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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended September 27, 1997
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ________________ to ________________
Commission File No. 0-3400
TYSON FOODS, INC.
(Exact Name of Registrant as specified in its Charter)
Delaware 71-0225165
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2210 West Oaklawn Drive, Springdale, Arkansas 72762-6999
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (501) 290-4000
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
------------------- -----------------------------------------
Class A Common Stock, New York Stock Exchange, Inc.
Par Value $.10
Securities Registered Pursuant to Section 12(g) of the Act:
Not Applicable
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, and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in part III of this Form 10-K or any
amendment to this Form 10-K. [X]
On September 27, 1997, the aggregate market value of the Class A Common and
Class B Common voting stock held by non-affiliates of the registrant was
$2,343,655,485 and $1,659,135, respectively.
On September 27, 1997, there were outstanding 110,774,912 shares of the
registrant's Class A Common Stock, $.10 par value, and 102,670,113 shares
of its Class B Common Stock, $.10 par value.
Page 1 of 71 Pages
The Exhibit Index appears on pages 22 through 28
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DOCUMENTS INCORPORATED BY REFERENCE
The following documents or the indicated portions thereof are incorporated
herein by reference into the indicated portions of this Annual Report on
Form 10-K: (i) pages 26-48 and back cover of the registrant's Annual Report
to Shareholders for fiscal year ended September 27, 1997 (the "Annual
Report") which are filed as Exhibit 13 to this Form 10-K and (ii) the
registrant's definitive Proxy Statement for the registrant's Annual Meeting
of Shareholders to be held January 9, 1998 (the "Proxy Statement").
PART I
Item 1. Business
Pages 28 through 31 of the Annual Report under the caption
"Management's Discussion and Analysis."
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
Pages 37 and 48 of the Annual Report under the caption "Capital Stock"
and "Price of Company's Common Stock."
Item 6. Selected Financial Data
Page 27 of the Annual Report under the caption "Eleven-Year Financial
Summary."
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Pages 28 through 31 of the Annual Report under the caption
"Management's Discussion and Analysis."
Item 8. Financial Statements and Supplementary Data
Pages 32 through 46 of the Annual Report under the captions
"Consolidated Statements of Income," "Consolidated Balance Sheets,"
"Consolidated Statements of Shareholders' Equity," "Consolidated
Statements of Cash Flows," "Notes to Consolidated Financial Statements" and
"Report of Independent Auditors."
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Part III
Item 10. Directors and Executive Officers of the Registrant
The information set forth under the caption "Election of Directors"
and "Compliance with Section 16(a) of the Securities Exchange Act of 1934"
in the Proxy Statement.
Item 11. Executive Compensation
The information set forth under the caption "Executive Compensation
and Other Information" in the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
The information set forth under the captions "Principal Shareholders"
and "Security Ownership of Management" in the Proxy Statement.
Item 13. Certain Relationships and Related Transactions
The information set forth under the caption "Certain Transactions" in
the Proxy Statement.
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PART I
ITEM 1. BUSINESS
General
Tyson Foods, Inc. and its various subsidiaries (collectively, the
"Company") produce, market and distribute a variety of food products
consisting of value-enhanced poultry; fresh and frozen poultry; value-
enhanced seafood products; fresh and frozen seafood products and prepared
foods and other products such as flour and corn tortillas and chips.
Additionally, the Company has live swine, animal feed and pet food
ingredients operations. The Company's integrated operations consist of
breeding and rearing chickens, harvesting seafood, as well as the
processing, further-processing and marketing of these food products. The
Company's products are marketed and sold to national and regional grocery
chains, regional grocery wholesalers, clubs and warehouse stores, military
commissaries, industrial food processing companies, national and regional
chain restaurants or their distributors, international export companies and
domestic distributors who service restaurants, foodservice operations such
as plant and school cafeterias, convenience stores, hospitals and other
vendors. Sales are made by the Company's sales staffs located in
Springdale, Arkansas, in regions throughout the United States and in
several foreign countries. Additionally, sales to the military and a
portion of sales to international markets are made through independent
brokers and trading companies. The Company conducts the major portion of
its business activities on a vertically integrated basis and considers its
business to be one industry segment, that of "food products." The Company
commenced business in 1935, was incorporated in Arkansas in 1947, and was
reincorporated in Delaware in 1986.
Description
Originally, the Company was a producer and distributor of fresh
chicken. The Company developed a strategy to reduce the impact of the
commodity market of the fresh chicken business through value-enhancement.
As the industry leader in value-enhanced poultry products, the Company
utilizes national and regional advertising, special promotions and brand
identification, and meets the varying demands of its customers through
capital expenditures and strategic acquisitions. With further-processed
poultry products, grain costs as a percentage of total product costs are
reduced because of the value added to the products by cutting, deboning,
cooking, packaging or freezing the poultry.
The Company's integrated poultry processes include genetic research,
breeding, hatching, rearing, ingredient procurement, feed milling,
veterinary and other technical services, and related transportation and
delivery services. The Company contracts with independent growers to
maintain the Company's flocks of breeder chicks which, when grown, lay the
eggs which the Company transfers to its hatcheries and hatch into broiler
chicks. Newly hatched broiler chicks are vaccinated and are then delivered
to independent contract growers who care for and feed the broiler chicks
until they reach processing weight, usually from the end of the fourth to
the eighth week. During the broiler growout period, the Company provides
growers with feed, vitamins and medication for the broilers, if needed, as
well as supervisory and technical services. The broilers are then
transported by the Company to its nearby processing plants. The Company
processed approximately 5.6 billion pounds of consumer poultry during
fiscal 1997.
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The Company's farrow to finish swine operations, which include genetic
and nutritional research, breeding, farrowing and feeder pig finishing and
the marketing of live swine to regional and national packers, are conducted
in Arkansas, North Carolina, Oklahoma, Missouri and Alabama. The Company
sold approximately 1.8 million head of market weight live swine in fiscal
1997.
The Company is the leading manufacturer, marketer and distributor of
branded surimi-based seafood offerings including analog crabmeat, lobster,
shrimp and scallops. Additionally, the Company's seafood operations consist
of one of the largest catching and at-sea processing fleets in the North
Pacific. These vessels harvest a wide range of species of bottomfish and
shellfish year-round off the coasts of Alaska, Washington and Oregon. The
catch is either processed at sea or in shore-based processing facilities
into a variety of product forms. The Company's long-term strategy for
seafood products continues to be a plan of using its marketing and
distribution channels to expand sales opportunities while using its
research and development resources to create additional value-enhanced
seafood products.
The Company's Mexican Original operations produce flour and corn
tortilla products for Mexican restaurants and other major customers.
Mallard's Food Products, Inc., which was acquired in August 1997, and
Culinary Foods, Inc., produce specialty pasta and meat dishes. These
products are included in the other prepared foods category.
The Company's by-products operations convert inedible poultry by-
products into high-grade pet food and animal feed ingredients.
Sources of Revenue
The principal revenue sources of the Company include value-enhanced
poultry products, fresh and frozen poultry products, Mexican Original
products, frozen dinner products, seafood products, live swine operations,
animal foods, by-products, and other products. In the first quarter of
1997, the Company sold the beef further-processing plants and closed the
pork further-processing plant. Revenue for 1996 and 1995 include value-
enhanced beef and pork products. The following table sets forth the
relative sources of the Company's revenues for the last three fiscal years.
For Fiscal Year Ended
---------------------
1997 1996 1995
---- ---- ----
Consumer poultry products:
Value-enhanced poultry (1) 69% 63% 64%
Basic poultry (2) 14 15 11
--- --- ---
Total consumer poultry 83 78 75
Beef and pork (3) 0 5 9
Mexican Original products and other prepared foods(4) 5 5 7
Seafood (5) 4 5 5
Animal foods, by-products, live swine and other 8 7 4
--- --- ---
Total 100% 100% 100%
=== === ===
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(1) Includes products such as chicken patties and nuggets, pre-cooked
chicken, individually-quick-frozen chicken segments, pre-packaged and pre-
priced poultry, Cornish game hens and other poultry products to which
certain processes are added to enhance their value to the Company's
customers.
(2) Includes fresh and frozen poultry products sold without value
enhancements. The increase in this category for fiscal 1996 results
from the acquisition of the U.S. broiler business of Cargill,
Incorporated and McCarty Farms, Inc., in September 1995.
(3) Previously included value-enhanced beef and pork products such as
portion controlled steaks, chops and roasts, ground beef, chicken-
fried steaks, meatloaf, hams, bacon and sausages. These products have
been discontinued due to the sale of the Company's beef further-processing
facilities and closure of the Company's pork further-processing operations
in the first quarter of fiscal 1997.
(4) Includes flour and corn tortillas, corn chips, taco shells and filled
tortilla specialty items; premium frozen dinners and other specialty items.
(5) Includes surimi-based products as well as breaded and battered
seafood, fillets and crab.
Marketing and Distribution
The Company seeks to develop and increase the demand for and market
share of a product or product line through concentrated national and local
advertising and other promotional efforts, stressing product quality and
brand identification and meeting specific customer requirements. The
Company's principal marketing strategy is to identify target markets for
value-enhanced food products consisting primarily of poultry, Mexican
Original and seafood. The Company concentrates production, sales and
marketing efforts in order to appeal to and enhance the demand from those
markets. The Company utilizes its national distribution system and customer
support services to achieve a dominant market position for its products and
identifies distinct markets through trade and consumer research.
The Company's nationwide distribution system utilizes a network of
food distributors which is supported by cold storage warehouses owned or
leased by the Company, by public cold storage facilities and by the
Company's transportation system. The Company ships products from two
Company-owned major frozen food distribution centers having a storage
capacity of approximately 58 million pounds, from a network of public cold
storages, from other owned or leased facilities or directly from plants.
The Company has a total frozen storage capacity in excess of 118 million
pounds, excluding public or outside cold storage. The Company's
distribution centers facilitate accumulating frozen products so that it can
fill and consolidate less-than-truckload orders into full truckloads,
thereby decreasing shipping costs while increasing customer service. In
addition, customers are provided with a selection of products that do not
require large volume orders. The Company's distribution system enables it
to supply large or small quantities of products to meet customer
requirements anywhere in the continental United States.
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The Company's food products are sold primarily in three broad domestic
markets consisting of foodservice, retail and wholesale clubs. The
foodservice, retail and wholesale club markets may, in some cases, overlap.
The Company's food products are also sold internationally.
In the foodservice market, the Company sells poultry, seafood and
tortilla products. Operators serving these products include commercial
restaurants, business/industry, colleges/universities, national/regional
chains, hotels/lodging, primary/secondary schools, health/elderly care and
other foodservice accounts. The Company's products are sold through
foodservice and specialty distributors who deliver to the above listed
operators.
Foodservice products are sold under the following brands and
registered trademarks: Tyson, Holly Farms, Weaver, Tastybird Tastybasted,
Honey Stung, Tyson's Pride, HoneyBest, Wing Stingers, W.W. Flyers,
Signature Specialties, Flavor-Redi, Lady Aster, Quality Cuisine, Our
Finest, Mexican Original, Louis Kemp, Arctic Ice, Enterprise, Crab
Delights, Lobster Delights, Ocean Master and Sure Salad.
Foodservice products include: (a) poultry items such as individually-
quick-frozen segments (IQF), ready-to-cook and fully cooked fried chicken,
fully cooked breaded and glazed wings, cooked and ready-to-cook breaded and
unbreaded tenderloins, breaded and unbreaded patties and chunks (cooked and
ready-to-cook), oven roasted chicken, stuffed breast specialties, split
broilers, Cornish hens, commodity breast, flavor marinated breasts, fully
cooked diced chicken products, breaded breast and thigh pieces and strips;
(b) tortilla items such as flour and corn tortillas and chips; and (c)
seafood items such as surimi, snow crab, king crab, pollock, cod and
several species of flatfish.
In the retail market the Company sells a wide variety of food products
to customers that sell food products for at-home consumption. These
customers include grocery store chains, independent grocery stores and
grocery wholesalers.
Tyson, Weaver, Tyson Holly Farms, Mexican Original, Louis Kemp, Crab
Delights, Lobster Delights, JAC Creative Foods, Captain JAC, SeaFest and
Mallard's are registered trademarks under which the Company sells retail
products.
Retail products include: (a) frozen prepared foods consisting of
separate lines of Tyson breaded chicken patties, chunks, fillets and
tenders; Weaver breaded chicken tenders, nuggets, patties and fillets;
Tyson premium plated dinners; Tyson and Weaver flavored chicken wings;
Tyson complete meal kits; Tyson premium pot pies; Tyson and Mallard's
meals; Tyson individually-quick-frozen chicken parts and breaded chicken
patties and chunks; (b) refrigerated prepared foods consisting of separate
lines of Tyson Holly Farms roasted ready-to-eat chicken; Tyson and Weaver
sliced lunch meat; Tyson, Weaver and Holly Farms hot dogs; Tyson and Weaver
deli meats; and Mexican Original tortillas and chips;(c) refrigerated Tyson
Holly Farms chill pack poultry; (d) frozen and refrigerated Tyson Cornish
game hens; and (e) seafood products which are marketed under the Louis Kemp
brand of Crab Delights and Lobster Delights, as well as the JAC Creative
Foods brands of Captain JAC and SeaFest.
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In the wholesale club market the Company designs and markets a variety
of products targeted to small foodservice operators and consumers who
frequent club stores. These products are aimed at both foodservice
operators who buy in small quantities and want to cut costs of storage and
final distribution, as well as retail consumers willing to buy larger than
normal quantities to realize cost savings. The Company sells several
categories of products including: IQF chicken, fresh chicken, refrigerated
roasted ready-to-eat chicken, frozen value-added chicken and canned
chicken; surimi-based seafood products, frozen pollock, cod and crab legs.
The Company's international division markets and sells throughout the
world the full line of Tyson products, including poultry, Mexican Original
products and seafood. The international division exported to 61 countries
in fiscal 1997. Major markets include Russia, Japan, China/Hong Kong,
Puerto Rico, Singapore, South Africa and Mexico. The Company also exported
to Canada, certain Middle Eastern countries and many countries in the
Caribbean.
The Company continues to believe that Southeast Asia offers tremendous
potential in terms of developing fully-integrated poultry facilities. A
memorandum of understanding has been signed with the Kuok Group to develop
up to ten poultry production and processing complexes in China. The Company
has also established a joint venture called Fil-Am Foods, Inc. with Aboitiz
Equity Ventures, Inc. and PM Nutrition Company, Inc., a subsidiary of
Purina Mills, Inc., to create a commercial feed and swine operation in the
Philippines. Meanwhile, the Company's joint venture operation in Mexico has
grown under economically difficult conditions. The Company has also
entered into a distribution agreement for the sale of products in Russia
and opened an office in Moscow allowing the Company to develop more direct
contact with its customers. Cobb-Vantress, Inc., a wholly-owned
subsidiary, has entered into a joint venture agreement with a Hong Kong
company to build a 180 thousand capacity breeder farm in China. The Company
also has a seafood processing joint venture in Shanghai, China. This joint
venture is engaged in the value-added processing of seafood items.
In 1995, the Company's International Division created a wholly-owned
subsidiary called "World Resource, Inc." This subsidiary acts as a trading
company which handles the acquisition, certification and transportation of
primarily agricultural goods worldwide.
Raw Materials and Sources of Supply
The primary raw materials used by the Company in its poultry
operations consists of feed ingredients, cooking ingredients, packaging
materials and cryogenic agents. The Company believes that its sources of
supply for these materials are adequate for its present needs and the
Company does not anticipate any difficulty in acquiring these materials in
the future. While the Company produces substantially all of its inventory
of breeder chickens and live broilers, it has the capability to purchase
live, ice-packed or deboned poultry to meet poultry production
requirements.
In addition, raw material requirements for the Company's seafood
operations are met by either purchasing in the open market or by the
Company's vessels harvesting a wide range of species of bottomfish and
shellfish off the coasts of Alaska, Washington and Oregon. A large supply
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of bottomfish, one of the principal groups of fish harvested for human
consumption, is found in the 200-mile U.S. exclusive economic zone off the
coast of Alaska. This area also provides a significant quantity of crab for
commercial harvesting; however, crab quotas have been severely limited in
recent years. Following passage of the Magnuson Fishery Conservation and
Management Act of 1976 (the "Magnuson Act"), the United States extended
control over the management of offshore fishing resources from a 12-mile to
a 200-mile exclusive economic zone by, among other things, establishing
annual catch limits and allocating the available resources between U.S. and
foreign catchers and processors. As a result of these government actions,
the Company's ability to harvest seafood is subject to these limitations.
Patents and Trademarks
The Company has registered a number of trademarks relating to its
products which either have been approved or are in the process of
application. Because the Company does a significant amount of brand name
and product line advertising to promote its products, it considers the
protection of such trademarks to be important to its marketing efforts. The
Company has also developed non-public proprietary information regarding its
production processes and other product-related matters. The Company
utilizes internal procedures and safeguards to protect the confidentiality
of such information, and where appropriate, seeks patent protection for the
technology it utilizes.
