Tyson Foods 1999 Annual Report Download

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To get to the other side.
1999 Annual Report

Table of contents

  • Page 1
    To get to the other side. 1999 Annual Report

  • Page 2
    ... 1999 annual report Answers to Questions ... 2 Consolidated Statements of Cash Flows Report of Management Board of Directors . ... 41 42 56 57 58 59 60 Letter to Shareholders . 16 20 24 26 38 39 40 Notes to Consolidated Financial Statements . Report of Independent Auditors . Business Group...

  • Page 3
    At Tyson Foods, it's our job to have answers.

  • Page 4
    ... at the Tyson Management Development Center from left to right: Michelle Hutcheison, Robards, Ky.; Milo Hughes, Waldron, Ark.; Florence Sims, Cleveland, Miss.; Urbano Rodriguez, Seguin, Texas; Basilio Zuniga, Chicago, Ill.; Jimmy Robinson, Forest, Miss.; Carolyn Lindsey, Union City, Tenn.; Michael...

  • Page 5
    ... way ? Yes. Tyson is the largest poultry producer in the world, and 1999 was a year when we reexamined ourselves. We reorganized our company into four groups focused on their respective markets - Food Service, Consumer Products, International and Prepared Foods. Sales and production are aligned in...

  • Page 6
    ...a corporate marketing group responsible for coordinating our communications, market research and product innovation efforts across the company. This is a new and resourceful way to help us harness our brand building activities and ensure that we deliver on our Tyson brand promise of "Quality Chicken...

  • Page 7
    who's chicken?

  • Page 8
    .... Our efforts in food safety are the industry standard. We're exploring new methods, such as cold pasteurization, to provide people with added peace of mind. Whether it's a restaurant owner for dinner, Tyson is quality chicken they can trust. who expects consistent quality or the family sitting down...

  • Page 9
    ... education program to inform consumers of safe handling and preparation procedures. Our trademarked 3 C's (Chill, Cook, Clean) program is promoted on all fresh chicken packaging, in-store materials and the Tyson web site. We will continue to be the industry leader in testing and using emerging food...

  • Page 10
    is the market ready ? Chicken is the only major protein expected to show an increase in consumption over the next five years. Tyson delivers products that offer great taste, outstanding quality and convenience. We are strengthening chicken's position as the protein of choice by quickly responding to...

  • Page 11
    In a recent market test in a college food court, the new Tyson chicken burger outsold beef burgers by a margin of two to one.

  • Page 12
    ... for value-added chicken, and Tyson is ready for the world. Emerging markets hold a tremendous opportunity to grow the Tyson brand. We have the capability to tailor products to suit international tastes and customs. World consumers will know the Tyson oval stands for "Quality Chicken You Can Trust...

  • Page 13

  • Page 14
    ... based warehouse management systems ensure that we track our product from the production line to our customer's warehouse. We communicate with our sales representatives and customers through the Internet, providing up-to-the-minute product and business information. Tyson is on the front lines of...

  • Page 15
    ...1999 PC Week magazine's Fast-Track 100 list of Internet Technology Innovators included the well-known computer and telecommunications companies, but there was only one perishable food company in the top 50 - Tyson, ranked 31st. There is no doubt our use of technology gives us a competitive advantage...

  • Page 16
    United Way Day of Caring in Fayetteville, Ark.

  • Page 17
    ... corporate giving. In addition to disaster and hunger relief, our team members have a special enthusiasm for children. Our sponsorship of children's reading and development programs and the Tyson Foundation's annual award of approximately 100 scholarships are just a few examples of both our company...

  • Page 18
    ... Tyson shareholders: In our letter to you last year we defined 1998 as a year of transition, refining and strengthening. Nineteen ninety-nine was a culmination and manifestation of these endeavors. This year we put an organization in place to better identify, develop and execute strategic objectives...

  • Page 19
    ... of sales and production, the new organization aligns sales and production together into market As part of our desire to achieve clarity and purpose in our Company, we initiated a new organizational structure in March. with Smithfield Foods, Inc. for the sale of The Pork Group. These businesses...

  • Page 20
    ..., International and Prepared Foods. Each business group is responsible for sales and production, operational planning, efficient use of capital and profitability. These groups are supported by typical shared services activities including finance, legal, human resources, quality assurance and supply...

