Tyson Foods, Inc. · NYSE:TSN
Tyson Foods — Investor Presentation (September 2017)
66 slides from Tyson Foods's investor presentation, Sep 6, 2017
Slide 1: Grow. Deliver. Sustain. Investor Presentation
Grow. Deliver. Sustain. Investor Presentation September 2017
Slide 2: Forward-Looking Statements
Forward-Looking Statements Certain information contained in this presentation may constitute forward-looking statements, such as statements relating to expected performance and including, but not limited to, statements appearing in the “Outlook” section and statements relating to adjusted EPS guidan
Slide 3: Why Invest in TSN
Why Invest in TSN • Our three-year (2014-2016) Total Shareholder Return far exceeds our peer set • We’ve produced consistent earnings growth and returned cash to shareholders through share repurchases and dividends; however, following the acquisition of AdvancePierre, we have prioritized debt repaym
Slide 4: Strong Today, Leading for Tomorrow
Strong Today, Leading for Tomorrow Future Strong Unique Purpose Clear Focused Financials Position Driven Strategy Team 4 Tyson Foods, Inc. Investor Presentation | September 2017
Slide 5: Driving Unmatched Shareholder Return Among Peers
Driving Unmatched Shareholder Return Among Peers Total Shareholder Return * 2014-2016 169% 88% 68% 68% 64% 56% 49% 48% 46% 44% 44% 38% 23% 11% DF BG HRL PPC CAG MKC SAFM MDLZ PEP GIS K CPB SJM ADM HSY -10% -18% *SOURCE: Bloomberg - This information should not be deemed to be “soliciting material” su
Slide 6: Consistent EPS Growth
Consistent EPS Growth FY16 Adjusted EPS* Growth Up 39% vs. FY15 $4.95 – 5.05** $4.39* $3.15* $2.94* $2.26* $1.97* FY12 FY13 FY14 FY15 FY16 FY17 proj. *Represents a non-GAAP financial measure. Adjusted EPS is explained and reconciled in the Appendix at “EPS Reconciliations.” **Projected adjusted EPS
Slide 7: Strong Cash Flow Fuels Growth
Strong Cash Flow Fuels Growth $2,716 $2,570 $1,314 $1,187 $1,178 FY12 FY13 FY14 FY15 FY16 Operating Cash Flow ($ in millions) 7 Tyson Foods, Inc. Investor Presentation | September 2017
Slide 8: Returning Cash to Shareholders
Returning Cash to Shareholders Dividends Paid per Class A Share $1.00 $0.90 $0.80 $0.70 $0.60 $0.50 $0.40 $0.30 $0.20 $0.10 $0.00 FY12 FY13 FY14 FY15 FY16 FY17* Regular Dividend Special Dividend Board of Directors increased regular quarterly dividend by 50% to $0.225 per share for Class A common sto
Slide 9: A Simple Framework for M&A
A Simple Framework for M&A New Brands IDEAL New New Capabilities Geographies 9 Tyson Foods, Inc. Investor Presentation | September 2017
Slide 10: Priorities for Cash
Priorities for Cash • Debt repayment • Growing our businesses organically through operational efficiency and capital expansion projects, along with investing in innovation and brand building • Acquiring businesses that support our strategic objectives • Returning cash to shareholders through share r
Slide 11: FY16 – Another Record Year
FY16 – Another Record Year ($ in millions) FY16 FY15 YOY Growth Net Sales $36,881 $40,623* -9% • Record Operating Income Adjusted Operating Income* $2,833 $2,253 26% • Record Operating Margin Adjusted Operating Margin* 7.7% 5.5% • Record Adjusted EPS* Adjusted EPS* $4.39 $3.15 39% • Record Operating
Slide 12: Q3 FY17
Q3 FY17 Highlights ($ in millions, except per share data) Q3 FY17 Sales $9,850 • Adjusted EPS* of $1.28, up 6% Adjusted Operating Income* $756 from Q3 last year Adjusted Operating Margin* 7.7% Adjusted EPS* $1.28 • Sales up 4.8% from Q3 last year and every segment delivered growth** ($ in millions)
Slide 13: Nine Months of FY17
