<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
(x) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly period ended April 2, 1994
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or
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from
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to
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Commission File Number 0-3400
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TYSON FOODS, INC.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 71-0225165
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(State or Other Jurisdiction of (I.R.S. Employer Identification
Incorporation or Organization) No.)
2210 West Oaklawn Drive, Springdale, Arkansas 72764
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(Address of Principal Executive Offices and Zip Code)
(501) 290-4000
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Registrant's Telephone Number, Including Area Code
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes x No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding April 2, 1994
- - ------------------------------------ -------------------------------------
Class A Common Stock, $.10 Par Value 79,142,321 Shares
Class B Common Stock, $.10 Par Value 68,455,438 Shares
Page 1
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TYSON FOODS, INC.
INDEX
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
April 2, 1994 and October 2, 1993 3
Consolidated Condensed Statements of Income
for the Three Months and Six Months Ended
April 2, 1994 and April 3, 1993 4
Consolidated Condensed Statements of Cash Flows
for the Six Months Ended
April 2, 1994 and April 3, 1993 5
Notes to Consolidated Condensed Financial
Statements 6-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-12
PART II. OTHER INFORMATION 13-18
SIGNATURES 19
2
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TYSON FOODS, INC.
Consolidated Condensed Balance Sheets
(In Thousands)
<TABLE>
<CAPTION>
(Unaudited)
April 2, October 2,
Assets 1994 1993
- - ------------------------------------ ------------ ------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 32,580 $ 21,547
Accounts receivable 397,042 104,767
Inventories 751,155 675,205
Other current assets 27,452 10,236
---------- ----------
Total Current Assets 1,208,229 811,755
Net Property, Plant, and Equipment 1,472,313 1,435,298
Excess of Investments over Net Assets Acquired 927,013 924,432
Investments and Other Assets 101,064 82,019
---------- ----------
Total Assets $3,708,619 $3,253,504
========== ==========
Liabilities and Shareholders' Equity
- - ------------------------------------
Current Liabilities:
Notes Payable $ 141,000 $ 29,800
Current portion of long-term debt 42,969 73,987
Trade accounts payable 202,695 205,592
Other accrued liabilities 199,278 217,326
--------- ----------
Total Current Liabilities 585,942 526,705
Long-Term Debt 1,223,637 920,465
Deferred Income Taxes 452,422 445,588
Shareholders' Equity:
Common stock 14,815 14,814
Capital in excess of par value 392,831 392,693
Retained earnings 1,048,910 965,493
---------- ----------
1,456,556 1,373,000
Less treasury stock 9,496 11,359
Less unamortized deferred compensation 442 895
---------- -----------
Total Shareholders' Equity 1,446,618 1,360,746
---------- ----------
Total Liabilities and Shareholders' Equity $3,708,619 $3,253,504
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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TYSON FOODS, INC.
Consolidated Condensed Statements of Income
(In Thousands Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------- -----------------------
April 2, April 3, April 2, April 3,
1994 1993 1994 1993
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Sales $1,261,903 $1,170,411 $2,414,693 $2,253,723
Cost of Sales 1,039,383 943,508 1,974,798 1,822,018
Expenses:
Selling 105,432 99,193 201,705 186,292
General and administrative 21,273 28,866 44,671 57,172
Amortization 8,084 8,040 16,249 15,587
Interest 20,083 18,917 37,099 37,809
Other expense (income) (3,048) (2,493) (3,272) (3,040)
--------- --------- ---------- ----------
Income Before Taxes on Income 70,696 74,380 143,443 137,885
Provision for Income Taxes 27,575 28,292 55,943 52,401
--------- --------- ---------- ----------
Net Income $ 43,121 $ 46,088 $ 87,500 $ 85,484
========= ========= ========== ==========
Average Shares Outstanding 148,544 148,515 148,496 148,457
======= ======= ======= =======
Earnings Per Share $0.29 $0.31 $0.59 $0.58
===== ===== ===== =====
Cash Dividends Per Share:
Class A $0.0200 $0.0100 $0.0300 $0.0200
======= ======= ======= =======
Class B $0.0167 $0.0083 $0.0250 $0.0167
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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TYSON FOODS, INC.
