01—Abstract
Summary
Summary of the 10-K filed November 23, 2015. Cited figures are marked; the original filing is the authoritative source.
Tyson Foods, Inc. reported record fiscal 2015 sales of $41.37 billiona, up from $37.58 billion in fiscal 2014, with operating income of $2.17 billion versus $1.43 billion a year earlier.
Net income attributable to Tyson was $1.22 billionb, or $2.95 per diluted share, compared with $864 million, or $2.37 per diluted share, in fiscal 2014. Fiscal 2015 was a 53-week year, and the Hillshire Brands acquisition on August 28, 2014 was consolidated into the Prepared Foods segment for the full year. The Chicken segment delivered record results with operating income of $1.37 billion and a 12.0% operating margin, while Prepared Foods posted record operating income of $588 million.
The Beef segment swung to an operating loss of $66 million, and Pork operating income declined to $380 millionc. Balance sheet and cash flow improved meaningfully. Operating cash flow was $2.57 billion, and total debt fell to $6.73 billion from $8.18 billion, with the company citing an approximate $1.7 billion net debt reduction during the year.
The net debt to EBITDA ratio dropped to 2.1x from 4.1x. Goodwill and indefinite-life intangible assets totaled $10.7 billiond, about 47% of total assets. Management expects more than $500 million of Hillshire synergies and profit improvement benefits in fiscal 2016 and more than $700 million by fiscal 2017.
The company also recorded a $169 million impairment on its China operation and a $161 million gain on the sale of its Mexico operation. Key risks highlighted in the filing include commodity cost volatility (feed ingredients were roughly 64% of the cost of growing a live chicken), Wal-Mart's 16.8% share of sales, the controlling ownership held by the Tyson Limited Partnership (about 70.64% of voting power), and integration risk from Hillshire Brands. The Board increased the quarterly dividend to $0.15 per Class A share, and management anticipates fiscal 2016 capital spending of approximately $900 million.
02—Key points
Key Highlights
- Record fiscal 2015 sales of $41.37 billion, up from $37.58 billion, with sales volume up 5.0% and average sales price up 4.8%.
- Operating income rose to $2.17 billion from $1.43 billion; operating margin was 5.2% for the year.
- Diluted EPS was $2.95 versus $2.37 in fiscal 2014; net income attributable to Tyson was $1.22 billion.
- Chicken segment posted record operating income of $1.37 billion (12.0% margin), while Beef swung to a $66 million operating loss.
- Net debt reduced by approximately $1.7 billion; total debt fell to $6.73 billion and net debt/EBITDA improved to 2.1x from 4.1x.
- Hillshire Brands synergies and profit improvement expected to add more than $500 million in fiscal 2016 and more than $700 million by fiscal 2017.
- Concentrated ownership: Tyson Limited Partnership and Tyson family members control approximately 70.64% of total voting power.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2015, Tyson Foods kept $0.03.
- Revenue$41.37B100.0%
- Cost of revenue−$37.46B90.5%
- Gross profit$3.92B9.5%
- Operating costs−$1.75B4.2%
- Operating income$2.17B5.2%
- Interest, other & tax−$949.0M2.3%
- Net income$1.22B2.9%
Where FY2015 revenue went
$41.37B- Cost of revenue: $37.46B, 91% of revenue
- Net income: $1.22B, 2.9% of revenue
- R&D: $75.0M, 0.2% of revenue
- SG&A: $1.75B, 4.2% of revenue
- Interest, other & tax: $949.0M, 2.3% of revenue
Kept 2.9% as net incomeNet income $1.22B · 2.9%R&D $75.0M · 0.2%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2015filed November 23, 2015Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $41.37B$37.58B | +10.1% |
| Cost of Revenue | $37.46B$34.90B | +7.3% |
| Gross Profit | $3.92B$2.69B | +45.9% |
| R&D Expenses | $75.00M$52.00M | +44.2% |
| SG&A Expenses | $1.75B$1.25B | +39.3% |
| Operating Income | $2.17B$1.43B | +51.7% |
| Net Income | $1.22B$864.00M | +41.2% |
| EPS (Diluted) | $2.95$2.37 | +24.5% |
| Shares Outstanding (Diluted) | 413.00M364.00M | +13.5% |
05—Questions
Frequently Asked Questions
How did Tyson's profitability change in fiscal 2015?
Operating income increased to $2.17 billion from $1.43 billion, and net income attributable to Tyson rose to $1.22 billion from $864 million. Diluted EPS increased to $2.95 from $2.37. The increase was driven by higher sales, a full year of Hillshire Brands results, and record Chicken and Prepared Foods operating income, partially offset by the Beef loss and a $169 million China impairment.
Which segments drove results, and which underperformed?
Chicken generated $1.37 billion of operating income on $11.39 billion of sales, and Prepared Foods produced $588 million on $7.82 billion of sales. Pork operating income fell to $380 million from $455 million. Beef reported an operating loss of $66 million, which the filing attributes to a temporary decline in cattle supply, export disruptions, and mark-to-market losses in September 2015.
How much debt did Tyson reduce, and what is its liquidity position?
Total debt declined to $6.73 billion from $8.18 billion, and the company cited an approximate $1.7 billion net debt reduction in fiscal 2015. Liquidity was $1.93 billion at October 3, 2015, including $688 million of cash and cash equivalents and $1.24 billion available under the $1.25 billion revolving credit facility. Operating cash flow was $2.57 billion.
What are the main risks investors should consider?
The filing highlights commodity and feed cost volatility, with corn, soybean meal, and other feed ingredients representing roughly 64% of the cost of growing a live chicken. Wal-Mart Stores accounted for 16.8% of sales, and the Tyson Limited Partnership controls about 70.64% of voting power. Other risks include integrating Hillshire Brands, livestock disease outbreaks, and goodwill and intangible impairment, given $10.7 billion of such assets.
What is the outlook for fiscal 2016?
Management expects net interest expense of approximately $255 million and capital spending of approximately $900 million in fiscal 2016. It anticipates Hillshire synergies and profit improvement will contribute more than $500 million in fiscal 2016. The Board raised the quarterly dividend to $0.15 per Class A share, payable December 15, 2015, and expects to increase annual dividends by approximately $0.10 per share beginning in fiscal 2017.
06—Continue