Nine Months of FY17 Nine Highlights ($ in millions, except per share data) Months FY17 Sales $28,115 • Record Adjusted EPS* of $3.88, up Adjusted Operating Income* $2,361 13% from last year Adjusted Operating Margin* 8.4% Adjusted EPS* $3.88 • Record Adjusted Operating Income* of $2.4 billion, up 5%
Slide 14: FY17 Outlook
FY17 Outlook Sales of ~$38B CapEx of ~$1B Adjusted EPS of Expect AdvancePierre to $4.95-5.05* have an incremental impact • ~13-15% growth over of approximately $550 million FY16 • 5 year CAGR of ~20% *Projected Adjusted EPS as of 8/7/17. Excludes impact of AdvancePierre, which is expected to be a fe
Slide 15: FY17 Segment Outlook
FY17 Segment Outlook 9 Months Ending Adjusted ROS%* FY17 Q4 Projection FY17 Outlook Beef 5.2% ~4-5% ~5% Pork 13.5% ~6-8% ~12% Chicken 9.5% ~10-11% ~10% Prepared Foods 9.4% ~7-8% ~9% *Represents a non-GAAP financial measure. Historical operating margin is explained and reconciled to a comparable GAAP
Slide 16: FY18 Outlook
FY18 Outlook* Sales of ~$41B** CapEx of ~$1B+ Topline growth of ~6% as we grow volume and have full year benefit of AdvancePierre Beef Segment Pork Segment Chicken Segment Prepared Foods operating margin operating margin operating margin Segment operating around 5% above 6-8% normalized approximatel
Slide 17: Strategy for Growth
Strategy for Growth
Slide 18: Our Purpose
Our Purpose Raise the world’s expectations for how much good food can do 18 Tyson Foods, Inc. Investor Presentation | September 2017
Slide 19: Strategic Intent
Strategic Intent Sustainably feed the world with the fastest growing portfolio of protein packed brands 19 Tyson Foods, Inc. Investor Presentation | September 2017
Slide 20: Twin Engines of Growth
Twin Engines of Growth Sustainably Growing our portfolio of Delivering sustainable feed the protein packed brands food at scale world with the fastest Driving profitable growth with and for our Enablers growing Critical customers through differentiated capabilities Creating fuel for reinvestment thr
Slide 21: Value Creation Model
Value Creation Model Protein Packed Financial Capabilities to Bold Brands Fitness drive profitable commitment growth to sustainable food at scale Annual Annual Value-Added EPS Growth Shared High Volume Growth Value +3% Single Digits Share Repurchases (after deleveraging) Dividends Total Shareholder
Slide 22: A New Approach to Efficiency Will Fund Investments for Sustainable Growth
A New Approach to Efficiency Will Fund Investments for Sustainable Growth REDUCE waste across the entire company through Continuous Improvement ALLOCATE financial and human capital for growth TRANSFORM our business through technology 22 Tyson Foods, Inc. Investor Presentation | September 2017
Slide 23: Superior Results Through Defined Portfolio Roles
Superior Results Through Defined Portfolio Roles Branded & Value Added Commodity Grow above industry Grow above industry Leverage throughput by investing in brand and expand margins and efficiency to building, innovation through customer generate cash ALL-CHANNELS FOODSERVICE and customer partnershi
Slide 24: Proven Leadership Team Aligned with Our Strategy
Proven Leadership Team Aligned with Our Strategy Tom Hayes President & CEO Team Elevates Focus on CONSUMERS CUSTOMERS SUSTAINABILITY TECHNOLOGY 24 Tyson Foods, Inc. Investor Presentation | September 2017
Slide 25: Leading the Way in Food Sustainability
Leading the Way in Food Sustainability
Slide 26: No. 1 Most Admired Company
FORTUNE No. 1 Most Admired Company Food Production Industry 26 Tyson Foods, Inc. Investor Presentation | September 2017
Slide 27: Over Time Sustainability Investments Will Fund Themselves
