01—Abstract
Summary
Summary of the 10-K filed November 12, 2019. Cited figures are marked; the original filing is the authoritative source.
Tyson Foods, Inc. (NYSE: TSN) reported fiscal 2019 sales of $42.41 billiona, up from $40.05 billion in fiscal 2018, driven mainly by acquisitions and higher average sales prices in the Beef and Prepared Foods segments.
Operating income declined to $2.83 billionb from $3.03 billion, as record Beef segment results were offset by lower operating income in the Chicken and Pork segments. Net income attributable to Tyson was $2.02 billion, or $5.52 per diluted share, compared with $3.02 billion, or $8.19 per diluted share, in fiscal 2018, which included a $1.00 billion post-tax benefit from the Tax Cuts and Jobs Act remeasurement of deferred tax liabilities. During fiscal 2019 the company acquired Keystone Foods and the Thai and European operations of BRF S.A. for approximately $2.5 billion net of cash acquired.
Total debt rose to $11.93 billionc from $9.87 billion, and total debt to capitalization was 45.6%. Net debt to EBITDA increased to 2.9x from 2.4x. Operating cash flow was $2.51 billion, capital expenditures were $1.26 billion, and fiscal 2020 capital spending is expected to be about $1.3 billion.
Liquidity was $1.2 billiond at fiscal year-end. The filing highlights concentration and legal exposure. Walmart Inc. accounted for 16.9% of fiscal 2019 consolidated sales, and the Tyson Limited Partnership controls approximately 70.97% of total voting power.
The company faces several antitrust class actions in its chicken, pork and beef businesses, including a Department of Justice grand jury subpoena related to the broiler chicken litigation. The Board also raised the quarterly dividend to $0.42 per Class A share, which the filing describes as a 12% increase in the annual fiscal 2020 dividend rate compared with fiscal 2019.
02—Key points
Key Highlights
- Sales rose to $42.41 billion from $40.05 billion, with sales volume up 8.8% and average sales price down 3.0%, and acquisitions contributing a net increase of $2.21 billion.
- Operating income fell to $2.83 billion from $3.03 billion; Beef reached $1.11 billion, while Chicken declined to $621 million from $866 million and Pork to $263 million from $361 million.
- Net income attributable to Tyson was $2.02 billion ($5.52 per diluted share), down from $3.02 billion ($8.19 per diluted share) in fiscal 2018, which included a $1.00 billion tax benefit.
- Total debt increased to $11.93 billion from $9.87 billion after issuing $1.8 billion of 2026 and 2029 notes and reopening the 2048 notes to fund the Keystone Foods and Thai and European acquisitions.
- Operating cash flow was $2.51 billion, against capital expenditures of $1.26 billion; fiscal 2020 capital spending is expected to approximate $1.3 billion.
- Walmart Inc. represented 16.9% of fiscal 2019 consolidated sales, and the Tyson Limited Partnership holds approximately 70.97% of total voting power.
- The quarterly dividend was increased to $0.42 per Class A share, with the fiscal 2020 annual rate expected to be $1.68, a 12% increase over fiscal 2019.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, Tyson Foods kept $0.05.
- Revenue$42.41B100.0%
- Cost of revenue−$37.38B88.2%
- Gross profit$5.02B11.8%
- Operating costs−$2.25B5.3%
- Operating income$2.77B6.5%
- Interest, other & tax−$790.0M1.9%
- Net income$1.98B4.7%
Where FY2019 revenue went
$42.41B- Cost of revenue: $37.38B, 88% of revenue
- Net income: $1.98B, 4.7% of revenue
- R&D: $97.0M, 0.2% of revenue
- SG&A: $2.25B, 5.3% of revenue
- Interest, other & tax: $790.0M, 1.9% of revenue
Kept 4.7% as net incomeNet income $1.98B · 4.7%R&D $97.0M · 0.2%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed November 12, 2019Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $42.41B$40.05B | +5.9% |
| Cost of Revenue | $37.38B$34.96B | +6.9% |
| Gross Profit | $5.02B$5.10B | −1.5% |
| R&D Expenses | $97.00M$114.00M | −14.9% |
| SG&A Expenses | $2.25B$2.13B | +5.9% |
| Operating Income | $2.77B$2.97B | −6.7% |
| Net Income | $1.98B$2.97B | −33.3% |
| EPS (Diluted) | $5.40$8.04 | −32.8% |
| Shares Outstanding (Diluted) | 366.00M369.00M | −0.8% |
05—Questions
Frequently Asked Questions
Why did operating income decline in fiscal 2019 even though sales grew?
The filing attributes the decline to lower operating income in the Chicken and Pork segments. Chicken faced challenging pricing from increased domestic supply, with average sales price down 9.3%, and Pork faced compressed margins as livestock costs rose faster than prices. Beef's record results only partly offset these declines. Company-level results also included a $41 million impairment tied to a planned divestiture, $41 million of restructuring charges, $37 million of Keystone Foods acquisition costs and $31 million of costs from a Beef plant fire.
How much did the company's debt and leverage increase?
Total gross debt rose to $11.93 billion at September 28, 2019, from $9.87 billion a year earlier. Net debt to EBITDA increased to 2.9x from 2.4x, and total debt to capitalization was 45.6%, compared with 43.5% in fiscal 2018. The filing attributes the increase to debt issued for business acquisitions and higher interest rates. The company says it was in compliance with all debt covenants at year end.
What are the main legal risks disclosed in the filing?
The filing discloses multiple antitrust class actions covering broiler chicken, pork and beef, including In re Broiler Chicken Antitrust Litigation, which the company says is subject to a U.S. Department of Justice grand jury subpoena. It also describes a wage-related antitrust suit filed in August 2019, an environmental matter at the Hanceville, Alabama rendering facility involving a fish kill and related suits, and a Korean criminal prosecution of a Keystone Foods subsidiary. The company states it believes it has substantial defenses and intends to vigorously defend these matters.
Who controls the company and what does that mean for shareholders?
The Tyson Limited Partnership owns 99.985% of the Class B common stock, and together with Tyson family members holds about 2.15% of Class A stock. Through these holdings the partnership controls approximately 70.97% of total voting power. The filing states this concentration of ownership could delay or prevent a change in control favored by other shareholders and could depress the stock price. As a result, the company is eligible for controlled company exemptions from certain New York Stock Exchange governance requirements.
What is the company's dividend outlook?
The Board increased the quarterly dividend to $0.42 per Class A share and $0.378 per Class B share, effective November 11, 2019, payable December 13, 2019. The company expects the annual fiscal 2020 dividend rate to be $1.68 for Class A and $1.512 for Class B, a 12% increase over fiscal 2019. Management also expects annual dividends to increase by about $0.10 per share per year, although the filing notes that the timing and amount remain at the Board's sole discretion.
06—Continue