Tyson Foods 2004 Annual Report Download

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Tyson Foods, Inc. 2004 Annual Report
Tyson Foods, Inc. 2004 Annual Report
LIFE
Powered by Tyson
Thinking
about the big
presentation
Headed
to class
Enjoying
retirement
Going to a
meeting Running
errands

Table of contents

  • Page 1
    Tyson Foods, Inc. 2004 Annual Report LIFE Powered by Tyson Enjoying retirement Going to a meeting Thinking about the big presentation Running errands Headed to class Tyson Foods, Inc. 2004 Annual Report

  • Page 2
    ... to do. 08 Food Service For customers from the smallest to the largest, the Tyson brand means one company supplying chicken, beef, pork and prepared foods. 10 Retail Tyson developed nearly 100 new retail products including new versions of old favorites. 12 International Tyson Foods is expanding our...

  • Page 3
    ... World" - is the foundation of our new branding and communication strategy which communicates the strengths of Tyson Foods: Tyson = Protein = Power. Energy from protein powers people longer than sugar and carbohydrates. And nobody produces and markets trusted quality, branded chicken, beef and pork...

  • Page 4
    ... full range of chicken, beef and pork products under the Tyson brand and the new slogan, "Powered by Tyson." At Tyson, we are united to "Power" people everywhere. We're embarking on a new era in our company, one that will be marked by opportunity and potential success for our team members, customers...

  • Page 5
    ... 2004. We set a goal to increase the percentage of sales of value-added products to 50 percent over the next five years. We finished 2004 at 38 percent value-added, and our goal for 2005 is 40 percent. Our company developed 400 new products this fiscal year to meet the changing needs of customers...

  • Page 6
    ... Tyson Foods Discovery Center will house expanded product development kitchens, a new pilot production plant, consumer insights and team member development. customers, improve margins and increase value for our shareholders. To support our efforts, we announced a new 184,000 square foot Discovery...

  • Page 7
    ... May. His wisdom and experience were crucial in forming the new company, and he will be missed. I am proud of the hard work our team members do every day to make Tyson Foods a great food company and to create long-term value for you, our shareholders. We will continue building on our success and our...

  • Page 8
    Labor of love All about me Whether you need a little help in the kitchen or a lot, Tyson has products to meet your needs and fit your lifestyle. CONSUMERS Powered by Tyson 6

  • Page 9
    ...Tyson Foods conducted a strategic analysis of the Tyson brand, its potential and its relevance to today's consumers. From the research, we developed an indepth consumer segmentation, and a simple, but very elegant truth emerged: protein = energy = power. As the world's largest protein company, Tyson...

  • Page 10
    ...our customers. Through value based systems, Tyson supplies chicken, beef, pork and prepared foods to restaurants, national chains, distributors, schools, universities, healthcare facilities and the military. Our commitment to customer growth means we also provide innovation, individualized marketing...

  • Page 11
    The next time you order pizza, remember Tyson is one of the largest producers of pizza toppings and crusts in the United States. 9

  • Page 12

  • Page 13
    ... a 33 percent market share. Tyson is also the industry leader in case-ready beef and pork. With a growth rate of about 20 percent in 2004, case-ready is 9 percent of our total beef and pork sales. Case-ready products help our customers better manage their meat cases because case-ready has a longer...

  • Page 14
    12

  • Page 15
    ... in Mexico. Tyson Foods has joint ventures in China and Canada, which produce a range of value-added products as we get more involved in selling and manufacturing our foods in other countries. Our newest joint venture in Canada is supplying fully-cooked chicken products to the Canadian market. We...

  • Page 16
    ... the Tyson annual meeting of shareholders, we honor production facilities that set the standard for a safe work environment by presenting the Excellence in Safety awards and the Chairman's Safety Circle awards. At the 2004 shareholders meeting, the Randall Road chicken processing plant in Springdale...

  • Page 17
    ... and processes. We strive to operate with integrity and trust in all we do. We strive to honor God and be respectful of each other, our customers and other stakeholders. Above, left to right: Marisol Lopez Ramirez Storm Lake, Iowa Team Member Liaison Tuan Tran Emporia, Kansas Production Supervisor...

  • Page 18
    ... Grannis/Broken Bow, Oklahoma, the Randall Road plant in Springdale, Arkansas, and the vehicle accounting department at the corporate offices in Springdale produced cookbooks to raise money for charity. Team members in 41 plants, including Amarillo, Texas, Joslin, Illinois and Dakota Dunes, South...

  • Page 19
    17

  • Page 20
    ... I S Tyson Foods is the world's largest protein company and the second largest publicly traded food company in the Fortune 500 with one of the most recognized brand names in the food industry. Tyson produces, distributes and markets chicken, beef, pork and prepared foods and related allied products...

