* Tyson Chicken, Beef and Pork sales volumes increased 7.4%, 6.1% and 0.5%,
respectively, quarter over quarter
* Oversupply of all proteins negatively impacted sales prices and operating
results
* Some margin recovery is expected in the latter half of year
* Fiscal 2006 diluted earnings per share are now estimated to be $(0.25) to
$0.10
SPRINGDALE, Ark., May 1 /PRNewswire-FirstCall/ -- Tyson Foods, Inc.
(NYSE: TSN), today reported a loss of $(0.37) per diluted share for the
second fiscal quarter ended April 1, 2006, compared to $0.21 diluted
earnings per share in the same quarter last year. Second quarter 2006 sales
were $6.3 billion compared to $6.4 billion for the same period last year.
Operating loss was $(141) million compared to operating income of $183
million, and net loss was $(127) million compared to net income of $76
million, for the same period last year.
Pretax loss for the second quarter of fiscal 2006 included $59 million,
or $0.11 per diluted share, of costs related to beef and prepared foods
plant closings.
Pretax earnings for the second quarter of fiscal 2005 included $2
million of costs related to poultry and prepared foods plant closings.
Loss per diluted share for the first six months of fiscal 2006 was
$(0.26) compared to diluted earnings per share of $0.35 in the same period
last year. Sales for the first six months of fiscal 2006 were $12.7 billion
compared to $12.8 billion for the same period last year. Operating loss for
the first six months of fiscal 2006 was $(27) million compared to operating
income of $312 million, and net loss was $(88) million compared to net
income of $124 million, for the same period last year.
Pretax loss for the first six months of fiscal 2006 included $59
million, or $0.11 per diluted share, of costs related to beef and prepared
foods plant closings.
Pretax earnings for the first six months 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 $5 million of costs related to poultry and prepared foods
plant closings. The combined effect increased diluted earnings per share by
$0.03.
In the second quarter of fiscal 2006, the Company issued $1.0 billion
of new 6.60% senior unsecured notes, which will mature in fiscal 2016. The
Company will use the net proceeds of this offering for general corporate
purposes and for the repayment of its outstanding $750 million principal
amount of 7.25% Notes due October 1, 2006. The Company's short-term
investment currently includes $750 million of proceeds from the new
issuance. These funds are on deposit in an interest bearing account with a
trustee and will be used for the repayment of the Notes maturing October 1,
2006.
"We said the second quarter would be very tough, and it was even
tougher than we anticipated," John Tyson, chairman and CEO of Tyson Foods,
said. "This quarter's results reflect the depressed markets and the
oversupply of all proteins. The Beef segment suffered from low capacity
utilization and declining boxed beef prices. The negative effect of high
live cattle prices and lower sales prices was made worse by interruptions
in export markets. Those factors combined to produce significant losses in
the Beef segment. The protein oversupply, in addition to higher operating
costs, affected our Pork segment as well.
"On the upside, the Company's sales volume increased and the Chicken
segment stayed in positive territory. Our focus on value-added products and
effective management of controllable costs helped our Chicken segment's
performance. Also, I am encouraged by our Prepared Foods segment margins
which, when adjusted for plant closings, continue to move in the right
direction.
"The impact of the oversupply of protein is expected to diminish in the
second half of the year. We expect the third and fourth quarters to be
better as demand improves, but they still will be difficult.
"We recently announced Wade Miquelon will join us as CFO in June. We
look forward to welcoming him to the Company, and we're excited about his
experience in consumer products and international markets. He is joining a
strong team, and together they will help us execute our business strategy."
Outlook
Based upon the Company's outlook for fiscal year 2006, including its
view of all the various markets, the Company now estimates its fiscal 2006
diluted earnings per share to be in the range of $(0.25) to $0.10.
