Sequential Improvement as Tyson Focuses on Cost Structure
Springdale, Arkansas – August 7, 2023 – 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, reported the following results:
Third Quarter Highlights
- Sales of $13,140 million, down 3% from prior year
- GAAP operating loss of $350 million, down 134% from prior year
- Adjusted operating income of $179 million, down 82% from prior year
- GAAP EPS of ($1.18), down 157% from prior year
- Adjusted EPS of $0.15, down 92% from prior year
- Total Company GAAP operating margin of (2.7%)
- Total Company Adjusted operating margin (non-GAAP) of 1.4%
- Announced the closure of four additional Chicken facilities expected to reduce costs and improve capacity utilization
- Liquidity of approximately $3.7 billion as of July 1, 2023; Entered into $1.75 billion of new term loan facilities
- Closed on the acquisition of Williams Sausage Company
- Recorded a goodwill impairment charge of $210 million in our Chicken segment and $238 million in International/Other
First Nine Months Highlights
- Sales of $39,533 million, flat from prior year
- GAAP operating income of $68 million, down 98% from prior year
- Adjusted operating income of $697 million, down 81% from prior year
- GAAP EPS of $(0.56), down 108% from prior year
- Adjusted EPS of $0.97, down 86% from prior year
- Total Company GAAP operating margin of 0.2%
- Total Company Adjusted operating margin (non-GAAP) of 1.8%
- Repurchased 5.4 million shares for $343 million
“While current market dynamics remain challenging, Tyson Foods is fully committed to our vision of delivering sustainable, top line growth and margin improvement,” said Donnie King, President and CEO, Tyson Foods. “I’m encouraged by the improvements we made this quarter, including our Tyson Core Business lines that continue to outpace our peers in volume growth.”
“The difficult decision to close four chicken facilities in North Little Rock, Arkansas, Corydon, Indiana, Dexter, Missouri and Noel, Missouri, demonstrates our commitment to bold action and operational excellence as we drive performance, including lower costs and improving capacity utilization, and build on our strategy of making Tyson Foods stronger in the long-term.”
For fiscal 2023, the United States Department of Agriculture (USDA) indicates domestic protein production (beef, pork, chicken and turkey) should increase slightly compared to fiscal 2022 levels. The following is a summary of the updated outlook for each of our segments, as well as an outlook for revenues, capital expenditures, net interest expense, liquidity and tax rate for fiscal 2023. Certain of the outlook numbers include adjusted operating margin (a non-GAAP metric) for each segment. The Company is not able to reconcile its full-year fiscal 2023 projected adjusted results to its fiscal 2023 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 and the amount of any potential applicable future adjustments, 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.
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 targeted an aggregate $1 billion in productivity savings by the end of fiscal 2024 relative to a fiscal 2021 cost baseline. We realized more than $700 million of productivity savings in fiscal 2022, which partially offset the impacts of inflationary market conditions, and we surpassed our aggregate $1 billion target in the second quarter of fiscal 2023, more than a year ahead of our plan.
USDA projects domestic production will decrease approximately 3% in fiscal 2023 as compared to fiscal 2022. We anticipate an adjusted operating margin of (1)% to 1% in fiscal 2023 as margins are expected to decrease.
USDA projects domestic production will be relatively flat in fiscal 2023 as compared to fiscal 2022. We anticipate adjusted operating margin of (4)% to (2)% in fiscal 2023.
USDA projects chicken production will increase approximately 3% in fiscal 2023 as compared to fiscal 2022. We anticipate an adjusted operating margin of (1)% to 1% for fiscal 2023.
Additionally, we announced the closure of four Chicken segment processing facilities, located in Corydon, Indiana; Dexter, Missouri; Noel, Missouri; and North Little Rock, Arkansas, to further optimize network asset utilization. We expect to shift production to other facilities and cease operations at the impacted locations in our first two quarters of fiscal 2024. We continue to evaluate the financial statement impact of the closures for charges related to contract terminations, impairments, accelerated depreciation, severance and retention. Based on our preliminary analysis, we currently estimate total charges of $300 million to $400 million which will be recorded through the planned closure dates.
We anticipate an adjusted operating margin of 8% to 10% in fiscal 2023 driven by volume growth, productivity and disciplined revenue management.
We anticipate improved results from our foreign operations in fiscal 2023 on an adjusted basis.
We expect sales to be $53 billion to $54 billion in fiscal 2023.
We expect capital expenditures of approximately $2.1 billion for fiscal 2023. 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 $340 million for fiscal 2023.
We expect total liquidity, which was approximately $3.7 billion as of July 1, 2023, to remain above our minimum liquidity target of $1.0 billion.
We currently expect our adjusted effective tax rate to be around 22% for fiscal 2023.
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 four 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®. Headquartered in Springdale, Arkansas, the Company had approximately 142,000 team members on October 1, 2022. 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, August 7, 2023. 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://events.q4inc.com/attendee/449859241. 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. A telephone replay will also be available until Thursday, September 7, 2023, 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 1444964. 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.
Certain information in this release 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 2023, 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 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 COVID-19 related impacts on the market, including production delays, labor shortages and increases in costs and inflation; (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) cyberattacks, other 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 conduct our operations; (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, including as a result of our plan to relocate certain corporate team members to our world headquarters in Springdale, Arkansas; (xv) issues related to food safety, including costs resulting from product recalls, regulatory compliance and any related claims or litigation; (xvi) the effect of climate change and any legal or regulatory response thereto; (xvii) 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; (xviii) adverse results from litigation; (xix) risks associated with leverage, including cost increases due to rising interest rates or changes in debt ratings or outlook; (xx) impairment in the carrying value of our goodwill or indefinite life intangible assets; (xxi) our participation in a multiemployer pension plan; (xxii) volatility in capital markets or interest rates; (xxiii) risks associated with our commodity purchasing activities; (xxiv) the effect of, or changes in, general economic conditions; (xxv) impacts on our operations caused by factors and forces beyond our control, such as natural disasters, fire, bioterrorism, pandemics, armed conflicts or extreme weather; (xxvi) failure to maximize or assert our intellectual property rights; (xxvii) effects related to changes in tax rates, valuation of deferred tax assets and liabilities, or tax laws and their interpretation; 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.
Source: Tyson Foods, Inc.