Item 5. Market for Registrant’s Common Equity
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
We have issued and outstanding two classes of capital stock, Class A stock and Class B stock. Holders of Class B stock may convert such stock into Class A stock on a share-for-share basis. Holders of Class B stock are entitled to 10 votes per share and holders of Class A stock are entitled to one vote per share on matters submitted to shareholders for approval. As of October 31, 2020 , there were approximately 22,000 holders of record of our Class A stock and six holders of record of our Class B stock.
DIVIDENDS
Cash dividends cannot be paid to holders of Class B stock unless they are simultaneously paid to holders of Class A stock. The per share amount of the cash dividend paid to holders of Class B stock cannot exceed 90% of the cash dividend simultaneously paid to holders of Class A stock. In fiscal 2020, the annual dividend rate for Class A stock was $1.68 per share and the annual dividend rate for Class B stock was $1.51 per share. Effective November 13, 2020, the Board of Directors increased the quarterly dividend previously declared on August 6, 2020, to $0.445 per share on our Class A common stock and $0.4005 per share on our Class B common stock. The increased quarterly dividend is payable on December 15, 2020, to shareholders of record at the close of business on December 1, 2020. The Board also declared a quarterly dividend of $0.445 per share on our Class A common stock and $0.4005 per share on our Class B common stock, payable on March 15, 2021, to shareholders of record at the close of business on March 1, 2021. We anticipate the remaining quarterly dividends in fiscal 2021 will be $0.445 and $0.4005 per share of our Class A and Class B stock, respectively. This results in an annual dividend rate in fiscal 2021 of $1.78 for Class A shares and $1.602 for Class B shares, or a 6% increase compared to the fiscal 2020 annual dividend rate. We have paid uninterrupted quarterly dividends on common stock each year since 1977.
MARKET INFORMATION
Our Class A stock is traded on the New York Stock Exchange under the symbol “TSN.” No public trading market currently exists for our Class B stock.
ISSUER PURCHASES OF EQUITY SECURITIES
The table below provides information regarding our purchases of Class A stock during the periods indicated.
Period
Total
Number of
Shares
Purchased
Average
Price Paid
per Share
Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs (3)
Maximum Number of
Shares that May Yet Be
Purchased Under the Plans
or Programs (1)
Jun. 28, 2020 to July 25, 2020
36,636
$
59.14
—
18,851,028
Jul. 26, 2020 to Aug. 29, 2020
56,130
62.75
—
18,851,028
Aug. 30, 2020 to Oct. 3, 2020
31,214
62.78
—
18,851,028
Total
123,980
(2)
$
61.69
—
18,851,028
(1)
On February 7, 2003, we announced our Board of Directors approved a program to repurchase up to 25 million shares of Class A common stock from time to time in open market or privately negotiated transactions. On May 3, 2012, our Board of Directors approved an increase of 35 million shares, on January 30, 2014, our Board of Directors approved an increase of 25 million shares and, on February 4, 2016, our Board of Directors approved an increase of 50 million shares under the program. The program has no fixed or scheduled termination date.
(2)
We purchased 123,980 shares during the period that were not made pursuant to our previously announced stock repurchase program, but were purchased to fund certain Company obligations under our equity compensation plans. These transactions included 121,048 shares purchased in open market transactions and 2,932 shares withheld to cover required tax withholdings on the vesting of restricted stock.
(3)
Shares purchased during the period pursuant to our previously announced stock repurchase program.
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PERFORMANCE GRAPH
The following graph shows a five-year comparison of cumulative total returns for our Class A stock, the Standard & Poor’s ("S&P") 500 Index and our peer group of companies described below.
Fiscal Years Ended
10/3/15
10/1/16
9/30/17
9/29/18
9/28/19
10/3/20
Tyson Foods, Inc.
