* Chicken operating income increased 18%, with operating margin of 6.0%
* Prepared Foods operating income increased, with operating margin of
3.5%
* Beef earnings continued to deteriorate
* Restated fiscal 2005 results increased for a $19 million tax benefit,
revised diluted EPS now $1.04
* Tyson revises EPS guidance to $0.50 - $0.80
SPRINGDALE, Ark., Jan. 30 /PRNewswire-FirstCall/ -- Tyson Foods, Inc.
(NYSE: TSN), today reported $0.11 diluted earnings per share for the first
fiscal quarter ended December 31, 2005, compared to $0.14 diluted earnings per
share in the same quarter last year. Sales for the first quarter of fiscal
years 2006 and 2005 were both $6.5 billion. Operating income was $114 million
compared to $129 million and net income was $39 million compared to $48
million for the same period last year.
Pretax earnings for the first quarter of fiscal 2005 included $12 million
received in connection with vitamin antitrust litigation, a gain of $8 million
from the sale of the Company's remaining interest in Specialty Brands, Inc.
and $3 million of costs related to a prepared foods plant closing. The
combined effect increased diluted earnings per share by $0.03.
John Tyson, chairman and CEO, said, "We entered fiscal 2006 knowing market
conditions would be difficult, especially early in the year. During the first
quarter our Chicken segment generated solid results and Prepared Foods
improved, while Pork struggled and Beef further deteriorated, producing
significant operating losses. Recent declines in international demand for
chicken coupled with greater than expected domestic supply will dramatically
impact the projected performance of our Chicken segment. Lower than projected
cattle supplies, along with unanticipated interruptions in export market
access, will slow the recovery that we expected for Beef later in the year.
The cumulative effect of these factors has caused us to project a net loss for
the second quarter and we now expect our fiscal 2006 earnings to range from
$0.50 to $0.80 per diluted share. However, we will continue to face these
challenges head on and remain focused on managing our business efficiently and
executing our long-term strategic plans."
The Company also today announced it will amend its Annual Report on Form
10-K for the fiscal year ended October 1, 2005, which will be filed in
February 2006 and will result in an increase to net income of $19 million or
$0.05 per diluted share. The amendment relates to the restatement of the
Company's financial statements for the year ended October 1, 2005, to correct
the tax treatment associated with a non-recurring actuarial gain the Company
recorded in the fourth quarter of fiscal 2005. The actuarial gain resulted
from the Medicare Prescription Drug, Improvement and Modernization Act of 2003
(the Act). The Act allows for a possible subsidy to retirement health plan
sponsors to help offset the costs of participant prescription drug benefits.
In March 2004, the FASB issued Staff Position No. 106-2, "Accounting and
Disclosure Requirements Related to the Act." In the fourth quarter of fiscal
2005, the Company concluded the prescription drug benefits included in its
postretirement medical plan were actuarially equivalent to Medicare Part D
under the Act. Included in a net actuarial loss of approximately $9 million
related to the Company's post-retirement health plan and in accordance with
FASB Staff Position 106-2, the Company decreased its accumulated
postretirement obligation and recognized an actuarial gain of approximately
$55 million related to the present value of all future subsidies expected to
be received for benefits earned. FASB Staff Position 106-2 states that "In
the periods in which the subsidy affects the employer's accounting for the
plan, it shall have no effect on any plan-related temporary difference
accounted for under FASB Statement 109 because the subsidy is exempt from
federal taxation." However, the Company recorded income tax expense related
to the actuarial gain of approximately $19 million, resulting in a $0.05
reduction to diluted earnings per share. Accordingly, this restatement will
result in the reporting of a material weakness in internal controls over
financial reporting in the Company's amended 2005 Annual Report on Form 10-K.
Restated earnings for fiscal 2005 were $372 million or $1.04 per diluted
share, compared to $403 million, or $1.13 per diluted share, in fiscal 2004.
