Tyson Foods Reports First Quarter 2022 Results

SPRINGDALE, Ark., Feb. 07, 2022 (GLOBE NEWSWIRE) -- Tyson Foods, Inc. (NYSE: TSN), one of the world’s largest food companies and a recognized leader in protein with leading brands including Tyson, Jimmy Dean, Hillshire Farm, Ball Park, Wright, Aidells, ibp and State Fair, today reported the following results:

¹ _{The Company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). Adjusted operating income and adjusted net income per share attributable to Tyson (Adjusted EPS) are non-GAAP financial measures. Refer to the end of this release for an explanation and reconciliation of these and other non-GAAP financial measures used in this release to comparable GAAP measures.}

First Quarter Highlights

• GAAP EPS of $3.07, up 140% from prior year; Adjusted EPS of $2.87, up 48% from prior year
• GAAP operating income of $1,455 million, up 106% from prior year; Adjusted operating income of $1,432 million, up 40% from prior year
• Total Company GAAP operating margin of 11.3%; Adjusted operating margin of 11.1%
• Liquidity of $5.2 billion at January 1, 2022
• Repurchased 4.2 million shares for $348 million
  

“We’re pleased with the results of the first quarter and of the steps that we are taking to improve productivity,” said Donnie King, President and CEO of Tyson Foods. “Our performance reflects the resilience of our multi-protein portfolio even with continued volatility in the marketplace. We remain committed to winning with our team members, winning with our customers and consumers and winning with excellence. We have the right team who are taking the right actions and as a result, we believe our future is bright.”

SEGMENT RESULTS (in millions)

ADJUSTED SEGMENT RESULTS (in millions)

² _{Average Price Change and Adjusted Operating Margin for the Chicken Segment and Total Company exclude the impact of a $320 million legal contingency accrual recognized as a reduction to Sales in the first quarter of fiscal 2021.}

SUMMARY OF SEGMENT RESULTS

Beef
Sales volume decreased due to the impacts associated with a challenging labor environment and increased supply chain constraints, partially offset by strong global demand. Average sales price increased as input costs such as live cattle, labor, freight and transportation costs increased and demand for our beef products remained strong. Operating income increased due to strong demand as we continued to optimize revenues relative to live cattle supply and a reduction in direct incremental expenses related to COVID-19, partially offset by production inefficiencies due to the impacts associated with a challenging labor environment. Additionally, operating income in fiscal 2021 was impacted by a $55 million gain from the recovery of cattle inventory related to a cattle supplier's misappropriation of Company funds.

Pork
Sales volume was up slightly as strong global demand was offset by the impacts associated with a challenging labor environment. Average sales price increased as input costs such as live hogs, labor, freight and transportation costs increased and demand for our pork products remained strong, partially offset by unfavorable mix associated with labor shortages. Operating income increased due to strong demand as we optimized revenues relative to live hog supply and a reduction in direct incremental expenses related to COVID-19, partially offset by the impacts associated with a challenging labor environment.

Chicken
Sales volume increased primarily due to increased live production and a strong demand environment. Average sales price increased due to the effects of an inflationary cost environment. Operating income increased due to increased sales volume and higher average sales prices, partially offset by the impacts of inflationary market conditions including $185 million of higher feed ingredient costs, increased supply chain costs and a challenging labor environment. Additionally, operating income in the first quarter of fiscal 2022 was impacted by $23 million of insurance proceeds, net of costs incurred related to a fire at a production facility and was impacted in the first quarter of fiscal 2021 by a $320 million loss from the recognition of a legal contingency accrual.

Prepared Foods
Sales volume decreased due to the divestiture of our pet treats business in the fourth quarter of fiscal 2021 as well as lower production throughput primarily associated with a challenging labor and supply environment. Average sales price increased primarily due to the effects of revenue management in an inflationary cost environment. Operating income decreased due to the impacts of inflationary market conditions, including $215 million of increased raw materials and other input costs, increased supply chain costs and a challenging labor environment, partially offset by favorable pricing.

