Tyson Foods 2002 Annual Report Download - page 22

management’s
discussion
and analysis
p 20
Beef segment sales were $10.5 billion, including beef case-ready sales of $689 million and international beef sales of $1.4 billion. Beef
segment operating income totaled $220 million. The beef segment resulted from the acquisition of IBP in the fourth quarter of fiscal 2001.
Chicken segment sales increased $165 million or 2.3% from the same period last year, with a 1.1% increase in average sale prices
and a 1.2% increase in volume. Foodservice chicken sales increased 4.9%, retail chicken sales increased 2.0% and international
chicken sales decreased 6.3%. In fiscal 2002, the Company’s Mexican subsidiary sales increased 36.1% from the same period last
year due to the acquisition of a production facility in Mexico in the third quarter of 2001. This increase was more than offset by
decreases in other international sales demand as markets continue to be impacted by import restrictions and political pressures
primarily in Russia and China. Operating income for Chicken increased $178 million from the same period last year primarily due to
decreases in live and production costs along with improvements in price and growth in value-added product mix. Additionally, prior
year costs were negatively impacted by weather related effects and higher grain and energy costs.
Pork segment sales including IBP’s pork processing revenues were $2.5 billion compared to $619 million for the same period
last year, including current year pork case-ready sales of $212 million and international pork sales of $248 million. Pork segment
operating income decreased $2 million from the same period last year. Sales and operating income were positively affected by the
inclusion of the IBP pork processing results in fiscal 2002. However, both were impacted by the negative results of the live swine
operation. Operating income was also affected by the restructuring charge related to the Company’s live swine operation of
approximately $26 million in the fourth quarter of fiscal 2002.
Prepared Foods segment sales increased $2.3 billion from the same period last year. The prepared foods segment operating
income increased $143 million from the same period last year. The increase in both sales and operating income is primarily due to
the inclusion of IBP results. Operating income was also influenced by lower and more stable raw material prices and improvement
in product mix. These increases were partially offset by the Thomas E. Wilson write-down adjustment of $27 million related to
the discontinuation of the brand.
Other segment operating income increased $64 million primarily due to the partial settlement of approximately $30 million
received in the third quarter of fiscal 2002 related to ongoing vitamin antitrust litigation combined with prior year IBP merger
related expenses of $19 million.
Acquisitions
In August 2001, the Company acquired 50.1% of IBP by paying approximately $1.7 billion in cash. In September 2001, the Company
issued approximately 129 million shares of Class A stock, with a fair value of approximately $1.2 billion, to acquire the remaining IBP
shares, and assumed approximately $1.7 billion of IBP debt. The total acquisition cost of approximately $4.6 billion was accounted
for as a purchase in accordance with Statement of Financial Accounting Standards (SFAS) No.141, “Business Combinations.”
Accordingly, the tangible and identifiable intangible assets and liabilities have been adjusted to fair values with the remainder of the
purchase price recorded as goodwill. The allocation of the purchase price has been completed.
In May 2002, the Company acquired the assets of Millard Processing Services, a bacon processing operation, for approximately
$73 million in cash. The acquisition has been accounted for as a purchase and goodwill of approximately $14 million has been recorded.
Tyson Foods, Inc. 2002 annual report