Seasonal Demand
The demand for the Company's products generally increases during the
spring and summer months and generally decreases during the winter months.
Because of the somewhat seasonal character of the Company's business, the
Company may increase its finished product inventories during the winter
months in anticipation of increased spring and summer demands.
Industry Practices
The Company's agreements with its customers are generally short-term,
verbal agreements due primarily to the nature of its products, industry
practice and the fluctuation in demand and price for such products.
Customer Relations
No single customer of the Company accounts for more than ten percent
of the Company's consolidated revenues, and the loss of any single customer
would not have a material adverse effect on the Company's business.
Although any extended discontinuance of sales to any major customer could,
if not replaced, have an impact on the Company's operations, the Company
does not anticipate any such occurrences due to the demand for its products
and its ability to obtain new customers.
Backlog of Orders
There is no significant backlog of unfilled orders for the Company's
products.
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Competition
The Company's food products compete with those of other national and
regional food producers and processors and certain prepared food
manufacturers. Additionally, the Company's food products compete in
international markets in Europe, South America, Central America and the Far
East. The Company's principal marketing and competitive strategy is to
identify target markets for value-enhanced products, to concentrate
production, sales and marketing efforts in order to appeal to and enhance
the demand from those markets and, utilizing its national distribution
system and customer support services, to achieve a dominant market position
for its products. Past efforts have indicated that customer demand
generally can be increased and sustained through application of the
Company's marketing strategy, as supported by its distribution system.
Research and Development
The Company conducts continuous research and development activities to
improve the strains of primary poultry breeding stock, the genetic
qualities of swine, and finished product development. Additionally, a
separate staff of research and development personnel is maintained to
develop and provide for product needs. The annual cost of such research and
development programs is less than one percent of total consolidated annual
sales.
Regulation
The Company's facilities for processing poultry and for housing live
poultry and swine are subject to a variety of federal, state and local laws
relating to the protection of the environment, including provisions
relating to the discharge of materials into the environment, and to the
health and safety of its employees. The Company's poultry and Mexican
Original processing and distribution facilities are also subject to
extensive inspection and regulation by the United States Department of
Agriculture. The cost of compliance with such laws and regulations has not
had a material adverse effect upon the Company's capital expenditures,
earnings or competitive position and it is not anticipated to have a
material adverse effect in the future.
Fishing activities and seafood processing activities of the Company's
seafood operations are closely regulated by the United States Department of
Commerce and various other state and governmental agencies. These
agencies, among other things, establish fishing seasons and resource
depletion restrictions and regulate legal gear types. Violations of the
Magnuson Act and state laws can result in substantial penalties, ranging
from fines to seizure of catch and vessels. In addition, the seafood
operations are subject to various federal, state and local laws relating to
the protection of the environment and the health and safety of its
employees.
To provide consumer reassurance of product integrity and safety, to
create a quality point of difference from the competition, and to assume a
position of measured industry leadership in production standards, the
Company's seafood operation voluntarily complies with certain United States
Department of Commerce regulations which enable it to show the United
States Department of Commerce seal of approval (PUFI) on its primary
products. Three of the Company's seafood manufacturing facilities are
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United States Department of Commerce inspected and are participants in the
government's pilot Hazard Analysis Critical Control Point (HACCP) program.
Employees and Labor Relations
As of September 27, 1997, the Company employed approximately 59,400
persons. The Company believes that its relations with its workforce are
good.
Set forth below is a listing of the Company facilities which have employees
subject to a collective bargaining agreement together with the name of the
union party to the collective bargaining agreement, the number of employees
at the facility subject thereto and the expiration date of the collective
bargaining agreement currently in effect.
Location Union No. of People Expiration Date
- -------- ----- ------------- ---------------
Chicago, IL UFCW 1100 August 31, 1997 (1)
Gadsden/Blountsville, AL Teamsters 28 March 31, 1998
Dardanelle, AR UFCW 1003 October 31, 1998
Wilkesboro, NC Teamsters 1507 November 1, 1998
Glen Allen, VA UFCW 858 November 1, 1998
Gadsden, AL RWDSU 1130 November 8, 1998
Jacksonville, FL Teamsters 662 December 31, 1998
Ashland, AL UFCW 887 February 24, 1999
Pine Bluff, AR UFCW 247 October 10, 1999
Shelbyville, TN RWDSU 950 November 13, 1999
Jackson, MS UFCW 1069 December 31, 1999
Center, TX UFCW 983 February 5, 2000
Buena Vista, GA RWDSU 1204 November 1, 2000
Carthage, TX UFCW 819 November 8, 2000
The Company has not experienced any strike or work stoppage which had a
material impact on operations.
(1) Prior to August 31, 1997, an election was held in which the Chicago
Truck Drivers Union was elected to represent the employees of the Company's
Chicago, Illinois facility. The UFCW has protested the results of that
election to the National Labor Relations Board ("NLRB"). The Company
anticipates that, upon a final determination of the matter by the NLRB, the
Company will enter into a new collective bargaining agreement with either
the UFCW or the Chicago Truck Drivers Union.
CAUTIONARY STATEMENTS RELEVANT TO FORWARD-LOOKING INFORMATION FOR THE
PURPOSE OF "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995
The Company and its representatives may from time to time make written
or oral forward-looking statements with respect to their current views and
estimates of future economic circumstances, industry conditions, company
performance and financial results. These forward-looking statements are
subject to a number of factors and uncertainties which could cause the
Company's actual results and experiences to differ materially from the
anticipated results and expectations expressed in such forward-looking
statements. The Company wishes to caution readers not to place undue
reliance on any forward-looking statements, which speak only as of the date
made.
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Among the factors that may affect the operating results of the Company
are the following: (i) fluctuations in the cost and availability of raw
materials, such as feed grain costs in relation to historical levels; (ii)
changes in the availability and relative costs of labor and contract
growers; (iii) market conditions for finished products, including the
supply and pricing of alternative proteins, all of which may impact the
Company's pricing power; (iv) effectiveness of advertising and marketing
programs; (v) the ability of the Company to make effective acquisitions and
to successfully integrate newly acquired businesses into existing
operations; (vi) risks associated with leverage, including cost increases
due to rising interest rates; (vii) changes in regulations and laws,
including changes in accounting standards, environmental laws,
occupational, health and safety laws, and laws regulating fishing and
seafood processing activities; (viii) access to foreign markets together
with foreign economic conditions, including currency fluctuations; and (ix)
the effect of, or changes in, general economic conditions.
ITEM 2. PROPERTIES
The Company currently has production and distribution operations in
the following states: Alabama, Alaska, Arkansas, California, Florida,
Georgia, Illinois, Indiana, Maryland, Michigan, Minnesota, Mississippi,
Missouri, North Carolina, Oklahoma, Oregon, Pennsylvania, South Carolina,
Tennessee, Texas, Virginia and Washington. Additionally, the Company,
either directly or through its subsidiaries, has facilities in or
participates in joint venture operations in Argentina, Brazil, Canada,
China, Denmark, France, Hong Kong, India, Indonesia, Ireland, Japan,
Mexico, the Philippines, Poland, South Africa, Spain, the United Kingdom
and Venezuela.
The principal poultry operations of the Company consist of 55
processing plants. These plants are devoted to various phases of
slaughtering, dressing, cutting, packaging, deboning or further-processing.
The total slaughter capacity is approximately 37 million head per week.
To support the above facilities the Company operates 31 feed mills and
58 broiler hatcheries with sufficient capacity to meet the needs of the
poultry growout operations. In addition, the Company owns poultry cold
storage facilities with a capacity of approximately 112.3 million pounds.
The Company's Mexican Original products and prepared foods operations
consist of eight processing plants, including two Mallard's Food Products,
Inc., facilities located in Modesto, California acquired in August 1997.
These operations are supported by five additional freezer storage
facilities.
The Company's seafood operations consist of 27 catching and at-sea
processing vessels along with two freighters. The at-sea processing is
supported by nine shore-based processing plants, five of which are
dedicated to surimi processing.
The Company's animal feed and pet food processing operations consist
of seven rendering plants with the capacity to produce 19.5 million pounds
of animal protein products per week supported by three freezer facilities.
Thirteen ground pet food processing operations in connection with poultry
processing plants are capable of producing 7.4 million pounds of product
per week.
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The Company's live swine operations consist of 158 swine farrowing and
nursery units and 389 swine finishing units. These swine growout operations
are supported by three dedicated feed mills supplemented by the production
from the poultry operations' feed mills. In addition, the Company operates
a grain drying and two storage facilities in support of its swine feed mill
operations.
The Company owns its major operating facilities and vessels with the
following exceptions: one poultry processing plant is leased under an
agreement expiring in 2002 and one poultry emulsified operation facility
and one poultry emulsified plant are leased month to month, 283 breeder
farms are leased under agreements expiring at various dates through 1999,
one freezer storage facility is leased under an agreement expiring in 1997,
64 swine farrowing and nursery units and 318 swine finishing units are
leased under one to ten year renewable lease agreements and two seafood
processing plants are leased under agreements expiring in 1998 and 2001.
Management believes that the Company's present facilities are
generally adequate and suitable for its current purposes. In general, the
Company's facilities are fully utilized. However, seasonal fluctuations in
inventories and production may occur as a reaction to market demands for
certain products. The Company regularly engages in construction and other
capital improvement projects intended to expand capacity and improve the
efficiency of its processing and support facilities.
ITEM 3. LEGAL PROCEEDINGS
As previously announced on June 20, 1997, the Company was notified
that it was a target of the Office of Independent Counsel's (OIC)
investigation of former Secretary of Agriculture Alphonso Michael Espy. No
charges have been filed against the Company related to this investigation.
The Company and its legal counsel are unable to estimate the amount or
likelihood of potential loss, if any, that may result from the OIC's
investigation or any subsequent proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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Executive Officers of the Company
Officers of the Company serve one year terms from the date of their
election, or until their successors are appointed and qualified. The name,
title, age and year of initial election of the Company's executive officers
are listed below:
Year
Name Title Age Elected
- ---- ----- --- -------
Don Tyson Senior Chairman of the 67 1963
Board of Directors
Leland E. Tollett Chairman of the Board of Directors 60 1966
and Chief Executive Officer
Donald E. Wray President and Chief Operating Officer 60 1979
John H. Tyson Vice Chairman of the 44 1984
Board of Directors
Wayne Britt Executive Vice President and 48 1977
Chief Financial Officer
Greg Lee Executive Vice President, Sales, 50 1993
Marketing and Technical Services
David Purtle Executive Vice President, Operations, 53 1985
Transportation and Warehousing
Gerard Dowd Senior Vice President, 46 1994
Foodservice Sales and Marketing
Steven Hankins Senior Vice President, 39 1997
Financial Planning and Shared Services
William Jaycox Senior Vice President, 51 1990
Human Resources
Roy Brown President, 45 1993
Seafood Division
William Kuckuck President, 43 1996
International Division
James Ennis Vice President, Controller and 52 1996
Chief Accounting Officer
Dennis Leatherby Vice President and Treasurer 37 1990
William Whitfield Vice President, 45 1997
Business Development and Analysis
Mary Rush Secretary and Director of 63 1982
Investor Relations
David L. Van Bebber Assistant Secretary 41 1990
14
<PAGE>
John H. Tyson is the son of Don Tyson. No other family relationships exist
among the above officers. Mr. Don Tyson was appointed Senior Chairman of
the Board of Directors in 1995 after previously serving as Chairman of the
Board and Chief Executive Officer. Mr. Tollett was appointed Chief
Executive Officer and Chairman of the Board of Directors in 1995 after
serving as Chief Executive Officer and President since 1991 and Vice
Chairman of the Board of Directors since 1994. Mr. Wray was appointed
President and Chief Operating Officer in 1995 after serving as Chief
Operating Officer since 1991. Mr. John H. Tyson was appointed Vice Chairman
of the Board of Directors in 1997 after serving as President, Beef and Pork
Division since 1993 and Vice President since 1987. Mr. Britt was appointed
Executive Vice President and Chief Financial Officer in 1996 after serving
as Senior Vice President, International Sales and Marketing since 1994 and
Vice President, Wholesale Club Division since 1992. Mr. Lee was appointed
Executive Vice President, Sales, Marketing and Technical Services in 1995
after serving as Senior Vice President, Sales and Marketing since 1993 and
Division Vice President of Foodservice Sales and Marketing since 1988. Mr.
Purtle was appointed Executive Vice President, Operations, Transportation
and Warehousing in 1995 after serving as Senior Vice President, Operations
since 1991. Mr. Dowd was appointed Senior Vice President, Foodservice Sales
and Marketing in 1994 after serving as Vice President, Foodservice Sales
and Marketing since 1993 and Vice President, Foodservice Sales since 1988.
Mr. Hankins was appointed Senior Vice President, Financial Planning and
Shared Services in 1997 after serving as Vice President, Management
Information Systems since 1993 and Director of Data Processing since 1991.
Mr. Jaycox was appointed Senior Vice President, Human Resources in 1995
after serving as Group Vice President, Human Resources since 1990. Mr.
Brown was appointed President, Seafood Division in 1997 after serving as
Senior Vice President, Seafood Division since 1993 and Vice President,
Sales and Marketing, International Division since 1992. Mr. Kuckuck was
appointed President, International Division in 1997 after serving as Senior
Vice President, International Sales, Marketing and Operations since 1996
and Vice President and Managing Director of Southeast Asia since he joined
Tyson in 1995. Prior to joining Tyson, Mr. Kuckuck was Vice President and
Chief Operations Officer for Ralston-Purina's International Division since
1991. Mr. Ennis was appointed Vice President, Controller and Chief
Accounting Officer in 1996 after serving as Corporate Tax Manager since
1986. Mr. Leatherby was appointed Vice President and Treasurer in 1997
after serving as Treasurer since 1994 and Assistant Treasurer since 1990.
Mr. Whitfield was appointed Vice President, Business Development and
Analysis in 1997 after serving as Director of Accounting Operations since
1994 and Assistant Controller since 1982. Ms. Rush was appointed Secretary
and Director of Investor Relations in 1992. Mr. Van Bebber was appointed
Assistant Secretary in 1990.
15
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company currently has issued and outstanding two classes of
capital stock, Class A Common Stock (the "Class A Stock") and Class B
Common Stock (the "Class B Stock"). Information regarding the voting rights
and dividend restrictions are set forth on page 37 of the Annual Report
under the caption "Capital Stock," which information is incorporated herein
by reference.
On September 27, 1997, there were approximately 35,199 holders of
record of the Company's Class A Stock and 20 holders of record of the
Company's Class B Stock, excluding holders in the security position
listings held by nominees. The Company's Class A Stock is traded on the New
York Stock Exchange under the symbol "TSN." No public trading market
currently exists for the Class B Stock. Information regarding the high and
low sales prices of the Company's Class A Stock is set forth in the table
on page 48 of the Annual Report under the caption "Price of Company's
Common Stock," which information is incorporated herein by reference.
The Company has paid uninterrupted quarterly dividends on its common
stock each year since 1977. On January 10, 1997, the Board of Directors
increased the post-split annual dividend rate on Class A Stock to $.10 per
share and fixed an annual dividend rate of $.09 per share for the Class B
Stock, effective with the quarterly dividend paid on March 15, 1997. The
Company has continued to pay quarterly dividends at the same rates through
fiscal 1997.
ITEM 6. SELECTED FINANCIAL DATA
See the information reflected under the caption "Eleven-Year Financial
Summary" on page 27 of the Annual Report, which information is incorporated
herein by reference.
ITEM 7. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
See the information reflected under the caption "Management's
Discussion and Analysis" on pages 28 through 31 of the Annual Report, which
information is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
Market risks relating to the Company's operations result primarily
from changes in interest rates, foreign exchange rates and commodity
prices, as well as credit risk concentrations. To address these risks the
Company enters into various hedging transactions as described below. The
Company does not use financial instruments for trading purposes and is not
a party to any leveraged derivatives.
Foreign Currency and Interest Rate Risks
The Company periodically enters into foreign exchange forward
contracts and option contracts to hedge some of its foreign currency
exposure. The Company uses such contracts to hedge exposure to changes in
foreign currency
16
<PAGE>
foreign currency exchange rates, primarily Japanese yen, associated with
sales denominated in foreign currency. Gains and losses on these contracts
are deferred and recognized as an adjustment of the subsequent transaction
when it occurs. Forward and option contracts generally have maturities not
exceeding twelve months.
The Company also hedges exposure to changes in interest rates on
certain of its financial instruments. Under the terms of various leveraged
equipment loans, the Company enters into interest rate swap agreements to
effectively lock in a fixed interest rate for these borrowings. The
maturity dates of these leveraged equipment loans range from 2005 to 2008
with interest rates ranging from 4.9% to 6.0%.