OUTLOOK
For fiscal 2022, the United States Department of Agriculture (“USDA”) indicates domestic protein production (beef, pork, chicken and turkey) should be relatively flat as compared to fiscal 2021 levels. The following is a summary of the outlook for each of our segments, as well as an outlook for revenues, capital expenditures, net interest expense, liquidity and tax rate for fiscal 2022.³

Beginning in fiscal 2022, we launched a new productivity program, which is designed to drive a better, faster and more agile organization that is supported by a culture of continuous improvement and faster decision making. We are targeting $1 billion in productivity savings by the end of fiscal 2024 and $300 million to $400 million in fiscal 2022, relative to a fiscal 2021 cost baseline. We are currently on track to achieve our planned productivity savings for fiscal 2022.

Beef
USDA projects domestic production will decrease approximately 1% in fiscal 2022 as compared to fiscal 2021. We anticipate another strong year with adjusted operating margin at the upper end of 9% to 11% in fiscal 2022. We expect the first half of the fiscal year will be stronger than the second half as a combination of higher utilization and demand for cattle may result in a narrowing spread.

Pork
USDA projects domestic production will decrease approximately 2% in fiscal 2022 as compared to fiscal 2021. We believe our Pork segment's adjusted operating margin will be 5% to 7% in fiscal 2022.

Chicken
USDA projects chicken production will increase approximately 2% in fiscal 2022 as compared to fiscal 2021. We anticipate an adjusted operating margin of 5% to 7% for fiscal 2022 as our adjusted operating margin is expected to achieve this on a run rate basis by the middle of the year resulting in overall stronger performance in the second half of the fiscal year.

Prepared Foods
We believe our adjusted operating margin will be at the upper end of 7% to 9% in fiscal 2022. We will remain disciplined in our pricing initiatives to ensure that additional inflationary pressures are mitigated by sales price increases, while also working diligently to deliver productivity savings to reduce costs.

International/Other
We anticipate improved results from our foreign operations in fiscal 2022.

Revenue
We expect sales to be at the upper end of $49 billion to $51 billion in fiscal 2022.

Capital Expenditures
We expect capital expenditures of approximately $2 billion for fiscal 2022. Capital expenditures include spending for capacity expansion and utilization, automation to alleviate labor challenges and brand and product innovation.

Net Interest Expense
We expect net interest expense to approximate $360 million for fiscal 2022.

Liquidity
We expect total liquidity, which was approximately $5.2 billion at January 1, 2022, to remain above our minimum liquidity target of $1.0 billion.

Tax Rate
We currently expect our adjusted effective tax rate to be around 23% in fiscal 2022.

³ _{The Company is not able to reconcile its full-year fiscal 2022 projected adjusted results to its fiscal 2022 projected GAAP results because certain information necessary to calculate such measures on a GAAP basis is unavailable or dependent on the timing of future events outside of our control. Therefore, because of the uncertainty and variability of the nature of the amount of future adjustments, such as legal contingency accruals and other significant items which could be significant, the Company is unable to provide a reconciliation for these forward-looking non-GAAP measures without unreasonable effort. Adjusted operating margin should not be considered a substitute for operating margin or any other measures of financial performance reported in accordance with GAAP. Investors should rely primarily on the Company’s GAAP results and use non-GAAP financial measures only supplementally in making investment decisions.}

TYSON FOODS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In millions, except per share data)
(Unaudited)

TYSON FOODS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions)
(Unaudited)

TYSON FOODS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)

TYSON FOODS, INC.
EBITDA Reconciliations
(In millions)
(Unaudited)

⁴ _{Excludes the amortization of debt issuance and debt discount expense of $2 million for the three months ended January 1, 2022, $3 million for the three months ended January 2, 2021, $19 million for the fiscal year ended October 2, 2021, and $18 million for the twelve months ended January 1, 2022 as it is included in interest expense.}

⁵ _{Relates to a plant relocation from a government land expropriation and includes accelerated depreciation and team member related charges recognized as an increase of Cost of Sales.}

⁶ _{Legal contingency accruals included $320 million recognized as a reduction of Sales in the first quarter of fiscal 2021 and $545 million recognized as a reduction of Sales and $81 million recognized as an increase of Cost of Sales in fiscal 2021.}