Over Time Sustainability Investments Will Fund Themselves Sustainability Investments Resources Waste Cost Innovation Volume Profits 27 Tyson Foods, Inc. Investor Presentation | September 2017
Slide 28: Poultry Farm of the Future
Poultry Farm of the Future Plant Barn Hatchery 28 Tyson Foods, Inc. Investor Presentation | September 2017
Slide 29: Poultry Farm of the Future
Poultry Farm of the Future Reduces Improves Improves Improves Reduces Greenhouse Worker Animal Food Land Emissions Welfare Welfare Safety Use 29 Tyson Foods, Inc. Investor Presentation | September 2017
Slide 30: Evidence-based Targets, Long-term Commitments
Evidence-based Targets, Long-term Commitments FOOD PEOPLE ANIMALS ENVIRONMENT Convert chicken Reduce workplace 3rd party audit of Working with partners supply chain to no injuries by 15% farms to certify to set science-based antibiotics ever per year humane treatment of targets chickens 30 Tyson Foo
Slide 31: Retail Packaged Brands
Retail Packaged Brands
Slide 32: Brand Portfolio for All Eating Occasions
Brand Portfolio for All Eating Occasions 32 Tyson Foods, Inc. Investor Presentation | September 2017
Slide 33: “Core 9” Advantaged Brands in Advantaged Categories
“Core 9” Advantaged Brands in Advantaged Categories Frozen 1 Prepared Chicken 1 Hot Dogs 1 Branded Stacked Bacon 1 Frozen Protein Breakfast 1 Breakfast Sausage 1 Smoked Sausage 2 Branded Lunchmeat 1 Corn Dogs 1 Super Premium Smoked Sausage Sources: IRI, Total US Multi-Outlet, data thru 8/6/17 33 Tys
Slide 34: Tyson is well positioned to capitalize on growth in the fresh retail perimeter
Tyson is well positioned to capitalize on growth in the fresh retail perimeter Retail Department Volume Growth (%) vs. YA indicates departments where Tyson has a significant presence DAIRY RFG MEAT ALL OTHER RFG Category +2.2% Category +2.0% +7.8% Category -0.9% SEAFOOD FROZEN GENERAL FOOD BEVERAGE
Slide 35: Core 9 and Total Tyson Leading in CPG Volume Performance
Core 9 and Total Tyson Leading in CPG Volume Performance Volume sales % change among top 10 branded food companies >$5B 5.1% 4.7% 4.7% Total F&B -0.2% -0.3% Core 9 Total -2.9% -3.1% -3.2% -4.6% -4.6% -7.3% -9.6% Source: IRI Total U.S. Multi-Outlet (x Costco) Volume Sales 52 weeks ending 8/06/2017 Pr
Slide 36: Core and Total Tyson Leading in CPG Dollar Performance
Core 9 and Total Tyson Leading in CPG Dollar Performance Dollar sales % change among top 10 branded food companies >$5B 3.6% 3.2% 2.1% 1.7% 0.5% Total Core 9 Total -0.6% -0.6% F&B -1.5% -2.9% -3.5% -5.6% -6.3% Source: IRI Total U.S. Multi-Outlet (x Costco) Dollar Sales 52 weeks ending 8/06/2017 Prod
Slide 37: #2 in Frozen Food
#2 in Frozen Food Sales in Billions $7.1 Tyson Foods leads in the growing categories of frozen poultry and protein breakfast $3.5 $2.9 $2.3 $2.1 $1.9 $1.3 $1.2 $1.1 Source: IRI U.S. Multi-Outlet frozen category sales, 52 weeks ending 8/6/17 37 Tyson Foods, Inc. Investor Presentation | September 2017
Slide 38: #7 in Total U.S. CPG Retail Food Sales
#7 in Total U.S. CPG Retail Food Sales Among branded food companies >$5B Sales in Billions $25.8 In addition to retail, Tyson Foods is a leading supplier to the $21.2 foodservice industry $16.5 $11.7 $8.5 $7.8 $7.7 $7.5 $6.4 $6.3 $5.8 $5.8 $5.3 $5.0 Source: IRI Total U.S. Multi-Outlet Sales, 52 week
Slide 39: Opportunity in Current Spaces
Opportunity in Current Spaces Breakfast Smoked Smoked Frozen Prepared Frozen Protein Frozen Corn Total Core 9 Lunchmeat Bacon Hot Dogs Sausage Sausage Sausage Chicken Breakfast Dogs 97% 87% 78% 79% 75% 62% 63% 63% 52% 38% 30% 30% 33% 26% 28% 24% 21% 7% 6% 10% Category HH Penetration Brand HH Penetra