Restated pretax earnings for fiscal 2005 included $33 million of costs related
to a legal settlement involving the Company's live swine operations, $14
million of costs for plant closing, $8 million of losses related to Hurricane
Katrina, $12 million received in connection with vitamin antitrust litigation
and a gain of $8 million from the sale of the Company's remaining interest in
Specialty Brands, Inc. Additionally, earnings included a non-recurring income
tax net benefit of $15 million. That includes the reversal of tax reserves,
partially offset by an income tax charge related to the repatriation of
foreign income. Also, in fiscal 2005 the Company recognized a tax-exempt
actuarial gain of $55 million, for which the Company erroneously recorded
income tax expense of $19 million. The Company's restated fiscal 2005 results
reduce the income tax provision accordingly. Combined, these items increased
fiscal 2005 restated diluted earnings per share by $0.03.
John Tyson, chairman and CEO, said, "The restatement relates to the tax
treatment of a one-time non recurring actuarial gain. Additionally the
restatement does not impact the Company's previously issued revenue, income
before taxes, or cash flows from operations; nor were the Company's segment
operating results impacted by the restatement."
Segment Performance Review (in millions)
Sales
(for the first quarter ended December 31, 2005, and January 1, 2005)
First Quarter
Avg. Sales
Sales Sales Volume Price
2006 2005 Change Change
Chicken $2,036 $2,066 0.2 % (1.7)%
Beef 2,918 2,795 0.4 % 4.0 %
Pork 792 845 1.5 % (7.7)%
Prepared Foods 693 733 (2.4)% (3.1)%
Other 15 13 n/a n/a
Total $6,454 $6,452 0.3 % (0.2)%
Operating Income (Loss)
(for the first quarter ended December 31, 2005, and January 1, 2005)
First Quarter
Operating Margin
2006 2005 2006 2005
Chicken $123 $104 6.0 % 5.0 %
Beef (64) (16) (2.2)% (0.6)%
Pork 11 15 1.4 % 1.8 %
Prepared Foods 24 12 3.5 % 1.6 %
Other 20 14 n/a n/a
Total $114 $129 1.8 % 2.0 %
Chicken (31.5% of Net Sales, 107.9% of Total Operating Income - 1st
Quarter 2006)
* Operating margins improved 1.0% from the first quarter of fiscal 2005,
despite lower average sales prices
First quarter fiscal 2006 operating income increased $19 million as
compared to the same period last year. Operating income was positively
impacted by decreased grain costs of approximately $14 million as compared to
the same period last year. Additionally, the impact resulting from the
Company's commodity risk management activities related to grain purchases was
less than $1 million in the first quarter of fiscal 2006, as compared to a
loss of $23 million recorded in the same period last year. First quarter
fiscal 2006 operating income was negatively impacted by decreased margins at
the Company's operations in Mexico and higher energy costs. Chicken segment
sales decreased 1.5% in the first quarter of fiscal 2006 as compared to the
same period last year. The decrease in sales was due to lower average sales
prices.
Beef (45.2% of Net Sales, (56.1)% of Total Operating Income - 1st Quarter
2006)
* Higher average sales prices resulted in increased sales, which were more
than offset by reduced margins at the Company's Canadian operation and
increased operating costs and higher live prices
First quarter fiscal 2006 operating income decreased $38 million,
excluding $10 million received in the first quarter of fiscal 2005 in
connection with vitamin antitrust litigation. The decrease in operating
income was due primarily to decreased volumes and margins at the Company's
Lakeside operation in Canada due in part to the labor strike occurring in the
first quarter of fiscal 2006. Additionally, operating income was negatively
impacted by higher operating costs per head. Beef segment sales increased
4.4% in the first quarter of fiscal 2006 as compared to the same period last
year. The increase in sales was due primarily to higher average sales prices
of approximately 4.0%. Sales and operating income for the three months ended
December 31, 2005 and January 1, 2005, were negatively impacted by $3 million
and $14 million, respectively, from net losses related to open mark-to-market
futures positions from the Company's on-going commodity risk management
activities related to its fixed forward boxed beef sales.