$
100.00
$
169.83
$
162.63
$
139.76
$
204.38
$
145.76
S&P 500 Index
100.00
115.43
136.92
161.43
166.51
191.87
Peer Group
100.00
113.16
112.81
114.29
133.93
137.65
The total cumulative return on investment (change in the year-end stock price plus reinvested dividends), which is based on the stock price or composite index at the end of fiscal 2015, is presented for each of the periods for the Company, the S&P 500 Index and our peer group. The complete list of our peer group includes: Archer-Daniels-Midland Company, Bunge Limited, Campbell Soup Company, ConAgra Foods, Inc., General Mills, Inc., Hormel Foods Corp., Kellogg Co., Kraft Heinz Company, Mondelez International Inc., PepsiCo, Inc., Pilgrim's Pride Corporation, The Coca-Cola Company, The Hershey Company and The J.M. Smucker Company. The graph compares the performance of the Company's Class A common stock with that of the S&P 500 Index and our peer group, with the return of each company in the peer group weighted on market capitalization. The stock price performance of the Company's Class A common stock shown in the above graph is not necessarily indicative of future stock price performance.
The information in this "Performance Graph" section shall not be deemed to be "soliciting material" or to be "filed" with the Securities and Exchange Commission or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Securities Exchange Act of 1934.
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ITEM 6. SELECTED FINANCIAL DATA
FIVE-YEAR FINANCIAL SUMMARY
in millions, except per share, percentage and ratio data
2020
2019
2018
2017
2016
Summary of Operations
Sales
$
43,185
$
42,405
$
40,052
$
38,260
$
36,881
Operating income
3,114
2,827
3,032
2,921
2,805
Net interest expense
475
451
343
272
243
Net income
2,150
2,035
3,027
1,778
1,772
Net income attributable to Tyson
2,140
2,022
3,024
1,774
1,768
Diluted net income per share attributable to Tyson:
Net income
5.86
5.52
8.19
4.79
4.53
Dividends declared per share:
Class A
1.725
1.575
1.275
0.975
0.650
Class B
1.553
1.418
1.148
0.878
0.585
Balance Sheet Data
Cash and cash equivalents
$
1,420
$
484
$
270
$
318
$
349
Total assets
34,741
33,097
29,109
28,066
22,373
Total gross debt
11,339
11,932
9,873
10,203
6,279
Shareholders’ equity
15,597
14,226
12,811
10,559
9,624
Other Key Financial Measures
Depreciation and amortization
$
1,192
$
1,098
$
943
$
761
$
705
Capital expenditures
1,199
1,259
1,200
1,069
695
EBITDA
4,423
3,968
4,021
3,648
3,538
Return on invested capital
12.2
%
11.8
%
14.1
%
16.2
%
17.9
%
Effective tax rate
22.4
%
16.3
%
(10.3
)%
32.3
%
31.8
%
Total debt to capitalization
42.1
%
45.6
%
43.5
%
49.1
%
39.5
%
Book value per share
$
42.83
$
38.95
$
35.09
$
28.72
$
25.67
Notes to Five-Year Financial Summary
a.
Fiscal 2020 net income included $116 million pretax gain from pension plan terminations, $75 million pretax restructuring and related charges and $65 million pretax income related to our accounting cycle resulting in a 53-week year in fiscal 2020. Additionally, in fiscal 2020, we adopted new guidance for leasing arrangements using the optional transition method, where prior periods were not restated. For further description, refer to Part II, Item 8, Notes to the Consolidated Financial Statements, Note 2: Changes in Accounting Principles.
b.
Fiscal 2019 net income included $105 million post tax income related to the recognition of previously unrecognized tax benefit, $55 million pretax gain on sale of an investment, $37 million pretax Keystone Foods purchase accounting and acquisition related costs, $41 million pretax impairment charge related to the planned divestiture of a business, $31 million pretax Beef production facility fire costs, $15 million pretax pension plan termination charge and $41 million pretax restructuring and related charges. Additionally, in fiscal 2019, we adopted accounting guidance related to net periodic pension and postretirement benefits. Accordingly, we retrospectively reduced prior periods operating income.
c.
Fiscal 2018 net income included $1,003 million post-tax recognition of tax benefit from remeasurement of net deferred tax liabilities at lower enacted tax rates, $109 million pretax one-time cash bonus to our hourly frontline team members, $68 million pretax impairment charge net of a realized gain related to the divestiture of non-protein businesses and $59 million pretax restructuring and related charges.
d.
