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

Good morning, everybody. Welcome. [Operator Instructions]. So thank you to everybody, and good morning. It's my honor as Chairman of Tyson Foods to welcome you to the 61st Annual Meeting of Shareholders, and I think back to the first one down on Emma Street. I do appreciate each and every one of you all joining us today, and I'm proud to have the meeting here at Tyson on Thompson, otherwise known as the fund building and the TOT building around our company. So to the [ fund ] people here. So it is 10:00 a.m. Central time of February 8, and the meeting is now called to order. Each year, I look forward to the moment to share the progress we've made, and especially with the journey we made with 139,000 team members who do make the difference and are the real reason why we're successful. We wouldn't be here today without each and every one of you. Every Tyson Foods team member accepts the responsibility to feed people across the globe. We strive to produce safe, healthy, sustainable and affordable food for millions of people each and every day. And we do this with integrity and respect for each other, our customers and our animals, and also the natural resources that are entrusted to us. When we do that and we do that as a team together, we will create that value for the shareholders here in this room today. Our business is complex. It is challenging, but most of all, it is rewarding to feed people. We do strive each and every day to earn a consistent and satisfactory profits for our shareholders and then to reinvest in our people, our products and our processes. We started this year with a lot of positive momentum. You've heard that on the earnings call on Monday. I can tell you the team that's in-charge right now is as focused and collaborative and as efficient as they've been for a while. And so I'm looking forward to the 90th anniversary of our company in 2025. We're moving in the right direction. We're fundamentally strong, and we are prepared for the future as we've been in a while. However, it is agriculture, and there is always work to do. But I'm confident, we're confident, right team in the right place, strategy in place to deliver on the long-term goals. And in a few moments, you'll hear from both our CFO and our CEO. Now I need to begin with the business portion of the meeting. The bylaws of the company specify that the Chairman and the Secretary of the Annual Shareholders Meeting, and the Chair recognizes our company's Secretary, Adam Deckinger, who will report on the preparations. So Adam, thanks.

All shareholders were sent a notice of the annual meeting and proxy on or about December 21, 2023, which is evidenced by an affidavit from our mail agent, Broadridge Financial Solutions, Inc. As required by Delaware Law, our certificate listing shareholders as of the record date of December 11, 2023, is available for inspection in the lobby. Those who might wish to overrule their previous proxy cards or to vote if they have not done so already, may do so by raising their hand and requesting a voting card. The bylaws of the company also provide for a proxy committee of one or more persons designated by the Board of Directors. The Board of Directors has appointed John H. Tyson and Kevin McNamara as members of the Proxy Committee. Mr. Chairman, I am reporting at the direction of the Proxy Committee that the total outstanding shares of 356,359,750 as of December 11, 2023, a clear majority of the shares have been voted and represent a quorum at this meeting.

Based upon the report of our Secretary, I declare that this shareholders' meeting has been properly called, and we do have a quorum that is present. I do ask that any questions from shareholders be submitted in writing. [Operator Instructions]. I hereby appoint Brett Johnson as Sergeant-At-arms and authorize him to appoint deputies to enforce the rules of the meeting, which we've spoken to earlier. The next item of business is the election of your directors. The nominees for the next year are set forth in the proxy statement are as follows: the Board would stand will hold the applause to all of them stand. Les Baledge, Governor Mike Beebe, Maria Borras, David Bronczek, Mikel Durham, Donnie King, Jonathan Mariner, Kevin McNamara, who's your Lead Independent Director, Cheryl Miller, Jeff Schomburger, Barbara Tyson; Noel White, myself and our newest Board member, Kate Quinn, who's going to be joining and be elected to the Board of Directors this year. This is your slate of directors as presented. Thank you all. And Mr. Secretary, would you report the results of the vote?

Yes, Mr. Chairman. Votes cast favoring the election of each nominee presented, represented a clear majority of the votes cast.

With a clear majority of the votes cast favoring the election of your nominees, I declare the slate of directors as nominated. The next item of business is the proposal to ratify the selection of PricewaterhouseCoopers LLP as the company's independent registered public accountant for the year ending September 28, 2024. Will the Secretary report the results of that vote regarding the ratification?

Mr. Chairman, votes cast favoring ratification of the selection of PricewaterhouseCoopers LLP as independent registered public accountant, represented a clear majority of the votes cast.

