs. Since many of our sales contracts are formula
    based or shorter-term in nature, we were able to offset rising input costs
    through improved pricing and mix. Operating income was positively impacted
    by increases in average sales price, improved live performance and
    operational improvements. These increases were partially offset by
    increased feed costs of $170 million.
  * Beef - Fed cattle supplies decreased which drove up average sales price
    and livestock cost. Sales volumes decreased due to a reduction in live
    cattle processed as a result of soft domestic demand for beef products and
    outside tallow purchases. Operating income increased in the first quarter
    of fiscal 2013 as the result of balancing our supply with customer demand
    partially offset by increased operating costs from reduced production.
  * Pork - Live hog supplies increased which drove down average sales price
    and livestock cost. Sales volumes decreased as a result of balancing our
    supply with customer demand. While reduced compared to prior year,
    operating income remained strong in the first quarter of fiscal 2013
    despite brief periods of imbalance in industry supply and customer demand.
  * Prepared Foods - Operating income decreased in the first quarter of fiscal
    2013, despite increased volumes, as the result of lower average sales
    prices caused by lower raw material costs as well as product mix and
    additional costs incurred as we invested in our lunchmeat business.

Outlook

Our continued capital investment in our businesses, strong liquidity and
reduced interest expense will help us to maintain strong operating results
despite challenging market conditions. In fiscal 2013, we expect overall
domestic protein production (chicken, beef, pork and turkey) to decrease
approximately 1% from fiscal 2012 levels. The recent drought conditions have
reduced expected grain supplies, which will result in higher input costs as
well as increased costs for cattle and hog producers. The following is a
summary of the fiscal 2013 outlook for each of our segments, as well as an
outlook on sales, capital expenditures, net interest expense, debt and
liquidity and share repurchases:

  * Chicken – Current USDA data shows U.S. chicken production to be relatively
    flat in fiscal 2013 compared to fiscal 2012. Based on current futures
    prices, we expect higher feed costs in fiscal 2013 compared to fiscal 2012
    of approximately $600 million. The capital investment and significant
    operational improvements we have made in our Chicken segment have better
    positioned us to adjust to rising feed costs and remain profitable.
    Additionally, many of our sales contracts are formula based or
    shorter-term in nature, which allows us to offset rising input costs
    through pricing. However, there may be a lag time for price increases to
    take effect. We anticipate our Chicken segment will return to normalized
    ranges in the second-half of fiscal 2013.
  * Beef – We expect to see a reduction of industry fed cattle supplies of
    2-3% in fiscal 2013 as compared to fiscal 2012, with the reduction
    predominately in the second half of 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. We anticipate beef
    exports will remain strong in fiscal 2013. For fiscal 2013, we believe our
    Beef segment will remain profitable, but could be below our normalized
    range of 2.5%-4.5%.
  * Pork – We expect industry hog supplies to be flat compared to fiscal 2012
    and pork exports to remain strong in fiscal 2013 but less than fiscal
    2012. For fiscal 2013, we believe our Pork segment should remain at or
    above our normalized range of 6.0%-8.0%.
  * Prepared Foods – We expect operational improvements and increased 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. For fiscal
    2013, we believe our Prepared Foods segment should be in its normalized
    range of 4.0%-6.0%.
  * Sales – We expect fiscal 2013 sales to approximate $35 billion mostly
    resulting from price increases related to expected decreases in domestic
    availability of protein and increased raw material costs.
  * Capital Expenditures – We expect fiscal 2013 capital expenditures will
    approximate $550 million.
  * Net Interest Expense – We expect fiscal 2013 net interest expense will
    approximate $140 million.
  * Debt and Liquidity – We do not have any significant scheduled maturities
    of debt due until October 2013 and may use our available cash to
    repurchase notes when available at attractive rates. Total liquidity at
    December 29, 2012, was $1.9 billion, 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 29, 2012, 30.1 million shares
    remain authorized for repurchases. 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.

