Tyson Foods, Inc. announced Sept. 28 increased adjusted guidance for fiscal 2017, adjusted guidance for fiscal 2018 and cost savings targets for 2018-2020.
Adjusted earnings guidance for the 2017 fiscal year, which ends Sept. 30, has been increased to an adjusted $5.20-5.30 per share, up from $4.95-5.05, primarily due to much better than expected earnings in the Beef segment.
Guidance for fiscal 2018 is an adjusted $5.70-5.85 earnings per share, which would be the seventh consecutive year of record adjusted EPS.
The company plans to provide GAAP results for its fourth quarter and full-year 2017 in its fourth quarter earnings report scheduled for Nov. 13; however, at this time the company is unable to reconcile its full-year fiscal 2017 and 2018 adjusted EPS guidance to its full-year fiscal 2017 and 2018 projected GAAP guidance because certain information necessary to calculate such measures on a GAAP basis is unavailable or dependent on the timing of future events outside of our control. These potential items include, but are not limited to, the potential impairment of a non-protein business classified as an asset held for sale and any gains or losses upon the completion of the sale of three non-protein businesses, potential impairments of long-lived assets and intangible assets, and additional expense or modifications to its restructuring plan and other charges. Therefore, because of the uncertainty and variability of the nature of the amount of future adjustments, which could be significant, the company is unable to provide a reconciliation of this measure without unreasonable efforts. Adjusted EPS should not be considered a substitute for net income per share attributable to Tyson or any other measure of financial performance reported in accordance with GAAP. Investors should rely primarily on our GAAP results and use non-GAAP financial measures only supplementally in making investment decisions.
Tom Hayes, Tyson’s president and chief executive officer, said the company is implementing its previously announced “Financial Fitness” plans. “We are creating momentum behind our continuous improvement agenda as we know we can be even more efficient operators,” he said. “We are a good partner for growth for our customers and are constantly challenging ourselves to identify opportunities to create value for our consumers, customers and shareowners.”
Through a combination of synergies from the integration of AdvancePierre Foods acquired in June, and additional eliminations of non-value-added costs, the company expects cumulative net savings of $200 million, $400 million and $600 million over fiscal years 2018, 2019 and 2020, respectively. These savings primarily will impact the Prepared Foods and Chicken segments, focusing on three areas:
- Supply Chain
The company plans to reduce headcount by approximately 450 positions across several areas and job levels. Most of the eliminated positions will come from the corporate offices in Springdale, Chicago and Cincinnati.
“We’re grateful to everyone who has contributed to the company’s success, and we’re thankful for their time with Tyson Foods,” Hayes said. “These are hard decisions, but I believe our customers and consumers will benefit from our more agile, responsive organization as we grow our business through differentiated capabilities, deliver ongoing financial fitness through continuous improvement and sustain our company and our world for future generations.”
In its fiscal fourth quarter earnings report, Tyson Foods plans to report restructuring and other charges of approximately $140 - $150 million, composed of an approximately $70 millionimpairment for costs related to in-process software implementations, $45 - $50 million in employee termination costs and $25 - $30 million in contract termination costs.
The company plans to provide a reconciliation of its fourth quarter adjusted EPS and its full-year fiscal 2017 adjusted EPS guidance to its fourth quarter GAAP EPS and its full-year fiscal 2017 GAAP guidance in its fourth quarter earnings report scheduled for Nov. 13. The company last provided a reconciliation of adjusted EPS and GAAP EPS in its third quarter earnings release. For a reconciliation of the company’s third quarter adjusted EPS and its nine-months ended adjusted EPS to its third quarter and nine-months ended GAAP EPS, respectively, see the company’s Current Report on Form 8-K filed with the SEC on August 7, 2017.
Adjusted net income per share attributable to Tyson (adjusted EPS) is a supplementary measure of our financial performance that is not required by, or presented in accordance with, GAAP. We use adjusted EPS as an internal performance measurement and as one criterion for evaluating our performance relative to that of our peers. We believe adjusted EPS is meaningful to our investors to enhance their understanding of our financial performance and is frequently used by securities analysts, investors and other interested parties to compare our performance with the performance of other companies that report adjusted EPS. Further, we believe that adjusted EPS is a useful measure because it improves comparability of results of operations from period to period. Adjusted EPS should not be considered a substitute for net income per share attributable to Tyson or any other measure of financial performance reported in accordance with GAAP. Investors should rely primarily on our GAAP results and use non-GAAP financial measures only supplementally in making investment decisions. Our calculation of adjusted EPS may not be comparable to similarly titled measures reported by other companies.