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 30, 1995
_________________
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 30, 1995
____________________________________ _____________________________
Class A Common Stock, $.10 Par Value 76,486,392 Shares
Class B Common Stock, $.10 Par Value 68,454,388 Shares
Page 1
TYSON FOODS, INC.
INDEX
PAGE
____
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
December 30, 1995 and September 30, 1995 3-4
Consolidated Condensed Statements of Income
for the Three Months Ended December 30, 1995 and
December 31, 1994 5
Consolidated Condensed Statements of Cash Flows
for the Three Months Ended December 30, 1995 and
December 31, 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 12-14
SIGNATURES 15
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TYSON FOODS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions)
(Unaudited)
December 30, September 30,
ASSETS 1995 1995
_______________________________________ ___________ ____________
Current Assets:
Cash and cash equivalents $ 24.2 $ 33.1
Accounts receivable 490.1 494.7
Inventories:
Finished and work-in-process 468.4 417.6
Live poultry and hogs 343.2 321.0
Seafood related products 62.7 75.1
Hatchery eggs and feed 61.4 58.6
Supplies 82.3 77.1
________ ________
Total inventories 1,018.0 949.4
Other current assets 39.4 42.6
________ ________
Total Current Assets 1,571.7 1,519.8
Net Property, Plant, and Equipment 2,019.8 2,013.5
Excess of Investments over Net Assets Acquired 801.3 808.1
Investments and Other Assets 104.8 102.9
________ ________
Total Assets $4,497.6 $4,444.3
======== ========
The accompanying notes are an integral part of these financial statements.
3
TYSON FOODS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions except per share data)
(Unaudited)
December 30, September 30,
LIABILITIES AND SHAREHOLDERS' EQUITY 1995 1995
_______________________________________ ___________ ____________
Current Liabilities:
Notes payable $ 79.9 $ 95.2
Current portion of long-term debt 76.8 269.0
Trade accounts payable 273.4 274.7
Other accrued liabilities 225.0 226.9
________ ________
Total Current Liabilities 655.1 865.8
Long-Term Debt 1,848.1 1,620.5
Deferred Income Taxes 479.5 479.7
Other Liabilities 6.8 10.6
Shareholders' Equity:
Common stock ($.10 par value):
Class A-Authorized 900 shares;
issued 79.7 shares at
12-30-95 and 9-30-95 8.0 8.0
Class B-Authorized 900 shares;
issued 68.5 shares at
12-30-95 and 9-30-95 6.8 6.8
Capital in excess of par value 375.5 377.9
Retained earnings 1,201.3 1,162.3
Currency translation adjustment (5.1) (5.2)
________ ________
1,586.5 1,549.8
Less treasury stock, at cost-
3.2 shares at 12-30-95 and
3.4 shares at 9-30-95 75.6 79.2
Less unamortized deferred compensation 2.8 2.9
________ ________
Total Shareholders' Equity 1,508.1 1,467.7
________ ________
Total Liabilities and Shareholders' Equity $4,497.6 $4,444.3
======== ========
The accompanying notes are an integral part of these financial statements.
4
TYSON FOODS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In millions except per share data)
(Unaudited)
Three Months Ended
__________________
December 30, December 31,
1995 1994
___________ ___________
Sales $1,546.8 $1,326.3
Cost of Sales 1,279.7 1,057.4
________ ________
Gross Profit 267.1 268.9
Expenses:
Selling 129.2 117.0
General and administrative 25.6 30.7
Amortization 6.9 6.5
________ ________
Operating Income 105.4 114.7
Other Expense (Income):
Interest 35.0 25.3
Foreign currency exchange 10.7 5.8
Other (3.1) .7
________ ________
Income Before Taxes on Income
and Minority Interest 62.8 82.9
Provision for Income Taxes 23.2 32.1
Minority Interest in Net Loss
of Consolidated Subsidiary 3.7 1.4
________ ________
Net Income $ 43.3 $ 52.2
======= =======
Average Shares Outstanding 145.4 145.0
===== =====
Earnings Per Share $0.30 $0.36
===== =====
Cash Dividends Per Share:
Class A $0.030 $0.0200
====== =======
Class B $0.027 $0.0167
====== =======
The accompanying notes are an integral part of these financial statements.