As of September 27, 1997 and September 28, 1996, the stated or
notional amounts of the Company's outstanding foreign currency and interest
rate derivative financial instruments were as follows:
(IN MILLIONS)
- ------------------------------------------------------------------
1997 1996
- ------------------------------------------------------------------
Interest rate swaps $147.7 $113.7
Foreign currency options 42.5
Foreign forward exchange contracts 0.5
==================================================================
Credit Risks
The Company's financial instruments that are exposed to concentrations
of credit risk consist primarily of cash equivalents and trade receivables.
The Company's cash 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
their dispersion across geographic areas. The Company performs periodic
credit evaluations of its customers' financial condition and generally does
not require collateral. One customer located in Russia accounts for
approximately 11% of total accounts receivable. No other single group or
customer represents greater than 10% of total accounts receivable.
The following table provides information about the Company's derivative
financial instruments and other financial instruments that are sensitive to
changes in interest rates. The table presents for the Company's debt
obligations, principal cash flows and related weighted-average interest
rates by expected maturity dates. For interest rate swaps, the table
presents notional amounts and weighted-average interest rates or strike
rates by contractual maturity dates. Notional amounts are used to calculate
the contractual cash flows to be exchanged under the contract.
17
<PAGE>
Interest Rate Sensitivity
Principal (Notional) Amount by Expected Maturity
Average Interest (Swap) Rate
___________________________________________________________________________
(dollars in millions) 1998 1999 2000 2001 2002 There- Total Fair
after Value
9/27/97
___________________________________________________________________________
Liabilities
Long-term Debt, including Current Portion
Fixed Rate $94.6 $72.6 $77.4 $124.5 $31.4 $454.6 $855.1 $855.1
Average Interest Rate 9.42% 9.46% 9.48% 8.27% 7.97% 6.70% 7.76%
Variable Rate - - - - $768.7 $29.0 $797.7 $797.7
Average Interest Rate - - - - 5.68% 4.25% 5.63%
Interest Rate Derivative Financial Instruments Related to Debt
Interest Rate Swaps
Pay Fixed $13.6 $24.7 $15.8 $16.9 $18.0 $58.7 $147.7 $146.4
Average Pay Rate 6.75% 6.87% 6.76% 6.73% 6.77% 6.69% 6.69%
Average Receive Rate - USD 6 Month Libor.
===========================================================================
The following table summarizes information on instruments and transactions
that are sensitive to foreign currency exchange rates, including foreign
currency forward exchange agreements. For foreign currency forward exchange
agreements, the table presents the notional amounts and weighted-average
exchange rates by expected (contractual) maturity dates. These notional
amounts generally are used to calculate the contractual payments to be
exchanged under the contract.
Exposures Related to Derivative Contracts
with United States Dollar Functional Currency
Principal (Notional) Amount by Expected Maturity
Average Forward Foreign Currency Exchange Rate (USD/Foreign Currency)
(dollars in millions)
___________________________________________________________________________
1998 1999 2000 2001 2002 There- Total Fair
after Value
9/27/97
___________________________________________________________________________
Related Forward Contracts to Sell Foreign Currencies for US$
Japanese Yen
Notional Amount - - - - - - - -
Average Contract
Rate - - - - - - - -
Purchased Option Contracts to Sell Foreign Currencies for US$
Japanese Yen
Notional Amount $ 36.0 $ 6.5 - - - - $42.5 $38.8
Weighted Average
Strike Price 113.87 109.48 - - - - - -
============================================================================
18
<PAGE>
Commodities Risk
The Company is a purchaser of certain commodities, primarily corn and
soybeans. The Company uses commodity futures and purchased options for
hedging purposes to reduce the effect of changing commodity prices on a
portion of its commodity purchases. The contracts that effectively meet
risk reductions and correlation criteria are recorded using hedge
accounting. Gains and losses on hedge transactions are recorded as a
component of the underlying inventory purchase.
The following table provides information about the Company's corn, soybean
meal and other feed ingredient inventory and futures contracts that are
sensitive to changes in commodity prices. For inventory, the table presents
the carrying amount and fair value at September 27, 1997. For the futures
contracts the table presents the notional amounts in bushels, the weighted
average contract prices, and the total dollar contract amount by expected
maturity dates, the latest of which occurs one year from the reporting
date. Contract amounts are used to calculate the contractual payments and
quantity of corn and soybean meal to be exchanged under the futures
contracts.
- ---------------------------------------------------------------------------
(In millions) Carrying amount Fair value
- ---------------------------------------------------------------------------
On Balance Sheet Commodity Position
and Related Derivatives
Corn, Soybean Meal and Other Feed
Ingredient Inventory $ 28.4 $ 28.4
Corn Futures Contracts
Contract Volumes
(bushels) 3,810,000 -
Weighted Average Price
(Per bushel) $ 2.65 -
Contract Amount
($US in millions) $ 10.1 $ 9.9
Soybean Meal Futures Contracts
Contract Volumes (tons) 32,900 -
Weighted Average Price
(Per ton) $ 215.0 -
Contract Amount
($US in millions) $ 7.1 $ 6.5
==========================================================================
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the information on pages 32 through 46 of the Annual Report under
the caption "Consolidated Statements of Income," "Consolidated Balance
Sheets," "Consolidated Statements of Shareholders' Equity," "Consolidated
Statements of Cash Flows," "Notes to Consolidated Financial Statements" and
"Report of Independent Auditors," which information is incorporated herein
by reference. Other financial information is filed under Item 14 of Part IV
of this report.
19
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
See information set forth under the captions "Election of Directors"
and "Compliance with Section 16(a) of the Securities Exchange Act of 1934"
in the Proxy Statement, which information is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
Pursuant to general instruction G(3) of the instructions to Annual
Report on Form 10-K, certain information concerning the Company's executive
officers is included under the caption "Executive Officers of the Company"
in Part I of this Report. See the information set forth under the caption
"Executive Compensation and Other Information" in the Proxy Statement,
which information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
See the information included under the caption "Principal
Shareholders" and "Security Ownership of Management" in the Proxy
Statement, which information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See the information included under the caption "Certain Transactions"
in the Proxy Statement, which information is incorporated herein by
reference.
20
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
1. The following consolidated financial statements of the
registrant included on pages 32 through 45 in the
Company's Annual Report for the fiscal year ended
September 27, 1997, and the Report of Independent
Auditors, on page 46 of such Annual Report are
incorporated herein by reference. Page references
set forth in the index below are to page numbers in
Exhibit 13 of this Form 10-K.
Pages
-----
Consolidated Statements of Income 47
for the three years ended September 27, 1997
Consolidated Balance Sheets at 48
September 27, 1997 and September 28, 1996
Consolidated Statements of Shareholders' Equity for 49
the three years ended September 27, 1997
Consolidated Statements of Cash Flows 50
for the three years ended September 27, 1997
Notes to Consolidated Financial Statements 51-63
Report of Independent Auditors 65
2. The following additional information for the years 1997,
1996, and 1995 is submitted herewith. Page references are
to the consecutively numbered pages of this Report on
Form 10-K:
Pages
-----
Report of Independent Auditors 31
Schedule VIII - Valuation and Qualifying 32
Accounts and Reserves for the three years ended
September 27, 1997
All other schedules are omitted because they are neither applicable
nor required.
3. The exhibits filed with this report are listed in the
Exhibit Index at the end of this Item 14.
4. On September 9, 1997, the Company filed a Current Report
on Form 8-K related to the definitive agreement and plan of
merger with Hudson Foods, Inc.
21
<PAGE>
EXHIBIT INDEX
The following exhibits are filed with this report or are incorporated
by reference to previously filed material. Page references are to the
cover page preceding each attached Exhibit.
Exhibit No. Page
- ----------- ----
3.1 Certificate of Incorporation of the Company as amended
(previously filed as Exhibit 3(a) to the Company's
Registration Statement on Form S-4 filed with the
Commission on July 8, 1992, Commission File No.
33-49368, and incorporated herein by reference).
3.2 Amended and Restated Bylaws of the Company (previously
filed as Exhibit 3.2 to the Company's Annual Report on
Form 10-K for the fiscal year ended September 28,
1996, Commission File No. 0-3400, and incorporated
herein by reference).
4.1 Form of Indenture between the Company and The Chase
Manhattan Bank, N.A., as Trustee relating to the
issuance of Debt Securities (previously filed as
Exhibit 4 to Amendment No. 1 to Registration Statement
on Form S-3, filed with the Commission on May 8, 1995,
Registration No. 33-58177, and incorporated herein by
reference).
4.2 Form of 6.75% $150 million Note due June 1, 2005
(previously filed as Exhibit 4(b) to the Company's
Quarterly Report on Form 10-Q for the period ended
July 1, 1995, Commission File No. 0-3400, and
incorporated herein by reference).
4.3 Form of Fixed Rate Medium-Term Note (previously filed
as Exhibit 4.2 to the Company's Current Report on Form
8-K, filed with the Commission on July 20, 1995,
Commission File No. 0-3400, and incorporated herein by
reference).
4.4 Form of Floating Rate Medium-Term Note (previously
filed as Exhibit 4.3 to the Company's Current Report
on Form 8-K, filed with the Commission on
July 20, 1995, Commission File No. 0-3400, and
incorporated herein by reference).
4.5 Form of Calculation Agent Agreement (previously filed
as Exhibit 4.4 to the Company's Current Report on Form
8-K, filed with the Commission on July 20, 1995,
Commission File No. 0-3400, and incorporated herein by
reference).
4.6 Amended and Restated Note Purchase Agreement, dated
June 30, 1993, by and between the Company and various
Purchasers as listed in the Purchaser Schedule
attached to said agreement, together with the
following documents:
22
<PAGE>
(a) Form of Series A Note
(b) Form of Series D Note
(previously filed as Exhibit 4(a) to the Company's
Quarterly Report on Form 10-Q for the period ended
July 3, 1993, Commission File No. 0-3400, and
incorporated herein by reference).
4.7 Amendment Agreement, dated November 1, 1994, to
Amended and Restated Note Purchase Agreements, dated
June 30, 1993, by and between the Company and various
Purchasers as listed in the Purchaser Schedule
attached to said agreement (previously filed as
Exhibit 10(a) to the Company's Quarterly Report on
Form 10-Q for the period ended December 31, 1994,
Commission File No. 0-3400, and incorporated herein by
reference).
4.8 Second Amendment Agreement, dated as of June 29, 1996,
to Amended and Restated Note Purchase Agreements,
dated June 30, 1993, by and between the Company and
various Purchasers as listed in the Purchaser Schedule
attached to said agreement (previously filed as
Exhibit 4.8 to the Company's Annual Report on Form
10-K for the fiscal year ended September 28, 1996,
Commission File No. 0-3400, and incorporated herein by
reference).
4.9 Amended and Restated Note Agreement, dated
June 30, 1993, by and between the Company and various
Purchasers as listed in the Purchaser Schedule
attached to said agreement, together with the
following related documents:
(a) Form of Series E Note
(b) Form of Series F Note
(c) Form of Series G Note
(previously filed as Exhibit 4(b) to the Company's
Quarterly Report on Form 10-Q for the period ended
July 3, 1993, Commission File No. 0-3400, and
incorporated herein by reference).
4.10 Amendment Agreement, dated November 1, 1994, to
Amended and Restated Note Agreement, dated
June 30, 1993, by and between the Company and various
Purchasers as listed in the Purchaser Schedule
attached to said agreement (previously filed as
Exhibit 10(b) to the Company's Quarterly Report on
Form 10-Q for the period ended December 31, 1994,
Commission File No. 0-3400, and incorporated herein by
reference).
23
<PAGE>
4.11 Second Amendment Agreement, dated as of June 29, 1996,
to Amended and Restated Note Agreement, dated
June 30, 1993, by and between the Company and
Purchasers as listed in the Purchaser Schedule
attached to said agreement (previously filed as
Exhibit 4.11 to the Company's Annual Report on Form
10-K for the fiscal year ended September 28, 1996,
Commission File No. 0-3400, and incorporated herein by
reference).
10.1 Master Shelf Agreement dated January 13, 1995, between
the Company and the Prudential Insurance Company of
America (previously filed as Exhibit 10(c) to the
Company's Quarterly Report on Form 10-Q for the period
ended December 31, 1994, Commission File No. 0-3400,
and incorporated herein by reference).
10.2 First Amended and Restated Credit Agreement, dated
May 26, 1995, by and among the Company, as Borrower,
The Chase Manhattan Bank N.A., Chemical Bank,
Cooperative Centrale Raiffeisen Boerenleenbank
B.A.(Rabobank Nederland), Morgan Guaranty Trust
Company of New York, National Westminister Bank Plc,
Nationsbank of Texas, N.A., and Societe Generale, as
Co-Agents, and Bank of America National Trust and
Savings Association, as Agent (previously filed as
Exhibit 4(g) to the Company's Quarterly Report on
Form 10-Q for the period ended July 1, 1995,
Commission File No. 0-3400, and incorporated herein by
reference).
10.3 Amendment No. 1 to First Amended and Restated Credit
Agreement, dated as of May 24, 1996, by and among the
Company, as Borrower, the banks party thereto, The
Chase Manhatten Bank, N.A., Chemical Bank, Cooperative
Centrale Raiffeisen-Boerenleenbank, B.A. (Rabobank
Nederland), Morgan Guaranty Trust Company of New York,
National Westminister Bank Plc, Nationsbank of Texas,
N.A., and Societe Generale as Co-Agents and Bank of
America National Trust and Savings Association, as
Agent (previously filed as Exhibit 4(a) to the
Company's Form 10-Q for the quarter ended
June 29, 1996, Commission File No. 0-3400, and
incorporated herein by reference).
10.4 Amendment No. 2 to First Amended and Restated Credit
Agreement, dated as of May 23, 1997, by and among the
Company, as Borrower, the banks party thereto, The
Chase Manhatten Bank, N.A., Chemical Bank, Cooperative
Centrale Raiffeisen-Boerenleenbank, B.A. (Rabobank
Nederland), Morgan Guaranty Trust Company of New York,
National Westminister Bank Plc, Nationsbank of Texas,
N.A., and Societe Generale as Co-Agents and Bank of
America National Trust and Savings Association, as
Agent (previously filed as Exhibit 4(a) to the
Company's Form 10-Q for the quarter ended
June 28, 1997, Commission File No. 0-3400, and
incorporated herein by reference).
24
<PAGE>
10.5 Fourth Amended and Restated Credit Agreement,
including all exhibits thereto, dated as of
May 26, 1995, by and among the Company, as Borrower,
The Chase Manhattan Bank N.A., Chemical Bank,
Cooperative Centrale Raiffeisen-Boerenleenbank B.A.
(Rabobank Nederland), Morgan Guaranty Trust Company of
New York, National Westminister Bank Plc, Nationsbank
of Texas, N.A., and Societe Generale, as Co-Agents,
and Bank of America National Trust and Savings
Association, as Agent (previously filed as Exhibit
4(f) to the Company's Quarterly Report on Form 10-Q
for the period ended July 1, 1995, Commission File
No. 0-3400, and incorporated herein by reference).
10.6 Amendment No. 1 to Fourth Amended and Restated Credit
Agreement, dated as of May 24, 1996, by and among the
Company, as Borrower, the banks party thereto, The
Chase Manhatten Bank, N.A., Chemical Bank, Cooperative
Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank
Nederland), Morgan Guaranty Trust Company of New York,
National Westminister Bank Plc, Nationsbank of Texas,
N.A., and Societe Generale as Co-Agents and Bank of
America National Trust and Savings Association, as
Agent (previously filed as Exhibit 4(b) to the
Company's Form 10-Q for the quarter ended
June 29, 1996, Commission File No. 0-3400, and
incorporated herein by reference).
10.7 Amendment No. 2 to Fourth Amended and Restated Credit
Agreement, dated as of May 23, 1997, by and among the
Company, as Borrower, the banks party thereto, The
Chase Manhatten Bank, N.A., Chemical Bank, Cooperative
Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank
Nederland), Morgan Guaranty Trust Company of New York,
National Westminister Bank Plc, Nationsbank of Texas,
N.A., and Societe Generale as Co-Agents and Bank of
America National Trust and Savings Association, as
Agent (previously filed as Exhibit 4(b) to the
Company's Form 10-Q for the quarter ended
June 28, 1997, Commission File No. 0-3400, and
incorporated herein by reference).
10.8 Issuing and Paying Agency Agreement dated July 1,
1993, between the Company and Morgan Guaranty Trust
Company of New York, (previously filed as Exhibit
10(d) to the Company's Quarterly Report on Form 10-Q
for the period ended July 3, 1993, Commission File No.
0-3400, and incorporated herein by reference).
10.9 Commercial Paper Dealer Agreement dated July 1, 1993,
between the Company and Merrill Lynch Money Markets,
Inc. (previously filed as Exhibit 10(e) to the
Company's Quarterly Report on Form 10-Q for the period
ended July 3, 1993, Commission File No. 0-3400, and
incorporated herein by reference).
25
<PAGE>
10.10 Commercial Paper Dealer Agreement dated July 1, 1993,
between the Company and the First Boston Corporation
(previously filed as Exhibit 10(g) to the Company's
Quarterly Report on Form 10-Q for the period ended
July 3, 1993, Commission File No. 0-3400, and
incorporated herein by reference).
