THE YEAR IN REVIEW
Tyson Foods, Inc.
Eleven-Year Financial Summary Page 20
Management Discussion and Analysis Page 22
Consolidated Statements of Operations Page 27
Consolidated Balance Sheets Page 28
Consolidated Statements of Shareholders' Equity Page 30
Consolidated Statements of Cash Flows Page 32
Notes to Consolidated Financial Statements Page 33
Report of Management Page 43
Report of Independent Auditors Page 44
Directors and Officers Page 45
Corporate Information Page 46
Corporate Recognition and Awards Page 47
74 (19)
Tyson Foods, Inc.
ELEVEN-YEAR FINANCIAL SUMMARY
(In thousands except per share data)
- -------------------------------------------------------------------------------
For Fiscal Year End 1994 1993 1992 1991
- ------------------------------------------------------------------------------
Sales $5,110,270 $4,707,396 $4,168,840 $3,922,054
Cost of Sales 4,149,050 3,796,539 3,390,343 3,147,475
- ------------------------------------------------------------------------------
Gross Margin 961,220 910,857 778,497 774,579
Operating Expenses 766,028 535,315 446,825 441,379
Interest Expense 86,063 72,811 76,887 95,459
Other Expense (Income) (9,488) (6,904) (6,254) (4,782)
- ------------------------------------------------------------------------------
Income Before Taxes on Income 118,617 309,635 261,039 242,523
Provision for Income Taxes 120,745 129,301 100,505 97,025
- ------------------------------------------------------------------------------
Net Income (Loss) $ (2,128) $ 180,334 $ 160,534 $ 145,498
- ------------------------------------------------------------------------------
Earnings Per Share Before
Special Charges $ 1.37 $ 1.22 $ 1.16 $ 1.05
Special Charges Per Share $ (1.38)
Earnings (Loss) Per Share $ (0.01) $ 1.22 $ 1.16 $ 1.05
Dividends Per Share:
Class A $ .0700 $ .0400 $ .0400 $ .0300
Class B $ .0583 $ .0333 $ .0333 $ .0250
- ------------------------------------------------------------------------------
At Fiscal Year End
- ------------------------------------------------------------------------------
Total Assets $3,668,000 $3,253,504 $2,617,679 $2,645,751
Net Property, Plant
and Equipment 1,609,997 1,435,298 1,142,187 1,161,952
Capital Expenditures 232,108 225,305 107,990 213,576
Working Capital 721,484 285,050 214,070 111,930
Long-Term Debt 1,381,481 920,465 726,515 845,914
Shareholders' Equity 1,289,423 1,360,746 980,189 822,491
Book Value Per Share $ 8.88 $ 9.24 $ 7.13 $ 5.99
- ------------------------------------------------------------------------------
Ratios
- ------------------------------------------------------------------------------
Current 233.66% 154.12% 145.96% 120.35%
Long-Term Debt
to Capitalization 51.72% 40.35% 42.57% 50.70%
Gross Margin 18.81% 19.35% 18.67% 19.75%
Return on Sales 3.97%* 3.83% 3.85% 3.71%
Annual Sales Growth 8.56% 12.92% 6.29% 2.53%
Five Year Compounded
Annual Sales Growth 15.02% 19.45% 18.48% 21.13%
Return on Average
Quarterly Equity 14.08%* 14.65% 17.92% 19.76%
Five Year Return on
Average Quarterly Equity 16.73%* 18.60% 21.34% 23.48%
- ------------------------------------------------------------------------------
* Before special charges.
75 (20)
- ------------------------------------------------------------------------------
1990 1989 1988 1987 1986 1985 1984
- ------------------------------------------------------------------------------
$3,825,274 $2,538,244 $1,935,960 $1,785,969 $1,503,719 $1,135,712 $750,112
3,081,739 2,056,085 1,627,598 1,483,004 1,271,928 954,425 651,901
- ------------------------------------------------------------------------------
743,535 482,159 308,362 302,965 231,791 181,287 98,211
423,422 271,496 183,985 156,773 116,639 92,264 54,954
128,561 45,001 19,490 22,925 20,648 19,446 11,029
(8,517) 2,117 484 59 (3,410) (591) (452)
- ------------------------------------------------------------------------------
200,069 163,545 104,403 123,208 97,914 70,168 32,680
80,054 62,965 22,969 55,444 47,625 35,337 14,516
- ------------------------------------------------------------------------------
$ 120,015 $ 100,580 $ 81,434 $ 67,764 $ 50,289 $ 34,831 $ 18,164
- ------------------------------------------------------------------------------
$ .90 $ .78 $ .64 $ .53 $ .39 $ .29 $ .16
$ .90 $ .78 $ .64 $ .53 $ .39 $ .29 $ .16
$ .0200 $ .0200 $ .0200 $ .0185 $ .0117 $ .0077 $ .0053
$ .0165 $ .0165 $ .0165 $ .0125 N/A N/A N/A
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
$2,501,062 $2,586,080 $ 889,095 $ 806,772 $ 760,675 $ 471,470 $298,172
1,071,116 1,020,756 430,025 415,855 347,910 226,426 129,619
163,846 128,891 86,279 132,855 117,537 56,625 36,377
102,697 279,940 254,262 71,205 66,589 44,370 40,500
950,407 1,319,385 205,831 211,283 211,888 118,564 87,254
662,988 447,720 341,360 269,462 203,631 154,721 84,299
$ 4.85 $ 3.46 $ 2.67 $ 2.10 $ 1.59 $ 1.21 $ .72
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
121.26% 159.60% 240.28% 123.11% 120.08% 123.23% 133.59%
58.91% 74.66% 37.62% 43.95% 50.99% 43.38% 50.86%
19.44% 19.00% 15.93% 16.96% 15.41% 15.96% 13.09%
3.14% 3.96% 4.21% 3.79% 3.34% 3.07% 2.42%
50.71% 31.11% 8.40% 18.77% 32.40% 51.41% 24.29%
27.49% 27.61% 26.25% 26.15% 24.55% 23.81% 14.44%
22.92% 25.95% 26.77% 28.77% 28.27% 30.49% 24.48%
25.64% 27.43% 27.77% 27.22% 25.59% 21.50% 15.18%
- ------------------------------------------------------------------------------
76 (21)
Management Discussion and Analysis
Tyson Foods, Inc.
ACQUISITIONS
On January 6, 1994, Tyson Foods, Inc. (the Company) acquired Gorges
Foodservice, Inc.(Gorges) and certain related assets. Gorges is a beef
further-processing company with annual sales of approximately $55 million. On
April 19, 1994, the Company increased its 18% ownership interest to 50.1% in
Trasgo, S.A. de C.V.(Trasgo). With annual sales of approximately $140
million, Trasgo is the third largest poultry producer and processor in
Mexico, serving both retail and foodservice markets. Effective July 3, 1994,
the Company acquired certain assets of Culinary Foods, Inc., a manufacturer
and processor of value-added specialty frozen foods with annual sales of
approximately $70 million. On August 18, 1994, the Company increased its 50%
ownership interest to 100% in Cobb-Vantress, Inc., one of the world's leading
suppliers of breeding stock to the broiler industry with annual sales of
approximately $35 million, excluding sales to Tyson. These transactions have
been accounted for as purchases, and the results of operations for these
entities have been included in the Company's consolidated results of
operations since the acquisition dates, but are not included in the results
of operations for fiscal 1993 and prior years. These factors should be
considered when making comparisons to fiscal 1993.