Pork (12.3% of Net Sales, 9.6% of Total Operating Income - 1st Quarter
2006)
* Lower live costs and increased sales volumes were more than offset by
decreased average sales prices and higher per head operating costs
First quarter fiscal 2006 operating income decreased $2 million, excluding
$2 million received in the first quarter of fiscal 2005 in connection with
vitamin antitrust litigation. Operating income was negatively impacted by
decreased average sales prices and higher operating costs per head, partially
offset by lower live costs and increased sales volumes. Pork segment sales
decreased 6.3% in the first quarter of fiscal 2006 as compared to the same
period last year. The decrease in sales was due primarily to lower average
sales prices, partially offset by increased sales volumes.
Prepared Foods (10.7% of Net Sales, 21.1% of Total Operating Income - 1st
Quarter 2006)
* Operating margin improved, driven by decreased raw material costs
First quarter fiscal 2006 operating income increased $9 million as
compared to the same period last year, excluding plant closing related
accruals of $3 million recorded in the first quarter of fiscal 2005. The
increase in operating income was due primarily to decreased raw material costs
and product mix improvements. Prepared Foods segment sales decreased 5.5% in
the first quarter of fiscal 2006 as compared to the same period last year.
The decrease in sales was due primarily to lower average sales prices and
decreased sales volumes, partially due to the rationalization of lower margin
product lines.
TYSON FOODS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In millions, except per share data)
(Unaudited)
Three Months Ended
December 31, January 1,
2005 2005
Sales $6,454 $6,452
Cost of Sales 6,106 6,089
348 363
Selling, General and Administrative 234 231
Other Charges - 3
Operating Income 114 129
Other (Income) Expenses:
Interest 51 58
Other 3 (5)
Income before Income Taxes 60 76
Provision for Income Taxes 21 28
Net Income $39 $48
Weighted Average Shares Outstanding:
Class A Basic 243 242
Class B Basic 102 102
Diluted 358 356
Earnings Per Share:
Class A Basic $0.12 $0.14
Class B Basic $0.10 $0.13
Diluted $0.11 $0.14
Cash Dividends Per Share:
Class A $0.040 $0.040
Class B $0.036 $0.036
Sales Growth (Decline) 0.0% (0.8)%
Margins: (Percent of Sales)
Gross Profit 5.4% 5.6%
Operating Income 1.8% 2.0%
Net Income 0.6% 0.7%
Effective Tax Rate 34.9% 36.6%
TYSON FOODS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions)
(Unaudited)
(Unaudited) (Restated)
December 31, 2005 October 1, 2005
Assets
Current Assets:
Cash and cash equivalents $30 $40
Accounts receivable, net 1,254 1,214
Inventories 2,154 2,062
Other current assets 182 169
Total Current Assets 3,620 3,485
Net Property, Plant and Equipment 4,069 4,007
Goodwill 2,502 2,502
Other Assets 508 510
Total Assets $10,699 $10,504
Liabilities and Shareholders' Equity
Current Liabilities:
Current debt $878 $126
Trade accounts payable 1,155 961
Other current liabilities 1,030 1,070
Total Current Liabilities 3,063 2,157
Long-Term Debt 2,110 2,869
Deferred Income Taxes 647 638
Other Liabilities 168 169
Shareholders' Equity 4,711 4,671
Total Liabilities and
Shareholders' Equity $10,699 $10,504
TYSON FOODS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended
December 31, January 1,
2005 2005
Cash Flows From Operating Activities:
Net income $39 $48
Depreciation and amortization 125 126
Plant closing-related charges - 3
Impairment and write-down of assets 2 -
Deferred income taxes and other (51) (54)
Net changes in working capital 68 299
Cash Provided by Operating Activities 183 422
Cash Flows From Investing Activities:
Additions to property, plant and equipment (189) (110)
Proceeds from sale of assets 11 9
Investment in marketable securities 3 5
Net changes in other assets and liabilities 5 5
Cash Used for Investing Activities (170) (91)
Cash Flows From Financing Activities:
Net change in debt (7) (292)
Purchases of treasury shares (12) (16)
Dividends (14) (14)
Stock options exercised and other 14 (1)
Cash Used for Financing Activities (19) (323)
Effect of Exchange Rate Change on Cash (4) -
Increase (Decrease) in Cash and Cash Equivalents (10) 8
Cash and Cash Equivalents at Beginning of Period 40 33
Cash and Cash Equivalents at End of Period $30 $41
The following statements reflect the changes from the Company's previously
issued financial statements for the fiscal year ending October 1, 2005.
