01—Abstract
Summary
Summary of the 10-K/A filed February 11, 2021. Cited figures are marked; the original filing is the authoritative source.
Tyson Foods, Inc. filed this Amendment on Form 10-K/A to restate Items 6, 7, 8 and 9A of its fiscal 2020 annual report (year ended October 3, 2020).
The restatement corrects an overstatement of live cattle inventory caused by misappropriation of Company funds by one cattle supplier, which made misrepresentations about the number of cattle it purchased for the Beef segment. The misstatement covered fiscal years 2017 through 2020 and is isolated to the Beef segment. The Company revised inventory down by $285 milliona as of October 3, 2020 and by $179 million as of September 28, 2019, and increased selling, general and administrative expense by $106 million for fiscal 2020.
Revised fiscal 2020 net income attributable to Tyson is $2,061 millionb, compared with $2,140 million as originally reported, and diluted net income per share is $5.64, compared with $5.86 as originally reported. Management now concludes that internal control over financial reporting was not effective as of October 3, 2020, because of a material weakness in controls over the existence of live cattle inventory. Disclosure controls were also concluded to be not effective for the same reason.
The Company describes remediation steps, including physical verification of live cattle on third-party feedyards and training on the reconciliation and review control. PricewaterhouseCoopers LLP's report was updated to reflect the restatement and an adverse opinion on internal control.
Underlying operations reported in the filing include sales of $43.2 billionc, operating income of $3,008 million, net cash provided by operating activities of $3,874 million, total liquidity of $3.2 billion and a net debt to EBITDA ratio of 2.3x. The filing also notes that COVID-19 increased costs, lowered volumes and reduced margins, particularly in the Chicken segment, which reported a 0.9% operating margin.
02—Key points
Key Highlights
- Restatement of inventory: live cattle inventory was overstated by $285 million at October 3, 2020 and $179 million at September 28, 2019, due to a cattle supplier's misappropriation of Company funds.
- Restated fiscal 2020 net income attributable to Tyson is $2,061 million versus $2,140 million as originally reported; diluted EPS is $5.64 versus $5.86 as originally reported.
- Fiscal 2020 SG&A was understated by $106 million in the original filing, which lowered operating income to $3,008 million on a revised basis.
- Material weakness: management concluded internal control over financial reporting was not effective as of October 3, 2020, and the auditor's opinion on internal control was revised accordingly.
- Cattle supplier losses were $106 million in fiscal 2020 and $57 million in fiscal 2019, recorded in the Beef segment results.
- Fiscal 2020 results: sales of $43,185 million, operating income of $3,008 million, operating cash flow of $3,874 million and total liquidity of $3,170 million.
- Segment operating margins for fiscal 2020 were Beef 10.0%, Pork 11.0%, Chicken 0.9% and Prepared Foods 8.7%.
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-K/AFY2020filed February 11, 2021Financial 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
What caused the restatement?
A cattle supplier misappropriated Company funds and misrepresented the number of cattle it purchased on Tyson's behalf for the Beef segment. This caused live cattle inventory to be overstated for fiscal years and interim periods from 2017 through 2020. The Company determined the misstatement was isolated to the Beef segment and to this supplier.
How much did the restatement change reported earnings?
For fiscal 2020, net income attributable to Tyson was revised to $2,061 million from $2,140 million as originally reported, and diluted net income per share was revised to $5.64 from $5.86. For fiscal 2019, net income attributable to Tyson was revised to $1,980 million from $2,022 million.
Did the material weakness change the conclusion on internal controls?
Yes. The original Form 10-K stated internal control over financial reporting was effective as of October 3, 2020. Management has now concluded that a material weakness existed, related to controls over the existence of live cattle inventory, and that internal control was not effective. Disclosure controls were also concluded not effective solely because of this weakness.
What remediation has the Company announced?
Under oversight of the Audit Committee, the Company is implementing a control requiring inspection and physical verification of live cattle on third-party feedyards, and training on the key control for reconciling and reviewing live cattle inventory, including review based on defined thresholds.
06—Continue