UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly period ended December 31, 1994
_________________
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from__________________to______________________
Commission File Number 0-3400
______
TYSON FOODS, INC.
________________________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 71-0225165
_______________________________ ___________________________________
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2210 West Oaklawn Drive, Springdale, Arkansas 72762-6999
________________________________________________________________________
(Address of principal executive offices and zip code)
(501) 290-4000
________________________________________________________________________
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes x No
___ ___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding December 31, 1994
____________________________________ _____________________________________
Class A Common Stock, $.10 Par Value Shares 75,755,704
Class B Common Stock, $.10 Par Value Shares 68,455,238
Page 1
TYSON FOODS, INC.
INDEX
PAGE
____
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
December 31, 1994 and October 1, 1994 3-4
Consolidated Condensed Statements of Income
for the Three Months Ended
December 31, 1994 and January 1, 1994 5
Consolidated Condensed Statements of Cash Flows
for the Three Months Ended
December 31, 1994 and January 1, 1994 6
Notes to Consolidated Condensed Financial
Statements 7-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-11
PART II. OTHER INFORMATION 12-13
SIGNATURES 14
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TYSON FOODS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
(Unaudited)
December 31, October 1,
ASSETS 1994 1994
_______________________________________ ____________ ___________
Current Assets:
Cash and cash equivalents $ 57,815 $ 27,020
Accounts receivable 394,906 444,216
Inventories 763,225 754,190
Other current assets 30,678 35,841
__________ __________
Total Current Assets 1,246,624 1,261,267
Net Property, Plant, and Equipment 1,634,420 1,609,997
Excess of Investments over Net Assets Acquired 738,162 741,626
Investments and Other Assets 75,095 55,110
__________ __________
Total Assets $3,694,301 $3,668,000
========== ==========
The accompanying notes are an integral part of these financial statements.
3
TYSON FOODS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in thousands except per share amounts)
(Unaudited)
December 31, October 1,
LIABILITIES AND SHAREHOLDERS' EQUITY 1994 1994
_______________________________________ ____________ __________
Current Liabilities:
Notes Payable $ 12,228 $ 49,360
Current portion of long-term debt 22,361 24,177
Trade accounts payable 247,464 258,589
Other accrued liabilities 219,790 207,657
__________ __________
Total Current Liabilities 501,843 539,783
Long-Term Debt 1,422,757 1,381,481
Deferred Income Taxes 437,278 440,546
Minority Interests in Subsidiaries 13,236 16,767
Shareholders' Equity:
Common stock ($.10 par value):
Class A-Authorized 900,000,000 shares;
issued 79,686,409 shares at 12-31-94
and 79,686,153 shares at 10-1-94 7,969 7,969
Class B-Authorized 900,000,000 shares;
issued 68,455,238 shares at 12-31-94
and 68,455,438 shares at 10-1-94 6,846 6,846
Capital in excess of par value 390,636 391,358
Retained earnings 1,003,379 953,840
Currency translation adjustment 5,431 1,180
__________ __________
1,414,261 1,361,193
Less treasury stock-3,930,705 shares at
12-31-94 and 2,941,151 shares at
10-1-94, at cost 92,054 68,700
Less unamortized deferred compensation 3,020 3,070
__________ __________
Total Shareholders' Equity 1,319,187 1,289,423
__________ __________
Total Liabilities and Shareholders' Equity $3,694,301 $3,668,000
========== ==========
The accompanying notes are an integral part of these financial statements.
4
TYSON FOODS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In thousands except per share data)
(Unaudited)
Three Months Ended
________________________
December 31, January 1,
1994 1994
___________ __________
Sales $1,326,357 $1,152,790
Cost of Sales 1,057,471 935,415
Expenses:
Selling 116,964 96,273
General and administrative 30,721 23,398
Amortization 6,502 8,165
Interest 25,359 17,016
Other expense (income) 5,073 (224)
__________ __________
Income Before Taxes on Income 84,267 72,747
Provision for Income Taxes 32,032 28,368
__________ __________
Net Income $ 52,235 $ 44,379
========== ==========
Average Shares Outstanding 145,045 148,580
======= =======
Earnings Per Share $0.36 $0.30
===== =====
Cash Dividends Per Share:
Class A $0.0200 $0.0100
======= =======
Class B $0.0167 $0.0083
======= =======
The accompanying notes are an integral part of these financial statements.