CONSOLIDATED STATEMENT OF INCOME
For the fiscal year ended
October 1, 2005
in millions, except per
share data
As
Originally (Unaudited)
Reported Adjustments Restated
Sales $ 26,014 $ - $26,014
Cost of Sales 24,274 24,274
1,740 - 1,740
Operating Expenses:
Selling, general and administrative 928 928
Other charges 47 47
Operating Income 765 - 765
Other Expense:
Interest 227 227
Other 10 10
237 - 237
Income Before Income Taxes 528 - 528
Provision for Income Taxes 175 (19) 156
Net Income $ 353 $ 19 $ 372
Weighted Average Shares Outstanding:
Class A Basic 243 243
Class B Basic 102 102
Diluted 357 357
Earnings Per Share:
Class A Basic $ 1.05 $ 0.06 $ 1.11
Class B Basic $ 0.95 $ 0.06 $ 1.01
Diluted $ 0.99 $ 0.05 $ 1.04
CONSOLIDATED BALANCE SHEET
October 1, 2005
in millions, except per share
data
As
Originally (Unaudited)
Reported Adjustments Restated
Assets
Current Assets:
Cash and cash equivalents $ 40 $ - $ 40
Accounts receivable, net 1,214 1,214
Inventories 2,062 2,062
Other current assets 169 169
Total Current Assets 3,485 - 3,485
Net Property, Plant and Equipment 4,007 4,007
Goodwill 2,502 2,502
Intangible Assets 142 142
Other Assets 368 368
Total Assets $ 10,504 $ - $10,504
Liabilities and Shareholders' Equity
Current Liabilities:
Current debt $ 126 $ - $ 126
Trade accounts payable 961 961
Other current liabilities 1,070 1,070
Total Current Liabilities 2,157 - 2,157
Long-Term Debt 2,869 2,869
Deferred Income Taxes 657 (19) 638
Other Liabilities 169 169
Shareholders' Equity:
Common stock ($0.10 par value):
Class A-authorized 900 million shares:
issued 268 million shares in 2005 27 27
Class B-authorized 900 million shares:
issued 102 million shares in 2005 10 10
Capital in excess of par value 1,867 1,867
Retained earnings 3,013 19 3,032
Accumulated other comprehensive income
(loss) 28 28
4,945 19 4,964
Less treasury stock, at cost-
15 million shares in 2005 238 238
Less unamortized deferred compensation 55 55
Total Shareholders' Equity 4,652 19 4,671
Total Liabilities and Shareholders'
Equity $ 10,504 $ - $10,504
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For the fiscal year ended
October 1, 2005
in millions
As
Originally (Unaudited)
Reported Adjustments Restated
Balance - October 2, 2004 $ 4,292 $ - $4,292
Comprehensive Income:
Net income 353 19 372
Other comprehensive income, net of tax
of $11 million 40 - 40
Total Comprehensive Income 393 19 412
Purchase of Treasury Shares (45) (45)
Stock Options Exercised 51 51
Restricted Shares Issued 3 3
Restricted Shares Canceled (2) (2)
Dividends Paid (55) (55)
Dividends Accrued (13) (13)
Amortization of Deferred Compensation 25 25
Other 3 3
Balance - October 1, 2005 $ 4,652 $ 19 $4,671
CONSOLIDATED STATEMENT OF CASH FLOWS
For the fiscal year ended
October 1, 2005
in millions
As
Originally (Unaudited)
Reported Adjustments Restated
Cash Flows From Operating Activities:
Net income $ 353 $ 19 $ 372
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation 465 465
Amortization 36 36
Plant closing related charges 10 10
Impairment and write-down of assets 25 25
Deferred taxes (74) (19) (93)
Other (2) (2)
(Increase) decrease in accounts
receivable 24 24
(Increase) decrease in inventories 13 13
Increase in trade accounts payable 11 11
Net change in other current assets and
liabilities 138 138
Cash Provided by Operating Activities 999 - 999
Cash Flows From Investing Activities:
Additions to property, plant and
equipment (571) (571)
Proceeds from sale of assets 47 47
Purchases of marketable securities (543) (543)
Proceeds from marketable securities 504 504
Net change in other assets and liabilities 2 2
Cash Used for Investing Activities (561) - (561)
Cash Flows From Financing Activities:
Payments of debt, net (720) (720)
Proceeds from borrowings of debt 353 353
Purchase of treasury shares (45) (45)
Dividends (55) (55)
Stock options exercised and other 24 24
Cash Used for Financing Activities (443) - (443)
Effect of Exchange Rate Change on Cash 12 - 12
Increase in Cash and Cash Equivalents 7 - 7
Cash and Cash Equivalents at
Beginning of Year 33 33
Cash and Cash Equivalents at
End of Year $ 40 $ - $ 40
Tyson Foods, Inc., founded in 1935 with headquarters in Springdale,
Arkansas, is the world's largest processor and marketer of chicken, beef and
pork and the second-largest food 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, which are marketed under the "Powered by Tyson(TM)" strategy.
