Tyson Foods, Inc. (TSN) Earnings Call Transcript & Summary

With 85.34% of the votes cast against this shareholder proposal, I declare that this shareholder proposal has been defeated. The next item of business is the shareholder proposal to prepare a report on human rights due diligence. And the chair at this time recognizes the representative of the proponent to present the proposal.

Good morning. My name is [ Gina Filata ], and I am here today with Martha Salomaa to move the human rights due diligence proposal filed by the American Baptist Home Mission Society and 12 co-filers. Following years of engagement, proponents offer this proposal a second time to urge Tyson to act on its human rights responsibility. Increased due diligence will strengthen protections for rights holders and help the company proactively manage its risks. Worker dignity, community livelihoods and consumer health are at stake. Tyson workers in Albertville, Alabama reported indescribable throbbing pain from repetitive motion injuries, difficulty breathing from chemical exposure and increasing line speeds. These pressures put food safety and consumer health at risk. Workers have also experienced harassment, discrimination and fear of retaliation. As Tyson expands internationally, new human rights challenges will arise. Martha Salomaa, representing the Sipsey Heritage Commission, will now share her community's experience.

I'm here to speak about the impact of just one example of Tyson's pollutions. This past summer, a Tyson plant located in Hanceville, Alabama spilled 220,000 gallons of wastewater into the Black Warrior River. By conservative estimates, 170,000 fish were killed. Most of my community, which is in another county and 28 miles downriver, only learned about the spill when we saw thousands of dead and dying fish passing through what we call the forks. The drinking water of my entire county, Walker County, comes from this river. Because of toxins created by this spill, recreational activity halted. We were forced to cancel our annual kayak race out of concern for public safety, negatively impacting our economy. We have no other industry. And this one thing we did have has been taken. We call upon Tyson to consult with my community, Sipsey, Alabama, to address these impacts. We urge all stakeholders to support the human rights resolutions and encourage Tyson to implement this proposal. Thank you.

We thank the proponents for their comments and they're duly recognized. The Board of Directors' statement with respect to this shareholder proposal is set forth in the proxy statement and speaks for itself. And would the secretary please report the results of the vote regarding this shareholder proposal?

Mr. Chairman, there were 135,654,900 votes cast favoring this shareholder proposal representing 14.58% of the votes cast. There were 794,222,731 votes cast against this shareholder proposal representing 85.41% of the votes cast. A clear majority votes against the adoption of this shareholder proposal.

With 85.41% of the votes cast against this shareholder proposal, I declare that this shareholder proposal has been defeated. The next item of business is the shareholder proposal regarding a share retention policy, and the chair recognizes a representative of the proponent to present the proposal.

[indiscernible] linking executive compensation with long-term performance is what the New York State Common Retirement Fund shareholder proposal seeks today at Tyson Foods. The fund urges the Compensation Committee of the Tyson Foods' Board of Directors to adopt a policy requiring that senior executives retain a significant percentage of shares acquired through equity compensation programs. Please note, this policy would supplement any other share ownership requirements that have been established for senior executives. Thank you.

Thank you for your comments. The Board of Directors' statement with respect to this shareholder proposal is set forth in the proxy statement and speaks for itself. And would the secretary please report the results of the vote regarding the proposal?

Mr. Chairman, there were 62,754,889 votes cast favoring this shareholder proposal representing 6.74% of the votes cast. There were 867,952,861 votes cast against this shareholder proposal representing 93.25% of the votes cast. A clear majority votes against the adoption of this shareholder proposal.

With 93.25% of the votes cast against this shareholder proposal, I declare that this shareholder proposal has been defeated. This concludes the business portion of our meeting. And there being no further business, do I hear a motion for adjournment?

[indiscernible]

Do I hear a second?

[indiscernible]

I declare the business portion of our 57th Annual Shareholders' Meeting adjourned at this time. Before you hear from Stewart and Noel, I want to take a moment to congratulate our team for some recent honors. For the fourth straight year, Tyson Foods ranked #1 on Fortune's list of World's Most Admired Companies in the food production category. We're proud of this ranking. I do believe it recognizes the efforts of our team. It also reflects positive on the strategy for our growth. We accept the responsibility and the challenges before us each and every day when we get up. Tyson Foods was also recently recognized by the Religious Freedom & Business Foundation for addressing the importance of faith in the lives of the people who work for us. Our company ranked #2 among Fortune 100 companies in the Religious Equity Diversity and Inclusion Index, and the recognition of the effort being made by the team leaders, being made by the management team and efforts to support our team members is just -- feels pretty good to me. So at this time, I'd like to hear from Stewart, and then Stewart will turn it over to Noel, and then we'll wrap up.