Slide 40: Innovation
Innovation
Slide 41: Innovation Performance
Innovation Performance insights Retail Packaged Brands innovation vitality growing FY16 14% FY15 12.5% innovation research & development % of sales dollars from Retail Packaged Brands products created in the previous three years 41 Tyson Foods, Inc. Investor Presentation | September 2017
Slide 42: Innovation Platforms
Innovation Platforms Fresh Fresh Keeping Meal Kits Take on Core 9 & Starters Breakfast Fresh 42 Tyson Foods, Inc. Investor Presentation | September 2017
Slide 43: Innovation – Recent Product Launches
Innovation – Recent Product Launches 43 Tyson Foods, Inc. Investor Presentation | September 2017
Slide 44: AdvancePierre Acquisition
AdvancePierre Acquisition
Slide 45: Logical Next Step in Strategy
Logical Next Step in Strategy • Expands Tyson’s prepared foods offerings with AdvancePierre’s portfolio of ready-to-eat lunch Expands prepared and dinner sandwiches, sandwich components, entrees, and snacks foods offering; joins • Broadens Tyson’s competitive position across poultry, beef and pork c
Slide 46: Complementary Portfolios of Strong Brands
Complementary Portfolios of Strong Brands 46 Tyson Foods, Inc. Investor Presentation | September 2017
Slide 47: Strong Today and Leading for Tomorrow
Strong Today and Leading for Tomorrow NEW BRANDS, NEW CAPABILITIES, NEW GEOGRAPHIES Natural extension of our Consolidated Enhanced distribution supply chain manufacturing footprint channels Leading foodservice brands with Leading supplier to national and Reaching a broader cross- high operator/distr
Slide 48: Driving Financial Results
Driving Financial Results CREATES SIGNIFICANT SYNERGIES • Expected to result in net cost synergies in excess of $200 million to be fully realized within three years • Cost synergies created by consolidated manufacturing footprint, lower input pricing, and addressing redundant foodservice and retail
Slide 49: Tyson and AdvancePierre Combine to Create Long-Term Value
Tyson and AdvancePierre Combine to Create Long-Term Value Next step in growth strategy and opportunity to refine the shape of our portfolio Financially compelling; expected to be immediately accretive to Tyson EPS based on net cost synergies exceeding $200 million. Significant ongoing benefits to Ty
Slide 50: Additional Information
Additional Information
Slide 51: As of 2016 fiscal year end. Tyson Foods, Inc. Investor Presentation | September 2017
As of 2016 fiscal year end. 51 Tyson Foods, Inc. Investor Presentation | September 2017
Slide 52: Leading U.S. Protein Producers
Leading U.S. Protein Producers Tyson Foods Tyson Foods Tyson Foods Other 18% 21% Other 25% 24% 29% Other 47% Pilgrim’s Pride Smithfield 17% National Beef 25% 10% Hormel JBS USA 8% 22% JBS USA Cargill 20% 19% Sanderson Perdue Farms 8% Farms 7% U.S. Chicken Producers U.S. Fed Beef Packers U.S. Pork Pa
Slide 53: FY16 Sales − $37 Billion
FY16 Sales − $37 Billion Other Other 1% 4% Pork International 11% Prepared 11% Foods 20% Consumer Products Food 53% Beef 38% Chicken Service 30% 32% Sales by Sales by Segment Distribution Channel 53 Tyson Foods, Inc. Investor Presentation | September 2017
Slide 54: FY16 International Sales
FY16 International Sales Japan Other 17% 30% Mexico 15% Taiwan China & 4% Hong Kong 21% Canada 6% South Korea 7% FY16 International Sales $4.1 Billion* *Includes exports and in-country production 54 Tyson Foods, Inc. Investor Presentation | September 2017
Slide 55: FY16 International Sales