Tyson is the recognized market leader in the retail and foodservice markets it
serves, providing products and service to customers throughout the United
States and more than 80 countries. Tyson has approximately 114,000 Team
Members employed at more than 300 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 today. To listen live via telephone, call 888-677-1801. A
pass code and the leader's name will be required to join the call. The pass
code is Tyson Foods and the leader's name is Ruth Ann Wisener. International
callers dial 773-681-5870. The call also will be webcast live on the Internet
at http://ir.tysonfoodsinc.com. Financial information, such as this news
release, as well as other supplemental data, including Company distribution
channel information, can be accessed from the Company's web site at
http://ir.tysonfoodsinc.com. A telephone replay will be available until
midnight March 1 at 866-463-4104. International callers dial 203-369-1380.
Forward-Looking Statements
The Company and its representatives may from time to time make written or
oral forward-looking statements, including forward-looking statements such as
statements related to expected earnings and results. These forward-looking
statements are subject to a number of factors and uncertainties which could
cause the Company's actual results and experiences to differ materially from
the anticipated results and expectations, expressed in such forward-looking
statements. The Company wishes 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 the
anticipated results and expectations expressed in such forward-looking
statements are the following: (i) fluctuations in the cost and availability of
raw materials, such as live cattle, live swine or feed grains; (ii) market
conditions for finished products, including the supply and pricing of
alternative proteins, and the demand for alternative proteins; (iii) risks
associated with effectively evaluating derivatives and hedging activities;
(iv) access to foreign markets together with foreign economic conditions,
including currency fluctuations and import/export restrictions; (v) outbreak
of a livestock disease (such as avian influenza (AI) or bovine spongiform
encephalopathy (BSE)) which could have an effect on livestock owned by the
Company, the availability of livestock for purchase by the Company, consumer
perception of certain protein products or the Company's ability to access
certain markets; (vi) successful rationalization of existing facilities, and
the operating efficiencies of the facilities; (vii) changes in the
availability and relative costs of labor and contract growers; (viii) issues
related to food safety, including costs resulting from product recalls,
regulatory compliance and any related claims or litigation; (ix) adverse
results from litigation; (x) risks associated with leverage, including cost
increases due to rising interest rates or changes in debt ratings or outlook;
(xi) changes in regulations and laws (both domestic and foreign), including
changes in accounting standards, environmental laws and occupational, health
and safety laws; (xii) the ability of the Company to make effective
acquisitions and successfully integrate newly acquired businesses into
existing operations; (xiii) effectiveness of advertising and marketing
programs; (xiv) the effect of, or changes in, general economic conditions; and
(xv) the on-going review of the circumstances surrounding the restatement of
previously issued financial statements for the year ended October 1, 2005, and
the consequences thereof.
SOURCE Tyson Foods, Inc.
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Related links:
http://www.tyson.com
CONTACT:
Media: Gary Mickelson, +1-479-290-6111 or
Investors: Ruth Ann Wisener, +1-479-290-4235, both of Tyson
Foods, Inc.
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