Tyson Foods Inc. reported the following results:

Fourth Quarter Highlights

  • Record sales of $10.1 billion, an increase of 14% over fourth quarter of prior year
  • Adjusted operating income increased 13% to $469 million over fourth quarter of prior year
  • Reported EPS was $0.35; Adjusted EPS up 24% to $0.87 compared to EPS from continuing operations of $0.70 in fourth quarter of fiscal 2013
  • Overall adjusted operating margin was 4.8%

Fiscal 2014 Highlights

  • Record adjusted EPS from continuing operations increased 30% to $2.94 compared to $2.26 of prior year
  • Record Sales of $37.6 billion, an increase of 9% over prior year
  • Record adjusted operating income of $1.65 billion, an increase of 20% over prior year
  • Overall adjusted operating margin was 4.4%

"Two years ago, I told our team members, 'The turnaround is over; it's time to turn it on.' They did and the proof is in our second year in a row of record sales and earnings," said Donnie Smith, president and chief executive officer of Tyson Foods.

"This is an exciting time as we integrate Hillshire Brands and Tyson Foods," Smith said, "and I believe that when we look back on this merger years from now, we'll see it as a watershed event. We're setting higher expectations and anticipating more growth and increased profitability, specifically in the Chicken and Prepared Foods segments. In the long-term, our Chicken segment should generate a 7-9% return on sales, although we expect fiscal 2015 to be particularly strong with a return of more than 10%.

"Although it's still early in the process, I'm pleased with the progress we've made with the integration. We've identified the synergy targets, and now we're working to bring those dollars to the bottom line. We're very confident we'll meet the expected synergy amounts of $225 million or more for fiscal '15 and more than $500 million by the end of year three, and when we get there in fiscal 2017, we expect the Prepared Foods segment to earn a 10-12% return on sales.

"Fiscal 2015 should be another great year and is already off to a strong start. We are projecting adjusted earnings for the year in the range of $3.30-3.40 per share, and as we look ahead to 2016, we see continued success and growth."

Tyson offered the following summaries of its operating segments:

  • Chicken – “Sales volume grew as a result of stronger demand for chicken products and mix of rendered product sales. Average sales price decreased as feed ingredient costs declined, partially offset by mix changes. Operating income for the fourth quarter of fiscal 2014 was negatively impacted by rapidly rising costs of outside meat purchases. For the 12 months of fiscal 2014, operating income increased due to higher sales volume and lower feed ingredient costs, partially offset by decreased average sales price. Feed costs decreased $140 million and $600 million for the fourth quarter and 12 months of fiscal 2014, respectively.”
  • Beef – “Sales volume decreased due to a reduction in live cattle processed. Average sales price increased due to lower domestic availability of beef products. Operating income decreased for the fourth quarter of fiscal 2014 due to higher fed cattle costs and periods of reduced consumption of beef products, which made it difficult to pass along increased input costs, as well as lower sales volumes and increased operating costs. For the 12 months of fiscal 2014, operating income increased due to improved operational execution and maximizing our revenues relative to the rising live cattle markets, partially offset by increased operating costs.”
  • Pork – “Sales volume slightly decreased for the fourth quarter of fiscal 2014 as a result of balancing our supply with consumption and reduced exports. Sales volumes increased for the 12 months of fiscal 2014 due to better domestic demand for our pork products. Average sales price increased due to lower total hog supplies, which resulted in higher input costs. Operating income increased as we maximized our revenues relative to live hog markets, partially attributable to operational and mix performance.”
  • Prepared Foods – “We acquired and consolidated Hillshire Brands on August 28, 2014. Sales volume increased as a result of improved demand for our Prepared Foods products and incremental volumes as a result of the acquisition of Hillshire Brands. Average sales price increased due to price increases associated with higher input costs along with better product mix which was positively impacted incrementally by the acquisition of Hillshire Brands. Legacy Prepared Foods operating income decreased as a result of higher raw material and other input costs of approximately $50 million and $210 million for the fourth quarter and 12 months of fiscal 2014, respectively. Because many of our sales contracts are formula based or shorter-term in nature, we are typically able to offset rising input costs through pricing. However, there is a lag time for price increases to take effect. Additionally, operating income was reduced by $64 million and $113 million for the fourth quarter and 12 months of fiscal 2014, respectively, due to additional costs associated with the Prepared Foods improvement plan, Hillshire Brands post-closing results, purchase price accounting adjustments and ongoing costs related to a legacy Hillshire Brands plant fire.”
  • International – “Sales volume increased as we grew our businesses in Brazil and China. Average sales price increased for the fourth quarter of fiscal 2014 due to a more favorable pricing environment in Mexico. Average sales price decreased for the 12 months of fiscal 2014 due to poor export market conditions in Brazil, supply imbalances associated with weak demand in China and a less favorable pricing environment in Mexico. Excluding the Brazil impairment and other related costs of $42 million, operating income in the fourth quarter was more favorable due to better market conditions in Mexico. Operating income decreased in the 12 months of fiscal 2014 due to poor operational execution in Brazil, challenging market conditions in Brazil and China and additional costs incurred as we grew our International operation.”

In fiscal 2015, Tyson said it expects overall domestic protein production (chicken, beef, pork and turkey) to increase approximately 1% from fiscal 2014 levels. Grain supplies are expected to increase in fiscal 2015, which should result in lower input costs as well as decreased costs for cattle and hog producers.

Source: Tyson Foods Inc.