01—Abstract
Summary
Summary of the 10-K filed November 22, 2010. Cited figures are marked; the original filing is the authoritative source.
Tyson Foods, Inc. reported fiscal 2010 (year ended October 2, 2010) sales of $28.43 billiona, up from $26.70 billion in fiscal 2009, and operating income of $1.56 billion, compared with an operating loss of $215 million in fiscal 2009 that included a $560 million Beef goodwill impairment.
Net income attributable to Tyson was $780 millionb, or $2.06 per diluted share, versus a net loss of $547 million ($1.47 per share) a year earlier. Management attributed the improvement to margin management gains, operational efficiency improvements, and better domestic market conditions. Operating margin was 5.5% for the year, which the filing describes as the first time since the 2001 IBP acquisition that annual operating margins exceeded 5.0%.
Segment operating income was $519 millionc for Chicken, $542 million for Beef, $381 million for Pork and $124 million for Prepared Foods. Debt was reduced substantially during the year. Total debt fell to $2.54 billion from $3.48 billion, after the company repurchased, retired or redeemed $956 million of senior notes, and the filing states this is the lowest level since the IBP acquisition.
Year-end cash and cash equivalents were $978 milliond, and total liquidity was $1.80 billion including $825 million available under a $1.0 billion revolving credit facility. Operating cash flow was $1.43 billion. Management guided to fiscal 2011 capital expenditures of approximately $700 million and net interest expense of approximately $245 million.
The filing also highlights concentration and legal risks. Wal-Mart Stores, Inc. accounted for 13.4% of fiscal 2010 consolidated sales. Members of the Tyson family control approximately 70% of total voting power.
Pending matters include an Oklahoma environmental suit that seeks compensatory damages in excess of $800 million, and an Armstrong case in which a jury verdict and final judgment of $8,655,735 were entered against the company, which intends to appeal. Management states that the ultimate results of other matters are not expected to have a material adverse effect on consolidated results.
02—Key points
Key Highlights
- Net sales rose to $28.43 billion in fiscal 2010 from $26.70 billion in fiscal 2009, with average sales prices up 7.1% and sales volume down 0.6%.
- Operating income was $1.56 billion, compared with an operating loss of $215 million in fiscal 2009, which included a $560 million Beef goodwill impairment.
- Net income attributable to Tyson was $780 million, or $2.06 per diluted share, versus a net loss of $547 million ($1.47 per share) in fiscal 2009.
- Operating margin was 5.5% for fiscal 2010, the first time since the 2001 IBP acquisition that annual operating margins exceeded 5.0%, per the filing.
- Total debt was reduced to $2.54 billion from $3.48 billion after $956 million of senior notes were repurchased, retired or redeemed; cash and equivalents were $978 million.
- Operating cash flow was $1.43 billion, and total liquidity was $1.80 billion at fiscal year-end.
- Wal-Mart Stores, Inc. accounted for 13.4% of fiscal 2010 consolidated sales, and Tyson family members control approximately 70% of total voting power.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2010, Tyson Foods kept $0.03.
- Revenue$28.43B100.0%
- Cost of revenue−$25.92B91.2%
- Gross profit$2.51B8.8%
- Operating costs−$958.0M3.4%
- Operating income$1.56B5.5%
- Interest, other & tax−$776.0M2.7%
- Net income$780.0M2.7%
Where FY2010 revenue went
$28.43B- Cost of revenue: $25.92B, 91% of revenue
- Net income: $780.0M, 2.7% of revenue
- R&D: $38.0M, 0.1% of revenue
- SG&A: $929.0M, 3.3% of revenue
- Interest, other & tax: $776.0M, 2.7% of revenue
Kept 2.7% as net incomeNet income $780.0M · 2.7%R&D $38.0M · 0.1%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2010filed November 22, 2010Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $28.43B$26.70B | +6.5% |
| Cost of Revenue | $25.92B$25.50B | +1.6% |
| Gross Profit | $2.51B$1.20B | +109.0% |
| R&D Expenses | $38.00M$33.00M | +15.2% |
| SG&A Expenses | $929.00M$841.00M | +10.5% |
| Operating Income | $1.56B-$215.00M | +823.7% |
| Net Income | $780.00M-$547.00M | +242.6% |
| EPS (Diluted) | $2.06$-1.47 | +240.1% |
| Shares Outstanding (Diluted) | 379.00M372.00M | +1.9% |
05—Questions
Frequently Asked Questions
What drove the improvement from fiscal 2009 to fiscal 2010?
The filing attributes the improvement primarily to margin management gains and operational efficiency improvements, which it says drove a nearly $1.2 billion increase in operating income excluding the 2009 Beef goodwill impairment. It also cites improving domestic market conditions, including reduced industry protein supply and higher average sales prices, which rose about $1.9 billion year over year.
How much debt did Tyson reduce, and how is its liquidity position?
Total debt declined to $2.54 billion from $3.48 billion. During fiscal 2010 the company repurchased, retired or redeemed $956 million of senior notes and used $1.4 billion of operating cash flow. At October 2, 2010, total liquidity was $1.80 billion, including $978 million of cash and cash equivalents and $825 million available under its $1.0 billion revolving credit facility.
What is the outlook for fiscal 2011?
The filing expects overall protein production to increase and total domestic protein availability to be relatively flat. It forecasts a gradual 1-2% reduction in cattle supplies, higher grain costs for Chicken offset by operational and pricing improvements, and capital expenditures of approximately $700 million. Net interest expense is expected to be approximately $245 million, down nearly $90 million from fiscal 2010.
What are the most significant risks disclosed?
Key risks include volatility in feed grain, live cattle, live hog and energy costs; customer concentration, with Wal-Mart at 13.4% of fiscal 2010 sales; livestock disease outbreaks; international operations; and goodwill impairment risk, with $1.9 billion of goodwill at October 2, 2010. Legal exposures include an Oklahoma poultry litter suit seeking compensatory damages in excess of $800 million and the Armstrong case, where a final judgment of $8,655,735 was entered and the company intends to appeal.
Who controls Tyson Foods?
Members of the Tyson family beneficially own 99.97% of the outstanding Class B stock and 2.42% of the Class A stock, giving them control of approximately 70% of total voting power. Three family members serve on the Board of Directors, and the company relies on the controlled company exemption from certain New York Stock Exchange corporate governance requirements.
06—Continue