10.11 Commercial Paper Dealer Agreement dated July 1, 1993,
between the Company and J.P. Morgan Securities, Inc.
(previously filed as Exhibit 10(h) to the Company's
Quarterly Report on Form 10-Q for the period ended
July 3, 1993, Commission File No. 0-3400, and
incorporated herein by reference).
10.12 Commercial Paper Dealer Agreement dated July 1, 1993,
between the Company and Bank of America National Trust
and Savings Association (previously filed as Exhibit
10(i) to the Company's Quarterly Report on Form 10-Q
for the period ended July 3, 1993, Commission File
No. 0-3400, and incorporated herein by reference).
10.13 Commercial Paper Dealer Agreement dated
September 1, 1994, between the Company and Chase
Securities, Inc. (previously filed as Exhibit 10(j) to
the Company's Annual Report on Form 10-K for the
fiscal year ended October 1, 1994, Commission File
No. 0-3400, and incorporated herein by reference).
10.14 Tyson Foods, Inc. Senior Executive Performance Bonus
Plan adopted November 18, 1994 (previously filed as
Exhibit 10(k) to the Company's Annual Report on
Form 10-K for the fiscal year ended October 1, 1994,
Commission File No. 0-3400, and incorporated herein by
reference).
10.15 Tyson Foods, Inc. Restricted Stock Bonus Plan,
effective August 21, 1989, as amended and restated on
April 15, 1994; and Amendment to Restricted Stock
Bonus Plan effective November 18, 1994 (previously
filed as Exhibit 10(l) to the Company's Annual Report
on Form 10-K for the fiscal year ended
October 1, 1994, Commission File No. 0-3400, and
incorporated herein by reference).
10.16 Profit Sharing Plan and Trust of Tyson Foods, Inc., as
amended and restated through April 1, 1993; Amendment
No.1 thereto, effective April 1, 1995; and terminating
resolution, effective March 31, 1996 (previously filed
as Exhibit 10(b) to the Company's Form 10-Q for the
quarter ended March 30, 1996, Commission File No.
0-3400, and incorporated herein by reference).
26
<PAGE>
10.17 Tyson Foods, Inc. Employee Stock Purchase Plan, as
amended and restated through April 1, 1993; and
Amendment Nos. 1 and 2 thereto, effective
April 1, 1996 (previously filed as Exhibit 10(d) to
the Company's Form 10-Q for the quarter ended
March 30, 1996, Commission File No. 0-3400, and
incorporated herein by reference).
10.18 Tyson Foods, Inc. Incentive Stock Option Plan of 1982,
as amended and restated on September 5, 1987,
(previously filed as Exhibit 10(c) to the Company's
Annual Report on Form 10-K for the fiscal year ended
October 3, 1987, Commission File No. 0-3400, and
incorporated herein by reference).
10.19 Tyson Foods, Inc. Nonstatutory Stock Option Plan, as
amended and restated on November 18, 1994, (previously
filed as Exhibit 99 to the Company's Registration
Statement on Form S-8 filed with the Commission on
January 30, 1995, Commission File No. 33-54716, and
incorporated herein by reference).
10.20 Tyson Foods, Inc. Employee Stock Ownership Plan as
amended and restated through April 1, 1993; and
terminating resolution, effective March 31, 1996
(previously filed as Exhibit 10(c) to the Company's
Form 10-Q for the quarter ended March 30, 1996,
Commission File No. 0-3400, and incorporated herein by
reference).
10.21 Second Amended and Restated Employment Agreement dated 33-35
August 1, 1997, between the Company and Don Tyson,
Senior Chairman of the Board of Directors of the
Company.
10.22 Retirement Savings Plan of Tyson Foods, Inc.,
qualified under Section 401(k) of the Internal Revenue
Code of 1986, as amended, originally effective as of
October 3, 1987, as amended and restated through
January 1, 1993; and Amendments Nos. 1-5 thereto
(previously filed as Exhibit 10(a) to the Company's
Form 10-Q for the quarter ended March 30, 1996,
Commission File No. 0-3400, and incorporated herein by
reference).
10.23 Tyson Employee Retirement Income Savings Plan, as
amended and restated effective April 1, 1987,
(previously filed as Exhibit 10(h) to the Company's
Annual Report on Form 10-K for the fiscal year ended
October 3, 1987, Commission File No. 0-3400, and
incorporated herein by reference).
10.24 Executive Savings Plan of Tyson Foods, Inc. effective
April 1, 1991; and Amendment No.1 thereto, effective
April 1, 1996 (previously filed and exhibit 10(e) to
the Company's Form 10-Q for the quarter ended
March 30, 1996, Commission File No. 0-3400, and
incorporated herein by reference).
27
<PAGE>
10.25 Form of Indemnity Agreement between Tyson Foods, Inc.
and its directors and certain of its executive
officers (previously filed as Exhibit 10(t) to the
Company's Annual Report on Form 10-K for the fiscal
year ended September 30, 1995, Commission File No.
0-3400, and incorporated herein by reference).
11 Statement Regarding Computation of Earnings Per Share. 36
12 Ratio of Earnings to Fixed Charges. 37
13 Pages 26-48 and back cover of the Annual Report to 38-68
Shareholders for the fiscal year ended
September 27, 1997.
21 Subsidiaries of the Company. 69-70
23 Consent of Independent Auditors. 71
27 Financial Data Schedule.
28
<PAGE>
SIGNATURES
Pursuant to requirements of Section 13 or 15(d) 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.
By /s/ Wayne Britt December 10, 1997
-------------------
Wayne Britt
Executive Vice President
and Chief Financial Officer
29
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
/s/ Wayne Britt Executive Vice President and December 10, 1997
- -------------------- Chief Financial Officer
Wayne Britt
/s/ Neely Cassady Private Investor and December 10, 1997
- -------------------- Arkansas State Senator
Neely Cassady
/s/ James G. Ennis Vice President, Controller December 10, 1997
- -------------------- and Chief Accounting Officer
James G. Ennis
/s/ Lloyd V. Hackley President and CEO of Lloyd V. December 10, 1997
- -------------------- Hackley and Associates, Inc.
Lloyd V. Hackley
/s/ Gerald Johnston Private Investor December 10, 1997
- --------------------
Gerald Johnston
/s/ Shelby D. Massey Private Investor December 10, 1997
- --------------------
Shelby D. Massey
/s/ Joe F. Starr Private Investor December 10, 1997
- --------------------
Joe F. Starr
/s/ Leland E. Tollett Chairman of the Board of December 10, 1997
- --------------------- Directors and Chief
Leland E. Tollett Executive Officer
/s/ Barbara Tyson Vice President December 10, 1997
- ---------------------
Barbara Tyson
/s/ Don Tyson Senior Chairman of the December 10, 1997
- --------------------- Board of Directors
Don Tyson
/s/ John H. Tyson Vice Chairman of the December 10, 1997
- --------------------- Board of Directors
John H. Tyson
/s/ Fred S. Vorsanger Vice President(Emeritus) December 10, 1997
- --------------------- University of Arkansas
Fred S. Vorsanger and Private Investor
/s/ Donald E. Wray President and Chief December 10, 1997
- --------------------- Operating Officer
Donald E. Wray
30
<PAGE>
FINANCIAL STATEMENT SCHEDULE
<PAGE>
REPORT OF INDEPENDENT AUDITORS
We have audited the consolidated financial statements of Tyson Foods, Inc.
as of September 27, 1997 and September 28, 1996, and for each of the three
years in the period ended September 27, 1997, and have issued our report
thereon dated November 14, 1997. Our audits also included the financial
statement schedule listed in Item 14(a) in this annual report (Form 10-K).
This schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
Little Rock, Arkansas /s/ERNST & YOUNG LLP
November 14, 1997 --------------------
ERNST & YOUNG LLP
31
<PAGE>
TYSON FOODS, INC.
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Three Years Ended September 27, 1997
(Dollars in Millions)
Balance at Charged to Charged Balance
Beginning Costs and to Other Additions at End
Description of Period Expenses Accounts (Deductions) of Period
- ----------- ---------- --------- -------- ----------- ---------
Allowance for
Doubtful Accounts
1997 $3.5 $2.0 0 ($1.1) $4.4
1996 $3.6 $1.9 0 ($2.0) $3.5
1995 $3.3 $1.1 0 ($0.8) $3.6
32
<PAGE>
SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Second Amended And Restated Employment Agreement (the
"Agreement") is made as of August 1, 1997 by and between Tyson Foods, Inc.,
a Delaware corporation (the "Company"), and Donald J. Tyson, an individual
and Florida resident ("Tyson"). This Agreement supersedes and replaces
that certain Amended and Restated Employment Agreement between the parties
dated July 1, 1994.
W I T N E S S E T H :
Whereas, during Tyson's employment by the Company he has been
primarily responsible for promoting the overall growth of the Company; and
Whereas, the Company believes that the future services of Tyson will
be of great value to the Company, and by this Agreement proposes to ensure
his continued employment; and
Whereas, Tyson hereby expresses his willingness to continue in the
employment of the Company as is hereby provided;
Now Therefore, in consideration of the premises, the mutual covenants
herein contained, and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree
as follows:
1. Period of Active Employment. Tyson shall continue in the active
employment of the Company until December 31, 1998 (the "Initial Term"),
which employment shall be automatically extended for successive periods of
one year, commencing January 1, 1999 and each January 1 thereafter ("the
Anniversary Date") following said Initial Term. Said employment may be
terminated upon written notice by either party at least 10 days prior to
any Anniversary Date (the "Termination Date").
2. Duties. During the period of this Agreement, and subject to the
limitations hereinafter expressed, Tyson agrees to serve the Company
faithfully and to the best of his ability, under the direction of the Board
of Directors of the Company, devoting his time, energy and skill to the
Company's business.
3. Compensation. The Company agrees to pay to Tyson during the
period of his employment the sum of Six Hundred Thousand Dollars ($600,000)
per annum, payable in equal monthly installments, subject to adjustment at
any time by mutual agreement of the parties hereto. Additional annual
compensation may be paid Tyson from time to time by majority vote of the
Compensation Committee of the Board of Directors of the Company, with
members of the Tyson family or any other interested director abstaining.
33
<PAGE>
4. Disability. If, while in the active employ of the Company, Tyson
becomes disabled to the extent that he is no longer capable of performing
his services fully as herein contemplated, the Company shall pay to him an
annual salary, in equal monthly installments, equal to one-half (1/2) of
his average total annual compensation (i.e., regular salary, bonuses and
payments relating to travel and entertainment expense) for the three (3)
years immediately preceding the date of his disability (the "Average
Compensation").
5. Death. In the event of Tyson's death during the term of this
Agreement, the Company shall pay to the surviving of his three children,
John Tyson, Cheryl Tyson and Carla Tyson, in equal shares, an annual sum,
in equal monthly installments, equal to one-half (1/2) of his Average
Compensation. These payments shall continue for a period of ten (10) years
from the date of Tyson's death.
In the event of Tyson's death while drawing payments under the
provisions of Paragraph 4, the Company shall pay to the surviving children
in equal shares an annual sum, in equal monthly installments, which sum
shall be the same as Tyson was drawing during his disability period, for a
period of time which shall end ten (10) years from the date of Tyson's
disability.
6. Retirement. The Company hereby retains Tyson to perform and
Tyson agrees to perform, during the period beginning with Tyson's
retirement from active employment on the Termination Date, and continuing
to the end of his life, such advisory and consultative services on a part
time basis as may be required by the Board of Directors of the Company,
subject, however, to the condition that Tyson shall not be required to
render such services during periods of illness or other incapacity.
The Company shall pay Tyson and Tyson shall accept from the Company
for his services during this period, annual compensation, payable in equal
monthly installments, equal to one-half his Average Compensation. If Tyson
dies during the consultative period, the Company shall continue to pay to
his same surviving children the aforesaid monthly payments for a period of
time which shall end ten (10) years from the date of Tyson's retirement.
7. Restrictive Covenant. Tyson expressly agrees, as a condition to
the performance by the Company of its obligations hereunder, that during
the term of this Agreement and during the further period providing for
consultative services, he will not, directly or indirectly, enter into or
in any manner take part in any business competitive with any business of
the Company, without the prior written consent of the Company.
34
<PAGE>
8. Prohibition Against Assignment. Neither Tyson nor his children
shall have the right to commute, encumber or dispose of the right to
receive payments hereunder, which payments and the right thereto are
expressly declared to be non-assignable and non-transferable, and in the
event of any attempted assignment or transfer, the Company shall have no
further liability hereunder.
9. Reorganization. The Company shall not merge (unless the Company
is the surviving corporation) or consolidate with any other organization or
organizations until such organization or organizations expressly assume the
duties of the Company herein set forth.
10. Independence of Other Agreements. This Agreement is hereby
declared to be independent of the cumulative of any other retirement or
deferred compensation plans now or hereafter adopted by the Company, and
shall not, unless mutually agreed upon in writing, be supplanted or
replaced by any other such plan or agreement.
In Witness Whereof, the parties have executed this Agreement in
duplicate original the day and year first above recited.
Tyson Foods, Inc.
By:/s/Leland Tollett
-----------------
Leland Tollett,
Chairman and
Chief Executive Officer
Attest:
/s/ Mary Rush
- --------------------
Mary Rush, Secretary
/s/ Donald J. Tyson
--------------------
Donald J. Tyson
35
<PAGE>
EXHIBIT 11
TYSON FOODS, INC.
COMPUTATION OF EARNINGS PER SHARE
(In millions except per share data)
1997 1996 1995
-----------------------------
Primary:
Average common shares outstanding
during the period 216.3 217.3 216.8
Net effect of dilutive stock
options based on the treasury
stock method using average
market price 1.9 .7 .9
----- ----- -----
Total common and common equivalent
shares outstanding 218.2 218.0 217.7
====== ===== ======
Net income $185.8 $86.9 $219.2
====== ===== ======
Earnings per share $0.85 $0.40 $1.01
===== ===== =====
Fully Diluted:
Average common shares outstanding
during the period 216.3 217.3 216.8
Net effect of dilutive stock
options based on the treasury
stock method using the quarter-
end market price, if higher
than average market price 2.5 1.1 1.1
----- ----- -----
Total common and common equivalent
shares outstanding 218.8 218.4 217.9
====== ===== ======
Net income $185.8 $86.9 $219.2
====== ===== ======
Earnings per share $0.85 $0.40 $1.01
===== ===== =====
36
<PAGE>
Exhibit 12
<TABLE>
<CAPTION>
Tyson Foods, Inc.
Ratio of Earnings to Fixed Charges
September 27, 1997
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993
Fixed Charges:
Interest Expense 118,514 137,841 114,840 86,343 73,111
Interest Capitalized 3,434 3,774 3,068 1,822 1,285
Amortization of Debt Discount 4,471 3,414 3,747 5,003 5,697
Interest Portion of Rental Expense (33%) 11,333 11,909 12,637 9,543 8,414
--------------------------------------------------------
Total Fixed Charges (A) 137,752 156,938 134,292 102,711 88,507
Earnings:
Net Income(Loss) 185,799 86,867 219,191 (2,128) 180,334
Provision for Income Taxes 143,922 49,048 131,036 120,745 129,301
Fixed Charges 137,752 156,938 134,292 102,711 88,507
Less Capitalized Interest (3,434) (3,774) (3,068) (1,822) (1,285)
--------------------------------------------------------
Earnings and Fixed Charges (B) 464,039 289,079 481,451 219,506 396,857
Ratio of Earnings to Fixed Charges (B/A) 3.37 1.84 3.59 2.14 4.48
</TABLE>
For purposes of computing the above ratios of earnings to
fixed charges, "earnings" consist of income from
continuing operations before income taxes and fixed
charges (excluding capitalized interest). "Fixed charges"
consist of (i) interest on indebtedness, whether expensed
or capitalized, but excluding interest to fifty-percent
owned subsidiaries (ii) the Company's proportionate share
of interest of fifty-percent owned subsidiaries, (iii)
that portion of rental expense the Company believes to be
representative of interest (one-third of rental expense)
and (iv) amortization of debt discount and expense.
37
<PAGE>
TYSON FOODS, INC. 1997 FINANCIALS
Eleven-Year Financial Summary 27
Management's Discussion and Analysis 28
Consolidated Statements of Income 32
Consolidated Balance Sheets 33
Consolidated Statements of Shareholders' Equity 34
Consolidated Statements of Cash Flows 35
Notes to Consolidated Financial Statements 36
Report of Management 46
Report of Independent Auditors 46
Directors and Officers 47
Corporate Information 48
This report contains forward-looking statements and reflects management's
current views and estimates of economic circumstances, industry conditions,
company performance and financial results. These forward-looking statements
are subject to a number of factors and uncertainties which would cause the
Company's actual results and experience to differ from the anticipated results
and expectations expressed in such forward-looking statements. A description
of certain factors which have affected or may affect operating results may be
found in the Company's Annual Report on Form 10-K for the fiscal year ended
September 27, 1997, as filed with the Securities and Exchange Commission, and
in subsequent quarterly reports filed by the Company.
