01—Abstract
Summary
Summary of the 10-K filed December 16, 1998. Cited figures are marked; the original filing is the authoritative source.
Tyson Foods, Inc. reported fiscal 1998 (53 weeks ended October 3, 1998) with sales of $7,414.1 milliona, up from $6,355.7 million in 1997, driven largely by the Hudson Foods acquisition completed January 9, 1998.
Net income fell sharply to $25.1 millionb, or $0.11 per diluted share, from $185.8 million, or $0.85 per diluted share, in 1997. The decline reflects $214.6 million in pre-tax asset impairment and other charges taken in the fourth quarter, including $142.2 million for asset impairment, writedowns and severance, $48.4 million for losses in the Russian export business following the Ruble devaluation, and $24.0 million for other charges. Operating income was $203.6 million versus $399.9 million a year earlier, and the effective tax rate rose to 64.7%.
Total assets grew to $5,242.5 millionc and total debt reached $2.1 billion, up $438.8 million, with shareholders' equity of $1,970.4 million. Cash provided by operating activities was $496.4 million, and capital expenditures were $310.4 million.
The company announced a restructuring to focus on its core chicken business, including the closure of eight plants and feedmills and the planned sale of certain assets, including Willow Brook Foods and the Albert Lea facility. The company also disclosed a lawsuit seeking trebled damages in excess of $3 billiond, which management believes lacks merit, and the company is in compliance with most debt covenants, with waivers obtained for others.
02—Key points
Key Highlights
- Sales rose to $7,414.1 million in fiscal 1998 from $6,355.7 million in fiscal 1997, with the Hudson Foods acquisition a significant contributor.
- Net income declined to $25.1 million ($0.11 per diluted share) from $185.8 million ($0.85 per diluted share) in 1997.
- Fourth-quarter pre-tax charges of $214.6 million ($0.68 per share) for asset impairment, Russian export losses and other items weighed on earnings.
- Operating income was $203.6 million, compared with $399.9 million in 1997; the effective tax rate was 64.7% versus 43.6%.
- Total assets increased to $5,242.5 million and total debt rose to $2.1 billion, partly from the $257.4 million cash portion of the Hudson acquisition.
- Cash provided by operating activities was $496.4 million, with capital expenditures of $310.4 million.
- Restructuring to focus on the core chicken business includes closing eight plants and feedmills, with expected annual after-tax savings of $12-$15 million.
03—Questions
Frequently Asked Questions
Why did net income fall so sharply in fiscal 1998?
Net income fell to $25.1 million from $185.8 million mainly because of $214.6 million in pre-tax asset impairment and other charges recorded in the fourth quarter, including $48.4 million in losses tied to the Russian Ruble devaluation. The filing also cites excess poultry supply and lower average prices for consumer poultry during the year.
What was the impact of the Hudson Foods acquisition?
Hudson Foods was acquired on January 9, 1998, for approximately 18.4 million Class A shares valued at $363.5 million plus $257.4 million in cash. The filing states that a significant portion of the increase in sales and consumer poultry sales was due to Hudson, and that Hudson's more commodity-based sales mix affected operating results.
What is the restructuring plan and what does it involve?
The Board approved a restructuring plan on August 28, 1998 to focus on the core chicken business. It includes closing eight plants and feedmills, reconfiguring production facilities, and writing down certain seafood assets. The anticipated three-year net benefit is approximately $130 million, and annual after-tax savings are expected to be $12-$15 million.
Are there significant legal risks disclosed?
Yes. The company pleaded guilty in December 1997 to violating the illegal gratuity statute in connection with the Michael Espy investigation and was fined $4 million plus $2 million in costs. A class action seeks trebled damages in excess of $3 billion, but management believes the lawsuit lacks merit and will not have a material adverse effect. Separate environmental matters, including a Clean Water Act settlement and a Maryland sludge complaint, are also disclosed.
How is the company's balance sheet and debt position?
Total debt was $2.1 billion at year-end, up $438.8 million from 1997, and shareholders' equity was $1,970.4 million. The company has a $1 billion unsecured revolving credit agreement expiring in May 2002, with $506.9 million of commercial paper outstanding under it. The company reports compliance with most debt covenants and has obtained waivers for those it does not meet.
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