  • Page 21
    ... of Des Arc, Ark., and a graduate of the University of Arkansas, joined Tyson Foods in 1961 as a field serviceman. He was promoted to production supervisor in 1963, to director of sales in 1964, to director of processing and sales in 1967, to vice president of sales and marketing in 1982 and to...

  • Page 22
    ...-added items address these customer concerns and are where Tyson places the majority of our attention. In a recent Gallop study, 66 percent of food service operators surveyed said Tyson was the best brand of chicken - eight times greater than the nearest competitor. New products this year included...

  • Page 23
    ... product line of family favorites such as Buffalo Style Chicken Strips and Popcorn Chicken Bitesâ„¢ packaged in resealable family size bags was well received. In a continuing effort to promote food safety, the Consumer Products Group launched the Cooking Smartâ„¢ 3 C's (Chill, Cook, Clean) program...

  • Page 24
    ... systems and marketing expertise to key business partners in selected foreign markets. The Group manages operations in three distinct geographic regions - Asia Pacific, The Americas/Africa and Russia/Europe/Middle East. It is led by a U.S.-based president who oversees regional heads as well...

  • Page 25
    ... in 1999. tortilla products. In 2000 Mexican Original® will continue to expand its business by targeting underdeveloped markets including schools, healthcare and sports and entertainment venues as well as promoting value-added products and services. Mallard's Food Products is the leader in branded...

  • Page 26
    ...loss on the anticipated sale of The Pork Group and a $22.5 million pre-tax charge for write-down of impaired assets of Mallard's Food Products. 2. Significant business combinations accounted for as purchases: Hudson Foods, Inc., Arctic Alaska Fisheries Corporation and Holly Farms Corporation on Jan...

  • Page 27
    Eleven-year financial summary T Y S O N F O O D S , I N C . 1 99 9 A N N U A L R E P O RT in millions, except per share data 1995 1994 1993 1992 1991 1990 1989 $5,...million pre-tax gain ($4 million after-tax) from the sale of the beef division assets. 5. The results for 1994 include a $205 million...

  • Page 28
    ... assets held for sale at Oct. 3, 1998, were acquired as part of the Hudson Acquisition. I M PA I R M E N T A N D O T H E R C H A R G E S In July 1999, the Company signed a letter of intent to sell Mallard's Food Products (Mallard's) for an amount less than net book value. The sale of Mallard's was...

  • Page 29
    .... Management anticipates this excess supply of all meats will continue through the first six months of fiscal 2000. The following is an analysis of net sales by segment: dollars in millions 1999 1998 change % change % change of total Food Service Consumer Products International Swine Seafood...

  • Page 30
    ...Amortization expense, as a percent of sales, was 0.5% in 1999 compared to 0.4% in 1998. The following is an analysis of segment profit defined as gross profit less selling expenses: dollars in millions 1999 1998 change Food Service Consumer Products International Swine Seafood $311.0 241.7 67...

  • Page 31
    ... leg quarter prices and slowed volume. The following is an analysis of net sales by segment: dollars in millions 1998 1997 change % change % change of total Food Service Consumer Products International Swine Seafood Other $3,329.4 2,074.0 592.5 160.4 214.1 1,043.7 $7,414.1 $2,793.3 1,829.6 664...

  • Page 32
    Management's discussion and analysis T Y S O N F O O D S , I N C . 1 99 9 A N N U A L R E P O RT The following is an analysis of segment profit defined as gross profit less selling expenses: dollars in millions 1998 1997 change Food Service Consumer Products International Swine Seafood $232.0 ...

  • Page 33
    ... debt may provide more cost-effective financing than fixed-rate debt; however, the Company issues fixedrate debt when advantageous market opportunities arise. Shareholders' equity increased 8% during 1999 and has grown at a compounded annual rate of 10.5% over the past five years, inclusive of...

  • Page 34
    ... is that the new systems are compliant and non-compliant systems were ultimately retired. Two examples of this are the implementation of new accounting software from SAP that the Company installed at the beginning of the 1999 fiscal year, and the new payroll and human resource software also from...