38
<PAGE>
<TABLE>
<CAPTION>
ELEVEN-YEAR FINANCIAL SUMMARY
TYSON FOODS,INC.
In millions except per share data
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------
1997 1996 1995 1994
- ------------------------------------------------------------------------------------------
Sales $6,355.7 $6,453.8 $5,511.2 $5,110.3
Cost of Sales 5,318.0 5,505.7 4,423.1 4,149.1
Gross Profit 1,037.7 948.1 1,088.1 961.2
Operating Expenses 637.8 678.5 616.4 766.0
Interest Expense 110.4 132.9 114.9 86.1
Provision for Taxes 143.9 49.0 131.0 120.7
Net Income (Loss) $ 185.8 $ 86.9 $ 219.2 $ (2.1)
Earnings (Loss) Per Share $ 0.85 $ 0.40 $ 1.01 $ (0.01)
Dividends Per Share:
Class A 0.095 0.080 0.053 0.047
Class B 0.086 0.072 0.044 0.039
- --------------------------------------------------------------------------------------------
Capital Expenditures 291.2 214.0 347.2 232.1
Depreciation and Amortization 230.4 239.3 204.9 188.3
Total Assets $ 4,411.0 $4,544.1 $4,444.3 $3,668.0
Net Property, Plant and Equipment 1,924.8 1,869.2 2,013.5 1,610.0
Total Debt 1,690.1 1,975.1 1,984.7 1,455.1
Shareholders' Equity 1,621.5 1,541.7 1,467.7 1,289.4
Shares Outstanding 213.4 217.4 217.2 217.8
Average Shares Outstanding 218.2 218.0 217.7 221.7
Book Value Per Share $ 7.60 $ 7.09 $ 6.76 $ 5.92
Total Debt to Capitalization 51.0% 56.2% 57.5% 53.0%
- --------------------------------------------------------------------------------------------
Return on Sales 2.9% 1.4% 4.0% 0.0%
Annual Sales Growth (Decline) (1.5)% 17.1% 7.9% 8.6%
Five-Year Compounded Annual Sales Growth 8.8% 10.5% 7.6% 15.0%
Gross Margin 16.3% 14.7% 19.7% 18.8%
Return on Beginning Assets 4.1% 2.0% 6.0% (0.1)%
Return on Beginning Shareholders' Equity 12.1% 5.9% 17.0% (0.2)%
Five-Year Return on Beginning
Shareholders' Equity 10.1% 10.9% 13.8% 14.1%
Effective Tax Rate 43.6% 37.0% 38.1% 101.8%
Stock Price High 23.63 18.58 18.17 16.67
Stock Price Low 17.75 13.83 13.83 12.50
</TABLE>
39
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988 1987
- -------------------------------------------------------------------------------------
$4,707.4 $4,168.8 $3,922.1 $3,825.3 $2,538.2 $1,936.0 $1,786.0
3,796.5 3,390.3 3,147.5 3,081.7 2,056.1 1,627.6 1,483.0
910.9 778.5 774.6 743.6 482.1 308.4 303.0
535.4 446.8 441.4 423.4 271.5 184.0 156.8
72.8 76.9 95.5 128.6 45.0 19.5 22.9
129.3 100.5 97.0 80.1 62.9 23.0 55.4
$ 180.3 $ 160.5 $ 145.5 $ 120.0 $ 100.6 $ 81.4 $ 67.8
$ 0.81 $ 0.77 $ 0.70 $ 0.60 $ 0.52 $ 0.42 $ 0.35
0.027 0.027 0.020 0.013 0.013 0.013 0.012
0.022 0.022 0.017 0.011 0.011 0.011 0.008
- ---------------------------------------------------------------------------------------
225.3 108.0 213.6 163.8 128.9 86.3 132.9
176.6 148.9 135.8 123.4 84.8 70.3 60.4
$3,253.5 $2,617.7 $2,645.8 $2,501.1 $2,586.1 $ 889.1 $ 806.8
1,435.3 1,142.2 1,162.0 1,071.1 1,020.8 430.0 415.9
1,024.3 825.6 984.0 1,020.5 1,374.4 211.3 217.0
1,360.7 980.2 822.5 663.0 447.7 341.4 269.5
220.9 206.2 206.1 204.9 194.0 191.4 192.3
222.5 207.6 207.1 199.3 194.6 192.0 192.1
$ 6.16 $ 4.75 $ 3.99 $ 3.24 $ 2.31 $ 1.78 $ 1.40
42.9% 45.7% 54.5% 60.6% 75.4% 38.2% 44.6%
- ---------------------------------------------------------------------------------------
3.8% 3.9% 3.7% 3.1% 4.0% 4.2% 3.8%
12.9% 6.3% 2.5% 50.7% 31.1% 8.4% 18.8%
19.5% 18.5% 21.1% 27.5% 27.6% 26.3% 26.2%
19.4% 18.7% 19.8% 19.4% 19.0% 15.9% 17.0%
6.9% 6.1% 5.8% 4.6% 11.3% 10.1% 8.9%
18.4% 19.5% 22.0% 26.8% 29.5% 30.2% 33.3%
21.7% 23.9% 26.8% 29.7% 31.8% 32.4% 32.2%
41.8% 38.5% 40.0% 40.0% 38.5% 22.0% 45.0%
18.08 15.08 15.58 11.79 8.63 7.25 7.79
12.83 10.17 8.46 7.17 4.92 3.63 5.29
<FN>
1. Significant business combinations accounted for as purchases: Holly Farms
Corporation and Arctic Alaska Fisheries Corporation on July 19, 1989 and
October 5, 1992, respectively. See Footnote 3 to the Consolidated
Financial Statements for acquisitions during the three-year period ended
September 27, 1997.
2. The results for 1994 include a $205 million after-tax charge, or $1.38 per
share due to the writedown of certain long-lived assets of Arctic Alaska
Fisheries Corporation.
3. The results for 1997 include a $41 million pre-tax gain ($4 million after-
tax) from the sale of the beef division assets.
4. All shares and per share data have been restated for a three-for-two stock
split in 1997.
</FN>
</TABLE>
40
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
TYSON FOODS, INC.
RESULTS OF OPERATIONS
Sales for 1997 decreased 1.5% from sales for 1996. This decrease is largely
attributable to the sale of the Company's beef division assets in the first
quarter of 1997 and the discontinuance of consolidation of Trasgo, S.A. de
C.V. (Trasgo) due to a change in voting stock ownership, which resulted in
Tyson becoming a minority shareholder on April 1, 1996. Excluding sales
related to these operations, total sales for 1997 increased 4.5% over
comparable sales for 1996. Consumer poultry sales accounted for an increase
of 4.1% of the total change in sales for 1997 as compared to 1996. This
increase was mainly due to a 0.8% increase in average sales prices and a 4.2%
increase in tonnage.
[GRAPH]
1997 Sources of Revenue
Consumer Poultry 83%
Mexican & Prepared Foods 5%
Seafood 4%
Animal Foods, Live Swine 8%
and Other
The Company has experienced intermittent sales disruptions and lower than
expected prices for leg quarters and related dark meat products in its
Russian markets. Although shipments to Russia are currently moving at
acceptable levels, such lower prices, together with tariffs, custom
regulations and other increased costs associated with these exports, have
diminished net returns. The Company is unable to predict when such returns
will improve. Further disruptions of shipments to, or the temporary loss of
these markets could also result in inventory accumulations.
The Company recognizes that conducting business in or selling products into
foreign countries, including Russia, entails inherent risks including various
political, credit, inventory and currency risks. The Company, however, is
continually monitoring its international business practices and, whenever
possible, will attempt to minimize the Company's financial exposure to these
risks.
Mexican Original products and prepared foods sales together accounted for a
decrease of 0.1% of the total change in sales for 1997 as compared to 1996.
This decrease was primarily due to a 2.1% decrease in tonnage partially
offset by a 0.8% increase in average sales prices. Seafood sales accounted
for a decrease of 0.5% of the change in total sales for 1997 as compared to
1996. This decrease was due to an 11.7% decrease in average sales prices,
partially offset by a 0.5% increase in tonnage. The decrease in average sales
prices is mainly due to a shift in product mix. The seafood operations
continue to be affected by the availability of some species of fish as well
as reduced pricing on some products and regulations which limit supply
sources. Sales of live swine, animal foods, by-products and other as a group,
accounted for an increase of 1.0% of the change in total sales for 1997 as
compared to 1996.
41
<PAGE>
Sales for 1996 increased 17.1% over sales for 1995. Consumer poultry sales
accounted for an increase of 16.0% of the total change in sales for 1996 as
compared to 1995. The increase in consumer poultry sales was primarily
attributable to a 24.3% increase in tonnage, partially offset by a 2.5%
decrease in average sales prices. The increase in tonnage and the decrease in
average sales prices for consumer poultry are mainly due to the acquisitions
in September 1995 of two poultry operations which changed the overall product
mix toward lower priced products.
Beef and pork sales accounted for a decrease of 3.5% of the total change in
sales for 1996 compared to 1995. The decrease in beef and pork sales was due
to a 51.2% decrease in tonnage partially offset by a 27.6% increase in
average sales prices. The decrease in tonnage is mainly due to the sale in
the fourth quarter of 1995 of a swine slaughter facility. In addition, the
sale of this swine slaughter facility eliminated lower priced fresh pork from
the product mix which accounts for the significant increase in average sales
prices.
Mexican Original products and prepared foods sales together accounted for a
decrease of 0.3% of the total change in sales for 1996 as compared to 1995.
This decrease was largely due to a 2.4% decrease in average sales prices as
well as a change in product mix and a 1.5% decrease in tonnage. Seafood sales
accounted for an increase of 0.9% of the change in total sales for 1996 due
to a 23.5% increase in tonnage slightly offset by a 3.3% decrease in average
sales prices. The increase in seafood tonnage is mainly due to acquisitions
at the end of the third quarter of 1995. Sales of live swine, animal foods,
by-products and other as a group accounted for 4.0% of the increase in total
sales for 1996 compared to 1995.
Cost of goods sold for 1997 decreased 3.4% compared to 1996, which is largely
attributable to the sale of the Company's beef division assets in the first
quarter of 1997 and the discontinuance of consolidation of Trasgo. Excluding
cost of sales related to these operations, total cost of sales for 1997
increased 2.5% over last year's comparable cost of sales. The cost of
ingredients used in feed for poultry and swine and the ingredients used in
Mexican Original operations during 1997 decreased in comparison with last
fiscal year. However, these costs did not moderate as much as management
anticipated. As a percent of sales, cost of sales was 83.7% for 1997
compared to 85.3% in 1996.
Cost of goods sold for 1996 increased 24.5% compared to 1995, mainly due to
the increase in sales volume and a significant increase in the cost of grain
used in the Company's operations. Increases in the cost of ingredients used
in feed for poultry and swine and the ingredients used in the Mexican
Original operations are estimated to have increased cost of sales by $445
million in 1996 compared to 1995. As a percent of sales, cost of sales
increased to 85.3% in 1996 compared to 80.3% in 1995.
Operating expenses for 1997 decreased 5.7% from 1996. This decrease is mainly
the result of the sale of the beef division assets in the first quarter of
fiscal 1997, the discontinuance of consolidation of Trasgo and cost
reductions. As a percent of sales, selling expense decreased to 8.1% in 1997
compared to 8.5% in 1996; general and administrative expense was 1.6% in 1997
and 1996; and amortization expense was 0.4% in 1997 and 1996.
42
<PAGE>
[GRAPH]
Expenses as a Percent of Sales
1995 1996 1997
Selling 8.7% 8.5% 8.1%
General and Administrative 2.0% 1.6% 1.6%
Operating expenses for 1996 increased 10.1% from 1995. As a percent of sales,
selling expense decreased to 8.5% in 1996 compared to 8.7% in 1995 mainly due
to increased sales volume; general and administrative expense was 1.6% in
1996 compared to 2.0% in 1995, due to a decrease in legal costs and cost
reduction initiatives; and amortization expense was 0.4% in 1996 compared to
0.5% in 1995.
Interest expense decreased 16.9% in 1997 compared to 1996. As a percent of
sales, interest expense was 1.7% in 1997 compared to 2.1% in 1996. The
Company had a lower level of borrowing in 1997, which decreased the Company's
average indebtedness by 12.8% over the same period last year due to paying
down debt with funds generated from operations and proceeds from the sale of
the beef division assets. The Company's short-term interest rates were
slightly lower than the same period last year and the average interest rate
on total debt for 1997 was 6.8% compared to 6.9% for 1996.
Interest expense increased 15.7% in 1996 compared to 1995. As a percent of
sales, interest expense was 2.1% in 1996 and 1995. The Company had a higher
level of borrowing, in 1996, which increased the Company's average
indebtedness by 35.2% over 1995. The Company's short-term interest rates were
approximately 5.1% lower in 1996 than 1995, which lowered the weighted
average interest rate on total debt for 1996 was 6.9% compared to 7.7% for
1995.
Included in other income in 1997 is a $41.0 million pre-tax gain from the
sale of the beef division assets.
The effective tax rate for 1997 was 43.6% compared to 37.0% in 1996. The 1997
effective tax rate was impacted by the taxes on the gain from the sale of the
beef division assets. Certain costs were allocated to the beef division which
are not deductible for tax purposes, resulting in a higher effective tax
rate. The 1996 effective tax rate was impacted by reduced state income taxes
and an adjustment to the liability for deferred income taxes to reflect the
Company's current assessment of tax contingencies provided for in prior
years.
Return on beginning assets for 1997 was 4.1% compared to 2.0% for 1996, with
a five-year average of 3.6%. Return on beginning shareholders' equity for
1997 was 12.1% compared to 5.9% for 1996. The five-year return on beginning
shareholders' equity was 10.1%.
[GRAPH]
Return on Beginning Assets
1995 6.0%
1996 2.0%
1997 4.1%
43
<PAGE>
ACQUISITIONS
On August 1, 1997, the Company acquired Mallard's Food Products, Inc.
(Mallard's) for a combination of Company Class A common stock and cash.
Mallard's, with annual sales of approximately $33 million, is the nation's
third largest producer of refrigerated gourmet pasta and sauce products and
has two processing plants located in Modesto, California.
On January 19, 1995, the Company completed the purchase of the Star of
Kodiak, a fish processing facility in Kodiak, Alaska. On June 26, 1995, the
Company completed the purchase of Multifoods Seafood, Inc. and JAC Creative
Foods, Inc., with combined annual sales of approximately $65 million. On
September 1, 1995, the Company acquired the U.S. broiler division of Cargill,
Incorporated, with operations in Georgia and Florida and 1994 sales of
approximately $268 million. On September 5, 1995, the Company acquired all
of the outstanding stock of McCarty Farms, Inc., an integrated poultry
company with all of its operations in Mississippi and 1994 sales of
approximately $320 million. The total cost of all of these acquisitions was
approximately $368.7 million including cash paid and assets exchanged.
These transactions have been accounted for as purchases, and the results of
operations for these entities have been included in the Company's
consolidated results of operations since the acquisition dates. These factors
should be considered when making comparisons between years.
On September 4, 1997, the Company signed a definitive agreement to acquire
all of the stock of Hudson Foods, Inc. The total purchase price will consist
of 18.4 million shares of Class A common stock and cash of approximately $257
million. This acquisition is expected to be finalized in January 1998 and
will be accounted for as a purchase.
LIQUIDITY AND CAPITAL RESOURCES
In 1997, net cash of $541.0 million was provided by operating activities,
an increase of $367.7 million over 1996. The Company used cash from
operations and proceeds from the sale of the beef division assets to pay down
debt and to fund additions to property, plant and equipment. The expenditures
for property, plant and equipment were related to acquiring new equipment,
upgrading facilities in order to maintain competitive standing and position
the Company for future opportunities. Additionally, the Company makes a
continuing effort to increase efficiencies, reduce overall cost and meet or
exceed environmental laws and regulations.
[GRAPH]
Cash Provided by Operating Activities
Dollars in Millions
1995 $291.3
1996 $173.3
1997 $541.0
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, as well as additional credit
facilities which the Company believes are available.
44
<PAGE>
At 1997 year end, working capital was $851.5 million compared to $1.1 billion
at the end of 1996, a decrease of $273.0 million. The current ratio for 1997
was 2.18 to 1 compared to 2.64 to 1 for 1996. Working capital and the
current ratio have decreased from 1996 primarily due to decreases in
inventories and assets held for sale. Total assets have increased by $1.8
billion or 68.5% over the past five years inclusive of acquisitions.
Additions, net of dispositions, to total property, plant and equipment for
the last five years were $1.4 billion including acquisitions, an increase of
80.0% over the last five years. At 1997 year end, the Company had
construction projects in progress that will require approximately $89.1
million to complete. Funding for these expenditures will be provided by cash
from operations or additional borrowings.
Total debt at 1997 year end was $1.7 billion, a decrease of $285 million from
the end of 1996. The Company has two unsecured revolving credit agreements
totaling $1.25 billion which support the Company's commercial paper program.