Consolidated Condensed Statements of Cash Flows
(In Thousands)
<TABLE>
<CAPTION>
(Unaudited)
Six Months Ended
-------------------------
April 2, April 3,
1994 1993
-------------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 87,500 $ 85,484
Adjustments to reconcile net income to cash
provided by (used for) operating activities:
Depreciation 75,999 69,493
Amortization 16,249 15,587
Deferred income taxes 6,553 7,396
Loss on dispositions of property and
equipment 1,957 1,553
(Increase) decrease in accounts receivable (289,120) 41,476
Increase in inventories (72,741) (104,115)
Decrease in trade accounts payable (4,532) (43,944)
Net change in other current assets and
liabilities (35,739) 14,478
---------- ---------
Cash Provided by (Used for) Operating Activities (213,874) 87,408
Cash Flows from Investing Activities:
Net cash paid for acquisitions (33,476) (43,377)
Additions to property, plant and equipment (102,370) (115,745)
Proceeds from sale of property, plant and
equipment 3,296 4,947
Net increase in other assets (22,469) (15,007)
---------- --------
Cash Used for Investing Activities (155,019) (169,182)
Cash Flows from Financing Activities:
Net change in notes payable 109,400 (30,100)
Proceeds from long-term debt 319,545 428,000
Repayments of long-term debt (47,391) (319,897)
Dividends and other (1,628) (1,181)
---------- --------
Cash Provided by Financing Activities 379,926 76,822
---------- --------
Increase (Decrease) in Cash and Cash Equivalents 11,033 (4,952)
Cash and Cash Equivalents at Beginning of Period 21,547 27,060
---------- --------
Cash and Cash Equivalents at End of Period $ 32,580 $ 22,108
========== =========
Supplemental Cash Flow Information,
Cash paid during the period for:
Interest $39,465 $34,700
Income taxes $50,481 $51,818
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
TYSON FOODS, INC.,
Notes to Consolidated Condensed Financial Statements
(Unaudited)
1. Accounting Policies
The consolidated condensed financial statements have been prepared by Tyson
Foods, Inc. (the "Company"), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information
and accounting policies and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules
and regulations. Although the management of the Company believes that the
disclosures are adequate to make the information presented not misleading,
these consolidated condensed financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's latest annual report for the fiscal year ended
October 2, 1993. In the opinion of the management of the Company, the
accompanying consolidated condensed financial statements contain all
adjustments, consisting of normal recurring accruals, necessary to present
fairly the financial position as of April 2, 1994 and October 2, 1993, the
results of operations for the three months and six months ended
April 2, 1994, and April 3, 1993 and cash flows for the six months ended
April 2, 1994, and April 3, 1993. The results of operations for the three
months and six months ended April 2, 1994 and April 3, 1993, and cash flows
for the six months ended April 2, 1994 and April 3, 1993, are not necessarily
indicative of the results to be expected for the full year.
The Notes to Consolidated Financial Statements for the year ended
October 2, 1993, reflect the significant accounting policies, debt
provisions, borrowing arrangements, dividend restrictions, contingencies and
commitments of the Company. There were no material changes in such items
during the six months ended April 2, 1994, except as disclosed below.
2. Acquisitions
On January 6, 1994, the Company acquired a beef further-processing company
and certain related assets with annual sales of approximately $55 million.
These transactions have been accounted for as purchases, and the results of
operations for these acquisitions have been included in the Company's
consolidated results of operations since the acquisition date.
3. Accounts Receivable
At October 2, 1993 the Company had an asset sale agreement with an unrelated
financial institution which allowed the Company to sell up to $275 million of
accounts receivable. As sold accounts receivable were collected, new
qualifying accounts were substituted such that the outstanding balance
remained at $275 million. In November 1993, the Company discontinued this
asset sale agreement due to lower financing costs available through the sale
of commercial paper, which resulted in an increase in accounts receivable of
$275 million at April 2, 1994.
6
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<TABLE>
<CAPTION>
4. Inventories
(In thousands)
Inventories, valued at the lower of April 2, October 2,
cost (first-in, first-out) or market 1994 1993
consist of the following: ---------- ----------
<S> <C> <C>
Finished and work-in-process $361,306 $299,388
Farm flocks and herds 172,855 152,187
Live swine 52,189 55,661
Seafood related products 47,783 53,064
Hatchery eggs and feed 41,905 40,110
Supplies 75,117 74,795
-------- --------
Total $751,155 $675,205
======== ========
</TABLE>
5. Excess of Investments over Net Assets Acquired
Excess cost over the fair value of net assets acquired generally is amortized
on a straight-line basis over periods ranging from 20 to 40 years. The
carrying value of excess of investments over net assets acquired will be
reviewed if the facts and circumstances suggest that it may be impaired. If
this review indicates that excess of investments over net assets acquired
will not be recoverable, as determined based on the undiscounted cash flows
of the entity acquired over the remaining amortization period, the Company's
carrying value of excess of investments over net assets acquired will be
reduced by the estimated shortfall of cash flows.
6. Contingencies
The Company is involved in various lawsuits and claims made by third parties
on an ongoing basis as a result of its day-to-day operations, including the
following two matters relating to Arctic Alaska Fisheries Corporation
("Arctic"). On April 20, 1994, after investigations beginning as early as
1990, a Federal Grand Jury in Seattle, Washington indicted fourteen (14)
former officers, directors and employees of Arctic as well as Arctic on
criminal charges stemming from the sinking of the fishing vessel Aleutian
Enterprise in 1991 and other matters relating to the overall operation of
Arctic. The factual allegations giving rise to the forty-four (44) count
indictment now pending in the United States District Court, Western District
of Washington at Seattle occurred prior to the Company's acquisition of
Arctic on October 5, 1992. Conviction of the individuals as well as Arctic
carry penalties and fines ranging from a maximum fine or penalty per count of
$500,000 and 10 years in prison. Also, on September 8, 1993, the State of
Alaska, after conducting investigations, filed a Complaint for Forfeiture and
Damages alleging that certain Arctic vessels participated in the use of
certain fishing gear during 1990, 1991, and 1992. While management is not
able at the present time to determine the outcome of these matters, based
upon information currently available, management presently does not believe
that any of these lawsuits or claims by third parties will have a material
adverse effect on the Company's financial position.