5
TYSON FOODS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended
__________________
December 30, December 31,
1995 1994
___________ ___________
Cash Flows from Operating Activities:
Net income $43.3 $52.2
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation 51.4 42.6
Amortization 6.9 6.5
Deferred income taxes (.2) (3.3)
Foreign currency exchange loss 10.7 5.8
Minority interest (3.7) (1.4)
Loss on dispositions of property and equipment 1.0 1.1
Decrease in accounts receivable 2.9 49.3
Increase in inventories (70.9) (9.0)
Decrease in trade accounts payable (4.5) (11.1)
Net change in other current assets and
liabilities 2.3 13.0
______ ______
Cash Provided by Operating Activities 39.2 145.7
Cash Flows from Investing Activities:
Additions to property, plant and equipment (69.9) (78.2)
Proceeds from sale of property, plant and
equipment 1.1 2.0
Net change in other assets and liabilities 2.0 (24.6)
______ ______
Cash Used for Investing Activities (66.8) (100.8)
Cash Flows from Financing Activities:
Net change in notes payable (15.3) (37.1)
Proceeds from long-term debt 334.0 55.7
Repayments of long-term debt (295.0) (16.3)
Purchase of treasury shares (1.2) (24.8)
Other (2.2) 8.4
______ ______
Cash Provided by (Used for) Financing Activities 20.3 (14.1)
Effect of Exchange Rate Change on Cash (1.6)
______ ______
Increase(Decrease) in Cash and Cash Equivalents (8.9) 30.8
Cash and Cash Equivalents at Beginning of Period 33.1 27.0
______ ______
Cash and Cash Equivalents at End of Period $24.2 $57.8
===== =====
Supplemental Cash Flow Information
Cash paid during the period for:
Interest $28.1 $18.1
Income taxes $2.5 $31.8
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
September 30, 1995. 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 30, 1995 and
September 30, 1995, the results of operations and cash flows for the three
months ended December 30, 1995 and December 31, 1994. The results of
operations and cash flows for the three months ended December 30, 1995 and
December 31, 1994, are not necessarily indicative of the results to be
expected for the full year. Certain amounts in the December 31, 1994
consolidated condensed financial statements have been reclassified to
conform with the December 30, 1995 presentation.
The Notes to Consolidated Financial Statements for the year ended
September 30, 1995, 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 30, 1995, except as disclosed
below.
2. 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 matter relating to Arctic Alaska Fisheries
Corporation ("Arctic"). On September 8, 1993, the State of Alaska (the
"State"), 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, all of which arose prior
to the Company's acquisition of Arctic. On February 2, 1996, Arctic and the
State agreed to settle the matter by Arctic agreeing to make future
payments to the State. The total of such payments will not have a material
adverse effect on the Company's financial condition or results of
operations.
3. Accounting Change
Effective October 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 121 (SFAS No. 121), "Accounting for the Impairment
7
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." Under
SFAS No. 121, impairment losses are recognized when information indicates
the carrying amount of long-lived assets, identifiable intangibles and
goodwill related to those assets will not be recovered through future
operations or sale. Impairment losses for assets to be held or used in
operations will be based on the excess of the carrying amount of the asset
over the asset's fair value. Assets held for disposal, except for
discontinued operations, will be carried at the lower of carrying amount or
fair value less cost to sell. The effect of adopting SFAS No. 121 was not
material.
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 30, 1995, net cash of $39.2 million was
provided by all operating activities, consisting of $109.4 million provided
by operations offset by $70.2 million used for net changes in receivables,
inventories, payables and other items. Finished inventories have increased
from 1995 fiscal year-end due to increased grain costs, more volume from
expansion and other general inventory increases.
