01—Abstract
Summary
Summary of the 10-K filed November 19, 2012. Cited figures are marked; the original filing is the authoritative source.
Tyson Foods, Inc. reported fiscal 2012 (year ended September 29, 2012) sales of $33.28 billiona, up from $32.27 billion in fiscal 2011, and net income attributable to Tyson of $583 million, or $1.58 per diluted share, versus $750 million, or $1.97 per diluted share, a year earlier.
Operating income was $1.25 billionb compared with $1.29 billion in fiscal 2011. Management attributed the strong operating result to improved internal performance, strong exports and favorable domestic chicken market conditions despite a $2.2 billion increase in input costs. Results were uneven across segments: Chicken operating income rose to $446 million, Pork fell to $417 million, and Beef fell to $218 million, while Prepared Foods rose to $181 million.
Balance sheet and liquidity items drew attention. The company issued $1.0 billionc of 4.50% senior notes due 2022 and used the proceeds to retire its 10.50% senior notes due 2014, a transaction that recorded a $167 million pretax loss on early extinguishment of debt and is expected to save approximately $55 million in annualized interest. Total liquidity was $2.0 billion at year end, including $1.07 billion of cash.
Fiscal 2013 guidance called for sales of approximately $35 billiond, net interest expense of about $140 million, capital expenditures of roughly $550 million, and higher grain costs of approximately $600 million, with Chicken and Beef expected to remain profitable but possibly below their normalized margin ranges. Investors should also note concentration in control and customers.
The Tyson Limited Partnership and Tyson family members control approximately 71.52% of the total voting power, and Wal-Mart Stores, Inc. accounted for 13.8% of consolidated sales. The company also disclosed a pending Oklahoma environmental suit seeking compensatory damages in excess of $800 million, which management has contested, and it declared a special dividend of $0.10 per Class A share along with a 25% increase in the quarterly dividend rate.
02—Key points
Key Highlights
- Fiscal 2012 sales rose to $33.28 billion from $32.27 billion, while net income attributable to Tyson declined to $583 million ($1.58 per diluted share) from $750 million ($1.97 per diluted share).
- Operating income was $1.25 billion, with an operating margin of 3.8% in fiscal 2012, and the company noted it has exceeded $1.2 billion for three consecutive years.
- Segment results diverged: Chicken operating income increased to $446 million from $164 million, while Beef fell to $218 million from $468 million and Pork fell to $417 million from $560 million.
- The company refinanced by issuing $1.0 billion of 4.50% senior notes due 2022 and retiring its 10.50% notes due 2014, incurring a $167 million pretax loss on early extinguishment of debt.
- Total liquidity was $2.0 billion at September 29, 2012, including $1.07 billion of cash and cash equivalents, and the company was in compliance with all debt covenants.
- Fiscal 2013 outlook projects sales of approximately $35 billion, approximately $600 million of higher grain costs, net interest expense of about $140 million, and capital expenditures of about $550 million.
- The Tyson family and the Tyson Limited Partnership control approximately 71.52% of total voting power, and Wal-Mart Stores, Inc. represented 13.8% of fiscal 2012 consolidated sales.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2012, Tyson Foods kept $0.02.
- Revenue$33.05B100.0%
- Cost of revenue−$30.86B93.4%
- Gross profit$2.19B6.6%
- Operating costs−$904.0M2.7%
- Operating income$1.29B3.9%
- Interest, other & tax−$703.0M2.1%
- Net income$583.0M1.8%
Where FY2012 revenue went
$33.05B- Cost of revenue: $30.86B, 93% of revenue
- Net income: $583.0M, 1.8% of revenue
- R&D: $43.0M, 0.1% of revenue
- SG&A: $904.0M, 2.7% of revenue
- Interest, other & tax: $703.0M, 2.1% of revenue
Kept 1.8% as net incomeNet income $583.0M · 1.8%R&D $43.0M · 0.1%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2012filed November 19, 2012Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $33.05B$32.03B | +3.2% |
| Cost of Revenue | $30.86B$29.84B | +3.4% |
| Gross Profit | $2.19B$2.19B | −0.2% |
| R&D Expenses | $43.00M$42.00M | +2.4% |
| SG&A Expenses | $904.00M$906.00M | −0.2% |
| Operating Income | $1.29B$1.29B | −0.2% |
| Net Income | $583.00M$750.00M | −22.3% |
| EPS (Diluted) | $1.58$1.97 | −19.8% |
| Shares Outstanding (Diluted) | 370.00M380.00M | −2.6% |
05—Questions
Frequently Asked Questions
Why did net income decline in fiscal 2012 even though sales increased?
Sales rose to $33.28 billion from $32.27 billion, but net income attributable to Tyson fell to $583 million from $750 million. The filing attributes the strong operating result to margin management and operational improvements, but Beef and Pork operating income declined, the company recorded a $167 million pretax loss on early debt extinguishment, and the effective tax rate increased to 37.9% from 31.8%.
What drove the change in the company's debt and interest expense?
The company issued $1.0 billion of 4.50% senior notes due 2022 and used the proceeds to retire its 10.50% senior notes due 2014. Total interest expense rose to $356 million from $242 million, largely because of the $167 million loss on early extinguishment. Management expects approximately $55 million in annualized interest savings and projects fiscal 2013 net interest expense of about $140 million.
What are the main risks to the company's fiscal 2013 outlook?
Management expects higher grain costs of approximately $600 million due to reduced grain supplies after the 2012 drought, and it anticipates that Chicken and Beef may remain profitable but below their normalized margin ranges. The filing also cites risks from livestock disease, international market access, customer concentration, and an Oklahoma environmental lawsuit seeking compensatory damages in excess of $800 million.
Who controls shareholder voting at Tyson Foods?
The Tyson Limited Partnership owns 99.977% of the outstanding Class B stock, and the partnership and members of the Tyson family own 2.53% of Class A stock. Together they control approximately 71.52% of total voting power, giving them substantial influence over director elections and major corporate transactions.
What dividend actions did the board announce?
On November 15, 2012, the Board declared a special dividend of $0.10 per Class A share and $0.09 per Class B share, payable December 14, 2012. The board also declared a 25% increase in the quarterly dividend rate, raising it to $0.05 per Class A share and $0.045 per Class B share.
06—Continue