⁷ _{Relates to fires at production facilities in Chicken in the fourth quarter of fiscal 2021 and Beef in the fourth quarter of fiscal 2019. Amount includes insurance proceeds, net of costs incurred, of $23 million recognized in Cost of Sales and $22 million net proceeds recognized in Other, net in the first quarter of fiscal 2022 and $23 million net expense recognized in Cost of Sales and $6 million net proceeds recognized in Other, net for fiscal 2021.}

EBITDA is defined as net income before interest, income taxes, depreciation and amortization. Net debt to EBITDA (Adjusted EBITDA) represents the ratio of our debt, net of cash, cash equivalents and short-term investments, to EBITDA (and to Adjusted EBITDA). EBITDA, Adjusted EBITDA, net debt to EBITDA and net debt to Adjusted EBITDA are presented as supplemental financial measurements in the evaluation of our business. Adjusted EBITDA is a tool intended to assist our management and investors in comparing our performance on a consistent basis for purposes of business decision-making by removing the impact of certain items that management believes do not directly reflect our core operations on an ongoing basis.

We believe the presentation of these financial measures helps management and investors to assess our operating performance from period to period, including our ability to generate earnings sufficient to service our debt, enhances understanding of our financial performance and highlights operational trends. These measures are widely used by investors and rating agencies in the valuation, comparison, rating and investment recommendations of companies; however, the measurements of EBITDA (and Adjusted EBITDA) and net debt to EBITDA (and to Adjusted EBITDA) may not be comparable to those of other companies, which may limit their usefulness as comparative measures. EBITDA (and Adjusted EBITDA) and net debt to EBITDA (and to Adjusted EBITDA) are not measures required by or calculated in accordance with GAAP and should not be considered as substitutes 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 (and Adjusted 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 (and Adjusted EBITDA) involve outlays of cash. As a result, actual cash available to service our debt obligations will be different from EBITDA (and Adjusted EBITDA). Investors should rely primarily on our GAAP results and use non-GAAP financial measures only supplementally in making investment decisions.

TYSON FOODS, INC.
EPS Reconciliations
(In millions, except per share data)
(Unaudited)

Adjusted net income per share attributable to Tyson (Adjusted EPS) is presented as a supplementary measure of our financial performance that is not required by, or presented in accordance with, GAAP. We use Adjusted EPS as an internal performance measurement and as one criterion for evaluating our performance relative to that of our peers. We believe Adjusted EPS is meaningful to our investors to enhance their understanding of our financial performance and is frequently used by securities analysts, investors and other interested parties to compare our performance with the performance of other companies that report Adjusted EPS. Further, we believe that Adjusted EPS is a useful measure because it improves comparability of results of operations from period to period. Adjusted EPS should not be considered a substitute for net income per share attributable to Tyson or any other measure of financial performance reported in accordance with GAAP. Investors should rely primarily on our GAAP results and use non-GAAP financial measures only supplementally in making investment decisions. Our calculation of Adjusted EPS may not be comparable to similarly titled measures reported by other companies.

TYSON FOODS, INC.
Operating Income (Loss) Reconciliation
(In millions)
(Unaudited)

Adjusted operating income is presented as a supplementary measure of our operating performance that is not required by, or presented in accordance with, GAAP. We use adjusted operating income as an internal performance measurement and as one criterion for evaluating our performance relative to that of our peers. We believe adjusted operating income is meaningful to our investors to enhance their understanding of our operating performance and is frequently used by securities analysts, investors and other interested parties to compare our performance with the performance of other companies that report adjusted operating income. Further, we believe that adjusted operating income is a useful measure because it improves comparability of results of operations from period to period. Adjusted operating income should not be considered as a substitute for operating income (loss) or any other measure of operating performance reported in accordance with GAAP. Investors should rely primarily on our GAAP results and use non-GAAP financial measures only supplementally in making investment decisions. Our calculation of adjusted operating income may not be comparable to similarly titled measures reported by other companies.

