Tyson Foods 2008 Annual Report Download - page 21

19 2008 Annual Report
Management’s Discussion and Analysis (continued)
• In fi scal 2007, we used proceeds from sale of the short-term
investment to repay our outstanding $750 million 7.25% Notes
due October 1, 2006. In addition, we used cash from operations
to reduce the amount outstanding under the Lakeside term loan
by $320 million, repay the outstanding $125 million 7.45% Notes
due June 1, 2007, and reduce other borrowings.
• In fi scal 2006, we repaid the $87 million 6.125% Senior Notes due
February 1, 2006, and reduced other borrowings.
• Net proceeds from borrowings include –
• In fi scal 2008, we issued $458 million of 3.25% Convertible
Senior Notes due October 15, 2013. Net proceeds were used for
the net cost of the related Convertible Note Hedge and Warrant
Transactions, toward the repayment of our borrowings under the
accounts receivable securitization facility, and for other general
corporate purposes.
• In fi scal 2006, we issued $1.0 billion of 2016 Notes. We used
proceeds to purchase a short-term investment, as well as for other
general corporate purposes. The short-term investment was later
sold and used in fi scal 2007 to repay our outstanding $750 million
7.25% Notes due October 1, 2006.
• In fi scal 2008, we issued 22.4 million shares of Class A stock in a
public offering. Net proceeds were used toward repayment of our
borrowings under the accounts receivable securitization facility and
for other general corporate purposes.
Liquidity
Outstanding
Letters of
Commitments Facility Credit (no Amount Amount
in millions Expiration Date Amount draw downs) Borrowed Available
Cash $ 250
Revolving credit facility September 2010 $1,000 $291 $ – $ 709
Accounts receivable securitization facility Aug. 2009, Aug. 2010 750 – – 750
Total liquidity $1,709
• The revolving credit facility supports our short-term funding needs
and letters of credit. Letters of credit are issued primarily in support
of workers’ compensation insurance programs and derivative activities.
• The accounts receivable securitization facility is with three
co-purchasers and allows us to sell up to $750 million of trade
receivables, consisting of $375 million expiring in August 2009 and
a $375 million 364-day facility with an additional one-year option,
which commits funding through August 2010. At September 27,
2008, we had access to the full $750 million borrowing capacity.
Our borrowing capacity could be reduced in the future if our
eligible receivables balance falls below $750 million.
• In conjunction with the $100 million of Gulf Opportunity Zone tax-
exempt bond issuance in October 2008, we agreed to issue a guarantee
for the full amount of the bond issuance, which was issued in the form
of a letter of credit, in exchange for eight million Syntroleum stock
warrants valued at $0.01 each. Both the issuance of the letter of
credit and the receipt of Syntroleum warrants occurred subsequent
to fi scal 2008. The letter of credit will reduce the unused borrowing
capacity available under the revolving credit facility.
• In October 2008, we completed the acquisition of three vertically
integrated poultry companies in southern Brazil. The purchase price
was $80 million, as well as up to an additional $15 million of contin-
gent purchase price based on production volumes payable through
fi scal 2010. Additionally, once the joint venture agreement with
Shandong Xinchang Group receives the necessary government
approvals, we expect to spend $110 – $115 million to acquire a
60% ownership. We expect this to be fi nalized during fi scal 2009.
• Subject to receipt of applicable government approvals, we anticipate
being ready to complete the sale of Lakeside by the end of the fi rst
quarter fi scal 2009, with plans to use available proceeds to pay down
debt and other general corporate purposes. Inclusive of working capital
of Lakeside initially retained by us at closing, as well as consideration
received from XL Foods, we expect the following future cash fl ows
based on the September 27, 2008, currency exchange rate: $55 million
received at closing; approximately $136 million in calendar 2009;
$49 million in notes receivable, plus interest, to be paid over two years
by XL Foods; and $29 million of XL Foods preferred stock redeemable
over fi ve years. The discontinuance of Lakeside’s operation will not
have a material effect on our future operating cash fl ows.
• Our current ratio at September 27, 2008, and September 29, 2007,
was 2.07 to 1 and 1.74 to 1, respectively.