  • Page 35
    ... will continue to test various components of the software portfolio until Dec. 31, 1999. The Company has not established a contingency plan for possible Year 2000 issues. However, all information systems personnel will be available over the New Year's holiday should any unforeseen problem arise. The...

  • Page 36
    ... of its foreign currency exposure. In 1999, the Company used such contracts to hedge exposure to changes in foreign currency exchange rates, primarily Mexican Peso, associated with debt denominated in U.S. dollars held by Tyson de Mexico. In 1998, the Company used such contracts to hedge exposure to...

  • Page 37
    ... As of Oct. 2, 1999 Liabilities Long-term debt, including current portion Fixed rate Average interest rate Variable rate Average interest rate Interest rate derivative financial instruments related to debt Interest rate swaps Pay fixed Average pay rate Average receive rate - USD 6 month LIBOR...

  • Page 38
    ...D A R D S In June 1998, the Financial Accounting Standards Board issued Statement No. 133, Accounting for Derivative Instruments and Hedging Activities, which requires adoption in the first quarter of fiscal 2001. The statement establishes accounting and reporting standards which require that all...

  • Page 39
    ...as a cumulative effect of an accounting change. At Oct. 2, 1999, the Company has no capitalized start-up costs. C A U T I O N A RY S TAT E M E N T S R E L E VA N T T O F O RWA R D - L O O K I N G I N F O R M AT I O N This annual report and other written reports and oral statements made from time to...

  • Page 40
    ... statements of income T Y S O N F O O D S , I N C . 1 99 9 A N N U A L R E P O RT in millions, except per share data three years ended Oct. 2, 1999 1999 1998 1997 Sales Cost of Sales $7,362.9 6,054.1 1,308.8 $7,414.1 6,260.1 1,154.0 $6,355.7 5,318.0 1,037.7 Operating Expenses: Selling...

  • Page 41
    ... per share data Oct. 2, 1999 and Oct. 3, 1998 1999 1998 Assets Current Assets: Cash and cash equivalents Accounts receivable Inventories Assets held for sale Other current assets Total Current Assets Net Property, Plant and Equipment Excess of Investments Over Net Assets Acquired Other Assets...

  • Page 42
    ... statements of shareholders' equity T Y S O N F O O D S , I N C . 1 99 9 A N N U A L R E P O RT in millions, except per share data 1999 1998 Amount 1997 Amount Shares Amount three years ended Oct. 2, 1999 Shares Shares Class A Common Stock Beginning balance Three-for-two stock split...

  • Page 43
    ... charges Deferred income taxes Minority interest Foreign currency exchange loss Gain on dispositions of property, plant and equipment Decrease (increase) in accounts receivable (Increase) decrease in inventories Increase (decrease) in trade accounts payable Net change in other current assets and...

  • Page 44
    ... chicken products through food service, retail grocery stores, club stores and international distribution channels. Although its core business is chicken, in the United States the Company is also the second largest maker of corn and ï¬,our tortillas under the Mexican Original® brand and through...

  • Page 45
    ... HELD FOR SALE Effective Sept. 28, 1999, the Company signed a letter of intent to sell its wholly-owned subsidiary, The Pork Group, Inc. (The Pork Group) to Smithfield Foods, Inc. (Smithfield). The Company will receive approximately three million shares of Smithfield common stock, subject to...

  • Page 46
    ... results that may occur in the future. N O T E 4 : I M PA I R M E N T A N D O T H E R C H A R G E S In July 1999, the Company signed a letter of intent to sell Mallard's Food Products (Mallard's) for an amount less than net book value. The sale of Mallard's was not consummated. However, based upon...

  • Page 47
    ... over net assets acquired and severance costs, $48.4 million for losses in the Company's export business to Russia which had been adversely affected by the continuing economic problems in Russia and $24 million for other charges related primarily to workers compensation and employment practice...

  • Page 48
    ... of these swaps were ($0.7) million and ($8.1) million at Oct. 2, 1999, and Oct. 3, 1998, respectively. Fair values of interest rate instruments are estimated amounts the Company would receive or pay to terminate the agreements at the reporting dates. These swaps mature from 2005 to 2008. Commodity...