The $1 billion facility expires in May 2002. At September 27, 1997, $768.7
million was outstanding under the $1 billion facility consisting of $638.7
million of commercial paper and $130.0 million drawn under the revolver. The
$250 million facility expires in May 1998. At September 27, 1997, all of the
$250 million facility was available. Additional outstanding long-term debt at
September 27, 1997, consisted of $348.5 million of public debt, $225.8
million of institutional notes, $166.5 million of leveraged equipment loans
and $48.7 million of other indebtedness.
[GRAPH]
Total Capitalization
Dollars in Billions
1995 1996 1997
Equity 1.5 1.5 1.6
Debt 2.0 2.0 1.7
--- --- ---
Total 3.5 3.5 3.3
The revolving credit agreements and notes contain various covenants, the more
restrictive of which require maintenance of a minimum net worth, current
ratio, cash flow coverage of interest and a maximum total debt-to-
capitalization ratio. The Company is in compliance with these covenants at
year end.
The Company prefers maintaining a 50/50 fixed-to-floating debt ratio.
Management believes that, over the long-term, variable-rate debt may provide
more cost-effective financing than fixed-rate debt; however, the Company will
issue fixed-rate debt if advantageous market opportunities arise.
In January 1997, the Company re-instituted its stock repurchase program which
authorized the purchase of up to 17 million shares (on a post-split basis) of
the Company's Class A common stock in open market or privately negotiated
transactions. The Company intends to utilize shares repurchased to fund
employee benefit plans and acquisitions. No timetable has been set for
completion of the repurchase program. During 1997, the Company purchased
approximately 5.2 million shares under this repurchase program, which
included the purchase of 2.3 million shares from the Tyson Foods, Inc. Profit
Sharing Plan and Trust on September 25, 1997.
45
<PAGE>
Shareholders' equity increased 5.2% during 1997 and has grown at a compounded
annual rate of 10.6% over the past five years, inclusive of $20.8 million for
the purchase of Mallard's in 1997, a $213.9 million write-down of assets in
1994 and $205.2 million of Class A common stock issued in 1993.
On January 10, 1997, the Company's Board of Directors authorized a three-for-
two stock split in the form of a stock dividend, effective February 15, 1997,
for shareholders of record on February 1, 1997. Additionally, the Board of
Directors increased the post-split quarterly dividend to $.025 per share for
Class A common stock and $.0225 per share for Class B common stock, payable
March 15, 1997, to holders of record on March 1, 1997.
ENVIRONMENTAL MATTERS
The Company has a strong financial commitment to clean water and has many
environmentally responsible practices. Consequently, management believes
that the Company has no incidence of environmental contamination or damages
requiring material expenditures. During 1997, the Company invested
approximately $34.6 million for capital outlays to build and upgrade
facilities as well as for day-to-day operations for water quality.
46
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
TYSON FOODS, INC.
THREE YEARS ENDED SEPTEMBER 27, 1997
<S> <C> <C> <C>
(IN MILLIONS EXCEPT PER SHARE DATA)
- -----------------------------------------------------------------------------
1997 1996 1995
- -----------------------------------------------------------------------------
Sales $6,355.7 $6,453.8 $5,511.2
Cost of Sales 5,318.0 5,505.7 4,423.1
- -----------------------------------------------------------------------------
1,037.7 948.1 1,088.1
- -----------------------------------------------------------------------------
Operating Expenses:
Selling 513.3 550.0 478.8
General and administrative 96.9 100.9 111.7
Amortization 27.6 27.6 25.9
- -----------------------------------------------------------------------------
637.8 678.5 616.4
- -----------------------------------------------------------------------------
Operating Income 399.9 269.6 471.7
Other Expense (Income):
Interest 110.4 132.9 114.9
Foreign currency exchange 9.0 15.6
Other (40.2) (4.9) (2.4)
- -----------------------------------------------------------------------------
70.2 137.0 128.1
- -----------------------------------------------------------------------------
Income Before Taxes on Income and
Minority Interest 329.7 132.6 343.6
Provision for Income Taxes 143.9 49.0 131.0
Minority Interest in Net Loss of
Consolidated Subsidiary 3.3 6.6
- -----------------------------------------------------------------------------
Net Income $ 185.8 $ 86.9 $ 219.2
=============================================================================
Earnings Per Share $0.85 $0.40 $1.01
Average Shares Outstanding 218.2 218.0 217.7
=============================================================================
SEE ACCOMPANYING NOTES.
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION> CONSOLIDATED BALANCE SHEETS
TYSON FOODS, INC.
SEPTEMBER 27, 1997 AND SEPTEMBER 28, 1996 (IN MILLIONS EXCEPT PER SHARE DATA)
<S> <C> <C>
ASSETS 1997 1996
Current Assets:
Cash and cash equivalents $ 23.6 $ 36.6
Accounts receivable 617.8 547.1
Inventories 886.1 1,027.4
Assets held for sale 6.2 155.5
Other current assets 38.8 43.7
- --------------------------------------------------------------------------------------
Total Current Assets 1,572.5 1,810.3
Net Property, Plant and Equipment 1,924.8 1,869.2
Excess of Investments Over Net Assets Acquired 731.1 731.5
Investments and Other Assets 182.6 133.1
- --------------------------------------------------------------------------------------
Total Assets $4,411.0 $4,544.1
======================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 37.3 $ 39.5
Current portion of long-term debt 94.6 129.2
Trade accounts payable 290.3 269.7
Accrued salaries and wages 80.9 65.6
Federal and state income taxes payable 27.2 17.4
Accrued interest payable 27.3 29.4
Other current liabilities 163.4 135.0
- --------------------------------------------------------------------------------------
Total Current Liabilities 721.0 685.8
Long-Term Debt 1,558.2 1,806.4
Deferred Income Taxes 506.1 495.6
Other Liabilities 4.2 14.6
Shareholders' Equity:
Common stock ($.10 par value):
Class A-authorized 900 million shares: Issued 119.5 million
shares in 1997 and 79.7 million shares in 1996 11.9 8.0
Class B-authorized 900 million shares: Issued 102.7 million
shares in 1997 and 68.5 million shares in 1996 10.3 6.8
Capital in excess of par value 379.1 375.4
Retained earnings 1,390.8 1,232.4
Currency translation adjustment (2.5) (2.8)
- --------------------------------------------------------------------------------------
1,789.6 1,619.8
Less Class A treasury stock, at cost-
8.8 million shares in 1997 and 3.2 million shares in 1996 165.6 75.4
Less unamortized deferred compensation 2.5 2.7
- --------------------------------------------------------------------------------------
Total Shareholders' Equity 1,621.5 1,541.7
- --------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $4,411.0 $4,544.1
======================================================================================
SEE ACCOMPANYING NOTES.
</TABLE>
48
<PAGE>
<TABLE><CAPTION>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
TYSON FOODS, INC.
THREE YEARS ENDED SEPTEMBER 27, 1997
(IN MILLIONS EXCEPT PER SHARE DATA)
1997 1996 1995
Shares Amount Shares Amount Shares Amount
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CLASS A COMMON STOCK
Beginning Balance 79.7 8.0 79.7 $8.0 79.7 $8.0
Three-for-two stock split 39.8 3.9
-----------------------------------------------------------
Ending Balance 119.5 11.9 79.7 $8.0 79.7 $8.0
CLASS B COMMON STOCK
Beginning Balance 68.5 6.8 68.5 6.8 68.5 6.8
Three-for-two stock split 34.2 3.5
-----------------------------------------------------------
Ending Balance 102.7 10.3 68.5 6.8 68.5 6.8
CAPITAL IN EXCESS OF PAR VALUE
Beginning Balance 375.4 377.9 391.4
Exercise of Options (0.3) (2.5) (13.5)
Acquisition 4.0
-----------------------------------------------------------
Ending Balance 379.1 375.4 377.9
RETAINED EARNINGS
Beginning Balance 1,232.4 1,162.3 953.8
Net income 185.8 86.9 219.2
Three-for-two stock split (7.4)
Dividends Class A per share (20.0) (16.8) (10.7)
(1997-$.095;1996-$.080;1995-$.053)
Class B per share (1997-$.086;
1996-$.072; 1995-$.044)
-----------------------------------------------------------
Ending Balance 1,390.8 1,232.4 1,162.3
CURRENCY TRANSLATION ADJUSTMENT
Beginning Balance (2.8) (5.2) 1.2
Currency translation adjustment 0.3 2.4 (6.4)
-----------------------------------------------------------
Ending Balance (2.5) (2.8) (5.2)
CLASS A TREASURY STOCK
Beginning Balance 3.2 (75.4) 3.4 (79.2) 2.9 (68.7)
Purchases 5.2 (109.6) 0.1 (1.3) 1.4 (32.0)
Exercise of options (0.2) 2.6 (0.3) 5.1 (0.9) 21.5
Acquisition (1.0) 16.8
Three-for-two stock split 1.6
-----------------------------------------------------------
Ending Balance 8.8 (165.6) 3.2 (75.4) 3.4 (79.2)
UNAMORTIZED DEFERRED COMPENSATION
Beginning Balance (2.7) (2.9) (3.1)
Amortization of deferred 0.2 0.2
compensation 0.2
-----------------------------------------------------------
Ending Balance (2.5) (2.7) (2.9)
-----------------------------------------------------------
Total Shareholders' Equity $1,621.5 $1,541.7 $1,467.7
===========================================================
SEE ACCOMPANYING NOTES
</TABLE> 49
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
TYSON FOODS, INC.
THREE YEARS ENDED SEPTEMBER 27, 1997 (IN MILLIONS)
- ----------------------------------------------------------------------------------------------
1997 1996 1995
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $185.8 $86.9 $219.2
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation 202.8 211.7 179.0
Amortization 27.6 27.6 25.9
Deferred income taxes 10.5 15.9 10.9
Minority interest (3.3) (6.6)
Foreign currency exchange loss 9.0 15.6
(Gain) Loss on dispositions of property and (34.8) 2.2 3.6
equipment
Increase in accounts receivable (68.4) (66.9) (29.6)
Decrease (increase) in inventories 143.6 (126.7) (140.5)
Increase (decrease) in trade accounts payable 19.2 (4.7) 12.8
Net change in other current assets and liabilities 54.7 21.6 1.0
- ----------------------------------------------------------------------------------------------
Cash Provided by Operating Activities 541.0 173.3 291.3
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash paid for acquisitions (4.3) (350.1)
Additions to property, plant and equipment (291.2) (214.0) (347.2)
Proceeds from sale of property, plant and equipment 223.4 21.1 20.1
Net change in other assets and liabilities (63.8) (29.5) (53.8)
- ----------------------------------------------------------------------------------------------
Cash Used for Investing Activities (135.9) (222.4) (731.0)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in notes payable (2.2) (55.7) 45.9
Proceeds from long-term debt 131.4 475.6 628.1
Repayments of long-term debt (420.8) (351.5) (189.5)
Purchase of treasury shares (109.6) (1.3) (32.0)
Other (17.2) (15.0) (1.1)
- ----------------------------------------------------------------------------------------------
Cash (Used for) Provided by Financing Activities (418.4) 52.1 451.4
Effect of Exchange Rate Change on Cash 0.3 0.5 (5.6)
- ----------------------------------------------------------------------------------------------
(Decrease) Increase in Cash (13.0) 3.5 6.1
Cash and Cash Equivalents at Beginning of Year 36.6 33.1 27.0
- ----------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year $23.6 $36.6 $33.1
- ----------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES.
</TABLE>
50
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
TYSON FOODS, INC.
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include
the accounts of Tyson Foods, Inc., and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
Description of Business: The Company is a fully integrated producer,
processor and marketer of chicken and chicken-based food products as well as
a producer and marketer of other center-of-the-plate and convenience food
items. The Company's food products are sold in the domestic foodservice,
retail and wholesale club markets as well as internationally.
Fiscal Year: The Company utilizes a 52 or 53 week accounting period which
ends on the Saturday closest to September 30.
Cash and Cash Equivalents: Cash equivalents consist of investments in short-
term, highly liquid securities having original maturities of three months or
less, which are made as part of the Company's cash management activity. The
carrying values of these assets approximate their fair market values. As a
result of the Company's cash management system, checks issued, but not
presented to the banks for payment, may create negative cash balances.
Checks outstanding in excess of related cash balances totaling approximately
$147.0 million at September 27, 1997, and $131.2 million at September 28,
1996, are included in trade accounts payable, accrued salaries and wages and
other current liabilities.
Inventories: Live poultry consists of broilers and breeders. Breeders are
stated at cost less amortization. Breeders costs are accumulated up to the
production stage and amortized into broiler costs over the estimated
production lives based on historical egg production. Live hogs consist of
breeding stock and finishing hogs. The cost of live hogs is included in cost
of sales when the hogs are sold. Broilers, live hogs, dressed and further-
processed products, seafood-related products, hatchery eggs and feed and
supplies are valued at the lower of cost (first-in, first-out) or market.
<TABLE>
(IN MILLIONS)
- ---------------------------------------------------------------------------
1997 1996
- ---------------------------------------------------------------------------
<S> <C> <C>
Dressed and further-processed products $ 366.1 $ 481.1
Live poultry and hogs 353.4 362.2
Seafood related products 39.5 51.4
Hatchery eggs and feed 57.8 63.8
Supplies 69.3 68.9
- ---------------------------------------------------------------------------
$ 886.1 $1,027.4
===========================================================================
</TABLE>
51
<PAGE>
The Company is a purchaser of certain commodities, primarily corn and
soybeans. The Company periodically uses commodity futures and purchased
options for hedging purposes to reduce the effect of changing commodity
prices on a portion of its commodity purchases. The contracts that
effectively meet risk reduction and correlation criteria are recorded using
hedge accounting. Gains or losses on hedged transactions are recorded as a
component of the underlying inventory purchase.
Property, Plant and Equipment and Depreciation: Depreciation is provided
primarily by the straight-line method using estimated lives for buildings and
leasehold improvements of 10 to 39 years; machinery and equipment of 3 to 12
years; vessels of 16 to 30 years; and other of 3 to 20 years.
The Company capitalized interest costs of $3.4 million in 1997, $3.8 million
in 1996 and $3.1 million in 1995 as part of the cost of major asset
construction projects. Approximately $89.1 million will be required to
complete construction projects in progress at September 27, 1997.
The major categories of property, plant and equipment and accumulated
depreciation, at cost, are as follows:
<TABLE>
(IN MILLIONS)
- ----------------------------------------------------------------------------
1997 1996
- ----------------------------------------------------------------------------
<S> <C> <C>
Land $ 47.7 $ 51.9
Buildings and leasehold improvements 931.9 847.1
Machinery and equipment 1,838.9 1,764.6
Vessels 101.7 111.3
Land improvements and other 90.7 89.6
Buildings and equipment under construction 152.3 113.6
- ----------------------------------------------------------------------------
3,163.2 2,978.1
Less accumulated depreciation 1,238.4 1,108.9
- ----------------------------------------------------------------------------
$1,924.8 $1,869.2
============================================================================
</TABLE>
Excess of Investments Over Net Assets Acquired: Costs in excess of net assets
of businesses purchased are amortized on a straight-line basis over periods
ranging from 15 to 40 years. The carrying value of excess of investments over
net assets acquired is reviewed at each balance sheet date to determine if
facts and circumstances suggest that it may be impaired. If this review
indicates that the excess of investments over net assets acquired may not be
recoverable, an estimate of the undiscounted cash flows of the entity
acquired is prepared and the Company's carrying value of excess of
investments over net assets acquired will be reduced by the estimated
shortfall of cash flows. At September 27, 1997 and September 28, 1996, the
accumulated amortization of excess of investments over net assets acquired
was $165.8 million and $142.6 million, respectively.
52
<PAGE>
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of:
Effective October 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of" (SFAS No. 121). Under the
provisions of SFAS No. 121, impairment losses are recognized when information
indicates the carrying amount of long-lived assets, including identifiable
intangibles and goodwill related to those assets, will not be recovered
through future operations or sale. Impairment losses for assets to be held
or used in operations are based on the excess of the carrying amount of the
asset over the asset's fair value. Assets held for sale, except for
discontinued operations, are carried at the lower of carrying amount, or fair
value less cost to sell. The effect of adopting SFAS No. 121 in 1996 was not
material.
Capital Stock: Holders of Class B common stock (Class B stock) may convert
such stock into Class A common stock (Class A stock) on a share-for-share
basis. Holders of Class B stock are entitled to ten votes per share while
holders of Class A stock are entitled to one vote per share on matters
submitted to shareholders for approval. Cash dividends cannot be paid to
holders of Class B stock unless they are simultaneously paid to holders of
Class A stock, and the per share amount of the cash dividend paid to holders
of Class B stock cannot exceed 90% of the cash dividend simultaneously paid
to holders of Class A stock.