  • Page 21
    ..., New Hampshire and Augusta, Maine, facilities. As part of its on-going plant rationalization efforts, the Company announced in February 2004 its decision to consolidate its manufacturing operations in Jackson, Mississippi, into the Company's Carthage, Mississippi, facility. The Company acquired the...

  • Page 22
    ...as schools, hotel chains, healthcare facilities, the military and other food processors, as well as to international markets throughout the world. It also sells allied products to pharmaceutical and technical products manufacturers, as well as live swine to pork producers. in millions 2004 $ 8,397...

  • Page 23
    ... 26.1%, international pork sales increased 60.2%, case-ready pork sales increased 29.4% and live swine sales of Company owned hogs decreased 14.8%. The increase in the Pork segment's operating income primarily was due to higher average selling prices and increased demand as pork benefited from...

  • Page 24
    ... ban on Canadian beef. However, these increases were partially offset by an increase in live cattle prices. sales decreased 1.3% compared to fiscal 2002. Domestic fresh meat pork sales decreased 3.5%, international pork sales increased 2.8%, case-ready pork sales increased 52.3% and live swine sales...

  • Page 25
    ... spending for a third fully dedicated case-ready plant, a new Corporate Center and a variety of projects that will increase automation and support valueadded product growth. The Company continues to evaluate potential international and domestic growth opportunities. DOLLARS IN MILLIONS 1,174 In...

  • Page 26
    ... to its financial position or results of operations. The off-balance sheet arrangements the Company has are guarantees of debt of outside third parties involving a lease, grower loans and residual value guarantees covering certain operating leases for various types of equipment. See Note 10 to the...

  • Page 27
    ... No. 128, Earnings per Share." This issue involves the computation of earnings per share for companies that have multiple classes of common stock or have issued securities other than common stock that participate in dividends with common stock (participating securities). The EITF concluded that...

  • Page 28
    ...133 could result in volatility in the Company's results of operations. See Market Risks on page 27. The Company is subject to lawsuits, investigations and other claims related to wage and hour/labor, livestock procurement, securities, environmental, product, taxing authorities and other matters, and...

  • Page 29
    ... in the fair value of open positions for grain. Market risks relating to the Company's operations result primarily from changes in commodity prices, interest rates and foreign exchange rates, as well as credit risk concentrations. To address certain of these risks, the Company enters into various...

  • Page 30
    ... in millions 2004 2003 Livestock: Cattle Hogs Grain Natural Gas $12 18 5 13 $28 12 26 11 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...

  • Page 31
    ... 1.13 1.02 1.08 Sales Cost of Sales Operating Expenses: Selling, general and administrative Other charges Operating Income Other Expense (Income): Interest Other Income Before Income Taxes Provision for Income Taxes Net Income Weighted Average Shares Outstanding: Class A Basic Class B Basic Diluted...

  • Page 32
    ...Current debt Trade accounts payable Other current liabilities Total Current Liabilities Long-Term Debt Deferred Income Taxes Other Liabilities Shareholders' Equity: Common stock ($0.10 par value): Class A-authorized 900 million shares: Issued 268 million shares in 2004 and 267 million shares in 2003...

  • Page 33
    ... Y Three years ended October 2, 2004 in millions Accumulated Common Stock Capital in Unamortized Other Total Class A Class B Excess of Retained Treasury Stock Deferred Comprehensive Shareholders' Shares Amount Shares Amount Par Value Earnings Shares Amount Compensation Income (Loss) Equity 267 $27...

  • Page 34
    ... provided by operating activities: Depreciation Amortization Plant closing related charges Impairment and write-down of assets Gain on sale of subsidiary Deferred taxes Other (Increase) decrease in accounts receivable Increase in inventories Increase (decrease) in trade accounts payable Net change...

  • Page 35
    ...1935 with world headquarters in Springdale, Arkansas, is the world's largest processor and marketer of chicken, beef and pork and the second largest food company in the Fortune 500. Tyson produces a wide variety of brand name protein-based and prepared food products marketed in the United States and...

  • Page 36
    ...20 percent but not greater than 50 percent. The Company's underlying share of each entity's equity is reported in the Consolidated Balance Sheets in the line item other assets. During fiscal 2004, the Company purchased $99 million of marketable debt securities. Of this amount, $63 million are due in...

  • Page 37
    ... to holders of Class A stock. The Company pays quarterly cash dividends to Class A and Class B shareholders. The Company paid Class A dividends per share of $0.16 and Class B dividends per share of $0.144 in fiscal years 2004, 2003 and 2002. According to the Emerging Issues Task Force Issue No. 03...

  • Page 38
    ... No. 128, Earnings per Share." This issue involves the computation of earnings per share for companies that have multiple classes of common stock or have issued securities other than common stock that participate in dividends with common stock (participating securities). The EITF concluded that...

