Tyson Foods 2005 Annual Report Download - page 6

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Tyson Foods, Inc. >> 04
plants and products safer, increase efficiencies, improve
yields, improve Team Member safety and control operating
costs. We spent $302 million in 2005 for cost savings and
income producing projects expected to save more than
$84 million per year. In 2006, we plan to spend approximately
$232 million for a projected annual savings of $72 million and
to deliver a 3 percent cost reduction of $14 million from our
shared services budget.
International Expanding our international business is a
fundamental part of Tyson Foods’ future growth. As our
global customers’ businesses grow outside the United States,
we grow with them. To support their growth and ours, we are
looking for in-country production opportunities through joint
ventures or acquisitions. Our key areas of interest continue to
be China, Mexico, Canada and South America.
This year has been especially challenging for international
beef exports. While we maintained our focus on developing
sales in all available markets, we supported the U.S. govern-
ment’s activities to renew exports to Japan, South Korea
and Taiwan. These bans resulted in a loss of an estimated
$800 million in beef export sales in fiscal 2005. We are
encouraged by recent developments in export market
access, but fiscal 2006 will present only gradual recovery in
beef as those markets stabilize and cattle supplies improve.
Although export bans affected beef sales the entire fiscal
year, we generated international business through increased
sales and by expanding our export customer base for chicken
products. By developing market-specific products, we
increased domestic sales in China. We increased processing
capacity at Tyson de Mexico and will boost live production
in fiscal 2006. We also plan to increase our in-country
presence in at least one foreign market in 2006.
Financial Performance We generated strong cash flow in
fiscal 2005. We paid down debt by $367 million. We set a
debt-to-capital ratio goal of 40 percent for the end of the
year, and we reached our goal ahead of schedule in the third
quarter. We are satisfied with our current debt level because
it gives us the flexibility to use our cash for other priorities.
Our capital spending in 2006 should be $600 million to
$650 million as we continue work on the new Discovery
Center and fund other projects to increase operational
efficiencies and support value-added product growth.
Diluted earnings per share (EPS) for the 52-week 2005 fiscal
year were $0.99 compared to $1.13 in the 53-week 2004
fiscal year, a decrease of 12.4 percent. Sales were $26.0 billion
in 2005, compared to $26.4 billion in 2004. We didn’t meet
our goal of achieving annual double-digit EPS growth because
$3,604 $3,362
$2,995
TOTAL
DEBT
IN MILLIONS
2003 2004 2005
47.7%
43.9%
39.2%
DEBT TO
CAPITAL
RATIO
PERCENTAGE
2003 2004 2005
Our debt-to-capital ratio
remains solid at 39.2 percent,
surpassing our goal of
40 percent for fiscal 2005.