TYSON FOODS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In millions, except per share data)
(Unaudited)
                                                              
                                                              
                                           Three Months Ended
                                           December 29, 2012 December 31, 2011
                                                              
Sales                                       $ 8,402           $ 8,329
Cost of Sales                               7,865             7,836
Gross Profit                                537               493
                                                              
Selling, General and Administrative         237               215
Operating Income                            300               278
Other (Income) Expense:                                       
Interest income                             (1)               (2)
Interest expense                            37                49
Other, net                                  —                 (12)
Total Other (Income) Expense                36                35
Income before Income Taxes                  264               243
Income Tax Expense                          96                87
Net Income                                  168               156
Less: Net Loss Attributable to              (5)               — 
Noncontrolling Interest
Net Income Attributable to Tyson            $ 173             $ 156
                                                              
Weighted Average Shares Outstanding:                          
Class A Basic                               285               297
Class B Basic                               70                70
Diluted                                     362               376
Net Income Per Share Attributable to                          
Tyson:
Class A Basic                               $ 0.50            $ 0.43
Class B Basic                               $ 0.45            $ 0.39
Diluted                                     $ 0.48            $ 0.42
Dividends Declared Per Share:                                 
Class A                                     $ 0.160           $ 0.040
Class B                                     $ 0.144           $ 0.036
                                                              
Sales Growth                               0.9%               
Margins: (Percent of Sales)                                   
Gross Profit                               6.4%              5.9%
Operating Income                           3.6%              3.3%
Net Income                                 2.0%              1.9%
Effective Tax Rate                         36.3%             35.8%

 
 
TYSON FOODS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions)
(Unaudited)
                                                             
                                                             
                                          December 29, 2012 September 29, 2012
Assets                                                       
Current Assets:                                              
Cash and cash equivalents                  $ 951             $ 1,071
Accounts receivable, net                  1,365             1,378
Inventories                               2,932             2,809
Other current assets                      139               145
Total Current Assets                      5,387             5,403
Net Property, Plant and Equipment         4,043             4,022
Goodwill                                  1,891             1,891
Intangible Assets                         126               129
Other Assets                              427               451
Total Assets                               $ 11,874          $ 11,896
                                                             
Liabilities and Shareholders' Equity                         
Current Liabilities:                                         
Current debt                               $ 519             $ 515
Accounts payable                          1,435             1,372
Other current liabilities                 892               943
Total Current Liabilities                 2,846             2,830
Long-Term Debt                            1,907             1,917
Deferred Income Taxes                     536               558
Other Liabilities                         527               549
                                                             
Total Tyson Shareholders' Equity          6,034             6,012
Noncontrolling Interest                   24                30
Total Shareholders' Equity                6,058             6,042
                                                             
Total Liabilities and Shareholders'        $ 11,874          $ 11,896
Equity

 
TYSON FOODS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
                                                              
                                                              
                                           Three Months Ended
                                           December 29, 2012 December 31, 2011
Cash Flows From Operating Activities:                         
Net income                                  $ 168             $ 156
Depreciation and amortization               130               122
Deferred income taxes                       (9)               24
Other, net                                  23                27
Net change in other current assets and      (122)             9
liabilities
Cash Provided by Operating Activities       190               338
                                                              
Cash Flows From Investing Activities:                         
Additions to property, plant and equipment  (157)             (182)
Purchases of marketable securities          (7)               (8)
Proceeds from sale of marketable            8                 11
securities
Other, net                                  4                 3
Cash Used for Investing Activities          (152)             (176)
                                                              
Cash Flows From Financing Activities:                         
Payments on debt                            (35)              (25)
Net proceeds from borrowings                24                45
Purchases of Tyson Class A common stock     (115)             (50)
Dividends                                   (53)              (15)
Other, net                                  21                22
Cash Used for Financing Activities          (158)             (23)
                                                              
Effect of Exchange Rate Change on Cash      —                 2
                                                              
Increase (Decrease) in Cash and Cash        (120)             141
Equivalents
Cash and Cash Equivalents at Beginning of   1,071             716
Year
Cash and Cash Equivalents at End of Period  $ 951             $ 857

 
 