7
<PAGE>
7. Income Taxes
At the beginning of fiscal 1994, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109").
This statement supersedes Statement of Financial Accounting Standards No. 96,
("SFAS No. 96") the method previously followed by the Company. Both SFAS
No. 109 and SFAS No. 96 require the liability method be used to account for
deferred income taxes. The liability method provides that deferred tax
liabilities are recorded at current tax rates based on the difference between
the tax basis of assets and liabilities and their carrying amounts for
financial reporting purposes referred to as temporary differences. The
cumulative effect of adoption of SFAS No. 109 did not affect the Company's
financial position or results of operations.
Significant components of the Company's deferred tax liabilities and assets
as of October 2, 1993 are as follows (In thousands):
<TABLE>
<CAPTION>
<S> <C>
Deferred tax liabilities:
Basis difference in property, plant and equipment $205,586
Suspended taxes from conversion to accrual method 150,162
Other 128,416
--------
Total deferred tax liabilities $484,164
--------
Deferred tax assets:
Accrued expenses (38,576)
--------
Total deferred tax assets (38,576)
--------
Net deferred tax liabilities $445,588
========
</TABLE>
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Financial Condition
- - -------------------
For the six months ended April 2, 1994, net cash of $213.9 million was used
by all operating activities, consisting of $188.3 million provided by
operations, offset by $402.2 million used for net changes in receivables,
inventories, payables and other items. Accounts receivable increased as a
result of management's decision to discontinue an asset sale agreement due to
lower financing costs available through the sale of commercial paper. See
Note 3 of Notes to Consolidated Condensed Financial Statements. Finished
inventories have increased from 1993 fiscal year-end due to increased grain
costs, seasonal inventory increases and shifts in product mix. Financing
activities provided net cash of $379.9 million, mainly due to additional long-
term debt incurred from issuing commercial paper to offset the discontinuance
of the sale of accounts receivable. The Company used funds generated from
operating activities and financing activities to fund $102.4 million of
property, plant and equipment additions and $33.6 million for business
acquisitions. The expenditures for property, plant and equipment were
related to new equipment and upgrading facilities to take advantage of market
opportunities and the Company's continuing effort to increase efficiencies,
reduce overall cost, and meet or exceed environmental standards.
At April 2, 1994, working capital was $622.3 million compared to
$285.1 million at 1993 fiscal year-end, an increase of $337.2 million. The
current ratio at the end of the second quarter of 1994 was 2.1 to 1 compared
to 1.5 to 1 at 1993 fiscal year-end. Working capital and the current ratio
at April 2, 1994, increased compared to year-end due to management's decision
to discontinue the sale of accounts receivable and increase commercial paper
borrowings to achieve lower financing costs. See Note 3 to Notes to
Consolidated Condensed Financial Statements.
The Company's foreseeable cash needs for operations and capital expenditures
will continue to be met through cash flows from operations and borrowings
supported by existing credit facilities and additional credit facilities
which the Company believes are available.
Long-term debt has increased $303.2 million since 1993 fiscal year-end. This
is primarily due to the Company's discontinuance of the sale of accounts
receivable in the amount of $275 million, and the financing of this amount
through the sale of commercial paper. At April 2, 1994, long-term debt was
45.8% of total capitalization compared to 40.3% at 1993 fiscal year-end. The
Company's three unsecured revolving credit agreements provide up to
$1 billion of financing which supports the Company's commercial paper
program. At April 2, 1994, $816.4 million was outstanding under the
$1 billion of financing facilities consisting of $571.4 million of commercial
paper and $245 million drawn under the three revolving credit facilities.
Additional outstanding debt at April 2, 1994, consisted of $366 million of
institutional notes and $41.2 million of other indebtedness.
9
<PAGE>
Results of Operations
- - ---------------------
Sales for the second quarter of 1994 increased 7.8% over the same quarter of
1993. This increase was partially due to an increase in consumer poultry
sales which accounted for 4.1% of the increase in 1994 total sales. The
increase in consumer poultry sales is attributable to a 3.2% increase in
tonnage and a 2.2% increase in sales prices. Beef and pork sales increased
second quarter 1994 total sales by 4.6% compared to the second quarter of
1993. The increase in beef and pork sales was due primarily to the
acquisition during the quarter of a beef further-processing company and
additional production from a new pork processing facility which was not fully
operational during the second quarter of 1993. Mexican food, prepared foods,
live swine and other sales decreased second quarter 1994 total sales by 1.4%.
