Among the highlights of the report from Tyson Foods are that chicken operating income $141 million, or 5.4 per cent of sales, or 6.5 per cent when excluding $29 million goodwill impairment charge. Beef operating income was $121 million, or 4.0 per cent of sales, while pork operating income was $125 million, or 9.9 per cent of sales. At 1.3 per cent of sales, Prepared Foods operating income $10 million.

Overall operating margin was 5.3 per cent in the fourth quarter 2010.

Fourth quarter 2010 EPS was $0.57 compared to $(1.23) last year, or $0.64 compared to $0.27 when excluding goodwill impairment charges. Goodwill impairment charges were $29 million ($0.07 per share) in fourth quarter 2010 and $560 million ($1.50 per share) in fourth quarter 2009.

Donnie Smith, president and chief executive officer of Tyson Foods, commented: "Our results this quarter and this year are directly due to our diversified protein business models and our operational improvements, which have raised the level of expectations for Tyson's performance.

"We produced record sales and earnings despite some market head-winds. Operating margins for the year were in or above their normalised ranges in each of our four segments. We generated more than $1.5 billion in operating income. Strong cash flows allowed us to repurchase or redeem nearly $1.0 billion of notes in the fiscal year. This reduced gross debt to $2.5 billion and net debt to $1.6 billion, bringing our debt to its lowest level in nearly a decade.

"We're just over halfway through our first quarter of fiscal 2011, and it is shaping up to be a strong quarter and another good year. There are always challenging market conditions to manage. That's the norm in our business, and we're prepared to address them," Mr Smith added.

Outlook

In 2011, overall protein (chicken, beef, pork and turkey) production is expected to increase. Because exports are likely to grow as well, Tyson's forecasts that total domestic availability of protein should be relatively flat compared to 2010. The following is a summary of the fiscal 2011 outlook for each of its segments, as well as an outlook on capital expenditures, net interest expense and debt:

• Chicken – While the Company expects chicken production to increase, domestic availability will depend on export volumes. Because of the less than expected yields in global feed grain crop production, current futures prices indicate higher grain costs in fiscal 2011 compared to fiscal 2010. Tyson's expects to offset the impact of increased grain costs with operational and pricing improvements.
  
  
• Beef – Tyson's expects to see a gradual reduction in cattle supplies of one to two per cent in fiscal 2011 but does not expect a significant change in the fundamentals of its Beef business as it relates to the previous few quarters. The company expects adequate supplies in the regions in which it operates plants. Beef exports are expected to remain strong in fiscal 2011.
  
  
• Pork – The Company expects hog supplies in fiscal 2011 will be comparable to fiscal 2010 and believes it will have adequate supplies in the regions in which it operates. Pork exports are expected to remain strong in fiscal 2011.
  
  
• Prepared Foods – Operational improvements are expected and increased pricing will more than offset the likely increase in raw material costs in fiscal 2011. While many of the Company's sales contracts are formula-based or shorter-term in nature, it says it is typically able to absorb rising input costs. However, there is a lag time for price increases to take effect, so it is more difficult to absorb rapidly rising raw material costs.
  
  
• Capital Expenditures – The preliminary capital expenditures plan for fiscal 2011 is approximately $700 million.
  
  
• Net Interest Expense – Tyson's expects fiscal 2011 net interest expense will be approximately $245 million, down nearly $90 million compared to fiscal 2010.
  
  
• Debt – The Company will continue to use available cash to repurchase notes when available at attractive rates. It does not have any significant maturities of debt coming due over the next three fiscal years, as its 8.25 per cent Notes due on 1 October 2011 balance was $315 million on 2 October 2010. Tyson's says it plans to retire these notes with current cash on hand and/or cash flows from operations.

Further Reading

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