In the first quarter of fiscal 1993, the Company acquired Arctic Alaska
Fisheries Corporation (Arctic), a seafood company; certain assets of Oscar
Mayer Foods Corporation known as Louis Kemp Seafood Company (Louis Kemp), a
seafood further-processing company; a pork processing plant in Marshall,
Missouri; and Brandywine Foods, Inc. (Brandywine), a poultry further-
processing company. The results of operations of these acquisitions and
purchases are included in the Company's results of operations from the
acquisition dates, but are not included in the results of operations for
fiscal 1992 and prior years. These factors should be considered when making
comparisons to fiscal 1992.
SPECIAL CHARGES
During the third quarter of 1994 the Company recorded special charges for the
excess of investments over net assets acquired totaling approximately $191
million plus an additional $23 million for impaired long-lived assets of
Arctic, a wholly-owned subsidiary. The after-tax impact of these special
charges was approximately $205 million or $1.38 per share. Arctic has
consistently performed below pre-acquisition expectations. The Company's
management has attempted to open marketing and distribution channels for this
business, initiated cost reduction and efficiency measures, and explored
global expansion opportunities. Competition for the allowable resource of
fish in the waters of the Pacific Northwest has become very intense in the
past few years. More vessels with greater production capacities are now
competing for the limited quotas set by government regulatory agencies.
Allocations toward onshore processing have created a competitive disadvantage
for Arctic due to its significant at-sea processing capabilities. Global
expansion has failed to materialize in spite of extensive management efforts.
Market prices which had risen significantly during the two years prior to
acquisition have fallen back to more modest levels. These conditions have led
to shorter fishing seasons, less production per vessel, significant excess
production capacity and continuing losses. After continued evaluation of
business opportunities for Arctic, management has concluded that there is
permanent impairment of the carrying value of Arctic's intangible assets and
certain other long-lived assets. See Notes 1 and 2 of Notes to Consolidated
Financial Statements.
77 (22)
RESULTS OF OPERATIONS
The table of changes in results of operations shows dollar and percent
changes in the components of operating results for the past two fiscal years.
The Company's accounting cycle resulted in a 52 week year for fiscal 1994 and
1993, compared to a 53 week year for fiscal 1992. The following discussion
relates to the table and the graphs presented.
(In thousands except per share data)
Changes in Results of Operations 1994 vs. 1993 1993 vs. 1992
- -------------------------------------------------------------------------------
$ Increase $ Increase
(Decrease) % Change (Decrease) % Change
- -------------------------------------------------------------------------------
Sales $ 402,874 8.6 $538,556 12.9
Cost of Sales 352,511 9.3 406,196 12.0
Operating Expenses 230,713 43.1 88,490 19.8
Other Expense (Income) 10,668 16.2 (4,726) (6.7)
Income Before Taxes on Income (191,018) (61.7) 48,596 18.6
Provision for Income Taxes (8,556) (6.6) 28,796 28.7
Net Income (Loss) (182,462) (101.2) 19,800 12.3
Earnings (Loss) Per Share $ (1.23) (100.8) $ 0.06 5.2
- -------------------------------------------------------------------------------
Sales for fiscal 1994 increased 8.6% over fiscal 1993. Consumer poultry sales
accounted for a 6.6% increase in total sales. The increase in consumer
poultry sales was primarily attributable to a 7.7% increase in tonnage and a
1% increase in average sales prices. Trasgo accounted for 18.4% of the
increase in consumer poultry sales. Beef and pork sales increased fiscal 1994
total sales by 2.9%. The increase in beef and pork sales was due to the
acquisition during the year of a beef further-processing company and
additional production from a new pork processing facility which was not fully-
operational during fiscal 1993. Mexican food, prepared foods, live swine and
other sales as a group decreased sales for fiscal 1994 compared to fiscal
1993 by 0.8%. Seafood sales decreased fiscal 1994 total sales by 0.4% due to
a 5.1% decrease in tonnage and a 2.5% decrease in average sales prices.
Seafood sales volumes and profit margins continue to be adversely affected by
various factors including government fishing regulations, intense industry
competition and fluctuations in market prices. By-product sales to the animal
and pet food industry increased fiscal 1994 total sales by 0.3% compared to
fiscal 1993. Over the past five years total sales have grown at a compounded
annual rate of 15%.
Sales for fiscal 1993 increased 12.9% over fiscal 1992. Consumer poultry
sales accounted for a 4.2% increase in total sales. The increase in consumer
poultry sales was attributable to an 8.1% increase in tonnage partially
offset by a 2.6% decrease in average sales prices. By-product sales to the
animal and pet food industry increased fiscal 1993 total sales by 0.1%
compared to fiscal 1992. Beef, pork, Mexican food products and other
specialty items increased total fiscal 1993 sales by 3.5%. This change was
primarily due to a 40.7% increase in beef and pork sales tonnage compared to
the previous year which primarily resulted from the Company's new pork
processing facility in Marshall, Missouri. Mexican food sales tonnage
increased 25.3% and prices increased 0.8% in fiscal 1993 compared to fiscal
1992. Reduced numbers of live swine sales resulted in a decrease in fiscal
1993 total sales by 1%. This decrease was primarily the result of a portion
of the Company's live swine production being integrated with the Company's
new pork processing facility. Seafood sales increased fiscal 1993 total sales
78 (23)
by 6.1% due to the acquisitions of Arctic and Louis Kemp.
The increase in cost of goods sold for 1994 over 1993 of 9.3% was mainly the
result of the increase in sales plus a 6% increase in feed ingredient costs
for live poultry. Although grain costs began decreasing during the third
quarter of 1994, past increases affected poultry, swine and Mexican food
production cost. The Company's strategy of adding value to poultry products
through further-processing offsets a portion of the impact of higher grain
cost. As a percent of sales, cost of sales increased to 81.2% in 1994
compared to 80.7% in 1993. The Company monitors and compares costs for
labor, raw material purchases, utilities and other expenses to companies
within the industry as part of its cost control measures and believes such
costs are at least within industry averages.
The increase in cost of goods sold for 1993 over 1992 of 12% was mainly the
result of increased sales volume and the acquisitions of Arctic, Louis Kemp
and Brandywine, partially offset by a 3.9% decrease in feed ingredient costs
for live poultry. While average feed costs for fiscal year 1993 were lower
than the previous year, costs for the fourth quarter increased over the
fourth quarter of 1992. This increase is attributable to the flooding in the
midwest during the summer of 1993 and its impact on the region's agriculture.
As a percent of sales, cost of sales decreased to 80.7% in 1993 compared to
81.3% in 1992.
Operating expenses increased 43.1% for 1994 over 1993. Special charges
related to Arctic accounted for 92.7% of this increase in operating expenses.
As a percent of sales, selling expense decreased to 8.3% in 1994 compared to
8.4% in 1993. Selling expense decreased primarily due to decreased sales
promotional and advertising expenditures offset slightly by increased
expenses related to Trasgo. Costs incurred in connection with the sale of
accounts receivable, which are classified as general and administrative
expense, were $1.4 million in 1994 compared to $9.6 million in 1993. This
decrease was due to the discontinuance of the sale of accounts receivable.
