Tyson Continues Strong Earnings Trend as First Quarter Earnings Increase 47% to $0.72

"I'm very pleased with our strong first quarter results, and I'm confident in my expectations for the full year," said Donnie Smith, president and CEO of Tyson Foods.

03 Feb 2014 --- "We're growing sales and earnings and executing our strategy - including making our third prepared foods acquisition in less than a year - while reinvesting in our existing businesses and buying back shares.

"We're in a position any company wants to be in, which is being able to make deliberate, long-term decisions to create shareholder value," Smith said. "But we're maintaining our sense of urgency, our flexibility and our opportunistic mindset. We're generating momentum that will take us into 2015, 2016 and beyond."

Tyson Foods, Inc. reported the following results:
- EPS up 47% to $0.72 compared to $0.49 in first quarter of prior year
- Sales of $8.8 billion, an increase of 4.7% over first quarter of prior year
- Operating income increased 36% to $412 million
- Overall operating margin was 4.7%
- Record Chicken segment operating income of $225 million
- 7.5% operating margin
- Pork segment operating income of $121 million
- 8.5% operating margin
- Repurchased 4.6 million shares for $150 million
- Liquidity totaled $1.8 billion at December 28, 2013

Outlook

In fiscal 2014, we expect overall domestic protein production (chicken, beef, pork and turkey) to increase approximately 1% from fiscal 2013 levels. Grain supplies are expected to increase in fiscal 2014, which should result in lower input costs. The following is a summary of the fiscal 2014 outlook for each of our segments, as well as an outlook on sales, capital expenditures, net interest expense, debt and liquidity and share repurchases:

- Chicken -- We expect domestic chicken production to increase around 3% in fiscal 2014 compared to fiscal 2013. Based on current futures prices, we expect lower feed costs in fiscal 2014 compared to fiscal 2013 of approximately $600 million. Many of our sales contracts are formula based or shorter-term in nature, but there may be a lag time for price changes to take effect. Due to the relative value of chicken compared to other proteins, we believe demand will remain strong in fiscal 2014. We believe our Chicken segment will be in or above its normalized range of 5.0%-7.0% for fiscal 2014.

- Beef -- We expect to see a reduction of industry fed cattle supplies of 2-3% in fiscal 2014 as compared to fiscal 2013. Although we generally expect adequate supplies in regions we operate our plants, there may be periods of imbalance of fed cattle supply and demand. For fiscal 2014, we believe our Beef segment's profitability will be similar to fiscal 2013, but could be below its normalized range of 2.5%-4.5%.

- Pork -- We expect industry hog supplies to decrease around 3% in fiscal 2014 compared to fiscal 2013, offset by increased average live weights. For fiscal 2014, we believe our Pork segment will be in its normalized range of 6.0%-8.0%.

- Prepared Foods -- We expect operational improvements and pricing to offset increased raw material costs. Because many of our sales contracts are formula based or shorter-term in nature, we are typically able to offset rising input costs through increased pricing. As we continue to invest heavily in our growth platforms, we believe our Prepared Foods segment could be slightly below its normalized range of 4.0%-6.0% for fiscal 2014.

- Sales -- We expect fiscal 2014 sales to approximate $36 billion as we continue to execute our strategy of accelerating growth in domestic value-added chicken sales, prepared food sales and international chicken production.

- Capital Expenditures -- We expect fiscal 2014 capital expenditures to approximate $700 million.

- Net Interest Expense -- We expect net interest expense will approximate $100 million for fiscal 2014.

- Debt and Liquidity -- We expect total liquidity, which was $1.8 billion at December 28, 2013, to be well above our goal to maintain liquidity in excess of $1.2 billion.

- Share Repurchases -- We expect to continue repurchasing shares under our share repurchase program. As of December 28, 2013, 9.6 million shares remained authorized for repurchases. On January 30, 2014, our Board of Directors approved an increase of 25 million shares authorized for repurchase under our share repurchase program. The timing and extent to which we repurchase shares will depend upon, among other things, our working capital needs, market conditions, liquidity targets, our debt obligations and regulatory requirements.