  • Page 49
    ... general counsel and management are of the opinion that the final outcome should not have a material effect on the Company's results of operations or financial position. On June 22, 1999, 11 current and/or former employees of the Company filed the case of M.H. Fox, et al. v. Tyson Foods, Inc. in...

  • Page 50
    ... imposed, would have a material adverse effect on the Company's results of operations or financial condition. On Dec.16, 1998, Hudson Foods, Inc., Michael Gregory, Hudson's former Director of Customer Relations and Quality Control, and Brent Wolke, the former plant manager of Hudson's Columbus, Neb...

  • Page 51
    ... 2002. At Oct. 2, 1999, $290.5 million in commercial paper was outstanding under this facility. At Oct. 2, 1999, the Company had outstanding letters of credit totaling approximately $112.6 million issued primarily in support of workers' compensation insurance programs, industrial revenue bonds and...

  • Page 52
    Notes to consolidated financial statements T Y S O N F O O D S , I N C . 1 99 9 A N N U A L R E P O RT NOTE 10: RESTRICTED STOCK AND STOCK OPTIONS The Company has outstanding 141,750 restricted shares of Class A stock. The restriction expires over periods ranging from 10 to 26 years. The ...

  • Page 53
    ... interest rates ranging from 5.5% to 6.4%, expected volatility of 0.2% and dividend yield of 0.5% in both 1999 and 1998. The Company applies Accounting Principles Board Opinion No. 25 and related interpretations in accounting for its employee stock option plans. Accordingly, no compensation expense...

  • Page 54
    ... into taxable income. The suspense account represents the initial catch-up adjustment to change from the cash to accrual method of accounting and any related income taxes are deferred. However, legislation was enacted in 1997 that now requires the Company to pay down the suspense account over 20...

  • Page 55
    ... wholesale club markets targeted to small food service operators, individuals and small businesses. The Company's international segment markets and sells the full line of Tyson chicken products throughout the world. The Company's swine segment includes feeder pig finishing and marketing of swine...

  • Page 56
    ...assets and other corporate unallocated assets. Information on segments and a reconciliation to income before taxes and minority interest are as follows: in millions Food Service Consumer Products International Swine Seafood Other Consolidated Fiscal year ended Oct. 2, 1999 Sales Gross profit less...

  • Page 57
    ... 1998 and 1997, respectively. The Company sells certain of its products in foreign markets, primarily Canada, China, Georgia, Guatemala, Japan, Puerto Rico, Russia and Singapore as well as certain Middle Eastern and Caribbean countries. The Company's export sales for 1999, 1998 and 1997 totaled $546...

  • Page 58
    ... 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...

  • Page 59
    ... of Tyson Foods, Inc., as of October 2, 1999, and October 3, 1998, and the related consolidated statements of income, shareholders' equity, and cash ï¬,ows for each of the three years in the period ended October 2, 1999. These financial statements are the responsibility of the Company's management...

  • Page 60
    ... vice president, international division; vice president, wholesale club sales and marketing; secretary-treasurer; controller; cost and budget manager; and complex controller.1 JIM KEVER, 46, founder of ENVOY and a private investor. He served as senior vice chairman of the board of directors from...

  • Page 61
    ...Officer Roy D. Brister Vice President, Poultry Research and Nutrition Ellis Brunton Vice President, Research and Quality Assurance Wayne Butler President, Prepared Foods Group Jim Cate President, Specialty Products Group Gary D. Cooper Vice President and Chief Information Officer John D. Copeland...

  • Page 62
    ... First Chicago Trust Company to implement its program for dividend reinvestment and direct purchase of shares for current as well as new investors of Tyson Class A Common Stock. This program provides alternatives to traditional retail brokerage methods of purchasing, holding and selling Tyson stock...

  • Page 63
    .... Corporate Headquarters Financial analysts and others seeking investorrelated information should contact: Director of Investor Relations Tyson Foods, Inc. P.O. Box 2020 Springdale, AR 72765-2020 Telephone (501) 290-4826 Fax (501) 290-6577 E-mail: [email protected] News Releases 2210 West Oaklawn...

  • Page 64
    Tyson Foods, Inc. 2210 West Oaklawn Drive Springdale, Arkansas 72762-6999 www.tyson.com