John Randal Tyson
Executive Vice President, Chief Financial Officer at Tyson Foods
Thank you, Donnie.
Let me turn first to a summary of our total company financial performance. We're pleased to report resilient fourth quarter and record annual performance in the fiscal year. Sales were up for both the fourth quarter and fiscal year benefiting from our pricing initiatives to offset the increase in cost of goods. Volumes were up for the fourth quarter and relatively flat for the full year as we overcame supply constraints in an elevated inflationary environment pressuring consumer demand.
Looking at our sales results by channel for the fiscal year. Retail drove $1.4 billion of top line improvement, while the ongoing recovery in the foodservice channel drove an increase of $2 billion. Fiscal year sales in international markets, including both domestically and internationally produced products, were $1.3 billion greater than the prior year as we leveraged our global scale to grow our business. Donnie covered our operating income and earnings per share results, so I won't repeat.
Slide 16 bridges operating income for the fiscal year, which was $126 million greater than the fiscal 2021. We significantly improved earnings in our Chicken segment and generated higher earnings in Prepared Foods, which more than offset the expected decline in Beef earnings. Our pricing actions, which offset the higher input costs, led to higher sales during the year. We saw notable year-over-year increases of 20% to 25% across the business in cost of goods, including labor, feed ingredients, live animals and freight costs.
Investment in growth is our priority. To facilitate this growth, an additional $80 million in SG&A expenses compared to last fiscal year was invested in team members, marketing, advertising and promotional spend to support our brand and digitalization initiatives among other things. While SG&A expenses increased, SG&A as a percentage of total sales was down to 4.2% from 4.5% in the prior fiscal year, reflecting our continued focus on assessing all expenses across the business to identify non-value-added spend and continuing to build leverage across the scale of our business.
As mentioned by Donnie, we significantly accelerated our productivity actions to improve efficiency across all segments during the past year, which has had a meaningful positive impact on our margin profile. Our year-to-date results clearly demonstrate that our diverse portfolio supports our growth objectives of growing faster than the overall market, improving operating margins and driving strong returns for our shareholders.
Now moving to the Beef segment. Sales were approximately $4.9 billion for the fourth quarter, down 3% versus the same period last year, but up 10% for the fiscal year at nearly $20 billion. Sales in the quarter remained strong, supported by higher volume, but offset by lower average sales price. Global consumer demand for beef products remains strong. We expect volumes to remain stable next year amid tightening supply of cattle, offset by improved labor participation, supporting higher plant productivity. On expenses, we incurred greater costs during the fiscal year compared to the prior year as live cattle costs increased approximately $2 billion. But we have sufficient livestock available to finish the year, and we continue to have ample supply to support our operations. We delivered segment operating income of $2.5 billion for the year, and our fiscal year operating margin of 12.5% was a very strong performance by historical standards. We still expect future Beef margins to be in a normalized range of 5% to 7% over the long term.
Looking next at the Pork segment. Sales were approximately $1.6 billion for the quarter and $6.4 billion for the fiscal year, down 3% and up 2% respectively versus the prior year. Global demand remains challenged by high domestic retail prices and the strong U.S. dollar, making U.S. pork relatively expensive as compared to alternative sources globally. For the year, the average sales price increased 4.1%, offsetting the decrease in volume of 1.9%. We expect these headwinds to impact pork volumes next year to a lesser extent than the past year. Segment operating income and margins were $198 million and 3.1% respectively for the fiscal year. The operating income deterioration was driven by herd health issues negatively impacting hog costs and a constrained cut out compressing pork margins in the elevated inflationary environment increasing operating costs overall. While the Q4 result was negative operating income, we do expect to flip back to positive returns in Q1.
Moving now to Prepared Foods. Sales were approximately $2.5 billion for the quarter, up 12% relative to the same period last year. For the fiscal year, sales increased 9.4%, driven by the higher average sales price increase of 13.5%, partially offset by the volume decline of 4.1%, in which 0.9% of the decline was due to the sale of our pet treats business. Volume performance improved in the fourth quarter as our investments in brands and merchandising drove an increase in portfolio market share. Our fourth quarter result, which was roughly flat versus last year, was our strongest performance this year and better than the competition, which underscores the strength of our brands. We expect volume to grow sequentially next year driven by foodservice recovery, improved supply and continued investment in our brands. Operating margin for the segment was 5.8% or $147 million for the quarter, up 4.1% compared to last year. For the fiscal year, our operating margin was 8.1%, up 0.5% compared to the prior year at $782 million.
Now on to the Chicken segment's results. Sales were $4.6 billion for the quarter, up 19%. And for the full year, sales were up 24% at $17 billion. Volumes improved both for the quarter and fiscal year as we gained momentum in the improvement of our live operations. We expect this operational improvement to continue driving sequential quarterly volume growth into next fiscal year. Average sales price increased by approximately 18% for both the quarter and the fiscal year compared to last year. Our shift in pricing mechanisms to more variable structures allowing us to be more agile in response to market conditions was a key decision by our management team. Chicken delivered operating income of $337 million or 7.3% for the fourth quarter and $926 million or 5.5% margin for the total fiscal year. Respectively, this represents margin improvement of 10.2% and 5.3% over the prior year comparable periods. This quarter, we surpassed our goal of processing 40 million head per week by the end of the fiscal year. We intend to continue to grow next year to 42 million head per week, enabling us to maximize our fixed cost leverage and grow market share along with our value-added business. With live operations on a positive trajectory, we will continue optimizing our plant network and portfolio mix to maximize the profitability of our Chicken segment. I am pleased with the tremendous progress we have made against our road map to restoring competitiveness in this business. However, there's still work to do to attain industry-leading performance, and I look forward to more great things to come from the team on this one.