Thank you. With a clear majority of the votes cast for ratification, I declare the selection of PricewaterhouseCoopers LLP as the company's independent registered public accountant for the year ending September 28, 2024, ratified. The next item of business is the shareholder proposal regarding corporate climate lobbying. At this time, the chair recognizes a representative of the proponent to present the proposal. Is a proponent here to speak on that proposal? Welcome.

Good morning. My name is Courtney [ Wix ]. And on behalf of Common Spirit Health and Mercy Investment Services, I am here to present Proposal #3 on the Tyson Foods proxy ballot for 2024. Our proposal requests that Tyson issue a report evaluating how its lobbying activities, both direct and through trade associations aligns with company science-based target and long-term Net Zero ambitions and assessing the risks presented by any misaligned lobbying activities, including how Tyson is working to mitigate such risks. Climate change poses financial, reputational and physical risks to Tyson Foods. Recognizing these risks, the company has set ambitious ambitions reduction targets, but achieving its goals will require strong and supportive public policy. Because of this link between company's long-term ambitions and public policy investors are increasingly asking or report on how corporate lobbying activities, both direct and indirect, are aligned with the company's own climate goals and the Net Zero goals of the Paris Climate Agreement. Companies in a variety of sectors have begun to release this information on an annual basis. However, Tyson provides only limited information about its climate lobbying activities. Although the company supports some trade associations and nonprofit organizations that lobby negatively on climate change, we urge our fellow investors to vote for this proposal and also urge Tyson's Board and management to implement our request for a report on the company's efforts to support public policies that will help it to achieve its ambitious climate goals. Thank you.

The Board of Directors' statements with respect to this shareholder disposal is set forth in the proxy statement and speaks for itself. Would the Secretary read the results of the vote?

Mr. Chairman, votes cast favoring the shareholder proposal represented a minority of the votes cast. Votes cast against the shareholder proposal represented a clear majority of the votes cast.

With a clear majority of the votes cast against this proposal, I declare that this shareholder proposal has been defeated. I do believe that our core values speak to our concerns about being good stewards and striving to make sure we protect our environment. The next item of business is a shareholder proposal regarding the company's labor practices and the Chair recognizes the representative of the proposal.

So I'm here today to move the proposal filed by American Baptist Home Mission Society, N6 state-based co-filers asking for the company to commission an independent third-party audit to assess the effectiveness of Tyson's policies and practices in preventing illegal child labor throughout its value chain. The presence of vulnerable children in Tyson's value chain is shameful and should be swiftly and effectively addressed. For years, long-term investors have tried to engage Tyson in good faith on issues of human rights due diligence, ratio equity and worker health and safety. However, investors remain concerned that the ongoing scandals of these intersecting issues point to systemic problems within the company's value chain, starting with Tyson's mismanagement of the COVID-19 pandemic, which resulted in thousands of infections, hundreds of worker deaths disparately impacting workers and communities of color. In response, Tyson committed to conducting a racial equity audit in 2021, but has not followed through. And now recent governmental investigations have documented a illegal child labor and Tyson's operations. Children have engaged in hazardous work, including using caustic chemicals and cleaning sharp and dangerous meat processing equipment. More recently, there have been allegations of illegal child labor in Tyson's contracted chicken farms. Investors are concerned that the presence of illegal child labor in Tyson value chain may be a tragic symptom of the company's disregard for the well-being of its workers. I urge all shareholders to support this proposal, and I call on the company to end its exploitation of black and brown workers and of children, worker rights or human rights.

The Board of Directors' statement with respect to this shareholder proposal is set forth in the proxy statement and speaks for itself with the Secretary, please report the results.

Mr. Chairman, votes cast favoring the shareholder proposal represent a minority of the votes cast. Votes cast against the shareholder proposal represent a clear majority of the votes cast.

With a clear majority of the votes cast against the shareholder proposal, I declare this shareholder proposal has been defeated. And once again, I would say that our core values speak to the integrity as we strive to make sure we take care of our folks in all of the places we live and work. The next item of business is a shareholder proposal regarding deforestation of the free supply chain. The Chair recognizes a representative of the proponent to present this proposal.