Live swine sales decreased primarily as a result of the integration of some
of the live swine production with the Company's pork processing facility.
Seafood sales increased second quarter 1994 total sales 0.2% due to a 19.4%
increase in average sales prices offset mostly by a 13.9% decrease in
tonnage. Seafood sales volumes and profit margins continue to be adversely
affected by various factors including changes in product mix resulting from
government fishing quotas, resource availability and fluctuations in market
prices. Second quarter sales to the animal and pet food industry increased
1994 total sales by 0.3% compared to the second quarter of last year due to a
11.8% increase in sales prices and a 0.7% increase in tonnage.
Sales for the first six months of 1994 increased 7.1% over the same period of
1993. This increase was mainly due to an increase in consumer poultry sales
which accounted for 5.1% of the increase in 1994 total sales. The increase
in consumer poultry sales is attributable to a 6.1% increase in tonnage and a
0.6% increase in sales prices. Beef and pork sales increased first six
months of 1994 total sales by 4.4% compared to 1993. The increase in beef
and pork sales was due primarily to the acquisition during the second quarter
of a beef further-processing company and additional production from a new
pork processing facility which was not fully operational during 1993.
Mexican food, prepared foods, live swine and other sales decreased sales for
the first six months of 1994 by 1.8%. Seafood sales decreased first six
months of 1994 total sales 0.9% due to a 17.8% decrease in tonnage offset
slightly by a 4.2% increase in average sales prices. Sales to the animal and
pet food industry increased first six months of 1994 total sales by 0.3%
compared to the first six months of last year due to a 7.4% increase in sales
prices and a 3.2% increase in tonnage.
The increase in cost of goods sold of 10.2% for the second quarter of 1994
compared to the same quarter of 1993 was mainly the result of the increase in
sales plus an increase of approximately 13.1% in feed ingredient costs. As a
percent of sales, cost of sales was 82.4% for the second quarter of 1994
compared to 80.6% in the second quarter of 1993. While the Company's
strategy of adding value to products through further-processing offsets a
portion of the impact of higher grain costs, such increases continue to
affect poultry, swine and Mexican food production cost. It is anticipated
that higher grain costs will have an adverse impact on third quarter
operating results and will continue to have an adverse impact on operating
results until such time as grain prices moderate or the market will permit
these costs to be passed through to customers. The Company monitors and
10
<PAGE>
compares costs for labor, raw material purchases, utilities and other
expenses to companies within the industry as part of its cost control
measures and believes such costs are at least within industry averages.
The increase in cost of goods sold of 8.4% for the first six months of 1994
compared to the same period of 1993 was mainly the result of the increase in
sales plus an increase of approximately 10.2% in feed ingredient costs. As a
percent of sales, cost of sales was 81.8% for the first six months of 1994
compared to 80.8% for the first six months of 1993. While the Company's
strategy of adding value to products through further-processing offsets a
portion of the impact of higher grain costs, such increases continue to
affect poultry, swine and Mexican food production cost.
Operating expenses decreased 1% for the second quarter of 1994 over the same
quarter of 1993. Selling expense, as a percent of sales, in the second
quarter of 1994 was 8.4% compared to 8.5% in the same quarter of 1993.
Selling expense as a percent of sales decreased primarily due to a reduction
in sales promotions offset somewhat by increases in storage and
transportation expenses. General and administrative expense, as a percent of
sales, decreased to 1.7% in the second quarter of 1994 compared to 2.5% in
the same period of 1993. Costs incurred in connection with the sale of
accounts receivable, which are classified as general and administrative
expense, were zero compared to 0.2% of sales in the same period last year.
This decrease was due to the discontinuance of the sale of accounts
receivable. Certain other administrative costs decreased compared to the
same period last year due to cost control and administrative initiatives
instituted by management. Amortization expense was 0.6% of sales in the
second quarter of 1994 compared to 0.7% in the same period of 1993.
Operating expenses increased 1.4% for the first six months of 1994 over the
same quarter of 1993. Selling expense, as a percent of sales, in the first
six months of 1994 was 8.4% compared to 8.3% in the same period of 1993.
Selling expense increased primarily due to increases in storage and
transportation expenses. General and administrative expense, as a percent of
sales, decreased to 1.8% in the first six months of 1994 compared to 2.5% in
the same period of 1993. Costs incurred in connection with the sale of
accounts receivable, which are classified as general and administrative
expense, were 0.1% of sales compared to 0.2% in the same period last year.
Certain other administrative costs decreased compared to last year due to
cost control and administrative initiatives instituted by management.
Amortization expense was 0.7% of sales for both the first six months of 1994
and 1993.