Certain other administrative costs decreased compared to 1993 due to cost
control and administrative initiatives instituted by management. As a percent
of sales, general and administrative expense was 1.9% in 1994 compared to
2.3% in 1993, and amortization expense was 0.6% in 1994 compared to 0.7% in
1993.
Operating expenses increased 19.8% for 1993 over 1992. As a percent of sales,
selling expense increased to 8.4% in 1993 compared to 7.7% in 1992. Selling
expense increased due primarily to increases in promotional, storage and
transportation expenses. Costs incurred in connection with the sale of
accounts receivable, which are classified as general and administrative
expense, were $9.6 million in 1993 compared to $9.3 million in 1992. This
increase was primarily a result of an increase in the amount of accounts
receivable sold which were partially offset by lower program costs. As a
percent of sales, general and administrative expense was 2.3% in both 1993
and 1992, and amortization expense was 0.7% in 1993 and 1992.
Interest expense increased 18.2% in 1994 compared to 1993. Short-term
interest rates were lower compared to 1993, due to market conditions and the
Company's use of less costly borrowing alternatives which lowered the
weighted average interest rate of all Company debt in 1994 compared to 1993.
These lower rates were offset by a higher level of borrowing due to the
discontinuance of the sale of accounts receivable, as the Company's average
indebtedness increased 28.7% compared to 1993. As a percent of sales,
interest expense increased to 1.7% in 1994 compared to 1.5% in 1993. The
average interest rate on the Company's total debt for fiscal year 1994 was
6.6% compared to 7.2% for 1993 fiscal year.
79 (24)
Interest expense decreased 5.3% in 1993 from 1992 mainly from lower overall
interest rates in 1993 as compared to 1992. This decrease in interest expense
was partially offset by the increase in expense from increased debt as a
result of the existing debt of Arctic. As a percent of sales, interest
expense decreased to 1.5% in 1993 compared to 1.8% in 1992. The average
interest rate on the Company's total debt for 1993 fiscal year was 7.2%
compared to 8.5% for 1992 fiscal year.
The effective tax rate for 1994 was 101.8% due to the non-deductibility of
special charges related to Arctic's excess of investments over net assets
acquired. Without special charges, the effective tax rate would have been 39%
for fiscal 1994 compared to 41.8% for fiscal 1993. The federal income tax
rate increase in 1993 resulted in a one-time increase in deferred income
taxes of $9 million. The effective tax rate for fiscal 1993 compared to
fiscal 1992 also included $1.6 million of additional taxes due to the tax
rate increase. The effective tax rate generally reflects the statutory
federal income tax rate plus the impact of the nondeductibility of
amortization of excess of investments over net assets acquired.
Return on total average assets for 1994 was (0.06%) compared to 5.8% for
1993, with a five year average of 4.2%. The return on total average assets
for 1994 would have been 5.7% without special charges. Because of the
special charges related to Arctic, return on average shareholders' equity for
1994 was (0.16%) compared to 14.7% for 1993. Also due to special charges,
the five-year return on average shareholders' equity has been reduced to
12.8%. Excluding special charges, return on average shareholders' equity
would have been 14.1% for the year and 16.7% for the five years. Return on
shareholders' equity based on year end shareholders' equity excluding special
charges for the year would yield a return of 15.7%.
LIQUIDITY AND CAPITAL RESOURCES
During fiscal 1994, cash flow, working capital, noncurrent assets and long-
term debt were all impacted by various acquisitions. These factors should be
considered when analyzing the Company's financial condition.
In fiscal 1994, net cash of $50.3 million was provided by operating
activities. This was a decrease of $258.1 million from 1993. The decrease in
cash flow from operations was primarily attributable to an increase in
accounts receivable which resulted from management's decision to discontinue
an accounts receivable sale agreement. Finished inventories have increased
from 1993 fiscal year end due to servicing the sales growth base which
includes acquisitions during the fiscal year, as well as increased operations
in pork processing and shifts in product mix. Financing activities provided
net cash of $265.5 million, primarily due to additional long-term debt
incurred from the issuance of commercial paper. The Company used funds
generated from operating and financing activities to fund additions to
property, plant and equipment. In addition to the aforementioned
acquisitions, the expenditures for property, plant and equipment were related
to new equipment and upgrading facilities to take advantage of marketing
opportunities as well as the Company's continuing effort to increase
efficiencies, reduce overall cost and meet or exceed environmental laws and
regulations.
At 1994 fiscal year end, working capital was $721.5 million compared to
$285.1 million at the end of 1993, an increase of $436.4 million. The current
ratio for 1994 is 2.34 to 1 compared to 1.54 to 1 for 1993. Working capital
and the current ratio have increased from 1993 mainly due to management's
decision to discontinue the sale of accounts receivable and increase
commercial paper borrowings to achieve lower financing costs. The Company's
foreseeable cash needs for operations and capital expenditures will continue
to be met through cash flows from operations and borrowings supported by
existing credit facilities and additional credit facilities which are
available to the Company.
80 (25)
Long-term debt at fiscal year end was $1.4 billion, an increase of
$461 million from fiscal 1993 primarily due to the Company's discontinuance
of the $275 million accounts receivable sale agreement and the financing of
this amount through the sale of commercial paper. The commercial paper
program was initiated in July 1993, following receipt by the Company of an "A-
2" rating from Standard & Poor's Corporation and a "P-2" rating from Moody's
Investors Service. The Company's two unsecured revolving credit facilities
provide up to $1.5 billion of financing which supports the commercial paper
program. At October 1, 1994, $909.2 million was outstanding under or
supported by the $1.5 billion financing facilities consisting of
$852.2 million of commercial paper and $57 million drawn under the revolving
credit facilities. Additional outstanding debt at October 1, 1994, consisted
of $366 million of institutional notes, $30 million of bank notes and
$76.3 million of other indebtedness such as industrial revenue bonds.
Additionally, at October 1, 1994, the Company had $457.9 million in unused,
unsecured lines of credit.
The revolving credit agreements and institutional notes contain various
covenants, the more restrictive of which require maintenance of a minimum net
worth, current ratio, cash flow coverage of interest and fixed charges and a
maximum total debt to capitalization ratio. The Company is in compliance with
these covenants.
Shareholders' equity decreased 5.2% during 1994 but has grown at a compounded
annual rate of 23.6% over the past five years, inclusive of $214 million of
special charges in 1994, $205.2 million of Class A stock issued for Arctic in
1993 and $89.6 million received from the sale of Class A stock during 1990.
During 1994, the Company initiated an open market stock repurchase program
which authorized the purchase of up to 15 million shares of the Company's
Class A common stock. The Company intends to utilize shares repurchased to
fund employee benefit plans and increase treasury stock. No timetable has
been set for completion of the repurchase program. As of October 1, 1994 the
Company had purchased approximately 2.5 million shares under the repurchase
program.
Total assets have increased by $1.1 billion or 41.8% over the past five years
inclusive of acquisitions. Additions, net of dispositions, to total
property, plant and equipment for the last five years were $1.2 billion
including acquisitions, an increase of 85.2% over the last five years. At
fiscal year end, the Company had construction projects in progress that will
require approximately $151.5 million to complete. In January 1994, the
Company announced plans to add four new poultry-processing complexes to be
completed over the next three years. This increase will enable the Company
to meet anticipated demand over the next three years. The Company has
already announced that the first of the four complexes is being built and
should be ready to start production in mid-1995. The Company is also
constructing another plant for production of Mexican food products. Funding
for these expenditures will be provided by cash from operations or additional
borrowings which will be subjected to debt covenants discussed in Note 5 of
Notes to Consolidated Financial Statements.