5
TYSON FOODS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
__________________________
December 31, January 1,
1994 1994
__________ _________
Cash Flows from Operating Activities:
Net income $ 52,235 $ 44,379
Adjustments to reconcile net income to cash
provided by (used for) operating activities:
Depreciation 42,645 37,451
Amortization 6,502 8,165
Deferred income taxes (3,268) 0
Loss on dispositions of property and
equipment 1,130 2,415
(Increase) decrease in accounts receivable 49,310 (242,411)
Increase in inventories (9,035) (33,830)
Increase (decrease) in trade accounts payable (11,125) 3,998
Net change in other current assets and
liabilities 17,296 (34,023)
_________ ________
Cash Provided by (Used for) Operating Activities 145,690 (213,856)
Cash Flows from Investing Activities:
Additions to property, plant and equipment (78,193) (44,368)
Proceeds from sale of property, plant and
equipment 1,967 1,142
Net increase in other assets (24,554) (1,866)
_________ ________
Cash Used for Investing Activities (100,780) (45,092)
Cash Flows from Financing Activities:
Net change in notes payable (37,132) 10,200
Proceeds from long-term debt 55,759 260,352
Repayments of long-term debt (16,299) (15,248)
Purchase of treasury shares (24,813) (991)
Dividends (2,696) (1,359)
Other 11,066 2,489
_________ _________
Cash Provided by (Used for) Financing Activities (14,115) 255,443
_________ _________
Increase (Decrease) in Cash and Cash Equivalents 30,795 (3,505)
Cash and Cash Equivalents at Beginning of Period 27,020 21,547
_________ _________
Cash and Cash Equivalents at End of Period $ 57,815 $ 18,042
========= =========
Supplemental Cash Flow Information,
Cash paid during the period for:
Interest $18,073 $11,444
Income taxes $31,827 $35,726
The accompanying notes are an integral part of these financial statements.
6
TYSON FOODS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Accounting Policies
The consolidated condensed financial statements have been prepared by Tyson
Foods, Inc. (the "Company"), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information
and accounting policies and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules
and regulations. Although the management of the Company believes that the
disclosures are adequate to make the information presented not misleading,
these consolidated condensed financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's latest annual report for the fiscal year ended
October 1, 1994. In the opinion of the management of the Company, the
accompanying consolidated condensed financial statements contain all
adjustments, consisting of normal recurring accruals necessary to present
fairly the financial position as of December 31, 1994 and October 1, 1994,
the results of operations and cash flows for the three months ended
December 31, 1994, and January 1, 1994. The results of operations and cash
flows for the three months ended December 31, 1994 and January 1, 1994, are
not necessarily indicative of the results to be expected for the full year.
The Notes to Consolidated Financial Statements for the year ended
October 1, 1994, reflect the significant accounting policies, debt
provisions, borrowing arrangements, dividend restrictions, contingencies and
commitments of the Company. There were no material changes in such items
during the three months ended December 31, 1994, except as disclosed below.
2. Inventories
(In thousands)
Inventories, valued at the lower of December 31, October 1,
cost (first-in, first-out) or market 1994 1994
consist of the following: ___________ __________
Finished and work-in-process $361,093 $346,846
Live poultry and hogs 252,943 255,904
Seafood related products 31,071 36,494
Hatchery eggs and feed 43,016 44,048
Supplies 75,102 70,898
________ ________
Total $763,225 $754,190
======== ========
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TYSON FOODS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
3. 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 the 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. In
December 1994, the Federal Grand Jury issued a second superseding indictment
against the former officers, directors and employees as well as Arctic on
substantially identical criminal charges with three prior indictees being
charged with misdemeanors rather than felonies. The factual allegations
giving rise to the 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 the trial of a portion of the defendants on the
indictments will begin in June 1995. Also, on September 8, 1993, the State of
Alaska, after conducting investigations, filed a Complaint for Forfeiture and
Damages 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.
8
TYSON FOODS, INC.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
FINANCIAL CONDITION
For the three months ended December 31, 1994, net cash of $145.7 million was
provided by all operating activities, consisting of $99.2 million provided by
operations and $46.5 million provided by net changes in receivables,
inventories, payables and other items. Finished inventories have increased
from 1994 fiscal year-end due to seasonal inventory increases and shifts in
product mix. Financing activities used net cash of $14.1 million, mainly due
to the purchase during the first quarter of 1995 of 1.1 million treasury
shares under the Company's 15 million share buyback program. The Company
primarily used funds generated from operating activities to fund
$78.2 million of property, plant and equipment additions. The expenditures
for property, plant and equipment were related to new equipment and upgrading
facilities to take advantage of market opportunities and the Company's
continuing effort to increase efficiencies, reduce overall cost, and meet or
exceed environmental standards.