Financing activities provided net cash of $20.3 million, mainly due to
additional debt borrowings during the first three months of fiscal 1996.
The Company primarily used funds generated from operating and financing
activities to fund $69.9 million of property, plant and equipment
additions. The expenditures for property, plant and equipment were related
to acquiring new equipment and upgrading facilities in order to maintain
competitive standing and position the Company for future opportunities.
Additionally, the Company makes a continuing effort to increase
efficiencies, reduce overall cost and meet or exceed environmental
standards.
At December 30, 1995, working capital was $916.6 million compared to $654
million at 1995 fiscal year-end, an increase of $262.6 million. The current
ratio at December 30, 1995 was 2.40 to 1 compared to 1.76 to 1 at September
30, 1995. Working capital and the current ratio have increased since year-
end primarily due to increases in inventories and a decrease in current
portion of 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 as well as additional credit facilities which the Company
believes are available.
Long-term debt has increased $227.6 million since September 30, 1995. In
October 1995, the Company issued $200 million in medium-term notes,
including $50 million in the form of 6.39-6.41% medium-term notes due
October 10, 2000 and $150 million in the form of 6.625% medium-term notes
due October 17, 2005. Proceeds from these medium-term notes were used to
repay a portion of the Company's borrowings under its commercial paper
program. At December 30, 1995, long-term debt was 55.1% of total
capitalization compared to 52.5% at September 30, 1995.
The Company has unsecured revolving credit facilities totaling $1.5 billion
which supports the Company's commercial paper program. The $1 billion
facility expires in May 2000. At December 30, 1995, $1 billion was
outstanding under this facility consisting of $785 million in commercial
paper and $215 million drawn under the revolver. The $500 million facility
expires in May 1996. At December 30, 1995, the Company had $499 million
available under this revolving credit facility. Additional outstanding long-
term debt at December 30, 1995, consisted of $348.2 million of public debt,
$297.7 million of institutional notes, $35 million of bank notes and $167.3
million of other indebtedness.
9
RESULTS OF OPERATIONS
Sales for the first quarter of fiscal 1996 increased 16.6% over the same
quarter of fiscal 1995. This increase was largely due to an increase in
consumer poultry sales which increased fiscal 1996 first quarter total
sales by 16.3%. The tonnage volume of consumer poultry sales increased
30.6% offset by a decrease in average sales prices of 6.8%. The decrease in
average sales prices for consumer poultry is mainly due to the acquisitions
in September 1995 of two poultry operations which changed the overall
product mix toward more lower priced products. Another contributing factor
to the decrease in average sales prices for consumer poultry was the
devaluation of the Mexican peso, which substantially lowered average sales
prices of the Company's 50.1% owned Mexican poultry subsidiary, Trasgo S.A.
de C.V. ("Trasgo").
Beef and pork sales decreased fiscal 1996 first quarter total sales by 3.7%
compared to the same quarter of fiscal 1995. The decrease in beef and pork
sales was due to a 53.7% decrease in tonnage partially offset by a 38.2%
increase in average sales prices. The decrease in tonnage is mainly due to
the sale in the fourth quarter of fiscal 1995 of the Company's swine
slaughter facility. In addition, the sale of this swine slaughter facility
eliminated lower priced fresh pork from the product mix which accounts for
the significant increase in average sales prices.
Sales of Mexican food-based products and prepared foods as a group
decreased fiscal 1996 first quarter total sales by 0.1%. This decrease was
primarily due to a 2.6% decrease in average sales prices as well as a
change in product mix, partially offset by a 1.6% increase in tonnage.
Seafood sales increased fiscal 1996 first quarter total sales 0.5% due to
an 11.3% increase in tonnage and a 2.3% increase in average sales prices.
