01—Abstract
Summary
Summary of the 10-K filed November 13, 2018. Cited figures are marked; the original filing is the authoritative source.
Tyson Foods, Inc. (NYSE: TSN) reported fiscal 2018 sales of $40.05 billiona, up from $38.26 billion in fiscal 2017, and operating income of $3.06 billion versus $2.93 billion.
Net income attributable to Tyson rose to $3.02 billionb, or $8.19 per diluted share, compared with $1.77 billion, or $4.79 per diluted share, the prior year. The result was driven largely by a $1.00 billion post-tax benefit from remeasuring deferred tax liabilities under the Tax Cuts and Jobs Act, which produced an effective tax rate of (10.3)%. Excluding that benefit, the filing shows operating income was pressured by a $109 million one-time cash bonus to frontline employees, a $68 million net impairment tied to non-protein divestitures, and $59 million of restructuring charges.
Segment results were mixed. Beef operating income rose to $1.01 billionc on sales of $15.47 billion, and Prepared Foods operating income increased to $868 million, helped by acquisitions and divestitures. Pork operating income fell to $361 million from $645 million on compressed margins, and Chicken operating income declined to $866 million from $1.05 billion as labor, freight and feed costs rose.
The company completed acquisitions of American Proteins, Tecumseh and Original Philly for about $1.5 billiond net of cash acquired, sold four non-protein businesses for net proceeds of $805 million, and agreed in August 2018 to buy Keystone Foods for $2.16 billion in cash, with closing expected in fiscal 2019. Balance sheet and liquidity indicators were stable. Total debt was $9.87 billion, net debt to EBITDA was 2.4x, and liquidity totaled $1.42 billion at year end.
Operating cash flow was $2.96 billion. The company disclosed that Tyson Limited Partnership controls approximately 70.96% of the total voting power, and that Walmart Inc. accounted for 17.3% of fiscal 2018 consolidated sales. The Board increased the quarterly dividend, with fiscal 2019 annual rates expected to be $1.50 per Class A share.
02—Key points
Key Highlights
- Fiscal 2018 sales rose to $40.05 billion from $38.26 billion, up 4.7% per the filing, with sales volume up 2.5% and average sales price up 2.1%.
- Net income attributable to Tyson was $3.02 billion, or $8.19 per diluted share, including a $1.00 billion post-tax tax benefit from the Tax Act remeasurement.
- Beef operating income increased to $1.01 billion (6.5% margin) and Prepared Foods operating income increased to $868 million (10.0% margin), while Pork and Chicken margins declined.
- Pork operating income fell to $361 million from $645 million, and Chicken operating income declined to $866 million from $1.05 billion amid higher labor, freight and feed costs.
- Acquired American Proteins, Tecumseh and Original Philly for about $1.5 billion net of cash acquired; sold four non-protein businesses for $805 million in net proceeds.
- Agreed to acquire Keystone Foods from Marfrig Global Foods for $2.16 billion in cash, expected to close in the first quarter or early second quarter of fiscal 2019.
- Net debt to EBITDA improved to 2.4x from 2.7x, total debt was $9.87 billion, and Tyson Limited Partnership holds about 70.96% of total voting power.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Tyson Foods kept $0.07.
- Revenue$40.05B100.0%
- Cost of revenue−$34.96B87.3%
- Gross profit$5.10B12.7%
- Operating costs−$2.13B5.3%
- Operating income$2.97B7.4%
- Interest, other & tax$1.0M0.0%
- Net income$2.97B7.4%
Where FY2018 revenue went
$40.05B- Cost of revenue: $34.96B, 87% of revenue
- Operating income: $2.97B, 7.4% of revenue
- R&D: $114.0M, 0.3% of revenue
- SG&A: $2.13B, 5.3% of revenue
Kept 7.4% as operating incomeOperating income $2.97B · 7.4%R&D $114.0M · 0.3%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed November 13, 2018Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $40.05B$38.26B | +4.7% |
| Cost of Revenue | $34.96B$33.18B | +5.4% |
| Gross Profit | $5.10B$5.06B | +0.7% |
| R&D Expenses | $114.00M$113.00M | +0.9% |
| SG&A Expenses | $2.13B$2.14B | −0.7% |
| Operating Income | $2.97B$2.92B | +1.6% |
| Net Income | $2.97B$1.77B | +67.4% |
| EPS (Diluted) | $8.04$4.79 | +67.8% |
| Shares Outstanding (Diluted) | 369.00M370.00M | −0.3% |
05—Questions
Frequently Asked Questions
How much of fiscal 2018 net income came from the tax law change?
The filing reports a $1,003 million post-tax benefit from remeasuring net deferred tax liabilities at lower enacted tax rates, which equals $2.71 per diluted share. Net income attributable to Tyson was $3,024 million, so this benefit accounted for a large portion of the year's earnings.
Why did Pork and Chicken operating income decline in fiscal 2018?
Pork operating income fell to $361 million from $645 million due to compressed margins from excess domestic pork availability, higher labor and freight costs, and a $12 million one-time bonus. Chicken operating income fell to $866 million from $1,053 million due to higher labor, freight and growout expenses, $103 million of higher feed ingredient costs, derivative losses, and a $51 million one-time bonus.
What is the significance of the Keystone Foods acquisition?
Tyson agreed in August 2018 to buy Keystone Foods from Marfrig Global Foods for $2.16 billion in cash. The filing describes it as a major supplier to the foodservice industry and a step in expanding value-added protein capabilities. Closing is expected in the first quarter or early second quarter of fiscal 2019, subject to regulatory approvals, and permanent financing is expected to combine senior notes, term loans, commercial paper and cash.
How concentrated is Tyson's customer base and ownership?
Walmart Inc. accounted for 17.3% of fiscal 2018 consolidated sales and 18.6% of net accounts receivable. The Tyson Limited Partnership and Tyson family members control approximately 70.96% of total voting power through Class B stock, which the filing notes can exert substantial influence over corporate matters.
What does the filing say about shareholder returns and dividends?
Class A dividends declared were $1.275 per share in fiscal 2018, up from $0.975. The Board increased the quarterly dividend to $0.375 per Class A share effective November 12, 2018, and the filing anticipates an annual fiscal 2019 rate of $1.50 for Class A shares. Share repurchases totaled $427 million in fiscal 2018, with 22.9 million shares remaining authorized.
06—Continue