Tyson Reports Second Quarter and Six Months Results
May 02, 2006

Monday May 1, 8:13 am ET Press Release Source: Tyson Foods, Inc.
* Tyson Chicken, Beef and Pork sales volumes increased 7.4%, 6.1% and 0.5%, respectively, quarter over quarter
* Oversupply of all proteins negatively impacted sales prices and operating results
* Some margin recovery is expected in the latter half of year
* Fiscal 2006 diluted earnings per share are now estimated to be $(0.25) to $0.10


SPRINGDALE, Ark., May 1 /PRNewswire-FirstCall/ -- Tyson Foods, Inc. (NYSE: TSN - News), today reported a loss of $(0.37) per diluted share for the second fiscal quarter ended April 1, 2006, compared to $0.21 diluted earnings per share in the same quarter last year. Second quarter 2006 sales were $6.3 billion compared to $6.4 billion for the same period last year. Operating loss was $(141) million compared to operating income of $183 million, and net loss was $(127) million compared to net income of $76 million, for the same period last year.
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Pretax loss for the second quarter of fiscal 2006 included $59 million, or $0.11 per diluted share, of costs related to beef and prepared foods plant closings.

Pretax earnings for the second quarter of fiscal 2005 included $2 million of costs related to poultry and prepared foods plant closings.

Loss per diluted share for the first six months of fiscal 2006 was $(0.26) compared to diluted earnings per share of $0.35 in the same period last year. Sales for the first six months of fiscal 2006 were $12.7 billion compared to $12.8 billion for the same period last year. Operating loss for the first six months of fiscal 2006 was $(27) million compared to operating income of $312 million, and net loss was $(88) million compared to net income of $124 million, for the same period last year.

Pretax loss for the first six months of fiscal 2006 included $59 million, or $0.11 per diluted share, of costs related to beef and prepared foods plant closings.

Pretax earnings for the first six months of fiscal 2005 included $12 million received in connection with vitamin antitrust litigation, a gain of $8 million from the sale of the Company's remaining interest in Specialty Brands, Inc. and $5 million of costs related to poultry and prepared foods plant closings. The combined effect increased diluted earnings per share by $0.03.

In the second quarter of fiscal 2006, the Company issued $1.0 billion of new 6.60% senior unsecured notes, which will mature in fiscal 2016. The Company will use the net proceeds of this offering for general corporate purposes and for the repayment of its outstanding $750 million principal amount of 7.25% Notes due October 1, 2006. The Company's short-term investment currently includes $750 million of proceeds from the new issuance. These funds are on deposit in an interest bearing account with a trustee and will be used for the repayment of the Notes maturing October 1, 2006.

"We said the second quarter would be very tough, and it was even tougher than we anticipated," John Tyson, chairman and CEO of Tyson Foods, said. "This quarter's results reflect the depressed markets and the oversupply of all proteins. The Beef segment suffered from low capacity utilization and declining boxed beef prices. The negative effect of high live cattle prices and lower sales prices was made worse by interruptions in export markets. Those factors combined to produce significant losses in the Beef segment. The protein oversupply, in addition to higher operating costs, affected our Pork segment as well.

"On the upside, the Company's sales volume increased and the Chicken segment stayed in positive territory. Our focus on value-added products and effective management of controllable costs helped our Chicken segment's performance. Also, I am encouraged by our Prepared Foods segment margins which, when adjusted for plant closings, continue to move in the right direction.

"The impact of the oversupply of protein is expected to diminish in the second half of the year. We expect the third and fourth quarters to be better as demand improves, but they still will be difficult.

"We recently announced Wade Miquelon will join us as CFO in June. We look forward to welcoming him to the Company, and we're excited about his experience in consumer products and international markets. He is joining a strong team, and together they will help us execute our business strategy."

Outlook

Based upon the Company's outlook for fiscal year 2006, including its view of all the various markets, the Company now estimates its fiscal 2006 diluted earnings per share to be in the range of $(0.25) to $0.10.





Chicken segment volume improvement was more than offset by lower sales prices, resulting in sales decreasing 2.2% and 1.8% in the second quarter and six months of fiscal 2006 as compared to the same periods last year.

Chicken segment operating income decreased $134 million and $115 million in the second quarter and six months of fiscal 2006, respectively, as compared to the same periods last year. Operating income was negatively impacted by lower average sales prices, primarily due to an oversupply of proteins in the marketplace. Additionally, the discovery of H5N1 avian influenza in certain foreign markets reduced export prices. Unprecedented leg quarter inventories delayed the recovery of the export prices. Also, operating income was negatively impacted by higher energy costs, higher grain costs and decreased margins at the Company's operations in Mexico. Operating income was positively impacted by improved results from the Company's commodity risk management activities related to grain purchases as it realized net losses of $4 million for both the second quarter and six months of fiscal 2006, as compared to net losses of $10 million and $33 million realized in the same periods last year.


