01—Abstract
Summary
Summary of the 10-Q filed February 5, 2024. Cited figures are marked; the original filing is the authoritative source.
Tyson Foods reported sales of $13.32 billiona for the first quarter of fiscal 2024 ended December 30, 2023, up slightly from $13.26 billion a year earlier.
Average sales prices rose and volumes were essentially flat. Operating income fell to $231 millionb from $467 million, which the filing describes as down 51%. The decline was driven mainly by the Beef segment, which posted an operating loss of $206 million compared with operating income of $166 million a year earlier.
The filing cites a $575 millionc increase in cattle costs, $40 million of plant closure costs, a $45 million legal contingency accrual and a $56 million inventory lower of cost or net realizable value adjustment in Beef. Pork and Chicken operating income improved, and Chicken benefited from a $170 million reduction in feed ingredient costs. Net income attributable to Tyson was $107 million, or $0.30 per diluted share, compared with $316 million, or $0.88 per diluted share.
The company's first-quarter results also included $75 milliond of plant closure charges, $73 million of legal contingency accruals and $30 million of restructuring and related charges. Cash provided by operating activities increased to $1.30 billion from $762 million, primarily due to lower annual incentive payments and reductions in inventory and accounts receivable. Cash and cash equivalents rose to $1.48 billion from $573 million at fiscal year-end, after the company borrowed $750 million under a new term loan due May 2028 and repaid $592 million of commercial paper.
Total liquidity was $3.75 billion at December 30, 2023, and total debt was $9.68 billion. The company expects fiscal 2024 capital expenditures between $1 billion and $1.5 billion and net interest expense of about $400 million. Litigation remains a significant factor.
The company recorded a $72.5 million accrual for a proposed settlement of wage-related class claims, which remains subject to court approval. The filing also describes ongoing broiler, pork and beef antitrust matters and a Mexican tax assessment of approximately $516 million, for which no liability has been recorded because the company believes the assertions have no merit.
02—Key points
Key Highlights
- Sales were $13.32 billion, up 0.4% from $13.26 billion, with flat volumes and higher average sales prices driven by Beef.
- Operating income declined to $231 million from $467 million, down 51%, with an overall operating margin of 1.7%.
- Beef posted an operating loss of $206 million, a margin of (4.1)%, reflecting higher cattle costs, a $45 million legal contingency accrual, $40 million of plant closure costs and a $56 million inventory write-down.
- Pork (operating margin 2.6%) and Chicken (operating margin 4.4%) improved year over year, with Chicken benefiting from a $170 million reduction in feed ingredient costs.
- Net income attributable to Tyson was $107 million, or $0.30 per diluted share, versus $0.88 per diluted share a year earlier.
- Cash from operating activities rose to $1.30 billion from $762 million, and cash and cash equivalents ended the quarter at $1.48 billion.
- Total liquidity was $3.75 billion, with total debt of $9.68 billion, and the company expects fiscal 2024 capital expenditures of $1 billion to $1.5 billion.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2024, Tyson Foods kept $0.01.
- Revenue$13.32B100.0%
- Cost of revenue−$12.50B93.8%
- Gross profit$823.0M6.2%
- Operating costs−$592.0M4.4%
- Operating income$231.0M1.7%
- Interest, other & tax−$124.0M0.9%
- Net income$107.0M0.8%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed February 5, 2024Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $13.32B$13.26B | +0.4% |
| Cost of Revenue | $12.50B$12.29B | +1.7% |
| Gross Profit | $823.00M$968.00M | −15.0% |
| SG&A Expenses | $592.00M$501.00M | +18.2% |
| Operating Income | $231.00M$467.00M | −50.5% |
| Interest Expense | $105.00M$84.00M | +25.0% |
| Net Income | $107.00M$316.00M | −66.1% |
| EPS (Diluted) | $0.30$0.88 | −65.9% |
| Shares Outstanding (Diluted) | 355.00M358.00M | −0.8% |
05—Questions
Frequently Asked Questions
Why did operating income fall so sharply this quarter?
The decline was driven mainly by the Beef segment, which swung to an operating loss of $206 million from operating income of $166 million a year earlier. The filing attributes this to compressed beef margins, including an approximately $575 million increase in cattle costs, along with a $56 million inventory lower of cost or net realizable value adjustment, a $45 million legal contingency accrual and $40 million of plant closure costs. Company-wide, the quarter also included $75 million of plant closure charges, $73 million of legal contingency accruals and $30 million of restructuring charges.
Which segments performed better than last year?
Pork swung to operating income of $39 million from an operating loss of $21 million, driven by improved pork margins and partly offset by a $28 million legal contingency accrual. Chicken operating income rose to $177 million from $69 million, due to improved operational efficiencies and a $170 million reduction in feed ingredient costs, partly offset by lower average sales prices and $35 million of plant closure charges. Prepared Foods operating income declined to $243 million from $258 million.
How is the company funding its operations and debt obligations?
The company borrowed the full $750 million available under a term loan due May 2028 and used it to repay $592 million of commercial paper. Cash and cash equivalents rose to $1.48 billion, and the company had $2.25 billion available under its revolving credit facility and no commercial paper outstanding at December 30, 2023. Current debt was $1.31 billion, which management intends to repay with operating cash flow and other liquidity sources. The company stated it was in compliance with all debt covenants.
What legal risks are highlighted in the filing?
The company recorded a $72.5 million accrual for a proposed settlement of a wage-related class action, which remains subject to court approval. The filing also describes ongoing broiler, pork and beef antitrust litigation and related government investigations, including a Department of Justice investigation into broiler chicken grower contracts. In addition, the company received a Mexican tax assessment of approximately $516 million, which it believes has no merit and for which it has not recorded a liability.
06—Continue