The increase in seafood tonnage is mainly due to acquisitions at the end of
the third quarter of fiscal 1995. Although management expects the Company's
seafood operations to be profitable in fiscal year 1996, the seafood
operations continue to be affected by reduced quotas and other regulations
which limit its source of supply. First quarter sales of live swine, animal
foods, by-products, and other as a group increased fiscal 1996 first
quarter total sales by 3.6% compared to the same quarter of last year.
The increase in cost of goods sold of 21.0% for the first quarter of fiscal
1996 compared to the same quarter of fiscal 1995 was mainly the result of
the increase in sales and a significant increase in the cost of grain used
in the Company's operations. Increases in the cost of ingredients used in
feed for poultry and swine and the ingredients used in Mexican food-based
operations are estimated to have increased cost of sales by $45 million
during the first quarter of fiscal 1996. Higher ingredient costs are
anticipated to continue for a period of time and the effect on the
Company's cost of sales will significantly increase as these costs pass
through inventories. Therefore, the impact on the second quarter of fiscal
1996 will be significantly greater than the impact on the first quarter of
fiscal 1996. The impact of high ingredient costs on the Company's
operations is difficult to predict and is dependent upon various factors in
the commodity grain market as well as the market for finished products. The
Company's emphasis on adding value to its products through further-
processing helps to offset a portion of the impact of increased ingredient
costs. Further, the Company is making an effort to recover a portion of
increased grain costs through increased sales prices. However, because of
the current excess supply of poultry and alternative red meats in the
10
market place there can be no assurance that such costs can be passed on to
the consumer in the future through higher sales prices. Until such time as
ingredient costs subside, results of operations will be negatively
impacted. As a percent of sales, cost of sales was 82.7% for the first
quarter of fiscal 1996 compared to 79.7% in the first quarter of fiscal
1995.
Operating expenses increased 4.9% for the first quarter of fiscal 1996 over
the same quarter of fiscal 1995. While selling expense has increased as
sales volume has increased, selling expense as a percent of sales decreased
to 8.4% for the first quarter of fiscal 1996 as compared to 8.8% for the
first quarter of fiscal 1995. General and administrative expense, as a
percent of sales, was 1.7% in the first quarter of fiscal 1996 compared to
2.3% in the same period last year. The reduction in general and
administrative expense was primarily the result of a decrease in legal
costs and various cost reduction initiatives instituted by management.
Amortization expense was 0.4% of sales in the first quarter of fiscal 1996
compared to 0.5% of sales in the first quarter of fiscal 1995.
The devaluation of the Mexican peso adversely affected Trasgo's first three
months of fiscal 1996 operating results. The Company's share of Trasgo's
net loss for the first three months of fiscal 1996 reduced the Company's
consolidated net income by $3.7 million ($0.025 per share). Management can
not predict the effect of exchange rates on Trasgo's future operating
results.
Interest expense increased 38.3% in the first quarter of fiscal 1996
compared to the same quarter of fiscal 1995. The Company had a higher level
of borrowing, mainly to fund acquisitions, which increased the Company's
average indebtedness by 39.7% over the same period last year. In addition,
the Company's short-term interest rates were approximately 20.1% higher
than the same period last year, which raised the weighted average interest
rate of all Company debt to 7.5% compared to 7.3% for the same period last
year.
The effective income tax rate for the first quarter of fiscal 1996 was 37%
compared to 38.7% in the same period of fiscal 1995. In addition to reduced
state income taxes, the tax rate was impacted by an adjustment to the
liability for deferred income taxes to reflect the Company's current
assessment of tax contingencies provided for in prior years.
ENVIRONMENTAL MATTERS
The Company has a strong financial commitment to environmental matters.
During the first three months of fiscal 1996 the Company invested
approximately $11.7 million in water quality facilities, including capital
outlays of $1.8 million to build and upgrade facilities, and $9.9 million
for day-to-day operations of waste-water facilities.