Segment Performance Review (in millions)
Sales
(for the second quarter and six months ended
April 1, 2006, and April 2, 2005)
Second Quarter
Avg. Sales
Sales Sales Volume Price
2006 2005 Change Change
Chicken $2,010 $2,056 7.4% (8.9)%
Beef 2,854 2,774 6.1% (3.0)%
Pork 729 828 0.5% (12.4)%
Prepared Foods 641 690 (0.7)% (6.5)%
Other 17 11 n/a n/a
Total $6,251 $6,359 5.1% (6.5)%
Six Months
Avg. Sales
Sales Sales Volume Price
2006 2005 Change Change
Chicken $4,046 $4,122 3.7% (5.4)%
Beef 5,772 5,569 3.2% 0.5%
Pork 1,521 1,673 1.0% (10.0)%
Prepared Foods 1,334 1,423 (1.6)% (4.8)%
Other 32 24 n/a n/a
Total $12,705 $12,811 2.7% (3.4)%
Operating Income (Loss)
(for the second quarter and six months ended
April 1, 2006, and April 2, 2005)
Second Quarter
Operating Margin
2006 2005 2006 2005
Chicken $9 $143 0.4% 7.0%
Beef (188) (19) (6.6)% (0.7)%
Pork 9 19 1.2% 2.3%
Prepared Foods 9 20 1.4% 2.9%
Other 20 20 n/a n/a
Total $(141) $183 (2.3)% 2.9%
Six Months
Operating Margin
2006 2005 2006 2005
Chicken $132 $247 3.3% 6.0%
Beef (252) (35) (4.4)% (0.6)%
Pork 20 34 1.3% 2.0%
Prepared Foods 33 32 2.5% 2.2%
Other 40 34 n/a n/a
Total $(27) $312 (0.2)% 2.4%
Chicken (32.2% of Net Sales -- 2nd Quarter 2006)
(31.8% of Net Sales -- Six Months 2006)
* Increased Chicken sales volumes were offset by the oversupply of
proteins and reduced export prices
Chicken segment volume improvement was more than offset by lower sales
prices, resulting in sales decreasing 2.2% and 1.8% in the second quarter
and six months of fiscal 2006 as compared to the same periods last year.
Chicken segment operating income decreased $134 million and $115
million in the second quarter and six months of fiscal 2006, respectively,
as compared to the same periods last year. Operating income was negatively
impacted by lower average sales prices, primarily due to an oversupply of
proteins in the marketplace. Additionally, the discovery of H5N1 avian
influenza in certain foreign markets reduced export prices. Unprecedented
leg quarter inventories delayed the recovery of the export prices. Also,
operating income was negatively impacted by higher energy costs, higher
grain costs and decreased margins at the Company's operations in Mexico.
Operating income was positively impacted by improved results from the
Company's commodity risk management activities related to grain purchases
as it realized net losses of $4 million for both the second quarter and six
months of fiscal 2006, as compared to net losses of $10 million and $33
million realized in the same periods last year.
Beef (45.7% of Net Sales -- 2nd Quarter 2006)
(45.4% of Net Sales -- Six Months 2006)
* Increased volumes resulted in increased sales, which were more than
offset by the inability to achieve satisfactory margins
Beef segment sales increased 2.9% and 3.6% in the second quarter and
six months of fiscal 2006, respectively, as compared to the same periods
last year. The increase in the second quarter of fiscal 2006 was primarily
due to a 6.1% increase in sales volumes, offset partially by a 3.0%
decrease in average sales prices. The increase in sales for the six months
of fiscal 2006 was primarily due to a 3.2% increase in volumes, as well as
a slight increase in average sales prices.
Beef segment operating results decreased $124 million and $162 million
in the second quarter and six months of fiscal 2006, respectively, as
compared to the same periods last year, excluding plant closing related
accruals of $45 million recorded in the second quarter and six months of
fiscal 2006 and $10 million received in the six months of fiscal 2005 in
connection with vitamin antitrust litigation. Beef segment operating
results were negatively impacted by continued high operating costs, the
oversupply of proteins in the marketplace and by the continued restrictions
of certain key beef export markets. Additionally, beef operating results
for the three months ended April 1, 2006, were negatively impacted by net
losses of $18 million from the Company's commodity risk management
activities related to its fixed forward boxed beef sales and forward live
cattle purchases, a decrease of $28 million from the same period last year.