Fiscal 2017 net income included $103 million pretax expense of AdvancePierre purchase accounting and acquisition related costs, pretax impairment charges of $52 million related to our San Diego Prepared Foods operation, $45 million related to the expected sale of a non-protein business and pretax restructuring and related charges of $150 million.
e.
Fiscal 2016 net income included $53 million post tax related to the recognition of previously unrecognized tax benefits and audit settlements. In fiscal 2016, we adopted new accounting guidance, retrospectively, requiring classification of debt issuance costs as a reduction of the carrying value of the debt. In doing so, $29 million of deferred issuance costs were reclassified from Other Assets to Long-Term Debt in our Consolidated Balance Sheets for fiscal 2016. This change is reflected above in total assets, total debt, total debt to capitalization and return on invested capital ratios.
f.
Return on invested capital is calculated by dividing operating income by the sum of the average of beginning and ending total debt and shareholders’ equity less cash and cash equivalents.
g.
For the total debt to capitalization calculation, capitalization is defined as total debt plus total shareholders’ equity.
h.
Book value per share is calculated by dividing shareholders’ equity by the sum of Class A and B shares outstanding and for fiscal 2016, the remaining minimum shares that were to be issued from our tangible equity units each period.
i.
"EBITDA" is a Non-GAAP measure and defined as net income less interest income, plus interest, taxes, depreciation and amortization. A reconciliation of net income to EBITDA immediately follows.
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EBITDA RECONCILIATIONS
A reconciliation of net income to EBITDA is as follows:
in millions, except ratio data
2020
2019
2018
2017
2016
Net income
$
2,150
$
2,035
$
3,027
$
1,778
$
1,772
Less: Interest income
(10
)
(11
)
(7
)
(7
)
(6
)
Add: Interest expense
485
462
350
279
249
Add: Income tax expense (benefit)
620
396
(282
)
850
826
Add: Depreciation
900
819
723
642
617
Add: Amortization (a)
278
267
210
106
80
EBITDA
$
4,423
$
3,968
$
4,021
$
3,648
$
3,538
Total gross debt
$
11,339
$
11,932
$
9,873
$
10,203
$
6,279
Less: Cash and cash equivalents
(1,420
)
(484
)
(270
)
(318
)
(349
)
Less: Short-term investments
—
(1
)
(1
)
(3
)
(4
)
Total net debt
$
9,919
$
11,447
$
9,602
$
9,882
$
5,926
Ratio Calculations:
Gross debt/EBITDA
2.6x
3.0x
2.5x
2.8x
1.8x
Net debt/EBITDA
2.2x
2.9x
2.4x
2.7x
1.7x
(a)
Excludes the amortization of debt issuance and debt discount expense of $14 million , $12 million , $10 million, $13 million and $8 million for fiscal 2020, 2019, 2018, 2017 and 2016, respectively, as it is included in Interest expense.
EBITDA is defined as net income before interest, income taxes, depreciation and amortization. Net debt to EBITDA represents the ratio of our debt, net of cash and short-term investments, to EBITDA. EBITDA and net debt to EBITDA are presented as supplemental financial measurements in the evaluation of our business. We believe the presentation of these financial measures helps investors to assess our operating performance from period to period, including our ability to generate earnings sufficient to service our debt, enhances understanding of our financial performance and highlights operational trends. These measures are widely used by investors and rating agencies in the valuation, comparison, rating and investment recommendations of companies; however, the measurements of EBITDA and net debt to EBITDA may not be comparable to those of other companies, which limits their usefulness as comparative measures. EBITDA and net debt to EBITDA are not measures required by or calculated in accordance with generally accepted accounting principles ("GAAP") and should not be considered as substitutes for net income or any other measure of financial performance reported in accordance with GAAP or as a measure of operating cash flow or liquidity. EBITDA is a useful tool for assessing, but is not a reliable indicator of, our ability to generate cash to service our debt obligations because certain of the items added to net income to determine EBITDA involve outlays of cash. As a result, actual cash available to service our debt obligations will be different from EBITDA. Investors should rely primarily on our GAAP results, and use non-GAAP financial measures only supplementally, in making investment decisions.
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