Beef (45.7% of Net Sales -- 2nd Quarter 2006)
(45.4% of Net Sales -- Six Months 2006)
* Increased volumes resulted in increased sales, which were more than
offset by the inability to achieve satisfactory margins

Beef segment sales increased 2.9% and 3.6% in the second quarter and six months of fiscal 2006, respectively, as compared to the same periods last year. The increase in the second quarter of fiscal 2006 was primarily due to a 6.1% increase in sales volumes, offset partially by a 3.0% decrease in average sales prices. The increase in sales for the six months of fiscal 2006 was primarily due to a 3.2% increase in volumes, as well as a slight increase in average sales prices.

Beef segment operating results decreased $124 million and $162 million in the second quarter and six months of fiscal 2006, respectively, as compared to the same periods last year, excluding plant closing related accruals of $45 million recorded in the second quarter and six months of fiscal 2006 and $10 million received in the six months of fiscal 2005 in connection with vitamin antitrust litigation. Beef segment operating results were negatively impacted by continued high operating costs, the oversupply of proteins in the marketplace and by the continued restrictions of certain key beef export markets. Additionally, beef operating results for the three months ended April 1, 2006, were negatively impacted by net losses of $18 million from the Company's commodity risk management activities related to its fixed forward boxed beef sales and forward live cattle purchases, a decrease of $28 million from the same period last year. Beef operating results for the six months ended April 1, 2006, were negatively impacted by $21 million from the Company's commodity risk management activities, a decrease of $19 million from the same period last year. Decreased volumes and margins at the Company's Lakeside operation in Canada, due in part to the labor strike occurring in the first quarter of fiscal 2006, also negatively impacted the Beef segment's operating results.


Pork segment volume improvement was more than offset by lower sales prices, resulting in sales decreasing 12.0% and 9.1% in the second quarter and six months of fiscal 2006, respectively, as compared to the same periods last year.

Pork segment operating income decreased $10 million and $12 million in the second quarter and six months of fiscal 2006, respectively, as compared to the same periods last year, excluding $2 million received in the six months of fiscal 2005 in connection with vitamin antitrust litigation. Operating income was negatively impacted by higher operating costs per head and an oversupply of proteins in the marketplace, resulting in decreased average sales prices, partially offset by lower average live prices.


Prepared Foods (10.3% of Net Sales -- 2nd Quarter 2006)
(10.5% of Net Sales -- Six Months 2006)
* Excluding plant closing charges, operating margins improved, driven by
decreased raw material costs

Prepared Foods segment sales decreased 7.1% and 6.3% in the second quarter and six months of fiscal 2006, as compared to the same periods last year. The decrease in sales was primarily due to lower average sales prices and slightly lower sales volumes, partially due to the planned rationalization of lower margin product lines.

Prepared Foods segment operating income increased $3 million and $12 million in the second quarter and six months of fiscal 2006, respectively, as compared to the same periods last year, excluding plant closing related accruals of $14 million recorded in the second quarter and six months of fiscal 2006 and $3 million recorded in the six months of fiscal 2005. The increases were primarily due to decreased raw material costs, partially offset by lower average sales prices.


Tyson Foods, Inc., founded in 1935 with headquarters in Springdale, Arkansas, is the world's largest processor and marketer of chicken, beef and pork and the second-largest food company in the Fortune 500 and a member of the S&P 500. The company produces a wide variety of protein-based and prepared food products, which are marketed under the "Powered by Tyson(TM)" strategy. Tyson is the recognized market leader in the retail and foodservice markets it serves, providing products and service to customers throughout the United States and more than 80 countries. Tyson has approximately 114,000 Team Members employed at more than 300 facilities and offices in the United States and around the world. Through its Core Values, Code of Conduct and Team Member Bill of Rights, Tyson strives to operate with integrity and trust and is committed to creating value for its shareholders, customers and Team Members. The company also strives to be faith-friendly, provide a safe work environment and serve as stewards of the animals, land and environment entrusted to it.

A conference call to discuss the Company's financial results will be held at 9 a.m. Eastern today. To listen live via telephone, call 888-677-1801. For security reasons, the pass code and the leader's name will be required to join the call. The pass code is Tyson Foods and the leader's name is Ruth Ann Wisener. International callers dial 773-681-5870. The call also will be webcast live on the Internet at http://ir.tysonfoodsinc.com . Financial information, such as this news release, as well as other supplemental data, including Company distribution channel information, can be accessed from the Company's web site at http://ir.tysonfoodsinc.com . A telephone replay will be available until May 31 at 7:00 p.m. Eastern at 800-839-2347. International callers dial 402-998-0556.




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