Tax rate changes boost Tyson Foods earnings, bonuses planned for ‘frontline’ workers

Selling chicken, beef, pork and prepared foods has been good business for Tyson Foods. So is the new federal tax law. Officials with the Springdale-based meat giant estimate a more than $300 million boost to cash flow from lower tax rates, with $100 million in bonuses going to “eligible frontline employees.”

Details on the impact of changes in the corporate tax rate recently approved by Congress were part of Tyson Foods’ Thursday morning (Feb. 8) report on its fiscal first quarter (ending Dec. 30, 2017) financials. The company reported quarterly earnings per share of $1.81, blowing past the consensus estimate among analysts of $1.50. Of the per share earnings, 21 cents was tied to gains from a lower tax rate. Earnings per share also topped the $1.59 posted in the same period in fiscal 2017.

The company posted first quarter net income of $1.632 billion, with $790 million of that resulted from the lower tax rate. The company reported net income of $594 million in the same quarter of fiscal 2017.

Revenue totaled $10.229 billion in the quarter, well ahead of the $9.182 billion in the 2017 fiscal quarter. The revenue also beat the consensus estimate of $9.87 billion.

“At Tyson Foods, we’re creating a modern food company focused on protein,” Tom Hayes, Tyson Foods president and CEO, said in the earnings report. “Building on our momentum from a record year in fiscal ’17, we’re off to a strong start in fiscal ’18. We delivered record adjusted EPS and our second-strongest quarter of operating income in Q1, with operating cash flows of more than $1.1 billion.”

IMPACT OF LOWER TAX RATE
The company estimates its new effective tax rate to be 24% in fiscal 2018 and 25% in fiscal 2019. The lower tax rate allowed the company to boost its full year earnings per share (EPS) guidance, with 85 cents per share estimated to be the tax benefit for fiscal year 2018.

“Including the benefit of lower enacted tax rates but excluding the one-time cash bonuses, Adjusted EPS guidance for fiscal 2018 is $6.55-$6.70, which represents an approximate 23-26% increase from fiscal 2017 Adjusted EPS,” the company noted in the report.

Hayes detailed in a note posted Thursday on Tyson’s website that more than 100,000 employees who do not receive an annual bonus will be eligible for a one-time cash bonus. Eligible full-time employees will receive $1,000, and part-time employees will receive $500.

In addition to the bonuses, the company also plans to use some of its tax savings on education and leadership programs for employees.

“For one, we’ll be increasing our investment in our Upward Academy program, an initiative that helps new workers with life skills, including English as a Second Language and General Educational Development (GED) classes,” Hayes noted.

SEGMENT PERFORMANCE
Of the company’s four segments, all posted sales gains in the quarter compared with the same quarter in fiscal 2017. Only the sales and prepared food segments posted operating income gains in the quarter. Sales and operating income from the 2017 acquisition of AdvancePierre are included in the chicken and prepared foods segments.

• Beef segment
First quarter fiscal 2018 sales: $3.886 billion
First quarter fiscal 2017 sales: $3.528 billion

First quarter fiscal 2018 operating income: $256 million
First quarter fiscal 2017 operating income: $299 million

• Chicken segment
First quarter fiscal 2018 sales: $2.997 billion
First quarter fiscal 2017 sales: $2.706 billion

First quarter fiscal 2018 operating income: $272 million
First quarter fiscal 2017 operating income: $263 million

• Pork segment
First quarter fiscal 2018 sales: $1.283 billion
First quarter fiscal 2017 sales: $1.252 billion

First quarter fiscal 2018 operating income: $151 million
First quarter fiscal 2017 operating income: $247 million

• Prepared Foods segment
First quarter fiscal 2018 sales: $2.292 billion
First quarter fiscal 2017 sales: $1.895 billion

First quarter fiscal 2018 operating income: $261 million
First quarter fiscal 2017 operating income: $190 million

Talk Business & Politics will have more later today on the company’s activities in the first quarter and future guidance.