Interest expense increased 6.2% in the second quarter of 1994 compared to the
same quarter of 1993. Short-term interest rates were lower compared to 1993,
due to market conditions and the Company's use of less costly borrowing
alternatives which lowered the weighted average interest rate of all Company
debt to 6.1% compared to 7.3% for the same period last year. However, these
lower rates were offset by a higher level of borrowing due to the
discontinuance of the sale of accounts receivable, as the Company's average
indebtedness increased 28.1% compared to the same period last year.
11
<PAGE>
Interest expense decreased 1.9% in the first six months of 1994 compared to
the same period of 1993. Short-term interest rates were lower compared to
1993, due to market conditions and the Company's use of less costly borrowing
debt to 6.1% compared to 7.3% for the same period last year. These lower
rates were partially offset by a higher level of borrowing due to the
discontinuance of the sale of accounts receivable, as the Company's average
indebtedness increased 18.5% compared to the same period last year.
The effective income tax rate for the second quarter and first six months of
1994 was 39%, compared to 38% in the same periods of 1993. The increase in
the effective rate is due to the increase in the federal income tax rate
during the fourth quarter of the Company's fiscal 1993. The increase in the
tax provision was offset slightly by reduced state income taxes and the
reduced impact of the non-deductibility of amortization of excess of
investments over net assets acquired as income before income taxes increases.
The income tax rate generally reflects the statutory corporate income tax
rate plus the impact of the non-deductibility of amortization of excess of
investments over net assets acquired.
Environmental Matters
- - ---------------------
The Company has a strong financial commitment to environmental matters.
During the first six months of fiscal 1994 the Company invested approximately
$2.7 million in water quality facilities, including capital outlays to build
and upgrade facilities and $15 million for day-to-day operations of these
facilities.
12
<PAGE>
PART II. OTHER INFORMATION
<TABLE>
<CAPTION>
Item 4. Submission of Matters to a Vote of Security Holders
The following directors were elected at the annual shareholders' meeting held
January 14, 1994:
<S> <C> <C>
Directors Votes For Votes Withheld
- - --------- ----------- --------------
Neely Cassady 744,272,658 701,589
Lloyd V. Hackley 744,263,616 710,631
Shelby Massey 744,268,504 705,743
Joe F. Starr 744,262,984 711,263
Leland Tollett 744,269,552 704,695
Barbara Tyson 744,272,267 701,980
Don Tyson 744,271,343 702,904
John H. Tyson 744,263,333 710,914
Fred S. Vorsanger 744,262,031 712,216
</TABLE>
Additionally, Don Tyson, Chairman of the Board of Directors, announced the
nomination of Donald E. "Buddy" Wray, Chief Operating Officer of Tyson Foods,
Inc., to the Board of Directors. Mr. Wray was elected to the Board of
Directors at its first meeting immediately after the adjournment of the
annual meeting of shareholders. Mr. Wray has been with the Company since
1961, and has served as chief operating officer since 1991.
The Board of Directors announced a 100 percent increase in the Company's
quarterly cash dividends for both Class A and Class B common stock. The
quarterly dividend for the Class A common stock increased from $0.01 to $0.02
per share and the quarterly dividend for Class B common stock increased from
$0.00833 to $0.01667 per share. The increases in the quarterly dividends for
Class A and Class B common stock were payable March 15, 1994 to holders of
record on March 1, 1994.
No other items were voted upon at the annual shareholders' meeting or during
the quarter ended April 2, 1994.
Item 5. Other Information
(a) WLR Foods, Inc.
Proposal and Offer
- - ------------------
On January 24, 1994 the Company delivered to the Board of Directors of WLR
Foods, Inc. ("WLR") a proposal to enter into a transaction whereby the
Company would acquire WLR at a purchase price of $30.00 per share in cash
and, in addition, indicated that the Company would be willing to negotiate
other possible ways of merging if a tax-free reorganization would be more
desirable for a significant number of WLR's shareholders. On February 6,
1994, WLR announced that at a meeting of WLR's Board held on February 4, 1994
(the "February 4 Board Meeting"), the Board had unanimously rejected the
Company's proposal.
13
<PAGE>
In connection with WLR's rejection of the Company's proposal, WLR and its
Board took a number of defensive actions in apparent anticipation of a tender
offer. WLR's Board adopted a Shareholder Protection Rights Plan (i.e. poison
pill) and commenced litigation against the Company (see below). Although not
reported until February 15, 1994, WLR's Board adopted amendments to WLR's
Bylaws that purport to "clarify" the positions of Chairman and Vice Chairman
of the WLR Board as being officers of the Board, rather than officers of WLR;
the Chairman and Vice Chairman of the WLR Board, respectively, purported to
terminate their current compensation from WLR; and two other directors
resigned their long-standing positions as Senior Vice Presidents of WLR and
purported to terminate their current compensation from WLR. In connection
with these actions, all four of such directors, who will continue to serve as
directors of WLR, were awarded individual deferred compensation agreements
which provide post-retirement health insurance coverage for life for these
directors and their families. Through this scheme of resignation and
"clarification," these four directors (who appear to control at least 11% of
the outstanding WLR shares), have attempted to become "disinterested" for the
sole purpose of voting their shares at the upcoming special meeting of WLR
shareholders (see below). Also at the February 4 Board Meeting, the WLR
Board approved "golden parachute" severance agreements for certain top
executives of WLR and adopted group severance arrangements covering all
salaried and hourly clerical employees of WLR. The golden parachute
contracts provide, among other things, that, the executives will be entitled
to receive certain benefits, including lump sum cash payments from WLR, if
they resign or are terminated following a "change in control" of WLR
(including the acquisition of more than 20% of the shares).
