Tyson Foods Achieves a Record Start with a 38% Rise in Earnings

On February 6, 2017, Tyson Foods, Inc. (NYSE: TSN), a global food company with top brands such as Tyson®, Jimmy Dean®, Hillshire Farm®, Sara Lee®, Ball Park®, Wright®, Aidells® and State Fair®, announced the following results from its headquarters in Springdale, Arkansas: First Quarter Highlights - A record EPS of $1.59, a 38% increase from Q1'16 - A record Operating income increase of 27% to $982 million - Total Company sales volume rose 2.4% from Q1'16; all segments sales volume increased from the previous year - Record total company operating margin at 10.7% - Record Pork segment operating margin at 19.7% - Record Beef segment operating margin at 8.5% - Chicken and Prepared Foods segment operating margin within normalized range - $161 million in total synergies captured; $40 million incremental synergies over Q1'16 - Record operating cash flows of over $1.1 billion - Repurchased 8.1 million shares for $520 million, excluding shares repurchased to offset dilution from our equity compensation plan Fiscal 2017 Guidance - EPS guidance increased to $4.90-$5.05, representing a 12% increase from adjusted EPS of fiscal 2016 Tom Hayes, president and CEO of Tyson Foods, stated, “The year has started off exceptionally well with record earnings, record operating income and record cash flows. Return on sales for each operating segment was in or above the normalized range. The tremendous returns generated in the Beef and Pork segments are providing fuel for growth in our value-added Chicken and Prepared Foods segments. Tyson Foods led retail food manufacturers in both sales volume and sales dollars for the 13-week period corresponding with our fiscal first quarter. According to IRI, we were the only company to show volume growth among the top 10 branded food companies. Due to our outstanding performance in Beef and Pork and strong market conditions in the first quarter, we are raising our annual earnings guidance to $4.90-5.05 per share. We expect the earnings cadence for the remainder of the fiscal year to follow more normal patterns, including the seasonality typical of our second quarter. We’re on a path toward what we expect to be our fifth straight year of record results. Our path won’t be linear, but our team is focused on delivering long-term growth and creating shareholder value.” Summary of Segment Results Chicken - Sales volume increased due to better demand for our chicken products, partially offset by a decrease in rendered product sales. Average sales price increased due to sales mix changes which offset general market price declines. Operating income decreased due to increased marketing, advertising and promotion spend and higher operating costs which included $23 million of compensation and benefit integration expense. Feed costs decreased $20 million during the first quarter of fiscal 2017. Beef - Sales volume increased due to improved availability of cattle supply and stronger domestic and export demand for our beef products. Average sales price decreased due to higher domestic availability of beef supplies and lower livestock cost. Operating income increased due to more favorable market conditions as we maximized our revenues relative to the decline in live fed cattle costs, partially offset by higher operating costs. Pork - Sales volume increased due to strong demand for our pork products and increased exports. Live hog supplies increased, which drove down livestock cost and average sales price. Operating income increased as we maximized our revenues relative to the live hog markets, partially attributable to stronger export markets and operational and mix performance, which were partially offset by higher operating costs. Prepared Foods - Sales volume increased due to improved demand for our prepared foods products. Average sales price decreased primarily due to a decline in input costs of approximately $100 million, partially offset by product mix changes. Operating income decreased due to higher operating costs at some of our facilities, increased marketing, advertising and promotion spend and $22 million of compensation and benefit integration expense. Additionally, Prepared Foods operating income was positively impacted by $127 million in synergies, of which $32 million was incremental synergies in the first quarter of fiscal 2017 above the $95 million of synergies realized in the first quarter of fiscal 2016. The positive impact of these synergies to operating income was partially offset with investments in innovation, new product launches and supporting the growth of our brands. Outlook In fiscal 2017, USDA indicates domestic protein production (chicken, beef, pork and turkey) should increase approximately 2-3% from fiscal 2016 levels and moderate export growth. As we continue with the integration of Hillshire Brands, we expect to realize synergies of around $675 million in fiscal 2017 from the acquisition as well as our profit improvement plan for our legacy Prepared Foods business with some incremental synergies expected to be realized in fiscal 2018. The