01—Abstract
Summary
Summary of the 10-K filed November 23, 2009. Cited figures are marked; the original filing is the authoritative source.
Tyson Foods, Inc. reported a net loss of $537 milliona, or $1.44 per diluted share, for fiscal 2009 (a 53-week year ended October 3, 2009), compared with net income of $86 million, or $0.24 per diluted share, in fiscal 2008.
The loss was driven primarily by a $560 millionb non-cash, non-tax-deductible goodwill impairment in the Beef segment, which produced an operating loss of $215 million for the company. Sales were $26.70 billion, roughly flat with $26.86 billion in fiscal 2008. Sales volume rose 4.4% while average sales prices fell 4.8%.
Net losses of $257 millionc on commodity risk management activities related to grain and energy purchases also weighed on results, particularly in the first half of the year. Segment results were mixed. Chicken posted an operating loss of $157 million, though the second half improved to a positive 3.5% operating margin from a negative 7.2% in the first half.
Beef's operating loss was $346 milliond including the impairment. Pork earned $160 million (4.7% margin) and Prepared Foods earned $133 million (4.7% margin). Cash flow from operations improved to $1.03 billion from $288 million, aided by a $432 million working capital release, and the company ended the year with about $1.2 billion in total cash including restricted cash.
Total debt rose to $3.55 billion from $2.90 billion, and the debt-to-capitalization ratio increased to 44.9% from 36.6%, following the March 2009 issuance of $810 million of 10.50% senior notes due 2014. The filing also highlights concentrated ownership and customer risk. Members of the Tyson family control approximately 70% of the total voting power, and Wal-Mart Stores, Inc. accounted for 13.8% of fiscal 2009 consolidated sales.
Management guided to lower grain costs and improving chicken pricing in fiscal 2010, and planned capital spending of about $600 million. Donnie Smith was named President and Chief Executive Officer on November 19, 2009, succeeding interim leader Leland E. Tollett.
02—Key points
Key Highlights
- Net loss of $537 million ($1.44 per diluted share) versus net income of $86 million ($0.24 per diluted share) in fiscal 2008
- $560 million non-cash, non-tax-deductible goodwill impairment in the Beef segment drove an operating loss of $215 million
- Sales of $26.70 billion, versus $26.86 billion in fiscal 2008; average sales prices declined 4.8% while sales volume rose 4.4%
- Net losses of $257 million from grain and energy commodity risk management activities in fiscal 2009, versus net gains of $206 million in fiscal 2008
- Cash provided by operating activities rose to $1.03 billion from $288 million, helped by a $432 million working capital change
- Total debt increased to $3.55 billion from $2.90 billion; debt-to-capitalization rose to 44.9% from 36.6%; liquidity of $1.74 billion including $733 million available under the revolver
- Wal-Mart Stores, Inc. accounted for 13.8% of fiscal 2009 consolidated sales; Tyson family controls approximately 70% of voting power
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2009, Tyson Foods lost $0.02.
- Revenue$26.70B100.0%
- Cost of revenue−$25.50B95.5%
- Gross profit$1.20B4.5%
- Operating costs−$1.42B5.3%
- Operating income−$215.0M0.8%
- Interest, other & tax−$332.0M1.2%
- Net income−$547.0M2.0%
04—Financials
Financial Highlights
Figures from 10-KFY2009filed November 23, 2009Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $26.70B$26.86B | −0.6% |
| Cost of Revenue | $25.50B$25.62B | −0.4% |
| Gross Profit | $1.20B$1.25B | −3.5% |
| R&D Expenses | $33.00M$30.00M | +10.0% |
| SG&A Expenses | $841.00M$879.00M | −4.3% |
| Operating Income | -$215.00M$331.00M | −165.0% |
| Net Income | -$547.00M$86.00M | −736.0% |
| EPS (Diluted) | $-1.47$0.24 | −712.5% |
| Shares Outstanding (Diluted) | 372.00M356.00M | +4.5% |
05—Questions
Frequently Asked Questions
Why did Tyson Foods report a net loss in fiscal 2009?
The largest driver was a $560 million non-cash, non-tax-deductible goodwill impairment in the Beef segment, triggered mainly by a higher discount rate of 10.1% versus 9.3% in fiscal 2008. Net losses of $257 million on grain and energy derivatives also reduced results, though the company noted these instruments were tied to falling commodity prices that benefit it long-term.
How did the segments perform?
Chicken had an operating loss of $157 million, but operating margin improved to positive 3.5% in the second half from negative 7.2% in the first half. Beef posted an operating loss of $346 million including the impairment; excluding it, operating results roughly doubled versus fiscal 2008. Pork earned $160 million (4.7% margin), down from $280 million in fiscal 2008, and Prepared Foods earned $133 million (4.7% margin), up from $63 million.
How is Tyson's liquidity and debt position?
At October 3, 2009, the company had about $1.2 billion of total cash including restricted cash and $733 million available under its $1.0 billion revolving credit facility, which expires in March 2012. Total debt was $3.55 billion. The company issued $810 million of 10.50% senior notes due March 2014 and bought back $293 million of notes during fiscal 2009. Ratings were BB (S&P) and Ba3 (Moody's).
What is the outlook for fiscal 2010?
Management expects chicken pricing to improve as demand recovers and cold storage inventories decline, and expects grain costs to be lower than in fiscal 2009. Pork hog supplies are expected to decline, and Prepared Foods expects raw material costs to rise but anticipates strong results due to contract changes moving toward formula pricing. Capital spending is expected to be approximately $600 million.
Who controls Tyson Foods and what leadership changes occurred?
Members of the Tyson family beneficially own 99.97% of Class B stock and 2.36% of Class A stock, giving them about 70% of total voting power. On November 19, 2009, Donnie Smith was appointed President and Chief Executive Officer, and James V. Lochner was appointed Chief Operating Officer. Leland E. Tollett, who had been Interim President and CEO, stepped down from that role and will continue to provide consulting services.
06—Continue