What drove the increase in sales in fiscal 2001?

The filing states that the 45.1% sales increase was due primarily to the inclusion of nine weeks of IBP's sales. Sales rose 29.8% on volume and 11.8% on price. Comparable sales, excluding the IBP effect, increased 3.7% on a 1.1% volume increase.

Why did earnings decline despite the larger sales base?

The filing attributes earnings pressure to an oversupply of chicken for most of the year, which hurt average sales prices and margins for core value-added products. Weather in the first half, higher grain and energy costs, and increased sales promotion and litigation costs also contributed. Fourth-quarter earnings improved due to better chicken prices and the inclusion of IBP's operations.

How was the IBP acquisition financed and what did it cost?

Tyson acquired 50.1% of IBP for about $1.7 billion in cash in August 2001 and issued about 129 million Class A shares, valued at about $1.2 billion, for the remaining shares in September 2001. It also assumed about $1.7 billion of IBP debt. The total acquisition cost was about $4.6 billion, accounted for as a purchase, with the remainder recorded as goodwill. Short-term bridge facilities were used and later refinanced with senior notes.

What are the company's most significant legal and regulatory risks?

The filing describes Fair Labor Standards Act wage-and-hour lawsuits against several poultry companies, an indictment in the Eastern District of Tennessee for alleged Immigration and Naturalization Act violations, and an anticipated indictment regarding Clean Water Act activities at the Sedalia, Missouri facility. It also discloses an SEC formal investigation of IBP related to its March 2001 earnings restatement and Delaware litigation tied to the terminated merger agreement. The company says it intends to vigorously defend these matters, and it cannot yet determine the likelihood or amount of liability for several of them.

What are the dividend and shareholder details?

The company has paid uninterrupted quarterly dividends since 1977. The annual dividend rate is $0.16 per share for Class A stock and $0.144 per share for Class B stock. As of October 31, 2001, there were approximately 37,700 Class A holders of record and 18 Class B holders of record. Class A stock trades on the New York Stock Exchange under the symbol TSN.

TSN 10-K FY2001 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed December 21, 2001. Cited figures are marked; the original filing is the authoritative source.

Tyson Foods, Inc. reported fiscal 2001 (year ended September 29, 2001) sales of $10,751 million^a, up from $7,410 million in fiscal 2000, with sales increasing 45.1%.

The increase was driven mainly by nine weeks of results from IBP, inc., acquired in the fourth quarter. Net income fell to $88 million^b, or $0.40 per diluted share, from $151 million, or $0.67 per share, a year earlier. The filing attributes the earnings pressure to an oversupply of chicken for most of the year, which weighed on prices and margins for value-added products, along with weather, higher grain and energy costs.

Cost of sales rose to 89.9% of sales from 87.1%, and operating income was $315 million^c compared with $348 million. The IBP acquisition reshaped the company into five segments: Beef, Chicken, Pork, Prepared Foods and Other. The company acquired 50.1% of IBP for approximately $1.7 billion in cash in August 2001, then issued about 129 million Class A shares with a fair value of approximately $1.2 billion for the remaining shares and assumed about $1.7 billion of IBP debt, for a total acquisition cost of approximately $4.6 billion.

Total debt rose to $4.8 billion^d from $1.5 billion, and shareholders' equity was $3.4 billion. Cash from operations was $511 million, a decrease of $76 million. Subsequent to year end, the company refinanced its $2.3 billion bridge facility with $2.25 billion of senior notes.

The filing also discloses significant legal matters, including Fair Labor Standards Act wage-and-hour suits, an indictment in the Eastern District of Tennessee for alleged Immigration and Naturalization Act violations, an anticipated indictment regarding Clean Water Act activities at the Sedalia, Missouri facility, a Securities and Exchange Commission formal investigation of IBP related to its earnings restatement, and Delaware litigation arising from the IBP merger. The company states that it believes it has substantial defenses to these claims, but the outcome of several matters cannot be determined at this time.

02—Key points

Key Highlights

Sales rose to $10,751 million from $7,410 million, a 45.1% increase driven primarily by nine weeks of IBP results.
Net income declined to $88 million ($0.40 per diluted share) from $151 million ($0.67 per share) in fiscal 2000.
Chicken oversupply weighed on the year; Chicken segment operating income decreased $66 million, or 20.9%, to $249 million, and cost of sales rose to 89.9% of sales from 87.1%.
IBP acquisition total cost of approximately $4.6 billion, including about $1.7 billion in cash for 50.1%, about 129 million Class A shares valued at about $1.2 billion, and about $1.7 billion of assumed IBP debt.
Total debt increased to $4.8 billion from $1.5 billion, and cash provided by operations was $511 million versus $587 million in fiscal 2000.
Subsequent to year end, the $2.3 billion IBP bridge facility was refinanced through $2.25 billion of senior notes maturing in 2004, 2006 and 2011.
Pending legal matters include wage-and-hour litigation, a Tennessee immigration-related indictment, a potential Clean Water Act indictment in Missouri, and an SEC formal investigation of IBP.

03—Questions

Frequently Asked Questions

What drove the increase in sales in fiscal 2001?
The filing states that the 45.1% sales increase was due primarily to the inclusion of nine weeks of IBP's sales. Sales rose 29.8% on volume and 11.8% on price. Comparable sales, excluding the IBP effect, increased 3.7% on a 1.1% volume increase.
Why did earnings decline despite the larger sales base?
The filing attributes earnings pressure to an oversupply of chicken for most of the year, which hurt average sales prices and margins for core value-added products. Weather in the first half, higher grain and energy costs, and increased sales promotion and litigation costs also contributed. Fourth-quarter earnings improved due to better chicken prices and the inclusion of IBP's operations.
How was the IBP acquisition financed and what did it cost?
Tyson acquired 50.1% of IBP for about $1.7 billion in cash in August 2001 and issued about 129 million Class A shares, valued at about $1.2 billion, for the remaining shares in September 2001. It also assumed about $1.7 billion of IBP debt. The total acquisition cost was about $4.6 billion, accounted for as a purchase, with the remainder recorded as goodwill. Short-term bridge facilities were used and later refinanced with senior notes.
What are the company's most significant legal and regulatory risks?
The filing describes Fair Labor Standards Act wage-and-hour lawsuits against several poultry companies, an indictment in the Eastern District of Tennessee for alleged Immigration and Naturalization Act violations, and an anticipated indictment regarding Clean Water Act activities at the Sedalia, Missouri facility. It also discloses an SEC formal investigation of IBP related to its March 2001 earnings restatement and Delaware litigation tied to the terminated merger agreement. The company says it intends to vigorously defend these matters, and it cannot yet determine the likelihood or amount of liability for several of them.
What are the dividend and shareholder details?
The company has paid uninterrupted quarterly dividends since 1977. The annual dividend rate is $0.16 per share for Class A stock and $0.144 per share for Class B stock. As of October 31, 2001, there were approximately 37,700 Class A holders of record and 18 Class B holders of record. Class A stock trades on the New York Stock Exchange under the symbol TSN.

04—Continue

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