ENVIRONMENTAL MATTERS
Before environmental issues were at the forefront of the nation's concerns,
the Company had many environmentally responsible practices. Consequently,
management believes that they have no incidence of environmental
contamination or damages requiring material expenditures on the Company's
part. The Company has a strong financial commitment to clean water. During
fiscal 1994, the Company invested approximately $37.7 million in water
quality, including both capital outlays totaling $6.7 million to build and
upgrade facilities and an additional $31 million for day-to-day operations.
81 (26)
Tyson Foods, Inc.
Consolidated Statements of Operations
Three Years Ended October 1, 1994
(In thousands except per share data)
- -----------------------------------------------------------------------------
1994 1993 1992
- -----------------------------------------------------------------------------
Sales $5,110,270 $4,707,396 $4,168,840
Cost of Sales 4,149,050 3,796,539 3,390,343
- -----------------------------------------------------------------------------
961,220 910,857 778,497
- -----------------------------------------------------------------------------
Operating Expenses:
Selling 426,495 397,361 322,221
General and administrative 95,895 107,201 95,102
Amortization 29,714 30,753 29,502
Special charges 213,924
- -----------------------------------------------------------------------------
766,028 535,315 446,825
- -----------------------------------------------------------------------------
Operating Income 195,192 375,542 331,672
Other Expense (Income):
Interest 86,063 72,811 76,887
Other (9,488) (6,904) (6,254)
- -----------------------------------------------------------------------------
76,575 65,907 70,633
- -----------------------------------------------------------------------------
Income Before Taxes on Income 118,617 309,635 261,039
Provision for Income Taxes 120,745 129,301 100,505
- -----------------------------------------------------------------------------
Net Income (Loss) $ (2,128) $ 180,334 $ 160,534
- -----------------------------------------------------------------------------
Earnings (Loss) Per Share $ (0.01) $ 1.22 $ 1.16
Average Shares Outstanding 147,778 148,341 138,392
- -----------------------------------------------------------------------------
See accompanying notes.
82 (27)
Tyson Foods, Inc.
Consolidated Balance Sheets
October 1, 1994 and October 2, 1993
(In thousands except per share data)
- ----------------------------------------------------------------------------
Assets 1994 1993
- ----------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $ 27,020 $ 21,547
Accounts receivable 444,216 104,767
Inventories 754,190 675,205
Other current assets 35,841 10,236
- ----------------------------------------------------------------------------
Total Current Assets 1,261,267 811,755
Property, Plant and Equipment, at Cost:
Land 56,128 40,144
Buildings and leasehold improvements 676,120 562,526
Machinery and equipment 1,452,156 1,277,956
Vessels 111,744 119,654
Land improvements and other 70,545 62,669
Buildings and equipment under construction 143,150 123,195
- ----------------------------------------------------------------------------
2,509,843 2,186,144
Less accumulated depreciation 899,846 750,846
- ----------------------------------------------------------------------------
Net Property, Plant and Equipment 1,609,997 1,435,298
Excess of Investments over Net Assets Acquired 741,626 924,432
Investments and Other Assets 55,110 82,019
- ----------------------------------------------------------------------------
Total Assets $3,668,000 $3,253,504
- ----------------------------------------------------------------------------
83 (28)
(In thousands except per share data)
- ------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY 1994 1993
- ------------------------------------------------------------------------------
Current Liabilities:
Notes payable $ 49,360 $ 29,800
Current portion of long-term debt 24,177 73,987
Trade accounts payable 258,589 205,592
Accrued salaries and wages 71,794 80,518
Federal and state income taxes payable 19,735 17,778
Accrued interest payable 4,253 5,744
Other current liabilities 111,875 113,286
- ------------------------------------------------------------------------------
Total Current Liabilities 539,783 526,705
Long-Term Debt 1,381,481 920,465
Deferred Income Taxes 440,546 445,588
Minority Interests in Subsidiaries 16,767
Shareholders' Equity:
Common stock ($.10 par value):
Class A-Authorized 900,000 shares; issued
79,687 shares in 1994 and 79,685 shares in 1993 7,969 7,968
Class B-Authorized 900,000 shares; issued
68,455 shares in 1994 and in 1993 6,846 6,846
Capital in excess of par value 391,358 392,693
Retained earnings 953,840 965,493
Currency translation adjustment 1,180
- ------------------------------------------------------------------------------
1,361,193 1,373,000
Less treasury stock-2,941 shares in 1994
and 872 shares in 1993, at cost 68,700 11,359
Less unamortized deferred compensation 3,070 895
- ------------------------------------------------------------------------------
Total Shareholders' Equity 1,289,423 1,360,746
- ------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $3,668,000 $3,253,504
- ------------------------------------------------------------------------------
See accompanying notes
84 (29)
Tyson Foods, Inc.
Consolidated Statements of Shareholders' Equity
Three years ended October 1, 1994
(In thousands except per share data)
- -------------------------------------------------------------------------------
Common Stock
--------------------------------
Class A Class B Capital in
-------------- -------------- Excess of
Shares Amount Shares Amount Par Value
- -------------------------------------------------------------------------------
Balance-September 28, 1991 70,137 $7,014 68,460 $6,846 $186,436
Purchase of treasury shares
Forfeiture of restricted shares
Exercise of stock options 962
Exchange of Class B for Class A 2 (2)
Net income
Amortization of deferred
compensation
Cash dividends paid:
($.04 per share, Class A;
$.033 per share, Class B)
- -------------------------------------------------------------------------------
Balance-October 3, 1992 70,139 7,014 68,458 6,846 187,398
Purchase of treasury shares
Forfeiture of restricted shares
Stock issued:
Exercise of options 1,060
Business acquisitions 9,543 954 204,220
Other 15
Exchange of Class B for Class A 3 (3)
Net income
Amortization of deferred
compensation
Cash dividends paid:
($.04 per share, Class A;
$.033 per share, Class B)
- -------------------------------------------------------------------------------
Balance-October 2, 1993 79,685 7,968 68,455 6,846 392,693
Purchase of treasury shares
Shares awarded for employee
stock plans
Forfeiture of restricted shares
Stock issued:
Exercise of options (1,363)
Other 2 1 28
Net loss
Amortization of deferred
compensation
Currency translation adjustment
Cash dividends paid:
($.07 per share, Class A;
$.0583 per share, Class B)
- -------------------------------------------------------------------------------
Balance-October 1, 1994 79,687 $7,969 68,455 $6,846 $391,358
- -------------------------------------------------------------------------------
See accompanying notes.