Beef operating results for the six months ended April 1, 2006, were
negatively impacted by $21 million from the Company's commodity risk
management activities, a decrease of $19 million from the same period last
year. 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, also negatively impacted the Beef segment's operating results.
Pork (11.7% of Net Sales -- 2nd Quarter 2006)
(12.0% of Net Sales -- Six Months 2006)
* Lower live costs were more than offset by decreased average sales
prices and higher per head operating costs
Pork segment volume improvement was more than offset by lower sales
prices, resulting in sales decreasing 12.0% and 9.1% in the second quarter
and six months of fiscal 2006, respectively, as compared to the same
periods last year.
Pork segment operating income decreased $10 million and $12 million in
the second quarter and six months of fiscal 2006, respectively, as compared
to the same periods last year, excluding $2 million received in the six
months of fiscal 2005 in connection with vitamin antitrust litigation.
Operating income was negatively impacted by higher operating costs per head
and an oversupply of proteins in the marketplace, resulting in decreased
average sales prices, partially offset by lower average live prices.
Prepared Foods (10.3% of Net Sales -- 2nd Quarter 2006)
(10.5% of Net Sales -- Six Months 2006)
* Excluding plant closing charges, operating margins improved, driven by
decreased raw material costs
Prepared Foods segment sales decreased 7.1% and 6.3% in the second
quarter and six months of fiscal 2006, as compared to the same periods last
year. The decrease in sales was primarily due to lower average sales prices
and slightly lower sales volumes, partially due to the planned
rationalization of lower margin product lines.
Prepared Foods segment operating income increased $3 million and $12
million in the second quarter and six months of fiscal 2006, respectively,
as compared to the same periods last year, excluding plant closing related
accruals of $14 million recorded in the second quarter and six months of
fiscal 2006 and $3 million recorded in the six months of fiscal 2005. The
increases were primarily due to decreased raw material costs, partially
offset by lower average sales prices.
TYSON FOODS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
April 1, April 2, April 1, April 2,
2006 2005 2006 2005
Sales $6,251 $6,359 $12,705 $12,811
Cost of Sales 6,097 5,937 12,203 12,026
154 422 502 785
Selling, General and
Administrative 236 237 470 468
Other Charges 59 2 59 5
Operating Income (Loss) (141) 183 (27) 312
Other Expenses:
Interest 58 58 109 116
Other 1 5 4 ---
Income (Loss) before
Income Taxes (200) 120 (140) 196
Income tax (benefit)
expense (73) 44 (52) 72
Net Income (Loss) $(127) $76 $(88) $124
Weighted Average Shares
Outstanding:
Class A Basic 247 242 245 242
Class B Basic 99 102 100 102
Diluted 346 357 345 357
Earnings (Loss) Per
Share:
Class A Basic $(0.38) $0.23 $(0.26) $0.37
Class B Basic $(0.34) $0.20 $(0.24) $0.33
Diluted $(0.37) $0.21 $(0.26) $0.35
Cash Dividends Per
Share:
Class A $0.040 $0.040 $0.080 $0.080
Class B $0.036 $0.036 $0.072 $0.072
Sales Growth (Decline) (1.7)% 3.3% (0.8)% 1.2%
Margins: (Percent
of Sales)
Gross Profit 2.5% 6.6% 4.0% 6.1%
Operating Income
(Loss) (2.3)% 2.9% (0.2)% 2.4%
Net Income (Loss) (2.0)% 1.2% (0.7)% 1.0%
Effective Tax Rate (36.2)% 36.6% (36.8)% 36.6%
TYSON FOODS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions)
(Unaudited) (Restated)
April 1, 2006 October 1, 2005
Assets
Current Assets:
Cash and cash equivalents $39 $40
Short-term investment 751 ---
Accounts receivable, net 1,145 1,214
Inventories 2,118 2,062
Other current assets 118 169
Total Current Assets 4,171 3,485
Net Property, Plant and Equipment 4,050 4,007
Goodwill 2,502 2,502
Other Assets 549 510
Total Assets $11,272 $10,504
Liabilities and Shareholders' Equity