Thank you, Mr. Chairman, and good morning. I'll begin with the required cautionary language stating that today's remarks include forward-looking statements. I encourage you to go to ir.tyson.com for this morning's earnings release and the 10-Q for a discussion of the risks that can affect our business. I must also tell you that any references to earnings per share, operating income and operating margin are on an adjusted basis, unless otherwise noted. The reconciliations to GAAP can be found in our earnings releases for the fourth quarter of fiscal 2019 and for the first quarter of 2020. Now let's get into the company's financial performance. It's been a few months since we reported on the fiscal 2019 results. So let's recap. Earnings were $5.46 per share. Sales were a record $42.4 billion. Operating income was approximately $3 billion with a return on sales of 7%. Operating cash flows for the year were just under $2.5 billion. Capital expenditures were $1.3 billion as we invested to grow our business with additional capacity for fresh chicken production. Also in 2019, we brought online 2 new distribution centers as well as the Tyson manufacturing automation center. In fiscal '20, we expect to spend at this level again as we finish the fresh chicken plants in Tennessee and construct a case-ready fresh meats plant in Utah. At the end of fiscal 2019, net debt was $11.4 billion, including cash of $484 million. We prioritized debt reduction in our capital allocation strategy. And in the fourth quarter last year, we paid off $1 billion of senior notes primarily with cash generated during the quarter. At year-end, our total liquidity was $1.2 billion. And for the year, we repurchased approximately 3.7 million shares for $252 million. Continuing our dividend growth trend, in November, the Board of Directors increased the annual dividend for fiscal 2020. It's currently expected to be $1.68 for Class A shares, which is a 12% growth over 2019. We're into -- we're well into fiscal 2020, and we just reported earnings this morning. Here are some highlights. First quarter EPS was $1.66, up 5% from Q1 last year. Operating income was $894 million, up 6% over last year. Sales were also up 6% to just over $10.8 billion with return on sales of 8.3%. Sales volume was up as well with a 4.7% increase. And now it's my privilege to introduce our next speaker, the CEO of Tyson Foods, Noel White.

Thank you, Stewart. Good morning, everyone. Sometimes, we're so focused on what is in front of us that we forget to look back in what we've accomplished. Fiscal 2019 was a year of accomplishments. It was highlighted by record sales and significant progress in delivering our strategy for long-term growth. We remain focused on our strategy to grow, deliver and sustain our business. This includes growing our Prepared Foods business as well as our International business, driving operational excellence throughout the company, delivering service and value to our customers and operating in a sustainable manner. When you look at our progress in 2019, here's what you'll see: that we expanded our global business with operations in Asia and in Europe. We continue to innovate to meet customer and consumer needs with new products, including plant-based proteins. And thanks to our iconic brands, our core retail business and total Tyson retail sales continue to lead the top 10 largest food and bev companies in volume and in growth. We've experienced 6 consecutive quarters of growth and we continue to invest in advanced analytics, automation and robotics. And we're also making strides in sustainability. We're working with the Environmental Defense Fund to make progress against our commitment to improve crop and farming practices, and our company has partnered with Proforest to conduct a deforestation risk assessment across our entire supply chain. We've expanded our Upward Academy, which is a live skills program for frontline team members, including on-site classes, and we're expanding our Progressive Beef program, which certifies cattle feedlot operators to make sure they're following best practices. A few weeks ago, Tyson Foods announced the creation of the Coalition for Global Protein. Our involvement is being led by John Randal Tyson, our new Chief Sustainability Officer. The goal is to unite key stakeholders to develop solutions to sustainably feed the world population. It's expected to reach almost 10 billion people in 2050. In fact, it's estimated the world will need to almost double its production of protein by 2050. While we're proud of our accomplishments, we have much more to achieve and not just this year but for many years to come. You don't get to be in business for 85 years without thinking ahead and to adapt at what is coming. For example, in Prepared Foods, we're focused on innovation and creating more products that are fresh and less processed, in flexible forms to fit our consumers' lives and are functional, serving a specific physical or emotional purpose. We also plan to launch more alternative protein products this year across brands, meal locations and channels. We believe these products will complement our core meat business but will also continue to grow. Later this year, we expect to open our new chicken processing complex in Humboldt, Tennessee. In addition, work continues on our new case-ready beef and pork plant in Utah. It's scheduled to open in 2021 to meet the growing demand in the Western United States. I'm excited about our future, and I'm pleased Dean Banks has joined us as President. Together, our entire team will remain focused on the opportunities ahead. If we continue to execute our strategy, Tyson Foods is well positioned to feed people for another 85 years. Thank you. And now our Chairman will provide some closing remarks.

Thanks, Noel. I think about the progress that's been made from the first time I showed up on Emma Street when I was 5 years old to the fact this is the third year in a row that we've held our shareholders' meeting here in Emma Street. And I remember the things that my grandfather and my father have shared with me and other people in the company have shared with me, which is you wake up every day trying to do the right thing. Some days, you're not going to get it right. You learn from it and you try to improve. Some days, you stumble and you get up. But the intent and the integrity of the 140,000 people that work here at Tyson Foods is always to do the right thing. I say that from my heart because I know what our company's made up of. We continue to invest in all the communities where we live and work, and we continue to invest in our hometown of Springdale, Arkansas. Our presence downtown now includes several facilities. They support the company in many areas: technology, robotics and automation. But in the end, the company is a set of people. These things help facilitate, but it is the people who make our company. Our folks represent our commitment to that improvement, to making jobs, safe jobs, to making great products, quality product, to making processes that are easier to manage and to make our company better each and every day with a responsibility to grow the right way with the right integrity. And if we do that, our shareholders will be rewarded. I want to thank everybody for the part you play in our growth story. I want to thank you for taking on the challenges of a complex business because we touch a lot of subjects, and we accept that responsibility and we accept our stewardship of that. So until next year. Travel safely, and we hope to see you then. God bless.