85 (30)
- -----------------------------------------------------------------------------
Currency Treasury Stock Unamortized
Retained Translation ------------------- Deferred
Earnings Adjustment Shares Amount Compensation Total
- -----------------------------------------------------------------------------
$635,097 1,217 $ (9,392) $(3,510) $ 822,491
65 (1,231) (1,231)
16 (195) 195
(198) 1,069 2,031
160,534 160,534
1,405 1,405
(5,041) (5,041)
- -----------------------------------------------------------------------------
790,590 1,100 (9,749) (1,910) 980,189
184 (4,140) (4,140)
5 (60) 60
(416) 2,582 3,642
205,174
(1) 8 23
180,334 180,334
955 955
(5,431) (5,431)
- -----------------------------------------------------------------------------
965,493 872 (11,359) (895) 1,360,746
2,797 (66,901) (66,901)
(130) 3,120 (3,120)
2 (25) 25
(600) 6,465 5,102
29
(2,128) (2,128)
920 920
1,180 1,180
(9,525) (9,525)
- -----------------------------------------------------------------------------
$953,840 $1,180 2,941 $(68,700) $(3,070) $1,289,423
- -----------------------------------------------------------------------------
86 (31)
Tyson Foods, Inc.
Consolidated Statements of Cash Flows
Three Years Ended October 1, 1994
(In thousands)
- -------------------------------------------------------------------------------
1994 1993 1992
- -------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (2,128) $180,334 $160,534
Adjustments to reconcile net income (loss)
to cash provided by operating activities:
Depreciation 158,611 145,756 119,363
Amortization 29,714 30,753 29,502
Special charges 213,924
Deferred income taxes (2,370) 5,378 17,883
Loss on dispositions of property
and equipment 2,800 695 218
(Increase) decrease in accounts receivable (307,400) 35,344 (25,259)
(Increase) decrease in inventories (34,000) (66,909) 10,606
Increase (decrease) in trade accounts
payable 35,595 (41,001) 7,414
Net change in other current assets and
liabilities (44,479) 18,052 (54,381)
- -------------------------------------------------------------------------------
Cash Provided by Operating Activities 50,267 308,402 265,880
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash paid for acquisitions (82,893) (43,377)
Additions to property, plant and equipment (232,108) (225,305) (107,990)
Proceeds from sale of property, plant and
equipment 8,502 7,387 6,615
Net change in other assets and liabilities (3,750) (41,393) (3,309)
- -------------------------------------------------------------------------------
Cash Used for Investing Activities (310,249) (302,688) (104,684)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in notes payable 3,462 (29,200) (10,000)
Proceeds from long-term debt 412,267 977,421 131,941
Repayments of long-term debt (81,079) (954,497) (278,694)
Purchase of treasury shares (66,901) (4,140) (1,231)
Dividends and other (2,294) (811) (1,605)
- -------------------------------------------------------------------------------
Cash Provided by (Used for) Financing
Activities 265,455 (11,227) (159,589)
- -------------------------------------------------------------------------------
Increase (Decrease) in Cash 5,473 (5,513) 1,607
Cash and Cash Equivalents at Beginning of 21,547 27,060 25,453
Year
- -------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $ 27,020 $ 21,547 $ 27,060
- -------------------------------------------------------------------------------
See accompanying notes.
87 (32)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Tyson Foods, Inc.
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of Tyson Foods, Inc. and its subsidiaries (the Company or
Tyson). All significant intercompany accounts and transactions have been
eliminated.
FISCAL YEAR: The Company utilizes a 52 or 53 week accounting period which
ends on the Saturday closest to September 30.
FOREIGN CURRENCY TRANSLATION: All foreign affiliates have a foreign
functional currency. Assets and liabilities of the Company's foreign
affiliates are translated at current exchange rates, while income and
expenses are translated at average rates for the period. Translation gains
and losses are reported as a component of shareholders' equity.
CASH AND CASH EQUIVALENTS: Cash equivalents consist of investments in short-
term, highly-liquid securities having original maturities of three months or
less made as part of the Company's cash management activity. The carrying
values of these assets approximate their fair values. As a result of the
Company's cash management system, checks issued but not presented to the
banks for payment may create negative cash balances. Checks outstanding in
excess of related cash balances totaling approximately $117.6 million at
October 1, 1994 and $96.9 million at October 2, 1993, are included in trade
accounts payable, accrued salaries and wages and other current liabilities.
INVENTORIES: Inventories, valued at the lower of cost (first-in, first-out)
or market, consist of the following:
(in thousands)
- ---------------------------------------------------------------------------
1994 1993
- ---------------------------------------------------------------------------
Dressed and further-processed products $346,846 $299,388
Live poultry and hogs 255,904 207,848
Seafood related products 36,494 53,064
Hatchery eggs and feed 44,048 40,110
Supplies 70,898 74,795
- ---------------------------------------------------------------------------
$754,190 $675,205
- ---------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION: Depreciation is provided
primarily by the straight-line method using estimated lives for buildings and
leasehold improvements of 10 to 39 years; machinery and equipment of 3 to 12
years; vessels of 16 to 30 years; and other of 3 to 20 years. Depreciation
expense in 1994, 1993 and 1992 was $158.6 million, $145.8 million and $119.4
million, respectively.
The Company capitalized interest costs of $2 million in 1994, $1.6 million in
1993 and $895 thousand in 1992 as part of the cost of major asset
construction projects. Approximately $151.5 million will be required to
complete construction projects in progress at October 1, 1994.
88 (33)
EXCESS OF INVESTMENTS OVER NET ASSETS ACQUIRED: Costs in excess of net
assets of businesses purchased are amortized on a straight-line basis over
periods ranging from 15 to 40 years. The carrying value of excess of
investments over net assets acquired is reviewed at each balance sheet date
to determine if facts and circumstances suggest that it may be impaired. If
this review indicates that the excess of investments over net assets acquired
may not be recoverable, an estimate of the undiscounted cash flows of the
entity acquired is prepared and the Company's carrying value of excess of
investments over net assets acquired will be reduced by the estimated
shortfall of cash flows. At October 1, 1994 and October 2, 1993, the
accumulated amortization of excess of investments over net assets acquired
was $106.7 million and $90.4 million, respectively.
CAPITAL STOCK: Holders of Class B stock may convert such stock into Class A
stock on a share for share basis. The holders of Class B stock are entitled
to ten votes per share while the holders of Class A stock are entitled to one
vote per share on matters submitted to shareholders for approval. Cash
dividends cannot be paid to the holders of Class B stock unless they are
simultaneously paid to the holders of Class A stock, and the per share amount
of the cash dividend paid to the holders of Class B stock cannot exceed 90%
of the cash dividend simultaneously paid to the holders of Class A stock.
During 1994, the Company initiated an open market stock repurchase program
which authorized the purchase of up to 15 million shares of the Company's
Class A common stock. The Company intends to utilize shares repurchased to
fund employee benefit plans and increase treasury stock. No timetable has been
set for completion of the repurchase program. As of October 1, 1994 the Company
had purchased approximately 2.5 million shares under the repurchase program.
EARNINGS PER SHARE: Earnings per share is computed by dividing net income by
the weighted average number of shares and share equivalents outstanding
during each year.
INCOME TAXES: The Company follows the liability method in accounting for
deferred income taxes. The liability method provides that deferred tax
liabilities are recorded at currently enacted tax rates based on the
difference between the tax basis of assets and liabilities and their carrying
amounts for financial reporting purposes, referred to as temporary
differences.
NOTE 2: ACQUISITIONS AND SPECIAL CHARGES
On January 6, 1994, the Company acquired Gorges Foodservice, Inc. (Gorges)
and certain related assets. Gorges is a beef further-processing company with
annual sales of approximately $55 million. On April 19, 1994, the Company
increased its 18% ownership interest to 50.1% in Trasgo, S.A. de
C.V.(Trasgo). With annual sales of approximately $140 million, Trasgo is the
third largest poultry producer and processor in Mexico, serving both retail
and foodservice markets. Effective July 3, 1994, the Company acquired
certain assets of Culinary Foods, Inc., a manufacturer and processor of value-
added specialty frozen foods with annual sales of approximately $70 million.