In January 1997, the Company re-instituted its stock repurchase program which
authorizes the purchase of up to 17 million shares (on a post-split basis) of
the Company's Class A stock in open market or privately negotiated
transactions. The Company intends to utilize shares repurchased to fund
employee benefit plans and acquisitions. No timetable has been set for
completion of the repurchase program. During 1997, the Company purchased
approximately 5.2 million shares under this repurchase program, which
included the purchase of 2.3 million shares from the Tyson Foods, Inc. Profit
Sharing Plan and Trust on September 25, 1997.
On January 10, 1997, the Company's Board of Directors authorized a three-for-
two stock split in the form of a stock dividend, effective February 15, 1997,
for shareholders of record on February 1, 1997. All references to number of
shares, per share amounts and average shares outstanding in the Consolidated
Statements of Income and Notes to Consolidated Financial Statements have been
restated to reflect this split.
Foreign Currency Translation: All foreign affiliates have a foreign
functional currency. Assets and liabilities of the Company's foreign
affiliates are translated at current exchange rates, while income and
expenses are translated at average rates for the period. Translation gains
and losses are reported as a component of shareholders' equity.
Earnings Per Share: Earnings per share is computed by dividing net income by
the weighted average number of shares and share equivalents outstanding
during each year.
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
(SFAS No. 128), which is required to be adopted on December 31, 1997. At that
time, the Company will be required to change the method currently used to
53
<PAGE>
compute earnings per share and to restate all prior periods. Under the new
requirements, primary earnings per share will be renamed basic earnings per
share and will exclude the dilutive effect of stock options. The impact of
adopting SFAS No. 128 will not change primary earnings per share materially
as primary earnings per share for the year ended September 27, 1997, will
increase to $0.86 and for the year ended September 28, 1996, will remain
unchanged. The Company will also be required to disclose diluted earnings
per share which will be reported as $0.85 and $0.40 for 1997 and 1996,
respectively.
Income Taxes: The Company follows the liability method in accounting for
deferred income taxes. The liability method provides that deferred tax
liabilities are recorded at currently enacted 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.
Advertising and Promotion Expenses: Advertising and promotion expenses are
charged to operations in the period incurred. Advertising and promotion
expenses for 1997, 1996 and 1995 were $233.2 million, $228.0 million and
$193.3 million, respectively.
Use of estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Actual results
could differ from those estimates.
Comprehensive Income: In June 1997, the FASB issued Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS No.
130). The provisions of SFAS No. 130 require companies to classify items of
comprehensive income by their nature in a financial statement and display the
accumulated balance of other comprehensive income separately from retained
earnings and capital in excess of par value in the consolidated financial
statements. The Company's comprehensive income items are not material;
accordingly, the effect of adopting this statement will not be material when
it becomes effective for fiscal 1999.
Segment Reporting: In June 1997, the FASB issued Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise
and Related Information" (SFAS No. 131). Under the provisions of SFAS No.
131, public business enterprises must report financial and descriptive
information about its reportable segments. Management is currently studying
and analyzing SFAS No. 131 as well as the Company's operations to determine
all of the Company's reportable segments. Based upon current analysis, the
Company believes consumer poultry will account for at least 75% of revenue
and operating income. This statement will be effective for fiscal 1999.
NOTE 2: ASSETS HELD FOR SALE
During 1996, the Company announced its intention to sell its beef and pork
further-processing operations in its effort to return to its core business.
On November 25, 1996, the Company sold its beef further-processing
operations, known as Gorges/Quik-to-Fix Foods, resulting in a pre-tax gain of
54
<PAGE>
$41.0 million which has been recorded in other income in the Consolidated
Statements of Income. The Company is still in the process of selling its pork
further-processing plant in Holland, Michigan, and accordingly these assets
have been classified as current assets in the Consolidated Balance Sheets.
The operating results of this facility were not material to the Company in
1997. During 1997, the Company recorded an impairment loss of $11.2 million
on the pork further-processing assets, which has been classified as an
operating charge in the Consolidated Statements of Income. The Company
expects to dispose of these assets in 1998.
NOTE 3: ACQUISITIONS
On August 1, 1997, the Company acquired Mallard's Food Products, Inc.,
(Mallard's) for a combination of 1.0 million shares of the Company's Class A
stock valued at $20.8 million and cash of $4.0 million. Mallard's, with two
plants in Modesto, California, has annual sales of approximately $33 million.
On January 19, 1995, the Company completed the purchase of the Star of
Kodiak, a fish processing facility in Kodiak, Alaska. On June 26, 1995, the
Company completed the purchase of Multifoods Seafood, Inc. and JAC Creative
Foods, Inc., with combined annual sales of $65 million. On September 1, 1995,
the Company acquired the U.S. broiler division of Cargill, Incorporated, with
operations in Georgia and Florida and 1994 sales of approximately $268
million. On September 5, 1995, the Company acquired all of the outstanding
stock of McCarty Farms, Inc., an integrated poultry company with all of its
operations in Mississippi and 1994 sales of approximately $320 million. The
total cost of all of these acquisitions was approximately $368.7 million,
including cash paid and assets exchanged.
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 dates. Pro forma
operating results are not presented as they would not differ materially from
actual results for 1997, 1996 and 1995.
On September 4, 1997, the Company signed a definitive agreement to acquire
all of the stock of Hudson Foods, Inc. The total purchase price will consist
of 18.4 million shares of Class A common stock and cash of
approximately $257 million. This acquisition is expected to be finalized in
January 1998 and will be accounted for as a purchase.
NOTE 4: FINANCIAL INSTRUMENTS AND CREDIT RISK CONCENTRATION
The Company periodically enters into foreign exchange forward contracts and
option contracts to hedge some of its foreign currency exposure. The Company
uses such contracts, which generally have maturities not exceeding twelve
months, to hedge exposure to changes in foreign currency exchange rates,
primarily Japanese yen, associated with sales denominated in foreign
currency. Gains and losses on these contracts are deferred and recognized as
an adjustment to the subsequent transaction when it occurs. The Company
also hedges exposure to changes in interest rates on certain of its financial
instruments.
At September 27, 1997, and September 28, 1996, the stated or notional amounts
of the Company's outstanding foreign currency and interest rate derivative
financial instruments were as follows:
55
<PAGE>
<TABLE>
(In millions)
- -----------------------------------------------------------------------------
1997 1996
- -----------------------------------------------------------------------------
<S> <C> <C>
Interest rate swaps $147.7 $113.7
Foreign currency options 42.5
Foreign forward exchange contracts 0.5
=============================================================================
</TABLE>
The Company's financial instruments that are exposed to concentrations of
credit risk consist primarily of cash equivalents and trade receivables. The
Company's cash 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 their
dispersion across geographic areas. The Company performs periodic credit
evaluations of its customers' financial condition and generally does not
require collateral. One customer located in Russia accounts for approximately
11% of total accounts receivable. No other single group or customer
represents greater than 10% of total accounts receivable.
NOTE 5: CONTINGENCIES AND COMMITMENTS
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. Although the
outcome of such items cannot be determined with certainty, the Company's
general counsel and management are of the opinion that the final outcome
should not have a material effect on the Company's results of operations or
financial position.
As previously announced on June 20, 1997, the Company was notified that it
was a target of the Office of Independent Counsel's (OIC) investigation of
former Secretary of Agriculture Alphonso Michael Espy. No charges have been
filed against the Company related to this investigation. The Company and its
legal counsel are unable to estimate the amount or likelihood of potential
loss, if any, that may result from the OIC's investigation or any subsequent
proceedings.
The Company leases certain farms and other properties and equipment for which
the total rentals thereon approximated $34.0 million in 1997, $35.7 million
in 1996 and $37.9 million in 1995. Most farm leases have terms ranging from
one to ten years with various renewal periods. The most significant
obligations assumed under the terms of the leases are the upkeep of the
facilities and payments of insurance and property taxes.
Minimum lease commitments under noncancelable leases at September 27, 1997,
total $102.8 million composed of $28.0 million for 1998, $22.0 million for
1999, $19.2 million for 2000, $15.9 million for 2001, $11.8 million for 2002
and $5.9 million for later years.
The Company assists certain of its swine and poultry growers in obtaining
financing for growout facilities by providing the growers with extended
growout contracts and conditional operation of the facilities should a grower
default under their growout or loan agreement.
56
<PAGE>
NOTE 6: LONG-TERM DEBT
The Company has unsecured revolving credit agreements totaling $1.25 billion
which support the Company's commercial paper program. The $1 billion
facility expires in May 2002. At September 27, 1997, $768.7 million was
outstanding under this facility consisting of $638.7 million in commercial
paper and $130.0 million drawn under the revolver. The $250 million facility
expires in May 1998. At September 27, 1997, the Company had $250 million
available under this revolving credit facility.
At September 27, 1997, the Company had outstanding letters of credit totaling
approximately $76.6 million issued primarily in support of workers'
compensation insurance programs, industrial revenue bonds and the leveraged
equipment loans.
Under the terms of the leveraged equipment loans, the Company had restricted
cash totaling approximately $38.9 million which is included in investments
and other assets at September 27, 1997. Under these leveraged loan
agreements, the Company entered into interest rate swap agreements to
effectively lock in a fixed interest rate for these borrowings.
Annual maturities of long-term debt for the five years subsequent to
September 27, 1997 are: 1998-$94.6 million; 1999-$72.6 million; 2000-$73.6
million; 2001-$124.5 million and 2002-$800.1 million.
The revolving credit agreements and notes contain various covenants, the more
restrictive of which require maintenance of a minimum net worth, current
ratio, cash flow coverage of interest and fixed charges and a maximum total
debt-to-capitalization ratio. The Company is in compliance with these
covenants at year end.
The fair value of long-term debt, at September 27, 1997, based upon quoted
market prices for the same or similar issues or on the Company's incremental
borrowing rate for debt of the same remaining maturities, was approximately
$1.7 billion.
The weighted average interest rate on all outstanding short-term borrowing
was 5.6% at September 27, 1997, and 5.0% at September 28, 1996.
57
<PAGE>
<TABLE>
<CAPTION>
Long-term debt consists of the following:
(IN MILLIONS)
- -------------------------------------------------------------------------------
Maturity 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial paper
(5.5% effective rate at 9/27/97) 2002 $ 638.7 $ 835.0
Debt securities:
6.75% notes 2005 149.1 149.1
6.625% notes 2005 149.3 149.3
6.39-6.41% notes 2000 50.1 50.1
Institutional notes:
10.33% notes 1999 33.7 101.2
10.61% notes 1999-2001 125.0 125.0
10.84% notes 2002-2006 50.0 50.0
11.375% notes 1999-2002 17.1 21.4
Revolving credit facility
(5.5% effective rate at 9/27/97) 2002 130.0 165.0
Leveraged equipment loans
(rates ranging from 4.9% to 6.0%) 2005-2008 166.5 127.1
Other Various 48.7 33.2
- -------------------------------------------------------------------------------
$1,558.2 $1,806.4
- -------------------------------------------------------------------------------
</TABLE>
NOTE 7: INCOME TAXES
<TABLE>
<CAPTION>
Detail of the provision for income taxes consists of:
(IN MILLIONS)
- ----------------------------------------------------------------------------
1997 1996 1995
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Federal $129.7 $49.9 $117.2
State 14.2 (0.9) 13.8
- ----------------------------------------------------------------------------
$143.9 $49.0 $131.0
============================================================================
Current $133.4 $33.1 $120.1
Deferred 10.5 15.9 10.9
- ----------------------------------------------------------------------------
$143.9 $49.0 $131.0
============================================================================
</TABLE>
58
<PAGE>
<TABLE>
<CAPTION>
The reasons for the difference between the effective income tax rate and the
statutory U.S. federal income tax rate are as follows:
- ---------------------------------------------------------------------------
1997 1996 1995
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. federal income tax rate 35.0% 35.0% 35.0%
Amortization of excess of investments
over net assets acquired 8.6 5.9 2.1
State income taxes (benefit) 2.8 (0.4) 2.6
Other differences, net (2.8) (3.5) (1.6)
- ---------------------------------------------------------------------------
43.6% 37.0% 38.1%
===========================================================================
</TABLE>
The Company follows the liability method in accounting 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.
<TABLE>
<CAPTION>
Significant components of the Company's deferred tax liabilities as of
September 27, 1997 and September 28, 1996 are as follows:
(IN MILLIONS)
- ----------------------------------------------------------------------------
1997 1996
- ----------------------------------------------------------------------------
<S> <C> <C>
Basis difference in property, plant and equipment $267.9 $268.1
Suspended taxes from conversion to accrual method 142.7 150.2
Other 95.5 77.3
- ----------------------------------------------------------------------------
Total deferred tax liabilities $506.1 $495.6
============================================================================
</TABLE>
The Omnibus Budget Reconciliation Act of 1987 required family-owned farming
businesses to use the accrual method of accounting for tax purposes. Internal
Revenue Code Section 447(i) provides that if any family corporation is
required to change its method of accounting for any taxable year, such
corporation shall establish a suspense account in lieu of taking the
adjustments into taxable income. The suspense account, which represents the
initial catch-up adjustment to change from the cash to accrual method of
accounting, is not currently includable in the Company's taxable income and
any related income taxes are deferred. However, legislation was enacted in
1997 which now requires the Company to pay down the suspense account over 20
years beginning in 1998.
59
<PAGE>
NOTE 8: RESTRICTED STOCK AND STOCK OPTIONS
In 1994, the Company awarded 130,000 restricted shares of Class A stock to
employees. The restrictions expire over periods ranging from ten to twenty-
six years. The unamortized portion is classified on the Consolidated Balance
Sheets as deferred compensation in shareholders' equity.
The Company has a nonqualified stock option plan which provides for the
granting of options for shares of Class A stock at a price not less than the
fair market value at the date of grant. The options generally become
exercisable ratably over four to eight years from the date of grant and must
be exercised within ten years of the grant date.
In October 1995, the FASB issued Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" (SFAS No. 123). Under
the provisions of SFAS No. 123, companies can elect to account for stock-
based compensation plans using a fair value based method or continue
measuring compensation expense for those plans using the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees." SFAS No. 123 requires that companies
electing to continue the intrinsic value method must make pro forma
disclosures of net income and earnings per share as if the fair value based
method of accounting had been applied. The Company currently accounts for
its stock-based compensation plan and intends to continue to account for
stock-based compensation using the intrinsic value method. Had compensation
cost for the Company's grants for stock-based compensation been determined
consistent with SFAS No. 123, the Company's net income and net income per
common share would not differ materially from the amounts reported.
<TABLE>
<CAPTION>
A summary of the Company's stock option activity for the plan is as follows:
- ----------------------------------------------------------------------------------
Shares Weighted Average
Under Option Price
Option Per Share
- ----------------------------------------------------------------------------------
<S> <C> <C>
Outstanding, October 1, 1994 5,351,328 $11.47
Exercised (1,445,265) 5.57
Canceled (234,667) 13.13
Granted 446,775 14.50
- ----------------------------------------------------------------------------------
Outstanding, September 30, 1995 4,118,171 13.79
Exercised (320,535) 8.05
Canceled (459,150) 14.49
Granted 2,129,775 15.04
- ----------------------------------------------------------------------------------
Outstanding, September 28, 1996 5,468,261 14.55
Exercised (163,906) 13.83
Canceled (560,296) 15.06
Granted 3,598,275 17.92
- ----------------------------------------------------------------------------------
Outstanding, September 27, 1997 8,342,334 $15.99
==================================================================================
</TABLE>
60
<PAGE>
The number of options exercisable was as follows: September 27, 1997-
806,837, September 28, 1996- 442,616, September 30, 1995- 371,013. The
remainder of the options outstanding at September 27, 1997 are exercisable
ratably through October 2006. The number of shares available for future
grants was 6,651,083 and 3,689,063 at September 27, 1997 and
September 28, 1996, respectively.
<TABLE>
<CAPTION>
The following table summarizes information about stock options outstanding at
September 27, 1997:
- -----------------------------------------------------------------------------------
Options Outstanding Options Exercisable
---------------------------------------------------------
Range of Shares Weighted Weighted Shares Weighted
Exercise Outstanding Average Average Exercisable Average
Prices Remaining Exercise Exercise
Contractual Price Price
Life(in years)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 4.83-$ 6.58 35,741 4.3 $ 5.94 35,741 $ 5.94
14.33- 14.50 2,909,968 6.9 14.40 771,096 14.42
14.58- 15.17 1,887,975 9.0 15.03
17.92 3,508,650 9.0 17.92
- -------------------------------------------------------------------------------------------
8,342,334 806,837
===========================================================================================
</TABLE>
The weighted average fair value of options granted during 1997 and 1996 is
approximately $7.15 and $5.86, respectively. The fair value of each option
grant is established on the date of grant using the Black-Scholes option-
pricing model. Assumptions include an expected life of eight years, weighted
average risk-free interest rates ranging from 5.5% to 6.4%, expected
volatility of 0.2% and dividend yield of 0.5% in both 1997 and 1996.