Now turning to Slide 20. Our healthy cash flows and improved balance sheet have continued to support our disciplined capital allocation approach with a focus on total shareholder return. We remain focused on building financial strength, investing in our team members and business and returning cash to shareholders. We produced $2.7 billion of operating cash flows in fiscal year '22. This is after funding a $2.1 billion increase in working capital, which included an investment of $1 billion in inventory to better service our customers as well as the impact of cost inflation. Additionally, we had other planned working capital outflows associated with taxes paid on the divestiture of our pet treats business, payment of a portion of deferred payroll taxes from the CARES Act and the settlement of certain legal accruals. Our leverage ratio finished the year at 1.3 times net debt-to-adjusted EBITDA demonstrating our powerful balance sheet and our continued capital allocation optionality. Investing in our business for both organic and inorganic growth and operational efficiency will continue to be an important priority as we utilize a disciplined capital allocation and balance sheet management approach to invest in desirable projects, brands, categories and geographies.
We also maintain a disciplined M&A approach, investing in opportunities that fit well with our existing portfolio or our growth objectives, such as the recent acquisition in Saudi Arabia providing access to the growing Halal market. While M&A will always be a consideration for growth, we're focused first on investing in growth in our existing footprint. This will facilitate Tyson increasing production capacity, market capabilities and profitability providing return on capital generation above the market and at a minimum of 12% return on invested capital for our shareholders as our long-term target. To address projected demand growth over the next decade, we invested $1.9 billion in our business in the past fiscal year, focused primarily on new capacity and automation objectives.
Finally, we remain committed to returning cash to shareholders through both dividends and share buybacks. For the fiscal year, we returned nearly $1.4 billion in cash to shareholders through $653 million in dividends and $702 million of share repurchases as we continue to prioritize shareholder return.
Let's now discuss the fiscal 2023 financial outlook. We anticipate total company sales between $55 billion and $57 billion and also expect volume growth compared to the prior fiscal year. Both total company sales and volume growth in fiscal '23 will largely be driven by our Chicken, Prepared Foods and International businesses as we work to run our plants full, optimizing our existing footprint and utilizing new capacity expansions.
To grow volumes in our Chicken, Prepared Foods and International businesses, construction is in progress of six new plants, all to be in operation by the end of fiscal 2023. We're building a value-added chicken plant in Danville, Virginia, and we're growing our bacon business with a new location in Bowling Green, Kentucky. And we're also expanding our footprint and increasing volumes outside the U.S. with three plants going live in China and one in Malaysia during 2023. These investments in the recently announced joint venture partnerships are fueling future growth both organically and inorganically in our international business. We remain focused on growing internationally and on those fastest-growing protein consumption markets in the world.
Now as we touched on earlier, our productivity program is expected to deliver an additional $300 million to $400 million of savings during fiscal 2023 as we build upon the foundation laid across the enterprise this year with focus on operational and functional excellence, digital solutions and programmatic automation initiatives. To continue to capitalize upon the organic growth opportunities ahead for our business, we expect to increase capex spending to approximately $2.5 billion during fiscal 2023 to pursue a healthy pipeline of projects with strong return profile. We currently expect our adjusted tax rate to be around 23%, and we anticipate net interest expense of approximately $320 million. Liquidity is expected to significantly exceed our minimum target and net leverage is expected to remain below 2 times net debt-to-adjusted EBITDA. We expect strong and meaningfully better operating cash flows in fiscal 2023 as we do not expect to invest as much in working capital as experienced in the past fiscal year.
Now, finally, let's look at how each of our segments will contribute to our total company performance. As mentioned earlier, we continue to expect future Beef segment margins to be in a normalized range of 5% to 7% for the long term. However, based on current market dynamics, we expect fiscal 2023 to be at or below the low end of that range. In Pork, we expect return on sales between 2% and 4%. Due to normal seasonality for our Pork segment, we expect the front half of the year to outperform the back half of the year. We continue to invest behind our expanded case-ready capacity, increasing volume through organic growth with new and existing customers, underpinned by product innovation for both our Beef and Pork segments. Prepared Foods is expected to deliver margins during fiscal 2023 between 8% and 10%, driven by volume growth, productivity and disciplined revenue management. We expect volume, sales revenue and operating income to all increase through the fiscal year with stronger quarters in the second half of the year compared to the first half of the year. In Chicken, our operational turnaround progress as forecasted, and we are now increasing our focus on optimizing our mix to maximize profitability of our value-added portfolio. We expect to deliver full year margins of 6% to 8%, driven primarily by progressively growing volume and sales revenue while at the same time realizing additional operational improvements. And in International, we anticipate improved profitability from our operations in fiscal 2023, driven by volume growth from capacity expansions ramping up. Our segments individually and in aggregate have clear and compelling roles within Tyson's portfolio strategy. We make products that provide options for consumers across proteins and up and down the value chain, delivering performance that supports the Company's long-term earnings objectives and desirable returns for shareholders.
To sum it up, fiscal 2022 was a record year in revenue, operating income and EPS. And as a result, we are in a strong financial position as we enter fiscal 2023 to support continued investment in our existing footprint, new capacity expansion, more automation and support for our brands as we continue to grow our business.
Now, before I turn the call over for your questions, I want to take a moment to address an important issue. I'm sure you've seen the news about the recent incident involving me. I'm embarrassed and I want to let you know that I take full responsibility for my actions. I also want to apologize to our investors as I have to our employees. This was inconsistent with our company values as well as my personal values. I just wanted you guys to hear this directly from me and to know that I'm committed to making sure this never happens again.
And with that, I'll turn the call back over to Donnie. Donnie?