Members of the Board, fellow shareholders. My name is Douglass Guernsey. I'm here today on behalf of Green Century Capital Management to advance the fifth item on Tyson Foods' proxy statement urging the company to eliminate deforestation from a supply chain by 2025. Deforestation drives this twin systemic risks of biodiversity loss and climate change, both of which threaten the stability of financial markets and industries dependent on natural resources. Companies that do not adequately address these vulnerable areas, run risk of operational, regulatory and reputational risks and are increasingly out of step with investor expectations. Increasing regulations such as the EU deforestation regulation will result in fines and product exclusions to companies that do not eliminate deforestation within their supply chain by 2025. Tyson's current deforestation commitments are inadequate to address this regulatory risk and the company may face fines and exclusions from the EU market when -- if it does not move up its current target. In closing, we believe that setting a deforestation goal by the end of 2025 would mitigate material risks to Tyson and meet evolving investor expectations and ultimately protect long-term shareholder value. We urge you to vote for this proposal. Thank you.

Thank you for the time. The Board of Directors' statement with respect to this shareholder proposal is set forth in the proxy statement and speaks for itself. Once again, will the Secretary report the votes?

Mr. Chairman, votes cast favoring the shareholder proposal represented a minority of the votes cast. Votes cast against the shareholder proposal represented a clear majority of the votes cast.

With a clear majority of the votes cast against this shareholder proposal, I declare that this shareholder proposal has been defeated. And once again, I will refer to our core. I think it speaks to the integrity of the men and women in this room on how they choose to run and represent our company. The next item of business is a shareholder proposal regarding a circular economy for packaging. And will the Chair recognizes via a proponent to present their proposal?

Good morning. I'm Kelly McBee with [indiscernible] here to move this proposal for a circular economy for packaging, which asks our company to extend our responsibility for packaging beyond point-of-sale and through to the packaging end of left. Governments around the world are passing laws, expanding the responsibility for packaging on to consumers -- excuse me, companies, a policy known as Extended Producer Responsibility or EPR. New EPR for packaging laws have already been passed in 4 U.S. states since 2021, including Maine, Oregon, California and Colorado. If governments continue this growing policy trend of holding companies financially accountable for packaging at their end of life, companies faced a collective annual risk of $100 billion. Our company has a goal for recyclable home compostable or reusable packaging, yet this goal will do little to ensure that our packaging is actually recycled. Tyson must move beyond technical recyclability and embrace new actions to ensure our packaging is recycled in practice, and that's scale. A mission that dozens of our competitors currently act on through voluntary financial contributions to support the U.S. recycling infrastructure. Tyson appears unprepared to meet the risks of EPR legislation and the forthcoming global plastics treaty as our company does not have a goal to reduce use of virgin plastic, nor does it make public contribution to U.S. recycling infrastructure, and it lacks commitment to recyclability in practice and at scale. Please vote yes on this proposal to support the evaluation of new circular action for packaging at Tyson.

The Board of Directors' statement with respect to this shareholder proposal is set forth in the proxy statement and speaks for itself. And once again, Secretary, would you report the podium results?

Mr. Chairman, votes cast favoring the shareholder proposal representing a minority of the votes cast. Votes cast against the shareholder proposal represent a clear majority of the votes cast.

With a clear majority of the votes cast against this shareholder proposal, I do declare their shareholder proposal has been defeated. And once again, I'll speak to the core values of this company and with respect to the shareholder proposals that were brought forth by the folks in the audience, there are a set of men and women that wake up each and every day to strive to make a difference in the communities where they live and work. And absolutely, we all have the same concerns to make this place a better place to live in. That concludes the business proportion of our meeting. There being no further business, I declare the business portion of the 61st Annual Shareholders Meeting adjourned. And now at this time, I'm pleased to turn the meeting over to our CFO, who happens to be my son, John Randal Tyson, and he'll be followed by Donnie King, our CEO.

Good morning, everyone. Thank you, Mr. Chairman. Let me start by reminding everyone that any of our remarks today are just not historical facts are forward-looking statements and are provided pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. I encourage you to visit ir.tyson.com for our most recent Forms 10-K and 10-Q to review discussions of the risks that can affect our business. Through fiscal 2023 -- though fiscal 2023 was a challenging year for our business, we took strategic actions to improve our performance. I'm pleased to say we saw the benefits of these measures ending the year with improving quarterly results. This momentum continued into Q1 of our fiscal 2024, which we reported earlier this week. And while uncertainties remain, we believe that our financial performance is on an upward trajectory. A key focus item for us in 2024 is driving cash flow by controlling how we deploy capital. This past quarter, we generated strong operating cash flow of $1.3 billion. Our priorities for allocating capital remains centered on growing -- on growth, particularly in our branded foods business, returns to our shareholders while also building financial strength and maintaining our investment-grade credit rating. We also remain committed to our dividend as the primary way we return cash to shareholders. We paid $670 million to shareholders via our dividend in 2023. And in the most recent quarter, we paid $171 million in dividends with our Board of Directors increasing the annual dividend per share for fiscal 2024 to an expected $1.96 for Class A shares in November. We've been paying the dividend since 1977, and we've increased it annually for the past 12 years. In fact, over the past 12 years, we paid nearly $4.5 billion in cumulative dividends to our shareholders. Before I wrap up, I want to acknowledge it is both a responsibility and a privilege to be here representing the hard work and efforts of our team members as well as the interest of our shareholders, alongside my family members, my dad, you just heard from my sister who is here in front of me, my great aunt and my aunt and my mother also as well, who are always here with us today. Tysons the leader in the global protein industry. We have strong brands, a broad portfolio of products and a great team, all of which uniquely position us to win in the market. Now I'd like to hand things over to our President and CEO, Donnie King. Donnie.