FY16 International Sales Other China & Hong Canada Japan 17% Kong 4% 18% 23% Other Mexico 48% Italy 6% 12% Mexico 11% Taiwan 7% South Brazil China & Korea 6% Hong Kong 12% India 6% 24% Canada Guatemala 3% 3% Chicken Beef $1.2 Billion* $2.0 Billion *Includes exports and in-country production 55 Tyson
Slide 56: FY16 International Sales
FY16 International Sales South Korea 4% Other 12% Other Canada Japan 32% 30% China & 37% H.K. 11% Canada 12% Mexico Mexico Japan 22% 24% S. Korea 5% 11% Pork Prepared Foods $848 million $87 million 56 Tyson Foods, Inc. Investor Presentation | September 2017
Slide 57: Chicken Segment
Chicken Segment The Road to Higher, More Stable Margins Optimize cost structure Change pricing structure Upgrade value-added Buy vs. Grow strategy Deliver high quality products products and customer service 57 Tyson Foods, Inc. Investor Presentation | September 2017
Slide 58: HSH Synergies
HSH Synergies • FY15 – $322 million realized • FY16 – $580 million realized • FY17 – expecting approximately $675 million • Expect to achieve at least $700 million in total synergies. Due to the timing of certain projects, some synergies will fall into fiscal 2018. • Synergy Categories Prepared Fo
Slide 59: Proforma Debt Maturity Profile
Proforma Debt Maturity Profile As of 7/1/17 Fiscal Year Maturities ($MM) 2,250 2,000 1,750 Pre-Payable Pre-Payable 1,500 1,250 1,000 750 500 250 0 '17 '18 '19 '20 '21 '22 '23 '24 '27 '33 '34 '44 '47 TFI Bonds Hillshire Bonds Term Loans Commercial Paper • Term loans are pre-payable at par • Excludes
Slide 60: Appendix
Appendix
Slide 61: Q3 and Nine Months EPS Reconciliations
Q3 and Nine Months EPS Reconciliations In millions, except per share data (Unaudited) Third Quarter Nine Months Ended Pretax Impact EPS Impact Pretax Impact EPS Impact 2017 2016 2017 2016 2017 2016 2017 2016 Reported net income per share attributable to Tyson $ 1.21 $ 1.25 $ 3.72 $ 3.50 Add: Advance
Slide 62: Segment Operating Income and Operating Margin Reconciliations
Segment Operating Income and Operating Margin Reconciliations Adjusted Segment Operating Income (Loss) In millions (for three months ended July 1, 2017) (Unaudited) Beef Pork Chicken Prepared Foods Other Intersegment Sales Total Sales $ 4,000 $ 1,322 $ 2,870 $ 1,944 $ 85 $ (371) $ 9,850 Reported ope
Slide 63: EPS Reconciliations
EPS Reconciliations $ In millions, except per share data (Unaudited) 12 Months Ended October 1, 2016 October 3, 2015 September 27, 2014 September 28, 2013 September 29, 2012 Operating Operating Operating Operating Operating Income EPS Income EPS Income EPS Income EPS Income EPS Reported from Continu
Slide 64: Sales, Operating Income and Operating Margin Reconciliations
Sales, Operating Income and Operating Margin Reconciliations $ In millions Fiscal Year (Unaudited) 2016 2015 Reported Sales $ 36,881 $ 41,373 Less: Impact of additional week (a) - (750) Adjusted sales $ 36,881 $ 40,623 Reported operating income $ 2,833 $ 2,169 Add: China impairment - 169 Add: Merger
Slide 65: Segment Operating Income Reconciliations
Segment Operating Income Reconciliations $ In millions (Unaudited) Adjusted Segm ent Operating Incom e (Loss) (for 12 months ended October 3, 2015) Prepared Beef Pork C hick en F oods Other Total Reported operating income (loss) $ (66) $ 380 $ 1,366 $ 588 $ (99) $ 2,169 Add: China impairment - - - -
Slide 66: Net Debt to Proforma Adjusted EBITDA
Net Debt to Proforma Adjusted EBITDA $ in millions (Unaudited) (a) Excludes the amortization of debt discount expense of $8 million for the twelve months ended July 1, 2017, as it is included in interest expense. 12 Months Ended July 1, 2017 (b) AdvancePierre acquisition and integration costs includ