  • Page 39
    ... of 2003 (the Act) was signed. The Act allows a possible subsidy to retirement health plan sponsors to help offset the costs of participant prescription drug benefits. In March 2004, the FASB issued Staff Position No. 106-2, "Accounting and Disclosure Requirements Related to the Act" (the Position...

  • Page 40
    ... No. 144. At October 2, 2004, $2 million related to employee termination benefits had been paid and $2 million of other plant closing related costs had been paid. In April 2003, the Company announced its decision to close its Berlin, Maryland, poultry operation. The Berlin poultry operation employed...

  • Page 41
    ... obligations under grower contracts, and $9 million of other related costs associated with the closing of the plants including plant clean-up costs and employee termination benefits. The Company accounted for the closing of the Stilwell, Oklahoma, and Jacksonville, Florida, operations in accordance...

  • Page 42
    ... contracts are recorded in sales. The Company generally does not enter into undesignated positions beyond 12 months. Based on the Company's evaluation of the grain markets, the Company has at times entered into a portion of its derivative products related to grain procurement prior to purchasing the...

  • Page 43
    ..., the cost of the livestock and the related boxed beef and pork market prices at the time of the sale will vary from this fixed price, creating market risk. Therefore, as fixed forward sales are entered into, the Company also enters into the appropriate number of livestock futures positions. The...

  • Page 44
    ... million that expire in June 2009. At October 2, 2004, the Company had outstanding letters of credit totaling approximately $274 million issued primarily in support of workers' compensation insurance programs, derivative activities and leveraged equipment loans. There were no draw downs under these...

  • Page 45
    ... a weighted average interest rate of 1.5%. The Company has fully and unconditionally guaranteed $476 million of senior notes issued by Tyson Fresh Meats, Inc. (TFM; formerly known as IBP, inc.), a wholly-owned subsidiary of the Company. The following condensed consolidating financial information is...

  • Page 46
    ... for the year ended October 2, 2004 in millions Tyson $9,257 8,033 1,224 TFM $17,204 16,537 667 313 53 301 50 251 92 $ 159 Adjustments $(20) (20) - Consolidated $26,441 24,550 1,891 880 86 925 290 635 232 Sales Cost of Sales Operating Expenses: Selling, general and administrative Other charges...

  • Page 47
    ...2004 in millions Tyson TFM Adjustments Consolidated Assets Current Assets: Cash and cash equivalents Accounts receivable, net Inventories Other current assets Total Current Assets Net Property, Plant and Equipment Goodwill Intangible Assets Other Assets Total Assets Liabilities and Shareholders...

  • Page 48
    ...net Inventories Other current assets Total Current Assets Net Property, Plant and Equipment Goodwill Intangible Assets Other Assets Total Assets Liabilities and Shareholders' Equity Current Liabilities: Current debt Trade accounts payable Other current liabilities Total Current Liabilities Long-Term...

  • Page 49
    ... closing related charges Impairment and write-down of assets Deferred taxes Other Net changes in working capital Cash Provided by Operating Activities Cash Flows From Investing Activities: Additions to property, plant and equipment Proceeds from sale of assets Investment in marketable securities...

  • Page 50
    ... income Depreciation and amortization Plant closing related charges Deferred taxes Other Net changes in working capital Cash Provided by Operating Activities Cash Flows From Investing Activities: Additions to property, plant and equipment Proceeds from sale of assets Sale of investment in commercial...

  • Page 51
    ... Deferred taxes Other Net changes in working capital Cash Provided by Operating Activities Cash Flows From Investing Activities: Additions to property, plant and equipment Proceeds from sale of assets Proceeds from sale of subsidiary Acquisition of assets Sale of investment in commercial paper Net...

  • Page 52
    ... STOCK The shareholders approved the Tyson Foods, Inc. 2000 Stock Incentive Plan (Incentive Plan) in January 2001. The Incentive Plan is administered by the Compensation Committee of the Board of Directors and permits awards of shares of Class A stock, awards of derivative securities related...

  • Page 53
    ... Balance Sheets as unamortized deferred compensation in shareholders' equity. The Company issues restricted stock at the market value as of the date of grant. The weighted average fair value of restricted stock granted was $15.69 per share during 2004 and $11.20 per share during 2003. NOTE FOURTEEN...

  • Page 54
    ...10 years. Prior to fiscal year 2004, the Company only had defined benefit plans which provided a retirement benefit based on the number of years of service multiplied by a benefit rate. During 2004, a plan was added with a 4% compensation increase inherent in its benefit obligation calculation. 52

  • Page 55
    ...objectives and target asset allocation were updated in January 2004. The Company's policy is to fund at least the minimum contribution required to meet applicable federal employee benefit and local tax laws. In its sole discretion, the Company may from time to time fund additional amounts. Expected...

