WASHINGTON, May 8, 2017 - Tyson Foods stock took a tumble today after the company said its net income for the quarter ending April 1 was down 21 percent from a year ago and also revealed it was being investigated by the state of Florida for possible anticompetitive practices.
In a filing with the Securities and Exchange Commission, Tyson said the Florida Attorney General’s office is looking into “possible anticompetitive conduct in connection with the Georgia Dock, a chicken products pricing index formerly published by the Georgia Department of Agriculture.”
Tyson said the AG’s office had sent a civil investigative demand to the company on March 1. That was in addition to a Jan. 20 subpoena from the SEC, which Tyson has already disclosed. The company said in its SEC filing that it believes the SEC subpoena is related to pending antitrust litigation.
Lawsuits filed by food distributors against Tyson and other major chicken producers allege they colluded to manipulate and artificially inflate prices on the widely used index, which the Georgia Department of Agriculture stopped publishing in November.
"Plaintiffs allege that beginning in 2008, broiler chicken producers coordinated their efforts to artificially reduce the supply of broiler chickens for sale in the United States, knowing that those supply reductions would increase prices," according to a website operated by plaintiffs' attorneys. "Defendants coordinated their supply reductions by sharing confidential production information with one another, closing plants, exporting hatching eggs, and destroying their breeder hens," practices that increased prices 50 percent.
Tyson has denied the allegations. CEO Tom Hayes called them "baseless" in an interview with CNBC in February, and in court documents, Tyson says production actually increased during the time plaintiffs claim it declined.
Tyson’s second-quarter report showed net income of $340 million, a decline from last year’s figure of $432 million. The stock fell from the opening price of about $62 per share to $59.48 at close of trading – a 6 percent drop.
In the first six months of its fiscal year, Tyson’s net income was $933 million, compared to $893 million for the year-ago period – a 4.5 percent increase.
“We concluded a record first half in fiscal 2017, and we're off to a strong start in the second half,” Tyson CEO Tom Hayes said on a conference call with analysts.
Fires at Tyson chicken plants in Georgia and Mississippi negatively affected operating income, the company said. "Had it not been for the fires, our chicken segment return on sales would have been within its normalized range,” Hayes said in a statement. Instead, operating income for the company’s chicken segment fell from $347 million in the second quarter of 2016 to $233 million this year.
Tyson said its beef and pork segments “generated tremendous operating income in the second quarter.” Operating income for beef increased from $46 million to $126 million from the year-ago period, while pork was stable at $141 million, up $1 million from the same quarter in 2016. Quarterly operating income for the prepared foods segment was down from $197 million in 2016 to $87 million this year.
Tyson announced on April 25 it would acquire AdvancePierre Foods Holdings Inc. for $3.2 billion. AdvancePierre is “a leading national producer and distributor of sandwiches, sandwich components and other entrées and snacks,” according to the company.
Tyson said in the SEC filing that it expected the acquisition would increase revenues by $1.7 billion in fiscal 2018. Tyson also said it expected to realize cost synergies of approximately $200 million within three years by combining its prepared foods business with AdvancePierre.
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