Following WLR's rejection on February 4, 1994, of the Company's proposal,
the Company began purchasing WLR shares in the open market. From
February 7, 1994, through February 24, 1994, the Company purchased 600,000
shares. On March 9, 1994, the Company, through its wholly owned subsidiary,
WLR Acquisition Corp. ("Acquisition"), commenced a tender offer (the "Offer")
for all of the shares of WLR at a price of $30.00 per share, net to the
seller in cash. The Company has received a firm commitment from Bank of
America National Trust and Savings Association to provide the total financing
for the Offer in the form of a credit facility of up to $340 million. WLR
reported that as of April 14, 1994, there were 10,970,878 shares issued and
outstanding. The Offer is conditioned upon, among other things, (1) there
being validly tendered, and not withdrawn prior to the expiration date of
the Offer, that number of WLR shares which, together with the WLR shares
beneficially owned by Acquisition and its affiliates, represents at least a
majority of the total number of WLR Shares outstanding on a fully diluted
basis on the date of purchase, (2) the poison pill rights having been
redeemed by the WLR Board or Acquisition being satisfied that such rights
have been invalidated or are otherwise inapplicable to the Offer and any
merger between Acquisition and WLR, (3) Acquisition being satisfied that
after consummation of the Offer, the restrictions contained in the Virginia
Affiliated Transactions Law will not apply to any such merger, and (4) full
voting rights for all WLR shares acquired by Acquisition or the Company or
any of their associates pursuant to, or in contemplation of, the Offer (which
would otherwise be denied voting rights under the Virginia Control Share Act)
having been approved at a special meeting of shareholders of WLR or
Acquisition being satisfied that the Virginia Control Share Act is
inapplicable to Acquisition or Tyson or any of their associates or the
acquisition of WLR shares by any of them. The Offer is also subject to other
14
<PAGE>
terms and conditions contained in the Offer to Purchase distributed to WLR
shareholders. The Offer is currently scheduled to expire on June 3, 1994.
The WLR Board has recommended that WLR's shareholders reject the Offer and
not tender their shares pursuant thereto. Despite the repeated requests of
the Company, the Board and management of WLR have continued to refuse to meet
with the Company to discuss any proposed acquisition of WLR.
The Virginia Control Share Act referred to above will deny voting rights to
WLR shares acquired by the company and its "associates" (as defined in the
Act) pursuant to, or in contemplation of, the Offer, unless the granting of
voting rights for such shares has been approved by the affirmative vote of
the holders of a majority of outstanding WLR shares, other than "Interested
Shares" (as defined in the Act). Acquisition, as a holder of in excess of 5%
of the outstanding WLR shares, is entitled under the Virginia Control Share
Act to require WLR to call a special meeting of shareholders to vote on the
granting of voting rights to WLR shares acquired by the Company and
Acquisition pursuant to, or in contemplation of, the Offer. On April 14,
1994, Acquisition requested that WLR hold a special meeting of its
shareholders. Pursuant to Acquisition's request, WLR has called a special
meeting of shareholders (the "Special Meeting") be held on May 21, 1994.
Litigation
- - ----------
On February 6, 1994, WLR filed a lawsuit (the "Virginia Action") in the
United States District Court for the Western District of Virginia,
Harrisonburg Division (Civil Action No. 94-0012(H)) naming the Company as a
defendant. The Virginia Action seeks a declaratory judgment that WLR's
Shareholders Protection Rights Agreement adopted on February 4, 1994, is
valid and was duly adopted and, that any rights issued thereunder are valid,
binding and legally enforceable under state and federal law. The Virginia
Action also seeks a declaration that the Virginia Control Share Act and the
Virginia Affiliated Transactions Law are constitutional under the Virginia
and United States Constitutions and valid under any other applicable law.
The Virginia Action also seeks a temporary, preliminary and permanent
injunction enjoining the Company and Acquisition from bringing any action in
any other court relating to the Company's proposal to acquire WLR.
On February 25, 1994, the Company answered WLR's complaint in the Virginia
Action, and filed counterclaims against WLR and all of its directors. The
Company and Acquisition filed an amended answer and counterclaims on March
21, 1994 and a supplemental counterclaim on May 4, 1994. The counterclaims
allege, among other things, that on February 4, 1994, WLR's Board took a
series of actions designed to erect numerous barriers that would insulate WLR
from any acquisition not approved by WLR's existing Board and, that through
its actions, WLR's Board attempted to impose its will on WLR's shareholders
and deprive them of the benefits of an acquisition proposal from the Company
or any other third party not endorsed by WLR's existing Board.