Current Liabilities:
Current debt $803 $126
Trade accounts payable 990 961
Other current liabilities 978 1,070
Total Current Liabilities 2,771 2,157
Long-Term Debt 3,183 2,869
Deferred Income Taxes 576 638
Other Liabilities 165 169
Shareholders' Equity 4,577 4,671
Total Liabilities and Shareholders' Equity $11,272 $10,504
TYSON FOODS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended Six Months Ended
April 1, April 2, April 1, April 2,
2006 2005 2006 2005
Cash Flows From Operating
Activities:
Net income (loss) $(127) $76 $(88) $124
Depreciation and
amortization 128 125 253 251
Plant closing-related
charges 52 1 52 4
Deferred income taxes
and other (72) 26 (121) (28)
Net changes in working
capital 9 (193) 77 106
Cash Provided by (Used for)
Operating Activities (10) 35 173 457
Cash Flows From Investing
Activities:
Additions to property,
plant and equipment (168) (122) (357) (232)
Proceeds from sale of
assets 2 7 13 16
Investment in marketable
securities (42) (39) (39) (34)
Purchase of short-term
investment (750) --- (750) ---
Other 5 (3) 10 2
Cash Used for Investing
Activities (953) (157) (1,123) (248)
Cash Flows From Financing
Activities:
Net change in debt 6 132 (1) (160)
Proceeds from Notes
offering 992 --- 992 ---
Purchases of treasury
shares (8) (11) (20) (27)
Dividends (13) (13) (27) (27)
Stock options exercised
and other 5 6 19 5
Cash Provided by (Used for)
Financing Activities 982 114 963 (209)
Effect of Exchange Rate
Change on Cash (10) 2 (14) 2
Increase (Decrease) in
Cash and Cash Equivalents 9 (6) (1) 2
Cash and Cash Equivalents
at Beginning of Period 30 41 40 33
Cash and Cash Equivalents
at End of Period $39 $35 $39 $35
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. For security reasons, the 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
May 31 at 7:00 p.m. Eastern at 800-839-2347. International callers dial
402-998-0556.
Forward-Looking Statements
The Company and its representatives may from time to time make written
or oral forward-looking statements, such as statements relating 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 inputs and raw materials, such as live cattle, live swine, or feed
grains, and energy; (ii) market conditions for finished products, including
competition from other global and domestic food processors, 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
and foreign politics; (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 domestic and foreign
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, and the ability of the
Company to maintain good relationships with employees, labor unions,
contract growers and independent producers providing livestock to the
Company; (viii) issues related to food safety, including costs resulting
from product recalls, regulatory compliance and any related claims or
litigation; (ix) changes in consumer preference and diets, and the
Company's ability to identify and react to consumer trends; (x) significant
marketing plan changes by large customers, or the loss of one or more large
customers; (xi) adverse results from litigation; (xii) risks associated
with leverage, including cost increases due to rising interest rates or
changes in debt ratings or outlook; (xiii) changes in regulations and laws
(both domestic and foreign), including changes in accounting standards, tax
laws, environmental laws and occupational, health and safety laws; (xiv)
the ability of the Company to make effective acquisitions and successfully
integrate newly acquired businesses into existing operations; (xv)
effectiveness of advertising and marketing programs; and (xvi) the effect
of, or changes in, general economic conditions.
SOURCE Tyson Foods, Inc.
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Related links:
http://www.tyson.com
http://ir.tysonfoodsinc.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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