01—Abstract
Summary
Summary of the 10-K filed November 20, 2008. Cited figures are marked; the original filing is the authoritative source.
Tyson Foods, Inc. reported fiscal 2008 (year ended September 27, 2008) sales of $26.86 billiona, up from $25.73 billion in fiscal 2007, but net income fell to $86 million, or $0.24 per diluted share, from $268 million, or $0.75 per diluted share, a year earlier.
Operating income declined to $331 millionb from $613 million. The decline was driven largely by the Chicken segment, which posted an operating loss of $118 million versus operating income of $325 million in fiscal 2007, reflecting increased input costs of approximately $900 million, including grain costs. The Pork segment was the standout, with record operating income of $280 million, and Beef improved to $106 million from $51 million.
The balance sheet shows total assets of $10.85 billionc, total debt of $2.90 billion, and shareholders' equity of $5.01 billion. Liquidity totaled $1.71 billion at year end, including $709 million available under the $1.0 billion revolver and the full $750 million under the receivables securitization facility. During fiscal 2008 the company issued $458 million of 3.25% convertible senior notes due 2013 and sold 22.4 million Class A shares for net proceeds of about $274 million.
Credit ratings were downgraded by S&P and Moody's, raising interest rates on the 2016 Notes to 7.85%. Management also flagged pending litigation, including Fair Labor Standards Act cases, an Oklahoma environmental suit, and consumer class actions over "raised without antibiotics" labeling. Subsequent events included the October 2008 purchase of three Brazilian poultry companies for $80 milliond and the planned sale of the Lakeside Canadian beef operation for $104 million plus about $82 million for additional assets.
02—Key points
Key Highlights
- Net sales rose to $26.86 billion from $25.73 billion, driven mainly by higher average sales prices, which contributed about $1.5 billion.
- Net income fell to $86 million ($0.24 diluted EPS) from $268 million ($0.75 diluted EPS) in fiscal 2007.
- Chicken segment swung to an operating loss of $118 million, pressured by roughly $900 million of higher input costs, partly offset by $127 million of commodity risk management gains.
- Pork segment posted record operating income of $280 million, up $135 million, while Beef operating income improved to $106 million from $51 million.
- Total debt stood at $2.90 billion, with $1.71 billion of total liquidity at September 27, 2008, and a debt-to-capitalization ratio of 36.6%.
- Credit ratings were downgraded in September and November 2008, raising the interest rate on the 2016 Notes from 6.85% to 7.85%.
- Capital spending for fiscal 2009 is expected at $600-$650 million, and the Lakeside Canadian beef sale is expected to close by the end of the first quarter of fiscal 2009.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2008, Tyson Foods kept $0.00.
- Revenue$26.86B100.0%
- Cost of revenue−$25.62B95.4%
- Gross profit$1.25B4.6%
- Operating costs−$915.0M3.4%
- Operating income$331.0M1.2%
- Interest, other & tax−$245.0M0.9%
- Net income$86.0M0.3%
Where FY2008 revenue went
$26.86B- Cost of revenue: $25.62B, 95% of revenue
- Net income: $86.0M, 0.3% of revenue
- R&D: $30.0M, 0.1% of revenue
- SG&A: $879.0M, 3.3% of revenue
- Interest, other & tax: $245.0M, 0.9% of revenue
Kept 0.3% as net incomeNet income $86.0M · 0.3%R&D $30.0M · 0.1%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2008filed November 20, 2008Financial Statements
05—Questions
Frequently Asked Questions
Why did Tyson's earnings decline in fiscal 2008?
The Chicken segment was the main driver, with an operating loss of $118 million compared with operating income of $325 million in fiscal 2007. The filing cites increased input costs of approximately $900 million, including grain, other feed ingredients and cooking ingredients, along with higher plant costs of about $200 million. Cost of sales rose $1.3 billion, and total operating income fell to $331 million from $613 million.
Which segments performed well in fiscal 2008?
The Pork segment reported record operating income of $280 million, supported by adequate hog supplies and strong domestic and export demand. The Beef segment improved to $106 million from $51 million, helped by higher average sales prices and operational efficiencies, even though sales volume declined with the closure of the Emporia, Kansas, slaughter operation.
How is Tyson funding its operations and growth?
Tyson issued $458 million of 3.25% convertible senior notes due 2013 and sold 22.4 million Class A shares for net proceeds of about $274 million. Liquidity at year end was $1.71 billion, including $709 million available under the revolving credit facility and $750 million under the accounts receivable securitization facility. The company expects cash from operations, Lakeside sale proceeds and short-term borrowings to meet working capital, capital expenditures and international growth needs.
What legal and financial risks does the filing highlight?
The filing discusses multiple pending matters, including Fair Labor Standards Act wage cases, an Oklahoma suit over poultry litter pollution in the Illinois River Watershed seeking wide-ranging relief, and thirteen consumer lawsuits alleging chicken was falsely advertised as "raised without antibiotics" with claims above $5 million each. Credit rating downgrades raised borrowing costs, and the revolving facility's leverage covenant was amended. Management also noted a possible $10 million expense if investment values decline further in the first quarter of fiscal 2009.
What major transactions occurred after fiscal 2008 year end?
In October 2008, Tyson completed the acquisition of three vertically integrated poultry companies in southern Brazil for $80 million plus up to $15 million of contingent consideration. Dynamic Fuels received $100 million of Gulf Opportunity Zone bonds, for which Tyson provided a letter of credit guarantee. The company also signed a letter of intent in June 2008 to sell its Canadian beef operation, Lakeside, to XL Foods for $104 million, with about $82 million more for cattle inventory, fertilizer and packaging assets, subject to government approvals.
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