About Tyson Foods, Inc.
Tyson Foods, Inc. (NYSE: TSN) is one of the world’s largest food companies and a recognized leader in protein. Founded in 1935 by John W. Tyson and grown under three generations of family leadership, the Company has a broad portfolio of products and brands like Tyson®, Jimmy Dean®, Hillshire Farm®, Ball Park®, Wright®, Aidells®, ibp® and State Fair®. Tyson Foods innovates continually to make protein more sustainable, tailor food for everywhere it’s available and raise the world’s expectations for how much good food can do. Headquartered in Springdale, Arkansas, the Company had approximately 137,000 team members at October 2, 2021. Through its Core Values, Tyson Foods strives to operate with integrity, create value for its shareholders, customers, communities and team members and serve as a steward of the animals, land and environment entrusted to it. Visit www.tysonfoods.com.

Conference Call Information and Other Selected Data
A conference call to discuss the Company's financial results will be held at 9 a.m. Eastern Monday, February 7, 2022. A link for the webcast of the conference call is available on the Tyson Investor Relations website at http://ir.tyson.com. The webcast also can be accessed by the following direct link: https://event.on24.com/wcc/r/3578688/776A66724A330AB0D97CEC70248EB449. For those who cannot participate at the scheduled time, a replay of the live webcast and the accompanying slides will be available at http://ir.tyson.com until Monday, March 7, 2022. A telephone replay will also be available until Monday, March 7, 2022, toll free at 1-877-344-7529, international toll 1-412-317-0088 or Canada toll free 855-669-9658. The replay access code is 3166566. 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 in this report constitutes forward-looking statements as contemplated by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, but are not limited to, current views and estimates of our outlook for fiscal 2022, other future economic circumstances, industry conditions in domestic and international markets, our performance and financial results (e.g., debt levels, return on invested capital, value-added product growth, capital expenditures, tax rates, access to foreign markets and dividend policy). These forward-looking statements are subject to a number of factors and uncertainties that could cause our actual results and experiences to differ materially from 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 are expressly qualified in their entirety by this cautionary statement and speak only as of the date made. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. 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 COVID-19 global pandemic and associated responses thereto have had an adverse impact on our business and operations, and the extent that the COVID-19 pandemic continues to impact us will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, and public adoption rates of COVID-19 vaccines and their effectiveness against emerging variants of COVID-19, including the Delta and Omicron variants, and the speed and effectiveness of new vaccine and treatment developments and their deployment; (ii) the effectiveness of our financial excellence programs; (iii) access to foreign markets together with foreign economic conditions, including currency fluctuations, import/export restrictions and foreign politics; (iv) cyber incidents, security breaches or other disruptions of our information technology systems; (v) risks associated with our failure to consummate favorable acquisition transactions or integrate certain acquisitions' operations; (vi) the Tyson Limited Partnership’s ability to exercise significant control over the Company; (vii) 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; (viii) 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; (ix) outbreak of a livestock disease (such as African swine fever (ASF), 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; (x) changes in consumer preference and diets and our ability to identify and react to consumer trends; (xi) effectiveness of advertising and marketing programs; (xii) significant marketing plan changes by large customers or loss of one or more large customers; (xiii) our ability to leverage brand value propositions; (xiv) changes in availability and relative costs of labor and contract farmers and our ability to maintain good relationships with team members, labor unions, contract farmers and independent producers providing us livestock; (xv) issues related to food safety, including costs resulting from product recalls, regulatory compliance and any related claims or litigation; (xvi) 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; (xvii) adverse results from litigation; (xviii) risks associated with leverage, including cost increases due to rising interest rates or changes in debt ratings or outlook; (xix) impairment in the carrying value of our goodwill or indefinite life intangible assets; (xx) our participation in a multiemployer pension plan; (xxi) volatility in capital markets or interest rates; (xxii) risks associated with our commodity purchasing activities; (xxiii) the effect of, or changes in, general economic conditions; (xxiv) impacts on our operations caused by factors and forces beyond our control, such as natural disasters, fire, bioterrorism, pandemics or extreme weather; (xxv) failure to maximize or assert our intellectual property rights; (xxvi) effects related to changes in tax rates, valuation of deferred tax assets and liabilities, or tax laws and their interpretation; (xxvii) the effectiveness of our internal control over financial reporting, including identification of material weaknesses; and (xxviii) the other risks and uncertainties detailed from time to time in our filings with the Securities and Exchange Commission, including those included under the captions "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our most recent Annual Report on Form 10-K and Quarterly reports on Form 10-Q.