On August 18, 1994, the Company increased its 50% ownership interest to 100%
in Cobb-Vantress, Inc., one of the world's leading suppliers of breeding
stock to the broiler industry with annual sales of approximately $35 million,
excluding sales to Tyson. These transactions have been accounted for as
purchases, and the results of operations for these acquisitions have been
included in the Company's consolidated results of operations since the
acquisition dates. Pro forma operating results are not presented as they
would not differ materially from actual results for 1994 and 1993.
89 (34)
On October 5, 1992, the Company acquired Arctic Alaska Fisheries Corporation
(Arctic), a seafood company. Additionally, on December 4, 1992, the Company
acquired Brandywine Foods, Inc. (Brandywine), a poultry further-processing
company. The Company issued stock and paid cash for a total of $248.6 million
for Arctic and Brandywine which were accounted for as purchases. The
Company's consolidated results of operations include the operations of Arctic
and Brandywine since the acquisition dates. The following unaudited pro
forma information shows the results of the Company's operations as though the
purchases of Arctic and Brandywine had been made at the beginning of fiscal
year 1992-sales of $4.4 billion, net income of $155.8 million and earnings
per share of $1.05. The unaudited pro forma results are not necessarily
indicative of the actual results of operations that would have occurred had
the purchases actually been made at the beginning of fiscal year 1992. Pro
forma results for 1993 would be approximately the same as 1993 actual
results, since the acquisitions were made at or near the beginning of fiscal
1993.
During the third quarter of fiscal 1994, the Company recorded special charges
for the excess of investments over net assets acquired totaling approximately
$191 million plus an additional $23 million for impaired long-lived assets of
Arctic. The impact of these special charges after-tax was approximately $205
million or $1.38 per share.
Government restrictions on fishing, intense industry competition and
fluctuations in market prices have continued to adversely affect Arctic.
Based on Arctic's continued performance below pre-acquisition expectations,
the Company made an impairment evaluation and determined that Arctic's
balance of excess of investments over net assets acquired would not be
recovered.
The methodology used to assess the recoverability of Arctic's excess of
investments over net assets acquired involved projecting aggregate cash
flows. The Company's projection assumes that Arctic's sales volumes and
prices will be comparable to the results for 1994. Due to government
restrictions on fishing and the addition into the fishing waters of the North
Pacific of new higher production capacity vessels by competitors, the Company
did not assume any increases in volume for the projected cash flows. The
aggregate undiscounted value of these projected cash flows are sufficient
only to recover a portion of the carrying value of the tangible net assets of
Arctic and would not provide any recovery of the $191 million of excess of
investments over net assets acquired related to Arctic. Additionally, the
Company's projection indicated that approximately $23 million of Arctic's
long-lived assets were impaired. The Company believes that its projection,
based on recent historic trends and current market conditions, is its best
estimate of Arctic's future performance, although there can be no assurances
that such estimates will be indicative of future results, which ultimately
may be less than or greater than these estimates.
NOTE 3: FINANCIAL INSTRUMENTS AND CREDIT RISK CONCENTRATION
Off-Balance Sheet Risk: The Company has entered into foreign exchange forward
contracts to hedge some of its foreign currency exposure. Foreign exchange
forward contracts are legal agreements between two parties to purchase and
sell a foreign currency, for a price specified at the contract date, with
delivery and settlement in the future. The Company uses such contracts to
hedge exposure to changes in foreign currency exchange rates associated with
certain assets and obligations denominated in foreign currency. Gains and
losses on these contracts are recognized concurrently with the transaction
gains and losses from the associated exposures.
90 (35)
At October 1, 1994, the Company had outstanding forward exchange contracts,
maturing on October 31, 1994, to sell $9.1 million of foreign currency
(principally Japanese yen). These forward exchange contracts hedge balance
sheet and operating income currency exposures.
Concentrations of Credit Risk: The Company's financial instruments that are
exposed to concentrations of credit risk consist primarily of cash
equivalents and trade receivables. The Company's cash equivalents are in
high quality securities placed with major banks and financial institutions.
Concentrations of credit risk with respect to receivables are limited due to
the large number of customers and their dispersion across geographic areas.
The Company performs periodic credit evaluations of its customers' financial
condition and generally does not require collateral. At October 1, 1994, the
Company does not have significant credit risk concentrations. No single group
or customer represents greater than 10% of total accounts receivable.
At October 2, 1993, the Company had an asset sale agreement with an unrelated
financial institution which allowed the Company to sell up to $275 million of
accounts receivable. As sold accounts receivable were collected, new
qualifying accounts were substituted such that the outstanding balance
remained at $275 million. In November 1993, the Company discontinued this
asset sale agreement due to lower financing costs available through the sale
of commercial paper, which resulted in an increase in accounts receivable of
$275 million.
NOTE 4: INCOME TAXES
At the beginning of fiscal 1994, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS No. 109).
This statement supersedes Statement of Financial Accounting Standards No. 96
(SFAS No. 96), the method previously followed by the Company. Both SFAS No.
109 and SFAS No. 96 require the liability method be used to account for
deferred income taxes. The liability method provides that deferred tax
liabilities are recorded at current tax rates based on the difference between
the tax basis of assets and liabilities and their carrying amounts for
financial reporting purposes referred to as temporary differences. The effect
of adoption of SFAS No. 109 did not affect the Company's financial position
or results of operations.
Detail of the provision for income taxes consists of:
(In thousands)
- ----------------------------------------------------------------------------
1994 1993 1992
- ----------------------------------------------------------------------------
Federal $107,413 $114,461 $ 88,838
State 13,332 14,840 11,667
- ----------------------------------------------------------------------------
$120,745 $129,301 $100,505
- ----------------------------------------------------------------------------
Current $123,115 $123,923 $ 82,622
Deferred (2,370) 5,378 17,883
- ----------------------------------------------------------------------------
$120,745 $129,301 $100,505
- ----------------------------------------------------------------------------
91 (36)
The reasons for the difference between the effective income tax rate and the
statutory U.S. federal income tax rate are as follows:
- ---------------------------------------------------------------------------
1994 1993 1992
- ---------------------------------------------------------------------------
U.S. federal income tax rate 35.0% 35.0% 34.0%
Special charges 62.6
Amortization of excess of investments
over net assets acquired 2.8 2.8 2.7
State income taxes 2.8 3.1 3.0
Effect of tax rate increase on deferred
income taxes 2.9
Other differences, net (1.4) (2.0) (1.2)
- ---------------------------------------------------------------------------
Effective income tax rate 101.8% 41.8% 38.5%
- ---------------------------------------------------------------------------
Significant components of the Company's deferred tax liabilities as of
October 1, 1994 are as follows:
(In thousands)
Basis difference in property, plant and equipment $227,431
Suspended taxes from conversion to accrual method 150,162
Other 62,953
-----------
Total deferred tax liabilities $440,546
===========
The Omnibus Budget Reconciliation Act of 1987 required family-owned farming
businesses to use the accrual method of accounting for tax purposes. Internal
Revenue Code Section 447(i) provides that if any family corporation is
required to change its method of accounting for any taxable year, such
corporation shall establish a suspense account in lieu of taking the
adjustments into taxable income. The suspense account, which represents the
initial catch-up adjustment to change from the cash to accrual method of
accounting, is not currently includable in the Company's taxable income and
any related income taxes are deferred. However, the deferred amount will be
included in taxable income if the business ceases to be family-owned or if
gross receipts from farming activities in future years drop below certain
1987 levels. A corporation is family-owned when at least 50 percent of the
total combined voting power of all classes of stock of the corporation are
owned by family members of the same family. Both of the deferral conditions
relative to ownership and gross receipts continue to be met by the Company.