NOTE 9: TRANSACTIONS WITH RELATED PARTIES
The Company has operating leases for farms, equipment and other facilities
with the Senior Chairman of the Board of Directors of the Company and certain
members of his family, as well as a trust controlled by him, for rentals of
$5.6 million in 1997, $7.0 million in 1996 and $7.0 million in 1995. Other
facilities, including a cold storage distribution facility, have been leased
from the Company's profit sharing plan and other officers and directors for
rentals totaling $5.3 million in 1997, $6.6 million in 1996 and $7.1 million
in 1995. In 1997, the Company purchased the cold storage distribution
facility as well as other facilities from the profit sharing plan.
Certain officers and directors are engaged in poultry and swine growout
operations with the Company whereby these individuals purchase animals, feed,
housing and other items to raise the animals to market weight. The total
value of these transactions amounted to $12.3 million in 1997, $11.7 million
in 1996 and $11.2 million in 1995.
61
<PAGE>
NOTE 10: BENEFIT PLANS
The Company has defined contribution retirement and incentive benefit
programs for various groups of Company personnel. Company discretionary
contributions, which are determined by the Board of Directors, totaled $26.8
million, $24.0 million and $25.1 million for 1997, 1996 and 1995,
respectively.
NOTE 11: SUPPLEMENTAL INFORMATION
<TABLE>
<CAPTION>
Supplemental cash flow information and noncash investing and financing
activities are as follows:
(IN MILLIONS)
- ----------------------------------------------------------------------------
1997 1996 1995
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Interest $123.4 $114.1 $115.0
Income Taxes 124.1 40.5 124.4
- ----------------------------------------------------------------------------
SUPPLEMENTAL NONCASH INVESTING AND
FINANCING ACTIVITIES
Fair value of assets exchanged $ 18.6
- ----------------------------------------------------------------------------
</TABLE>
SUPPLEMENTAL SALES INFORMATION: The Company sells certain of its products in
foreign markets, primarily Russia, Japan, China/Hong Kong, Puerto Rico,
Singapore, South Africa, Mexico as well as certain Middle Eastern countries
and countries in the Caribbean. The Company's export sales for 1997, 1996 and
1995 totaled $762.5 million, $790.9 million and $606.1 million, respectively.
Substantially all of the Company's export sales are transacted through
unaffiliated brokers, marketing associations and foreign sales staffs.
Foreign sales were less than 10% of total consolidated sales for 1997, 1996
and 1995, respectively.
62
<PAGE>
NOTE 12: QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
(IN MILLIONS EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
1997 First Quarter Second Quarter Third Quarter Fourth Quarter
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $1,527.9 $1,574.3 $1,591.2 $1,662.3
Gross Margin 248.4 262.2 268.0 259.1
Net Income 44.6 48.2 45.2 47.8
Earnings Per Share 0.20 0.22 0.21 0.22
================================================================================
1996
- --------------------------------------------------------------------------------
Sales $1,546.8 $1,587.7 $1,628.2 $1,691.1
Gross Margin 267.1 229.3 229.3 222.4
Net Income 43.3 14.4 14.6 14.6
Earnings Per Share 0.20 0.07 0.07 0.07
==================================================================================
63
<PAGE>
REPORT OF MANAGEMENT
TYSON FOODS, INC.
The management of Tyson Foods, Inc., (the Company) has the responsibility of
preparing the accompanying financial statements and is responsible for their
integrity and objectivity. The statements were prepared in conformity with
generally accepted accounting principles applied on a consistent basis. Such
financial statements are necessarily based, in part, on best estimates and
judgments.
The Company maintains a system of internal accounting controls, and a program
of internal auditing designed to provide reasonable assurance that the
Company's assets are protected and that transactions are executed in
accordance with proper authorization, and are properly recorded. This system
of internal accounting controls is continually reviewed and modified in
response to changing business conditions and operations and to
recommendations made by the independent auditors and the internal auditors.
The management of the Company believes that the accounting and control
systems provide reasonable assurance that assets are safeguarded and
financial information is reliable.
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 accounting controls and the quality
of financial reporting. The independent auditors and the Internal Audit
Department have free and independent access to the Audit Committee to discuss
the results of their audits or any other matters relating to the Company's
financial affairs.
The accompanying consolidated financial statements have been audited by Ernst
& Young LLP, independent auditors.
November 14, 1997
/s/Leland Tollett /s/Wayne Britt
- ----------------- --------------------
Leland Tollett Wayne Britt
Chairman of the Board and Executive Vice President and
Chief Executive Officer Chief Financial Officer
64
<PAGE>
REPORT OF INDEPENDENT AUDITORS
BOARD OF DIRECTORS AND SHAREHOLDERS
TYSON FOODS, INC.
We have audited the accompanying consolidated balance sheets of Tyson Foods,
Inc., as of September 27, 1997 and September 28, 1996, and the related
consolidated statements of income, shareholders' equity, and cash flows for
each of the three years in the period ended September 27, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Tyson Foods,
Inc., at September 27, 1997 and September 28, 1996, and the consolidated
results of its operations and its cash flows for each of the three years in
the period ended September 27, 1997, in conformity with generally accepted
accounting principles.
Little Rock, Arkansas /s/Ernst & Young LLP
November 14, 1997 --------------------
Ernst & Young LLP
65
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
DIRECTORS AND OFFICERS
BOARD OF DIRECTORS
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Neely Cassady * & # Shelby D. Massey & # Barbara Tyson Fred Vorsanger * & #
Private Investor and Private Investor Vice President, Vice President Emeritus)
Arkansas State Senator Tyson Foods, Inc. University of Arkansas
Joe Starr and Private Investor
Lloyd Hackley * # Private Investor Don Tyson @
President and Chief Senior Chairman Donald Wray
Executive Officer, Leland Tollett @ of the Board of Directors, President and
Lloyd V. Hackley and Chairman of the Board Tyson Foods, Inc. Chief Operating Officer,
Associates, Inc. and Chief Executive Officer, Tyson Foods, Inc.
Tyson Foods, Inc. John Tyson @
Gerald Johnston President, @ Executive Committee
Private Investor Pork Division, * Audit Committee
Tyson Foods, Inc. & Compensation Committee
# Special Committee
</TABLE>
<TABLE>
<CAPTION>
CORPORATE AND OPERATIONAL OFFICERS
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Wayne Britt Steven Hankins Greg Lee John Tyson
Executive Vice President, Senior Vice President, Executive Vice President, President,
Finance Financial Planning Sales, Marketing and Beef and Pork Division
and Shared Services Technical Services
Roy Brown David Van Bebber
President, William Jaycox David Purtle Assistant Secretary
Seafood Division Senior Vice President, Executive Vice President,
Human Resources Operations, Transportation
Gerard Dowd and Warehousing William Whitfield
Senior Vice President, William Kuckuck Vice President,
Foodservice Sales and President, Mary Rush Business Development
Marketing International Division Secretary and Director of and Analysis
Investor Relations
James Ennis Dennis Leatherby Donald Wray
Vice President, Treasurer Leland Tollett President and
Controller and Chairman of the Board and Chief Operating Officer
Chief Accounting Officer Chief Executive Officer
</TABLE>
66
<PAGE>
CORPORATE INFORMATION
TYSON FOODS, INC.
<TABLE>
<CAPTION>
Price of Company's Common Stock
- -----------------------------------------------------------------------------------
Fiscal Year 1997 Fiscal Year 1996
- -----------------------------------------------------------------------------------
High Low High Low
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First Quarter $22.42 $17.79 $18.08 $15.17
- -----------------------------------------------------------------------------------
Second Quarter 23.63 19.88 17.75 13.83
- -----------------------------------------------------------------------------------
Third Quarter 21.56 17.75 18.42 14.58
- -----------------------------------------------------------------------------------
Fourth Quarter 23.56 19.00 18.58 15.83
- -----------------------------------------------------------------------------------
</TABLE>
As of September 27, 1997, the Company had 35,199 Class A common shareholders
of record and 20 Class B common shareholders of record.
DIRECTSERVICE SHAREHOLDER INVESTMENT PROGRAM- Tyson has authorized First
Chicago Trust Company to implement its program for dividend reinvestment and
direct purchase of shares for current as well as new investors of Tyson Class
A common stock. This program provides alternatives to traditional retail
brokerage methods of purchasing, holding and selling Tyson stock. All
inquiries concerning this program should be directed to:
DirectSERVICE Program for Shareholders
of Tyson Foods, Inc.
c/o First Chicago Trust Company
P.O. Box 2598
Jersey City, NJ 07303-2598
CHANGE OF ADDRESS- If your Tyson stock is registered in your own name(s),
send change of address information to First Chicago Trust Company.
MULTIPLE DIVIDEND CHECKS AND DUPLICATE MAILINGS- If your Tyson stock is
registered in similar but different names, e.g. Jane A. Doe and J.A. Doe, we
are required to create separate accounts and mail dividend checks and proxy
materials separately even if the mailing addresses are the same. To
consolidate accounts, contact First Chicago Trust Company.
LOST OR STOLEN STOCK CERTIFICATES OR LEGAL TRANSFERS- If your stock
certificates are lost, stolen, or in some way destroyed, or if you wish to
transfer registration, notify First Chicago Trust Company in writing. Please
include the exact name(s) and Social Security or tax identification number(s)
in which the stock is registered and, if possible, the numbers and issue
dates of the certificates.
67
<PAGE>
CORPORATE INFORMATION
TYSON FOODS, INC.
CORPORATE DATA INDEPENDENT AUDITORS
Tyson Foods, Inc., which employs Ernst & Young LLP
approximately 59,400 people, is the 425 West Capitol, Suite 3600
world's largest fully integrated producer, Little Rock, Arkansas 72201
processor and marketer of chicken and
chicken-based food products as well as a TRANSFER AGENT & DIVIDEND
producer and marketer of other center-of- DISBURSING AGENT
the-plate and convenience food items. First Chicago Trust Company
of New York
P.O. Box 2506
STOCK EXCHANGE LISTINGS Jersey City, NJ 07303-2506
The Class A common stock of the Company
is traded on the New York Stock Exchange Shareholders may also communicate
under the symbol TSN. Prior to with First Chicago Trust Company
October 17, 1997, the Company's Class A through the Internet at
common stock was traded on the Nasdaq http://www.fctc.com
stock market's National Market under the INVESTOR RELATIONS
symbol TYSNA. Financial analysts and others
seeking investor-related
CORPORATE HEADQUARTERS information should contact:
2210 West Oaklawn Drive Director of Investor Relations
Springdale, Arkansas 72762-6999 Tyson Foods, Inc.
Telephone (501) 290-4000 P.O. Box 2020
Fax (501) 290-4061 Springdale, Arkansas 72765-2020
Telephone (501) 290-4351
AVAILABILITY OF FORM 10-K
A copy of the Company's Form 10-K NEWS AND PRESS RELEASES
Report, as filed with the Securities and Press Releases and other
Exchange Commission for 1997, may be information concerning Tyson Foods
obtained by Tyson shareholders by can be delivered direct via
writing to: fax by calling PR Newswire
Corporate Secretary at (800)758-5804, ext. 113769.
Tyson Foods, Inc.
P.O. Box 2020 TYSON ON THE INTERNET
Springdale, Arkansas 72765-2020 Shareholders and others can access
various information about Tyson
ANNUAL MEETING Foods via the Internet. Tyson
The Annual Meeting of Shareholders will Foods' Internet address is
be held at 10 a.m., January 9, 1998, at http://www.tyson.com
the Walton Arts Center, Fayetteville,
Arkansas. Shareholders who cannot attend LEGAL NOTICE
the meeting are urged to exercise their The term "Tyson" and such terms as
right to vote by proxy. "the Company","our","we" and "us"
may refer to Tyson Foods, Inc., to
GENERAL COUNSEL one or more of its consolidated
James B. Blair, Esquire subsidiaries or to all of them
3422 North College, Suite 3 taken as a whole. These terms are
Fayetteville, Arkansas 72703 used for convenience only and are
not intended as a precise
description of any of the separate
companies, each of which manages
its own affairs.
68
<PAGE>
EXHIBIT 21 - SUBSIDIARIES OF TYSON FOODS, INC.
Names Under
Jurisdiction of Which Subsidiary
Name Incorporation Does Business
- ----------------- --------------- ----------------
Cobb-Vantress, Inc. Delaware Cobb-Vantress, Inc.
Cobb Breeding Company United Kingdom Cobb Breeding Company
Limited Limited
Culinary Foods, Inc. Delaware Culinary Foods, Inc.
JAC Creative Foods of Delaware JAC Creative Foods Of,
Minnesota, Inc. Minnesota, Inc.
Mallard's Food Products, California Mallard's Food Products,
Inc. Inc.
McCarty Farms, Inc. Mississippi McCarty Farms, Inc.
McCarty Foods, Inc. Mississippi McCarty Foods, Inc.
Tyson Breeders, Inc. Delaware Tyson Breeders, Inc.
Tyson Enterprise Alaska Tyson Enterprise
Seafood, Inc. Seafood, Inc.
Tyson Export Sales, U.S. Virgin Tyson Export Sales,
Inc. Islands Inc.
Tyson Farms, Inc. Delaware Tyson Farms, Inc.
Tyson Farms of Texas, Texas Tyson Farms of Texas,
Inc. Inc.
Tyson Foods of Alabama Alabama Tyson Foods of Alabama
Inc. Inc.
Tyson Holding Company Delaware Tyson Holding Company
Tyson International Bermuda Tyson International
Company, Ltd. Company, Ltd.
Tyson International Delaware Tyson International
Holding Company Holding Company
Tyson Marketing, Ltd. Ontario, Canada Tyson Marketing, Ltd.
Tyson Seafood Group, Inc. Washington Tyson Seafood Group, Inc.
World Resource, Inc. Delaware World Resource, Inc.
The Company considers the foregoing to be its primary operating
subsidiaries. Certain other subsidiaries which do not meet in the
aggregate the definition of a significant subsidiary as defined in
Rule 1-02 (w) of Regulation S-X are as follows:
AAFC Holdings, Ltd. Yukon
AAFC International, Inc. U.S. Virgin Islands
Arctic Fisheries Washington
Benton Sales, Ltd. British Virgin Islands
Cobb Denmark A/S Denmark
Cobb-Espanola, S.A. Spain
Cobb France E.U.R.L. France
Cobb-Poland B.V. Poland
Cobb (Straffon)Ireland, Ltd Ireland
Global Employment Delaware
Services Inc.
Gorges Foodservice, Texas
Inc.
Henry House, Inc. Michigan
69
<PAGE>
HFI Acquisition Sub Inc. Delaware
JAC Creative Foods, California
Inc.
JAC Creative Foods (Canada) Ontario
Inc.
National Comp Care, Inc. Delaware
Oaklawn Capital Corporation Delaware
Oaklawn Capital-Mississippi, Mississippi
LLC
Oaklawn Sales, Ltd. British Virgin Islands
Offshore Ventures, Inc. Washington
Tri-Venture Trucking, Ltd British Columbia
TPM Holding Company Delaware
TyNet Corporation Delaware
Tyson Enterprise Alaska
Protein, Inc.
Tyson Seafood Group-Japan, Japan
Inc.
Ucluelet Seafood British Columbia
Processors, Ltd.
Universal Plan Investments Hong Kong
WLR Acquisition Corp. Delaware
70
<PAGE>
Exhibit 23
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in this Annual
Report (Form 10-K) of Tyson Foods, Inc. of our report dated
November 14, 1997, included in the 1997 Annual Report to
Shareholders of Tyson Foods, Inc.
We also consent to the incorporation by reference in the
Registration Statements (Form S-8 Nos. 33-30680; 333-02135;
2-81928; 2-44550; 33-53028; 333-22883; 333-22881; 33-54716;
and 33-53026, as amended by 33-57515) pertaining to certain
employee benefit plans of Tyson Foods, Inc. and the
Registration Statement (Form S-3 No. 33-58177) and the
related prospectus of our reports dated November 14, 1997,
with respect to the consolidated financial statements and
schedule of Tyson Foods, Inc. included or incorporated by
reference in this Annual Report (Form 10-K) for the year
ended September 27, 1997.
December 10, 1997 /s/ Ernst & Young LLP
Little Rock, Arkansas ---------------------
Ernst & Young LLP
71
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
fiscal 1997 annual report to shareholders and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000100493
<NAME> TYSON FOODS, INC.
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-27-1997
<PERIOD-END> SEP-27-1997
<CASH> 24
<SECURITIES> 0
<RECEIVABLES> 618
<ALLOWANCES> 0
<INVENTORY> 886
<CURRENT-ASSETS> 1573
<PP&E> 3163
<DEPRECIATION> 1238
<TOTAL-ASSETS> 4411
<CURRENT-LIABILITIES> 721
<BONDS> 1558
0
0
<COMMON> 22
<OTHER-SE> 1600
<TOTAL-LIABILITY-AND-EQUITY> 4411
<SALES> 6356
<TOTAL-REVENUES> 6356
<CGS> 5318
<TOTAL-COSTS> 5318
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 110
<INCOME-PRETAX> 330
<INCOME-TAX> 144
<INCOME-CONTINUING> 186
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 186
<EPS-PRIMARY> 0.85
<EPS-DILUTED> 0.85
</TABLE>