  • Page 56
    ..., a new pilot production plant, provide space for the consumer insights group and make provisions for team member development activities. In the second quarter of fiscal 2004, the Company purchased 1,028,577 shares of Class A stock in a private transaction with Don Tyson, a director and managing...

  • Page 57
    ... equipment Suspended taxes from conversion to accrual method Intangible assets Inventory Accrued expenses Net operating loss carryforwards International items All other Valuation allowance Net deferred tax liability 2004 2003 2002 Numerator: Net Income Less Dividends: Class A ($0.16/share) Class...

  • Page 58
    ... the world. It also sells allied products to pharmaceutical and technical products manufacturers, as well as live swine to pork processors. includes the Company's operations that manufacture and market frozen and refrigerated food products. Products include pepperoni, beef and pork toppings, pizza...

  • Page 59
    ..., primarily Canada and Mexico, at fiscal years ended 2004, 2003 and 2002, respectively. The Company sells certain of its products in foreign markets, primarily Canada, China, European Union, Japan, Mexico, Puerto Rico, Russia, Taiwan and South Korea. The Company's export sales for 2004, 2003...

  • Page 60
    ...in discovery that the case seeks to require the Company to compensate all hourly chicken processing workers for pre- and post-shift clothes changing, washing and related activities and for one of two unpaid 30-minute meal periods. The Secretary of Labor seeks unspecified back wages for all employees...

  • Page 61
    ... failing to pay for time taken to put on, take off and sanitize certain working supplies, and violations of the Pennsylvania Wage Payment and Collection Law. Plaintiffs seek to represent themselves and all similarly situated current and former employees of the poultry processing plant in New Holland...

  • Page 62
    ... former employees have opted into the class. The District Court stayed discovery on November 8, 2004, pending the Supreme Court's decision on certiorari in Alvarez. On October 23, 2001, a putative class action lawsuit was filed in the District Court for Mayes County, Oklahoma, against the Company by...

  • Page 63
    ...oral arguments are scheduled to be heard by the Circuit Court on December 17, 2004. On September 12, 2002, 82 individual plaintiffs filed Michael Archer, et al. v. Tyson Foods, Inc. and The Pork Group, Inc., CIV 2002-497, in the Circuit Court of Pope County, Arkansas. On August 18, 2002, the Company...

  • Page 64
    ... U.S. generally accepted accounting principles. As discussed in Note 1 to the financial statements, in 2004 the Company adopted Emerging Issues Task Force Issue No. 03-6, "Participating Securities and the Two-Class Method under FASB Statement No. 128, Earnings per Share." Rogers, Arkansas December...

  • Page 65
    ... information is reliable. December 8, 2004 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...

  • Page 66
    ...per share Class B basic earnings (loss) per share Dividends per share: Class A Class B Depreciation and amortization Balance Sheet Data Capital expenditures Total assets Net property, plant and equipment Total debt Shareholders' equity Other Key Financial Measures Return on sales Annual sales growth...

  • Page 67
    ...the Company's adoption of EITF Issue No. 03-6, "Participating Securities and the Two-Class Method under FASB Statement No. 128, Earnings per Share." 14. Return on invested capital is calculated by dividing operating income by the sum of the average of beginning and ending total debt and shareholders...

  • Page 68
    ... President of Investor Relations Tyson Foods, Inc. P.O. Box 2020 Springdale, Arkansas 72765-2020 Telephone (479) 290-4826 Fax (479) 757-6577 E-mail: [email protected] If your Tyson stock is registered in your own name(s), send change of address information to the Company's transfer agent, EquiServe...

  • Page 69
    ...'s Beef Promotion and Research Board. She was a director of IBP from 1993 to 2001. Ms. Smith has been a member of the Board since 2001.2,3,4 63, is President and CEO of the United States-Mexico Chamber of Commerce. Gen. Zapanta is Chairman of the Reserve Forces Policy Board, an independent policy...

  • Page 70
    ..., Commodity and Trading Risk Management Secretary and Vice President, Legal Group Vice President, Tyson Fresh Meats, Inc. President and Chief Operating Officer Group Vice President, Tyson International Group Vice President, Food Service Senior Vice President, Corporate Research and Development...

  • Page 71
    ...phone or by mail. Members of the news media seeking information about Tyson Foods should contact: Gary Mickelson Director of Media Relations Tyson Foods, Inc. P.O. Box 2020 Springdale, AR 72765-2020 Telephone (479) 290-61 1 1 Fax (479) 757-7984 E-mail: [email protected] Tyson currently pays...

  • Page 72
    Meeting friends Window Shopping Going to work Walking to school Have you had your protein today? Tyson Foods, Inc. 2210 West Oaklawn Drive Springdale, Arkansas 72762-6999 www.tysonfoodsinc.com