At December 31, 1994, working capital was $744.8 million compared to
$721.5 million at 1994 fiscal year-end, an increase of $23.3 million. The
current ratio at December 31, 1994 was 2.48 to 1 compared to 2.34 to 1 at
October 1, 1994. Working capital and the current ratio have increased since
year-end due to a shift in total debt from short-term borrowings to long-term
debt. 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 the Company believes are available.
Long-term debt has increased $41.3 million since October 1, 1994. At
December 31, 1994, long-term debt was 51.9% of total capitalization compared
to 51.7% at October 1, 1994. The Company's two unsecured revolving credit
agreements provide up to $1.5 billion of financing which supports the
Company's commercial paper program. At December 31, 1994, $963.7 million was
outstanding under, or supported by the $1.5 billion financing facilities
consisting of $728.7 million of commercial paper and $235 million drawn under
the revolving credit facilities. Additional outstanding long-term debt at
December 31, 1994, consisted of $348.7 million of institutional notes,
$30 million of bank notes and $80.3 million of other indebtedness.
RESULTS OF OPERATIONS
Sales for the first quarter of 1995 increased 15.1% over the same quarter of
1994. This increase was partially due to an increase in consumer poultry
sales which increased 1995 first quarter total sales by 10.3%. The increase
in consumer poultry sales is attributable to a 15.8% increase in tonnage
offset somewhat by a 2% decrease in average sales prices. Trasgo S.A. de C.V.
(Trasgo), the Company's 50.1% owned Mexican subsidiary which was acquired in
the third quarter of fiscal 1994, accounted for 28.7% of the increase in
9
TYSON FOODS, INC.
consumer poultry. Beef and pork sales increased 1995 first quarter total
sales by 0.7% compared to the same quarter of 1994. The increase in beef and
pork sales was due to an 18.2% increase in tonnage offset by a 10% decrease
in average sales prices. The increase in beef and pork tonnage is mainly due
to the acquisition of Gorges Foodservice, Inc. in the second quarter of
fiscal 1994. Sales of Mexican food and prepared foods as a group increased
1995 first quarter total sales by 2.8%. Culinary Foods, acquired by the
Company in the fourth quarter of fiscal 1994, accounted for 72.5% of the
increase in prepared foods. Seafood sales increased 1995 first quarter total
sales 0.5% due to an 8.2% increase in tonnage and a 6% increase in average
sales prices. First quarter sales of animal foods, by-products, live swine
and other sales as a group increased 1995 first quarter total sales by 0.8%
compared to the same quarter of last year due to a 13.3% increase in tonnage
and a 3.6% increase in average sales prices. Extremely low market prices,
which were below rearing costs, adversely affected both sales and profit
margins for live swine during the first quarter of 1995. The Company's pork
processing operations were also adversely affected as competitors were able
to buy their raw materials at lower prices while the Company's integrated
operations provided higher cost raw materials. Market prices for live swine
have trended upward during the second quarter. Although increased live swine
prices are expected to improve this division's results, management cannot
predict when the Company's integrated pork operations will achieve expected
performance goals.
The increase in cost of goods sold of 13% for the first quarter of 1995
compared to the same quarter of 1994 was mainly the result of the increase in
sales offset by a decrease of approximately 11.3% in feed ingredient costs.
As a percent of sales, cost of sales was 79.7% for the first quarter of 1995
compared to 81.1% in the first quarter of 1994. 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.
Operating expenses increased 20.6% for the first quarter of 1995 over the
same quarter of 1994. Increased storage and distribution costs, a portion of
which is related to increases in international sales, have contributed to
increased selling expenses. In addition, acquisitions since the first quarter
of last year have added to increased selling expense when expressed as a
percent of sales. Selling expense, as a percent of sales, in the first
quarter of 1995 was 8.8% compared to 8.4% in the same quarter of 1994. The
Company's recent acquisitions, which have higher general and administrative
expenses as a percent of sales than normal Company target levels, have
contributed to higher overall general and administrative expenses. Temporary
increases in legal costs have also had an impact on general and
administrative expenses. General and administrative expense, as a percent of
sales, was 2.3% in the first quarter of 1995 compared to 2% in the same
period of 1994. Amortization expense was 0.5% of sales in the first quarter
of 1995 compared to 0.7% in 1994.
10
TYSON FOODS, INC.
