Tyson Foods, Inc. — Fiscal 2024 Second-Quarter 10-Q
Reporting period: Three months ended March 30, 2024; comparisons are with the three months ended April 1, 2023. Six-month figures cover the first half of fiscal 2024. Dollar amounts are in millions unless otherwise noted.
Financial performance
| Metric | Q2 FY2024 | Q2 FY2023 | Six months FY2024 | Six months FY2023 |
|---|---|---|---|---|
| Sales | $13,072 | $13,133 | $26,391 | $26,393 |
| Gross profit | $866 | $527 | $1,689 | $1,495 |
| Operating income (loss) | $312 | $(49) | $543 | $418 |
| Net income (loss) attributable to Tyson | $145 | $(97) | $252 | $219 |
| Diluted earnings (loss) per share | $0.41 | $(0.28) | $0.71 | $0.61 |
| Gross margin | 6.6% | 4.0% | 6.4% | 5.7% |
| Operating margin | 2.4% | (0.4)% | 2.1% | 1.6% |
Quarterly sales fell 0.5%; higher average prices were more than offset by lower volume. First-half sales were essentially flat. Q2 improvement reflected stronger Chicken and Pork results, partially offset by Beef and Prepared Foods.
Segments and operating drivers
- Chicken: Q2 operating income was $158 million, versus a $258 million loss a year earlier; first-half income was $335 million, versus a $189 million loss. Lower feed costs and improved operational efficiencies supported the recovery, partly offset by lower selling prices and derivative losses.
- Beef: Q2 operating loss was $35 million; first-half loss was $241 million versus income of $166 million a year earlier. Limited cattle supply and higher cattle costs compressed margins.
- Pork: Q2 operating loss narrowed to $1 million from $33 million; first-half operating income was $38 million versus a $54 million loss, reflecting improved margins.
- Prepared Foods: Q2 operating income was $230 million, down from $241 million; first-half income was $473 million, down from $499 million. Lower pricing was largely offset by reduced raw-material costs.
Cash flow, liquidity and debt
- First-half cash provided by operations was $1,177 million, up from $769 million. Capital expenditures were $621 million, compared with $1,097 million; cash used in investing was $621 million.
- Cash and cash equivalents were $2,182 million at March 30, 2024, up from $573 million at September 30, 2023. Reported liquidity was $4,448 million, including $2,250 million available on the revolving facility; the company had no commercial paper outstanding. The current ratio was 1.8, up from 1.3.
- Total debt was $10,960 million, versus $9,506 million at fiscal year-end; current debt was $1,315 million and long-term debt $9,645 million. The company was compliant with debt covenants.
- In March, Tyson issued $1.5 billion of senior notes: $600 million due 2029 at 5.40% and $900 million due 2034 at 5.70%. It used part of the proceeds to repay $250 million of a term loan and expects to use the remainder to retire its August 2024 notes.
- First-half dividends paid were $342 million. The company repurchased $31 million of shares to fund equity-plan obligations and made no repurchases under its public program during the period.
Outlook, unusual items and risks
- Management expects fiscal 2024 capital expenditures of $1.2–$1.4 billion and net interest expense of approximately $400 million. It said current liquidity and capital resources should be sufficient; no full-year earnings or revenue guidance is provided in the supplied filing text.
- First-half operating results included $114 million of plant-closure costs, $80 million related to a Netherlands facility fire and planned asset discontinuance, $73 million of legal contingency accruals and $31 million of restructuring charges, partly offset by $24 million of fire-insurance proceeds. Q2 included $39 million of plant-closure costs and $54 million of Netherlands-related costs.
- The company closed six Chicken facilities and two Beef case-ready plants; it expects to cease operations at a Perry, Iowa Pork facility in fiscal Q3. A new poultry grower-contract rule led to recognition of a $72 million right-of-use asset and corresponding lease liability.
- Management cited tight cattle supply and uncertainty over herd rebuilding, commodity and feed-price volatility, elevated interest rates, international conflict and foreign-market uncertainty. Several reporting units and brands have limited fair-value cushions; goodwill and indefinite-lived intangible assets could face impairment if assumptions or operating outlook weaken.
- Legal matters include antitrust and wage-rate litigation and government investigations. Recorded accruals include $103 million for broiler antitrust matters and $60 million for wage-rate litigation; a proposed $72.5 million settlement of a separate beef/pork wage case remains subject to court approval and is accrued. The company also disputes a Mexican tax assessment of approximately $528 million and has recorded no liability for it.
Most important facts for investors to verify
- Whether Chicken’s improved margins persist and whether Beef losses deepen as cattle remain scarce and costly.
- Progress and cash costs of facility closures, the Netherlands asset decision, and the expected retirement of the August 2024 notes.
- Whether litigation settlements, legal accruals or the Mexican tax dispute result in additional cash payments or liabilities.
- Whether management achieves its $1.2–$1.4 billion capital-spending plan and approximately $400 million net-interest expectation.
- How assumptions affecting goodwill and brand valuations change, particularly for the identified higher-risk reporting units and intangibles.