The Company also believes that these conditions will continue to be met for
the foreseeable future.
92 (37)
NOTE 5: LONG-TERM DEBT
Long-term debt consists of the following:
(In thousands)
- ---------------------------------------------------------------------------
Maturity 1994 1993
- ---------------------------------------------------------------------------
Commercial paper:
(4.91% effective rate at 10/1/94) 1999 $ 852,162 $497,245
Institutional notes:
10.33% notes 1996-1999 135,000 135,000
10.61% notes 1999-2001 125,000 125,000
10.75% notes 1995-1996 26,000 39,000
10.84% notes 2002-2006 50,000 50,000
11.375% notes 1996-2001 30,000 30,000
Revolving credit facility
(5.04% effective rate at 10/1/94) 1999 57,000
Bank loans (6.72%-7.22% effective rates at
10/1/94) 1999 30,000
Other various 76,319 44,220
- ---------------------------------------------------------------------------
$1,381,481 $920,465
- ---------------------------------------------------------------------------
The Company has two unsecured revolving credit agreements totaling $1.5
billion which expire in June, 1999. These agreements support the Company's
commercial paper program which was initiated in July, 1993. At
October 1, 1994, $909.2 million was outstanding under the $1.5 billion
financing facilities. Additionally, at October 1, 1994, the Company had
$457.9 million in unused, unsecured lines of credit available.
Annual maturities of long-term debt for the five years subsequent to October
1, 1994 are: 1995-$24.2 million; 1996-$65.9 million; 1997-$65 million; 1998-
$51 million and 1999-$972.4 million.
The revolving credit agreements and institutional notes contain various
covenants, the more restrictive of which require maintenance of a minimum net
worth, current ratio, cash flow coverage of interest and fixed charges and a
maximum total debt-to-capitalization ratio.
The fair value of long-term debt is determined based upon quoted market
prices for the same or similar issues or on the Company's incremental
borrowing rate for debt of the same remaining maturities. At October 1, 1994,
the fair value of long-term debt was approximately $1.4 billion.
NOTE 6: RESTRICTED STOCK AND STOCK OPTIONS
In 1994, the Company awarded 130,000 restricted shares of Class A stock to
employees. The restrictions expire over periods ranging from ten to twenty-
six years. The unamortized portion is classified on the balance sheet as
deferred compensation. In 1989, the Company issued 615,912 restricted shares
of Class A stock to employees which are no longer restricted as to
transferability. In 1994, 1993 and 1992, restrictions were removed from
73,119 shares, 82,943 shares and 133,933 shares, respectively, and the
related unamortized deferred compensation was expensed.
93 (38)
The Company has qualified (6 million shares authorized) and nonqualified (1.5
million shares authorized) stock option plans, both of which provide for the
granting of options for shares of Class A stock at a price not less than the
fair market value at the date of grant. The options generally become
exercisable ratably over five to eight years from the date of grant and must
be exercised within ten years of the grant date. Activity for the plans for
1994, 1993 and 1992 was as follows:
(In thousands except per share data)
- ---------------------------------------------------------------------------
Option Price
Shares --------------------
Under Option Per Share Total
- ---------------------------------------------------------------------------
Outstanding, September 28,1991 2,046 $7.50-11.94 $18,596
Exercised (198) 7.50-11.94 (2,031)
Canceled (61) 7.50-11.94 (507)
- ---------------------------------------------------------------------------
Outstanding, October 3, 1992 1,787 7.50-11.94 16,058
Exercised (416) 6.91-11.94 (3,642)
Canceled (85) 6.94-21.63 (928)
Granted 2,247 6.91-21.63 40,995
- ---------------------------------------------------------------------------
Outstanding, October 2, 1993 3,533 6.92-21.63 52,483
Exercised (600) 6.92-11.94 (5,102)
Canceled (156) 6.93-21.63 (3,007)
Granted 791 21.50 16,994
- ---------------------------------------------------------------------------
Outstanding, October 1, 1994 3,568 $7.19-21.63 $61,368
- ---------------------------------------------------------------------------
Exercisable, October 1, 1994 906
- ---------------------------------------------------------------------------
The remainder of the options are exercisable ratably through April 2003.
NOTE 7: CONTINGENCIES AND COMMITMENTS
CONTINGENCIES: The Company is involved in various lawsuits and claims made by
third parties on an ongoing basis as a result of its day-to-day operations,
including the following two matters relating to Arctic Alaska Fisheries
Corporation (Arctic). In April 1994, after investigations beginning as early
as 1990, a Federal Grand Jury in Seattle, Washington indicted former
officers, directors and employees of Arctic as well as Arctic on criminal
charges stemming from the sinking of the fishing vessel Aleutian Enterprise
in 1990 and other matters relating to overall operation of Arctic. In
September 1994, the Federal Grand Jury issued superseding indictments against
the former officers, directors and employees as well as Arctic on
substantially identical criminal charges with two prior indictees being
dismissed. The factual allegations giving rise to the fifty-three (53) count
multiple indictments now pending in the United States District Court, Western
District of Washington at Seattle, occurred prior to the Company's
acquisition of Arctic on October 5, 1992. Conviction of the individuals, as
well as Arctic, carries penalties and fines ranging from a maximum fine or
penalty per count of $500,000 and 10 years in prison. The Company
anticipates that a trial of a portion of the defendants on the indictments
will begin in June of 1995. Also, on September 8, 1993, the State of Alaska,
after conducting investigations, filed a Complaint for Forfeiture and Damages
94 (39)
alleging that certain Arctic vessels participated in the use of certain
fishing gear during 1990, 1991 and 1992. While management is not able at the
present time to determine the outcome of these matters, based upon
information currently available, management presently does not believe that
any of these lawsuits or claims by third parties will have a material adverse
effect on the Company's financial position.
OPERATING LEASES: The Company leases certain farms and other properties and
equipment for which the total rentals thereon approximated $29.6 million in
1994, $26.5 million in 1993, and $17.2 million in 1992. Most farm leases are
for a three year term and are renewable for a total of nine additional years.
The most significant obligations assumed under the terms of the leases are
the upkeep of the facilities and payment of insurance and property taxes.
LEASE COMMITMENTS: Minimum lease commitments under noncancelable leases at
October 1, 1994 total $79.3 million composed of $25 million for 1995,
$18.4 million for 1996, $12.4 million for 1997, $9.4 million for 1998,
$6.5 million for 1999 and $7.6 million for later years.
The Company assists certain of its swine and poultry growers in obtaining
financing for growout facilities by providing the growers with extended
growout contracts and conditional operation of the facilities should a grower
default under their growout or loan agreement.