11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On April 13, 1995, a purported shareholder's derivative action (the
"Action") was filed by a single shareholder on the Company's behalf in the
Court of Chancery of Delaware against the directors and principal
shareholders of the Company. The Action alleges that such persons breached
their fiduciary duties to the Company as a result of their approval and/or
participation in certain transactions in fiscal year 1994 between the
Company and various officers and directors or their affiliates, including
certain lease, poultry supply, poultry grow-out, wastewater treatment and
research and development service arrangements (such transactions being more
fully described under the caption "Certain Transactions" in the Company's
Proxy Statement for its 1995 Annual Meeting). Additionally, the Action
alleges that the compensation and expense reimbursements paid to the
Company's Senior Chairman in fiscal year 1994, and the expense
reimbursements paid to him in fiscal year 1993, were excessive. The Action
seeks various remedies, including (i) voiding of the challenged
transactions and an accounting of profits derived therefrom, (ii) damages
resulting from the challenged transactions and (iii) costs, expenses and
attorney fees. The Company is named as a nominal defendant in the Action,
but no claim has been asserted against it.
On May 10, 1995, the defendants filed a Motion to Dismiss the Action
claiming failure by the plaintiff to (i) make a pre-suit demand for action
by the directors of the Company, (ii) obtain personal jurisdiction over
certain shareholder defendants and (iii) state a claim upon which relief
can be granted. On July 6, 1995, the Court of Chancery entered a stipulated
order dismissing the Action without prejudice as to certain of the non-
director defendants. The Motion to Dismiss as to the remaining defendants
is currently pending before the Court of Chancery. By Stipulation Order of
said Court dated October 18, 1995, and pursuant to agreement of the
parties, said Motion to Dismiss is being held in abeyance while settlement
discussions occur.
Since the Action purports to be a shareholder's derivative suit, any
recovery (except attorneys fees or other costs and expenses, if allowed)
would not be paid to the plaintiff, but rather would be paid directly to
the Company. The Company has undertaken to advance certain expenses of the
director defendants and, if applicable, may be required to satisfy certain
indemnification obligations with respect to such individuals. However,
Management does not believe that the Action or such indemnification
obligations will have a material adverse effect on the Company's financial
position or results of operations.
See Note 2 of Notes to Consolidated Condensed Financial Statements with
respect to a contingency related to Arctic.
12
Item 4. Submission of Matters to a Vote of Security Holders
The following directors were elected at the annual shareholders' meeting
held January 12, 1996:
DIRECTORS VOTES FOR VOTES WITHHELD
_________ _________ ______________
Neely Cassady 745,266,220 715,169
Lloyd V. Hackley 745,244,495 736,894
Shelby Massey 745,243,285 738,104
Joe F. Starr 745,286,431 694,958
Leland Tollett 745,288,650 692,739
Barbara Tyson 745,286,949 694,440
Don Tyson 745,287,620 693,769
John H. Tyson 745,277,609 703,780
Fred S. Vorsanger 745,262,065 719,324
Donald E. Wray 745,291,379 690,010
No other items were voted upon at the annual shareholders' meeting or
during the quarter ended December 30, 1995.
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:
There were no reports filed on Form 8-K during the quarter ended
December 30, 1995.
13
TYSON FOODS, INC.
EXHIBIT INDEX
The following exhibits are filed with this report.
Exhibit No. Page
___________ ____
3(a) Certificate of Incorporation of the Company as amended
(previously filed as Exhibit 3(a) to the Company's
Registration Statement on Form S-4 filed with the
Commission on July 8, 1992, Commission File No. 33-49368,
and incorporated herein by reference).
3(b) Amended and Restated Bylaws of the Company (previously
filed as Exhibit 3(a) to the Company's Annual Report
on Form 10-K for the fiscal year ended October 1, 1994,
Commission File No. 0-3400, and incorporated herein by
reference).
11 Statement Regarding Computation of Per Share Earnings 16
27 Financial Data Schedule
14
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 9, 1996 /s/ Gerald Johnston
________________ ________________________
Gerald Johnston
Executive Vice President,
Finance
Date: February 9, 1996 /s/ Gary Johnson
________________ ________________
Gary Johnson
Corporate Controller
15