The counterclaims further allege that the Virginia Affiliated Transactions
Law and the Virginia Control Share Act are unconstitutional because, among
other things, each conflicts with federal law regulating tender offers, and
should be declared invalid. The counterclaims seek a declaration that: (1)
Virginia Affiliated Transactions Law and the Virginia Control Share Act, as
well as the Virginia statutory scheme regulating mergers and acquisitions,
are unconstitutional; (2) the poison pill rights and the various severance
15
<PAGE>
arrangements adopted by WLR's Board are invalid; (3) none of WLR's directors
whose status was purported to be affected by the actions taken on February 4,
1994 will be permitted to vote their shares at the Special Meeting; and (4)
WLR's directors breached their fiduciary duties to WLR's shareholders in
taking the actions described in the counterclaims.
The Court has set a trial date of September 12 through 15, 1994 for the case.
The Company and Acquisition have filed a motion to obtain preliminary relief
barring the four directors whose statuses were purportedly altered on
February 4, 1994, WLR's officers, and each of the foregoing person's
"associates" (as defined in the Virginia Control Share Act) from being
permitted to vote their shares at the Special Meeting. The Court has
scheduled a May 26 through 27, 1994 hearing on the motion for preliminary
relief that the Company has brought.
Summary
- - -------
Through the Offer and its continuing efforts in the above described
litigation, the Company continues to attempt to acquire WLR; however, there
can be no assurance that any transaction on any terms will be consummated
with WLR or when, if at all, a transaction could be consummated. The Company
is still willing to meet with the WLR Board and management and attempt to
negotiate a mutually agreeable transaction.
Reference is made to the Company's Schedule 13D which was filed on
March 4, 1994, as amended to date, with respect to WLR, the Company's
Schedule 14D-1 which was filed on March 9, 1994, as amended to date, with
respect to the Offer, and the Company's Proxy Statement for the Special
Meeting which was filed on April 22, 1994, each of which was filed
electronically through the EDGAR system and are included herein as exhibits.
(b) Trasgo, S.A. DE C.V.
On April 20, 1994 the Company announced it had acquired a majority interest
in Trasgo, S.A. DE C.V.("Trasgo") the third largest Mexican poultry producer
with annual sales of approximately $140 million. The Company previously held
an 18% minority interest in Trasgo.
(c) Culinary Foods, Inc.
On April 28, 1994 the Company announced that it had signed a letter of intent
to acquire assets of Culinary Foods, Inc., a manufacturer and processor of
value-added high quality specialty frozen foods with annual sales of
approximately $70 million.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
The exhibits filed with this report are listed in the exhibit index at the
end of this Item 6.
(b) Reports on Form 8-K:
None.
16
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
The following exhibits are filed with this report.
Exhibit No. Page
- - ----------- ----
<C> <S> <C>
11. Statement Regarding Computation of Earnings Per Share 20-21
99 (a) Schedule 13D for Tyson Foods, Inc., WLR Acquisition Corp.,
Tyson Limited Partnership and Mr. Don Tyson reporting their
beneficial ownership of WLR Foods, Inc. shares previously
filed on March 4, 1994 and incorporated herein by reference.
99 (b) Schedule 14D-1 for WLR Acquisition Corp. and Tyson Foods, Inc.
for the tender offer for all outstanding shares of common
stock for WLR Foods, Inc. and Amendment No. 1 to the
Schedule 13D previously filed on March 9, 1994 and incorporated
herein by reference.
99 (c) Amendment No. 1 to the Tender Offer Statement on Schedule 14D-1
for all outstanding shares of common stock for WLR Foods, Inc.
and Amendment No. 2 to the Schedule 13D by WLR Acquisition
Corp. and Tyson Foods, Inc. previously filed on March 11, 1994
and incorporated herein by reference.
99 (d) Amendment No. 2 to the Tender Offer Statement on Schedule 14D-1
for all outstanding shares of common stock for WLR Foods, Inc.
and Amendment No. 3 to the Schedule 13D by WLR Acquisition
Corp. and Tyson Foods, Inc. previously filed on March 22, 1994
and incorporated herein by reference.
99 (e) Amendment No. 3 to the Tender Offer Statement on Schedule 14D-1
for all outstanding shares of common stock for WLR Foods, Inc.
and Amendment No. 4 to the Schedule 13D by WLR Acquisition
Corp. and Tyson Foods, Inc. previously filed on March 25, 1994
and incorporated herein by reference.
99 (f) Amendment No. 4 to the Tender Offer Statement on Schedule 14D-1
for all outstanding shares of common stock for WLR Foods, Inc.
and Amendment No. 5 to the Schedule 13D by WLR Acquisition
Corp. and Tyson Foods, Inc. previously filed on April 8, 1994
and incorporated herein by reference.