TYSON FOODS, INC.
EBITDA Reconciliations
(In millions)
(Unaudited)
                                                                 
                                                                 
                   Three Months Ended            Fiscal Year    Twelve Months
                                                 Ended          Ended
                   December 29,   December 31,   September 29,  December 29,
                   2012           2011           2012           2012
                                                                 
Net income          $ 168          $ 156          $ 576          $ 588
Less: Interest      (1)            (2)            (12)           (11)
income
Add: Interest       37             49             356            344
expense
Add: Income tax     96             87             351            360
expense
Add: Depreciation   119            108            443            454
Add: Amortization   4              4              17             17
(a)
EBITDA              $ 423          $ 402          $ 1,731        $ 1,752
                                                                 
                                                                 
Total gross debt                                  $ 2,432        $ 2,426
Less: Cash and                                    (1,071)        (951)
cash equivalents
Total net debt                                    $ 1,361        $ 1,475
                                                                 
Ratio                                                            
Calculations:
Gross debt/EBITDA                                1.4x           1.4x
Net debt/EBITDA                                  0.8x           0.8x
                                                                 
(a)  Excludes the amortization of debt discount expense of $7 million and $10
million for the three months ended December 29, 2012, and December 31, 2011,
respectively, and $39 million for the fiscal year ended September 29, 2012, as
it is included in Interest expense.

EBITDA represents net income, net of interest, income tax and depreciation and
amortization. EBITDA is presented as a supplemental financial measurement in
the evaluation of our business. We believe the presentation of this financial
measure helps investors to assess our operating performance from period to
period and enhances understanding of our financial performance and highlights
operational trends. This measure is widely used by investors and rating
agencies in the valuation, comparison, rating and investment recommendations
of companies. However, the measurement of EBITDA may not be comparable to
those of other companies in our industry, which limits its usefulness as a
comparative measure. EBITDA is not a measure required by or calculated in
accordance with GAAP and should not be considered as a substitute 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.

Tyson Foods, Inc., founded in 1935 with headquarters in Springdale, Arkansas,
is one of the world's largest processors and marketers of chicken, beef and
pork, the second-largest food production company in the Fortune 500 and a
member of the S&P 500. The company produces a wide variety of protein-based
and prepared food products and is the recognized market leader in the retail
and foodservice markets it serves. Tyson provides products and services to
customers throughout the United States and approximately 130 countries. The
company has approximately 115,000 Team Members employed at more than 400
facilities and offices in the United States and around the world. Through its
Core Values, Code of Conduct and Team Member Bill of Rights, Tyson strives to
operate with integrity and trust and is committed to creating value for its
shareholders, customers and Team Members. The company also strives to be
faith-friendly, provide a safe work environment and serve as stewards of the
animals, land and environment entrusted to it.

A conference call to discuss the Company's financial results will be held at 9
a.m. Eastern Friday, February 1, 2013. To listen live via telephone, call
888-455-8283. International callers dial 210-839-8865. The pass code "Tyson
Foods" will be required to join the call. A telephone replay will be available
until March 1, 2013, at 866-489-8051. International callers may access the
replay at 203-369-1676. The live webcast, as well as the replay, will be
available on the Internet at http://ir.tyson.com. Financial information, such
as this news release, as well as other supplemental data, can be accessed from
the Company's web site at http://ir.tyson.com.

Forward-Looking Statements

Certain information contained in the press release may constitute
forward-looking statements, such as statements relating to expected
performance, and including, but not limited to, statements appearing in the
"Outlook" section. 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) risks associated with
leverage, including cost increases due to rising interest rates or changes in
debt ratings or outlook; (xiv) 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; (xv) our ability to make effective acquisitions or joint ventures
and successfully integrate newly acquired businesses into existing operations;
(xvi) effectiveness of advertising and marketing programs; and (xvii) those
factors listed under Item 1A. "Risk Factors" included in our September 29,
2012, Annual Report filed on Form 10-K.

CONTACT: Media Contact:
         Gary Mickelson, 479-290-6111
        
         Investor Contact:
         Jon Kathol, 479-290-4235

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