The recent devaluation of the Mexican peso adversely affected Trasgo's fiscal
1995 first quarter operating results, which reduced Tyson's after-tax
operating results by $2.2 million. Management will continue to evaluate the
effect of exchange rates on Trasgo's operating results to determine its
impact, if any, on the Company's future operating results.
Interest expense increased 49% in the first quarter of 1995 compared to the
same quarter of 1994. Trasgo accounted for 24.8% of the increase in interest
expense. Short-term interest rates were approximately 75% higher than the
same period last year, which raised the weighted average interest rate of all
Company debt to 7.3% compared to 6.2% for the same period last year. In
addition, the Company had a higher level of borrowing as a result of
acquisitions and the consolidation of Trasgo's debt which increased the
Company's average indebtedness by 27.4% over the same period last year.
The effective income tax rate for the first quarter of 1995 was 38% compared
to 39% in the same period of 1994. The decrease in the effective tax rate is
due to reduced state income taxes and the reduced impact of the non-
deductibility of amortization of excess of investments over net assets
acquired as income before income taxes increases plus an increase in items
deductible for income tax purposes that are not deductible for financial
statement purposes.
ENVIRONMENTAL MATTERS
The Company has a strong financial commitment to environmental matters.
During the first three months of fiscal 1995 the Company invested
approximately $9.3 million in water quality facilities, including capital
outlays to build and upgrade facilities, and $8.6 million for day-to-day
operations of waste-water facilities.
11
TYSON FOODS, INC.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The following directors were elected at the annual shareholders' meeting held
January 13, 1995:
DIRECTORS VOTES FOR VOTES WITHHELD
________________ ___________ ______________
Neely Cassady 745,139,649 675,993
Lloyd V. Hackley 745,129,210 686,432
Shelby Massey 745,139,992 675,650
Joe F. Starr 745,126,731 688,911
Leland Tollett 745,145,866 669,776
Barbara Tyson 745,140,905 674,737
Don Tyson 745,135,555 680,087
John H. Tyson 745,138,611 677,031
Fred S. Vorsanger 745,132,638 683,004
Donald E. Wray 745,151,802 663,840
Additionally, Don Tyson, Chairman of the Board of Directors of the Company,
announced that effective April 21, 1995, he would step down as Chairman of
the Board of Directors and serve as Senior Chairman of the Board of
Directors. Don Tyson was elected Senior Chairman of the Board of Directors at
its meeting prior to the annual shareholders meeting. The Board of Directors
also elected Leland Tollett, currently President and Chief Executive Officer,
to succeed Don Tyson as Chairman of the Board of Directors effective
April 21, 1995.
Shareholders also approved (1) the adoption of the Senior Executive
Performance Bonus Plan with 737,233,361 votes for approval, 4,300,727 votes
against, 933,582 votes abstaining and 3,347,972 nonvotes and (2) Amendments
to the Amended and Restated Nonstatutory Stock Option Plan with 728,678,413
votes for approval, 2,785,174 votes against, 1,061,483 votes abstaining and
13,290,572 nonvotes.
No other items were voted upon at the annual shareholders' meeting or during
the quarter ended December 31, 1994.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
The exhibits filed with this report are listed in the exhibit index at the
end of this Item 6.
(b) Reports on Form 8-K:
None.
12
TYSON FOODS, INC.
EXHIBIT INDEX
The following exhibits are filed with this report.
Exhibit No. Page
___________ ____
10(a) Amendment Agreement, dated November 1, 1994, to Amended 15-22
and Restated Note Purchase Agreements, dated June 30, 1993,
by and between the Company and various Purchasers as listed
in the Purchaser Schedule attached to said agreement,
together with the following related documents:
(i) Form of Series A Note
(ii) Form of Series D Note
10(b) Amendment Agreement, dated November 1, 1994, to Amended 23-30
and Restated Note Agreements, dated June 30, 1993, by and
between the Company and various Purchasers as listed in
the Purchaser Schedule attached to said agreement, together
with the following related documents:
(i) Form of Series E Note
(ii) Form of Series F Note
(iii) Form of Series G Note
10(c) Master Shelf Agreement dated January 13, 1995, between 31-84
the Company and the Prudential Insurance Company of America.
11 Statement Regarding Computation of Earnings Per Share 85
27 Financial Data Schedule 86
13
TYSON FOODS, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TYSON FOODS, INC.
Date: February 10, 1995 /s/ Gerald Johnston
_________________ _________________________
Gerald Johnston
Executive Vice President,
Finance
Date: February 10, 1995 /s/ Gary Johnson
_________________ _________________________
Gary Johnson
Corporate Controller
14