99 (g) Amendment No. 5 to the Tender Offer Statement on Schedule 14D-1
for all outstanding shares of common stock for WLR Foods, Inc.
and Amendment No. 6 to the Schedule 13D by WLR Acquisition
Corp. and Tyson Foods, Inc. previously filed on April 15, 1994
and incorporated herein by reference.
99 (h) Amendment No. 6 to the Tender Offer Statement on Schedule 14D-1
for all outstanding shares of common stock for WLR Foods, Inc.
and Amendment No. 7 to the Schedule 13D by WLR Acquisition
Corp. and Tyson Foods, Inc. previously filed on April 19, 1994
and incorporated herein by reference.
17
<PAGE>
Exhibit No. Page
- - ----------- ----
99 (i) Amendment No. 7 to the Tender Offer Statement on Schedule 14D-1
for all outstanding shares of common stock for WLR Foods, Inc.
and Amendment No. 8 to the Schedule 13D by WLR Acquisition
Corp. and Tyson Foods, Inc. previously filed on April 22, 1994
and incorporated herein by reference.
99 (j) Amendment No. 8 to the Tender Offer Statement on Schedule 14D-1
for all outstanding shares of common stock for WLR Foods, Inc.
and Amendment No. 9 to the Schedule 13D by WLR Acquisition
Corp. and Tyson Foods, Inc. previously filed on April 29, 1994
and incorporated herein by reference.
99 (k) Amendment No. 9 to the Tender Offer Statement on Schedule 14D-1
for all outstanding shares of common stock for WLR Foods, Inc.
and Amendment No. 10 to the Schedule 13D by WLR Acquisition
Corp. and Tyson Foods, Inc. previously filed on May 3, 1994
and incorporated herein by reference.
99 (l) Amendment No. 10 to the Tender Offer Statement on Schedule 14D-1
for all outstanding shares of common stock for WLR Foods, Inc.
and Amendment No. 11 to the Schedule 13D by WLR Acquisition
Corp. and Tyson Foods, Inc. previously filed on May 5, 1994
and incorporated herein by reference.
99 (m) Amendment No. 11 to the Tender Offer Statement on Schedule 14D-1
for all outstanding shares of common stock for WLR Foods, Inc.
and Amendment No. 12 to the Schedule 13D by WLR Acquisition
Corp. and Tyson Foods, Inc. previously filed on May 6, 1994
and incorporated herein by reference.
99 (n) Amendment No. 12 to the Tender Offer Statement on Schedule 14D-1
for all outstanding shares of common stock for WLR Foods, Inc.
and Amendment No. 13 to the Schedule 13D by WLR Acquisition
Corp. and Tyson Foods, Inc. previously filed on May 12, 1994
and incorporated herein by reference.
</TABLE>
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TYSON FOODS, INC.
Date: May 13, 1994 /s/ Gerald Johnston
----------------- -------------------
Gerald Johnston
Executive Vice President,
Finance
Date: May 13, 1994 /s/ Gary Johnson
----------------- ----------------
Gary Johnson
Corporate Controller
19
<PAGE>
<PAGE>
EXHIBIT 11
TYSON FOODS, INC.
Computation of Earnings Per Share
(In Thousands Except Per Share Data)
Quarter Ended
------------------------
April 2, April 3,
1994 1993
------------------------
Primary:
Average common shares outstanding
during the period 147,598 147,209
Net effect of dilutive stock
options based on the treasury
stock method using average
market price 946 1,306
------- -------
Total common and common equivalent
shares outstanding 148,544 148,515
======= =======
Net income $43,121 $46,088
======= =======
Earnings per share $0.29 $0.31
===== =====
Fully Diluted:
Average common shares outstanding
during the period 147,598 147,209
Net effect of dilutive stock
options based on the treasury
stock method using the quarter-
end market price, if higher
than average market price 946 1,306
------- -------
Total common and common equivalent
shares outstanding 148,544 148,415
======= =======
Net income $43,121 $46,088
======= =======
Earnings per share $0.29 $0.31
===== =====
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<PAGE>
EXHIBIT 11
TYSON FOODS, INC.
Computation of Earnings Per Share
(In Thousands Except Per Share Data)
Six Months Ended
------------------------
April 2, April 3,
1994 1993
------------------------
Primary:
Average common shares outstanding
during the period 147,550 147,151
Net effect of dilutive stock
options based on the treasury
stock method using average
market price 946 1,306
------- -------
Total common and common equivalent
shares outstanding 148,496 148,457
======= =======
Net income $87,500 $85,484
======= =======
Earnings per share $0.59 $0.58
===== =====
Fully Diluted:
Average common shares outstanding
during the period 147,550 147,151
Net effect of dilutive stock
options based on the treasury
stock method using the quarter-
end market price, if higher
than average market price 946 1,306
------- -------
Total common and common equivalent
shares outstanding 148,496 148,457
======= =======
Net income $87,500 $85,484
======= =======
Earnings per share $0.59 $0.58
===== =====
21
