* 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.
CONTACT:
media
Gary Mickelson
479-290-6111
investors
Ruth Ann
Wisener
479-290-4235
both of Tyson Foods, Inc.
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