Good morning, everyone. And as John just mentioned, fiscal 2023 was a uniquely challenging year. Our Branded Foods business performed well, while all of our core protein categories faced headwinds simultaneously. Despite the obstacles, 2023 forced us to focus on controlling the control and getting back to the basics of winning with team members, customers and consumers and executing with excellence. We have entered fiscal 2024 a more agile, more collaborative and disciplined business. Our people are the foundation of our business, and we want to attract, develop and retain the right talent to meet Tyson's goals. As part of this, we continue to enhance our benefits. Beginning in 2024, we changed our medical and pharmacy administrators with the goal of improving the team member experience. To help enhance our skills and improve our team members' quality of life, we recently launched new development and training tools. Our digital awareness program helps ensure the team members understand our digital strategy and introduces new approaches to solving problems and leading change. Nearly 4,000 team members have enrolled or completed this course. We also began new enterprise-wide development programs, our ILEAD program has an array of learning experiences designed to upscale first-time and aspiring managers all the way up to senior leaders. Our Upward Academy online program provides formal education opportunities to all team members from associates to master's degrees, all online and all free. Both of these enable team members to select the development and experience they need to further their professional growth and career goals. We are winning with both consumers and customers. Our brands continue to resonate with consumers with nearly 3/4 of households buying a product from our Tyson Core business line in 2023, which is an increase of 60 basis points from 2022. Our dollar and pound share grew significantly across our core business lines and ended the year at higher levels than any other previous year. We also winning with customers, as demonstrated by Tyson making the top 10 in the Kantar PoweRanking for the second year in a row. We took bold actions to improve our performance in 2023. For example, to better balance customer and consumer demand within our network, we announced the closure of 6 of our older, less efficient plants in chicken and 2 of our smaller beef case-ready value-added facility. Closing plants is always a difficult decision, but it was the right one for our business and our shareholders. We also made significant improvements in our live operations in chicken, including hatchability, livability and uniformity that have reduced our cost and improve our yields, we've seen these benefits and changes in our improving results. Beyond one segment, I'm pleased to report that every one of our business is executing better today than 18 months ago as we control the controllables and focus on operational excellence. Our goal is to drive shareholder value by focusing on the long term. We believe that we have the right strategy and priorities in place to do just that. I want to thank you for your continued interest, investment and confidence in what we're doing at Tyson. I'm excited about our future and hope you are, too. With that, Mr. Chairman, I'll turn it back over to you.

So Donnie spoke to the improvement that's happened over the last 18 months. As a result of the leadership team. I'd like the executive leadership team to stand up, so you all can acknowledge that or stand up everybody. You're the ones that have made the difference. So we want to thank you all. Thank you, Donnie. Thank you, John Randal. Thanks to everyone here in person and online today for your time, your interest. But most of all, thank you to the men and women of Tyson Foods, the folks that are out there on the front line that make a difference producing safe, healthy, sustainable and affordable food. In the end, our responsibility is to put a product in a place so families can go home and enjoy their families starting with the word affordable. I can tell you that we strive each and every day to operate with integrity and trust in all we do. We will work to create value for our shareholders, for our customers. We will be great leaders of our team members, and we will be the best we can in the communities where we live and work. I do look forward to updating on our progress at next year's meeting 90th, It's a pretty big number, and it's a result of men and women who make the difference. At this point in time, Mr. Secretary, I will declare that the 61st Annual Meeting of the shareholders is adjourned. We thank each and every one of you for being here, be safe, travel home. Thank you for your time.

Ladies and gentlemen, that does conclude today's presentation. We do hope you enjoy the rest of your day. You may now disconnect your lines.