Tyson Foods is quickly integrating Hillshire Brands into its business and realizing cost savings from the acquisition, Donnie Smith, Tyson's chief executive officer, said Wednesday.
Smith spoke at the Morgan Stanley Global Consumer and Retail Conference in New York. Dennis Leatherby, chief financial officer, and Andy Callahan, retail president and a former member of the Hillshire leadership team, joined him onstage.
The group reinforced and elaborated on points made during Monday's quarterly earnings report and shared information about the company's transition plans.
"We've shown good growth over the last five years as a company, but I think right now is the beginning of a new growth phase for us," Smith said. "We've got the right brands, we've got the right product in the right places for today's consumers."
Smith said the combined company would begin to transition into a new organizational structure Dec. 1. During a conference call for media Monday, he said the new structure would not force employees to move from one location to another.
"We feel like it's much better ... if we put the pressure on leadership to be able to manage people in two locations rather than to uproot so many families," he said. "We want to keep people where they are."
Responding to a question about employees being laid off at the corporate headquarters in Springdale, Smith said "very few" employees had been affected. Tyson has about 124,000 employees.
"I think it's understandable when you bring two companies together like this that there are going to be some redundant functions and tasks and that kind of thing, but by and large the number of people who have been displaced will be very small," he said.
Bob Williams, a senior vice president and managing director at Delta Trust Investments, said when people are going to be laid off after a merger or acquisition, generally they're told at the beginning of the process.
"Normally, the impact is known on the front end," he said. "You don't want to keep an unhappy, soon-to-be pool of former employees sitting around with access to your information."
On Wednesday, Smith elaborated on other cost-saving measures.
He said plant closures announced in July would not have been possible without the ability to shift work to more efficient Hillshire facilities.
Tyson's Cherokee, Iowa, prepared-foods plant -- which primarily produced hot dogs -- closed in September, displacing 450 people. Its Buffalo, N.Y., and Santa Teresa, N.M., prepared-foods plants are scheduled to close during the first half of 2015. Their closures will displace 500 people, according to a news release.
"It couldn't have happened without having Hillshire's productive capability," Smith said.
He said teams of employees were looking at other areas of cost savings and have built models that are being vetted by the senior leadership team.
About $225 million in cost savings have been identified for the first year, and about $500 million by the third year.
Freight savings will be worth about $25 million alone, Smith said.
"When you think about synergies, think about big components," he said. "Also think about inside the four walls of the plant, as we're able to consolidate this large product mix into large, efficient plants to bring cost synergies into each of the lines of production."
Leatherby spoke about Tyson's finances and said the company's cash flow will help it pay down its $8.55 billion acquisition of Hillshire, a figure that includes debt. In Tyson's fourth quarter, the company held $7.5 billion in long-term debt.
"We're pleased our business generates a lot of cash, and our first priority for using that cash will be for rapid [debt reduction] and strengthening our balance sheet," he said. "Looking farther out, we'll also fund acquisitions to fulfill our growth strategies."
Business on 11/20/2014