Redeemable Preferred Stock: Trasgo has a class of manditorily redeemable
preferred stock, for which the redemption price is cumulative and determined
based upon "excess profits" in years from 1994 to 1999, as defined in the
shareholders agreement. This price cannot be reasonably estimated at this
time, but cannot exceed $29.5 million. Trasgo cannot pay dividends until all
of this preferred stock is redeemed. This redemption must take place by the
year 2000. This preferred stock is included in "minority interests in
subsidiaries" on the consolidated balance sheets.
NOTE 8: TRANSACTIONS WITH RELATED PARTIES
The Company has operating leases for farms, equipment and other facilities
with the Chairman of the Board of the Company and certain members of his
family, as well as a trust controlled by him, for rentals of $6.8 million in
1994, $6.4 million in 1993 and $5.7 million in 1992. Other facilities,
including a cold storage distribution facility, are also leased from other
officers and directors and the Company's profit sharing plan for rentals
totaling $6.7 million in 1994, $6.2 million in 1993 and $6.1 million in 1992.
The Company sold office facilities to the profit sharing plan for a cost of
$5.1 million in 1992.
Certain officers and directors are engaged in poultry and swine growout
operations with the Company whereby these individuals purchase animals, feed,
housing and other items to raise the animals to market weight. The total
value of these transactions amounted to $11.4 million in 1994, $11.3 million
in 1993 and $8.5 million in 1992.
95 (40)
NOTE 9: BENEFIT PLANS
The Company has defined contribution retirement and incentive benefit
programs for various groups of Company personnel. Discretionary Company
contributions which are determined by the Board of Directors totaled
$21.7 million, $19.6 million and $17.9 million for the years ending 1994,
1993 and 1992, respectively.
In fiscal year 1992, the Company adopted Statement of Financial Accounting
Standards No. 106 (SFAS No. 106) "Employers' Accounting for Post-retirement
Benefits Other Than Pensions", which requires that the projected future cost
of providing post-retirement benefits be recognized as an expense as
employees render service instead of when the benefits are paid. The effect of
adopting SFAS No. 106 was not material to the Company's financial condition
or results of operations.
NOTE 10: SUPPLEMENTAL INFORMATION
Supplemental cash flow information and noncash investing and financing
activities are as follows:
(In thousands)
- ----------------------------------------------------------------------------
1994 1993 1992
- ----------------------------------------------------------------------------
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 89,894 $ 72,348 $103,827
Income Taxes $123,228 $117,589 $ 88,534
- ----------------------------------------------------------------------------
SUPPLEMENTAL NONCASH INVESTING AND
FINANCING ACTIVITIES
Retirement of capital lease
of property $ 1,559
Acquisitions:
Fair value of assets acquired $ 124,023 $537,398
Liabilities assumed (109,209) (288,847)
Fair value of assets exchanged $ (14,814)
Stock issued (205,174)
- ----------------------------------------------------------------------------
Total cash paid $ 43,377
- ----------------------------------------------------------------------------
SUPPLEMENTAL SALES INFORMATION: The Company sells certain of its products in
foreign markets, primarily Japan, Hong Kong, Singapore and other Far Eastern
and certain Middle Eastern countries, as well as in Canada, Russia and the
Caribbean Islands. The Company's foreign sales for fiscal 1994, 1993 and 1992
totaled $537.9 million, $352 million and $192.5 million, respectively.
Substantially all of the Company's export sales are transacted through
unaffiliated brokers and marketing associations.
96 (41)
NOTE 11: QUARTERLY FINANCIAL DATA (Unaudited)
(In thousands except per share data)
- ----------------------------------------------------------------------------
Net Earnings
Gross Income (Loss) Per
Quarter Ended Sales Margin (Loss) Share
- ----------------------------------------------------------------------------
01-01-94 $1,152,790 $217,375 $ 44,379 $ .30
04-02-94 1,261,903 222,520 43,121 .29
07-02-94 1,307,697 256,708 (148,401)* (1.00)*
10-01-94 1,387,880 264,617 58,773 .40
- ----------------------------------------------------------------------------
Fiscal 1994 $5,110,270 $961,220 $ (2,128)* $ (.01)*
- ----------------------------------------------------------------------------
01-02-93 $1,083,312 $204,802 $ 39,396 $ .27
04-03-93 1,170,411 226,903 46,088 .31
07-03-93 1,216,875 239,422 53,711 .36
10-02-93 1,236,798 239,730 41,139 .28
- ----------------------------------------------------------------------------
Fiscal 1993 $4,707,396 $910,857 $180,334 $ 1.22
- ----------------------------------------------------------------------------
* Includes special charges of $213,924 or $1.38 per share. See Note 2 of
Notes to Consolidated Financial Statements.
PRICE OF COMPANY'S COMMON STOCK (Nasdaq stock market)
- ----------------------------------------------------------------------------
Fiscal Year 1994 Fiscal Year 1993
- ----------------------------------------------------------------------------
High Low High Low
- ----------------------------------------------------------------------------
First Quarter 24 1/8 21 1/8 24 7/8 19 7/8
- ----------------------------------------------------------------------------
Second Quarter 25 18 3/4 27 1/8 22 1/8
- ----------------------------------------------------------------------------
Third Quarter 23 3/4 18 7/8 24 1/4 20 1/2
- ----------------------------------------------------------------------------
Fourth Quarter 25 22 7/8 22 19 1/4
- ----------------------------------------------------------------------------
97 (42)
Report of Management
The management of Tyson Foods, Inc. (the Company) has the responsibility of
preparing the accompanying financial statements and is responsible for their
integrity and objectivity. The statements were prepared in conformity with
generally accepted accounting principles applied on a consistent basis. Such
financial statements are necessarily based, in part, on best estimates and
judgments.
The Company maintains a system of internal accounting controls, and a program
of internal auditing designed to provide reasonable assurance that the
Company's assets are protected and that transactions are executed in
accordance with established authorization, and are properly recorded. This
system of internal accounting controls is continually reviewed and modified
in response to changing business conditions and operations and to
recommendations made by the independent auditors and the internal auditors.
The management of the Company believes that the accounting and control
systems provide reasonable assurance that assets are safeguarded and
financial information is reliable.
The Audit Committee of the Board of Directors meets regularly with the
Company's financial management and counsel, with the Company's internal
auditors, and with the independent auditors engaged by the Company. These
meetings include discussions of internal accounting controls and the quality
of financial reporting. The independent auditors and the Internal Audit
Department have free and independent access to the Audit Committee to discuss
the results of their audits or any other matters relating to the Company's
financial affairs.
The accompanying consolidated financial statements have been audited by Ernst
& Young LLP, independent auditors.
November 14, 1994
/s/Don Tyson
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Don Tyson
Chairman of the Board
/s/Gerald Johnston
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Gerald Johnston
Executive Vice President, Finance
98 (43)
Report of Independent Auditors
Board of Directors and Shareholders
Tyson Foods, Inc.
We have audited the accompanying consolidated balance sheets of Tyson Foods,
Inc. as of October 1, 1994 and October 2, 1993, and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of
the three years in the period ended October 1, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Tyson Foods,
Inc. at October 1, 1994 and October 2, 1993, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended October 1, 1994 in conformity with generally accepted accounting
principles.
/s/Ernst & Young LLP
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Little Rock, Arkansas
November 14, 1994
99 (44)