01—Abstract
Summary
Summary of the 10-K filed November 16, 2020. Cited figures are marked; the original filing is the authoritative source.
Tyson Foods, Inc. (NYSE: TSN) reported fiscal 2020, a 53-week year ended October 3, 2020, with sales of $43.19 billiona, up from $42.41 billion in fiscal 2019, and operating income of $3.11 billion versus $2.83 billion.
Net income attributable to Tyson was $2.14 billionb, or $5.86 per diluted share, compared with $2.02 billion, or $5.52, a year earlier. Results were helped by strong Beef and Pork segment operating income of $1.69 billion and $565 million, while Chicken operating income fell to $122 million from $621 million. The company cited COVID-19 as an adverse factor, with direct incremental expenses of approximately $540 million, slowdowns and idling of production facilities, and a shift in demand from foodservice to retail.
Cash flow and balance sheet metrics were stronger. Net cash provided by operating activities was $3.87 billionc, compared with $2.51 billion, and cash and cash equivalents rose to $1.42 billion. Net debt to EBITDA improved to 2.2x from 2.9x, and total liquidity was $3.17 billion.
The company also reported goodwill of $3,266 milliond for its Domestic Chicken reporting unit, and management stated that this unit would have failed the quantitative impairment test had fiscal 2020 operating margins been used as the long-term assumption. Tyson Limited Partnership controls approximately 71.06% of total voting power. For fiscal 2021, the company guided to net interest expense of about $440 million and capital spending of $1.2 billion to $1.4 billion, and it announced a quarterly dividend increase to $0.445 per Class A share, an annual rate of $1.78, which the filing describes as a 6% increase over fiscal 2020.
02—Key points
Key Highlights
- Sales rose to $43.19 billion in fiscal 2020 from $42.41 billion, and diluted EPS was $5.86 versus $5.52, with the 53rd week contributing $65 million of pretax income.
- Beef operating income increased to $1.69 billion from $1.11 billion, with an operating margin of 10.7%, while Pork operating income rose to $565 million from $263 million.
- Chicken operating income fell to $122 million from $621 million, with an operating margin of 0.9% versus 4.7%, as market conditions, unfavorable product mix and COVID-19 costs weighed on results.
- COVID-19 caused direct incremental expenses of approximately $540 million in fiscal 2020, and the company reported slowdowns, temporary idling of facilities, and a shift from foodservice to retail demand.
- Operating cash flow was $3.87 billion, net debt to EBITDA improved to 2.2x from 2.9x, and liquidity totaled $3.17 billion at October 3, 2020.
- Goodwill and indefinite-lived intangibles totaled $15.0 billion, about 43% of total assets, and the Domestic Chicken reporting unit's $3,266 million of goodwill would have failed the quantitative test under fiscal 2020 margins.
- Walmart Inc. accounted for 18.7% of fiscal 2020 consolidated sales, and the Tyson Limited Partnership controls approximately 71.06% of total voting power.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2020, Tyson Foods kept $0.05.
- Revenue$43.19B100.0%
- Cost of revenue−$37.80B87.5%
- Gross profit$5.38B12.5%
- Operating costs−$2.38B5.5%
- Operating income$3.01B7.0%
- Interest, other & tax−$947.0M2.2%
- Net income$2.06B4.8%
Where FY2020 revenue went
$43.19B- Cost of revenue: $37.80B, 88% of revenue
- Net income: $2.06B, 4.8% of revenue
- R&D: $98.0M, 0.2% of revenue
- SG&A: $2.38B, 5.5% of revenue
- Interest, other & tax: $947.0M, 2.2% of revenue
Kept 4.8% as net incomeNet income $2.06B · 4.8%R&D $98.0M · 0.2%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed November 16, 2020Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $43.19B$42.41B | +1.8% |
| Cost of Revenue | $37.80B$37.38B | +1.1% |
| Gross Profit | $5.38B$5.02B | +7.2% |
| R&D Expenses | $98.00M$97.00M | +1.0% |
| SG&A Expenses | $2.38B$2.25B | +5.5% |
| Operating Income | $3.01B$2.77B | +8.6% |
| Net Income | $2.06B$1.98B | +4.1% |
| EPS (Diluted) | $5.64$5.40 | +4.4% |
| Shares Outstanding (Diluted) | 365.00M366.00M | −0.3% |
05—Questions
Frequently Asked Questions
How did Tyson's segments perform in fiscal 2020?
Beef and Pork delivered the strongest results, with Beef operating income of $1.69 billion on sales of $15.74 billion and Pork operating income of $565 million on sales of $5.13 billion. Chicken operating income declined to $122 million on sales of $13.23 billion, and Prepared Foods operating income fell to $743 million from $843 million.
What was the financial impact of COVID-19 on Tyson in fiscal 2020?
Tyson reported direct incremental COVID-19 expenses of approximately $540 million, including about $114 million of thank-you bonuses to frontline team members. The company also experienced facility slowdowns, temporary idling, absenteeism, and lower sales volumes in the back half of the year, and it said these effects would likely continue into fiscal 2021.
How strong is Tyson's balance sheet and liquidity?
At October 3, 2020, Tyson had cash and cash equivalents of $1.42 billion, total liquidity of $3.17 billion, and total debt of $11.34 billion. Net debt to EBITDA was 2.2x, down from 2.9x, and the company was in compliance with all debt covenants.
What did Tyson say about its outlook and dividends?
The company expects net interest expense of about $440 million and capital expenditures of $1.2 billion to $1.4 billion in fiscal 2021. The Board increased the quarterly dividend to $0.445 per Class A share, which the filing states would produce an annual rate of $1.78 in fiscal 2021, a 6% increase over fiscal 2020.
What are the key governance and concentration risks for investors?
The Tyson Limited Partnership controls approximately 71.06% of total voting power, which allows the family partners to exert substantial influence over the company. Walmart Inc. accounted for 18.7% of fiscal 2020 consolidated sales, and the loss of this or another large customer could have a material impact.
06—Continue